<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
U.S. ENERGY SYSTEMS, INC.
--------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
U.S. ENERGY SYSTEMS, INC.
515 NORTH FLAGLER DRIVE, SUITE 702
WEST PALM BEACH, FLORIDA 33401
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 1999
You are invited to attend our Annual Meeting of Stockholders, which will be
held on November 16, 1999, at 10:00 a.m. at The City Athletic Club, 50 W. 54th
Street, New York, New York, for the following purposes:
1) To elect three Class II Directors to hold office for a term of
three years each, and one Class I Director to hold office for a term of two
years, or until their respective successors are duly elected and qualified;
and
2) To transact such other business as may properly come before you at
the annual meeting and any adjournments or postponements of the meeting.
The Board of Directors has fixed the close of business on October 1, 1999
as the record date for the determination of stockholders entitled to notice of
and to vote at the annual meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Seymour J. Beder
Seymour J. Beder
Chief Financial Officer and Secretary
West Palm Beach, Florida
October 18, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE
MEETING. EVEN IF YOU EXECUTE A PROXY CARD, YOU MAY NEVERTHELESS ATTEND THE
MEETING, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON. PLEASE NOTE, HOWEVER,
THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE, AND
YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY
ISSUED IN YOUR NAME.
<PAGE> 3
U.S. ENERGY SYSTEMS, INC.
515 NORTH FLAGLER DRIVE, SUITE 702
WEST PALM BEACH, FLORIDA 33401
PROXY STATEMENT
The Board of Directors of U.S. Energy Systems, Inc., a Delaware
corporation, has enclosed a proxy for use at the Annual Meeting of Stockholders
to be held on November 16, 1999, at 10:00 a.m., or at any adjournment or
postponement thereof, for the purposes set forth in this proxy statement. The
annual meeting will be held at The City Athletic Club, 50 W. 54th Street, New
York, New York. The approximate date of mailing this proxy statement and
accompanying proxy card to all stockholders entitled to vote at the annual
meeting is October 18, 1999.
INFORMATION CONCERNING SOLICITATION OF PROXIES
We will bear the entire cost of solicitation of proxies, including expenses
in connection with preparing and mailing this proxy statement, the proxy and any
additional information furnished to the stockholders. We will furnish copies of
solicitation materials to banks, brokerage houses, nominees, fiduciaries and
custodians holding in their names shares of our common stock beneficially owned
by others to forward to such beneficial owners. We will reimburse persons
representing beneficial owners of common stock for their costs in forwarding
solicitation materials to such beneficial owners.
We may supplement original solicitation of proxies by telephone, telegram
and personal solicitation by our directors, officers or other regular employees
or agents. No additional compensation will be paid to directors, officers or
other regular employees or agents for such services. The persons named as
proxies were selected by the Board of Directors and are executive officers or
directors of U.S. Energy Systems.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of our common stock and Series A Convertible
Preferred Stock at the close of business on October 1, 1999 (referred to herein
as the "Record Date") will be entitled to notice of and to vote at the annual
meeting. At the close of business on the Record Date, we had outstanding
5,153,003 shares of common stock and 277,778 shares of Series A Preferred Stock.
Each holder of record of common stock as of the close of business on the
Record Date will be entitled to one vote for each share held on all matters to
be voted upon at the annual meeting. When the enclosed proxy has been properly
executed and returned, the shares it represents will be voted at the annual
meeting as specified. All votes will be tabulated by the inspector of elections
appointed for the meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes.
The holders of shares of Series A Preferred Stock have the right to vote on
any matter that comes before our common stock holders. Each share of Series A
Preferred Stock currently has four votes, subject to adjustment upon the
happening of certain specified events. Of the 277,778 shares of Series A
Preferred Stock outstanding as of the Record Date, 250,000 are beneficially
owned by Energy Systems Investors, LLC, a company controlled by Lawrence
Schneider, one of our directors, and the remaining 27,778 shares are
beneficially owned directly by Lawrence Schneider.
Executed proxies with no instructions indicated thereon that have not been
revoked will be voted:
(i) FOR the election of three Class II Directors and one Class I
Director, as set forth below under "PROPOSAL ONE -- ELECTION OF DIRECTORS";
and
(ii) to transact such other business as may properly come before the
annual meeting, including any adjournments or postponements thereof.
<PAGE> 4
QUORUM AND REQUIRED VOTE
As set forth in our bylaws, the attendance, in person or by proxy, of the
holders of a majority of the outstanding shares of capital stock entitled to
vote at the annual meeting is necessary to constitute a quorum for the
transaction of business at the annual meeting. If less than a majority of the
outstanding shares of capital stock are represented at the annual meeting, the
Board of Directors may adjourn the annual meeting from time to time without
further notice until a quorum is obtained. Our capital stock is comprised of our
common stock and Series A Preferred Stock.
In accordance with the General Corporation Law of the State of Delaware and
our bylaws, in order to be elected, each director must receive the affirmative
vote of a plurality of the votes cast by the shares of common stock and Series A
Preferred Stock represented at the annual meeting.
Abstentions will be counted towards the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum but are not
counted for any purpose in determining whether a matter has been approved. You
will not have any dissenters' rights of appraisal in connection with the
proposals contemplated herein.
REVOCABILITY OF PROXIES
If you give a proxy pursuant to this solicitation, you have the power to
revoke it any time before it is voted. You may revoke your proxy by filing with
our Secretary, at our principal executive office, 515 North Flagler Drive, Suite
702, West Palm Beach, Florida 33401, a written notice of revocation or a duly
executed proxy bearing a later date. You may also revoke your proxy by attending
the annual meeting and voting in person. Attendance at the annual meeting will
not, by itself, revoke a proxy.
2
<PAGE> 5
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Theodore Rosen......................... 74 Chairman of the Board of Directors
Richard H. Nelson...................... 59 President, Chief Executive Officer and
Director
Howard A. Nevins....................... 43 Executive Vice President and Director
Henry Schneider........................ 34 Vice President and Director
Seymour J. Beder....................... 72 Secretary, Treasurer and Chief
Financial Officer
Terrence Page.......................... 52 Vice President
Evan Evans............................. 73 Director
Asher E. Fogel......................... 50 Director
Allen J. Rothman....................... 42 Director
Lawrence I. Schneider.................. 63 Director and Chairman of Executive
Committee
</TABLE>
Theodore Rosen. Mr. Rosen has been Chairman of the Board of Directors of
the Company since November 1993. Since June 1993, Mr. Rosen has been Managing
Director of Burnham Securities. He was Senior Vice President of Oppenheimer &
Co. from January 1991 to June 1993, and was Vice President of Smith Barney & Co.
from 1989 to 1991. Mr. Rosen also currently serves as a director of Waterhouse
Investors Cash Management Co., an investment management company engaged in
management of money market mutual funds. Mr. Rosen holds a BA degree from St.
Lawrence University and did graduate work at both Albany Law School and Columbia
University School of Business.
Richard H. Nelson. Mr. Nelson has been President, Chief Executive Officer
and a Director of the Company since November 1993. Mr. Nelson has been engaged
in the power plant industry for more than twenty years and has been involved
with over 200 power projects throughout the world, 125 of which have been
cogeneration projects. In 1973, Mr. Nelson formed Sartex Corp., which was merged
into the Company, then called Cogenic Energy Systems, Inc. ("Cogenic"), in 1981.
Mr. Nelson served as president of Cogenic until 1989. From January 1989 until
January 1991, Mr. Nelson was president of Utility Systems Corp., a subsidiary of
Cogenic. In January 1991, Mr. Nelson formed Utility Systems Florida, Inc.
("USF") where he served as president until November 1993, when USF and Cogenic
merged, with Cogenic being the surviving corporation and changing its name to
U.S. Envirosystems, Inc. U.S. Envirosystems changed its name to U.S. Energy
Systems, Inc. in November 1996. Mr. Nelson was Special Assistant to the Director
of the Peace Corps from 1961 to 1962; thereafter he served as Military Aide to
the Vice President of the United States from 1962 to 1963 and Assistant to the
President of the United States from 1963 to 1967. From 1967 to 1969, Mr. Nelson
was Vice President of American International Bank, and from 1969 to 1973 he was
Vice President of Studebaker-Worthington Corp. Mr. Nelson received his BA degree
from Princeton University.
Howard A. Nevins. Mr. Nevins has been Executive Vice President of the
Company's Environmental Division and a Director of the Company since August
1997. Mr. Nevins has wide ranging experience in the fields of mineral
exploration, chemical operations and environmental compliance. In 1985, he
founded Trey Explorations, Inc., a land exploration and development drilling
company which presently operates 80 oil and gas wells in the Illinois Basin. In
1990, he co-founded Midwest Custom Chemicals, Inc., a manufacturer and
international distributor of specialty chemicals used for oil and water
demulsification, specializing in used oil recycling. In 1994, he co-founded both
Quality Environmental Laboratories, Inc. and America Enviro-Services, Inc., the
latter company which was acquired by the Company in August 1997. Mr. Nevins
remains on the boards of Midwest Custom Chemicals and Quality Environmental
Laboratories. Mr. Nevins is a Certified Professional Geologist, past president
of the Indiana-Kentucky Geological Society, past Chairman of the Society of
Petroleum Engineers (Illinois Basin) and is currently on the boards of both the
Illinois Oil &
3
<PAGE> 6
Gas Association and the Independent Oil Producers. He is also on the Advisory
Council of the Indiana Department of Natural Resources. Mr. Nevins received his
BS degree in Geology from Western Michigan University in 1978.
Henry Schneider. Mr. Schneider, a member of Energy Systems Investors, LLC,
was appointed Vice President for Development in March 1998 and was appointed a
Director of the Company in December 1998. From 1986 to 1988, Mr. Schneider was
an associate at Drexel Burnham Lambert specializing in taxable institutional
fixed income products and portfolio strategies. From 1989 to 1994, Mr. Schneider
was an associate with S & S Investments and Wood Gundy, specializing in mergers,
acquisitions and corporate restructuring. From 1994 to 1996, Mr. Schneider was a
principal of Global Capital Resources, Inc., a private merchant bank. Since
1996, Mr. Schneider has been a private investor. He has been involved in
arranging acquisitions and funding for the telecommunications, energy, apparel,
airline, financial and garage industries. Mr. Schneider holds an Economics
degree from Tufts University and a Master of Business Administration from Boston
University. Mr. Schneider is the son of Lawrence I. Schneider.
Seymour J. Beder. Mr. Beder has been Secretary, Treasurer and Chief
Financial Officer of the Company since November 1993. From 1970 through 1980 he
was Chief Financial Officer for Lynnwear Corporation, a textile company, and
from 1980 to September 1993, Mr. Beder was president of Executive Timeshare,
Inc., a provider of executive consulting talent. Mr. Beder is a Certified Public
Accountant, and a member of the New York State Society of Certified Public
Accountants and the American Institute of Certified Public Accountants. Mr.
Beder received his BA degree from City College of New York.
Terrence Page. Mr. Page has been Vice President of Western Resources of
the Company since March 1997. From 1982 to 1989, he was Regulatory Operations
Supervisor of the Nevada Public Service Commission and from 1989 until he
resigned to join the Company, he served as Director of Regulatory Operations. In
this position, he had final responsibility for developing all staff positions
brought before the Commission and coordinated with federal, state and local
governments on matters of regulatory policy. He has served on the Nevada
Department of Information Services Advisory Committee, the Ohio State
University's National Regulatory Research Institute Advisory Committee, the Las
Vegas Regional Transportation Advisory Committee and the Washoe Regional Water
Planning Commission. Mr. Page holds his BS in Business from the University of
the State of New York and his MS in Management from the American University.
Evan Evans. Mr. Evans has been a Director of the Company since August
1995. Since 1983 he has been chairman of Holvan Properties, Inc. ("Holvan"), a
real estate developer, and was managing director of Easco Marine, Ltd. from 1983
to 1988. Also, from 1985 to 1986 Mr. Evans was general manager of Belgian
Refining Corporation ("BRC"), pursuant to a contract between BRC and Holvan, and
from 1992 to 1996, Mr. Evans was a director of BRC. From 1981 to 1983 he was
vice president of Getty Trading and Transportation Company and president of its
subsidiary, Getty Trading International, Inc. From 1970 to 1981 Mr. Evans was
vice president and member of the board of directors of United Refining Corp
("URC"). Mr. Evans also currently serves as a director of Holvan, and since 1997
has been a director of URC Mr. Evans received his BS degree in Mathematics from
St. Lawrence University and his BS in Civil Engineering from M.I.T.
Asher E. Fogel. Mr. Fogel was appointed to the Board of Directors of the
Company in December 1998. From 1985 to 1997 Mr. Fogel held senior positions at
Citicorp in London and New York specializing in corporate finance, capital
markets and investment advice and was a Managing Director of Citicorp
Securities, Inc. For twelve years prior to joining Citicorp Mr. Fogel held a
number of positions in Bank or America and Samuel Montagu & Co. In June 1997,
Mr. Fogel founded Dovertower Capital, a merchant banking boutique providing
corporate finance services in the United States and international markets. Mr.
Fogel holds a BA in Economics and an MBA from Hebrew University. Mr. Fogel has
indicated to the Company that he will not stand for election to the Board of
Directors at the 1999 annual meeting due to personal reasons.
Allen J. Rothman. Mr. Rothman has been a member of the Board of Directors
of the Company since January 1997. Mr. Rothman is a partner with the law firm of
Robinson, Brog, Leinwand, Greene, Genovese & Gluck P.C. in New York with whom he
has been associated since January 1996. Mr. Rothman specializes in
4
<PAGE> 7
corporate, finance and real estate law. Prior to joining Robinson Brog, he was
associated with several New York law firms. Mr. Rothman received his BA degree
from Columbia University and his JD degree from Harvard University.
Lawrence I. Schneider. Mr. Schneider, manager of Energy Systems Investors,
LLC, has been a member of Board of Directors since March 1998 and serves as
Chairman of its Executive Committee. Mr. Schneider has been associated with
numerous corporations through the years, including Newpark Resources, Inc., a
company involved with oil field environmental remediation, where he was Chairman
of the Executive Committee. Mr. Schneider was also a partner in Sassower, Jacobs
and Schneider, a member firm of the New York Stock Exchange. He holds his BS
degree from New York University. Mr. Schneider is the father of Henry Schneider.
Director Nominee:
Richard T. Brandt II. Richard Brandt is the Chairman and Chief Executive
Officer of Marathon Capital, LLC, a Chicago based, financing company
specializing in the origination, processing and financing of non-conforming
commercial loans and leases. Prior to founding Marathon in 1999, Mr. Brandt
served as the Senior Vice President and General Manager of the Vendor Financial
Services unit of Transamerica Distribution Finance. During his tenure at
Transamerica, Mr. Brandt created a dedicated Energy Financing Group, which
provided capital for energy equipment retrofit projects as well as various other
small and medium energy related project financing situations. Prior to his
employment with Transamerica in 1997, Mr. Brandt held senior positions in
several other niche financing companies including, Prime Capital, Inc., Lessor
Capital Services and Dana Commercial Credit. He holds an undergraduate degree in
economics from Oberlin College and an MBA from The University of Chicago.
ELECTION OF EXECUTIVE OFFICERS
Our officers are elected annually by the Board of Directors and serve at
the discretion of the Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
certain officers, directors, and beneficial owners of more than ten percent
(10%) of our common stock to file reports of ownership and changes in their
ownership of our equity securities with the Securities and Exchange Commission
and Nasdaq. Based solely on a review of the reports and representations
furnished to us during the last fiscal year, we believe that each of these
persons is in compliance with all applicable filing requirements, except Mr.
Lawrence Schneider may have failed to file timely a Form 4 in August, 1999
relating to the exercise of his option and purchase of 27,778 shares of Series A
Preferred Stock.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF
DIRECTORS
Our Board of Directors is comprised of three classes of directors, each
being elected every three years at our annual meeting of stockholders. Class I
directors currently serve until the 2001 annual meeting of stockholders, Class
II directors currently serve until the 1999 annual meeting of stockholders, and
Class III directors currently serve until the 2000 annual meeting of
stockholders. Messrs. Howard Nevins, Lawrence I. Schneider and Asher Fogel serve
as Class I members of the Board of Directors, Messrs. Allen J. Rothman, Evan
Evans and Henry Schneider serve as Class II members of the Board of Directors,
and Messrs. Theodore Rosen and Richard H. Nelson serve as Class III members of
the Board of Directors.
Mr. Henry Schneider, who was appointed to the Board of Directors in 1998,
and who serves as a Class II member of the Board of Directors, will stand for
election at the 1999 annual meeting of stockholders for the first time.
Mr. Asher Fogel was appointed to the Board in December 1998 to serve as a
Class I director. Mr. Fogel's term expires at the 1999 annual meeting, however,
he has informed the Company that he does not intend to stand for election due to
personal reasons. Mr. Fogel's nomination will be filled by Richard T. Brandt II,
who
5
<PAGE> 8
will stand for election at the 1999 annual meeting for the first time as a Class
I member of the Company's Board of Directors.
During the year ended January 31, 1999, the Board of Directors held a total
of ten meetings and took approximately ten actions by unanimous written consent.
During 1998, no director attended fewer than 75% of the aggregate of (i) the
number of meetings of the Board of Directors held during the period he served on
the Board, and (ii) the number of meetings of committees of the Board of
Directors held during the period he served on such committees.
The Board has two standing committees, an Audit Committee and an Executive
Committee. The Board does not have either a Nominating Committee or a
Compensation Committee.
The duties of the Audit Committee include recommending the engagement of
independent auditors, reviewing and considering actions of management in matters
relating to audit functions, reviewing with independent auditors the scope and
results of its audit engagement, reviewing reports from various regulatory
authorities, reviewing our system of internal controls and procedures and
reviewing the effectiveness of procedures intended to prevent violations of law
and regulations. Our Audit Committee is comprised of Messrs. Henry Schneider,
Evans and Fogel (as of December 1998). The Audit Committee met twice in 1998.
The Executive Committee oversees all of our business activities between
meetings of the Board of Directors and may exercise the power and authority of
the full Board of Directors to the extent permitted by Delaware law and our
bylaws. The duties of the Executive Committee also include recommending to the
Board remuneration to be paid to our executive officers, administering and
monitoring compensation and recommending the establishment of incentive and
bonus programs for our executives, including determining the number of options
to be awarded pursuant to our stock option plans. Executive Committee members
receive no additional compensation for their participation. The Executive
Committee is comprised of Messrs. Lawrence Schneider (Chairman), Rothman, Nelson
and Rosen. The Executive Committee met 12 times in 1998.
EXECUTIVE COMPENSATION
The following table shows the total compensation we paid during the fiscal
years ended January 31, 1999, 1998 and 1997 to Mr. Nelson, our President and
Chief Executive Officer, and during the fiscal year ended January 31, 1999 and
1998 to Mr. Nevins, our Executive Vice President. No other of our executives
received total compensation in excess of $100,000 during any of such years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------- --------------------------
YEAR ENDED SECURITIES
NAME AND PRINCIPAL POSITION JANUARY 31, SALARY BONUS UNDERLYING OPTIONS/SARS(#)
- --------------------------- ----------- -------- ----- --------------------------
<S> <C> <C> <C> <C>
Richard H. Nelson........................ 1999 $162,500(1) -- 40,000
President and Chief 1998 150,000 -- 50,000
Executive Officer 1997 150,000 -- 100,000
Howard Nevins 1999 100,000 -- 40,000
Executive Vice President............... 1998 49,457(2) -- 100,000
</TABLE>
- ---------------
(1) Mr. Nelson's annual base salary was increased from $150,000 to $165,000 on
April 1, 1998.
(2) Mr. Nevins' employment contract with the Company commenced as of August 23,
1997, and provides for an annual salary of $100,000.
6
<PAGE> 9
The following table sets forth certain information with respect to all
options to purchase shares of our common stock granted to the named executive
officers during the fiscal year ended January 31, 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS OPTIONS EMPLOYEES IN BASE PRICE
NAME (#) FISCAL YEAR ($/SH) EXPIRATION DATE
---- -------------------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
Richard H. Nelson.................. 40,000 13.45% $2.50 August 26, 2008
Howard Nevins...................... 40,000 13.45 2.50 August 26, 2008
</TABLE>
TERMS OF OPTIONS
Stock options to Messrs. Nelson and Nevins were granted in 1998 under our
1998 Executive Incentive Compensation Plan (the "1998 Plan"). All options
granted in 1998 to Messrs. Nelson and Nevins, as well as to the other executive
officers and directors, under the 1998 Plan are qualified, incentive stock
options, expire 10 years from the date of grant, and were immediately
exercisable upon the date of grant.
REPRICING OF STOCK OPTIONS
On December 8, 1998, the Board of Directors unanimously approved a plan to
reprice a total of 639,000 stock options held by certain of our directors,
executive officers and employees to $2.50 per share, a price equal to
approximately 24% above the average high bid and ask price of our common stock
as reported on the Nasdaq SmallCap Market on December 7, 1998. The Board's
decision to reprice these options was based on the Board's unanimous belief that
such an action would help retain and provide incentives for the option holders
whose compensation is largely dependent on their option grants. We granted a
majority of these options in 1996 and 1997, and other options were granted in
1995.
The following table shows stock option exercises during the fiscal year
ended January 31, 1999 by the named executive officers. In addition, this table
describes the number of unexercised options and the value of unexercised
in-the-money options at January 31, 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND JANUARY 31, 1999 OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS/SARS AT MONEY OPTIONS/SARS AT
JANUARY 31, 1999(#) JANUARY 31, 1999($)(1)
SHARES ACQUIRED ------------------------- ----------------------------
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- ----------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Richard H. Nelson.... 0 0 190,000/0 $42,188/0
Howard A. Nevins..... 0 0 140,000/0 0/0
</TABLE>
- ---------------
(1) Represents the difference between market price of the Company's Common Stock
and the exercise price of the options at January 31, 1999. Such amounts may
not necessarily be realized. Actual values which may be realized, if any,
upon any exercise of such options will be based on the market price of the
Common Stock at the time of any such exercise and thus are dependent upon
future performance of the Common Stock.
COMPENSATION OF DIRECTORS
Outside directors are compensated at an annual rate of $10,000 plus travel
expenses, and must attend at least four meetings annually. Employee directors
are not compensated for attendance at meetings of the
7
<PAGE> 10
Board, although certain travel expenses relating to attending meetings are
reimbursed. No additional compensation is given to committee members or
participants in special projects.
EMPLOYMENT AGREEMENTS
Mr. Nelson entered into an amended employment agreement with us on March
31, 1998 to serve as our President and Chief Executive Officer until March 31,
2001, which term automatically extends for additional one-year periods beginning
on the second anniversary of the agreement and on each anniversary thereafter.
Mr. Nelson's agreement currently provides for an annual salary of $165,000,
commencing on April 15, 1998, plus normal benefits. If Mr. Nelson is terminated
without cause during the term of the employment agreement, as defined in the
agreement, or if Mr. Nelson resigns from our employment because his salary or
benefits are decreased or he is demoted within three years after we have
experienced a change in control, as defined in the employment agreement, he is
entitled to severance pay equal to approximately three times his base salary.
Under the terms of Mr. Nelson's employment agreement, he may not disclose any
confidential information pertaining to our business nor compete with us during
the term of his employment and for an additional two years.
Mr. Rosen entered into an amended employment agreement with us on March 31,
1998, to serve as our Chairman of the Board of Directors until March 31, 2001,
which term automatically extends for additional one-year periods beginning on
the second anniversary of the agreement and on each anniversary thereafter. Mr.
Rosen's agreement currently provides for an annual salary of $87,500, commencing
on May 15, 1998, plus normal benefits. If Mr. Rosen is terminated without cause
during the term of his employment, as defined in the agreement, or if Mr. Rosen
resigns because his salary or benefits are decreased or he is demoted within
three years after we experience a change in control, as defined in the
employment agreement, he is entitled to severance pay equal to approximately
three times his base salary. Under the terms of Mr. Rosen's employment
agreement, he may not disclose any confidential information pertaining to our
business nor compete with us during the term of his employment and for an
additional two years thereafter.
Mr. Nevins entered into an employment agreement with us on August 4, 1997,
to serve as the Executive Vice President for a term of three years ending August
4, 2000. Mr. Nevins' contract provides for an annual salary of $100,000 plus
normal benefits, and an initial grant of options to purchase 100,000 shares of
our common stock. Provision is also made for incentive compensation in addition
to the base salary and options. Under the terms of Mr. Nevins' employment
agreement, Mr. Nevins agrees that he will not disclose any confidential
information pertaining to our business nor compete with us during the term of
his employment and for an additional two years thereafter, but no earlier than
August 4, 2002.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of our common stock,
owned as of October 1, 1999 (i) by each director and nominee, (ii) by each of
our executive officers, (iii) by those persons known to us to beneficially own
5% or more of the outstanding shares of our common stock, and (iv) by all of our
directors and officers as a group. With respect to any person who beneficially
owns 5% or more of the outstanding shares of common stock, the address of such
person is also set forth.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ---------------- ----------------------- ----------------
<S> <C> <C>
Theodore Rosen........................................... 345,214(2) 6.28%
Richard H. Nelson........................................ 328,210(3) 5.99
Howard A. Nevins......................................... 406,000(4) 7.30
Seymour J. Beder......................................... 128,500(5) 2.43
Evan Evans............................................... 117,500(6) 2.23
Allen J. Rothman......................................... 128,500(7) 2.43
Lawrence I. Schneider.................................... 1,201,112(8) 18.90
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ---------------- ----------------------- ----------------
<S> <C> <C>
Henry Schneider.......................................... 1,077,500(9) 17.29%
Asher Fogel.............................................. 65,000(10) 1.25
Richard T. Brandt II..................................... 20,000(11) *
Energy Systems Investors, LLC............................ 1,000,000(12) 16.25
450 Park Avenue
Suite 1000
New York, New York 10022
Cambridge Investments Limited............................ 360,000(13) 6.53
600 Montgomery Street
27th Floor
San Francisco, CA 94111
All officers and directors as a group (10 persons)....... 2,817,536 33.05
</TABLE>
- ---------------
* Indicates less than 1%.
(1) The tabular information gives effect to the exercise of warrants or options
exercisable within 60 days of the date of this table owned in each case by
the person or group whose percentage ownership is set forth opposite the
respective percentage and is based on the assumption that no other person
or group exercises its option. The address of each of the officers and
directors is 515 North Flagler Drive, Suite 702, West Palm Beach, Florida
33401.
(2) Includes 50,000 shares issuable upon exercise of presently exercisable
options at an exercise price of $2.875 per share, 50,000 shares issuable
upon exercise of presently exercisable options at an exercise price of
$2.031 per share, 11,357 shares issuable upon exercise of warrants at an
exercise price of $4.00 per share, and 200,250 shares issuable upon
exercise of presently exercisable options at an exercise price of $2.50 per
share. Excludes 50,000 shares issuable upon exercise of options exercisable
in March 2000.
(3) Includes 50,000 shares issuable upon exercise of presently exercisable
options at an exercise price of $2.875 per share, 50,000 shares issuable
upon exercise of options at an exercise price of $2.031 per share, and
140,000 shares issuable upon exercise of presently exercisable options at
an exercise price of $2.50 per share. Excludes 50,000 shares issuable upon
exercise of options exercisable in March 2000.
(4) Includes 25,000 shares issuable upon exercise of presently exercisable
options at an exercise price of $2.875 per share, and 140,000 shares
issuable upon exercise of presently exercisable options at an exercise
price of $2.50 per share. Excludes 25,000 shares issuable upon exercise of
options exercisable in March 2000.
(5) Includes 25,000 shares issuable upon exercise of presently exercisable
options at an exercise price of $2.875 per share, 85,000 shares issuable
upon exercise of presently exercisable options at an exercise price of
$2.50 per share, and 15,000 shares issuable upon exercise of presently
exercisable options at an exercise price of $2.031 per share. Excludes
25,000 shares issuable upon exercise of options exercisable in March 2000.
(6) Includes 25,000 shares issuable upon exercise of presently exercisable
options at an exercise price of $2.875 per share, 81,250 shares issuable
upon exercise of presently exercisable options at an exercise price of
$2.50 per share, and 10,000 shares issuable upon exercise of presently
exercisable options at an exercise price of $2.031 per share. Excludes
25,000 shares issuable upon exercise of options exercisable in March 2000.
(7) Includes 37,500 shares issuable upon exercise of presently exercisable
options at an exercise price of $2.875 per share, 80,000 shares issuable
upon exercise of presently exercisable options at an exercise price of
$2.50 per share, and 10,000 shares issuable upon exercise of presently
exercisable options at an exercise price of $2.031 per share. Excludes
37,500 shares issuable upon exercise of options exercisable in March 2000.
(8) Includes 50,000 shares issuable upon exercise of presently exercisable
options at an exercise price of $2.875 per share, 40,000 shares issuable
upon exercise of presently exercisable options at an exercise
9
<PAGE> 12
price of $2.50 per share and 250,000 shares of Series A Preferred Stock,
currently convertible into 1,000,000 shares of Common Stock, which is owned
by Energy Systems Investors, LLC, and 27,778 shares of Series A Preferred
Stock, currently convertible into 111,112 shares of Common Stock, which is
owned by Mr. Schneider directly. Lawrence I. Schneider and Henry Schneider
are members and managers of Energy Systems Investors, LLC; Rita Schneider
is a member of Energy Systems Investors, LLC. Henry Schneider is the son of
Lawrence and Rita Schneider. Excludes 50,000 shares issuable upon exercise
of options exercisable in March 2000.
(9) Includes 37,500 shares issuable upon exercise of presently exercisable
options of an exercise price of $2.875 per share, and 40,000 shares
issuable upon exercise of presently exercisable options at an exercise
price of $2.50 per share and 250,000 shares of Series A Preferred Stock,
currently convertible into 1,000,000 shares of Common Stock, which is owned
by Energy Systems Investors, LLC. Henry Schneider and Lawrence Schneider
are members and managers of Energy Systems Investors LLC. Henry Schneider
is the son of Lawrence Schneider. Excludes 37,500 shares issuable upon
exercise of options exercisable in March 2000.
(10) Includes 25,000 shares issuable upon exercise of presently exercisable
options at an exercise price of $2.875 per share, and 40,000 shares
issuable upon exercise of presently exercisable options at an exercise
price of $2.50 per share. Excludes 25,000 shares issuable upon exercise of
options exercisable in March 2000.
(11) Consists of 20,000 shares issuable upon exercise of presently exercisable
options at an exercise price of $2.875 per share. Excludes 20,000 shares
issuable upon exercise of options exercisable in March 2000.
(12) Comprised of 250,000 shares of Series A Preferred Stock, currently
convertible into 1,000,000 shares of Common Stock. Lawrence I. Schneider
and Henry Schneider are members and managers of Energy Systems Investors,
LLC; Rita Schneider is a member of Energy Systems Investors, LLC. Henry
Schneider is the son of Lawrence and Rita Schneider.
(13) Based on a Schedule 13-D sent to the Company on December 26, 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lawrence I. Schneider is a manager and member of Energy Systems Investors,
LLC, the entity which was granted an option to purchase up to 888,888 shares of
our Series A Preferred Stock, at our 1998 annual meeting of stockholders. Mr.
Schneider is a member of our Board of Directors and chairman of its Executive
Committee. Appointment to these positions was a condition of the Energy Systems
Investors' initial purchase of 250,000 shares of our Series A Preferred Stock.
Henry Schneider, our Vice President and a Director, is also a manager and a
member of Energy Systems Investors. His appointment to the positions as Vice
President and Director were made following, but not as a condition to, this
financing.
Howard Nevins, Executive Vice President and a Director, was the former
President and Director of American Enviro-Services, Inc., an Indiana corporation
which we acquired pursuant to a merger in August 1997. As part of this AES
merger, Mr. Nevins received 240,000 shares of our common stock and options to
purchase 100,000 shares of our common stock. Mr. Nevins was also appointed to
our Board of Directors in connection with the merger.
The law firm of Robinson, Brog, Leinwand, Green, Genovese & Gluck P.C., of
which Allen J. Rothman, one of our directors, is a partner, provides us with
certain legal services from time to time.
All transactions between us and our officers, directors, principal
stockholders or other affiliates have been on terms no less favorable than those
that are generally available from unaffiliated third parties. Any such future
transactions will be on terms no less favorable to us than could be obtained
from an unaffiliated third party on an arm's-length basis and will be approved
by a majority of our independent and disinterested directors.
10
<PAGE> 13
PROPOSAL ONE
ELECTION OF DIRECTORS
Our Board currently consists of eight directors. The directors are divided
into three classes (Classes I, II and III), whose three-year terms of office
expire in annual succession. Currently, the Classes of the Board are comprised
as follows:
<TABLE>
<CAPTION>
CLASS DIRECTORS TERM EXPIRES
- ----- --------- ------------
<S> <C> <C>
I Howard Nevins, Lawrence I. Schneider, Asher Fogel 2001
II Allen J. Rothman, Evan Evans, Henry N. Schneider 1999
III Theodore Rosen, Richard H. Nelson 2000
</TABLE>
At this annual meeting, three Class II directors will be elected to serve
until the annual meeting of stockholders in 2002, or until their successors have
been duly elected and qualified. The Board has nominated the following three
persons to serve as Class II directors:
ALLEN J. ROTHMAN
EVAN EVANS
HENRY N. SCHNEIDER
Mr. Henry Schneider, who was appointed a member of the Board in December
1998 by action of the Board, is standing for election by the stockholders for
the first time.
Additionally, at this annual meeting, one Class I director will be elected
to serve until the annual meeting of stockholders in 2001, or until his
successor has been duly elected and qualified. Mr. Asher Fogel was appointed to
the Board in December 1998 to serve as a Class I director. Mr. Fogel was to
stand for election at this annual meeting, but he has informed the Company that
he does not intend to do so for personal reasons. The Board, therefore, has
nominated as of October 1999 the following person to serve as a Class I
director:
RICHARD T. BRANDT II
If, at the time of election, any of the nominees should be unavailable for
election, a circumstance which we do not expect, it is intended that the proxies
will be voted for such substitute nominee as we may select. Proxies not marked
to the contrary will be voted for the election of the persons listed above.
Biographical information relating to these nominees for director positions
appears above starting on page 5 of this proxy statement under the heading
"DIRECTORS AND EXECUTIVE OFFICERS".
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
ALL FOUR OF THE NOMINEES FOR ELECTION AS DIRECTORS.
11
<PAGE> 14
MISCELLANEOUS
INDEPENDENT AUDITORS
The Audit Committee and the Board of Directors has selected the firm of
Richard A. Eisner & Co., LLC, independent certified public accountants, to
examine our consolidated financial statements and those of our subsidiaries for
the fiscal year ended January 31, 2000. Representatives of Richard A. Eisner are
expected to be available at the annual meeting, and will have an opportunity to
make a statement if they desire to do so and to respond to appropriate questions
from shareholders.
OTHER MATTERS
At the time this proxy statement went to press, the Board of Directors knew
of no matters to be presented for consideration at the annual meeting other than
those described in this proxy statement. If other matters are properly
presented, it is the intention of the persons designated as proxies in the
enclosed form of proxy to vote as proxies with respect to such matters in
accordance with their best judgment.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Any stockholder satisfying the Securities and Exchange Commission ("SEC")
requirements and wishing to submit a proposal to be included in the proxy
statement for the 2000 Annual Meeting of Stockholders should submit the proposal
in writing to the Corporate Secretary, U.S. Energy Systems, Inc., 515 N. Flagler
Drive, Suite 702, W. Palm Beach, Florida 33401. We must receive a proposal by
June 18, 2000 in order to consider it for inclusion in the proxy statement for
the 2000 Annual Meeting of stockholders.
Stockholders who wish to present director nominations or any other business
at the 2000 Annual Meeting of Stockholders are required to notify the Corporate
Secretary of their intent no later than September 18, 2000 and the notice must
provide information as required in our By-laws. A copy of these By-laws
requirements will be provided upon request in writing to the Corporate
Secretary. This requirement does not apply to the deadline for submitting
shareholder proposals for inclusion in the proxy statement, nor does it apply to
questions a shareholder may wish to ask at the meeting.
We retain discretion to vote proxies we receive with respect to proposals
received after September 18, 2000, provided (i) we include in our proxy
statement advice on the nature of the proposal and how we intend to exercise our
voting discretion and (ii) the proponent does not issue a proxy statement.
By Order of the Board of Directors
/s/ Seymour J. Beder
Seymour J. Beder
Chief Financial Officer and Secretary
West Palm Beach, Florida
October 18, 1999
12
<PAGE> 15
U.S. ENERGY SYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 1999
The undersigned hereby appoints Richard H. Nelson and Seymour J.
Beder, and each of them, as attorneys and proxies of the undersigned, with full
power of substitution, to vote all of the shares of stock of U.S. Energy
Systems, Inc. which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of U.S. Energy Systems to be held at The City Athletic
Club, 50 W. 54th Street, New York, New York, on November 16, 1999, at 10:00
a.m., (local time, and at any and all postponements, continuations and
adjournments thereof), with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED "FOR" THE
PROPOSAL SET FORTH BELOW, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY
STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN
ACCORDANCE THEREWITH. MANAGEMENT RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED IN
PROPOSAL ONE.
PROPOSAL ONE: Election of Directors.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for
all nominees listed below
A VOTE FOR ALL NOMINEES IS RECOMMENDED BY THE BOARD OF DIRECTORS. NOMINEES ARE:
Class II: Allen J. Rothman, Evan Evans and Henry Schneider, Class I: Richard T.
Brandt II.
* To withhold authority to vote for any individual nominee, write that
nominee's name in the space provided below:
Exceptions:
(Continued and to be signed on other side)
<PAGE> 16
DATED ____________________________ ___________________________________
-----------------------------------
SIGNATURE(S)
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer is
a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
