<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
U.S. ENERGY SYSTEMS, INC.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
902951102
(CUSIP Number)
Mr. Wayne A. Harris
Senior Counsel
Cinergy Corp.
139 East Fourth Street, 25 Atrium Two
Cincinnati, Ohio 45202
513-287-3020
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 12, 2000
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box |_|.
(Continued on following pages)
(Page 1 of 8 Pages)
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<S> <C>
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CUSIP No. 902951102 13D Page 2 of 8 Pages
------------------------------------------------ ----------------------------------------------
--------- --------------------------------------------------------------------------------------------- ------------
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
CINERGY SOLUTIONS, INC.
--------- --------------------------------------------------------------------------------------------- ------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
NOT APPLICABLE
--------- --------------------------------------------------------------------------------------------- ------------
3 SEC USE ONLY
--------- --------------------------------------------------------------------------------------------- ------------
4 SOURCE OF FUNDS
AF
--------- --------------------------------------------------------------------------------------------- ------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) |_|
NOT APPLICABLE
--------- --------------------------------------------------------------------------------------------- ------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
--------- --------------------------------------------------------------------------------------------- ------------
7 SOLE VOTING POWER
NUMBER OF 583,333 SHARES
SHARES ------ -------------------------------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY NOT APPLICABLE
OWNED BY ------ -------------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
EACH 583,333 SHARES
REPORTING ------ ------------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
PERSON WITH NOT APPLICABLE
--------- ----------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
583,333 SHARES
--------- --------------------------------------------------------------------------------------------- ------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_|
NOT APPLICABLE
--------- --------------------------------------------------------------------------------------------- ------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.6%
--------- --------------------------------------------------------------------------------------------- ------------
14 TYPE OF REPORTING PERSON
CO
--------- --------------------------------------------------------------------------------------------- ------------
</TABLE>
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<TABLE>
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CUSIP No. 902951102 13D Page 3 of 8 Pages
------------------------------------------------ ----------------------------------------------
--------- --------------------------------------------------------------------------------------------- ------------
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
CINERGY CORP.
--------- --------------------------------------------------------------------------------------------- ------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
NOT APPLICABLE
--------- --------------------------------------------------------------------------------------------- ------------
3 SEC USE ONLY
--------- --------------------------------------------------------------------------------------------- ------------
4 SOURCE OF FUNDS
NOT APPLICABLE
--------- --------------------------------------------------------------------------------------------- ------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) |_|
NOT APPLICABLE
--------- --------------------------------------------------------------------------------------------- ------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
------------------------ ------ ------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF NOT APPLICABLE
SHARES ------ ------------------------------------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY NOT APPLICABLE
OWNED BY ------ ------------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
EACH NOT APPLICABLE
REPORTING ------ ------------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
PERSON WITH NOT APPLICABLE
--------- ----------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
583,333 SHARES HELD INDIRECTLY THROUGH ITS INTEREST IN ITS AFFILIATE,
CINERGY SOLUTIONS, INC.
--------- ----------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_|
NOT APPLICABLE
--------- --------------------------------------------------------------------------------------------- ------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.6%
--------- --------------------------------------------------------------------------------------------- ------------
14 TYPE OF REPORTING PERSON
CO
--------- --------------------------------------------------------------------------------------------- ------------
</TABLE>
<PAGE> 4
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CUSIP No. 902951102 13D Page 4 of 8 Pages
------------------------------ ----------------------------
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the shares of Common Stock, $0.01 par
value per share, of U.S. Energy Systems, Inc. ("U.S. Energy Systems"), a
corporation incorporated under the laws of the State of Delaware, with its
principal executive offices located at 515 N. Flagler Drive, Suite 702, West
Palm Beach, Florida 33401.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is being filed by Cinergy Solutions, Inc. ("Cinergy
Solutions") and Cinergy Corp. ("Cinergy"), with Cinergy Solutions and Cinergy
being referred to sometimes hereinafter as the "Reporting Persons."
Cinergy is a corporation incorporated under the laws of the State of
Delaware. Cinergy is a utility holding company which, along with its
subsidiaries, is engaged primarily in the generation, transmission, distribution
and sale of electricity and the sale and transportation of natural gas in
Indiana, Kentucky and Ohio. Cinergy's Common Stock is listed for trading on the
New York Stock Exchange. Cinergy's principal address and business address is 139
East Fourth Street, Cincinnati, Ohio 45202.
Cinergy Solutions is a corporation incorporated under the laws of the
State of Delaware. Cinergy Solutions is engaged primarily in cogeneration and
energy outsourcing for industrial customers. Cinergy Solution's principal
address and business address is 139 East Fourth Street, Cincinnati, Ohio 45202.
Cinergy Solutions is an indirect wholly-owned subsidiary of Cinergy.
The name, citizenship, present position with the Reporting Persons,
present principal occupation and business address of each of the directors and
executive officers of the Reporting Persons are set forth in Exhibit 99.1
hereto, which exhibit is hereby incorporated by reference into this Schedule
13D. None of the persons listed in Exhibit 99.1 has any direct or indirect
interest in U.S. Energy Systems as of the date of this Schedule 13D.
None of the Reporting Persons or the persons listed in Exhibit 99.1 has
during the last five years been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activity subject to, United States federal or state securities laws or
finding any violation with respect to such laws as a result of a civil
proceeding of a judicial or administrative body of competent jurisdiction.
<PAGE> 5
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CUSIP No. 902951102 13D Page 5 of 8 Pages
------------------------------ ----------------------------
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The total amount of funds used by Cinergy Solutions to purchase the
583,333 shares of Common Stock of U.S. Energy Systems held by it was $3.5
million. Cinergy Solutions obtained such funds from its affiliate, Cinergy
Investments, Inc.
ITEM 4. PURPOSE OF TRANSACTION.
Cinergy Solutions currently holds its interest in U.S. Energy Systems
for investment purposes.
Except as set forth in this Schedule 13D, none of the Reporting Persons
nor, to the best knowledge of the Reporting Persons, any of their respective
directors, executive officers or controlling persons has any current plan or
proposal which relates to or would result in: (a) the acquisition by any person
of additional securities of U.S. Energy Systems, or the disposition of
securities of U.S. Energy Systems; (b) an extraordinary corporate transaction,
such as a merger, reorganization or liquidation, involving U.S. Energy Systems
or any of its subsidiaries; (c) a sale or transfer of a material amount of
assets of U.S. Energy Systems or any of its subsidiaries; (d) any change in the
present board of directors or management of U.S. Energy Systems, including any
plans or proposals to change the number or term of directors or to fill any
existing vacancies on the board; (e) any material change in the present
capitalization or dividend policy of U.S. Energy Systems; (f) any other material
change in the business or corporate structure of U.S. Energy Systems; (g)
changes in the charter, bylaws or instruments corresponding thereto of U.S.
Energy Systems or other actions which may impede the acquisition of control of
U.S. Energy Systems by any person; (h) causing a class of securities of U.S.
Energy Systems to be delisted from a national securities exchange or to cease to
be authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (i) a class of equity securities of U.S. Energy
Systems becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934, as amended; or (j) any action
similar to any of those enumerated above.
Cinergy Solutions intends to continuously review its investment in
U.S. Energy Systems. Cinergy Solutions may at any time in the future determine
to change its investment intent with respect to U.S. Energy Systems, and may
determine to: (i) acquire additional securities of U.S. Energy Systems, through
open market purchases, private agreements, tender offer or otherwise; (ii)
dispose of all or a portion of the shares of Common Stock of U.S. Energy
Systems owned by it; or (iii) take any other available course of action, which
could involve one or more of the types of transactions or have one or more of
the results described in the immediately preceding paragraph. Cinergy Solutions
specifically reserves the right to acquire additional shares of Common Stock of
U.S. Energy Systems, through open market purchases, private agreements, tender
offer or otherwise, to dispose of all or a portion of the shares of Common
Stock of U.S. Energy Systems owned by it, or to change its intention with
respect to any or all of the matters referred to in the immediately preceding
paragraph.
<PAGE> 6
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CUSIP No. 902951102 13D Page 6 of 8 Pages
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Cinergy Solutions owns 583,333 shares of Common Stock of U.S.
Energy Systems, representing approximately 8.6% of the outstanding shares of
Common Stock of U.S. Energy Systems (calculated based upon the 6,214,538 shares
of Common Stock reported as outstanding as of May 26, 2000 by U.S. Energy
Systems in its Annual Report on Form 10-KSB for its fiscal year ended January
31, 2000 plus the shares issued to Cinergy Solutions). Cinergy does not directly
own any shares of Common Stock of U.S. Energy Systems, but may be deemed to
beneficially own the shares of Common Stock of U.S. Energy Systems held by
Cinergy Solutions. None of the persons listed in Exhibit 99.1 has any direct or
indirect interest in U.S. Energy Systems as of the date of this Schedule 13D.
(b) Cinergy Solutions has the sole power to direct the vote and sole
power to direct the disposition of all the shares of Common Stock of U.S. Energy
Systems held by it. Cinergy has the indirect power to direct the vote and the
indirect power to direct the disposition of the shares of Common Stock of U.S.
Energy Systems held by Cinergy Solutions through its indirect interest in
Cinergy Solutions.
(c) Cinergy Solutions purchased the 583,333 shares of Common Stock of
U.S. Energy Systems held by it directly from U.S. Energy Systems on October 12,
2000 at a price of $6.000003 per share.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Cinergy Solutions purchased the 583,333 shares of Common Stock of U.S.
Energy Systems held by it pursuant to a Stock Purchase Agreement, dated October
12, 2000, for an aggregate purchase price of $3.5 million. The Stock Purchase
Agreement restricts Cinergy Solutions from transferring the purchased shares for
one year other than to its affiliates, and prevents Cinergy Solutions from
transferring the purchased shares at any time in certain limited circumstances.
In connection with the purchase of the shares and the execution of the Stock
Purchase Agreement, Cinergy Solutions entered into voting agreements with U.S.
Energy Systems and a number of stockholders of U.S. Energy Systems which provide
that one designee of Cinergy Solutions will be elected to the Board of Directors
of U.S. Energy Systems. Cinergy Solutions also entered into a Registration
Rights Agreement with U.S. Energy Systems which grants Cinergy Solutions certain
piggyback and demand registration rights with respect to the shares of Common
Stock issued to it.
The Stock Purchase Agreement, Registration Rights Agreement and voting
agreements are included as Exhibits 99.3 through 99.6 to this Schedule 13D, and
are hereby incorporated into this Schedule 13D by reference.
<PAGE> 7
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CUSIP No. 902951102 13D Page 7 of 8 Pages
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
99.1 Schedule of Directors and Executive Officers of the Reporting
Persons
99.2 Joint Filing Statement Required by Rule 13d-1(k)
99.3 Stock Purchase Agreement, dated October 12, 2000, by and
between Cinergy Solutions, Inc. and U.S. Energy Systems, Inc.
99.4 Voting Agreement, dated October 12, 2000, by and between
Cinergy Solutions, Inc., Energy Systems Investors, L.L.C.,
Lawrence I. Schneider and Henry Schneider
99.5 Voting Agreement, dated October 12, 2000, by and between
Cinergy Solutions, Inc. and U.S. Energy Systems, Inc.
99.6 Registration Rights Agreement, dated October 12, 2000, by and
between Cinergy Solutions, Inc. and U.S. Energy Systems, Inc.
<PAGE> 8
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 23, 2000 CINERGY SOLUTIONS, INC.
By: /s/ Donald B. Ingle, Jr.
-------------------------
Name: Donald B. Ingle, Jr.
Title: President
CINERGY CORP.
By: /s/ Donald B. Ingle, Jr.
-------------------------
Name: Donald B. Ingle, Jr.
Title: Vice President
<PAGE> 9
EXHIBIT 99.1
<TABLE>
<CAPTION>
CINERGY CORP.
-------------
PRINCIPAL BUSINESS BUSINESS ADDRESS
POSITION WITH (OR RESIDENCE
CORPORATION; PRINCIPAL ADDRESS IF NO BUSINESS
NAME; CITIZENSHIP OCCUPATION, IF DIFFERENT ADDRESS AVAILABLE)
----------------- ------------------------ ------------------
<S> <C> <C>
Jackson H. Randolph Director and Chairman of the Board 139 East Fourth Street
United States of America of Cinergy Corp. Cincinnati, Ohio 45202
James E. Rogers Director and Vice Chariman, President 139 East Fourth Street
United States of America and Chief Executive Officer of Cinergy Cincinnati, Ohio 45202
Corp.
James K. Baker Director of Cinergy Corp.; 139 East Fourth Street
United States of America retired Vice Chairman of Arvin Cincinnati, Ohio 45202
Industries, Inc. (worldwide supplier
of automotive parts)
Michael G. Browning Director of Cinergy Corp.; 139 East Fourth Street
United States of America Chairman and President of Cincinnati, Ohio 45202
Browning Investments, Inc.
(real estate venture firm)
Phillip R. Cox Director of Cinergy Corp.; 139 East Fourth Street
United States of America President and Chief Executive Cincinnati, Ohio 45202
Officer of Cox Financial Corporation
(financial and estate planning services)
John A. Hillenbrand II Director of Cinergy Corp.; 139 East Fourth Street
United States of America Chairman, President and Chief Executive Cincinnati, Ohio 45202
Officer of Glynnadam, Inc. (personal
investment holding company); Chairman of
Able Body Corporation and Nambe' Mills,
Inc.; Vice Chairman of Pri-Pak, Inc.
George C. Julifs Director of Cinergy Corp.; 139 East Fourth Street
United States of America President and Chief Executive Officer of Cincinnati, Ohio 45202
SENCORP (international holding company with
subsidiaries that manufacture fastening
systems and commercialize health care
technologies)
Thomas E. Petry Director of Cinergy Corp.; retired 139 East Fourth Street
United States of America Chairman of the Board and Chief Executive Cincinnati, Ohio 45202
Officer of Eagle-Picher Industries, Inc.
(diversified manufacturer of industrial and
automotive products)
Mary L. Schapiro Director of Cinergy Corp.; 139 East Fourth Street
United States of America President of NASD Regulation, Inc. Cincinnati, Ohio 45202
(indepndent regulatory subsidiary of
the NASD)
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS BUSINESS ADDRESS
POSITION WITH (OR RESIDENCE
CORPORATION; PRINCIPAL ADDRESS IF NO BUSINESS
NAME; CITIZENSHIP OCCUPATION, IF DIFFERENT ADDRESS AVAILABLE
----------------- ------------------------ -----------------
<S> <C> <C>
John J. Schiff, Jr. Director of Cinergy Corp.; 139 East Fourth Street
United States of America Chairman of the Board, President and Cincinnati, Ohio 45202
Chief Executive Officer of Cincinnati
Financial Corporation (insurance
holding company) and The
Cincinnati Insurance Company
Philip R. Sharp, Ph.D. Director of Cinergy Corp.; 139 East Fourth Street
United States of America Lecturer in Public Policy at Harvard Cincinnati, Ohio 45202
University's John F. School of
Government; Chairman of the Secretary's
Electric System Reliability Task Force
Dudley S. Taft Director of Cinergy Corp.; 139 East Fourth Street
United States of America President and Chief Executive Cincinnati, Ohio 45202
Officer of Taft Broadcasting Company
(media investment company)
Oliver W. Waddell Director of Cinergy Corp.; retired 139 East Fourth Street
United States of America Chairman of the Board of Star Banc Cincinnati, Ohio 45202
Corporation (now Firstar Corporation, a
bank holding company)
Charles J. Winger Vice President and Acting Chief Financial 139 East Fourth Street
United States of America Officer of Cinergy Corp. Cincinnati, Ohio 45202
Michael J. Cyrus Vice President of Cinergy Corp. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
John Bryant Vice President of Cinergy Corp. 139 East Fourth Street
United Kingdom Cincinnati, Ohio 45202
William J. Grealis Executive Vice President and 139 East Fourth Street
United States of America Chief of Staff of Cinergy Corp. Cincinnati, Ohio 45202
J. Joseph Hale, Jr. Vice President of Cinergy Corp. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
M. Stephen Harkness Vice President of Cinergy Corp. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
Donald B. Ingle, Jr. Vice President of Cinergy Corp. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
Julie S. Janson Secretary of Cinergy Corp. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
Bernard F. Roberts Vice President and Comptroller 139 East Fourth Street
United States of America of Cinergy Corp. Cincinnati, Ohio 45202
Lisa D. Gamblin Vice President and Treasurer 139 East Fourth Street
United States of America of Cinergy Corp. Cincinnati, Ohio 45202
Larry E. Thomas Group President of Cinergy Corp. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS BUSINESS ADDRESS
POSITION WITH (OR RESIDENCE
CORPORATION; PRINCIPAL ADDRESS IF NO BUSINESS
NAME; CITIZENSHIP OCCUPATION, IF DIFFERENT ADDRESS AVAILABLE
----------------- ------------------------ -----------------
<S> <C> <C>
James L. Turner Vice President of Cinergy Corp. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
Jerome A. Vennemann Vice President, General Counsel and 139 East Fourth Street
United States of America Assistant Secretary of Cinergy Corp. Cincinnati, Ohio 45202
.
CINERGY SOLUTIONS, INC.
-----------------------
James E. Rogers Director of Cinergy Solutions, Inc.; 139 East Fourth Street
United States of America Vice Chairman, President and Chief Cincinnati, Ohio 45202
Executive Officer of Cinergy Corp.
Donald B. Ingle, Jr. Director and Chief Executive Officer 139 East Fourth Street
United States of America of Cinergy Solutions, Inc.; Vice Cincinnati, Ohio 45202
President of Cinergy Corp.
Charles J. Winger Director and Vice President of 139 East Fourth Street
United States of America Cinergy Solutions, Inc.; Vice Cincinnati, Ohio 45202
President and Acting Chief Financial
Officer of Cinergy Corp.
Felicia A. Ferguson Vice President of Cinergy Solutions, Inc. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
M. Stephen Harkness President and Chief Operating Officer 139 East Fourth Street
United States of America of Cinergy Solutions, Inc. Cincinnati, Ohio 45202
Charles M. O'Donnell Vice President of Cinergy Solutions, Inc. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
Donna L. Robichaud Vice President of Cinergy Solutions, Inc. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
Jeremiah J. Sullivan Vice President of Cinergy Solutions, Inc. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
Bernard F. Roberts Comptroller of Cinergy Solutions, Inc. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
Lisa D. Gamblin Treasurer of Cinergy Solutions, Inc. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
Jerome A. Vennemann Secretary of Cinergy Solutions, Inc. 139 East Fourth Street
United States of America Cincinnati, Ohio 45202
</TABLE>
<PAGE> 12
Exhibit 99.2
JOINT FILING STATEMENT
In accordance with Rule 13d-1(k) of Regulation 13D-G of the Securities
Exchange Act of 1934, as amended, the entities listed below agree to the joint
filing on behalf of each of them of this Statement on Schedule 13D (including
any and all amendments thereto) with respect to the shares of Common Stock of
U.S. Energy Systems, Inc., and further agree that this Joint Filing Statement
shall be included as an Exhibit to such joint filings. In evidence thereof the
undersigned, being duly authorized, hereby executes this Statement on this
October 23, 2000.
CINERGY SOLUTIONS, INC.
By: /s/ Donald B. Ingle, Jr.
-------------------------
Name: Donald B. Ingle, Jr.
Title: President
CINERGY CORP.
By: /s/ Donald B. Ingle, Jr.
-------------------------
Name: Donald B. Ingle, Jr.
Title: Vice President
<PAGE> 13
Exhibit 99.3
STOCK PURCHASE AGREEMENT, dated as of October 12, 2000 (this
"AGREEMENT"), by and among U.S. ENERGY SYSTEMS, INC., a Delaware corporation
("ISSUER"), and CINERGY SOLUTIONS, INC., a Delaware corporation (the
"PURCHASER").
WHEREAS, the Issuer desires to issue 583,333 shares of its Common Stock
to the Purchaser and the Purchaser desires to purchase such shares on the terms
and subject to the conditions of this Agreement,
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE SECURITIES
SECTION 1.01 ISSUANCE AND SALE OF THE SHARES.
(a) Subject to the terms and conditions set forth herein, the
Issuer shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Issuer, on the Closing Date (as defined), an aggregate of 583,333
shares of the Company's Common Stock, par value $.01 per share (said aggregate
of 583,333 shares being herein collectively called the "SHARES"), at a purchase
price of $6.000003 per Share for an aggregate purchase price of Three Million
Five Hundred Thousand Dollard ($3,500,000) (the "PURCHASE PRICE"), and the
Issuer shall issue and deliver to the Purchaser stock certificates in definitive
form, registered in the name of the Purchaser, evidencing the Shares being
purchased by it hereunder.
(b) As payment in full for the Shares being purchased by it
hereunder, and against delivery thereof as aforesaid, the Purchaser shall
deliver to the Issuer on the Closing Date a certified or official bank check in
New York Clearing House funds, payable to the order of the Company, in the
amount of Three Million Five Hundred Thousand Dollars ($3,500,000), or shall
transfer such sum to the account of the Issuer by wire transfer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 2.01 GENERAL REPRESENTATIONS AND WARRANTIES.
The Purchaser represents and warrants to the Issuer that:
-1-
<PAGE> 14
(a) The Purchaser is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to enter into this Agreement and the agreements, documents
and instruments contemplated hereby ("ANCILLARY AGREEMENTS") and perform its
obligations hereunder and thereunder (the Ancillary Agreements together with
this Agreement are collectively referred to as the "TRANSACTION AGREEMENTS").
(b) The execution, delivery and performance of the Transaction
Agreements (i) have been duly authorized by all necessary corporate action, and
(ii) do not and will not violate, breach or constitute a default (or an event
which with or without notice and/or lapse of time would constitute a default)
under the Purchaser's organizational documents, or, to the best of the knowledge
of the Purchaser, any agreement or instrument by which it is bound or any law,
regulation, order, award, judgment, decree, license, permit or instrument to
which it is subject. Each Transaction Agreement is valid and enforceable against
the Purchaser in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization and similar laws
affecting creditors' rights generally and applicable equitable principles.
(c) The Purchaser has obtained all consents, approvals, novations,
waivers or notifications of any third party or governmental entity
(collectively, "CONSENTS") which are necessary or required on its part for the
consummation of the transactions contemplated by the Transaction Agreements.
(d) There is no action, suit, legal or administrative proceeding,
arbitration, investigation or other proceeding or claim pending or, to the
knowledge of the Purchaser, threatened against, or affecting the Purchaser that,
if adversely determined, might reasonably be expected to have an adverse effect
on its ability to consummate the transactions contemplated by the Transaction
Agreements.
(e) The Purchaser understands that the Shares have not been registered
under the Securities Act of 1933, as amended (the "ACT"), or the securities or
similar laws of any state and are offered in reliance on exemptions therefrom.
(f) The Purchaser understands that neither the Securities and Exchange
Commission nor any other Federal or state agency has recommended, approved or
endorsed the acquisition of the Shares as an investment or passed on the
accuracy or adequacy of the information set forth in any documents provided by
the Issuer.
(g) The Purchaser has not been organized for the specific purpose of
acquiring the Shares.
(h) The Purchaser confirms that the Shares were not offered to it by
any means of general solicitation or general advertising, that it has received
no representations, warranties or written communications with respect to the
offering of the Shares other than those contained in this Agreement, and in
entering into the transactions contemplated by the
-2-
<PAGE> 15
Transaction Agreements, the Purchaser is not relying upon any information other
than that contained in this Agreement and the results of its own independent
investigation.
(i) The Purchaser is acquiring the Shares solely for its own account,
for investment purposes only, and not with a view to the distribution or resale
thereof.
(j) The Purchaser acknowledges that the Issuer is making no
representations concerning the value of the Shares, except as otherwise set
forth in Article III.
(k) The Purchaser will not sell or otherwise transfer the Shares
without registration under the Act or an exemption therefrom and agrees that it
must bear the economic risk of the purchase for an indefinite period of time
because, among other reasons, the Shares have not been registered under the Act
or under the securities laws of any state and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of unless such shares are subsequently
registered under the Act and under applicable state securities laws or an
exemption from such registration is available. The Purchaser understands that,
other than as provided pursuant to the Registration Rights Agreement (as
defined) dated as of the date hereof by and between the parties hereto, the
Issuer is under no obligation to register the Shares on behalf of the Purchaser
or to assist the Purchaser in complying with any exemption from such
registration under the Act.
(l) The Purchaser acknowledges, represents, agrees and is aware that:
(i) the representations, warranties, agreements, undertakings
and acknowledgments made by the Purchaser in this Agreement are made
with the intent that they be relied upon by the Issuer in determining
the suitability of the Purchaser as a purchaser of the Shares and shall
survive the issuance of the Shares to the Purchaser; and
(ii) the Shares are illiquid and the Purchaser must bear the
economic risk of its purchase of the Shares for an indefinite period of
time.
(m) The Purchaser is an "accredited investor" within the meaning of
Rule 501(a) under the Act with respect to the acquisition of the Shares and has
such knowledge and experience in financial and business matters to make it
capable of evaluating the merits and risks of such an investment and is able and
prepared to bear the economic risk respecting an investment in the Shares.
(n) The Purchaser acknowledges that (i) it has had the right to request
copies of any documents, records and books pertaining to this investment and the
Issuer and (ii) such documents, records and books which the undersigned
requested have been made available for inspection by the Purchaser and its
representatives.
(o) The Purchaser has had a reasonable opportunity to ask questions of
and receive answers from a person or persons acting on behalf of the Issuer
concerning the Issuer and all such questions have been answered to the full
satisfaction of the Purchaser.
-3-
<PAGE> 16
SECTION 2.02 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO REGULATORY
MATTERS.
The Purchaser further represents and warrants to the Issuer that:
(a) REPRESENTATIONS AND WARRANTIES WITH RESPECT TO REGULATORY MATTERS.
The Purchaser further represents and warrants to the Issuer that: Purchaser is a
"subsidiary company" of a registered holding company under the Public Utility
Holding Company Act of 1935 ("PUHCA"). Upon the consummation of the transactions
described herein (the "Transaction"), the Issuer may become an "affiliate" of a
holding company as such term is defined by PUHCA. Based on the Issuer's
representations and warranties contained in Section 3.03 hereof, the
consummation of the transactions described herein shall not cause the Issuer or
any subsidiary to become: (i) an "affiliate" of an electric utility company or a
"subsidiary company" of an electric utility company or a holding company as such
terms are defined by PUHCA, (ii) subject to the Federal Power Act or Natural Gas
Act, or (iii) subject to regulation as a "public utility", a "local distribution
company", an "electrical load serving entity" or a similar entity under the laws
of any state, except to the extent with respect to the foregoing clauses (i),
(ii) and (iii) the Issuer is already subject to regulation as such or
thereunder. Neither the Purchaser nor any parent company or affiliate of the
Purchaser has received any notice of any inquiry or other action by the
Securities and Exchange Commission ("SEC") with respect to the Transaction.
(b) Based on the Issuer's representations and warranties contained in
Section 3.03 hereof, the consummation of the Transaction shall not cause any
"Qualifying Facility" (as defined in Section 3.03) in which Issuer owns an
equity interest to lose its status as such under the Public Utility Regulatory
Policies Act of 1978 ("PURPA").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ISSUER
SECTION 3.01. SEC FILINGS; ISSUER FINANCIAL STATEMENTS.
(a) The Issuer has made all filings required to be filed by it under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") since
January 1, 1997 through the date of this Agreement (collectively, the "SEC
REPORTS"). The SEC Reports were prepared in all material respects in accordance
with the requirements of the Exchange Act. None of the SEC Reports, as of their
respective dates, contained any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.
(b) Each of the consolidated financial statements for the fiscal year
and fiscal quarter then ended together with notes thereto contained in the SEC
Reports (the "FINANCIAL
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<PAGE> 17
STATEMENTS") was prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each presented fairly, the consolidated financial position of the
Issuer as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal year-end adjustments).
SECTION 3.02. POWER AND AUTHORIZATION. The Issuer hereby represents and
warrants that:
(a) The Issuer is duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to enter into Transaction Agreement and perform its obligations
hereunder and thereunder.
(b) The execution, delivery and performance of the Transaction
Agreements (i) have been duly authorized by all necessary corporate action, and
(ii) do not and will not violate, breach or constitute a default (or an event
which with or without notice and/or lapse of time would constitute a default)
under the Issuer's organizational documents or, to the best of the knowledge of
the Issuer, any agreement or instrument by which it is bound or any law,
regulation, order, award, judgment, decree, license, permit or instrument to
which it is subject. Each Transaction Agreement is valid and enforceable against
the Issuer in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization and similar laws
affecting creditors' rights generally and applicable equitable principles.
(c) The Issuer has obtained all Consents which are necessary or
required on its part for the consummation of the transactions contemplated by
the Transaction Agreements.
(d) The Shares, when issued in accordance with this Agreement, shall be
deemed duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock of the Issuer.
SECTION 3.03. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO REGULATORY
MATTERS. Issuer further represents and warrants to the Purchaser that: Issuer is
not an "electric utility company" or a "holding company" or, to its knowledge,
an "affiliate" of an "electric utility company" or a "holding company" as such
terms are defined by PUHCA. Issuer or its subsidiaries has duly self-certified
or obtained certification from the Federal Energy Regulatory Commission that
each of its cogeneration or small power production facilities is a qualifying
facility within the meaning of PURPA and 18 C.F.R. Part 292 ("Qualifying
Facility"). No more than 33% of the equity interests of any such facility is
held by an electric utility or utilities or by an electric utility holding
company or companies or any combination thereof.
ARTICLE IV
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COVENANTS
SECTION 4.01. CONFIDENTIALITY.
(a) Neither any party hereto nor any of their respective officers,
directors, managers, employees, Affiliates (as defined in this Section 4.01(a)),
agents or advisors shall without the prior written consent of the other party:
(i) reveal to any third party any confidential or proprietary information, data,
documents, know-how or trade secrets of the other parties hereto ("CONFIDENTIAL
INFORMATION"); or (ii) use any Confidential Information in any manner which may
directly or indirectly adversely affect the other party hereto or its
Affiliates; provided, however, that any Confidential Information may be
disclosed by such party if required by law or legal or regulatory process (but
only in accordance with such law or legal or regulatory process) or in
compliance with the valid order of a court of competent jurisdiction.
Confidential Information shall not include information which has become
available as a matter of public record through no act or omission of such party,
or any of its Affiliates, agents or advisors, or to the extent such Confidential
Information was in the possession of such party or its Affiliates prior to its
receipt from the other parties or which was received from a third party without
breach of confidentiality obligations. Confidential Information shall not be
used by the receiving party for any reason outside of the purpose and scope of
this Agreement. The obligations established pursuant to this Section 4.01 shall
survive any termination of this Agreement for a period of three years, except
that there shall be no limit on the amount of time trade secrets must be kept
confidential. The "AFFILIATE" of any person means any other person directly or
indirectly through one or more intermediary persons, that controls, is
controlled by or is under common control with such person. The term "CONTROL"
shall mean the power to direct the management and policies of such Person
directly or indirectly, by or through stock ownership, agency or otherwise, or
pursuant to or in connection with an agreement, arrangement or understanding
(written or oral) with one or more other Persons by or through stock ownership,
agency or otherwise; and the term "CONTROLLED BY" shall have meanings
correlative to the foregoing. Notwithstanding the foregoing, the limitations
imposed pursuant to Section 4.01 shall not be applicable with respect to
Confidential Information provided pursuant to other agreements between the
parties hereto and/or their Affiliates.
(b) Each party shall take reasonable efforts to ensure that the
Confidential Information is not disclosed to, or obtained from it or its
employees, officers or agents by, any person other than personnel employed by it
or acting on its behalf who require to have access to it in order to facilitate
the transactions contemplated by this Agreement and the conduct of the business
of the Company in accordance with this Agreement.
(c) The parties hereto agree that irreparable damage shall occur in the
event of a breach of Sections 4.01 (a) or (b) and that the non-breaching parties
shall be entitled to equitable relief in the event of any such breach.
SECTION 4.02. BOARD OF DIRECTORS. Contemporaneously with the Closing,
Issuer shall elect one person designated by the Purchaser (such person to be
reasonably
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acceptable to the Issuer) to serve as a member of the board of directors of the
Issuer provided that a person designated by the Purchaser or its affiliates is
not then a member of the board of directors of the Issuer.
SECTION 4.03. PUBLIC ANNOUNCEMENTS. All media contacts and public
announcements by the parties hereto or their Affiliates regarding the matters
covered by this Agreement shall be mutually agreed upon by the parties hereto.
Notwithstanding the foregoing, the parties hereto and their Affiliates may make
such public announcements, reports, filings and disclosures concerning this
Agreement and the businesses of the Issuer as may be required by the rules of or
any agreement with the SEC, the New York Stock Exchange, Inc. or NASDAQ,
provided, that, such disclosing party or Affiliate shall use reasonable efforts
to consult with the other party regarding the nature and contents of the
contemplated disclosure.
SECTION 4.04. COVENANTS WITH RESPECT TO REGULATORY MATTERS. The
Purchaser covenants and agrees that it will not, at any time, without the
consent of the Issuer, take any action that would (a) cause any Qualifying
Facility in which Issuer holds an equity interest to lose its status as such
under PURPA, (b) subject Issuer to regulation as a "holding company" or a
"public utility company," or an "affiliate" of a "public utility company" as
such terms are defined by PUHCA, or (c) subject Issuer to regulation as a
"public utility", a "local distribution company", "electrical load serving
entity" or a similar entity under the laws of any state. The Purchaser covenants
and agrees that it will give prompt notice to the Issuer of any notice of any
inquiry or other action by the SEC with respect to the Transaction which is
received by Purchaser or any parent company or affiliate of Purchaser. The
Issuer covenants and agrees that it will not, at any time, without the consent
of the Purchaser, take any action that would subject Issuer to regulation as a
"holding company" or a "public utility company" or an "affiliate" of a "public
utility company" as such terms are defined by PUHCA.
SECTION 4.05. FURTHER ASSURANCES. The parties hereto shall execute and
deliver such agreements and arrangements which are customary in connection with
transactions of this type. In addition to the actions specifically provided for
elsewhere in this Agreement, each of the parties hereto shall use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things, reasonably necessary, proper or advisable under applicable
laws, regulations and agreements to effectuate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using its best efforts to obtain the consents and approvals, to enter into any
amendatory agreements and to make the filings and applications necessary or
desirable in order to effectuate the transactions contemplated by this
Agreement.
SECTION 4.06. COOPERATION WITH RESPECT TO GOVERNMENT FILINGS AND
REPORTS. The Purchaser and the Issuer agree to provide the other party (without
cost to such other party) with access during reasonable business hours and for a
reasonable business purpose and such cooperation and information, including, but
not limited to, all records, books, contracts, instruments, computer data and
other data, including all historical financial and tax information, and
personnel with relevant knowledge of such information, as may be reasonably
requested by
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<PAGE> 20
the other in connection with the preparation or filing of any government report
or other government filing, contemplated by this Agreement. Such cooperation and
information shall include, without limitation, promptly forwarding copies of
appropriate notices and forms or other communications received from or sent to
any government authority to the appropriate party. Each party shall make its
employees and facilities available during normal business hours and on
reasonable prior notice and shall provide explanation of any documents or
information provided hereunder.
ARTICLE V
TRANSFERABILITY OF SHARES
SECTION 5.01. RESTRICTIONS UPON TRANSFER OF SHARES. Except as set forth
in this Agreement, the Purchaser shall not sell, transfer, donate, give,
mortgage, pledge, hypothecate, or otherwise encumber or dispose of, whether
voluntarily, by operation of law or otherwise (any of the foregoing acts being
herein referred to as a "TRANSFER") the Shares. Any Transfer or attempted
Transfer of Shares, unless pursuant to the terms and conditions hereof, shall be
absolutely null and void, of no force or effect and may be enjoined. No dividend
shall be paid or any distribution made to any transferee of Shares transferred
in violation hereof nor shall any such Transfer be registered on the books of
the Issuer. The Transfer or attempted Transfer of any Shares in violation hereof
shall not affect the beneficial ownership of such Shares, and, notwithstanding
such Transfer or attempted Transfer, the Purchaser shall retain the right to
vote and the right to receive dividend and liquidation proceeds with respect to
such Shares.
SECTION 5.02. RESTRICTIVE LEGEND ON CERTIFICATES. Every certificate
representing Shares shall bear the following legend in addition to any other
legend which may be required by applicable law:
"The sale, transfer, pledge, hypothecation, or other encumbrance or
disposition of the securities represented hereby is restricted by the
terms of a certain Stock Purchase Agreement dated as of October 12,
2000 (the "Agreement"), between the U.S. Energy Systems, Inc. (the
"Issuer") and Cinergy Solutions, Inc., a copy of which is on file at
the principal place of business of the Issuer and is available for
inspection by the stockholders of the Issuer during the regular
business hours of the Issuer. Any sale, transfer, pledge,
hypothecation, or other encumbrance or disposition of the securities
represented hereby shall be absolutely void if in contravention of the
terms, provisions or conditions of such agreement. The securities
represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the "ACT"), or under any applicable
state securities law. These securities may not be sold or transferred
in the absence of an effective
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registration statement under the Act and any applicable state
securities law or receipt by the Issuer of an opinion of counsel
satisfactory to the Issuer that registration under the Act and
applicable state law is not required"
SECTION 5.03. PERMITTED TRANSFERS. Subject to the provisions of Section
5.04, (a) the Transfer of Shares to an entity which was an Affiliate of
Purchaser before such Transfer and remains an Affiliate of Purchaser after such
Transfer is permitted at any time and (b) all other Transfers will be permitted
beginning one year from the date hereof.
SECTION 5.04. ADDITIONAL REQUIREMENTS OF TRANSFER. Any Transfer
permitted by this Agreement shall be further subject to and conditioned upon
full compliance by the transferor and transferee with each of the following
conditions:
(a) The Transfer shall not cause the Issuer to become a "holding
company" or a "public utility company" or an "affiliate" of a "public utility
company" as such terms are defined by PUHCA;
(b) The Transfer shall not cause the Issuer or its subsidiaries to
become subject to the Federal Power Act or Natural Gas Act or regulation as a
"public utility," a "local distribution company," an "electrical load serving
entity" or a similar entity under the law of any state except to the extent
that, at the time of the Transfer, the Issuer or any subsidiary thereof is
already subject to regulation thereunder; and
(c) The Transfer shall not cause any Qualifying Facility in which
Issuer holds an equity interest to lose its status as such under PURPA or have
any material adverse effect on the regulatory status of any other project owned
or operated by the Issuer or its subsidiaries.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect this Agreement and
the other transactions contemplated herein shall be subject to the satisfaction
at or prior to the Closing of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable law:
(a) No governmental entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, judgment, injunction or
other order (whether temporary, preliminary or permanent), in any case which is
in effect and which prevents or prohibits the transactions contemplated in this
Agreement.
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<PAGE> 22
(b) All consents, approvals and authorizations legally required to be
obtained to consummate the transactions contemplated hereby have been obtained.
(c) None of the Transaction Agreements shall have been modified or
terminated or challenged in court.
SECTION 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ISSUER. The
obligations of Issuer to effect the transactions contemplated herein are also
subject to the following conditions:
(a) Each of the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date, except that those representations and warranties which
address matters only as of a particular date shall remain true and correct in
all material respects as of such date. The Purchaser shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing.
(b) At or prior to the Closing Date, all filings necessary under
federal and state securities laws to permit the issuance and delivery of the
Shares in connection with the Agreement in compliance with such laws shall have
been made, and any authorizations in connection therewith from all applicable
securities regulatory authorities shall have been obtained.
(c) The Purchaser shall have delivered the Ancillary Agreements
required to be delivered by it pursuant to Section 7.01(b).
SECTION 6.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE PURCHASER.
The obligation of the Purchaser to effect the transactions contemplated in this
Agreement is also subject to the following conditions:
(a) Each of the representations and warranties of the Issuer contained
in this Agreement shall be true and correct in all material respects as of the
Closing Date, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct in all
material respects as of such date. The Issuer shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing.
(b) The Issuer shall have delivered the Ancillary Agreements required
to be delivered by it pursuant to Section 7.01(a).
ARTICLE VII
CLOSING
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SECTION 7.01 CLOSING DATE. The closing of the sale and purchase of the
Shares shall take place at the offices of Robinson Brog Leinwand Greene Genovese
& Gluck P.C., 1345 Avenue of the Americas, New York, New York 10105, at 10 a.m.,
New York City time, on October 12, 2000, or at such other date and time as may
be mutually agreed upon between the Issuer and the Purchaser (such date and time
of closing being herein called the "CLOSING" or the "CLOSING DATE"). The parties
agree that at Closing:
(a) The Issuer shall deliver (or cause to be delivered) to the
Purchaser against delivery of the items listed in Section 7.01(b):
(i) a certificate evidencing the Shares;
(ii) a certificate of Good Standing of the Issuer from the
Secretary of State of Delaware;
(iii) a certificate of the resolutions of the Issuer's Board
of Directors approving the transactions contemplated hereby;
(iv) the Registration Rights Agreement dated as of the date
hereof by and between the parties hereto in the form annexed hereto as
Exhibit 7.01(a)(iv) (the "REGISTRATION RIGHTS AGREEMENT") executed by
the Issuer.
(v) a certificate of an executive officer of the Issuer to the
effect that the conditions set forth in Section 6.03(a) have been
satisfied;
(vi) the Voting Agreement by and between the parties
identified therein in the form annexed hereto as Exhibit 7.01(a)(vi)
executed by Lawrence I. Schneider, Henry Schneider and Energy Systems
Investors, L.L.C. (the "VOTING AGREEMENT");
(vii) such other instruments as the Purchaser or its counsel
shall reasonably deem necessary to consummate the transactions
contemplated hereby.
(b) The Purchaser shall deliver (or cause to be delivered) to the
Issuer against delivery of the item listed in Section 7.01(a):
(i) the Purchase Price;
(ii) a certificate of Good Standing of the Purchaser from the
Secretary of State of Delaware;
(iii) a certificate of the resolutions of the Purchaser's
Board of Directors approving the transactions contemplated hereby;
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<PAGE> 24
(iv) the Registration Rights Agreement executed by the
Purchaser;
(v) a certificate of an executive officer of the Purchaser to
the effect that the conditions set forth in Section 6.02(a) have been
satisfied;
(vi) the Voting Agreement executed by the Purchaser;
(vii) such other instruments as the Issuer or its counsel
shall reasonably deem necessary to consummate the transactions
contemplated hereby.
(c) All proceedings taken and all documents executed and delivered by
the parties at the Closing shall be deemed to have been taken and executed
simultaneously, and no proceeding shall be deemed taken nor any document
executed or delivered until all have been taken, executed and delivered.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations or warranties set forth in Article III
of this Agreement shall survive the Closing.
SECTION 8.02. NOTICES. (a) Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally by
hand, by telecopy or MAIL if mailed by, registered or certified mail postage
prepaid return receipt requested or by Federal Express or similar overnight
courier service if addressed to the parties identified below at the addresses
set forth below:
If to the Issuer:
U.S. Energy Systems, Inc.
515 N. Flagler Drive, Suite 702
West Palm Beach, Florida 33401
Facsimile No.: (914) 271-5315
Attention: Goran Mornhed, President
With a copy to:
U.S. Energy Systems, Inc.
515 N. Flagler Drive, Suite 702
West Palm Beach, Florida 33401
Facsimile No.: (718) 499-6014
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<PAGE> 25
Attention: Barbara Farr, Esq., General Counsel
If to the Purchaser:
Cinergy Solutions, Inc.
1000 East Main Street
Plainfield, IN 46168
Attention: M. Stephen Harkness, President and
Chief Operating Officer
Facsimile: 317-838-2090
With a copy to:
Cinergy Corp.
221 East Fourth Street
Cincinnati, Ohio 45201
Attention: Jerome A. Vennemann, General Counsel
Facsimile: (513)289-1363
(b) Unless otherwise specified herein, such notices or other
communications shall be deemed effective (i) on the date delivered, if delivered
personally or by a nationally recognized overnight courier, (ii) one business
day after being sent, if sent by telecopier with confirmation of good
transmission and receipt, and (iii) three business days after being sent, if
sent by registered or certified mail. Each of the parties herewith shall be
entitled to specify another address by giving notice as aforesaid to each of the
other parties hereto.
SECTION 8.03. HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.04. SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity and enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
SECTION 8.05. ENTIRE AGREEMENT. This Agreement (together with the
Disclosure Schedules and the other documents delivered pursuant hereto)
constitutes the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
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<PAGE> 26
SECTION 8.06. MUTUAL DRAFTING. Each party hereto has participated in
the drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
SECTION 8.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable choice of law principles.
SECTION 8.08. JURISDICTION. The parties hereto irrevocably: (a) agree
that any suit, action or other legal proceeding arising out of this Agreement
shall be brought in the courts of the State of New York, (b) consent to the
jurisdiction of each such court in any such suit, action or proceeding, (c)
waive any objection which they, or any of them, may have to the laying of venue
of any such suit, action or proceeding in any of such courts, and (d) agree that
service of process by registered or certified mail, at the addresses set forth
in Section 8.02 hereto, shall be good and sufficient service of process.
SECTION 8.09. EXPENSES. Except as otherwise provided herein, each party
shall bear its own fees and expenses incurred in connection with, relating to or
arising out of the negotiation, preparation, execution, delivery and performance
of this Agreement, and the effectuation of the transactions contemplated hereby,
including, without limitation, financial advisors', attorneys', accountants' and
other professional fees and expenses.
SECTION 8.10. ASSIGNMENT; PARTIES IN INTERESTS. This Agreement shall
not be assigned by any party hereto or by operation of law or otherwise,
provided, however, that a merger of the ultimate parent of any parties hereto
shall not be deemed to be an assignment by operation of law for the purposes of
this Section 8.10. This Agreement shall be binding upon and inure solely to the
benefit of each party hereto and its permitted assigns, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 8.11 NO CONSEQUENTIAL DAMAGES. Except as otherwise provided in
this Agreement, it is agreed that no party hereto will be responsible to the
others for any indirect, special, incidental or consequential loss or damage
whatsoever (including lost profits and opportunity costs) arising out of this
Agreement.
SECTION 8.13. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Issuer and Purchaser have caused this Agreement to
be executed as of the date first written above.
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U.S. ENERGY SYSTEMS, INC.
By: /s/ Goran Mornhed
-------------------------------
Name: Goran Mornhed
Title: President and
Chief Operating Officer
CINERGY SOLUTIONS, INC.
By: /s/ M. Stephen Harkness
-------------------------------
Name: M. Stephen Harkness
Title: President and Chief Operating Officer
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<PAGE> 28
EXHIBIT 99.4
Lawrence I. Schneider
Henry Schneider
Energy Systems Investors, L.L.C.
920 Park Avenue, Apt. 4D
New York, New York 10028
Dated as of October 12, 2000
Cinergy Solutions, Inc.
1000 East Main Street
Plainfield, IN 46168
Ladies and Gentlemen:
In connection with the execution and delivery of the Stock
Purchase Agreement (the "Purchase Agreement") dated as of October 12, 2000 by
and between U.S. Energy Systems, Inc. ("USE") and Cinergy Solutions, Inc.
("Purchaser"), the parties hereto, for good and valuable consideration, receipt
of which they hereby acknowledge, agree that (capitalized terms used without
being defined herein shall have the meanings ascribed to such term by the
Purchase Agreement):
1. (a) Contemporaneously with the Closing, M. Stephen
Harkness, ("Harkness") the person designated by Purchaser to serve on the Board
of Directors of USE (the "Board") was elected to fill a newly created
directorship in the Board with a term expiring at the same time as the terms of
Lawrence I. Schneider ("L. Schneider"), Howard Nevins and Richard Brandt, II as
directors of USE expire (such class of directors referred to herein as the
"Class 1 Directors"). (Harkness or any other person designated by Purchaser to
serve on the Board pursuant to Section 4.02 of the Purchase Agreement is
referred to herein as the "Purchaser Designee").
(b) Each of Energy Systems Investors, LLC ("ESI"), Henry
Schneider and L. Schneider (in their capacities as stockholders of USE)
(collectively, the "Schneider Group") hereby severally agree that except as
provided in paragraph 3 hereof they will, at the meeting of the stockholders of
USE at which the Class 1 Directors are to be elected vote (or cause to be voted)
their shares of USE capital stock owned beneficially or of record by them at the
time in favor of the election of the Purchaser Designee to the Board.
2. The Purchaser agrees that it will, at the meeting of the
stockholders of USE at which Class 1 Directors are to be elected vote (or cause
to be voted) the shares of capital stock
<PAGE> 29
Cinergy Solutions, Inc.
Dated as of October 12, 2000
Page 2
of USE owned beneficially or of record by it at the time in favor of the
election to the Board of Lawrence I. Schneider or the Schneider Group designee.
3. The parties acknowledge that the obligations of ESI under
paragraph 1 above are subject and subordinate to the limitations on voting (the
"Pledge Agreement Restrictions") imposed with respect to certain of the shares
of capital stock of USE owned beneficially or of record by ESI pursuant to the
Pledge Agreement (the "Pledge Agreement") dated as of July 31, 2000 by and among
ESI, USE and the other parties identified therein and in the event of any
inconsistency between paragraph 1 and the Pledge Agreement Restrictions, the
Pledge Agreement Restrictions shall govern.
4. Except as provided in paragraph 3 hereof, each party hereto
agrees that, if, at any time, such party is then entitled to vote for the
removal of directors of USE, such party will not vote any of its shares of USE
capital stock in favor of the removal of any director elected pursuant to
paragraphs 1 or 2 or Henry Schneider unless such removal shall be for Cause (as
defined below). "Cause" shall mean (a) the director having been convicted of a
crime which constitutes a felony under applicable law or having entered a plea
of guilty or nolo contendere with respect thereto, (b) the engaging by the
director in illegal or fraudulent conduct with respect to USE or (c) any willful
or persistently repeated material non-performance of the director's duties to
USE (other than by reason of the incapacity of the director due to physical or
mental illness) after notice by USE of such failure and the director's
non-performance and continued, willful or persistently repeated material
non-performance after such notice.
5. No party hereto shall enter into any agreement or
understanding with any person or entity to vote such party's shares or give
instructions in any manner inconsistent with this agreement.
6. (a) The obligations of the Schneider Group hereunder shall
terminate on the earlier to occur of the third anniversary of this agreement or
the date that the Purchaser ceases to beneficially own at least three (3%)
percent of the then outstanding voting shares of USE.
(b) The obligations of the Purchaser hereunder shall terminate
on the earlier of the third anniversary of this agreement or the date that the
Schneider Group ceases to beneficially own at least three (3%) percent of the
then outstanding voting shares of USE.
(c) Beneficial ownership shall be determined in accordance
with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") exclusive of the effects of this agreement on such
determination. The Schneider Group are the beneficial owners of the shares of
USE capital stock subject to the Pledge Agreement until such shares are disposed
of to person(s) not affiliated with the Schneider Group. The term "voting
shares" as used herein means shares of USE capital stock (including the right to
acquire voting
<PAGE> 30
Cinergy Solutions, Inc.
Dated as of October 12, 2000
Page 3
shares of USE capital stock determined in accordance with Rule 13d-3(d))
entitled to vote with respect to the election of directors.
7. All notices hereunder shall be given to the parties at
their respective addresses set forth herein or such other address as a party may
specify pursuant to notice given in accordance with this paragraph 7. Unless
otherwise specified herein, such notices or other communications shall be deemed
effective (i) on the date delivered, if delivered personally or by a nationally
recognized overnight courier, (ii) one business day after being sent, if sent by
telecopier with confirmation of good transmission and receipt, and (iii) three
business days after being sent, if sent by registered or certified mail. Each of
the parties herewith shall be entitled to specify another address by giving
notice as aforesaid to each of the other parties hereto.
Kindly acknowledge your agreement to the foregoing by signing
your name where indicated below.
Very truly yours,
Energy Systems Investors, L.L.C.
By: /s/ Henry Schneider
---------------------------
Henry Schneider, Manager
/s/ Lawrence I. Schneider
-------------------------------
Lawrence I. Schneider
/s/ Henry Schneider
-------------------------------
Henry Schneider
Acknowledged and Agreed:
Cinergy Solutions, Inc.
By: /s/ M. Stephen Harkness
---------------------------
<PAGE> 31
EXHIBIT 99.5
Cinergy Solutions, Inc.
October 12, 2000
Page 1
U.S. Energy Systems, Inc.
515 N. Flagler Drive, Suite 702
West Palm Beach, Florida 33401
October 12, 2000
Cinergy Solutions, Inc.
1000 East Main Street
Plainfield, IN 46168
Ladies and Gentlemen:
In connection with the Stock Purchase Agreement (the "Purchase
Agreement") dated as of October 12, 2000 by and between U.S. Energy Systems,
Inc. ("USE") and Cinergy Solutions, Inc. ("Purchaser"), and the letter agreement
(the "Voting Agreement") dated as of October 12, 2000 by and between Purchaser,
Energy Systems Investors, L.L.C. ("ESI"), Lawrence I. Schneider ("LS") and Henry
Schneider ("HS") and to induce the Purchaser to enter into the Purchase
Agreement and to consummate the transactions contemplated thereby, USE hereby
agrees that, subject to the approval of the USE Board of Directors (which
approval will be sought at the next regularly scheduled meeting of the USE Board
of Directors) it will cause the Pledge Agreement dated as of July 31, 2000 by
and between ESI, LS, HS and USE to be amended so that the Schneider Group may
vote its shares in favor of the Purchaser's Designee in accordance with
paragraph 1 of the Voting Agreement without regard to the Pledge Agreement
Restrictions. ESI, LS and HS hereby agree to effect such amendment. Capitalized
terms used without being defined herein shall, except as otherwise provided
herein, have the meanings ascribed to such terms by the Voting Agreement.
<PAGE> 32
Cinergy Solutions, Inc.
October 12, 2000
Page 2
Kindly acknowledge your agreement to the foregoing by signing
your name where indicated below.
Very truly yours,
U.S. Energy Systems, Inc.
By: /s/ Goran Mornhed
-----------------------------
Goran Mornhed, President and
Chief Operating Officer
Acknowledged and Agreed:
Cinergy Solutions, Inc.
By: /s/ M. Stephen Harkness
----------------------------
Energy Systems, Inc.
By: /s/ Henry Schneider
----------------------------
/s/ Henry Schneider
--------------------------------
Henry Schneider
/s/ Lawrence I. Schneider
--------------------------------
Lawrence I. Schneider
<PAGE> 33
EXHIBIT 99.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is dated as
of October 12, 2000 between U.S. ENERGY SYSTEMS, INC., a Delaware corporation
(the "Company") and CINERGY SOLUTIONS, INC., a Delaware corporation ("CSI").
RECITALS
I. Pursuant to that certain Stock Purchase Agreement dated as
of October 12, 2000, by and between the Company and CSI (the "Stock Purchase
Agreement"), the Company has agreed to provide CSI certain registration rights
with respect to the shares of the Company's Common Stock issued pursuant to the
Stock Purchase Agreement (all of such shares of Common Stock being referred to
herein as the "Restricted Shares").
II. Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed thereto in the Stock Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein, the parties agree as follows:
1. INCIDENTAL (PIGGYBACK) REGISTRATION RIGHTS.
(a) Subject to the limitations set forth in this
Agreement, if the Company at any time more than twelve (12) months after the
Closing Date and prior to the tenth anniversary of the Closing Date proposes to
file on its behalf a registration statement (a "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), on any form
(other than a Registration Statement on Form S-4 or S-8 or any successor form
not available for registering the Restricted Shares, or any form for securities
to be offered in a transaction of the type referred to in Rule 145 under the
Securities Act or to employees of the Company pursuant to any employee benefit
plan, respectively) for the general registration of securities to be sold for
cash with respect to its Common Stock or any other class of equity security (as
defined in Section 3(a) (11) of the Securities Exchange Act of 1934, as amended)
of the Company, it will give written notice to CSI at least fifteen (15) days
before the initial filing with the Securities and Exchange Commission (the
"Commission") of such Registration Statement, which notice shall set forth the
intended method of disposition of the securities proposed to be registered by
the Company. The notice shall offer to include in such filing the aggregate
number of shares of Restricted Shares as CSI may request subject to the
limitations set forth in this Agreement.
<PAGE> 34
(b) If CSI desires to have Restricted Shares registered under
this Section 1, CSI shall advise the Company in writing within five (5) days
after the date of receipt of such offer from the Company, setting forth the
amount of such Restricted Shares for which registration is requested. The
Company shall thereupon include in such filing the number of shares of
Restricted Shares for which registration is so requested; provided that nothing
herein shall prevent the Company from abandoning or delaying any such
registration at any time. In the event that the proposed registration by the
Company is, in whole or in part, an underwritten public offering of securities
of the Company, the Company shall not be required to include any of the
Restricted Shares in such underwriting unless CSI agrees to accept the offering
on the same terms and conditions as the shares of Common Stock, if any,
otherwise being sold through underwriters under such registration, and provided,
further, that if the managing underwriter advises the Company that the inclusion
of all Restricted Shares proposed to be included by CSI in the underwritten
public offering and other issued and outstanding shares of Common Stock proposed
to be included therein by the persons other than CSI (the "Other Shares") would
jeopardize the success of the Company's offering, then the Company shall be
required to include in the offering (in addition to the number of shares to be
sold by the Company) only that number of Restricted Shares that the managing
underwriter believes will not jeopardize the success of the Company's offering
and the number of Restricted Shares and Other Shares not included in such
underwritten public offering shall be reduced pro rata based upon the number of
shares of Restricted Shares and Other Shares requested by the holders thereof to
be registered in such underwritten public offering. In the event the Company
chooses a registration form which limits the size offering either in terms of
the number of shares or dollar amount, the Company shall not be required to
include in the offering (in addition to the number of shares to be sold by the
Company) Restricted Shares which would exceed such limits.
(c) Notwithstanding anything to the contrary contained in this
Section 1, in the event that there is a firm commitment underwritten public
offering of securities of the Company pursuant to a registration covering
Restricted Shares and CSI does not elect to sell CSI's Restricted Shares to the
underwriters of the Company's securities in connection with such offering (and
the Company nonetheless permits such shares to be registered pursuant to such
registration statement), CSI shall refrain from selling such Restricted Shares
so registered pursuant to this Section 1 during the period of distribution of
the Company's securities by such underwriters and the period in which the
underwriting syndicate participates in the after market; provided, however, that
CSI shall, in any event, be entitled to sell CSI's Restricted Shares commencing
on the 90th day after the effective date of such registration statement.
2. DEMAND REGISTRATION RIGHTS.
(a) If at any time at least twelve (12) months after
the Closing Date and prior to the tenth anniversary of the Closing Date (the
"Registration Period"), the Company shall receive a written request from CSI (a
"Registration Request") that the Company effect the registration on Form S-3 (or
subsequent similar form) of all or any portion of the Restricted Shares owned by
CSI, the Company will, if eligible to do so on such form, use commercially
<PAGE> 35
reasonable efforts to cause the Restricted Shares to be registered under the
Securities Act and to promptly effect and comply with all such requirements as
may be necessary to permit the sale or other transfer of such Restricted Shares.
The Company shall not be obligated to file and cause to become effective more
than one registration statement in which Restricted Shares are sold pursuant to
this Section 2(a), nor to conduct a special audit of its financial statements,
unless CSI undertakes to pay the costs associated with such audit.
(b) Notwithstanding the foregoing, the Company may, for a
period not to exceed 135 days (the "Delay Period") postpone filing of the
registration statement if the Company determines in good faith that such
registration (i) might interfere or affect the negotiation or completion of any
transaction that is being contemplated by the Company (whether or not a final
decision has been made to undertake such transaction) or (b) involve initial or
continuing disclosure obligations that might not be in the best interests of the
Company's stockholders. If, after a registration statement becomes effective,
the Company advises CSI that the Company considers it appropriate for the
registration statement to be amended, CSI shall suspend immediately any further
sales of such shares until the Company advises it that the registration
statement has been amended, provided, however, that the period in which such
offers and sales shall be suspended shall be added to the distribution period
calculated pursuant to Section 3(c) herein.
3. REGISTRATION PROCEDURES.
(a) In connection with the filing of a registration
statement pursuant hereto, the Company will:
(i) prepare and file with the Commission a
registration statement with respect to such securities and use commercially
reasonable efforts to cause such registration statement to become and remain
effective for the period of distribution contemplated thereby (as determined
pursuant to Section 3(c) herein);
(ii) use commercially reasonable efforts to prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective (and to remain effective
for the period of distribution contemplated thereby (as determined pursuant to
Section 3(c) herein)) and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all securities covered by such
registration statement;
(iii) furnish to CSI such number of copies of a
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as CSI may reasonably request;
(iv) register or qualify the securities covered by
such registration statement under such other securities or blue sky laws of such
jurisdictions within the United States as CSI shall reasonably request
(provided, however, the Company shall not be obligated to
<PAGE> 36
qualify as a foreign corporation to do business under the laws of any
jurisdiction in which it is not then qualified or to file any general consent to
service of process), and do such other commercially reasonable acts and things
as may be required of it to enable CSI to consummate the disposition in such
jurisdiction of the securities covered by such registration statement;
(v) enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Common Stock and as shall be required in connection with the action taken by the
Company; and
(vi) promptly notify CSI in writing of the happening
of any event, during the period of distribution, as a result of which the
registration statement includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing (in which case, if so requested by the Company in writing, CSI shall
promptly take action to cease making any offers of the Restricted Shares until
receipt and distribution of a revised or supplemental prospectus).
(b) In connection with any registration hereunder, CSI will
(i) furnish the Company in writing such information with respect to CSI and the
proposed distribution by CSI as reasonably requested by the Company and all such
information necessary in order to assure compliance with Federal and applicable
state securities laws and (ii) if CSI elects to sell the Restricted Shares to
underwriters, enter into an agreement with the managing underwriters in such
form and containing such provisions as are customary in the securities business
for such an arrangement between major underwriters and companies of the
Company's size and investment stature, provided that such agreement shall not
contain any provisions applicable to the Company that are inconsistent with the
provisions hereof and, provided further, that the time and place of the closing
of such agreement shall be as mutually agreed upon between the Company and the
managing underwriter.
(c) For purposes of Section 3(a) hereof, the period of
distribution of Restricted Shares in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it (but in no event more than twelve
(12) months from the effective date of such registration statement), and the
period of distribution of Restricted Shares in any other registration shall be
deemed to extend until the earlier of the sale of all Restricted Shares covered
thereby or twelve (12) months after the Closing Date thereof. The Company shall
not be required to keep a registration statement current after the expiration of
the distribution period with respect to the securities registered pursuant to
such registration statement.
(d) In connection with a distribution of Restricted Shares
effected pursuant to a registration statement on a non-underwritten basis, CSI
shall provide the Company with information regarding the status of its sales of
such Restricted Shares, as and when such information is requested by the
Company.
<PAGE> 37
4. EXPENSES.
All expenses incurred in complying with this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, and
expenses (including attorneys' fees) of complying with the securities or blue
sky laws of any jurisdictions, except to the extent required to be paid by
participating selling security holders by state securities or blue sky laws, and
except as provided by Section 2(a) herein, shall be paid by the Company;
provided, however, that CSI (and not the Company) shall be liable for (i) all
fees, discounts and commissions to any underwriter or broker relating to the
Restricted Shares, if any, (ii) all transfer taxes, if any, and (iii) all fees
and disbursements of its legal counsel, if any.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of
any registration of any Restricted Shares under the Securities Act pursuant to
this Agreement, the Company shall indemnify and hold harmless CSI, each
underwriter of the Restricted Shares, if any, each such broker or any other
person, if any, who controls any of the foregoing persons, within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which any of the foregoing persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement of a material fact contained in the Registration Statement
under which such Restricted Shares were registered under the Securities Act, any
final prospectus contained therein, or any amendment or supplement thereto, or
arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or, with respect to any final prospectus, necessary to make the
statements therein in light of the circumstances under which they were made, not
misleading; and shall reimburse CSI, such underwriter, broker and each such
controlling person for any legal expenses reasonably incurred by any of them in
connection with defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be obligated to so indemnify CSI,
such underwriter, broker or any such controlling person insofar as such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
Registration Statement, said final prospectus or said amendment or supplement in
reliance upon and in conformity with information furnished to the Company or
such underwriter or broker by CSI in writing for use in preparation thereof.
(b) INDEMNIFICATION BY CSI. Before Restricted Shares held by
CSI shall be included in any Registration Statement pursuant to this Agreement,
CSI shall indemnify and hold harmless (in the same manner and to the same extent
as set forth in Section 5(a) hereof for the indemnification of CSI by the
Company) the Company, each director of the Company, each officer of the Company
who shall sign such Registration Statement and any person who controls the
Company within the meaning of the Securities Act, with respect to any untrue
statement or omission from such Registration Statement or final prospectus
contained therein or any amendment or supplement thereto, if such untrue
statement or omission was (i) made in
<PAGE> 38
reliance upon and in conformity with information furnished to the Company by CSI
in writing for use in the preparation of such Registration Statement, final
prospectus or amendment or supplement or (ii) contained in any Registration
Statement which was utilized by CSI or any controlling person or affiliate of
CSI after CSI was notified in accordance with Section 7(a) hereof that such
Registration Statement (x) should be amended, (y) contained an untrue statement
of a material fact or (z) omitted to state any material fact.
(c) INDEMNIFICATION PROCEDURES. Promptly after receipt by an
indemnified party of notice of the commencement of any action involving a claim
referred to in this Section 5, such indemnified party will, if a claim in
respect thereof is made against any indemnifying party, give written notice to
the latter of such claim and/or the commencement of such action. In case any
such action is brought against an indemnified party, the indemnifying party will
be entitled to participate in and assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election to assume the
defense thereof, the indemnifying party shall be responsible for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, provided that if any indemnified party shall have reasonably
concluded that there may be one or more legal defenses available to such
indemnified party which conflict in any material respect with those available to
the indemnifying party, or that such claim or litigation involves or could have
an effect upon matters beyond the scope of the indemnity agreement provided in
this Section 5, such indemnifying party shall reimburse such indemnified party
and shall not have the right to assume the defense of such action on behalf of
such indemnified party and such indemnifying party shall reimburse such
indemnified party and any person controlling such indemnified party for that
portion of the fees and expenses of any counsel retained by the indemnified
party which are reasonably related to the matters covered by the indemnity
agreement provided in this Section 5. The indemnifying party shall not make any
settlement of any claims indemnified against thereunder without the written
consent of the indemnified party or parties, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing provisions of this Section
5, if pursuant to an underwritten public offering of the Common Stock, the
Company, CSI and the underwriters enter into an underwriting or purchase
agreement relating to such offering that contains provisions covering
indemnification by each of the parties thereto with respect to each other party
thereto in connection with such offering, the indemnification provisions of this
Section 5 shall be deemed inoperative for purposes of such offering.
6. CERTAIN LIMITATIONS ON REGISTRATION RIGHTS.
Notwithstanding the other provisions of this
Agreement, the Company shall not be obligated to register the Restricted Shares
if, in the opinion of counsel to the Company, the sale or other disposition of
the Restricted Shares may be effected without registering such Restricted Shares
under the Securities Act.
7. MISCELLANEOUS.
<PAGE> 39
(a) NOTICE GENERALLY. (i) Any notice or other
communication required or permitted hereunder shall be in writing and shall be
delivered personally by hand, by telecopy or MAIL if mailed by, registered or
certified mail postage prepaid return receipt requested or by Federal Express or
similar overnight courier service if addressed to the parties at the addresses
set forth below:
if to the Company, at U.S. Energy Systems, Inc.
515 N. Flagler Drive, Suite 702
West Palm Beach, Florida 33401
Attn: Goran Mornhed, President
and Chief Operating Officer
Facsimile: 561-795-5138
with a copy to: Robinson Brog Leinwand Greene Genovese & Gluck P.C.
1345 Avenue of the Americas
New York, New York 10105-0143
Attn: Allen J. Rothman, Esq.
Facsimile: 212-956-2164
if to CSI: Cinergy Solutions, Inc.
1000 East Main Street
Plainfield, IN 46168
Attn: M. Stephen Harkness, President
and Chief Operating Officer
Facsimile: 317-838-2090
with a copy to: Cinergy Corp.
221 East Fourth Street
Cincinnati, Ohio 45201
Attention: Jerome A. Vennemann, Esq., General Counsel
Facsimile: 513-287-1363
(ii) Unless otherwise specified herein, such notices
or other communications shall be deemed effective (A) on the date delivered, if
delivered personally or by a nationally recognized overnight courier, (B) one
business day after being sent, if sent by telecopier with confirmation of good
transmission and receipt, and (C) three business days after being sent, if sent
by registered or certified mail. Each of the parties herewith shall be entitled
to specify another address by giving notice as aforesaid to each of the other
parties hereto.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto; provided, however, that, CSI's rights hereunder may not be assigned or
transferred (except to an affiliate of CSI in connection with a permitted
transfer under Section 5.03 of the Stock
<PAGE> 40
Purchase Agreement) without the prior written consent of the Company, which may
be withheld in the Company's sole and absolute discretion.
(c) GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Delaware, without regard to the provisions thereof relating
to choice of laws.
(d) SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity and enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (i) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (ii) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof.
This Agreement may not be modified or amended except by a writing executed by
the parties hereto.
(f) NO CONSEQUENTIAL DAMAGES. Except as otherwise expressly
provided in this Agreement, it is agreed that no party hereto will be
responsible to the others for any indirect, special, incidental or consequential
loss or damage whatsoever (including lost profits and opportunity costs) arising
out of this Agreement.
(g) CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The
parties hereto irrevocably: (i) agree that any suit, action or other legal
proceeding arising out of this Agreement shall be brought in the courts of the
State of New York, (ii) consent to the jurisdiction of each such court in any
such suit, action or proceeding, (iii) waive any objection which they, or any of
them, may have to the laying of venue of any such suit, action or proceeding in
any of such courts, and (iv) agree that service of process by registered or
certified mail, at the addresses set forth in Section 7(a) hereto, shall be good
and sufficient service of process.
(h) COUNTERPARTS. This Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately,
constitute one agreement.
(i) CLOSING DATE. This Agreement shall be effective beginning
with the Closing Date and no party hereto shall have any rights or obligations
hereunder until such time.
(j) DEFINITION OF RESTRICTED SHARES. Notwithstanding anything
to the contrary herein the term "Restricted Shares" shall not include shares of
Common Stock that
<PAGE> 41
are (i) disposed of in accordance with a registration statement filed pursuant
to this Agreement or (ii) distributed to the public pursuant to Rule 144 under
the Securities Act.
IN WITNESS WHEREOF, the Company and CSI have executed this
Agreement as of the date first above written.
U.S. ENERGY SYSTEMS, INC.
By: /s/ Goran Mornhed
---------------------------
Goran Mornhed, President
and Chief Operating Officer
CINERGY SOLUTIONS, INC.
By: /s/ M. Stephen Harkness
-----------------------------
M. Stephen Harkness, President
and Chief Operating Officer
