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NEW YORK, Dec. 19, 2006 - U.S. Energy Biogas Corp. ("USEB" or "the Subsidiary"), a U.S.-based renewable energy business, announced today that in proceedings before the U.S. Bankruptcy Court for the Southern District of New York, Countryside Power Income Fund ("Countryside") stipulated that USEB's April 8, 2004 Royalty Agreement ("the Royalty Agreement") gives rise to no more than a pre-petition claim in USEB's bankruptcy case. As a result of Countryside's stipulation, Countryside will no longer have the right to convert its royalty interests into a 49% equity interest in USEB, and none of Countryside's claims under the Royalty Agreement will have administrative priority status. Countryside's stipulation led to the same result as that sought by USEB in its motion to reject the Royalty Agreement, rendering further prosecution of USEB's motion unnecessary.
"This is a very important step toward establishing a viable capital structure for USEB and its healthy business operations," said Asher E. Fogel, Chairman of USEB and Chief Executive Officer of USEB's parent company, U.S. Energy Systems, Inc. (Nasdaq: USEY). "In particular, USEB no longer will be exposed to a significant equity conversion right, which had represented a significant obstacle to our past efforts to refinance the business."
Under terms of the Royalty Agreement, USEB was required to pay a royalty to Countryside equal to 7% of USEB's cash flow distributable to USEB shareholders, plus 1.8% of USEB's gross revenues. In certain circumstances, the Royalty Agreement also provided that Countryside could convert its royalty interests into a 49% non-voting, equity interest in USEB.
Today's Court action follows USEB's November 30, 2006 announcement that it had voluntarily filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code, as well as the Court's December 1, 2006 approval of the Subsidiary's critical "first day pleadings". USEB's Chapter 11 filing did not include USEB's parent company, USEY, or the parent company's other subsidiary, a UK-based natural gas exploration and development business, UK Energy Systems (UKES). Moreover, neither USEY's nor UKES's operations are affected by USEB's Chapter 11 filing.
The USEB Chapter 11 case number is 06-12827(RDD). Today's hearing was presided over by Judge Robert D. Drain.
USEB's legal advisor in the Chapter 11 filing is Hunton & Williams LLP.
Additional information is available on the Company's website at: http://www.useyinc.com.
About U.S. Energy Systems, Inc.
U.S. Energy Systems, Inc. is an owner of green power and clean energy and resources. USEY owns and operates energy projects in the United States and United Kingdom that generate electricity, thermal energy and gas production.
Certain matters discussed in this press release are forward-looking statements, and certain important factors may affect the Company's actual results and could cause actual results to differ materially from any forward-looking statements made in this release, or which are otherwise made by or on behalf of the Company. Such factors include, but are not limited to, the effect of the USEB's Chapter 11 filing, access to needed financing or refinancing on acceptable terms, our ability to continue as a going concern, revisions in the initial estimates in the fair market value of the acquired assets, failure to realize the estimated savings or operating results of the acquisition, and other risks associated with acquisitions generally, including risks relating to managing and integrating acquired businesses, changes in market conditions, the impact of competition, changes in local or regional economic conditions, and the amount and rate of growth in expenses, dependence on management and key personnel, changes in federal or state laws and their interpretation with respect to regulation, energy policy and other business issues, the inability to commence planned projects in a timely manner, our ability to continue our growth strategy, and the ability to complete acquisitions, as well as other risks detailed from time to time in U.S. Energy's Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the year ended December 31, 2005 as well as the 10-Q for the period ended September 30, 2006. We do not undertake to update any of the information set forth in this press release.
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