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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SECURITIES
      AND EXCHANGE COMMISSION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington,
      D.C. 20549</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">---------------------</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>FORM
      8-K</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
      REPORT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pursuant
      to Section 13 or 15(d) of</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      Securities Exchange Act of 1934</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">---------------------</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">August
      7,
      2006</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
      of
      Report (Date of earliest event reported)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">U.S.
      Energy Systems, Inc.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
      name of registrant as specified in its charter)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Delaware</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
                or other </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">jurisdiction
                of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporation)</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0-10238</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">File
                Number)</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="right" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">52-1216347</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(I.R.S.
                Employer </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Identification
                No.)</font></div>
            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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      <table cellpadding="0" cellspacing="0" width="100%">

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            <td align="left" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">545
                Madison Avenue</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td width="32%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="right" valign="top" width="32%">&#160;</td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">New
                York, NY</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td width="32%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="right" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10022</font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
                of principal executive offices)</font></div>
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            <td width="2%">&#160;</td>
            <td width="32%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="right" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Zip
                Code)</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registrant's
      telephone number, including area code: (212) 588-8901</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>see</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      General
      Instruction A.2. below):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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            <td align="left" style="width: 27pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font></font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)</font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

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            <td style="width: 18pt;">
            </td>
            <td align="left" style="width: 27pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font></font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

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            <td style="width: 18pt;">
            </td>
            <td align="left" style="width: 27pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font></font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
                communications pursuant to Rule 14d-2(b) under the Exchange Act (17
                CFR
                240.14d-2(b))</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
            </td>
            <td align="left" style="width: 27pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font></font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
                CFR
                240.13e-4(c))</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      1 - Registrant&#8217;s Business and Operations </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      1.01 Entry into a Material Definitive Agreement </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Background
      </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      August
      7, 2006, we completed our acquisition and financing (the &#8220;UK Transaction&#8221;) of
      certain energy assets in the United Kingdom through certain of our subsidiaries
      as further described below. The assets (the &#8220;UK Assets&#8221;) acquired include (i)
      gas licenses for approximately 100,000 acres of onshore natural gas properties
      and mineral rights in North Yorkshire, England (the &#8220;Gas Licenses&#8221;), containing
      approximately 62.4 bcf (P2) of proved and probable reserves (consisting of
      approximately 46 bcf (P1) of proved reserves and approximately 16.4 bcf of
      probable reserves), (ii) the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Knapton
      Generating Station, a 42 MW gas-fired power plant associated with and located
      in
      the vicinity of the natural gas reserves in North Yorkshire, England, (iii)
      and
      certain related gas gathering and processing assets. As part of the UK
      Transaction, our subsidiaries entered into a power purchase agreement and a
      gas
      sales agreement with Scottish Power Energy Management (&#8220;Scottish Power&#8221;) under
      which Scottish Power is required to take all of the electricity generated by
      the
      Knapton Generating Station and all of the natural gas produced from the
      associated reserves up to 100 bcf for a term of up to 12 years. The financing
      of
      the UK Transaction provided approximately $167 million for the acquisition
      of
      the UK Assets, for certain reserves required by the terms of the financing
      and
      for working capital to be used by our subsidiaries for the operation and
      upgrading of the UK Assets and the proposed increased production of natural
      gas
      from the reserves covered by the Gas Licenses. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Acquisition
      of Assets</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Gas
      Licenses and certain related gas gathering and processing assets were owned
      (directly and indirectly) by Viking Petroleum UK Limited (&#8220;Viking Petroleum&#8221;)
      and by Scottish Power Generation Limited (&#8220;Scottish Power Generation&#8221;), an
      affiliate of Scottish Power. The Knapton Generating Station and the other
      related assets were owned by Scottish Power Generation. As part of the UK
      Transaction, we acquired a 99% interest in the Gas Licenses and the related
      assets owned by Viking Petroleum by purchasing all of the outstanding equity
      interests in Viking Petroleum from the owners of those equity interests. All
      of
      the equity interests in Viking Petroleum are now owned by UK Energy Systems
      Limited (&#8220;UK Energy&#8221;), an English company which is a wholly-owned subsidiary of
      GBGH, LLC (&#8220;GBGH&#8221;), a Delaware limited liability company, which is 79% owned by
      our subsidiary, US Energy Overseas Investments, LLC (&#8220;Overseas&#8221;). (Twenty-one
      percent of GBGH is owned by Marathon Capital Holdings (UK), L.L.C. See &#8220;GBGH
      Operating Agreement&#8221;). The Knapton Generating Station, the remaining 1% interest
      in the Gas Licenses and certain related assets owned by Scottish Power
      Generation were purchased by RGS Energy Limited, an English company which is
      a
      wholly-owned subsidiary of UK Energy. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Following
      acquisition of the UK Assets, GBGH intends to further develop the natural gas
      fields subject to the Gas Licenses in a several phase process which will involve
      resolving certain operational issues, expanding the gas collection system,
      constructing a pipeline and making modifications to the Knapton Generating
      Station (the &#8220;Expansion&#8221;). </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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      <div id="HDR">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table summarizes certain information regarding the acquisition of
      the
      UK Assets:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
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          <tr>
            <td align="left" valign="middle" width="15%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Purchaser</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="15%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sellers</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Assets
                Acquired</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Purchase
                Price</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="15%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="15%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UK
                Energy</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Viking,
                LLC and TCW Global Project Fund II, Ltd.</font></div>
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            <td align="left" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Approximately
                65% of the equity interest in Viking Petroleum</font></div>
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            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Repayment
                of approximately $40 million of indebtedness of Viking Petroleum
                and its
                affiliates </font></div>
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            <td align="left" valign="top" width="15%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="15%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Overseas</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">VTEX
                Energy, Inc.</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
                of the issued and outstanding shares of common stock of Viking
                International Petroleum Limited, which held approximately 25% equity
                interest in Viking Petroleum</font></div>
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            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Class
                B Membership Units in Overseas and our warrants convertible or
                exchangeable into an aggregate of 2.4 million shares of our common
                stock.
                See &#8220;Transactions with VTEX Energy, Inc.&#8221;</font></div>
            </td>
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            <td align="left" valign="top" width="15%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="15%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UK
                Energy </font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Individuals
                with whom we were unaffiliated</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Approximately
                10% equity interest in Viking Petroleum</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Approximately
                $400,000.</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="15%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="15%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">RGS
                Energy Limited</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Scottish
                Power Generation </font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">42
                MW gas-fired power plant, certain gas gathering and processing assets
                and
                a 1% interest in the Gas Licenses</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td align="left" valign="top" width="32%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Approximately
                $29.6 million</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Financing
      Arrangements</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      order
      to provide funds for the acquisition of the UK Assets and working capital for
      the operation and maintenance of the UK Assets and the Expansion, GBGH borrowed
      $144,000,000 through financing arranged by Credit Suisse, Cayman Islands Branch
      (&#8220;Credit Suisse&#8221;) and Overseas borrowed Approximately </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$23.3
      million</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      through
      financing arranged by Silver Point Finance, LLC (&#8220;Silver Point&#8221;). Overseas
      contributed the proceeds from the Silver Point financing to GBGH. GBGH used
      approximately $70.4 million of the proceeds from both financings to purchase
      the
      UK Assets. GBGH used the remainder of the proceeds of the financings to fund
      reserves for debt service, the operation and maintenance of the UK Assets and
      to
      pay costs and expenses associated with the Expansion. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Credit
      Suisse Financing Arrangements</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GBGH
      borrowed $113,500,000 from certain lenders pursuant to a First Lien Credit
      Agreement with such lenders and Credit Suisse, and borrowed $29,500,000 from
      certain lenders pursuant to a Second Lien Credit Agreement with such lenders
      and
      Credit Suisse.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following is a summary of the material terms and conditions of the Credit Suisse
      financing arrangements: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="25%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">First
                Lien Credit Agreement </font></div>
            </td>
            <td align="left" valign="top" width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="top" width="73%" style="border-bottom: #ffffff solid;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Borrower:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GBGH</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Amount
                Borrowed:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$113,500,000</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stated
                Maturity:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">August
                7, 2013</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
                Rate:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
                present, the loan is a eurodollar rate loan and bears interest, payable
                quarterly, at 11.25% per annum. GBGH is permitted to elect from time
                to
                time to have portions of the loan treated as either a base rate advance
                (which advances generally bear interest at 4.5% plus the higher of
                (i)
                Credit Suisse&#8217;s prime rate in New York and (ii) &#189; of one percent above the
                federal funds rate) or a Eurodollar rate advance (which advances
                generally
                bear interest at the British Bankers&#8217; Association Interest Settlement
                Rates for deposits in dollars plus 5.5% percent).</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Collateral:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                obligations of GBGH are secured on a first priority basis: (i) by
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a
                first priority security interest in substantially all of the assets
                of
                GBGH and its subsidiaries, including GBGH&#8217;s equity interests in UK Energy,
                and (ii) by Overseas&#8217; first priority pledge of all of its interest in
                GBGH.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                In
                addition, GBGH and its subsidiaries were required to establish reserve
                accounts which are required to maintain certain funds for various
                purposes, such as the Expansion, operating costs and
                maintenance.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prepayments:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GBGH,
                in its discretion, may prepay the loan in whole or in part, together
                with
                a prepayment penalty. In addition, GBGH is required to prepay the
                loan at
                the end of each quarter in an amount equal to (i) prior to completion
                of
                the Expansion, 90% of the excess cash flow for such quarter from
                revenues
                of GBGH and its subsidiaries generated by the UK Assets, after payment
                of
                all operating and maintenance expenses of the UK Assets and debt
                service
                for Credit Suisse financings and replenishment of certain required
                reserves (&#8220;Excess Cash Flow&#8221;), and (ii) after the completion of the
                Expansion, 100% of the Excess Cash Flow for such
                quarter.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GBGH
                is also required to repay the loan in certain other specified
                circumstances, including a casualty or condemnation with respect
                to the UK
                Assets.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div align="left">
      <table border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Covenants:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
                arrangements generally (A) prohibit GBGH and its subsidiaries from
                (i)
                incurring or allowing any liens or indebtedness, (ii) selling their
                assets, (iii) making investments, (iv) making distributions to their
                equity holders, (v) prepaying indebtedness (other than amounts owing
                pursuant to the Credit Suisse financing arrangements) and (B) require
                GBGH
                to maintain certain debt service coverage ratios, a total leverage
                ratio,
                a proven reserve coverage ratio and a net debt to proven reserve
                ratio.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Second
                Lien Credit Agreement </font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Borrower:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GBGH</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Amount
                Borrowed:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$29,500,000</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stated
                Maturity:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">August
                7, 2014</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
                Rate:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
                present, the loan is a eurodollar rate loan and bears interest, payable
                quarterly, at 14% per annum payable on a current basis at the end
                of each
                interest period. The loan also bears additional interest at 6% per
                annum
                which will be capitalized and added to the outstanding principal
                amount of
                the loan on a quarterly basis. For calculating the interest that
                is due on
                a current basis, GBGH may elect from time to time to have portions
                of the
                loan treated as either a base rate advance (which advances generally
                bear
                cash interest at 1.5% plus the higher of Credit Suisse&#8217;s prime rate in New
                York and &#189; of one percent above the federal funds rate) or a Eurodollar
                rate advance (which advances generally bear cash interest at the
                British
                Bankers&#8217; Association Interest Settlement Rates for deposits in dollars
                plus 2.5 percent rate). </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div>
      <table border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Collateral:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                obligations of GBGH are secured on a second priority basis as follows:
                (i)
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GBGH
                granted Credit Suisse a second priority security interest in substantially
                all of GBGH and its subsidiaries, and (ii) Overseas gave a second
                priority
                pledge of all of its interest in GBGH. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                addition, GBGH and its subsidiaries were required to establish accounts
                which are required to maintain certain funds for various purposes,
                such as
                the Expansion, operating costs and maintenance.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prepayments:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GBGH,
                in its discretion, may, but only after the repayment of the first
                lien
                loan, prepay the second lien loan in whole or in part, plus a make
                whole
                or prepayment penalty. In addition, after the first lien loan is
                repaid in
                full GBGH is required to prepay the second lien loan at the end of
                each
                quarter in an amount equal to 100% of the Excess Cash Flow for such
                quarter.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GBGH
                is also required to make prepayments in specified
                circumstances</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                including a casualty or condemnation with respect to the UK
                Assets.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Covenants:</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
                description under &#8220;First Lien Financing -
                Covenants&#8221;.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Equity
      Support Agreement </u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the First and Second Lien Credit Agreements we and GBGH entered
      into an Equity Support Agreement (the &#8220;Equity Support Agreement&#8221;) with Credit
      Suisse, as collateral agent for the lenders, whereby we agreed to provide
      certain funding in certain circumstances to GBGH (in addition to the equity
      contributions described under &#8220;GBGH Operating Agreement&#8221;) as
      follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">we
                shall deposit &#8356;2,659,576 (approximately $ 5,000,000 based on the exchange
                rate in effect on or about August 7, 2006) no later than September
                7, 2007
                in one of the collateral accounts to cover certain of GBGH&#8217;s major
                maintenance expenses, </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">until
                the occurrence of certain milestones in connection with the Expansion
                to
                the extent that there are insufficient funds in the designated reserve
                account for Expansion, we shall provide the shortfall (any such funding,
                an &#8220;Additional Expansion Cost Contribution&#8221;),
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">upon
                the occurrence of an event of default under the Credit Suisse financing
                arrangements, we shall pay $20,000,000 less the Additional Expansion
                Cost
                Contributions, </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">upon
                the occurrence of certain breaches of warranties under the agreements
                pursuant to which we acquired the UK Assets or the discovery of certain
                negative information relating to the UK Assets, we shall pay the
                amount
                determined by Credit Suisse, as agent for the lenders to be the damages
                to
                GBGH resulting from such breaches or discoveries of negative information;
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>provided
                </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">that
                we shall not be required to pay more than $4,000,000 in the aggregate
                for
                the breaches and discoveries; and </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">we
                shall provide (i) $20 million, if</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                GBGH elects to extend the initial interest rate and currency hedge
                agreement which is due to expire on August 7, 2009, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
                (ii) if GBGH enters into one or more replacement interest rate and
                currency hedge agreements, the amount payable as an upfront fee or
                premium
                to the providers thereunder</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Silver
      Point Financing Arrangements</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      August
      7, 2006, Overseas borrowed approximately $23.3 million from certain lenders
      pursuant to a financing arranged by Silver Point (the &#8220;Silver Point Credit
      Agreement&#8221;). Set forth below is a summary of the material terms of this
      financing arrangement:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Borrower:</font></div>
            </td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Overseas
                is borrower and we are guaranteeing these obligations.</font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">&#160;</td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Amount
                borrowed:</font></div>
            </td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Approximately
                $23.3 million</font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">&#160;</td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Maturity:</font></div>
            </td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                loan matures on the earlier of (i) February 7, 2014, (ii) the repayment
                of
                the loan pursuant to the Second Lien Credit Agreement and (iii) any
                earlier acceleration of the loan pursuant to the Silver Point Credit
                Agreement. </font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">&#160;</td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Use
                of Proceeds:</font></div>
            </td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Overseas
                contributed approximately $ 22.8 million of the proceeds to GBGH,
                which
                GBGH used in part to finance the acquisition of the UK Assets and
                the
                funding of certain reserves as described above, and Overseas used
                the
                balance to pays fees and expenses associated with the acquisition
                and the
                transactions contemplated by the Credit Suisse and Silver Point financing
                arrangements.</font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">&#160;</td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Required
                Payments:</font></div>
            </td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Overseas
                is generally required to prepay the loan, with certain exceptions
                (i) in
                connection with the sale, of any assets by us or our subsidiaries,
                (ii) if
                we or our subsidiaries receive insurance proceeds, (iii) if we or
                our
                subsidiaries issue equity (provided that only 50% of the net proceeds
                in
                excess of the first $3 million from issuances of our equity is to
                be
                applied to reduce such loan), (iv) if Overseas receives any cash,
                and (v)
                and if we receive any cash (other than the amount necessary for our
                quarterly operating and administrative expenses). The foregoing prepayment
                require- ments with respect to events involving our majority owned
                subsidiary, US Energy Biogas Corp. (&#8220;Biogas&#8221;), apply only to the extent
                such events occur on or after December 31,
                2006.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">7</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
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    <div>&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest:
                </font></div>
            </td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
                present, the loan is a LIBOR rate loan and bears interest at 10.5%
                per
                annum. Accrued interest is added to the outstanding principal amount
                of
                the loan thereby resulting in an increase in the outstanding principal
                amount. Overseas may elect from time to time to have portions of
                the loan
                treated as either a base rate advance (which advances generally bear
                cash
                interest at 3.5% plus the higher of JPMorganChase&#8217;s prime rate and the
                federal funds rate plus three percent and which require monthly payments
                of interest) or a LIBOR rate advance (which advances generally bear
                cash
                interest at 5 percent plus (i) the British Bankers&#8217; Association Interest
                Settlement Rates for deposits in dollars divided by (ii) an amount
                equal
                to one minus plus the Applicable Reserve Requirement (as defined
                in the
                Silver Point Credit Agreement) and which require payments of interest
                at
                the end of the period for such LIBOR rate advance, which period shall
                be
                no more than three months.</font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">&#160;</td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Collateral:</font></div>
            </td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                obligations of USEY and Overseas under the Silver Point Credit Agreement
                are secured by: (i) substantially all of our assets (other than the
                stock
                of Biogas),</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                (ii) substantially all of Overseas&#8217; assets (other than its interest in
                GBGH), and (iii) Overseas&#8217; pledge on a subordinated basis of all of its
                interest in GBGH. Also, the obligations of Overseas under the Silver
                Point
                financing arrangements are secured on a third priority basis by a
                lien on
                the collateral granted as security under the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Credit
                Suisse financing arrangements. </font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">&#160;</td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">&#160;</td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Covenants:</font></div>
            </td>
            <td align="justify" valign="top" width="2%">&#160;</td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
                arrangements, with specified exceptions, generally: (i) require Overseas
                to cause GBGH to distribute to Overseas the maximum amount of excess
                cash
                flow that GBGH is permitted to distribute to Overseas pursuant to
                the
                Second Lien Credit Agreement, (ii) require us to cause Biogas to
                distribute to us the maximum amount of excess cash flow that Biogas
                is
                permitted to distribute to us pursuant to our financing arrangements
                with
                the Countryside Power Income Fund and its affiliates, (iii) prohibit
                us
                and our subsidiaries from incurring or suffering to exist any
                indebtedness, or any liens, (iv) prohibit us and Overseas from making
                distributions to the equity holders of these entities, (v) prohibit
                us and
                our subsidiaries from making investments, (vi) prohibit us and our
                subsidiaries from selling our and their assets or changing our or
                their
                businesses, (vii) prohibit us and our subsidiaries from prepaying
                indebtedness (other than amounts owing pursuant to the Credit Suisse
                and
                Countryside financing arrangements) and (vii) prohibit us from amending
                our organizational documents or material contracts without prior
                approval
                by Silver Point. In addition, it is an event of default if (i) if
                Biogas
                does not grant Silver Point a first priority perfected security interest
                on all of its assets promptly upon the payment in full of the debt
                to
                Countryside Power Income Fund and its affiliates or (ii) we do not
                obtain,
                by December 31, 2006, a guaranty from Biogas of the amounts owing
                pursuant
                to the Silver Point financing
                arrangements.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>GBGH
      Operating Agreement </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      or
      about August 7, 2006, Overseas and Marathon Capital Holdings (UK), LLC, a
      Delaware limited liability company (&#8220;Marathon&#8221;) entered into a Second Amended
      and Restated Limited Liability Company Agreement (the &#8220;GBGH LLC Agreement&#8221;) with
      respect to GBGH. The GBGH LLC Agreement provides that at the closing of the
      UK
      Transaction, which occurred on August 7, 2006:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Overseas
                made an initial capital contribution in the amount of $5,000,000
                and an
                additional capital contribution of $8,125,000, to
                GBGH.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Marathon
                made a capital contribution of $375,000 and is required to contribute
                an
                additional $620,000 before September 7, 2006, to
                GBGH.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Overseas
                contributed $17,000,000 and Marathon contributed $4,000,000 of additional
                equity to GBGH which was deposited in a reserve account to be used
                to pay
                costs of the UK Transaction, to provide working capital for GBGH
                and its
                subsidiaries and to fund costs of the Expansion.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Distribution
      of Net Cash Flow</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      GBGH
      LLC Agreement provides that to the extent GBGH&#8217;s Board of Directors determines
      that net cash flow is to be distributed, it is to be distributed in the
      following descending order of priority:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">95%
                to Overseas and 5% to Marathon, until Overseas has received distributions
                equal to its initial capital contribution of $5 million and a preferred
                return of 12% per year on such contribution; and
                thereafter,</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">79%
                to Overseas and 21% to Marathon.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Voting</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Overseas
      has the right to elect four directors and Marathon has the right to elect one
      director. Each of the five directors is entitled to one vote. A majority vote
      at
      any meeting where a quorum is present is required to cause GBGH to take any
      actions. Overseas, therefore, has control of GBGH.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Transactions
      with VTEX Energy, Inc.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      May
      22, 2006, we and VTEX entered into an amended and restated limited liability
      company agreement (the &#8220;Overseas Operating Agreement&#8221;) with respect to Overseas.
      The Overseas Operating Agreement provides that at the closing of the
      transaction: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">VTEX
                contributed to Overseas all the outstanding share capital of Viking
                International Petroleum Limited, an entity that owned approximately
                25% of
                Viking Petroleum, </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Overseas
                issued its Class B membership units to VTEX,
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                issued to VTEX warrants to acquire up to 500,000 shares of our common
                stock and </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                made total contributions of approximately $ 8 million to
                Overseas.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Overseas&#8217;
      Operating Agreement: Distribution of Net Cash Flow; Allocation of Income and
      Losses</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Overseas&#8217;
      Operating Agreement provides that to the extent Overseas&#8217; Board of Managers
      determines that net cash flow is to be distributed, it is to be distributed
      in
      the following descending order of priority: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
                rata based on VTEX&#8217;s and US Energy&#8217;s capital contributions until each has
                received distributions equal to their capital contribution and a
                preferred
                return of 12% per year on such
                contributions;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">50%
                to each party until such party has received total distributions of
                net
                cash flow equal to $350,000 plus 12% per annum thereon; and
                thereafter,</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gain
      on a
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      or
      dissolution of Overseas is to be allocated in the following order of
      priority:</font></div>
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        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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                rata, to VTEX and US Energy until both VTEX and US Energy&#8217;s capital
                account is equal to such member&#8217;s unrecovered capital and a preferred
                return thereon of 12% per year ;</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
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          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100%
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      income and losses are to be allocated in the same manner as net cash flow is
      distributed.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Voting</u></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Representatives
      of US Energy constitute Overseas&#8217; Board of Managers. With limited exceptions, we
      hold all the voting rights with respect to Overseas.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Terms
      and Conditions of Conversion of Class B Membership Units and Exercise of Series
      D, E and F Common Stock Purchase Warrants </u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Class
      B membership units that Overseas issued to VTEX are convertible into up to
      1,900,000 shares of our common stock beginning, subject to stockholder approval
      as described below, on the earlier to occur of the third anniversary of the
      closing or the date on which the average market price of our common stock
      exceeds $11.00 per share for 20 consecutive trading days. In addition, we have
      the right to cause the Class B membership units that Overseas issued to VTEX
      to
      be converted into our common stock if the average market price, determined
      as
      described in the previous sentence, exceeds $14.30. The right to convert the
      Class B membership units that Overseas issued to VTEX ends on or about August
      7,
      2012. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      warrants issued to VTEX (the &#8220;VTEX Warrants&#8221;) are exercisable, subject to
      stockholder approval, until August 7, 2011, for the number of shares of our
      common stock and at the exercise prices set forth below: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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          <tr>
            <td valign="bottom" width="63%" style="border-bottom: black thin solid;">
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            <td colspan="2" valign="bottom" width="16%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Number</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
                shares</font></div>
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            <td align="left" valign="bottom" width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td colspan="2" valign="bottom" width="16%" style="border-bottom: black thin solid;">
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                Price</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="63%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="15%">&#160;</td>
            <td align="left" valign="bottom" width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="15%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="63%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
                D Common Stock Purchase Warrants</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="15%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">166,667</font></div>
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            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="15%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">8.00</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="63%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="15%">&#160;</td>
            <td align="left" valign="bottom" width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="15%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="63%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
                E Common Stock Purchase Warrants</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="15%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
              </div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">166,667</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
              </div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="15%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
              </div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">9.00</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="63%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="15%">&#160;</td>
            <td align="left" valign="bottom" width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="15%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="63%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
                F Common Stock Purchase Warrants</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="15%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
              </div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">166,666</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
              </div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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            <td align="right" valign="bottom" width="15%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
              </div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10.00</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, the Class B Membership Units and the VTEX Warrants are not
      convertible into, or exercisable for, common stock, until our stockholders
      have
      approved the issuance of the underlying shares and the issuance of the shares
      underlying the warrants issued to Silver Point, Credit Suisse and certain others
      in connection with the Credit Suisse and Silver Point financing arrangements.
      In
      the event shareholder approval is not obtained by November 6, 2006, subject
      to
      an additional 59 days in specified circumstances, the VTEX Warrants will
      terminate and the Class B Membership Units may only be converted into up to
      900,000 shares of common stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">10</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      issuance of the Class B Membership Units and the VTEX Warrants and the VTEX
      Shares are exempt from the registration requirements of the Securities Act
      pursuant to Section 4(2) promulgated thereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">VTEX
      is
      entitled, under specified circumstances, to have the resale of the shares of
      common stock issuable upon conversion of the Class B Membership Units and upon
      exercise of the VTEX Warrants registered under the Securities Act of 1933,
      as
      amended (the &#8220;Securities Act&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Fees
      payable to Credit Suisse, Silver Point and Kenmont </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      paid
      an aggregate of approximately $ 3.8 million in fees (excluding the fees of
      their
      professionals) to Credit Suisse, Silver Point, and Kenmont Special Opportunities
      Master Fund L.P. (&#8220;Kenmont&#8221;). We also issued warrants acquire our common stock
      to such parties. Set forth below is a summary of the material terms of such
      arrangements:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Silver
      Point</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      issued
      to Silver Point&#8217;s designees our Series G Warrants exercisable until February 7,
      2014 to acquire 4,488,780 million shares of our common stock at an exercise
      price of $0.01 per share. In the event that we do not obtain Biogas&#8217; guaranty of
      the Silver Point financing arrangements by December 31, 2006, warrants (with
      the
      same terms and conditions) to acquire an additional 3,998,000 shares will be
      issued to Silver Point or its designees. The exercise price is subject to
      adjustment on a weighted average basis (i) for issuances by the Company, with
      certain exceptions, of common stock, options, warrants and other rights to
      acquire our common stock, at a price below the greater of $ 3.00 (subject to
      adjustment) or fair market value (as determined pursuant to the warrant) of
      a
      share of our common stock, and (ii) for acquisitions of such securities at
      a
      price greater than fair market value.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
      warrants are not exercisable until the issuance of the underlying shares is
      approved by our stockholders. If stockholder approval is not obtained by
      November 6, 2006, subject to an additional 59 days in specified circumstances,
      the money borrowed pursuant to the Silver Point financing arrangement becomes
      due and payable, we are obligated to pay Silver Point an additional $40 million
      and Silver Point will be entitled to exercise warrants to acquire up to the
      maximum number of shares permitted under Nasdaq&#8217;s rules less the number of
      shares potentially issuable to VTEX (as described under &#8220;Transactions with VTEX
      Energy, Inc.&#8221;) and the shares potentially issuable to Credit Suisse Securities
      (USA) LLC (&#8220;Credit Suisse Securities&#8221;) and Kenmont Special Opportunities Master
      Fund L.P. (&#8220;Kenmont&#8221;), as described under &#8220;Fees payable to Credit Suisse, Silver
      Point and Kenmont - Credit Suisse and Kenmont&#8221; but in no event less than
      2,076,712 shares of our common stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Holders
      of these Series G Warrants are entitled to designate, at their option, one
      person to either serve as a member of these board of directors or as an observer
      at board meetings. The holders also have shelf, demand and piggyback
      registration rights for the resale of the shares underlying these warrants
      and
      certain other US Energy shares.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      issuance of these warrants are, and the issuance of the underlying shares will
      be, exempt from the registration requirements of the Securities Act pursuant
      to,
      among other things, Section 4(2) promulgated thereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">11</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Credit
      Suisse and Kenmont</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with their participation in the financing transactions, we issued
      the
      following warrants to Kenmont and Credit Suisse Securities: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="center">
      <table cellpadding="0" cellspacing="0" width="90%">

          <tr>
            <td align="left" valign="bottom" width="23%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Initial
                Holder </font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="bottom" width="23%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Title</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="bottom" width="23%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Number</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
                shares</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="bottom" width="23%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exercise</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Price</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="23%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Kenmont</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
                H Warrants</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">495,220</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$0.01</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Credit
                Suisse Securities</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
                H Warrants</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">90,000</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$0.01</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Kenmont
                </font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
                I Warrants</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">465,000</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$4.37</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Credit
                Suisse Securities</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Series
                I Warrants</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">135,000</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$4.37</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
      warrants are exercisable, subject to stockholder approval, until February 7,
      2014. The exercise price is subject to adjustment on a weighted average basis
      for our acquisition of our common stock or of rights to acquire our common
      stock, for more than fair market value. If stockholder approval of the shares
      issuable upon the exercise of these Warrants, the Silver Point Warrants, the
      VTEX Warrants and the exercise of VTEX&#8217;s Class B Membership Units in Overseas is
      not obtained by November 6, 2006, subject to an additional 59 days under
      specified circumstances, Kenmont and Credit Suisse Securities have the following
      remedies:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Kenmont&#8217;s
      Remedies:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">receive
                $6,102,200 from us and return all of the Series H and Series I Warrants
                that were issued to them, or</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">receive
                $4,227,200 from us, retain the Series H Warrants to acquire up to
                306,212
                shares and return all of the other Warrants to us.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Credit
      Suisse Securities&#8217; Remedies:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">receive
                $1,125,000 from us and return all of the Series H and Series I Warrants
                that were issued to them or</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">receive
                $687,500 from us and retain the Series H Warrant to acquire up to
                88,000
                shares and return all of the other Warrants to
                us.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      issuance of the these Warrants are, and the issuance of the underlying shares
      will be, exempt from the registration requirements of the Securities Act
      pursuant to, among other things, Section 4(2) promulgated
      thereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      holders also have shelf, demand and piggyback registration rights for the resale
      of the shares underlying these warrants and certain other US Energy
      shares.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">12</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Carbon
      Trade Agreement</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      expect
      to operate the Knapton Generating Station more often, and at more frequently
      at
      maximum capacity, than it has been operated in the recent past. Because the
      Knapton Generating Station will operate more than in the past, we project that
      it will require additional carbon emission allowances for its operation. Carbon
      emission allowance amounts have been set by the European Union (&#8220;EU&#8221;) for each
      member state, and in turn for each power producing facility, per the
      requirements of the Kyoto Protocol. To cover the shortfall for Phase I (defined
      as the period from January 1, 2005 through December 31, 2007) GBGH&#8217;s subsidiary
      RGS has entered into an Emissions Allowance Trade Agreement for the EU Scheme
      (the &#8220;Carbon Trade Agreement&#8221;) with Credit Suisse Energy, LLC (&#8220;CSE&#8221;). The
      purpose of the Carbon Trade Agreement is to ensure that a fixed price is paid
      for the acquisition of carbon emission allowances and that the projected
      shortfall in carbon emission allowances is covered, thus reducing the level
      of
      risk associated with this aspect of the Knapton Generating Station&#8217;s operations.
      Pursuant to this agreement, CSE will sell RGS 5,000 carbon emission allowances
      for use in 2006 at a price of &#8364;16.25 each, and 110,000 carbon emission
      allowances for use in 2007 at a price of &#8364;18.00 each. Payment for the 2006
      carbon emission allowances is due by March 15, 2007 and payment for the 2007
      carbon emission allowances is due by March 15, 2008. In addition, RGS will
      transfer to CSE the following carbon credit allowances issued to the Knapton
      Generating Station: 30,123 carbon credit allowances for 2006 and 90,367 carbon
      credit allowances for 2007. RGS also made a credit support payment of &#8364;500,000
      at closing, which payment will be returned on the payment date for the 2007
      carbon credit allowances, March 15, 2008.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Hedging
      Arrangements</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Gas
      Hedge</u></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the UK Transaction, we (or one of our subsidiaries) enter into
      a
      hedge agreement with J. Aron &amp; Company (Aron), an affiliate of Goldman Sachs
      International, whereby in exchange for a payment of &#163;7,710,000, we established
      (i) a floor price of &#163;43.75/mWh for the sale of electricity from the Knapton
      Generating Station for our first three years of operation and (ii) a floor
      price
      of &#163;3.41 MMBtu for the sale of gas from the same facility for our fourth and
      fifth year of operation. Electricity and gas volumes for this hedge were set
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      principal into United States dollars denominated principal on each payment
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      counterparty in exchange for floating rate interest payments.</font></div>
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      million to maintain the hedge for the subsequent four years. GBGH can choose
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      currency market </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">environment
      allows it to purchase a less expensive hedge. The payment of the remaining
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      contribution agreement See &#8220;Credit Suisse Financing Arrangements - Equity
      Support Agreement&#8221;. We will ensure that $20 million is available under a letter
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>1.02
      Termination of a Material Definitive Agreement</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">information
      set forth in Item 8.01 is incorporated by reference to the extent necessary
      to
      respond to the requirements of Item 1.02.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      2 - Financial Information</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      2.01 Completion of Acquisition or Disposition of Assets.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">information
      set forth in item 1.01 is hereby incorporated by reference to the extent
      necessary to respond to the requirements of Item 2.01.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      2.03 Creation of a Direct Financial Obligation or an Obligation under an
      Off-Balance </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Sheet
      Arrangement of a Registrant</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      information set forth in item 1.01 is hereby incorporated by reference to the
      extent necessary to respond to the requirements of Item 2.03. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      3 - Securities and Trading Markets</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      3.02 Unregistered Sale of Equity Securities</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      information set forth in item 1.01 is hereby incorporated to the extent
      necessary to respond to the requirements of Item 3.02.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      8 - Other Events</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      8.01 Other Events</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      agreement dated October 7, 2005 (the &#8220;October Agreement&#8221;) among VTEX, Marathon
      Capital LLC, Viking International Petroleum, Ltd. and us was terminated as
      of
      May 22, 2006 (the &#8220;May Agreement&#8221;). Generally, the October Agreement set forth
      the terms and conditions under which the parties thereto would complete certain
      of the acquisitions and transactions described herein. Pursuant to the May
      Agreement, the parties to the October Agreement released the other parties
      to
      the October Agreement from any liability with respect to the October Agreement.
      Effectively, the agreements and transactions entered into on August 7, 2006
      superseded the October Agreement. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      9 - Financial Statements and Exhibits</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      9.01 Financial Statements and Exhibits</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

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            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)&#160;&#160;</font></td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Financial
                statements of businesses
                acquired.</u></font></div>
            </td>
          </tr>

      </table>
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    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      financial statements of the businesses acquired called for by this item will,
      if
      required to be filed and available, be filed by amendment to this report by
      October 23, 2006.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>&#160;</div>
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            <td><u><font size="2">Pro forma financial
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
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      if
      required to be filed and available, be filed by amendment to this report by
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SIGNATURE</font></div>
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      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
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      duly authorized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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            <td width="48%">&#160;</td>
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              Energy Systems, Inc.</font></td>
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          <tr>
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            <td width="3%">&#160;</td>
            <td align="left" valign="top" width="48%">&#160;</td>
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          <tr>
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            </td>
            <td width="3%">&#160;</td>
            <td align="left" valign="top" width="48%">&#160;</td>
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          <tr>
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                11, 2006</font></div>
            </td>
            <td width="3%" style="border-bottom: medium none;"><font size="2">By:</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
                Asher E. Fogel </font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
            </td>
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          <tr>
            <td width="48%">&#160;</td>
            <td width="3%">&#160;</td>
            <td align="left" valign="top" width="48%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Asher
                E. Fogel, Chief Executive Officer </font></div>
            </td>
          </tr>

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{"company-data": {"conformed-name": "U S ENERGY SYSTEMS INC", "cik": "0000351917", "assigned-sic": "4900", "irs-number": "521216347", "state-of-incorporation": "DE", "fiscal-year-end": "0609"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-10238", "film-number": "061024282"}, "business-address": {"street1": "545 MADISON AVENUE", "city": "NEW YORK", "state": "NY", "zip": "10022", "phone": "2125888901"}, "mail-address": {"street1": "545 MADISON AVENUE", "city": "NEW YORK", "state": "NY", "zip": "10022"}, "former-company": [{"former-conformed-name": "U S ENVIROSYSTEMS INC /DE/", "date-changed": "19960607"}, {"former-conformed-name": "COGENIC ENERGY SYSTEMS INC", "date-changed": "19940714"}]}
SECURITIES
      AND EXCHANGE COMMISSION
Washington,
      D.C. 20549
---------------------
FORM
      8-K
CURRENT
      REPORT
Pursuant
      to Section 13 or 15(d) of
The
      Securities Exchange Act of 1934
---------------------
August
      7,
      2006
Date
      of
      Report (Date of earliest event reported)
U.S.
      Energy Systems, Inc.
(Exact
      name of registrant as specified in its charter)
Delaware
(State
                or other
jurisdiction
                of
Incorporation)
0-10238
(Commission
File
                Number)
52-1216347
(I.R.S.
                Employer
Identification
                No.)
545
                Madison Avenue
New
                York, NY
10022
(Address
                of principal executive offices)
(Zip
                Code)
Registrant's
      telephone number, including area code: (212) 588-8901
Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (
see
General
      Instruction A.2. below):
o
Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)
o
Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)
o
Pre-commencement
                communications pursuant to Rule 14d-2(b) under the Exchange Act (17
                CFR
                240.14d-2(b))
o
Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
                CFR
                240.13e-4(c))
Section
      1 - Registrant's Business and Operations
Item
      1.01 Entry into a Material Definitive Agreement
Background
On
      August
      7, 2006, we completed our acquisition and financing (the "UK Transaction") of
      certain energy assets in the United Kingdom through certain of our subsidiaries
      as further described below. The assets (the "UK Assets") acquired include (i)
      gas licenses for approximately 100,000 acres of onshore natural gas properties
      and mineral rights in North Yorkshire, England (the "Gas Licenses"), containing
      approximately 62.4 bcf (P2) of proved and probable reserves (consisting of
      approximately 46 bcf (P1) of proved reserves and approximately 16.4 bcf of
      probable reserves), (ii) the
Knapton
      Generating Station, a 42 MW gas-fired power plant associated with and located
      in
      the vicinity of the natural gas reserves in North Yorkshire, England, (iii)
      and
      certain related gas gathering and processing assets. As part of the UK
      Transaction, our subsidiaries entered into a power purchase agreement and a
      gas
      sales agreement with Scottish Power Energy Management ("Scottish Power") under
      which Scottish Power is required to take all of the electricity generated by
      the
      Knapton Generating Station and all of the natural gas produced from the
      associated reserves up to 100 bcf for a term of up to 12 years. The financing
      of
      the UK Transaction provided approximately $167 million for the acquisition
      of
      the UK Assets, for certain reserves required by the terms of the financing
      and
      for working capital to be used by our subsidiaries for the operation and
      upgrading of the UK Assets and the proposed increased production of natural
      gas
      from the reserves covered by the Gas Licenses.
Acquisition
      of Assets
The
      Gas
      Licenses and certain related gas gathering and processing assets were owned
      (directly and indirectly) by Viking Petroleum UK Limited ("Viking Petroleum")
      and by Scottish Power Generation Limited ("Scottish Power Generation"), an
      affiliate of Scottish Power. The Knapton Generating Station and the other
      related assets were owned by Scottish Power Generation. As part of the UK
      Transaction, we acquired a 99% interest in the Gas Licenses and the related
      assets owned by Viking Petroleum by purchasing all of the outstanding equity
      interests in Viking Petroleum from the owners of those equity interests. All
      of
      the equity interests in Viking Petroleum are now owned by UK Energy Systems
      Limited ("UK Energy"), an English company which is a wholly-owned subsidiary of
      GBGH, LLC ("GBGH"), a Delaware limited liability company, which is 79% owned by
      our subsidiary, US Energy Overseas Investments, LLC ("Overseas"). (Twenty-one
      percent of GBGH is owned by Marathon Capital Holdings (UK), L.L.C. See "GBGH
      Operating Agreement"). The Knapton Generating Station, the remaining 1% interest
      in the Gas Licenses and certain related assets owned by Scottish Power
      Generation were purchased by RGS Energy Limited, an English company which is
      a
      wholly-owned subsidiary of UK Energy.
Following
      acquisition of the UK Assets, GBGH intends to further develop the natural gas
      fields subject to the Gas Licenses in a several phase process which will involve
      resolving certain operational issues, expanding the gas collection system,
      constructing a pipeline and making modifications to the Knapton Generating
      Station (the "Expansion").
2
The
      following table summarizes certain information regarding the acquisition of
      the
      UK Assets:
Purchaser
Sellers
Assets
                Acquired
Purchase
                Price
UK
                Energy
Viking,
                LLC and TCW Global Project Fund II, Ltd.
Approximately
                65% of the equity interest in Viking Petroleum
Repayment
                of approximately $40 million of indebtedness of Viking Petroleum
                and its
                affiliates
Overseas
VTEX
                Energy, Inc.
All
                of the issued and outstanding shares of common stock of Viking
                International Petroleum Limited, which held approximately 25% equity
                interest in Viking Petroleum
Class
                B Membership Units in Overseas and our warrants convertible or
                exchangeable into an aggregate of 2.4 million shares of our common
                stock.
                See "Transactions with VTEX Energy, Inc."
UK
                Energy
Individuals
                with whom we were unaffiliated
Approximately
                10% equity interest in Viking Petroleum
Approximately
                $400,000.
RGS
                Energy Limited
Scottish
                Power Generation
42
                MW gas-fired power plant, certain gas gathering and processing assets
                and
                a 1% interest in the Gas Licenses
Approximately
                $29.6 million
Financing
      Arrangements
In
      order
      to provide funds for the acquisition of the UK Assets and working capital for
      the operation and maintenance of the UK Assets and the Expansion, GBGH borrowed
      $144,000,000 through financing arranged by Credit Suisse, Cayman Islands Branch
      ("Credit Suisse") and Overseas borrowed Approximately
$23.3
      million
through
      financing arranged by Silver Point Finance, LLC ("Silver Point"). Overseas
      contributed the proceeds from the Silver Point financing to GBGH. GBGH used
      approximately $70.4 million of the proceeds from both financings to purchase
      the
      UK Assets. GBGH used the remainder of the proceeds of the financings to fund
      reserves for debt service, the operation and maintenance of the UK Assets and
      to
      pay costs and expenses associated with the Expansion.
Credit
      Suisse Financing Arrangements
GBGH
      borrowed $113,500,000 from certain lenders pursuant to a First Lien Credit
      Agreement with such lenders and Credit Suisse, and borrowed $29,500,000 from
      certain lenders pursuant to a Second Lien Credit Agreement with such lenders
      and
      Credit Suisse.
3
The
      following is a summary of the material terms and conditions of the Credit Suisse
      financing arrangements:
First
                Lien Credit Agreement
Borrower:
GBGH
Amount
                Borrowed:
$113,500,000
Stated
                Maturity:
August
                7, 2013
Interest
                Rate:
At
                present, the loan is a eurodollar rate loan and bears interest, payable
                quarterly, at 11.25% per annum. GBGH is permitted to elect from time
                to
                time to have portions of the loan treated as either a base rate advance
                (which advances generally bear interest at 4.5% plus the higher of
                (i)
                Credit Suisse's prime rate in New York and (ii) ½ of one percent above the
                federal funds rate) or a Eurodollar rate advance (which advances
                generally
                bear interest at the British Bankers' Association Interest Settlement
                Rates for deposits in dollars plus 5.5% percent).
Collateral:
The
                obligations of GBGH are secured on a first priority basis: (i) by
a
                first priority security interest in substantially all of the assets
                of
                GBGH and its subsidiaries, including GBGH's equity interests in UK Energy,
                and (ii) by Overseas' first priority pledge of all of its interest in
                GBGH.
In
                addition, GBGH and its subsidiaries were required to establish reserve
                accounts which are required to maintain certain funds for various
                purposes, such as the Expansion, operating costs and
                maintenance.
Prepayments:
GBGH,
                in its discretion, may prepay the loan in whole or in part, together
                with
                a prepayment penalty. In addition, GBGH is required to prepay the
                loan at
                the end of each quarter in an amount equal to (i) prior to completion
                of
                the Expansion, 90% of the excess cash flow for such quarter from
                revenues
                of GBGH and its subsidiaries generated by the UK Assets, after payment
                of
                all operating and maintenance expenses of the UK Assets and debt
                service
                for Credit Suisse financings and replenishment of certain required
                reserves ("Excess Cash Flow"), and (ii) after the completion of the
                Expansion, 100% of the Excess Cash Flow for such
                quarter.
GBGH
                is also required to repay the loan in certain other specified
                circumstances, including a casualty or condemnation with respect
                to the UK
                Assets.
4
Covenants:
These
                arrangements generally (A) prohibit GBGH and its subsidiaries from
                (i)
                incurring or allowing any liens or indebtedness, (ii) selling their
                assets, (iii) making investments, (iv) making distributions to their
                equity holders, (v) prepaying indebtedness (other than amounts owing
                pursuant to the Credit Suisse financing arrangements) and (B) require
                GBGH
                to maintain certain debt service coverage ratios, a total leverage
                ratio,
                a proven reserve coverage ratio and a net debt to proven reserve
                ratio.
Second
                Lien Credit Agreement
Borrower:
GBGH
Amount
                Borrowed:
$29,500,000
Stated
                Maturity:
August
                7, 2014
Interest
                Rate:
At
                present, the loan is a eurodollar rate loan and bears interest, payable
                quarterly, at 14% per annum payable on a current basis at the end
                of each
                interest period. The loan also bears additional interest at 6% per
                annum
                which will be capitalized and added to the outstanding principal
                amount of
                the loan on a quarterly basis. For calculating the interest that
                is due on
                a current basis, GBGH may elect from time to time to have portions
                of the
                loan treated as either a base rate advance (which advances generally
                bear
                cash interest at 1.5% plus the higher of Credit Suisse's prime rate in New
                York and ½ of one percent above the federal funds rate) or a Eurodollar
                rate advance (which advances generally bear cash interest at the
                British
                Bankers' Association Interest Settlement Rates for deposits in dollars
                plus 2.5 percent rate).
5
Collateral:
The
                obligations of GBGH are secured on a second priority basis as follows:
                (i)
GBGH
                granted Credit Suisse a second priority security interest in substantially
                all of GBGH and its subsidiaries, and (ii) Overseas gave a second
                priority
                pledge of all of its interest in GBGH.
In
                addition, GBGH and its subsidiaries were required to establish accounts
                which are required to maintain certain funds for various purposes,
                such as
                the Expansion, operating costs and maintenance.
Prepayments:
GBGH,
                in its discretion, may, but only after the repayment of the first
                lien
                loan, prepay the second lien loan in whole or in part, plus a make
                whole
                or prepayment penalty. In addition, after the first lien loan is
                repaid in
                full GBGH is required to prepay the second lien loan at the end of
                each
                quarter in an amount equal to 100% of the Excess Cash Flow for such
                quarter.
GBGH
                is also required to make prepayments in specified
                circumstances
,
                including a casualty or condemnation with respect to the UK
                Assets.
Covenants:
See
                description under "First Lien Financing -
                Covenants".
Equity
      Support Agreement
In
      connection with the First and Second Lien Credit Agreements we and GBGH entered
      into an Equity Support Agreement (the "Equity Support Agreement") with Credit
      Suisse, as collateral agent for the lenders, whereby we agreed to provide
      certain funding in certain circumstances to GBGH (in addition to the equity
      contributions described under "GBGH Operating Agreement") as
      follows:
·
we
                shall deposit ₤2,659,576 (approximately $ 5,000,000 based on the exchange
                rate in effect on or about August 7, 2006) no later than September
                7, 2007
                in one of the collateral accounts to cover certain of GBGH's major
                maintenance expenses,
·
until
                the occurrence of certain milestones in connection with the Expansion
                to
                the extent that there are insufficient funds in the designated reserve
                account for Expansion, we shall provide the shortfall (any such funding,
                an "Additional Expansion Cost Contribution"),
·
upon
                the occurrence of an event of default under the Credit Suisse financing
                arrangements, we shall pay $20,000,000 less the Additional Expansion
                Cost
                Contributions,
·
upon
                the occurrence of certain breaches of warranties under the agreements
                pursuant to which we acquired the UK Assets or the discovery of certain
                negative information relating to the UK Assets, we shall pay the
                amount
                determined by Credit Suisse, as agent for the lenders to be the damages
                to
                GBGH resulting from such breaches or discoveries of negative information;
provided
that
                we shall not be required to pay more than $4,000,000 in the aggregate
                for
                the breaches and discoveries; and
·
we
                shall provide (i) $20 million, if
GBGH elects to extend the initial interest rate and currency hedge
                agreement which is due to expire on August 7, 2009,
and
                (ii) if GBGH enters into one or more replacement interest rate and
                currency hedge agreements, the amount payable as an upfront fee or
                premium
                to the providers thereunder
.
6
Silver
      Point Financing Arrangements
On
      August
      7, 2006, Overseas borrowed approximately $23.3 million from certain lenders
      pursuant to a financing arranged by Silver Point (the "Silver Point Credit
      Agreement"). Set forth below is a summary of the material terms of this
      financing arrangement:
Borrower:
Overseas
                is borrower and we are guaranteeing these obligations.
Amount
                borrowed:
Approximately
                $23.3 million
Maturity:
The
                loan matures on the earlier of (i) February 7, 2014, (ii) the repayment
                of
                the loan pursuant to the Second Lien Credit Agreement and (iii) any
                earlier acceleration of the loan pursuant to the Silver Point Credit
                Agreement.
Use
                of Proceeds:
Overseas
                contributed approximately $ 22.8 million of the proceeds to GBGH,
                which
                GBGH used in part to finance the acquisition of the UK Assets and
                the
                funding of certain reserves as described above, and Overseas used
                the
                balance to pays fees and expenses associated with the acquisition
                and the
                transactions contemplated by the Credit Suisse and Silver Point financing
                arrangements.
Required
                Payments:
Overseas
                is generally required to prepay the loan, with certain exceptions
                (i) in
                connection with the sale, of any assets by us or our subsidiaries,
                (ii) if
                we or our subsidiaries receive insurance proceeds, (iii) if we or
                our
                subsidiaries issue equity (provided that only 50% of the net proceeds
                in
                excess of the first $3 million from issuances of our equity is to
                be
                applied to reduce such loan), (iv) if Overseas receives any cash,
                and (v)
                and if we receive any cash (other than the amount necessary for our
                quarterly operating and administrative expenses). The foregoing prepayment
                require- ments with respect to events involving our majority owned
                subsidiary, US Energy Biogas Corp. ("Biogas"), apply only to the extent
                such events occur on or after December 31,
                2006.
7
Interest:
At
                present, the loan is a LIBOR rate loan and bears interest at 10.5%
                per
                annum. Accrued interest is added to the outstanding principal amount
                of
                the loan thereby resulting in an increase in the outstanding principal
                amount. Overseas may elect from time to time to have portions of
                the loan
                treated as either a base rate advance (which advances generally bear
                cash
                interest at 3.5% plus the higher of JPMorganChase's prime rate and the
                federal funds rate plus three percent and which require monthly payments
                of interest) or a LIBOR rate advance (which advances generally bear
                cash
                interest at 5 percent plus (i) the British Bankers' Association Interest
                Settlement Rates for deposits in dollars divided by (ii) an amount
                equal
                to one minus plus the Applicable Reserve Requirement (as defined
                in the
                Silver Point Credit Agreement) and which require payments of interest
                at
                the end of the period for such LIBOR rate advance, which period shall
                be
                no more than three months.
Collateral:
The
obligations of USEY and Overseas under the Silver Point Credit Agreement
                are secured by: (i) substantially all of our assets (other than the
                stock
                of Biogas),
(ii) substantially all of Overseas' assets (other than its interest in
                GBGH), and (iii) Overseas' pledge on a subordinated basis of all of its
                interest in GBGH. Also, the obligations of Overseas under the Silver
                Point
                financing arrangements are secured on a third priority basis by a
                lien on
                the collateral granted as security under the
Credit
                Suisse financing arrangements.
Covenants:
These
                arrangements, with specified exceptions, generally: (i) require Overseas
                to cause GBGH to distribute to Overseas the maximum amount of excess
                cash
                flow that GBGH is permitted to distribute to Overseas pursuant to
                the
                Second Lien Credit Agreement, (ii) require us to cause Biogas to
                distribute to us the maximum amount of excess cash flow that Biogas
                is
                permitted to distribute to us pursuant to our financing arrangements
                with
                the Countryside Power Income Fund and its affiliates, (iii) prohibit
                us
                and our subsidiaries from incurring or suffering to exist any
                indebtedness, or any liens, (iv) prohibit us and Overseas from making
                distributions to the equity holders of these entities, (v) prohibit
                us and
                our subsidiaries from making investments, (vi) prohibit us and our
                subsidiaries from selling our and their assets or changing our or
                their
                businesses, (vii) prohibit us and our subsidiaries from prepaying
                indebtedness (other than amounts owing pursuant to the Credit Suisse
                and
                Countryside financing arrangements) and (vii) prohibit us from amending
                our organizational documents or material contracts without prior
                approval
                by Silver Point. In addition, it is an event of default if (i) if
                Biogas
                does not grant Silver Point a first priority perfected security interest
                on all of its assets promptly upon the payment in full of the debt
                to
                Countryside Power Income Fund and its affiliates or (ii) we do not
                obtain,
                by December 31, 2006, a guaranty from Biogas of the amounts owing
                pursuant
                to the Silver Point financing
                arrangements.
GBGH
      Operating Agreement
On
      or
      about August 7, 2006, Overseas and Marathon Capital Holdings (UK), LLC, a
      Delaware limited liability company ("Marathon") entered into a Second Amended
      and Restated Limited Liability Company Agreement (the "GBGH LLC Agreement") with
      respect to GBGH. The GBGH LLC Agreement provides that at the closing of the
      UK
      Transaction, which occurred on August 7, 2006:
·
Overseas
                made an initial capital contribution in the amount of $5,000,000
                and an
                additional capital contribution of $8,125,000, to
                GBGH.
·
Marathon
                made a capital contribution of $375,000 and is required to contribute
                an
                additional $620,000 before September 7, 2006, to
                GBGH.
·
Overseas
                contributed $17,000,000 and Marathon contributed $4,000,000 of additional
                equity to GBGH which was deposited in a reserve account to be used
                to pay
                costs of the UK Transaction, to provide working capital for GBGH
                and its
                subsidiaries and to fund costs of the Expansion.
8
Distribution
      of Net Cash Flow
:
The
      GBGH
      LLC Agreement provides that to the extent GBGH's Board of Directors determines
      that net cash flow is to be distributed, it is to be distributed in the
      following descending order of priority:
·
95%
                to Overseas and 5% to Marathon, until Overseas has received distributions
                equal to its initial capital contribution of $5 million and a preferred
                return of 12% per year on such contribution; and
                thereafter,
·
79%
                to Overseas and 21% to Marathon.
Voting
:
Overseas
      has the right to elect four directors and Marathon has the right to elect one
      director. Each of the five directors is entitled to one vote. A majority vote
      at
      any meeting where a quorum is present is required to cause GBGH to take any
      actions. Overseas, therefore, has control of GBGH.
Transactions
      with VTEX Energy, Inc.
On
      May
      22, 2006, we and VTEX entered into an amended and restated limited liability
      company agreement (the "Overseas Operating Agreement") with respect to Overseas.
      The Overseas Operating Agreement provides that at the closing of the
      transaction:
·
VTEX
                contributed to Overseas all the outstanding share capital of Viking
                International Petroleum Limited, an entity that owned approximately
                25% of
                Viking Petroleum,
·
Overseas
                issued its Class B membership units to VTEX,
·
We
                issued to VTEX warrants to acquire up to 500,000 shares of our common
                stock and
·
We
                made total contributions of approximately $ 8 million to
                Overseas.
Overseas'
      Operating Agreement: Distribution of Net Cash Flow; Allocation of Income and
      Losses
Overseas'
      Operating Agreement provides that to the extent Overseas' Board of Managers
      determines that net cash flow is to be distributed, it is to be distributed
      in
      the following descending order of priority:
·
Pro
                rata based on VTEX's and US Energy's capital contributions until each has
                received distributions equal to their capital contribution and a
                preferred
                return of 12% per year on such
                contributions;
·
50%
                to each party until such party has received total distributions of
                net
                cash flow equal to $350,000 plus 12% per annum thereon; and
                thereafter,
·
90%
                to us and 10% to VTEX.
Gain
      on a
      sale of all or substantially all of the assets of Overseas or the liquidation
      or
      dissolution of Overseas is to be allocated in the following order of
      priority:
9
·
Pro
                rata, to VTEX and US Energy until both VTEX and US Energy's capital
                account is equal to such member's unrecovered capital and a preferred
                return thereon of 12% per year ;
·
99%
                to VTEX and 1% to us, until VTEX has been allocated an amount equal
                to
                $20,900,000; and thereafter
·
100%
                to us.
Generally,
      income and losses are to be allocated in the same manner as net cash flow is
      distributed.
Voting
Representatives
      of US Energy constitute Overseas' Board of Managers. With limited exceptions, we
      hold all the voting rights with respect to Overseas.
Terms
      and Conditions of Conversion of Class B Membership Units and Exercise of Series
      D, E and F Common Stock Purchase Warrants
The
      Class
      B membership units that Overseas issued to VTEX are convertible into up to
      1,900,000 shares of our common stock beginning, subject to stockholder approval
      as described below, on the earlier to occur of the third anniversary of the
      closing or the date on which the average market price of our common stock
      exceeds $11.00 per share for 20 consecutive trading days. In addition, we have
      the right to cause the Class B membership units that Overseas issued to VTEX
      to
      be converted into our common stock if the average market price, determined
      as
      described in the previous sentence, exceeds $14.30. The right to convert the
      Class B membership units that Overseas issued to VTEX ends on or about August
      7,
      2012.
The
      warrants issued to VTEX (the "VTEX Warrants") are exercisable, subject to
      stockholder approval, until August 7, 2011, for the number of shares of our
      common stock and at the exercise prices set forth below:
Title
Number
of
                shares
Exercise
Price
Series
                D Common Stock Purchase Warrants
166,667
$
8.00
Series
                E Common Stock Purchase Warrants
166,667
$
9.00
Series
                F Common Stock Purchase Warrants
166,666
$
10.00
Notwithstanding
      the foregoing, the Class B Membership Units and the VTEX Warrants are not
      convertible into, or exercisable for, common stock, until our stockholders
      have
      approved the issuance of the underlying shares and the issuance of the shares
      underlying the warrants issued to Silver Point, Credit Suisse and certain others
      in connection with the Credit Suisse and Silver Point financing arrangements.
      In
      the event shareholder approval is not obtained by November 6, 2006, subject
      to
      an additional 59 days in specified circumstances, the VTEX Warrants will
      terminate and the Class B Membership Units may only be converted into up to
      900,000 shares of common stock.
10
The
      issuance of the Class B Membership Units and the VTEX Warrants and the VTEX
      Shares are exempt from the registration requirements of the Securities Act
      pursuant to Section 4(2) promulgated thereunder.
VTEX
      is
      entitled, under specified circumstances, to have the resale of the shares of
      common stock issuable upon conversion of the Class B Membership Units and upon
      exercise of the VTEX Warrants registered under the Securities Act of 1933,
      as
      amended (the "Securities Act").
Fees
      payable to Credit Suisse, Silver Point and Kenmont
We
      paid
      an aggregate of approximately $ 3.8 million in fees (excluding the fees of
      their
      professionals) to Credit Suisse, Silver Point, and Kenmont Special Opportunities
      Master Fund L.P. ("Kenmont"). We also issued warrants acquire our common stock
      to such parties. Set forth below is a summary of the material terms of such
      arrangements:
Silver
      Point
We
      issued
      to Silver Point's designees our Series G Warrants exercisable until February 7,
      2014 to acquire 4,488,780 million shares of our common stock at an exercise
      price of $0.01 per share. In the event that we do not obtain Biogas' guaranty of
      the Silver Point financing arrangements by December 31, 2006, warrants (with
      the
      same terms and conditions) to acquire an additional 3,998,000 shares will be
      issued to Silver Point or its designees. The exercise price is subject to
      adjustment on a weighted average basis (i) for issuances by the Company, with
      certain exceptions, of common stock, options, warrants and other rights to
      acquire our common stock, at a price below the greater of $ 3.00 (subject to
      adjustment) or fair market value (as determined pursuant to the warrant) of
      a
      share of our common stock, and (ii) for acquisitions of such securities at
      a
      price greater than fair market value.
These
      warrants are not exercisable until the issuance of the underlying shares is
      approved by our stockholders. If stockholder approval is not obtained by
      November 6, 2006, subject to an additional 59 days in specified circumstances,
      the money borrowed pursuant to the Silver Point financing arrangement becomes
      due and payable, we are obligated to pay Silver Point an additional $40 million
      and Silver Point will be entitled to exercise warrants to acquire up to the
      maximum number of shares permitted under Nasdaq's rules less the number of
      shares potentially issuable to VTEX (as described under "Transactions with VTEX
      Energy, Inc.") and the shares potentially issuable to Credit Suisse Securities
      (USA) LLC ("Credit Suisse Securities") and Kenmont Special Opportunities Master
      Fund L.P. ("Kenmont"), as described under "Fees payable to Credit Suisse, Silver
      Point and Kenmont - Credit Suisse and Kenmont" but in no event less than
      2,076,712 shares of our common stock.
Holders
      of these Series G Warrants are entitled to designate, at their option, one
      person to either serve as a member of these board of directors or as an observer
      at board meetings. The holders also have shelf, demand and piggyback
      registration rights for the resale of the shares underlying these warrants
      and
      certain other US Energy shares.
The
      issuance of these warrants are, and the issuance of the underlying shares will
      be, exempt from the registration requirements of the Securities Act pursuant
      to,
      among other things, Section 4(2) promulgated thereunder.
11
Credit
      Suisse and Kenmont
In
      connection with their participation in the financing transactions, we issued
      the
      following warrants to Kenmont and Credit Suisse Securities:
Initial
                Holder
Title
Number
of
                shares
Exercise
Price
Kenmont
Series
                H Warrants
495,220
$0.01
Credit
                Suisse Securities
Series
                H Warrants
90,000
$0.01
Kenmont
Series
                I Warrants
465,000
$4.37
Credit
                Suisse Securities
Series
                I Warrants
135,000
$4.37
These
      warrants are exercisable, subject to stockholder approval, until February 7,
      2014. The exercise price is subject to adjustment on a weighted average basis
      for our acquisition of our common stock or of rights to acquire our common
      stock, for more than fair market value. If stockholder approval of the shares
      issuable upon the exercise of these Warrants, the Silver Point Warrants, the
      VTEX Warrants and the exercise of VTEX's Class B Membership Units in Overseas is
      not obtained by November 6, 2006, subject to an additional 59 days under
      specified circumstances, Kenmont and Credit Suisse Securities have the following
      remedies:
Kenmont's
      Remedies:
·
receive
                $6,102,200 from us and return all of the Series H and Series I Warrants
                that were issued to them, or
·
receive
                $4,227,200 from us, retain the Series H Warrants to acquire up to
                306,212
                shares and return all of the other Warrants to us.
Credit
      Suisse Securities' Remedies:
·
receive
                $1,125,000 from us and return all of the Series H and Series I Warrants
                that were issued to them or
·
receive
                $687,500 from us and retain the Series H Warrant to acquire up to
                88,000
                shares and return all of the other Warrants to
                us.
The
      issuance of the these Warrants are, and the issuance of the underlying shares
      will be, exempt from the registration requirements of the Securities Act
      pursuant to, among other things, Section 4(2) promulgated
      thereunder.
The
      holders also have shelf, demand and piggyback registration rights for the resale
      of the shares underlying these warrants and certain other US Energy
      shares.
12
Carbon
      Trade Agreement
We
      expect
      to operate the Knapton Generating Station more often, and at more frequently
      at
      maximum capacity, than it has been operated in the recent past. Because the
      Knapton Generating Station will operate more than in the past, we project that
      it will require additional carbon emission allowances for its operation. Carbon
      emission allowance amounts have been set by the European Union ("EU") for each
      member state, and in turn for each power producing facility, per the
      requirements of the Kyoto Protocol. To cover the shortfall for Phase I (defined
      as the period from January 1, 2005 through December 31, 2007) GBGH's subsidiary
      RGS has entered into an Emissions Allowance Trade Agreement for the EU Scheme
      (the "Carbon Trade Agreement") with Credit Suisse Energy, LLC ("CSE"). The
      purpose of the Carbon Trade Agreement is to ensure that a fixed price is paid
      for the acquisition of carbon emission allowances and that the projected
      shortfall in carbon emission allowances is covered, thus reducing the level
      of
      risk associated with this aspect of the Knapton Generating Station's operations.
      Pursuant to this agreement, CSE will sell RGS 5,000 carbon emission allowances
      for use in 2006 at a price of €16.25 each, and 110,000 carbon emission
      allowances for use in 2007 at a price of €18.00 each. Payment for the 2006
      carbon emission allowances is due by March 15, 2007 and payment for the 2007
      carbon emission allowances is due by March 15, 2008. In addition, RGS will
      transfer to CSE the following carbon credit allowances issued to the Knapton
      Generating Station: 30,123 carbon credit allowances for 2006 and 90,367 carbon
      credit allowances for 2007. RGS also made a credit support payment of €500,000
      at closing, which payment will be returned on the payment date for the 2007
      carbon credit allowances, March 15, 2008.
Hedging
      Arrangements
Gas
      Hedge
In
      connection with the UK Transaction, we (or one of our subsidiaries) enter into
      a
      hedge agreement with J. Aron & Company (Aron), an affiliate of Goldman Sachs
      International, whereby in exchange for a payment of £7,710,000, we established
      (i) a floor price of £43.75/mWh for the sale of electricity from the Knapton
      Generating Station for our first three years of operation and (ii) a floor
      price
      of £3.41 MMBtu for the sale of gas from the same facility for our fourth and
      fifth year of operation. Electricity and gas volumes for this hedge were set
      per
      base case projections for the project.
Interest
      and Currency Hedges
GBGH
      entered into currency and interest rate hedges. A cross currency swap allowed
      GBGH to lock in an exchange rate at the spot rate on the date of closing of
      $1.905 to £1. GBGH
made
an
      initial exchange of principal on the closing date. Since the Credit Suisse
      loans
      amortize over time, GBGH will exchange Great Britain Pounds ("GBP") denominated
      principal into United States dollars denominated principal on each payment
      date
      under these Loans. The interest rate hedge will function in a similar manner.
      GBGH lock
ed
in an
      interest rate on August 7, 2006. Thereafter, GBGH will deliver fixed rate
      interest payments to the
hedge
      counterparty in exchange for floating rate interest payments.
Both
      the
      interest rate hedge and the currency swap will be combined in a seven years
      compound hedge with an upfront premium of $7 million.
GBGH
      has
      hedged the currency risk below an exchange rate of $1.907 to
£1
.
At
      the
      end of the third year, GBGH will be required to pay an additional fee of $20
      million to maintain the hedge for the subsequent four years. GBGH can choose
      to
      terminate the hedge at the end of the third year if a more favorable interest
      rate
and
      currency market
environment
      allows it to purchase a less expensive hedge. The payment of the remaining
      $20
      million hedge premium will be an obligation of US Energy under its equity
      contribution agreement See "Credit Suisse Financing Arrangements - Equity
      Support Agreement". We will ensure that $20 million is available under a letter
      of credit to support this obligation.
13
Item
1.02
      Termination of a Material Definitive Agreement
The
information
      set forth in Item 8.01 is incorporated by reference to the extent necessary
      to
      respond to the requirements of Item 1.02.
Section
      2 - Financial Information
Item
      2.01 Completion of Acquisition or Disposition of Assets.
The
information
      set forth in item 1.01 is hereby incorporated by reference to the extent
      necessary to respond to the requirements of Item 2.01.
Item
      2.03 Creation of a Direct Financial Obligation or an Obligation under an
      Off-Balance
Sheet
      Arrangement of a Registrant
The
      information set forth in item 1.01 is hereby incorporated by reference to the
      extent necessary to respond to the requirements of Item 2.03.
Section
      3 - Securities and Trading Markets
Item
      3.02 Unregistered Sale of Equity Securities
The
      information set forth in item 1.01 is hereby incorporated to the extent
      necessary to respond to the requirements of Item 3.02.
Section
      8 - Other Events
Item
      8.01 Other Events
The
      agreement dated October 7, 2005 (the "October Agreement") among VTEX, Marathon
      Capital LLC, Viking International Petroleum, Ltd. and us was terminated as
      of
      May 22, 2006 (the "May Agreement"). Generally, the October Agreement set forth
      the terms and conditions under which the parties thereto would complete certain
      of the acquisitions and transactions described herein. Pursuant to the May
      Agreement, the parties to the October Agreement released the other parties
      to
      the October Agreement from any liability with respect to the October Agreement.
      Effectively, the agreements and transactions entered into on August 7, 2006
      superseded the October Agreement.
14
Section
      9 - Financial Statements and Exhibits
Item
      9.01 Financial Statements and Exhibits
(a)
Financial
                statements of businesses
                acquired.
The
      financial statements of the businesses acquired called for by this item will,
      if
      required to be filed and available, be filed by amendment to this report by
      October 23, 2006.
(b)
Pro forma financial
              information
The
      pro
      forma financial information of the businesses called for by this item will,
      if
      required to be filed and available, be filed by amendment to this report by
      October 23, 2006.
15
SIGNATURE
Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.
U.S.
              Energy Systems, Inc.
Dated:
August
                11, 2006
By:
/s/
                Asher E. Fogel
Asher
                E. Fogel, Chief Executive Officer
16