SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 and 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 1, 1996
U.S. ENERGY CORP.
- ------------------------------------------------------------------
Exact Name of Registrant as Specified in its Charter)
Wyoming 0-6814 83-0205516
- ------------------------- ------------ ------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation)
Glen L. Larsen Building
877 North 8th West
Riverton, WY 82501
- ----------------------------------------- ------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (307) 856-9271
Not Applicable
- ------------------------------------------------------------------
(Former Name, Former Address or Former Fiscal Year,
if Changed From Last Report)
<PAGE>
ITEM 5. OTHER EVENTS
On November 1, 1996, a hearing was held in the United States
District Court of Colorado on the confirmation of the Arbitration
Award concerning the Sheep Mountain Partners arbitration. U.S.
Energy Corp. and its majority owned subsidiary, Crested Corp.,
doing business as the joint venture "USECC", reported that
following the hearing on USECC's motions to confirm the arbitration
Award, Judge Lewis T. Babcock took the motions under advisement and
expected to rule shortly.
On November 4, 1996, Judge Lewis T. Babcock of the United
States District Court of Colorado entered two Orders and a Judgment
granting USECC's petition for confirmation of the Arbitration Award
entered by a three member Panel of the American Arbitration
Association on April 18, 1996 as clarified on July 3, 1996.
The arbitration proceedings were initiated in June 1991, by
Nukem, Inc. of Stamford, CT ("Nukem") and its 100% owned subsidiary
Cycle Resource Investment Corporation ("CRIC") concerning the Sheep
Mountain Partners ("SMP") uranium operations in Wyoming after
disputes arose between the parties. The SMP Partnership was formed
in December 1988, between USECC and Nukem/CRIC to develop and mine
uranium ore from the SMP mines in Wyoming to be milled into uranium
concentrates (U3O8) and market U3O8 worldwide. USECC filed suit in
July 1991, against Nukem/CRIC in the U.S. District Court of
Colorado to rescind the Partnership and for damages. The Court
stayed the arbitration proceedings and USECC conducted extensive
legal discovery. Thereafter in February 1994, the parties agreed
to arbitrate their disputes. Hearings on the consensual
arbitration were commenced on June 27, 1994 and consumed some 73
hearing days which ended on May 31, 1995.
On April 18, 1996, the three member Arbitration Panel entered
its Order and Award awarding USECC a net of approximately
$12,200,000 and ordered Nukem to transfer to SMP a contract it
entered into with a domestic utility. The Panel also ordered
contracts Nukem had entered into for the purchase of uranium
concentrates from three CIS Republics, placed in constructive trust
with SMP. USECC petitioned the U.S. District Court in Colorado for
confirmation of the Award and Nukem filed objections and motions to
modify and vacate portions of the Award, alleging that significant
portions of the Award were erroneous. Nukem was seeking to set
aside some $16 million claiming double recovery, which the Panel
had awarded USECC. On May 31, 1996, the Court remanded the Award
to the Panel for consideration of these motions. On July 3, 1996,
the Panel entered a new order affirming its earlier Award stating
that, "There was wrongdoing on the part of Nukem when it used what
were clearly partnership contracts to obtain financial benefits for
itself alone . . . Our Award . . . is premised upon wrongdoing by
Nukem and a judgment by us that Nukem ought not to be permitted to
profit from that wrongful conduct." The Panel clarified its April
18, 1996 Order awarding SMP Nukem contracts which include the
rights to purchase CIS uranium, the uranium acquired pursuant to
those rights and the profits therefrom. The contracts between Nukem
and three CIS Republics were impressed with a constructive trust in
favor of SMP. The Panel further stated, "We thus conclude that
there is no inconsistency and no double recovery and no subtraction
that ought to be made from profits already realized . . ."
USECC then filed new motions to confirm and correct the
Arbitration Award as clarified by the Panel on July 3, 1996 and
Nukem/CRIC filed objections and motions in the U.S. District Court
of Colorado to modify and vacate portions of the Award. The
hearing on these motions was held on November 1, 1996 and the
Orders and Judgment were entered as noted above by the Court on
November 4, 1996.
In its Order and Judgment, the Court modified and confirmed
the Panel's April 18, 1996 Award in favor of USECC by deleting
$265,313 from the Award reimbursing Nukem/CRIC for monies advanced
to purchase U3O8 for delivery to SMP customers. The Panel awarded
USECC a net of approximately $7,779,268 in damages against Nukem,
plus an amount of $4,448,192 to be paid USECC out of funds held in
SMP bank accounts. SMP had a total of $19,900,789 as of November
5, 1996 in accounts at two banks, which will be divided between
USECC and Nukem/CRIC pursuant to a judgment of the Court. The
Court found as a matter of law that Nukem/CRIC failed to meet their
burden of proof to vacate or modify the arbitration award.
The Court further granted USECC's petition to confirm the
Panel's Award to SMP of a uranium supply contract that Nukem had
entered into with a domestic utility, when the SMP Partnership was
formed in 1988. This contract should produce substantial profits
for the SMP Partnership. Additionally, the Court granted USECC's
petition to confirm the Panel's Award to SMP in constructive trust,
of contracts entered into for the acquisition of uranium between
Nukem and three CIS Republics of the former Soviet Union because
Nukem, without SMP's permission and consent, used the SMP uranium
supply contracts which were partnership assets to obtain purchase
rights for CIS uranium. The clarified Award of July 3, 1996
provided:
"Since the rights to purchase the CIS uranium were
obtained through the use of SMP contracts (partnership
assets), those purchase rights, the uranium acquired
pursuant to those rights and the profits therefrom are
impressed with a constructive trust in favor of SMP and
we concluded that SMP is entitled to damages in the
amount of $31,355,070 to compensate it for its past and
future lost profits."
Notwithstanding the foregoing, Nukem/CRIC continue to dispute
that the Arbitration Award orders Nukem's CIS contracts impressed
with a constructive trust in favor of SMP claiming that Nukem did
not violate the SMP Partnership or Marketing or Trading Agreement.
As a partner in SMP, USECC believes it is entitled to one-half of
the net benefits of these contracts. Nukem has stated in open
court that an amount of at least 72 million pounds of uranium
concentrates from the CIS Republics are in question. Management of
USECC believes the amount of uranium concentrates is significantly
greater, but the exact amount and the value of the CIS contracts
cannot be determined at this time.
On or about November 5, 1996, USECC received $4,367,474 of the
money on deposit in SMP bank accounts. USECC expects further
proceedings to take place on the distribution of the balance of
those funds. Nukem and CIRC have indicated that they intend to
appeal the decisions of the U.S. District Court to the Tenth
Circuit Court of Appeals. Distribution of these remaining funds
will be to the parties at a later date to be determined. Nukem and
CRIC presently claim that they should be allocated approximately
$14 million out of the remaining account.
SIGNATURES
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 CORP.
Dated: November 14, 1996 By: s/ Daniel P. Svilar
-------------------------------
DANIEL P. SVILAR,
Assistant Secretary
