U.S. ENERGY CORP.
Minerals Plaza, Glen L. Larsen Building
877 North 8th West
Riverton, Wyoming 82501
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Tuesday, November 26, 1996
TO THE SHAREHOLDERS OF U.S. ENERGY CORP:
PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of
U.S. Energy Corp., a Wyoming corporation (the "Company" or "USE"),
will be held at the Company's executive offices, 877 North 8th
West, Riverton, Wyoming 82501 on Tuesday, November 26, 1996, at
11:00 a.m., local time, or at any adjournments thereof (the
"Meeting"), for the purpose of acting upon:
1. The election of three directors to serve until the third
succeeding annual meeting of shareholders, and until
their successors have been duly elected or appointed and
qualified;
2. Amending the current Incentive Stock Option Plan to
increase the number of qualified stock options which may
be issued.
3. Approval of the 1996 Stock Award Program for the issuance
of up to 67,000 shares of Common Stock each year (based
on the earnings of the Company for the prior fiscal year
ended May 31) from 1997 through 2002 to the five
executive officers of the Company as a group.
4. Such other business as may properly come before such
meeting.
Only shareholders of record at the close of business on
Thursday, October 3, 1996, will be entitled to notice of and to
vote at the Annual Meeting or any adjournment thereof. The
Company's transfer books will not be closed for the Meeting.
A list of shareholders entitled to vote at the Meeting will be
available for inspection by any record shareholder at the Company's
principal executive offices in Riverton, Wyoming. The inspection
period begins two days after the date this Notice is given and ends
at the conclusion of the Meeting.
By Order of the Board of Directors
s/ MAX T. EVANS, Secretary
<PAGE>
Please date, sign and return your Proxy so that your shares
may be voted as you wish, and to assure quorum. The prompt return
of your signed Proxy, regardless of the number of shares you hold,
will aid the Company in reducing the expense of additional Proxy
solicitation. The giving of such Proxy does not affect your right
to vote in person should you attend the Meeting.
YOUR VOTE IS IMPORTANT
Dated: October 25, 1996
<PAGE>
U.S. ENERGY CORP.
Minerals Plaza, Glen L. Larsen Building
877 North 8th West
Riverton, Wyoming 82501
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY NOVEMBER 26, 1996
The enclosed Proxy is solicited on behalf of the Board of
Directors (the "Board") of U.S. Energy Corp. (the "Company" or
"USE") for use at the Annual Meeting of Shareholders to be held at
11:00 a.m. local time on Tuesday, November 26, 1996 (the
"Meeting"). It is expected that the Notice of Meeting, Proxy
Statement and Proxy will be mailed to record shareholders on or
about October 31, 1996.
REVOCABILITY OF PROXY
The Proxy may be revoked at any time, to the extent it has not
been exercised, by: (i) written revocation; (ii) executing a
later-dated Proxy and delivering it to the Company; (iii)
requesting (in writing) a return of the Proxy; or (iv) the
shareholder voting in person at the Meeting.
VOTING OF PROXY
If the enclosed Proxy is executed and returned, it will be
voted as indicated by the shareholder on the proposals. Unless
otherwise instructed to the contrary in the Proxy, the appointees
named in the Proxy will:
1. VOTE FOR the three management nominees to the Board; and
2. VOTE FOR the increase in the number of qualified
incentive stock options which may be issued under the
existing Incentive Stock Option Plan.
3. VOTE FOR the approval of the 1996 Stock Award Program.
4. VOTE in accordance with their best judgment on any other
matters that may properly come before the Meeting.
As of the date of the Notice of Meeting and Proxy Statement, the
management of the Company has no knowledge of other matters that
may be brought before the Meeting.
SOLICITATION
The costs of preparing, assembling and mailing the Notice of
Meeting, Proxy Statement, Proxy, (collectively the "Proxy
Materials") as well as solicitations of the Proxies and
miscellaneous costs with respect to the same, will be paid by the
Company. The solicitation is to be made by use of the mails. The
Company may also use the services of its directors, officers and
employees to solicit Proxies, personally or by telephone and
telegraph, at no additional salary or compensation. The Board does
not expect to use specially engaged employees or paid solicitors,
although it reserves the right to do so.
The Company intends to request banks, brokerage houses and
other such custodians, nominees and fiduciaries to forward copies
of the Proxy Materials to those persons for whom they hold shares
and request authority for the execution of the Proxies. The
Company will reimburse the nominee holders for reasonable out-of-
pocket expenses incurred by them in so doing.
VOTING SECURITIES
Only holders of record of shares of the Company's $.01 par
value common stock (the "Common Stock"), at the close of business
on Thursday October 3, 1996, will be entitled to vote at the
Meeting. On the record date, the Company had 6,686,909 shares of
Common Stock outstanding and entitled to vote. The Company has no
other class of voting securities outstanding. Each share of Common
Stock is entitled to one vote, in person or by proxy, on all
matters other than the election of directors, with respect to which
cumulative voting is provided. Cumulative voting generally allows
each holder of shares of Common Stock to multiply the number of
shares owned by the number of directors being elected, and to
distribute the resulting number of votes among nominees in any
proportion that the holder chooses.
A majority of the issued and outstanding shares of Common
Stock, represented in person or by Proxy, constitutes a quorum at
any shareholders' meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following is a list of all record holders who, as of
October 3, 1996 beneficially owned more than five percent of the
outstanding shares of Common Stock, as reported in filings with the
Securities Exchange Commission (the "SEC") or as otherwise known to
the Company. Except as otherwise noted, each holder exercises the
sole voting and dispositive powers over the shares listed opposite
the holder's name, excluding the shares subject to forfeiture and
those held in ESOP accounts established for the employee's benefit.
Dispositive powers over the forfeitable shares is shared by the
Company's Board of Directors, while the ESOP Trustees exercise
dispositive powers over all ESOP shares. It should be noted that
voting and dispositive powers over certain shares are shared by two
or more of the listed holders. Such securities are reported
opposite each holder having a shared interest therein. See
"Certain Other Transactions".
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
------------------------------------------------
Voting Rights Dispositive Rights Total
Name and address --------------------- ------------------------ Beneficial Percent
of beneficial owner Sole Shared Sole Shared Ownership of Class(1)
- - -------------------- ---- ------ ---- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John L. Larsen(2) 593,330 1,054,338 548,136 1,497,619 2,045,755 29.1%
201 Hill Street
Riverton, WY 82501
Max T. Evans(3) 120,137 866,726 93,589 1,310,007 1,403,596 20.6%
1410 Smith Road
Riverton, WY 82501
Daniel P. Svilar(4) 155,178 904,682 116,163 904,682 1,237,020 17.9%
580 S. Indiana Street
Hudson, WY 82515
Michael D. Zwickl(5) 63,069 510,359 63,069 510,359 573,428 8.9%
137 North Beech Street
Casper, WY 82601
Kathleen R. Martin(6) -0- 510,359 -0- 510,359 510,359 8.0%
309 North Broadway
Riverton, WY 82501
Crested Corp. 510,359 510,359 510,359 -0- 510,359 7.6%
877 North 8th West
Riverton, WY 82501
Harold F. Herron(7) 100,990 368,979 95,832 812,260 908,092 13.4%
3425 Riverside Road
Riverton, WY 82501
U.S. Energy Corp. ESOP(8)155,811 -0- 403,572 -0- 403,572 6.0%
877 North 8th West
Riverton, WY 82501
</TABLE>
__________
<PAGE>
(1) Percent of class is computed by dividing the number of
shares beneficially owned plus any options held by the reporting
person, by the number of shares outstanding plus the shares
underlying options held by that person.
(2) Mr. Larsen exercises sole voting powers over 242,036
directly owned shares, 106,000 shares held in joint tenancy with
his wife, 20,400 shares subject to forfeiture, 200,100 shares
underlying options and 24,794 shares held in the U.S. Energy Corp.
Employee Stock Ownership Plan ("ESOP") account established for his
benefit. The directly owned shares include 27,500 shares gifted to
his wife, that have remained in Mr. Larsen's name. Shares over
which shared voting rights are exercised consist 155,811 shares
held by the ESOP, which have not been allocated to accounts
established for specific beneficiaries and shares held by
corporations of which Mr. Larsen is a director consisting of
510,359 shares held by Crested Corp. ("Crested"), 125,556 shares
held directly by Plateau Resources Limited ("Plateau"), 75,000
shares underlying options held by Plateau, 100,000 shares held by
Sutter Gold Mining Company ("SGMC"), 75,000 shares underlying
options held by SGMC, and 12,612 shares held by Ruby Mining Company
("Ruby"). Mr. Larsen shares voting and dispositive rights over
such shares with the other directors of such corporations. Mr.
Larsen shares voting powers over the unallocated ESOP shares in his
capacity as an ESOP Trustee with the other ESOP Trustees. Shares
over which sole dispositive rights are exercised consist of
directly owned shares, joint tenancy shares and options, less the
27,500 shares gifted, but not transferred, to his wife. Shares for
which shared dispositive powers are held consist of the 403,572
shares held by the ESOP, 195,520 shares subject to forfeiture, the
shares held by Crested, Plateau, SGMC and Ruby, and the Plateau and
SGMC option shares. The shares shown as beneficially owned by Mr.
Larsen do not include 42,350 shares owned directly by his wife, who
exercises the sole investment and voting powers over those shares.
(3) Shares over which Mr. Evans exercises sole voting powers
consist of 36,389 directly owned shares which are held in joint
tenancy with his wife, 12,750 shares subject to forfeiture, 57,200
shares underlying options and 13,798 shares held in the ESOP
account established for his benefit. Shares for which Mr. Evans
holds sole dispositive powers are comprised of his directly held
shares and the shares underlying his options. Shares over which
Mr. Evans exercises shared voting rights consist of the shares held
by Crested, Plateau, the unallocated ESOP shares and the Plateau
options. He exercises shared dispositive rights over the shares
held by Crested, Plateau, the ESOP, the shares subject to
forfeiture and the Plateau options. Mr. Evans shares voting and
dispositive power over the shares held by Crested and Plateau with
the remaining directors of those companies.
(4) Mr. Svilar exercises sole voting powers over 29,263
directly owned shares, 7,700 shares held in joint tenancy with his
wife, 12,200 shares held jointly with a deceased family member,
1,000 shares held as custodian for his minor child under the
Wyoming Uniform Transfers to Minors Act (the Minor's shares),
18,360 shares subject to forfeiture, 66,000 shares underlying
options and 20,655 shares held in the ESOP account established for
his benefit. He holds sole dispositive power over his directly
held shares, joint tenancy shares, Minor's shares and the shares
underlying his options. The shares over which he exercises shared
voting and dispositive rights consist of the 510,359 shares held by
Crested and the 100,000 shares and 75,000 shares underlying options
held by SGMC. Mr. Svilar exercises shared investment and voting
powers as a director of Crested, Plateau and SGMC with the other
directors of those companies. He also exercises shared voting and
investment powers of 18,767 shares held by a nonaffiliated company
of which Mr. Svilar is a partner. The listed shares include
125,556 shares and 75,000 shares underlying options held by
Plateau, because Mr. Svilar is an executive officer of Plateau.
However, Mr. Svilar is not a director of Plateau and therefore does
not share voting or dispositive rights over the USE shares held by
Plateau.
(5) Mr. Zwickl exercises sole voting and dispositive powers
over 9,444 directly held shares and 53,625 shares held by two (2)
limited partnerships. He is the sole officer and director of the
corporate general partner of those partnerships. As a director of
Crested, Mr. Zwickl exercises shared voting and dispositive powers
over the 510,359 shares held by Crested with the other Crested
directors.
(6) Consists of shares held by Crested over which shared voting
and dispositive powers are exercised with the other Crested
directors.
(7) Mr. Herron exercises sole voting powers over 71,251
directly owned shares, 12,000 shares held for his minor children
under the Wyoming Uniform Transfers to Minors Act (the Minor's
shares), 11,000 shares underlying options, 5,158 shares held in the
ESOP account established for his benefit and 1,581 shares held by
Northwest Gold, Inc. ("NWG"). Sole dispositive powers are
exercised over the directly held shares, the Minor's shares, the
shares underlying options and the shares held by NWG. Mr. Herron
exercises sole voting and investment powers over the NWG shares as
NWG's sole director. Mr. Herron exercises shared voting rights
over 125,556 shares held by Plateau, 75,000 shares underlying
options held by Plateau, 12,612 shares held by Ruby and the 155,811
unallocated ESOP shares. Shared dispositive rights are exercised
over the shares held by the ESOP, Plateau, Ruby and the forfeitable
shares. Mr. Herron exercises shared dispositive and voting powers
over the shares held by Plateau and Ruby as a director of those
companies with the other directors of those companies. He
exercises powers over the ESOP shares in his capacity as an ESOP
Trustee with the other ESOP Trustees. The shares shown as
beneficially owned by Mr. Herron do not include 3,030 shares owned
directly by his wife who exercises the sole voting and dispositive
powers over those shares.
<PAGE>
(8) The ESOP holds 403,572 shares, 155,811 of which have not
been allocated to accounts of individual plan beneficiaries. The
Trustees exercise the voting rights over the unallocated shares.
Plan participants exercise voting rights over allocated shares.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's directors have been divided into three classes,
each consisting of two persons. Directors are elected until the
third succeeding annual meeting and until their successors have
been duly elected or appointed and qualified or until death,
resignation or removal. The terms of two directors, Don C.
Anderson and Nick Bebout, will expire at the Meeting, and they have
been nominated for re-election. The current directors of the
Company are:
Meeting
Other at which
Name, age and positions with Director term will
designation with the Company since expire
- - ------------ --------------- -------- ---------
John L. Larsen (65) Chairman, CEO 1966 1997
(continuing director) and President Annual Meeting
(c)(d)(e)
Max T. Evans (72) Secretary 1978 1997
(continuing director) (a)(c)(e) Annual Meeting
Harold F. Herron (43) Vice President 1989 1998
(continuing director) (b)(c)(e) Annual Meeting
David W. Brenman (40) (b)(d) 1989 1998
(continuing director) Annual Meeting
Don C. Anderson (70) (c) 1990 1996
(nominee) Annual Meeting
Nick Bebout (46) (a)(b)(d) 1989 1996
(nominee) Annual Meeting
H. Russell Fraser
(nominee)
(a) Member of the nominating committee.
(b) Member of the compensation/stock option committee.
(c) Member of the executive committee.
(d) Member of the audit committee.
(e) ESOP trustee.
As noted under "Voting Securities", cumulative voting is
allowed in the election of directors. The three directors
receiving the greatest number of votes cast at a duly convened
meeting will be elected. The proxy holders named in the Proxies do
not currently intend to cumulate the votes of Proxies received by
them, but reserve the right to cumulatively vote such shares for
the management appointees, in such manner as they elect.
Management recommends that the shareholders vote for the re-
election of Mr. Anderson, Mr. Bebout and Mr. Fraser to the Board of
Directors. Mr. Fraser has not previously served as an officer or
director of the Company.
Executive officers of the Company are elected by the Board at
annual directors' meetings, which follow each Annual Shareholders'
Meeting, to serve until the officer's successor has been duly
elected and qualified, or until death, resignation or removal by
the Board.
Family Relationships.
Harold F. Herron, a director and Vice-President, is the son-
in-law of John L. Larsen, a principal shareholder, Chairman,
President and CEO. Nick Bebout, a director, is a nephew of Daniel
P. Svilar, a principal shareholder and General Counsel. There are
no other family relationships among the executive officers or
directors of the Company.
Business Experience and Other Directorships of Directors and
Nominees.
John L. Larsen has been principally employed as an officer and
director of the Company and Crested for more than the past five
years. He is also a director of the Company's subsidiary, Ruby.
Crested and Ruby have registered equity securities under the
Securities Exchange Act of 1934 (the "Exchange Act"). Mr. Larsen
is chief executive officer and chairman of the board of directors
of Plateau Resources, Limited and of Sutter Gold Mining Company.
Max T. Evans has been principally employed as an officer and
chief geologist of the Company and Crested for more than the past
five years. He is President and a director of Crested. Mr. Evans
received B.S. and M.S. degrees in geology from Brigham Young
University.
Harold F. Herron has been the Company's Vice-President since
January 1989. From 1976, Mr. Herron has been an employee of
Brunton, a manufacturer and/or marketer of compasses, binoculars
and knives. Brunton was a wholly owned Company subsidiary until
Brunton was sold in February 1996. Initially, he was Brunton's
sales manager, and since 1987 he has been its President. Mr.
Herron is a director of Ruby and NWG, which have registered equity
securities under the Exchange Act. Mr. Herron received an M.B.A.
degree from the University of Wyoming after receiving a B.S. degree
in Business Administration from the University of Nebraska at
Omaha.
David W. Brenman has been a director of the Company since
January 1989. Since September 1988, Mr. Brenman has been a self-
employed financial consultant. In that capacity, Mr. Brenman has
assisted the Company and Crested in negotiating certain financing
arrangements. From February 1987 through September 1988, Mr.
Brenman was a vice-president of project financing for Lloyd's
International Corp., a wholly-owned subsidiary of Lloyd's Bank,
PLC. From October 1984 through February 1987, Mr. Brenman was
President, and continues to be a director of Cogenco International,
Inc., a company engaged in the electric cogeneration industry,
which has registered equity securities under the Exchange Act. Mr.
Brenman has an L.L.M. degree in taxation from New York University
and a J.D. degree from the University of Denver.
Don C. Anderson has been a Company director since May 1990.
From January 1990 until mid-fiscal 1993, Mr. Anderson was the
manager of the geology department for the Company. Mr. Anderson
was Manager of Exploration and Development for Pathfinder Mines
Corporation, a major domestic uranium mining and milling
corporation, from 1976 until his retirement in 1988. Previously,
he was Mine Manager for Pathfinder's predecessor, Utah
International, Inc., from 1965 to 1976. He received a B. S. degree
in geology from Brigham Young University.
Nick Bebout has been director and President of NUCOR, Inc.
("NUCOR"), a privately-held corporation that provides exploration
and development drilling services to the mineral and oil and gas
industries, since 1987. Prior to that time, Mr. Bebout was Vice
President of NUCOR from 1984. Mr. Bebout is also an officer,
director and owner of other privately-held entities involved in the
resources industry.
H. Russell Fraser has been chairman of the board and chief
executive officer of Fitch Investors Services, L.P. for more than
the past five years. Fitch Investors Services, L.P., New York, New
York, is a nationwide stock and bond rating and information
distribution company. From 1980-1989, Mr. Fraser served as
president and chief executive officer of AMBAC, the oldest
municipal bond issuer in the United States. Under his direction,
AMBAC's assets grew to more than $1 billion at year-end 1988 from
$35 million at the beginning of 1980, while statutory net income
after taxes increased to $57 million in 1988 from a loss in 1979.
Before joining AMBAC, Mr. Fraser was senior vice president and
director of fixed-income research at Paine Webber, Inc. While a
member of the board of directors at paine Webber, Mr. Fraser
participated in both the corporate and public finance departments
and headed Paine Webber's trading and sales for all corporate bond
products. Previously, he managed corporate ratings at Standard &
Poor's, supervising research analysis of corporate bonds, preferred
stock, and commercial paper. During his tenure at S&P he stated
commercial paper ratings 'A-1' through 'A-3', initiating the plus
and minus qualifiers and rating the first two financial guaranty
companies, AMBAC and MBIA.
Mr. Fraser holds a BS in finance and economics from the
University of Arizona. he is a member of the Municipal Analysts
Group of New York and founder of the Fixed Income Analysts Society.
SECURITY OWNERSHIP OF NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of October 3, 1996, the
shares of Common Stock, and the $.001 par value common stock of the
Company's 52%-owned subsidiary, Crested, held by each director and
nominee, and by all officers and directors as a group. Unless
otherwise noted, the listed record holder exercises sole voting and
dispositive powers over the shares reported as beneficially owned,
excluding the shares subject to forfeiture and those held in ESOP
accounts established for the employee's benefit. Dispositive
powers over the forfeitable shares is shared by the Company's Board
of Directors, while the ESOP Trustees exercise dispositive powers
over all ESOP shares. It should be noted that voting and
dispositive powers for certain shares are shared by two or more of
the listed holders. Such shares are reported opposite each holder
having a shared interest therein, but are only included once in the
shareholdings of the group presented in the table.
<PAGE>
<TABLE>
<CAPTION>
Company Common Stock Crested Common Stock
--------------------------------- -------------------------------
Amount and Percent Amount and Percent
Nature of of Nature of of
Beneficial Ownership Class(1) Beneficial Ownership Class(1)
-------------------- -------- -------------------- --------
<S> <C> <C> <C> <C>
John L. Larsen 2,045,755(2) 29.1% 5,826,182(8) 57.1%
Max T. Evans 1,403,596(2) 20.6% 5,661,533(9) 55.4%
Harold F. Herron 908,092(2) 13.4% 5,574,999(10) 54.6%
Don C. Anderson 204,675(3) 3.0% 5,300,297(11) 51.9%
Nick Bebout 211,626(4) 3.2% 5,300,297(11 51.9%
David W. Brenman 200,520(5) 3.0% 5,300,297(11) 51.9%
H. Russell Fraser 5,300 * 26,000 *
Daniel P. Svilar 1,237,020(2) 17.9% 5,987,297(12) 58.6%
R. Scott Lorimer 1,141,361(6) 16.6% 5,830,067(13) 57.1%
All officers and
directors as a
group (eight persons) 2,435,360(7) 33.8% 6,217,235(14) 60.9%
_________
*Less than one percent.
</TABLE>
<PAGE>
(1) Percent of class is computed by dividing the number of
shares beneficially owned plus any options held by the reporting
person or group, by the number of shares outstanding plus the
shares underlying the options held by that person or group.
(2) See footnotes for this person to the table presented under
the heading "Principal Holders of Voting Securities".
(3 Includes 8,155 directly held shares and 195,020 shares
subject to forfeiture. Mr. Anderson exercises sole voting rights
with respect to 26,155 shares (18,000 of which are subject to
forfeiture), and sole dispositive rights over the directly held
shares.
(4) Consists of 15,056 shares held directly, 50 shares held in
joint tenancy with his wife, 196,020 shares subject to forfeiture.
Mr. Bebout exercises sole voting powers over 16,106 shares (1,000
of which are subject to forfeiture) and sole investment powers over
the directly held shares and joint tenancy shares.
(5) Consists of 4,000 shares held directly and 196,020 shares
subject to forfeiture. Mr. Brenman exercises sole voting powers
over 5,000 shares (1,000 of which are subject to forfeiture) and
sole dispositive powers over the 4,000 directly held shares.
(6) Mr. Lorimer exercises sole voting powers over 2 directly
held shares, 16,031 shares held in the ESOP account established for
his benefit, 12,240 shares subject to forfeiture and 29,700 shares
underlying options. Mr. Lorimer exercises sole dispositive powers
over his directly held shares and the shares underlying his
options. He shares voting and dispositive powers over 100,000
shares and 75,000 shares underlying options held by SGMC as a
director of SGMC. The listed shares include 510,359 shares held by
Crested, 125,556 shares and 75,000 shares underlying options held
by Plateau, 53,885 shares held by Ruby and 3,885 shares held by NWG
as indirectly beneficially owned because Mr. Lorimer is an
executive officer of Crested, Plateau, Ruby and NWG. However, Mr.
Lorimer is not a director of either Crested, Plateau, Ruby or NWG
and therefore does not exercise voting or dispositive powers over
the USE shares held by those companies.
(7) Consists of 1,074,869 shares over which the group members
exercise sole voting rights, including 364,000 shares underlying
options and 80,436 shares allocated to ESOP accounts established
for the benefit of group members. The listed shares include
910,683 shares over which group members exercise sole dispositive
rights. Shared voting and dispositive rights are exercised with
respect to 1,073,105 and 1,384,430 shares, respectively.
(8) Consists of 5,300,297 Crested shares held by the Company,
100,000 shares and 150,000 shares underlying options held by SGMC,
60,000 shares and 150,000 shares underlying options held by
Plateau, 53,885 shares held by Ruby with respect to which shared
voting and dispositive powers are exercised as a director with the
other directors of those Companies and 12,000 forfeitable shares
over which Mr. Larsen exercises shared dispositive powers with the
remaining Crested directors.
(9) Includes 139,236 directly held shares; and 5,300,297
Crested shares held by the Company, and 60,000 shares and 150,000
shares underlying options held by Plateau, with respect to which
shared voting and dispositive powers are exercised as a director
with the other directors of those Companies and 12,000 forfeitable
shares over which Mr. Evans exercises shared dispositive powers
with the remaining Crested directors.
(10) Include 6,932 directly held shares and 3,885 shares held
by NWG over which Mr. Herron exercises sole voting and investment
powers. Mr. Herron is the sole director of NWG. Also includes the
Crested shares held by the Company and Ruby, and the shares and
shares underlying options held by Plateau, with respect to which
shared voting and dispositive powers are exercised as a USE,
Plateau and Ruby director with the other directors of directors of
those companies.
(11)Consist of the Crested shares held by the Company with
respect to which shared voting and dispositive powers are exercised
as a director with the other directors of the Company.
(12) Mr. Svilar exercises shared voting and dispositive over
175,000 directly held shares and 40,000 shares which are held in
joint tenancy with a family member. Also includes 100,000 shares
and 150,000 shares underlying options held by SGMC with respect to
which shared voting and dispositive powers are exercised as a
director with the other directors of SGMC and 12,000 forfeitable
shares over which Mr. Svilar exercises shared dispositive powers
with the remaining Crested directors. The listed shares include
5,300,297 Crested shares held by the Company, and 60,000 shares and
150,000 shares underlying options held by Plateau as indirectly
beneficially owned because Mr. Svilar is an executive officer of
USE and Plateau. However, Mr. Svilar is not a director of USE or
Plateau and therefore has no voting or dispositive power with
respect to the Crested shares held by those companies.
(13) Mr. Lorimer exercises sole voting powers over 12,000 shares
which are subject to forfeiture. In addition, as a director of
SGMC, Mr. Lorimer shares voting and dispositive powers with the
other SGMC directors over 100,000 Crested shares and 150,000
Crested shares underlying options held by SGMC. The listed shares
include shares held by USE, Plateau, Ruby and NWG, and the Plateau
as indirectly beneficially held by Mr. Lorimer because he is an
executive officer of USE, Plateau, Ruby and NWG. However, because
Mr. Lorimer is not a director of USE, Plateau, Ruby or NWG, he has
no voting or dispositive powers with respect to the Crested shares
held by those companies.
(14)Consists of 373,168 shares over which the group members
exercise sole voting rights, including 12,000 shares subject to
forfeiture. The listed shares include 361,168 shares over which
group members exercise sole dispositive rights. Shared voting and
dispositive rights are exercised with respect to 5,814,182 and
5,826,182 shares, respectively.
Each director beneficially holds the 2,400,000, 2,040,000 and
255,000,000 shares of Ruby, NWG, and Four Nines Gold, Inc. ("FNG")
common stock, respectively, held by the Company. They exercise
shared voting and dispositive powers over those shares as Company
directors with the other Company directors. Those shares represent
26.7%, 7.6%, and 50.9% of the outstanding shares of Ruby, NWG, and
FNG, respectively. John L. Larsen beneficially holds 272,500,000
shares of FNG common stock (54.4% of the outstanding shares), which
includes 255,000,000 shares held by the Company, 5,000,000 held by
USECC Joint Venture and 5,000,000 shares held by Crested, over
which Mr. Larsen shares voting and dispositive powers with the
remaining directors of the Company and Crested. Harold F. Herron
beneficially holds 2,400,500, 2,597,500, and 265,000,000 shares of
the common stock of Ruby, NWG, and FNG, respectively, representing
26.7%, 9.7%, and 52.9%, respectively, of those classes of stock.
Daniel P. Svilar beneficially owns 14,000,000 shares of the common
stock of FNG (4,000,000 shares directly in joint tenancy with other
family members), representing 2.8% of that class. None of the
other directors or officers directly hold any other shares of stock
of Ruby, NWG or FNG. All executive officers and directors of the
Company as a group (8 persons) hold 2,400,500, 2,597,500, and
284,500,000 shares of the stock of Ruby, NWG, and FNG, representing
26.7%, 9.7%, 60.0% and 56.2% of the outstanding shares of those
companies, respectively.
The Company has reviewed Forms 3, 4 and 5 reports concerning
ownership of Common Stock in the Company, which have been filed
with the SEC under Section 16(a) of the Exchange Act, and received
written representations from the filing persons. Based solely upon
review of the reports and representations, Crested Corp. and
Messrs. Larsen and Herron each had three late filings, and Messrs.
Evans, Bebout, Svilar and Lorimer each had two late filings. The
Company believes no other director, executive officer, beneficial
owner of more than ten percent of the Common Stock, or other person
subject to the statutory filing obligations, failed to file such
reports on a timely basis during fiscal 1996.
Information Concerning Executive Officers Who Are Not Directors
The following information is provided pursuant to Item 401 of Reg.
S-B, regarding the executive officers of the Company who are not
also directors.
Daniel P. Svilar, age 67 has been General Counsel for USE and
Crested for more than the past five years. He also has served as
Secretary and a director of Crested, Assistant Secretary of USE,
and is a director and officer of SGMC. His positions of General
Counsel to, and as officers of the companies, are at the will of
each board of directors. There are no understandings between Mr.
Svilar and any other person pursuant to which he was named as
officer or General Counsel. He has no family relationships with
any of the other executive officers or directors of USE or Crested,
except his nephew Nick Bebout is a USE director. During the past
five years, Mr. Svilar has not been involved in any Reg. S-B Item
401(d) proceeding.
Robert Scott Lorimer, age 45, has been Controller and Chief
Accounting Officer for USE and Crested for more than the past five
years. Mr. Lorimer also has been Chief Financial Officer for both
companies since May 25, 1991, and their Treasurer since December
14, 1990. Mr. Lorimer also is an officer and director of Sutter
Gold Mining Company. He serves at the will of the Boards of
Directors. There are no understandings between Mr. Lorimer and any
other person, pursuant to which he was named an officer, and he has
no family relationship with any of the other executive officers or
directors of USE or Crested. During the past five years, he has
not been involved in any Reg. S-B Item 401(d) listed proceeding.
EXECUTIVE COMPENSATION
Under a Management Agreement dated August 1, 1981, the Company
and Crested share certain general and administrative expenses,
including compensation of the officers and directors of the
companies (but excluding directors' fees) which have been paid
through the USECC Joint Venture ("USECC"). Substantially all the
work efforts of the officers of the Company and Crested are devoted
to the business of both the Company and Crested.
All USECC personnel are Company employees, in order to utilize
the Company's ESOP as an employee benefit mechanism. The Company
charges USECC for the direct and indirect costs of its employees
for time spent on USECC matters, and USECC charges one-half of that
amount to each of Crested and the Company.
The following table sets forth the compensation paid to the
USE Chief Executive Officer, and those of the four most highly
compensated USE executive officers who were paid more than $100,000
cash in any of the three fiscal years ended May 31, 1996. The
table includes compensation paid such persons by Crested and
Brunton for such persons' services to such subsidiaries.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs(#) ($) ($)(2)
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <S> <C> <S> <S> <C>
John L. Larsen 1996 $148,600 $ -0- -- $ -- -0- -- $15,566
CEO and 1995 144,023 2,751 -- 9,000(1) -0- -- 13,361
President 1994 148,239 7,028 -- 9,600(1) -0- -- 14,394
Daniel P. Svilar 1996 124,153 -0- -- -- -0- -- 14,009
General Counsel 1995 112,615 2,076 -- 8,100(1) -0- -- 11,008
and Assistant 1994 112,753 64,984 -- 8,640(1) -0- -- 17,300
Secretary
Harold F. Herron 1996 113,600 -0- -- -- -0- -- 4,037
Vice President 1995 117,238 2,033 -- -- -0- -- 6,626
1994 105,983 18,268 -- -- -0- -- 9,743
R. Scott Lorimer 1996 110,100 -0- -- -- -0- -- 13,749
Treasurer 1995 112,403 2,098 -- 5,681(1) -0- -- 10,989
and CFO 1994 92,799 43,461 -- 6,181(1) -0- -- 13,260
(1) Bonus shares equal to 20% of original bonus shares issued FY 1990, multiplied by $3.75 in
1995 and $4.00 in 1994, the closing bid price on issue dates. These shares are subject to
forfeiture on termination of employment, except for retirement, death or disability. Does
not include additional shares which may be granted if the 1996 Stock Award Program is
approved at the 1996 Annual Meeting. See Proposal Three.
(2) Dollar values for ESOP contributions and 401K matching contributions.
</TABLE>
<PAGE>
Executive Compensation Plans and Employment Agreements
To provide incentive to Mr. Larsen for his efforts in having
Green Mountain Mining Venture (" GMMV") develop a producing mine as
soon as possible, in fiscal 1993 the USE Board adopted a long-term
incentive arrangement under which Mr. Larsen is to be paid a non-
recurring $1,000,000 cash bonus, provided that the Nuexco Exchange
Value of uranium oxide concentrates has been maintained at $25.00
per pound for six consecutive months, and provided further that USE
has received cumulative cash distributions of at least $10,000,000
from GMMV as a producing property. It is not expected that this
cash bonus will become payable in fiscal 1997.
The Company has adopted a plan to pay the estates of Messrs.
Larsen, Evans and Svilar amounts equivalent to the salaries they
are receiving at the time of their death, for a period of one year
after death, and reduced amounts for up to five years thereafter.
The amounts to be paid in such subsequent years have not yet been
established, but would be established by the Boards of the Company
and Crested.
Mr. Svilar has an employment agreement with the Company and
Crested, which provides for an annual salary in excess of $100,000,
with the condition that Mr. Svilar pay an unspecified amount of
expenses incurred by him on behalf of the Company and its
affiliates. In the event Mr. Svilar's employment is involuntarily
terminated, he is to receive an amount equal to the salary he was
being paid at termination, for a two year period. If he should
voluntarily terminate his employment, the Company and Crested will
pay him that salary for nine months thereafter. The foregoing is
in addition to Mr. Svilar's Executive Severance and Non-Compete
Agreement with the Company (see below).
In fiscal 1992, the Company signed Executive Severance and
Non-Compete Agreements with Messrs. Larsen, Evans, Svilar and
Lorimer, providing for payment to such person upon termination of
his employment with the Company, occurring within three years after
a change in control of the Company, of an amount equal to (i)
severance pay in an amount equal to three times the average annual
compensation over the prior five taxable years ending before change
in control, (ii) legal fees and expenses incurred by such persons
as a result of termination, and (iii) the difference between market
value of securities issuable on exercise of vested options to
purchase securities in USE, and the options' exercise price. These
Agreements also provide that for the three years following
termination, the terminated individual will not compete with USE in
most of the western United States in regards to exploration and
development activities for uranium, molybdenum, silver or gold.
For such non-compete covenant, such person will be paid monthly
over a three year period an agreed amount for the value of such
covenants. These Agreements are intended to benefit the Company's
shareholders, by enabling such persons to negotiate with a hostile
takeover offeror and assist the Board concerning the fairness of a
takeover, without the distraction of possible tenure insecurity
following a change in control. As of this Proxy Statement date,
the Company is unaware of any proposed hostile takeover.
The Company and Crested provide all of their employees with
certain forms of insurance coverage, including life and health
insurance. The health insurance plan does not discriminate in
favor of executive employees; life insurance of $50,000 is provided
to each member of upper management (which includes all persons in
the compensation table), $25,000 of such coverage is provided to
middle-management employees, and $15,000 of such coverage is
provided to other employees.
Employee Stock Ownership Plan ("ESOP"). An ESOP has been
adopted to encourage ownership of the Common Stock by employees,
and to provide a source of retirement income to them. Because the
persons performing duties for the Company are employees of USE,
they benefit from the ESOP and the other compensation plans of USE,
as described below. The ESOP is a combination stock bonus plan and
money purchase pension plan. It is expected that the ESOP will
continue to invest primarily in the Common Stock. Messrs. Larsen,
Herron and Evans are the trustees of the ESOP.
Contributions to the stock bonus plan portion of the ESOP are
discretionary and are limited to a maximum of 15% of the covered
employees' compensation for each year ended May 31. Contributions
to the money purchase portion of the ESOP are mandatory (fixed at
ten percent of the compensation of covered employees for each
year), are not dependent upon profits or the presence of
accumulated earnings, and may be made in cash or shares of Company
Common Stock.
The Company made a contribution of 10,089 shares to the ESOP
for fiscal 1996, of which 8,075 shares were contributed under the
money purchase pension plan and 2,014 were contributed under the
ESOP stock bonus plan. At the time the shares were contributed,
the market price was approximately $20.87 per share, for a total
contribution with a market value of $210,575.34 (which has been
funded by the Company), however, the historical basis cost of $8.65
per share was used for fiscal 1996 financial presentation purposes.
Crested and the Company are each responsible for one-half of that
amount (i.e., $105,287.67) and Crested currently owes its one-half
to the Company. The funding was effected by the transfer by the
ESOP of 10,089 USE shares out of the 165,900 USE shares securing
loans made by USE to the ESOP in 1991 and 1992. See below.
Employees are eligible to participate in the ESOP on the first
day of the plan year (June 1) following completion of one year of
service in which at least 1,000 hours are credited. Each
employee's participation in the ESOP continues until the ESOP's
anniversary date coinciding with or next following termination of
service by reason of retirement, disability or death. In these
cases, the participant will share in the allocation of USE's
contributions for the ESOP year in which the retirement, death or
disability occurs, and will have a fully-vested interest in
allocations to the participant's account.
An employee's participation in the ESOP does not cease upon
termination of employment. If the employment of a participant in
the ESOP is terminated for reasons other than disability, death, or
retirement (unless the employee receives a lump sum distribution
upon the termination of employment), participation continues
following the termination, until five consecutive one-year breaks
in service have been incurred. An employee is deemed to have
incurred a one-year break in service during any year in which 500
or fewer hours of service are completed.
Employee interests in the ESOP are earned pursuant to a seven
year vesting schedule. Upon completion of three years of service
for the Company, the employee is vested as to 20% of the employee's
account in the ESOP, and thereafter at the rate of 20% per year.
Any portion of an employee's ESOP account which is not vested is
forfeited upon termination of employment for any reason, other than
retirement, disability, or death.
The 10,089 shares issued to the ESOP for fiscal 1996 included
746 shares allocated to John L. Larsen's account, 466 shares
allocated to Max T. Evans' account, 194 shares allocated to Harold
F. Herron's account, 671 shares allocated to Daniel P. Svilar's
account, and 658 shares allocated to R. Scott Lorimer's account,
for a total of 2,735 shares allocated to accounts for all executive
officers as a group (five persons). Shares forfeited by terminated
employees who were not fully vested were reallocated to plan
participants and included 152, 94, 39, 136 and 134 shares to the
accounts of Messrs. Larsen, Evans, Herron, Svilar and Lorimer,
respectively. The accounts of the executive officers are fully
vested, as they have all been employed by the Company and USECC for
more than the past seven years. Allocations of shares for fiscal
1997 have not been made with respect to any participant in the
ESOP.
The maximum loan outstanding during fiscal 1996 under a loan
arrangement between the Company and the ESOP, was $1,014,300 at May
31, 1996 for loans made in fiscal 1992 and 1991. Interest owed by
the ESOP was not booked by the Company. Crested pays one-half of
the amounts contributed to the ESOP by USE. Because the loans are
expected to be repaid by contributions to the ESOP, Crested may be
considered to indirectly owe one-half of the loan amounts to USE.
The loan was reduced by $183,785 plus interest of $168,574.84
through the contribution of shares by the ESOP to the ESOP in 1996.
Stock Option Plan. The Company has a combined incentive stock
option/non-qualified stock option plan ("ISOP"), reserving an
aggregate of 550,000 shares of Common Stock for issuance upon
exercise of options granted thereunder. Awards under the plan are
made by a committee of two or more persons selected by the Board
(presently Messrs. Herron, Bebout and Brenman). The committee
establishes the exercise periods and exercise prices for options
granted under the plan. The Board ultimately ratifies the actions
of the committee. Total grants to officers and directors as a
group may not exceed 275,000 shares.
Options expire no later than ten years from the date of grant,
and upon termination of employment, except in cases of death,
disability or retirement. Subject to the ten year maximum period,
upon the death, retirement or permanent and total disability of an
optionee, options are exercisable for three months (in case of
retirement or disability) or one year (in case of death) after such
event. In fiscal 1994, conditions relating to periods of Company
service before vesting of stock purchased on exercise of the non-
qualified options were removed.
For fiscal 1996, non-qualified options to purchase 360,000
shares of Common Stock were granted to USE employees (none were
granted to officers or directors). The nonqualified options were
issued at an exercise price of $4.00 per share (the closing bid
price on grant date in December 1996). All 731,200 options
currently outstanding (including the 360,000 granted in 1996) will
become qualified options if the proposed amendment to the ISOP is
approved. See Proposal Two.
The following table shows unexercised options, how much
thereof were exercisable, and the dollar values for in-the-money
options, at May 31, 1996.
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal year and FY-End Option/SAR Values
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired Value FY-End (#) FY-End($)
on Exercise Realized Exercisable/ Exercisable
Name (#) ($) Unexercisable Unexercisable
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John L. Larsen, -0- -0- 100,000 $1,875,000(1)
CEO, President exercisable exercisable and
unexercised
100,100 $1,786,785(2)
exercisable exercisable and
unexercised
Max T. Evans, -0- -0- 57,200 $1,021,020(2)
Secretary exercisable exercisable and
unexercised
Harold F. Herron, -0- -0- 11,000 $196,350(2)
Vice President exercisable exercisable and
unexercised
Daniel P. Svilar -0- -0- 66,000 $1,178,100(2)
exercisable exercisable and
Assistant Secretary unexercised
R. Scott Lorimer -0- -0- 29,700 $530,145(2)
Treasurer exercisable exercisable and
unexercised
(1)Equal to $20.75 closing bid on last trading day in FY 1996, less $2.00 per share option
exercise price, multiplied by all shares exercisable.
(2)Equal to $20.75 closing bid on last trading day in FY 1996, less $2.90 per share option
exercise price, multiplied by all shares exercisable.
</TABLE>
<PAGE>
PROPOSAL TWO
To approve an amendment to the 1989 Incentive Stock Option
Plan to increase the number of qualified options.
On December 22, 1995, the Board of Directors amended the 1989
Incentive Stock Option Plan ("ISOP") by increasing the number of
nonqualified stock options issuable to employees (not including
executive officers or directors of the Company) from 275,000 up to
700,000 options. Under the ISOP as so amended, on December 22,
1995 the Board of Directors issued 360,000 nonqualified stock
options (to purchase 360,000 shares of Common Stock) to employees
other than officers and directors; each option has an exercise
price of $4.00 per share (which equals the closing bid price for
the Common Stock of the Company as reported on December 22, 1995 by
the National Market System of NASDAQ). Prior to December 22, 1995
there were issued and outstanding 264,000 nonqualified options to
purchase 264,000 shares of Common Stock, which were issued to 11
employees of the Company (including five executive officers) in
April and May 1992; such options have exercise prices of from $2.75
to $2.90 per share. An additional 243,800 options to purchase
243,800 shares are issuable under the ISOP, however, none of the
remaining options have been issued to date, and are being reserved
for issuance in future years.
Qualified options granted under the ISOP are intended to
qualify for the deferred tax treatment permitted by Section 422 of
the Internal Revenue Code, such that the holder of the option does
not realize taxable income upon exercise of a qualified option.
Any recognition of income for federal tax purposes is deferred
until disposition of the underlying shares which were purchased on
exercise of the option. Upon disposition of the underlying shares,
income is recognized by the holder in an amount equal to the
difference between the exercise price and the disposition price.
Nonqualified options do not qualify for any deferred tax
treatment; income must be recognized by the holder upon exercise of
the option, in an amount equal to the difference between the
exercise price and fair value (market) price of the underlying
shares purchased, determined as of the date the option is
exercised.
The Compensation Committee of the Board of Directors has
advised the Board of Directors, and the Board of Directors agrees
that it is in the best interest of the Company to request the
shareholders to ratify the Board of Directors decision to amend the
ISOP to increase the number of options issuable up to 700,000.
Such approval will permit the conversion of all outstanding
nonqualified options to qualified options, without any change in
the terms of such options (as to exercise price, conditions of
employment and terms of exercise). Such conversion to qualified
option status has been recommended by the Compensation Committee,
and also by the Board of Directors, to alleviate potential selling
pressure on the public trading market for the Company's Common
Stock, which might otherwise develop upon exercise of nonqualified
options (a holder would have to sell within the same calendar year
in order to raise the money with which to pay income tax on the
income recognized upon exercise of the option).
Management of the Company recommends that the shareholders
vote in favor of Proposal Two.
Restricted Stock Plans. The Company and Crested have issued
stock bonuses to various executive officers and directors of the
Company and others. These shares are subject to forfeiture to the
issuer by the grantee if employment terminates otherwise than for
death, retirement or disability. If the required service is
completed, the risk of forfeiture lapses and the shares become the
unrestricted property of the holder. Messrs. Larsen, Evans,
Svilar, Lorimer and all executive officers who are participants of
this restricted stock plan, as a group (four persons), received
20,400, 12,750, 18,360, 12,240 and 63,750 shares of Common Stock,
respectively, through fiscal 1995. The 1996 bonus was deferred
until 1997. Additional bonuses of 20% of the original shares
(7,500) will be issued annually through fiscal 1997. The expenses
relating to these stock issuances are shared equally by the Company
and Crested.
Subsidiary Plans. During the year ended May 31, 1991, Brunton
adopted a salary deduction plan intended to qualify as a deferred
compensation plan under Internal Revenue Code Section 401(k).
Harold F. Herron and John L. Larsen are the only Company officers
who are able to participate in this retirement plan. The fiscal
1994 acquisition of Brunton by the Company, and the sale of Brunton
in 1996, have not affected the Brunton 401(k) plan.
Other than as set forth above, neither the Company nor any of
its subsidiaries have any pension, stock option, bonus, share
appreciation, rights or other plans pursuant to which they
compensate the executive officers and directors of the Company.
Other than as set forth above, no executive officer received other
compensation in any form which, with respect to any individual
named in the Cash Compensation Table, exceeded ten percent of the
compensation reported for that person, nor did all executive
officers as a group receive other compensation in any form which
exceeded ten percent of the compensation reported for the group.
Directors' Fees and Other Compensation
The Company pays non-employee directors a fee of $150 per
meeting attended. All directors are reimbursed for expenses
incurred with attending meetings.
Prior to fiscal 1992, the Board authorized the Executive
Committee to make loans to members of the Board, or to guarantee
their obligations in amounts of up to $50,000, if such loans or
surety arrangements would benefit the Company. Any loans or surety
arrangements for directors which are in excess of $50,000 will
require Board rather than Executive Committee approval. The
Company loaned $25,000 to David W. Brenman under this plan prior to
fiscal 1991. The loan to Mr. Brenman bears interest at the prime
rate of the Chase Manhattan Bank and was due September 1, 1994, but
has been extended to December 31, 1997 by Board vote (Mr.Brenman
abstaining). The loan was provided as partial consideration for
Mr. Brenman's representation of the Company to the financial
community in New York City. The loan to Mr. Brenman originally was
approved by the executive committee.
Pursuant to shareholder approval of the 1992 Stock
Compensation Plan for Outside Directors at the 1992 Annual Meeting,
in fiscal 1993 the Board issued 5,000 shares of Common Stock each
to outside directors Brenman, Anderson and Bebout, which shares
vest 1,000 shares to each on the 1992 Annual Meeting date and each
succeeding four Annual Meetings through 1996.
1996 Stock Award Program. The Board of Directors of the
Company has approved an annual incentive compensation arrangement
for five officers. Implementation of this arrangement is subject
to shareholder approval. See Proposal Three.
PROPOSAL THREE
To approve the 1996 Stock Award Program for the issuance of up
to 67,000 shares of Common Stock each year (from 1997 through 2002)
to the five executive officers of the Company, in amounts to be
determined each year based on the earnings of the Company for the
prior fiscal year ended May 31.
In May 1996, the Company's Board of Directors approved an
annual incentive compensation arrangement (the "1996 Stock Award
Program" or "Program") for the Chief Executive Officer and the next
four most senior officers of the Company, to be payable in shares
of the Company's Common Stock. Pursuant to the 1996 Stock Award
Program, if approved by the shareholders at the 1996 Annual
Meeting, shares will be issued annually, provided that each officer
to whom the shares are to be issued is employed by the Company as
of the issue date of the grant year, and provided further that the
Company has been profitable in the preceding fiscal year. Under
the program, the officers will receive up to an aggregate total of
67,000 shares per year for the years 1997 through 2002. One-half
of the compensation under the Program is the responsibility of
Crested. The Board of Directors will determine the date each year
(starting in 1997) when shares are to be issued to the officers.
The number of shares to be awarded each year out of such
67,000 shares aggregate limit will be determined by the
Compensation Committee of the Board of Directors, and will be based
on the Company's earnings per share of Common Stock for the prior
fiscal year. Other factors bearing on the prior year's
profitability may be taken into consideration by the Compensation
Committee. In addition, the actual issuance of the number of
shares recommended by the Compensation Committee to be awarded to
shareholders of the Company at the Annual Meeting held subsequent
to the end of the fiscal year. There will be no carryover to
subsequent years of any unused shares out of the 67,000 share
annual limit.
For the fiscal year ended May 31 1996 the Company earned net
income after income taxes of $270,700 from the sale of Brunton. In
addition to the $4.3 million realized from the sale of Brunton in
fiscal 1996 (which amount includes a three year $1 million
promissory note), the Company in the future will receive from the
purchaser amounts equal to 45% of the net profits before taxes
derived from Brunton's sales of 1996 products and other new
products being developed by Brunton as of the Brunton sale date,
for a period of four years and three months commencing February 1,
1996. The first such net profits payment would be made on or
before July 15, 1997 for the period from February 1, 1996 through
April 30, 1997, if net profits are earned for such period.
The Compensation Committee has determined that, taking into
the account the foregoing favorable terms upon which Brunton was
sold as negotiated by the five officers of the Company, that the
Program award for fiscal 1996 should be 14,158 shares of Common
Stock, as follows: John L. Larsen (3,846 shares), Harold F. Herron
(959 shares), R. Scott Lorimer (3,485 shares), Daniel P. Svilar
(3,462 shares), and Max T. Evans (2,404 shares). If Proposal Three
is approved by the shareholders at the 1996 Annual Meeting, such
shares will be issued to the officers in 1997, provided such
persons then are employed by the Company on the issue date in 1997
as determined by the Board of Directors.
Management of the Company recommends the shareholders vote for
Proposal Three.
COMMITTEES AND MEETING ATTENDANCE
During the fiscal year ended May 31, 1996, there were six
Board meetings and five Executive Committee meetings. Each current
member of the Board attended at least 75% of the combined Board
meetings and meetings of committees on which the director serves.
From time to time, the Board and Executive Committee act by
unanimous written consent pursuant to Wyoming law. Such actions
are counted as meetings for purposes of disclosure under this
paragraph.
The Board has established an Executive Committee to act in
place of the Board between meetings of the Board. The Executive
Committee had five meetings in fiscal 1996.
An Audit Committee has also been established by the Board.
The Audit Committee had one meeting in fiscal 1996. Members of the
Audit Committee have also met informally at various times during
the year. The Audit Committee reviews the Company's financial
statements and accounting controls, and contacts the independent
public accountants as necessary to ensure that adequate accounting
controls are in place and that proper records are being kept. The
Audit Committee also reviews the audit fees of the independent
public accountants.
The Compensation Committee reviews, approves and makes
recommendations on the Company's compensation policies, practices
and procedures. During the year ended May 31, 1996, the members of
the Compensation Committee discussed compensation matters on an
individual basis and had one formal meeting.
A Management Cost Apportionment Committee was established by
USE and Crested in 1982, for the purpose of reviewing the
apportionment of costs between USE and Crested. John L. Larsen,
Max T. Evans and Scott Lorimer are members of this Committee.
The Board of Directors has a Nominating Committee, which did
not meet during the most recently completed year. The Nominating
Committee will consider nominees recommended by security holders
for consideration as potential nominees. Anyone wishing to submit
a potential nominee for consideration as a management nominee for
the 1997 Annual Meeting must provide the nominee's name to the
Nominating Committee not later than June 9, 1997, together with a
completed questionnaire, the form of which will be supplied by the
Company on request.
CERTAIN OTHER TRANSACTIONS
Transactions with Sheep Mountain Partners ("SMP"). In fiscal
1989, the Company and Crested through USECC sold a one-half
interest in the Sheep Mountain properties to Cycle Resource
Investment Corporation ("CRIC"), a wholly-owned subsidiary of
Nukem, Inc., and thereafter USECC and CRIC contributed their 50%
interests in the properties to a new Colorado partnership, SMP,
which was organized to further develop and mine the uranium claims,
market uranium and acquire additional uranium sales contracts. Due
to disputes (in arbitration proceedings at Proxy Statement date)
with CRIC and Nukem, necessary mine maintenance has been funded by
USECC alone without reimbursement from SMP since June 1991. For
fiscal 1996, the Company and Crested spent an additional $832,400
on SMP property maintenance, none of which has been reimbursed by
SMP. At May 31, 1995, accumulated SMP property maintenance costs
and fees owed the Company and Crested were $5,354,000.
Transactions with Brunton In fiscal 1996, the Company issued
18,889 restricted shares of Common Stock to Brunton as $1.00 per
share stock redemption price (in lieu of paying $3.50 per share
cash redemption) on 56,667 shares of Common Stock purchased by
Brunton in the Company's fiscal 1995 private placement of 400,000
shares of redeemable Common Stock. The shares were sold and issued
to Brunton on the same terms by which all other investors
participated in the offering. Brunton was sold in fiscal 1996,
however, certain Brunton assets were not sold, including the
subject 75,556 shares of the Company (and other options and
securities) which were acquired by Plateau Resources Limited and
Sutter Gold Mining Company when Brunton was sold.
The transfer of the USE and Crested securities to Plateau
resulted in a $354,366 reduction of USECC debt owed to Plateau; the
transfer of the USE and Crested securities to SGMC was valued at
$296,3334. In both cases, the values were equal to Brunton's cost
basis in the securities.
Transactions with Arrowstar Investments Inc. In April 1995,
Canyon Homesteads, Inc. ("Canyon") entered into an agreement with
First-N-Last LLC ("FNL", a Utah limited liability company), to
develop and operate certain assets in Utah near the Ticaboo, Utah
townsite located 3.5 miles south of the Shootaring Uranium Mill
owned by Plateau Resources, Limited. Under the agreement, Canyon
contributed to FNL an operating service station and boat storage
operation, and Arrowstar Investments, Inc. ("Arrowstar", the other
member of FNL) will contribute up to $150,000 cash. Arrowstar will
contribute up to another $50,000 as needed. The purpose of FNL is
to remodel the contributed assets, build a convenience store and
gift shop, and operate the upgraded facility. Profits are
allocated 90 percent to Arrowstar until recovery of its cash
investment, then 75 percent to Arrowstar until it has received
$215,000 cash (including investment), and 50 percent to FNL and 50
percent to Canyon thereafter. Arrowstar is not expected to become
profitable until 1997. Although FNL is not an arms-length
transaction, Plateau (and the Company, as its sole shareholder)
approved the arrangement because neither Plateau nor USE had (nor
could they acquire on favorable terms) the funds required to
upgrade the facility. Arrowstar has advised it intends to borrow
the money required to fund its FNL obligations from a commercial
bank, with the personal guarantees of the Arrowstar shareholders,
as may be required by the bank. Arrowstar is a private
corporation: the three sons of John L. Larsen (who are not
affiliates of the Company or Crested) are directors and
shareholders of Arrowstar. John L. Larsen owns no interest in
Arrowstar. In 1996 Arrowstar assigned its interest in FNL to
USECC, see below.
In June 1995, USECC signed a six year option to acquire from
Arrowstar a 7,200 square foot hangar at the Riverton Regional
Airport. The option purchase price originally was agreed to be
$110,000; subsequently, Arrowstar and USE agreed the purchase price
would equal an independent market value appraisal. The Company has
paid $40,000 against the purchase price, and expects to pay the
balance when an appraisal is completed. Arrowstar acquired the
property for cash from the prior owner in 1992, at which time
neither the Company or Crested had any interest in acquiring the
property. USECC expects to use the facility in connection with
expanded municipal airport traffic in the coming years and in the
interim for airplane and vehicle storage purposes.
On April 26, 1996 USECC sold its Wind River Estates Mobile
Home Park (including various personal property) in Riverton,
Wyoming to Arrowstar for $804,000, the appraised value. The total
purchase price consists of $500,000 cash; Arrowstar's unsecured 10%
promissory note due 2006 for $56,000; cancellation of the
promissory note USECC gave Arrowstar in connection with the
purchase of the hangar described above, which note was valued at
$47,934 including accrued interest; and $161,378.34 by Arrowstar
assigning to USECC its entire interest in Firs-N-Last L.L.C. with
respect to the Ticaboo assets described above. Additionally, USECC
credited Arrowstar $38,687 against the purchase price for the Wind
River Estates mobile home park for good will due to Arrowstar's
investing in First-N-Last at a time when neither Plateau nor USE or
Crested had the funds required to upgrade the facility.
Subsequently, USECC assigned the 50% interest in FNL (which it had
acquired from Arrowstar) to Plateau Resources, Limited, which
reduced USE's payable to Plateau.
Transactions with Directors. Three of the Company's
directors, Messrs. Larsen, Evans and Herron, are trustees of the
ESOP. In that capacity they have an obligation to act in the best
interests of the ESOP participants. This duty may conflict with
their obligations as directors of the Company in times of adverse
market conditions for the Common Stock, or in the event of a tender
offer or other significant transaction.
In general, the ESOP trustees exercise dispositive powers over
shares held by the ESOP, and exercise voting powers with respect to
ESOP shares that have not been allocated to a participant's
account. In addition, the Department of Labor has taken the
position that in certain circumstances ESOP trustees may not rely
solely upon voting or dispositive decisions expressed by plan
participants, and must investigate whether those expressions
represent the desires of the participants, and are in their best
interests.
Harold F. Herron, son-in-law of John L. Larsen, has been
living in and caring for a house owned by the Company until such
time as the property was sold. In fiscal 1995, Mr. Herron
purchased the house for $260,000, the appraised value of the
property, and was reimbursed by the Company for leasehold
improvements totaling $22,830. The Company accepted a promissory
note in the amount of $112,170 with interest compounded annually at
7% due on September 6, 1999 as a result of this transaction. This
note is secured by 30,000 shares of USE common stock owned by Mr.
Herron.
Other Information. The Company has adopted a stock repurchase
plan under which it may purchase up to 275,000 shares of its Common
Stock. These shares would be purchased in part to provide a source
of shares for issuance upon the exercise of various outstanding
options.
Three of John L. Larsen's sons and a son-in-law are employed
by the Company (as manager of USECC's commercial operations,
uranium fuels marketing director, as chief pilot and landman,
respectively). Mr. Larsen's son-in-law Harold F. Herron is an
officer and director of the Company, and president and a director
of Brunton. Collectively, the five individuals received $288,600
in cash compensation (paid by the Company, Crested and Brunton) for
those services during the fiscal year ended May 31, 1996, which
amount includes $81,250 cash compensation paid Mr. Herron
(principally in his capacity as president of Brunton, and also for
his service as a Company vice president, see Executive Compensation
above). The foregoing compensation expense (excluding compensation
paid by Brunton to Mr. Herron, and one of Mr. Larsen's sons as a
Brunton officer) was shared by the Company and Crested, in
accordance with the compensation arrangements for all employees.
Mr. Herron continues as president and a director of Brunton; one of
Mr. Larsen's sons, who had served as a Brunton officer resigned as
an officer of Brunton upon its sale in fiscal 1996.
The Company and Crested provide management and administrative
services for affiliates under the terms of various management
agreements. Revenues from services by the Company and Crested to
affiliates were $233,000 in fiscal 1996 and $198,400 in fiscal
1995. The Company provides all employee services required by
Crested. In exchange Crested is obligated to the Company for its
share of the costs for providing such employees.
CERTAIN INDEBTEDNESS
Transactions Involving USECC. The Company and Crested conduct
the bulk of their activities through their equally-owned joint
venture, USECC. From time to time the Company and Crested advance
funds to or make payments on behalf of USECC in furtherance of
their joint activities. These advances and payments create
intercompany debt between the Company and Crested. The party
extending funds is subsequently reimbursed by the other venturer.
The Company had an account receivable of $6,199,700 from Crested at
May 31, 1996 ($4,163,315 during fiscal 1995).
Debt Associated with USE's ESOP. During the year ended May 31,
1996, the Company made a contribution of 10,089 shares of Common
Stock to the ESOP. Because Crested engages the Company's employees
to discharge substantially all of its functions, these
contributions benefitted Crested. As a result, Crested owes the
Company $43,650 for one-half of the Company's contribution to the
ESOP. Regular and substantial contributions by the Company to the
ESOP are required to maintain the ESOP in effect. In fiscal 1995
the Company contributed 37,204 shares of Common Stock to the ESOP,
for one-half of which Crested owes the Company $99,983.
Loans to Three Directors. As of May 31, 1996 three directors
owed the Company $400,222 as follows (each loan is secured with
shares of Common Stock of the Company owned by the individual):
Harold F. Herron $10,995 (1,000 shares); John L. Larsen $355,348
(124,000 shares), and Max T. Evans $33,889 (7,500 shares). The
outstanding loan amounts represent various loans made to the
individuals over a period of several years. The loans mature
December 31, 1997 and bear interest at 10% per year. For
information on an additional loan to Mr. Herron, see below. At
May 31, 1996, John L. Larsen and members of his immediate family
were indebted to the Company for $673,000 (of which $650,400 is
represented by notes secured by 170,500 shares of the Company's
Common Stock). At May 31, 1995 the Larsen family indebtedness
(including the amount owed by John L. Larsen) totaled $609,000
secured by 132,500 shares of the Company's Common Stock. Such
indebtedness of the Larsen family would be paid by the Company
withholding an equal amount out of the $1 million cash bonus
payable to Mr. Larsen when the GMMV properties have been placed
into production and certain related conditions have been met. See
"Executive Compensation Plans and Engagement Agreements." The
preceding amounts do not include the loan to Mr. Herron, see below.
In fiscal 1995, the Company made a five year non-recourse loan
in the amount of $112,170 to Harold F. Herron. The loan is secured
by 30,000 shares of the Company's Common Stock, bears interest at
a rate of 7% and is payable at maturity. The Board approved the
loan to obtain a higher interest rate of return on the funds
compared to commercial rates, and to avoid having the USE stock
prices depressed from Mr. Herron selling his shares to meet
personal obligations. See Transactions with Directors above.
Other Debt. Crested had a non-recourse promissory note
receivable of $72,700 due from a shareholder who is the brother of
Nick Bebout, a director of USE and the nephew of Daniel P. Svilar,
an executive officer of the Company and director and executive
officer of Crested. This note was non-interest bearing and was
repaid in fiscal 1994 with the USE common stock that collateralized
the note. At the same time, Crested also assumed a non-recourse
promissory note payable from this shareholder to the Company for
$260,600. This note is secured by 60,000 shares of Common Stock
and was due October 30, 1995. The loan maturity has been extended
to October 30, 1998.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board has selected Arthur Andersen LLP as independent
certified public accountants for the year ending May 31, 1997.
Such firm has audited the Company's financial statements since
1990. A representative of Arthur Andersen LLP may be present at
the Meeting and if present, will be available to respond to
appropriate questions, and will be provided the opportunity to make
a statement at the Meeting.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the 1996 Annual Report to Shareholders, including
financial statements, has been forwarded to all record shareholders
entitled to vote at the Meeting. If any recipient of this Proxy
Statement has not received a copy of that Annual Report, please
notify Max T. Evans, 877 North 8th West, Riverton, WY 82501,
telephone (307) 856-9271, and the Company will send a copy.
<PAGE>
SHAREHOLDERS' PROPOSALS
The next Annual Meeting of Shareholders is expected to be held
in November of 1997. Shareholder proposals to be presented at the
next Annual Meeting of Shareholders must be received in writing by
the Company at its offices in Riverton, Wyoming, addressed to the
President, no later than June 9, 1997.
OTHER MATTERS
The Board does not know of any other matters which may
properly come before the Meeting. However, if any other matters
properly come before the Meeting, it is the intention of the
appointees named in the enclosed form of Proxy to vote said Proxy
in accordance with their best judgment on such matters.
Your cooperation in giving these matters your immediate
attention, and in returning your Proxy promptly, will be
appreciated.
By Order of the Board of Directors
U.S. ENERGY CORP.
s/ Max T. Evans
MAX T. EVANS, Secretary
Dated: October 25, 1996
PROXY U.S. ENERGY CORP. PROXY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned shareholder of
U.S. Energy Corp. (the "Company") in the amount noted below, hereby
constitutes and appoints Messrs. John L. Larsen and Max T. Evans, or either
of them with full power of substitution, as attorneys and proxies, to appear,
attend and vote all of the shares of stock standing in the name of the
undersigned at the Annual Meeting of the Company's shareholders to be held at
the Company's executive offices, 877 North 8th West, Riverton, Wyoming 82501,
on Tuesday, November 26, 1996 at 11:00 a.m., local time, or at any
adjournments thereof upon the following:
(INSTRUCTION: Mark only one box as to each item.)
1. Election of Directors:
___ FOR the nominees listed below ___ AGAINST the nominees listed below
___ ABSTAIN
Don C. Anderson Nick Bebout H. Russell Fraser
To withhold authority to vote for any nominee, please draw a line through the
name of that nominee.
In the event you wish to vote your shares cumulatively, write the name(s)
of the person(s) you wish to vote for in the following space, and indicate
the number of votes to be cast for each such nominee immediately after the
name.
___________________________________________________________________________
___
2. To adopt an amendment to the current Incentive Stock Option Plan to
increase the number of qualified stock options which may be issued.
___ FOR ___ AGAINST ___ ABSTAIN
3. To adopt the 1996 Stock Award Program for executive officers.
___ FOR ___ AGAINST ___ ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
<PAGE>
U.S. ENERGY CORP.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED HEREON WITH RESPECT TO THE
ABOVE PROPOSALS. Where no vote is specified, the proxyholder will cast votes
for the election of management's nominees and, in their discretion, on any
other matters that may come before the Meeting.
Sign your name exactly as it appears on the mailing label below. It is
important to return this Proxy properly signed in order to exercise your
right to vote, if you do not attend in person. When signing as an attorney,
executor, administrator, trustee, guardian, corporate officer, etc., indicate
your full title as such.
_______________________________________
(Sign on this line - joint holders
may sign appropriately)
_______________ _____________________
(Date) Number of Shares
PLEASE NOTE: Please sign, date and
place this Proxy in the enclosed
self-addressed, postage prepaid
envelope and deposit it in the mail
as soon as possible.
Please check if you are planning to
attend the meeting.
If the address on the mailing label
is not correct, please provide the
correct address in the following
space.
_______________________________________
_______________________________________
