SEC File No. 33-74154
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 1
FORM S-8
REGISTRATION STATEMENT UNDER SECURITIES ACT OF 1933
U.S. ENERGY CORP.
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(Exact name of registrant as specified in its charter)
Wyoming 83-0205516
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(State or other jurisdiction (I.R.S. Employer
incorporating or organization) Identification No.)
877 North 8th West,
Riverton, Wyoming 82501
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(Address of Principal Executive Offices) (Zip Code)
1989 Stock Option Plan; Restricted Stock Bonus Plan
Outside Directors Compensation Plan
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(Full title of plan)
Daniel P. Svilar, 877 North 8th West, Riverton, WY 82501
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(307) 856-9271
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement is
declared effective.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and
there is compliance with General instruction G, check the following
box. [ ]
<PAGE>
Calculation of Registration Fee
Title of each Proposed Proposed
class of maximum maximum Amount
securities Amount offering aggregate of
to be to be price offering regis.
registered registered per share price fee
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Common stock, 425,000 $4.00(2) $1,700,000(3) $586.21
par value shares(1)
$0.01 per share
Common stock, 20,000(4) $17.00(4) $ 340,000(4) $117.24
par value
$0.01 per share
Totals 445,000 $2,030,000 $703.45
(1) Amendment to Registrant's 1989 Incentive Stock Option Plan
increasing the number of shares issuable under the Plan by 425,000.
(2) Based on the per share option exercise price for options issued
on December 22, 1995.
(3) Aggregate offering price is based on total options multiplied
by ($4.00) the per share option exercise price. Pursuant to Rule
457(h)(1), the registration fee is calculated on the exercise price
for the option.
(4) Based on the average ($17.00) of the NASDAQ/NMS closing bid and
ask prices on July 16, 1996 for a share of registrant's common
stock. The aggregate offering price is based on 20,000 shares
issued and issuable under the Non-Employee Directors Compensation
Plan, multiplied by the average price on July 16, 1996. The
registration fee is calculated on the average price, pursuant to
Rule 457(c).
<PAGE>
U.S. ENERGY CORP.
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REOFFER PROSPECTUS
FOR
1,019,770 COMMON SHARES
OFFERED FOR THE ACCOUNT OF SELLING SECURITY HOLDERS
See "Selling Security Holders."
---------------------------------------
See "Certain Considerations Relating to an Investment in USE"
for certain matters relevant to owning USE Shares.
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THE SECURITIES TO BE SOLD PURSUANT TO THIS PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, OR ANY
STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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U.S. Energy Corp. ("USE") has filed a S-8 Registration Statement
with the Securities and Exchange Commission ("Commission"),
registering 925,000 USE common shares issuable under the USE 1989
Incentive Stock Option Plan, 550,000 USE common shares issuable
under the 1992 Restricted Stock Bonus Plan, 30,000 common shares
issuable under the 1992 Stock Compensation Plan for Outside
Directors and 100,000 common shares issuable under a Nonqualified
Option issued to the Registrant's President and Chief Executive
Officer. This Reoffer Prospectus covers resale of such number of
the 15,000 common shares as the Outside Directors may own at the
time of sale of shares, 827,000 shares underlying options held by
officers, directors, employees and a consultant and 177,770 common
shares issued through January 4, 1996 under the 1992 Restricted
Stock Bonus Plan pursuant to this Prospectus.
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered
hereby, by any person in any jurisdiction in which such an offer
or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so, or to any
person to whom it is unlawful to make such an offer, or
solicitation of an offer.
The date of this Prospectus is July 18, 1996.
<PAGE>
AVAILABLE INFORMATION
USE is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other statements and
information with the Commission. The reports and other documents
so filed can be inspected and copied at the Commission's public
reference room located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's public reference
facilities at Commission regional offices located at: 7 World Trade
Center, 13th Floor, New York, New York 10048; and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such documents can be obtained at
prescribed rates by writing to the Securities and Exchange
Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
This Prospectus does not contain all of the information set forth
in the Registration Statement covering the USE Shares offered
hereby, certain portions of which have been omitted pursuant to
Commission rules and regulations. Statements herein concerning any
such other information are not necessarily complete. In each
instance where reference is made herein to such other information,
reference is made to the copies of such documents filed as exhibits
to the Registration Statement. Each such statement is qualified in
its entirety by such reference.
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE
This Prospectus incorporates by reference documents not presented
herein or delivered herewith. Documents relating to USE are
available without charge upon request to Secretary, U.S. Energy
Corp., 877 North 8th West, Riverton, Wyoming 82501. Telephone
requests may be directed to Sharon Miller at (307) 856-9271. See
"Incorporation of Certain Information by Reference" for a
description of documents so incorporated.
The following documents are incorporated herein by reference: USE
latest annual report on Form 10-K (for fiscal year ended May 31,
1995), and the latest USE prospectus filed under Commission Rule
424(b) pursuant to the Securities Act of 1933; all other reports
filed by USE pursuant to Section 13(a) or 14(d) of the Exchange Act
since the filing of the Form 10-K report (for the fiscal year ended
May 31, 1995).
All documents subsequently filed with the Commission by USE,
pursuant to Sections 13(a), 13(c) 14 or 15(d) of the Exchange Act,
prior to termination of the offering hereby, shall be deemed to be
incorporated by reference into this Reoffer Prospectus.
<PAGE>
SELLING SECURITY HOLDERS
This Reoffer Prospectus includes common shares issued to the
Outside directors pursuant to the Outside Directors Plan filed with
the Registration Statement on Form S-8, Shares underlying options
issued under the 1989 Incentive Stock Option Plan, as amended, and
shares issued under the 1992 Restricted Stock Bonus Plan, as
amended.
No. of
No. of No. of Shares of
Shares to Shares of USE USE Common
be Offered Common Stock Stock to be
by Selling Owned Prior Owned After
Name Shareholder to Offering* Offering
John L. Larsen 220,500 (1) 592,432 391,932
Chairman, Pres.
Max T. Evans 69,950 (2) 119,577 49,627
Director, Secretary
Harold F. Herron 20,900 (3) 99,176 78,276
Director, Vice Pres.
Daniel P. Svilar 84,360 (4) 173,138 88,778
General Counsel
Robert S. Lorimer 41,940 (5) 57,181 15,241
Treasurer, CFO
Don C. Anderson 22,000 (6) 26,155 4,155
Director
Nick Bebout 7,750 (7) 21,661 13,911
Director
David W. Brenman 5,000 (8) 5,250 250
Director
Michael E. Sweeney 89,000 (9) 125,875 36,875
Employee
Leslie W. Larsen 11,220 (10) 57,440 46,200
Employee (Deceased)
George F. Smith 98,820 (11) 152,892 54,072
Employee
John W. Powell 7,980 (12) 15,468 7,488
Employee
Kenneth W. Webber 58,550 (13) 81,571 23,021
Employee
Richard P. Larsen 57,980 (14) 116,161 58,181
Employee
Keith G. Larsen 77,980 (15) 193,724 115,744
Employee
M. Shane Larsen 29,560 (16) 55,879 26,319
Employee
Mark J. Larsen 70,000 (17) 115,196 45,196
Employee
Randall Van Vleet 17,980 (18) 29,724 11,744
Employee
Thomas M. Evans 25,000 (19) 48,651 23,651
Employee
Herrick K. Lidstone 3,300 (20) 3,300 -0-
Consultant
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* Includes shares held directly, shares held in escrow by the
Registrant which are forfeitable unless certain employment
conditions are met, shares held in the USE Employee Stock
Ownership Plan (the "ESOP") account established for the
benefit of the employee, shares held jointly, shares held
directly by immediate family members in the same household
and shares underlying options held by various individuals.
(1) Includes 200,100 option shares and 20,400 forfeitable stock
bonus shares (issued through January 4, 1996).
(2) Includes 57,200 option shares and 12,750 forfeitable stock
bonus shares (issued through January 4, 1996).
(3) Includes 11,000 option shares and 9,900 restricted shares
(issued in 1990, none issued thereafter through January 4, 1996).
(4) Includes 66,000 option shares and 18,360 forfeitable stock
bonus shares (issued through January 4, 1996).
(5) Includes 29,700 option shares, and 12,240 forfeitable shares
(issued through January 5, 1996).
(6) Includes 5,000 restricted shares, which have been issued to
Mr. Anderson as an outside director (1,000 shares are forfeitable
until the Registrant's 1996 Annual Meeting of Shareholders) and
17,000 forfeitable shares (issued through January 4, 1996).
(7) Includes 7,750 restricted shares, of which 5,000 have been
issued to Mr. Bebout as an outside director (1,000 shares are
forfeitable until the Registrant's 1996 Annual Meeting of
Shareholders).
(8) Includes 5,000 restricted shares issued to Mr. Brenman as an
outside director (1,000 shares are forfeitable until the
Registrant's 1996 Annual Meeting of Shareholders).
(9) Includes 70,000 option shares and 19,000 forfeitable shares
issued through January 4, 1996).
(10) Includes 11,220 restricted shares issued through January 4,
1996.
(11) Includes 89,700 option shares and 9,120 forfeitable shares
(issued through January 4, 1996).
(12) Includes 7,980 forfeitable shares issued through January 4,
1996.
(13) Includes 50,000 option shares and 8,550 forfeitable shares
(issued through January 4, 1996).
(14) Includes 50,000 option shares and 7,980 forfeitable shares
(issued through January 4, 1996).
<PAGE>
(15) Includes 70,000 option shares and 7,980 forfeitable shares
(issued through January 4, 1996).
(16) Includes 25,000 option shares and 4,560 forfeitable shares
(issued through January 4, 1996).
(17) Includes 70,000 option shares.
(18) Includes 10,000 option shares and 7,980 forfeitable shares
(issued through January 4, 1996).
(19) Includes 25,000 option shares.
(20) Includes 3,300 option shares.
Risk Factors
An investment in the Shares involves substantial risks, including
the risks of USE's failure to obtain necessary capital to put its
principal properties into production, a recurrence of low uranium
prices, litigation and competition. See "RISK FACTORS".
RISK FACTORS
Prospective investors should note that the business of USE is
subject to certain risks, including the following:
1. Working Capital Requirements. Registrant's cash requirements
for fiscal 1997 are the funding of on-going general and
administrative expenses, including legal costs incurred as a result
of the Sheep Mountain Partners ("SMP") arbitration/litigation
proceedings described below; mine and mill development and holding
costs of the Sutter gold property described below; holding
(standby) costs for the uranium mill owned by Plateau Resources
Limited, a 100% subsidiary of the Company ("Plateau"), in
southeastern Utah; SMP mines care and maintenance costs; and costs
to acquire uranium oxide which the Company may be obligated to
deliver under the SMP contracts. As a result of the disputes
between the SMP partners (see "Business and Properties - Legal
Proceedings - Sheep Mountain Partners Arbitration/Litigation),
Registrant and Crested have been delivering certain of the U3O8
concentrates required to fill various delivery requirements on
long-term U3O8 contracts with domestic utilities. Recently, Nukem,
Inc. ("Nukem") and its 100% subsidiary Cycle Resource Investment
Corporation ("CRIC") have made most of the SMP deliveries of U3O8.
It is not known how long this arrangement will continue. The
capital requirements to fill Registrant's and Crested's portion of
the remaining commitments in fiscal 1997 will depend on the timing
of payments to the Registrant and Crested by Nukem/CRIC under the
arbitration award, whether SMP will be wound up and dissolved
as a partnership and its assets distributed to partners
Registrant/Crested and Nukem/CRIC, and whether a receiver is
<PAGE>
appointed by the court to oversee SMP contract delivery obligations
pending dissolution of SMP.
The primary source of Registrant's capital resources for the of
first half fiscal 1997, will be (i) cash on hand February 29, 1996;
(ii) Registrant's share of cash received from the sale of the Wind
River Estates Mobile Home Park by USECC (see "Certain Relationships
and Related Transactions - Transactions with Arrowstar Investments,
Inc."); (iii) possible sale of equity or interests in investment
properties or other affiliated companies; (iv) sale of equipment;
(v) proceeds from the resolution of the SMP arbitration/litigation;
(vi) sale of royalties or interests in mineral properties; (vii)
proceeds from the sale of uranium under the SMP contracts, and
(viii) borrowings from financial institutions. Construction
revenues from the Company's 50.9% subsidiary, Four Nines Gold, Inc.
("FNG"), fees from oil production, rentals of various real estate
holdings and equipment and the sale of aviation fuel are also
expected to provide cash.
Registrant's working capital increased during the nine months ended
February 29, 1996 by $1,115,000 to working capital of $1,137,000
principally due to the sale of the 812,432 shares of the Company's
common stock in June and July 1995, resulting in net proceeds to
Registrant of $2,842,200. Registrant's other investing activities
provided $1,183,600 during the nine months ended February 29, 1996.
This increase in cash was a result of proceeds from the sale of
assets, $77,700 and the sale of Brunton, $3,300,000. These
increases in cash were partially offset by investments in
affiliates due to Registrant funding the activities of Plateau and
Registrant and Crested funding their interest in SMP, as well as
funding their 90% subsidiary, Energx, Ltd. ("Energx") in the oil
and gas business, Plateau and Sutter Gold Mining Company ("SGMC").
Additionally, the Registrant and its affiliates (1) purchased
$1,021,100 of additional equipment (2) developed mineral
properties, $349,200 and (3) developed gas properties $23,400
during the nine months ended February 29, 1996.
Monthly operating expense to hold properties and fund general and
administrative expense is estimated at $300,000 to $350,000 for the
first half of fiscal 1997. Revenues from commercial operations are
expected to provide approximately $110,000 monthly. Operating
expense estimates reflect elimination of most legal expenses
associated with the SMP arbitration/litigation proceedings, because
an Order and Award was entered by the arbitration panel on April
18, 1996 (see "Business and Properties - Legal Proceedings - Sheep
Mountain Partners Arbitration/ Litigation").
Working capital in addition to funds on hand at February 29, 1996
and funds provided from the award in the SMP arbitration/litigation
and the sale of the Wind River Estates Mobile Home Park will be
required to fund the mine and mill permitting and the construction
of a gold processing mill and mine development of SGMC. Registrant
and Crested are currently seeking means of financing the
<PAGE>
construction of the SGMC gold processing mill and mine development,
but there can be no assurance that such financing can be arranged.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for additional information on working
capital requirements and capital resources. See also Risk Factor
2 below.
2. Loss of Future Operating Income Due to Brunton Sale. In fiscal
1995, 49% of Registrant's net revenues were provided by Brunton's
professional and outdoor recreational product sales (29% in the six
months ended November 30, 1995). Brunton was sold in February
1996. The inability to include Brunton's operations with
Registrant's other operating revenues in the future could result in
continued operating losses for Registrant, unless Registrant is
able to develop other profitable businesses, such as Registrant's
uranium business or FNG's construction business, to replace profits
from Brunton. Continued operating losses without offsetting
replacements of working capital will adversely affect USE's ability
to continue its operations as described in this Prospectus. See
also Risk Factor 1 above and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," in Registrant's
1995 Form 10-K.
3. Litigation/Arbitration - Sheep Mountain Partners. Because of
USE and Crested litigation/arbitration against Nukem/CRIC, their
partner in the Sheep Mountain Partners Partnership ("SMP"), USE and
Crested have been required to fund $4,521,600 in standby mine
maintenance and related costs (including $136,500 for the purchase
of U3O8) of the SMP mines in Fremont County, Wyoming, from June 1991
through May 31, 1995. Another $326,700 was spent on such costs in
the six months ended November 30, 1995. USE and Crested are sought
to recover these amounts from Nukem and CRIC, along with interest
which has not been booked on the financial statements of the
Registrant and Crested.
Recovery by USE and Crested of their funds advanced to the SMP
partnership will depend on the timing of payment on awards in the
litigation/arbitration, which timing presently is uncertain but is
expected to be in calendar 1996. See Item 3 - "Legal Proceedings -
Sheep Mountain Partners Arbitration/Litigation" in Registrant's
1995 Form 10-K, and the audited USE Consolidated Financial
Statements contained in Registrant's 1995 Form 10-K, "Legal
Proceedings" in USE's Form 10-Q for the quarter ended February 29,
1996 and Forms 8-K reporting events of May 24, 1996 and July 3,
1996.
On July 3, 1991, USE and Crested ("plaintiffs") filed a complaint
in the United States District Court for the District of Colorado
against CRIC, Nukem and various affiliates of CRIC and Nukem
(together, the "defendants"), alleging that CRIC and Nukem
misrepresented material facts to and concealed material information
from the plaintiffs to induce their entry into the SMP Partnership
Agreement and various related agreements. Plaintiffs also claim
<PAGE>
CRIC and Nukem have wrongfully pursued a plan to obtain ownership
of the USE-Crested interests in SMP through various means,
including overcharging SMP for uranium "sold" to SMP by defendants.
Plaintiffs further allege that defendants refused to provide a
complete accounting with respect to dealings in uranium with and on
behalf of SMP, and that certain defendants misappropriated SMP
property and engaged in other wrongful acts relating to the
acquisition of uranium by SMP.
Plaintiffs requested that the court order rescission of the SMP
Partnership Agreement and related contracts, and asked the court
to determine the amounts payable to CRIC by USECC as a result of
any such rescission order to place the parties in status quo. USE
and Crested also requested that the court order defendants to make
a complete accounting to them concerning the matters alleged in the
amended complaint. They requested an award of damages (including
punitive, exemplary and treble damages under the Racketeer
Influenced and Corrupt Organization Act ("RICO") and its Colorado
State equivalent, interest, costs and attorneys' fees) in an amount
to be determined at trial. Plaintiffs further requested imposition
of a constructive trust on all property of SMP held by defendants
and on profits wrongfully realized by defendants on transactions
with SMP.
The defendants filed various motions, including an application to
stay judicial process and compel arbitration and motions to dismiss
certain of plaintiffs' claims. The defendants also filed an answer
and counterclaims against plaintiffs, claiming plaintiffs breached
the SMP Agreement and misappropriated a partnership opportunity by
providing certain information about SMP to Kennecott and entering
into the GMMV with Kennecott involving the Green Mountain uranium
properties. The defendants also claim that plaintiffs wrongfully
sold an interest in SMP to Kennecott through the GMMV without
CRIC's consent and without providing CRIC a right of first refusal
to purchase such interests; that Registrant breached the uranium
marketing agreement between CRIC and SMP, which had been assigned
by CRIC to Nukem, by agreeing with Kennecott in the GMMV that
Kennecott could market all the uranium from Green Mountain, thereby
depriving Nukem of commissions to be earned under such marketing
agreement; that Registrant and Crested interfered with certain SMP
supply contracts, costing CRIC legal fees and costs; that CRIC and
Nukem are entitled to be indemnified for purchases of uranium made
on behalf of SMP; that Registrant and Crested failed to perform
their obligations under an Operating Agreement with SMP in a proper
manner, resulting in additional costs to SMP; that Registrant and
Crested overcharged SMP for certain services under the SMP
Partnership Agreement and refused to allow SMP to pay certain
marketing fees to Nukem under the Uranium Marketing Agreement; that
Registrant and Crested breached the SMP Partnership Agreement by
failing to maintain a toll milling agreement with Pathfinder Mines
Corporation, thereby rendering SMP's uranium resources worthless;
and that Registrant and Crested have engaged in vexatious
litigation against CRIC and Nukem. Defendants also requested
damages (including punitive, exemplary and treble damages under
<PAGE>
RICO, interest costs and attorney fees). See the further
information set forth below in this Risk Factor, concerning the
damages requested by defendants.
After more than three years of pretrial motions and discovery the
plaintiffs and defendants agreed in November 1994 to proceed with
exclusive, binding arbitration before a panel of three arbitrators
with respect to any and all post-December 21, 1988 disputes, claims
and controversies, that any party may assert against the other.
All pre-December 21, 1988 claims, disputes and controversies
pending before the U.S. District Court have been stayed by
stipulation between the parties, until the arbitrators enter an
order and award in the arbitration proceedings.
On April 18, 1996 the arbitration panel entered its Arbitration
Order and Award. Although future limited proceedings are
contemplated regarding clarification of the timing of payments, the
panel overall found in favor of the Registrant and Crested on
several monetary claims, and other issues. See "Material Changes".
4. Sutter Gold - No Current Mining Operations or Gold Production.
As of May 31, 1995, USE and Crested have invested more than
$11,000,000 in capitalized costs (in addition to approximately
$3,000,000 in costs that have been expensed) to acquire, permit and
develop a gold property in California, held through a subsidiary,
Sutter Gold Mining Company. This investment represents a
significant portion of USE's consolidated assets. There is no
assurance current efforts will be successful in financing the mill
construction and mine development costs needed to put the property
into full production. If third-party financing cannot be obtained
and USE is unable to fund development and production costs from
internally generated funds over the next two years the property may
be sold at a loss. See Item 1 "Description of Business - Gold -
Lincoln Project (California)" in Registrant's 1995 Form 10-K.
5. Project Delay. Registrant's minerals business is subject to
the risk of unanticipated delays in developing and permitting its
uranium and gold projects. Such delays may be caused by
fluctuations in commodity prices (see Risk Factor 7), mining risks
(see Risk Factor 10), difficulty in arranging needed financing,
unanticipated permitting requirements or legal obstruction in the
permitting process by project opponents. In addition to adding to
project capital costs (and possibly operating costs), such delays,
if protracted, could result in a write off of all or a portion of
the carrying value of the delayed project and/or could trigger
certain reclamation obligations sooner than planned.
6. Commodity Price Fluctuations. The ability of the Company to
develop and operate its uranium and gold projects profitably can be
significantly affected by changes in the market price of uranium
and gold, respectively. Until very recently the spot market price
for uranium concentrates has been depressed (less than $15.00 per
pound) since 1988 and has been below $8.00 per pound as recently as
1992. (See Item 1, "Description of Business - Uranium - Uranium
<PAGE>
Market Information" in Registrant's 1995 Form 10-K for additional
information on the uranium markets and pricing.) Uranium prices
are subject to a number of factors beyond Registrant's control
including imports of uranium from Russia and other CIS countries,
the amount of uranium produced and sold from the blending of highly
enriched uranium recovered from U. S. and Russian nuclear weapons
to produce lower enriched uranium for nuclear fuel, the build up by
utilities of uranium fuel inventories and the sale of excess
inventories into the market, the rate of consumption of uranium
inventories by utilities, the rate of uranium production in the
United States, Canada, Australia and elsewhere by other producers
and the rate of new construction of nuclear generating facilities,
verses the rate of shutdown and decommissioning of older nuclear
generating facilities, particularly in the United States.
Market prices for uranium concentrates in the United States have
recovered to between $16.25 and $16.50 per pound as of May 31,
1996. The Company believes that if the price remains at this level
or higher, United States utilities will seek long term price
stabilizing uranium supply contracts. If the Company is able to
obtain long term uranium supply contracts with assured prices
exceeding $18.00 per pound, that should be sufficient to operate
the Company's Utah uranium properties profitably. It should also
be sufficient to proceed with development of the GMMV Jackpot Mine
and operation of the Sweetwater uranium mill, although there can be
no assurance that Kennecott, which controls the management
committee of GMMV, would be of the same opinion. There also can be
no assurance that this recent upward price movement will continue.
USE would be adversely affected if the United States utilities with
nuclear power plants do not seek long term uranium supply contracts
during the balance of the 1990s. Although the extent of such
adverse impact cannot be predicted, if uranium prices remained so
depressed through the 1990s that USE's properties and facilities
were not put into operation, the book value of such assets might
decrease and USE could be required to reclaim or restore such
properties sooner than planned (see also Risk Factor 12).
The market price of gold has fluctuated widely and is affected by
numerous factors beyond the Company's control, including
international economic trends, currency exchange fluctuations,
expectations for inflation, the extent of forward sales of gold by
other producers, consumption patterns (such as purchases of gold
jewelry and the development of gold coin programs), purchases and
sales of gold bullion holdings by central banks or other large gold
bullion holders or dealers and global or regional political events,
particularly in major gold-producing countries such as South Africa
and some of the CIS countries. Gold market prices are also
affected by worldwide production levels, which have increased in
recent years. The aggregate effect of these factors, all of which
are beyond the Company's control, is impossible for the Company to
predict. In addition, the market price of gold has on occasion
been subject to rapid short-term changes because of market
speculation. As of June 20, 1996 the Comex spot price of gold was
$384.20 per ounce.
<PAGE>
7. Proposed Federal Legislation. The U.S. Congress has, in
legislative sessions in recent years, actively considered several
proposals for major revision of the General Mining Law, which
governs mining claims and related activities on federal public
lands. If any of the recent proposals become law, it could result
in the imposition of a royalty upon production of minerals from
federal lands and new requirements for mined land reclamation and
other environmental control measures. It remains unclear whether
the current Congress will pass such legislation and, if passed, the
extent such new legislation will affect existing mining claims and
operations. The effect of any revision of the General Mining Law
on the Company's operations cannot be determined conclusively until
such revision is enacted; however, such legislation could
materially increase the carrying costs of the Green Mountain
mineral properties, the SMP properties and some of Plateau's
mineral properties which are located on federal unpatented mining
claims, and could increase both the capital and operating costs for
such projects and impair the Company's ability to hold or develop
such properties, as well as other mineral prospects on federal
unpatented mining claims.
8. Exploration Risks. Mineral exploration, particularly for gold,
is highly speculative in nature, involves many risks and frequently
is nonproductive. There can be no assurance that the Company's
efforts at the Sutter Gold Project to identify additional gold ore
reserves will be successful. Moreover, substantial expenditures
are required to establish additional ore reserves through drilling,
to determine metallurgical processes to extract the metal from the
ore and to construct mining and processing facilities. During the
time required to establish additional ore reserves, determine
suitable metallurgical processes and construct such mining and
processing facilities, the economic feasibility of production may
change because of fluctuating gold prices (see Risk Factor 7).
9. Mining Risks and Insurance. The business of uranium and gold
mining generally is subject to a number of risks and hazards,
including environmental hazards, industrial accidents and rock
falls, flooding, interruptions due to weather conditions and other
acts of God. Such risks could result in damage to or destruction
of Registrant's mineral properties and production facilities, as
well as to properties of others in the area, personal injury,
environmental damage and process and production delays, causing
Registrant monetary losses and possible legal liability. While the
Company maintains, and intends to continue to maintain, liability,
property damage and other insurance consistent with industry
practice, no assurance can be given that such insurance will
continue to be available, be available at economically acceptable
premiums or be adequate to cover any resulting liability.
10. Title to Properties. Nearly all the uranium mining properties
held by GMMV, SMP, and Plateau are on federal unpatented claims.
Unpatented claims are located upon federal public land pursuant to
procedure established by the General Mining Law (see also Risk
Factor 8). Requirements for the location of a valid mining claim
<PAGE>
on public land depend on the type of claim being staked, but
generally include discovery of valuable minerals, erecting a
discovery monument and posting thereon a location notice, marking
the boundaries of the claim with monuments, and filing a
certificate of location with the county in which the claim is
located and with the U. S. Bureau of Land Management ("BLM"). If
the statutes and regulations for the location of a mining claim are
complied with, the locator obtains a valid possessory right to the
contained minerals. To preserve an otherwise valid claim, a
claimant must also annually pay certain rental fees to the federal
government (currently $100 per claim) and make certain additional
filings with the county and the BLM. Failure to pay such fees or
make the required filings may render the mining claim void or
voidable. Because mining claims are self-initiated and self-
maintained, they possess some unique vulnerabilities not associated
with other types of property interests. It is impossible to
ascertain the validity of unpatented mining claims solely from
public real estate records and it can be difficult or impossible to
confirm that all of the requisite steps have been followed for
location and maintenance of a claim. If the validity of an
unpatented mining claim is challenged by the government, the
claimant has the burden of proving the present economic feasibility
of mining minerals located thereon. Thus, it is conceivable that
during times of falling metal prices, claims which were valid when
located could become invalid if challenged. Disputes can also
arise with adjoining property owners for encroachment or under the
doctrine of extralateral rights (see Risk Factor 17).
11. Reclamation and Environmental Liabilities. Registrant's
projects and operations are subject to various federal, state and
local laws and regulations regarding the discharge of materials
into the environment or otherwise relating to the protection of the
environment, including the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act and the Comprehensive
Environmental Response Compensation Liability Act. With respect to
mining operations conducted in Wyoming, Wyoming's mine permitting
statutes, Abandoned Mine Reclamation Act and industrial development
and siting laws and regulations will impact USE. Similar laws in
California affect SGMC operations and in Utah will affect Plateau's
operations. In addition, Registrant's uranium mills are subject to
jurisdiction of the Nuclear Regulatory Commission ("NRC").
To Registrant's knowledge, it is in compliance in all material
respects with current environmental regulations. To the extent
that production by SMP, GMMV or SGMC is delayed, interrupted or
discontinued due to need to satisfy present or future laws or
regulations which relate to environmental protection, future USE
earnings could be adversely affected. For additional information
concerning the effect such environmental laws and regulations have
on the Company's capital expenditures, see Registrant's 1995 Form
10-K.
<PAGE>
USE is a joint venturer in the GMMV, which entity is responsible
for mine reclamation, environmental restoration and decommissioning
associated with mineral properties on Green Mountain, in south
central Wyoming, and the nearby Sweetwater Mill. Future costs to
comply with these obligations are now estimated at approximately
$25,000,000. If actual costs are higher, USE could be adversely
impacted. There is no assurance the properties will generate
sufficient revenues to fund reclamation, restoration and
decommissioning costs in excess of current estimates. See Note K
to the audited USE Consolidated Financial Statements in
Registrant's 1995 Form 10-K, and the notes to the unaudited USE
Consolidated Financial Statements in Registrant's Form 10-Q for
fiscal quarter ended February 29, 1996 for further information.
Current bonds and funds in escrow are deemed adequate for
reclamation and decommissioning liabilities associated with the
Shootaring Mill in Utah.
USE and Crested have assumed the reclamation obligations,
environmental liabilities and contingent liabilities for employee
injuries, from mining the SMP properties and other properties in
the Sheep and Green Mountain Mining Districts. The reclamation
obligations, which are established by governmental regulators, were
most recently set at $1,451,800, which amount is shown on USE's
balance sheet as a long-term obligation.
To assure the reclamation work will be performed, regulatory
agencies require posting of a bond or other security. USE and
Crested satisfied this requirement with respect to SMP properties
by mortgaging their executive office building and a trailer park,
both located in Riverton, Wyoming. A portion of the funds for the
reclamation of SMP's properties was to have been provided by SMP,
which agreed to pay up to $.50 per pound of uranium concentrates
produced from its properties to USE and Crested for reclamation
work. The status of this commitment could be impacted by the
ultimate resolution of the arbitration/litigation with Nukem/CRIC
(see Risk Factor 3 above).
The GMMV and Sweetwater Mill reclamation liabilities are self
bonded by Kennecott pursuant to written agreements with the NRC and
the State of Wyoming, and accordingly these liabilities are not
recorded in the USE or Crested financial statements. The SMP and
Plateau reclamation liabilities were recorded at $1,451,800 and
$2,500,000 respectively (total $3,951,800) in the audited USE
Consolidated Financial Statements. See the USE 1995 Form 10-K. A
cash bond of approximately $40,000 is posted for miscellaneous
reclamation costs at the Sutter gold property (carried under "Other
Assets-Deposits and Other" on the USE financial statements).
Reclamation and environmental obligations for the oil and gas
properties held by USE are deemed insignificant and manageable in
the ordinary course of business.
12. Possible Losses on Uranium Contracts. As of May 31, 1995, SMP
held contracts for delivery of an estimated 5.5 million pounds of
U3O8 to domestic utilities from 1996 through 2000. The arbitration
<PAGE>
panel found that another contract worth an estimated 810,000 pounds
to be delivered form 1996 to 2000 was to be assigned to SMP by
Nukem/CRIC. See "Material Changes". Actual quantities of U3O8
purchased by utilities over that period of time may vary by 10 to
25 percent, as provided in the contracts (see Item 1 "Description
of Business - Uranium - Sheep Mountain Partners - SMP Marketing" in
Registrant's 1995 Form 10-K), and profit or loss to SMP on the
deliveries will depend on the cost of inventory. Profits on such
future deliveries cannot be predicted, however, management of the
Company does not anticipate any material losses from the sales of
U3O8 pursuant to these contracts. As of the date of this
Prospectus, the prices under the one remaining base escalated
contract exceed the current market price, however, there can be no
assurance this situation will not change in the future.
Increases in the spot market price would increase USE's and
Crested's cost of delivering on certain of the SMP contracts prior
to the time that their uranium properties are in production, thus
reducing potential profits or possibly producing losses, while spot
market price decreases would be likely to increase profits on such
contracts. USE recorded a loss of $162,900 in fiscal 1994 on
deliveries of its portion of certain of the SMP contracts, as the
cost of uranium exceeded the contracted price. Due to the SMP
dispute, earlier arrangements between the partners to deliver their
shares of the SMP contracts in spite of the dispute were abandoned,
and USE made no deliveries (and therefore recorded no revenues or
losses) on any SMP contracts during fiscal 1995. For the nine
months ended February 29, 1996 Registrant recorded a gross profit
of $350,000 from mineral sales transactions. For information on
the status of the contracts in SMP, see "Material Changes".
13. Competition. There is keen competition in the domestic
minerals industry and the oil and gas business for properties and
capital. USE's competitors include a number of major mining and
oil and gas companies, most of which are larger than USE in all
respects. In the production and marketing of uranium concentrates
there are more than 10 major international entities (some of which
are government controlled) that are significantly larger and better
capitalized than USE. Although the Registrant presently is not
engaged in the mining or milling of uranium, and therefore should
not be counted in the top ten uranium producers, the Registrant's
competitive stature may improve significantly at such time as it
commences uranium mining and production.
The location and composition of mineral ore bodies are of great
importance to the competitive position of a mining company.
Producers of high-grade ore with readily extractable minerals are
in an advantageous position. Producers of one mineral may be able
to efficiently recover other minerals as by-products, with
significant competitive impact on primary producers. Substantial
capital costs for equipment and mine-works are often needed. As a
result, owners of producing properties, particularly if purchase
contracts for the production are in place, generally enjoy
substantial competitive advantages over organizations that propose
<PAGE>
to develop non-producing properties. Competition is also keen in
the search for mineral properties and prospects and in the
employment and retention of qualified personnel.
USE believes that with the recent improvements in market prices for
uranium concentrates, it will be able to compete with other uranium
producers, primarily because it holds significant uranium resources
in place, along with the necessary mining and milling facilities,
all of which it acquired for little or no cost. Applications have
been submitted to upgrade the mill licenses to operating levels,
however, delays in final permitting may be encountered, as the
uranium refining industry is closely regulated by the NRC.
Nonetheless, USE expects competition from larger producers in
Canada, Australia and Africa, as well as from U.S. in situ
producers of uranium and other producers that recover uranium as a
byproduct of other mineral recovery processes, and from uranium
recovered from the de-enrichment of highly enriched uranium
obtained from the dismantlement of U.S. and Russian nuclear weapons
and sold in the market by the United States Enrichment Corporation
and/or the United States Department of Energy, as well as from
imports to the United States of uranium from the Commonwealth of
Independent States (formerly the Soviet Union). See Item 1
"Description of Business - Uranium - Uranium Market Information"
and "NUEXCO Exchange Value" in Registrant's 1995 Form 10-K.
USE's affiliate FNG encounters strong competition with a number of
larger civil engineering construction firms in the western United
States.
14. Reserves Estimates. While the ore reserve estimates at GMMV
Round Park ore deposit in Wyoming and SGMC's Lincoln project in
California have been reviewed by independent consultants, such ore
reserve estimates are necessarily imprecise and depend to some
extent on statistical inferences drawn from limited drilling, which
may, on occasion, prove unreliable. Should the Company encounter
mineralization or formations at any of its mines or projects
different from those predicted by drilling, sampling and similar
examinations, ore reserve estimates may have to be adjusted and
mining plans may have to be altered in a way that could adversely
affect the Company's operations. Moreover, short-term operating
factors relating to the ore reserves, such as the need for
sequential development of ore bodies and the processing of new or
different ore grades, may adversely affect the Company's
profitability in any particular accounting period.
15. Variable Revenues and Recent Losses. Due to the nature of
USE's business, there are from time to time major increases in
gross revenues from sale of mineral properties. During fiscal
1991, $7,193,600 was recognized from sale of a partial interest in
a uranium property to Kennecott Uranium Company (a GMMV partner).
No such revenues were recognized from fiscal 1992 through fiscal
1995. Further, USE realized a net gain in fiscal 1992 of $613,000,
<PAGE>
but net losses were realized from fiscal 1993 through fiscal 1995
(in the respective amounts of $221,900, $3,370,800 and $2,070,600).
16. Bullfrog Litigation. Registrant, Crested, Parador Mining
Company, Inc. ("Parador") and H. B. Layne Contractor, Inc.
("Layne") are defendants and counter- or cross-claimants in certain
litigation in the District Court of Nye County, Nevada, brought by
Bond Gold Bullfrog Inc. ("BGBI") in July 1991. BGBI (now known as
Barrick Bullfrog, Inc.) is an affiliate of Barrick Corp., a large
international gold producer headquartered in Toronto, Canada. The
litigation primarily concerns extralateral rights associated with
two patented mining claims owned by Parador and initially leased to
a predecessor of BGBI, which claims are in and adjacent to BGBI's
Bullfrog open pit and underground mine. USE and Crested assert
certain interests in the claims under an April 1991 assignment and
lease from Parador, which is subject to the lease to BGBI's
predecessor.
Parador, USE and Crested had previously advised BGBI that they are
entitled to royalty payments with respect to extralateral rights of
the subject claims on minerals produced at the Bullfrog Mine,
claiming that the lode or vein containing the gold mineralization
apexes on the Parador claims and dips under the claims leased to
BGBI by Layne.
BGBI seeks to quiet title to its leasehold interest in the subject
claims, alleging that Parador's lease thereof to USE and Crested is
adverse to the interest claimed by BGBI, and that the assertions by
USE and Crested of an interest in the claims have no foundation.
BGBI seeks a determination that USE and Crested have no rights in
the claims and an order enjoining USE and Crested from asserting
any interest in them. BGBI further asserts that, in attempting to
lease an interest in the subject claims to USE and Crested, Parador
breached the provisions of its lease to BGBI, and that Parador is
responsible for the legal fees and costs incurred by BGBI in the
quiet title action, which may be offset against royalties. Under
an arrangement to pay certain legal expenses of Parador, USE and
Crested may be responsible for any such amounts.
BGBI alleges that by entering into the Assignment and Lease of
Mining Claims with Parador, USE and Crested disrupted the
contractual relationship between BGBI and Parador. In addition,
BGBI claims that the USECC-Parador agreement slanders BGBI's title
to the claims. BGBI seeks compensatory damages from Parador, USE,
and Crested; punitive damages from USE and Crested; and costs and
other appropriate relief from Parador, USE and Crested, all in
amounts to be determined.
A partial or bifurcated trial to the court of the extralateral
rights issues was held on December 11 and 12, 1995. The purpose of
the hearing was to determine whether the Bullfrog orebody is a
"vein, lode or ledge" as described in the General Mining Law and,
if so, whether the facts of the case warrant the application of the
doctrine of extralateral rights as set forth in such statute.
<PAGE>
Although the Court sat as both the finder of fact and law with
respect to such issues, the Court concluded that the questions are
ultimately one of law which must be decided based on the testimony
and exhibits introduced at the trial concerning the description of
the orebody. Registrant and defendants Crested Corp. and Parador
presented five experts in the field of geology, including the
person who was responsible for the discovery of the gold deposit at
the mine. All five experts opined that the deposit was a lode and
it apexed on a portion of Parador's two mining claims. The
defendant Layne presented a single witness who testified that there
was no apex within the Parador claims. The Court nevertheless
found that Parador had failed to meet its burden of proof and
therefore Parador, Registrant and Crested have no right, title and
interest in the minerals lying beneath the claims of Layne pursuant
to extralateral rights. The Court entered a partial judgment in
favor of Layne and ordered that Parador pay Court costs to Layne.
Defendants intend to appeal the Court's ruling as erroneous as a
matter of law at such time as it is appropriate to do so.
The partial trial did not address any of the other issues pending
in the litigation other than those required to decide the question
of whether the doctrine of extralateral rights is applicable to
this case. All other claims and counterclaims remain pending
before the Court and no hearing date has been set for those issues.
If USE's and Crested's position concerning extralateral rights is
ultimately sustained, substantial additional revenues and income
may be received by USE and Crested from royalties payable with
respect to gold produced from the Bullfrog Mine. If, however, the
final decision of the appellate court is adverse to USE and
Crested, an award of damages against USE and Crested in any
substantial amount by this Court could have a material adverse
effect on the ability of USE and Crested to carry on their business
in the manner described in this Prospectus.
17. Potential Issuance of Preferred Stock. Under the USE Restated
Articles of Incorporation, as amended ("Restated Articles") and as
permitted by the Wyoming Business Corporation Act ("WBCA"), the USE
Board of Directors has authority to create series of preferred
stock and to issue shares thereof, without the approval of any USE
shareholders. The creation and issue of USE preferred stock with
dividend rights senior to the USE common stock could adversely
affect common stockholder participation in future earnings through
dividends that otherwise would be available for distribution to
holders of the common stock, including those purchasing the
Shares.
Such preferred stock also could inhibit a takeover of USE. Under
the WBCA, separate voting approval by classes of stock is required
for certain substantive corporate transactions. If the interests
of preferred stockholders is perceived to be different from those
of the common stockholders, the preferred stockholders could
withhold approval of the transactions needed to effect the
takeover.
<PAGE>
19. Potential Anti-Takeover Effects of Staggered Board. The USE
Board of Directors is presently divided into three classes of two
directors each. Pursuant to the USE Restated Articles and as
permitted by the WBCA, the directors in each class serve a three
year term, and only those directors in one class are reelected each
year. This board classification could stall a takeover of USE,
even if a majority of the common stock were to be held by persons
desiring a change in control of the Board. See "Description of
Securities to be Registered."
PLAN OF DISTRIBUTION
The Shares will be offered from time to time by the Selling
Shareholders (i) in transactions in the over-the-counter market,
automated inter-dealer system on which the Company's common stock
is then listed, in negotiated transactions or a combination of such
methods of sale, and (ii) at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, or at
negotiated prices. The Selling Shareholders may effect such
transactions directly with the broker-dealers. Such broker-dealers
may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of
the Shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary
commissions). Sales of the Shares may be made pursuant to this
Prospectus or pursuant to Rule 144 adopted under the 1933 Act.
No underwriting arrangements exist as of the date of this
Prospectus. Upon being advised of any underwriting arrangements
that may be entered into by the Selling Shareholders after the date
of this Prospectus, the Company will prepare and file a post-
effective amendment to this Registration Statement including a
supplement to this Prospectus to disclose the name of such
underwriters and such arrangements.
Expense of any sales pursuant to this Prospectus will be borne by
the Selling Shareholders, except that the Company is paying certain
of the expenses, which are estimated at $1,000, of registering the
Shares under the 1933 Act, consisting of all costs incurred in
connection with the preparation of the registration statement
(except for any fees of counsel for the Selling Shareholders). The
Selling Shareholders will pay or assume brokerage commissions, or
underwriting discounts, incurred in the sale of the Shares, which
commissions or discounts are not being paid or assumed by the
Company.
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
May 31,
-----------------------------------------------------------
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current assets $ 3,866,600 $ 1,650,300 $ 3,260,500 $ 7,302,300
Current liabilities 1,291,700 1,592,100 681,900 816,000
Working capital 2,574,900 58,200 2,578,600 6,486,300
Total assets 33,090,300 24,037,200 24,583,000 20,500,100
Long-term
obligations(1) 16,612,500 2,900,000 4,540,400 3,244,100
Shareholders' equity 12,559,100 15,063,200 14,982,900 15,045,500
</TABLE>
<TABLE>
<CAPTION>
February 29, 1996 (3)
May 31, 1995 (unaudited)
------------ ------------------
<S> <C> <C>
Current assets $ 4,058,000 $ 2,228,700
Current liabilities 4,036,000 1,091,000
Working capital 22,000 1,137,700
Total assets 34,165,000 34,950,900
Long-term
obligations(1)(2) 15,882,300 14,416,400
Shareholders' equity 12,168,400 16,007,700
__________
</TABLE>
(1) Includes $3,951,800, $3,951,800, $1,695,600, $1,695,600, and
$725,900 of reclamation liabilities, and additional amounts of other
accrued liabilities, on uranium properties at May 31, 1995, 1994, 1993,
1992, and 1991, respectively. See Notes F and K to the Consolidated
Financial Statements contained in Registrant's 1995 Form 10-K.
(2) See Notes 4 and 5 to the unaudited Condensed Consolidated Financial
Statements contained in Registrant's Form 10-Q for fiscal quarter ended
February 29, 1996.
(3) Reflects the reclassification for amounts associated with the
operations of Brunton as discontinued because Brunton was sold by
Registrant as of January 31, 1996. See Notes 1 and 3 to the unaudited
Condensed Consolidated Financial Statements for the fiscal quarter and
nine months ended February 29, 1996.
See the Form 8-K Report for February 16, 1996 for pro forma condensed
consolidated financial information, giving effect to the Brunton sale.
<PAGE>
<TABLE>
<CAPTION>
Years Ended May 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 9,148,000 $ 8,776,300 $ 9,045,500 $ 6,353,600 $ 9,569,100
Income (loss) before
equity in income
(loss) of affiliates,
provision for
income taxes and
extraordinary item (2,281,500) (3,587,900) (103,100) 819,200 6,082,900
Equity in (loss) of
affiliates (442,300) (390,700) (444,700) (324,900) (96,100)
Net income (loss) (2,070,600) (3,370,800) (221,900) 613,200 6,164,900
Income (loss) per
share before
extraordinary item $ (.42) $ (.70) $ (.05) $ .09 $ .93
Extraordinary item -- -- -- .06 .62
----------- ----------- ----------- ----------- -----------
Income (loss) per
share before
cumulative effect
of accounting change (.42) (.70) (.05) .15 1.55
Cumulative effect at
June 1, 1993 of income
tax accounting change -- (.06) -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss)
per share $ (.42) $ (.76) $ (.05) $ .15 $ 1.55
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Cash dividends
per share $ -0- $ -0- $ -0- $ -0- $ -0-
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- ----------------------------
February 29 February 28 February 29, February 28,
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 1,875,600 $ 1,386,300 $ 8,151,800 $ 3,638,500
Loss before equity in
loss of affiliates
and provision for
income taxes (1,290,900) (218,400) (1,882,500) (1,551,200)
Equity in loss
of affiliates - net (115,700) (128,100) (281,600) (304,900)
Loss from continuing
operations (1,074,400) (270,300) (1,765,400) (1,437,700)
Income (loss) from
discontinued operations
net of income taxes (9,200) (58,100) 308,900 121,900
Gain on disposal of
discontinued operations
net of income taxes 2,295,700 -- 2,295,700 --
Income (loss) from
discontinue operations 2,286,500 (58,100) 2,604,600 121,900
Net income (loss) 1,212,100 (328,400) 839,200 (1,315,800)
Loss from continuing
operations per share (.17) (.06) (.28) (.29)
Net income (loss) per share $ .19 $ (.07) $ .14 $ (.27)
Cash dividends per share -0- -0- -0- -0-
</TABLE>
See the Form 8-K Report for February 16, 1996 for pro forma condensed
consolidated financial information, giving effect to the Brunton sale.
MATERIAL CHANGES
Brunton.
On February 16, 1996 Registrant completed the sale of 8,267,450
shares of common stock, $0.01 par value, (the "Stock") of Brunton
to Silva Production AB, a closely held Swedish corporation
("Silva"), pursuant to the terms of a Stock Purchase Agreement
dated January 30, 1996 (the "Agreement") by and between Registrant
and Silva. The Brunton transaction was prompted in part by
Registrant's desire to focus on its core business of acquiring and
developing mineral properties and mining and marketing minerals,
particularly uranium and gold. The Stock constitutes all of the
issued and outstanding shares of Brunton owned by Registrant as of
the date of the sale including 90,750 shares held in Brunton's
treasury.
The purchase price for the Stock was $4,300,000, which was a
negotiated price based on an Adjusted Shareholder's Equity in
Brunton (as defined in the Agreement) as of January 31, 1996 of
$2,399,103. Registrant received $300,000 upon execution and
delivery of the Agreement, approximately $3,000,000 by wire
transfer from Silva at closing and an agreement by Silva to pay
<PAGE>
Registrant $1,000,000 in three annual installments of $333,333
together with interest at the rate of 7% per annum, such
installments to be paid on February 15, 1997, February 15, 1998 and
February 15, 1999.
In addition, Silva agreed that, in the operation of Brunton, Silva
will cause the existing Brunton products and operations (including
lasers and other new products being developed by Brunton at the
time of the sale) to be a separate profit center and to pay
Registrant 45% of the net profits before taxes derived from that
profit center for a period of four years and three months
commencing February 1, 1996. The first such net profits payment
will 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. Additional net profits payments will be made, on
July 15, 1998, July 15, 1999 and July 15, 2000, if net profits are
earned for the corresponding twelve month period. There can be no
assurance that Brunton will earn net profits for any such period
and therefore there can be no assurance that any such net profits
payment will be received by Registrant.
The assets of Brunton that were acquired by Silva through the
purchase of the Stock consist of certain real estate housing
Brunton's headquarters and manufacturing operations in Riverton,
Wyoming; Brunton's working capital; equipment, inventory,
machinery, personal property and all of Brunton's intellectual
property rights. Certain items of equipment and personal property
were withheld by the Registrant from the Agreement and transferred
from Brunton to Registrant, by mutual agreement with Silva, for
Registrant's assumption of the indebtedness thereon. Such items
include off-book inventory and depreciated mining equipment, real
estate not used in Brunton operations, and miscellaneous other
equipment, as well as 225,556 shares of Registrant's common stock,
par value $0.01 per share, and options to purchase 150,000 shares
of Registrant's common stock for $3.50 per share; 160,000 shares of
Crested Corp. common stock, par value $0.001, and options to
purchase (from Crested Corp.) 300,000 shares of Crested Corp.
common stock for $0.40 per share, all of which were previously
owned by Brunton. 125,556 shares of USE (and options to purchase
75,000 shares of USE), plus 60,000 shares of Crested (and options
to purchase 150,000 shares of Crested) were transferred to Plateau
in partial payment of debt owed to Plateau by USECC. The remaining
100,000 USE shares (and options to purchase 75,000 USE shares),
plus 100,000 Crested shares (and options to purchase 150,000 shares
of Crested) were transferred to SGMC.
Also at closing, the Registrant paid Brunton $171,685 for accrued
rentals on mining equipment owned by Brunton and transferred to
Registrant at closing, and the Registrant paid off $273,000 in bank
debt previously incurred by Brunton in connection with a loan to
the Registrant.
<PAGE>
The sale will eliminate Brunton's manufacturing and/or marketing of
professional and recreational outdoor products from the commercial
segment of Registrant's business, except to the extent that there
are net profit payments from Silva over the next four years and
three months, of which there can be no assurance. For the fiscal
year ended May 31, 1995, Brunton's sales provided 49% of net
revenues of USE (29% for the six months ended November 30, 1995).
The inability to include Brunton's operations with Registrant's
other operating revenues in the future could result in continued
operating losses for Registrant, unless Registrant is able to
develop other profitable businesses, such as Registrant's uranium
business or FNG's construction business, to replace profits from
Brunton. Continued operating losses without offsetting
replacements of working capital will adversely affect USE's ability
to continue its operations as described in this Prospectus. See
also Risk Factors 1 and 2 above and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," in
Registrant's 1995 Form 10-K.
On the other hand, receipt in February 1996 of approximately
$2,900,000 in net cash from the sale (and future payments on
Silva's $1,000,000 promissory note and any profits payments) will
enhance the Company's financial condition and medium term liquidity
as well as providing additional resources to put the Company's
Plateau uranium mill into operation and develop the Company's
uranium and gold properties.
Plateau Resources.
Registrant intends to consolidate all of its uranium assets into a
wholly-owned subsidiary (Plateau Resources Limited) in the fiscal
year ending May 31, 1996, and fund the start up of its Shootaring
Canyon uranium mill and commencement of mining operations at the
mines now owned by Plateau in Utah, with debt or equity funding.
However, such consolidation has not been effected to date and there
are no agreements in place for the financing of such uranium
operations. There can be no assurance that uranium prices will
remain at the current level, that the Company will succeed in
obtaining long-term uranium supply contracts required to allow
Registrant to operate its uranium properties profitably or that the
required financing will be available to put such properties into
operation.
Update on Sheep Mountain Partners Arbitration
On April 18, 1996 the arbitration panel (the "Panel") entered an
Arbitration Order and Award (the "Order") in the Nukem/CRIC
proceedings. The Panel found in favor of the Registrant and
Crested on certain claims made by the Registrant and Crested
(including the claims for reimbursement of standby, maintenance
expense and other expenses on the SMP mines), and in favor of
Nukem/CRIC and against the Registrant and Crested on certain other
claims.
<PAGE>
The Registrant and Crested were awarded monetary damages of
approximately $7.4 million, which amount is after deduction of
monetary damages which the panel awarded in favor of Nukem/CRIC and
against the Registrant and Crested. An additional amount of
approximately $4.8 million was awarded by the Panel to the
Registrant and Crested, to be paid out of cash funds held in SMP
bank accounts, which accounts have been accruing operating funds
from SMP since the arbitration/litigation proceedings were
commenced. It is anticipated that such payment out of the SMP bank
accounts will be made in the first quarter of fiscal 1997.
The Panel ordered that one utility supply contract for 980,000
pounds of uranium oxide held by Nukem/CRIC belonged to SMP, and
ordered such contract assigned to SMP. The contract expires in
2000.
The fraud and RICO claims of the Registrant and Crested against
Nukem and CRIC were dismissed.
On April 30, 1996 Nukem/CRIC filed with the Panel two motions (the
"Nukem Motions") requesting correction of the Order, claiming to
have discovered errors and inconsistencies in two of the 36 claims
addressed in the Order that they allege improperly increased the
damages awarded to Registrant and Crested by an aggregate amount
exceeding $16 million. They have also written a letter to the bank
holding most of the SMP escrowed proceeds instructing the bank to
take no action with respect to releasing funds from the SMP escrow
account without prior notification to them.
On May 15, 1996, Registrant and Crested filed the Order (under seal
with respect to certain portions containing commercially sensitive
information) with the United States District Court for the District
of Colorado (the "Court") together with a petition for confirmation
of the Order. At a hearing on May 24, 1996 the Court remanded the
Order to the Panel for limited review of the Nukem Motions, without
taking further evidence. The petition for confirmation of the
Order and motions filed by Registrant and Crested for dissolution
of SMP, for the appointment of a receiver to oversee the
obligations of SMP to make delivery of uranium concentrates to
utilities and supervise the formal dissolution of SMP, and for an
order directing distribution of the escrowed proceeds, were stayed
by the Court pending a ruling by the Panel on the Nukem Motions.
On July 3, 1996 the Panel ruled on the Nukem Motions, denying the
principal claim of error by Nukem/CRIC and modifying the language
of the Order in certain respects, which did not materially alter
the amount awarded to Registrant and Crested. With respect to the
principal claim of error alleged in the Nukem Motions, concerning
the award of more than $16 million of damages and interest to
Registrant and Crested attributable to Nukem's unauthorized use of
SMP uranium supply contracts to obtain rights to purchase U3O8 from
the Commonwealth of Independent States ("CIS"), the Panel affirmed
the amount of its award to Registrant and Crested. In so doing the
Panel stated that "There was wrongdoing on the part of Nukem when
<PAGE>
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
affirmed the Order awarding SMP the rights to purchase CIS uranium
as well as the uranium acquired pursuant to those rights and the
profits therefrom which are 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...."
The Panel did correct a portion of the award to reimburse $137,700
to CRIC for U3O8 it purchased, out of a bank account in Riverton,
WY. The Panel also made a correction to have the $136,500
previously awarded to USECC paid out of the First Interstate Bank
of Riverton account rather than the Norwest Bank account in Denver,
CO. Registrant and Crested called a mathematical error to the
Panel's attention which was made by Nukem after the close of
evidence in the amount of $265,313.83. The Panel did not consider
that error because it was not directed by the Court to do so and it
remains for the Court to resolve that issue.
The Panel did not order SMP dissolved. The Registrant and Crested
have filed a motion with the Court seeking judicial dissolution of
SMP. Pending a favorable ruling on that motion, the Registrant and
Crested may seek to reach an agreement with Nukem/CRIC on
dissolution of SMP. If a dissolution is not achievable through
negotiation, the Registrant and Crested may renew its motion for
judicial intervention and the appointment of a receiver by the
courts, to wind up the partnership affairs and distribute assets
after payment of liabilities. The timing and ultimate resolution
of the question of SMP dissolution presently is uncertain. Pending
such resolution, the Registrant and Crested are hopeful that
delivery obligations under the various SMP utility supply contracts
can be met through the cooperation of Nukem/CRIC.
Construction - Four Nines Gold, Inc.
The contract awarded to FNG by the City of Lead, South Dakota for
municipal road and drainage construction and rock slide area
stabilization has been increased as a result of change orders by
the City to $3,550,604 as of December 31, 1995. FNG had performed
86 percent of the contract, billing $3,018,023 (including 5 percent
retainage against completion of the project) of which $2,656,224
had been paid as of December 31, 1995. FNG continues to expect the
contract to be profitable.
On September 13, 1995, FNG was awarded a separate construction
contract for $618,270 by the United States Department of the
Interior, Bureau of Reclamation, for the Minor Laterals, North
Canal, Stage 5, Belle Fourche Unit, South Dakota. The work
consists of constructing 3.81 miles of pipeline, approximately 1.4
miles of gravel-surfaced road, removing existing reinforced
concrete hydraulic structures and constructing miscellaneous
<PAGE>
concrete structures which include four inlets. Notice to proceed
with the work on this contract was given on September 29, 1995,
with final completion required by May 10, 1996. As of December 31,
1995 FNG had performed 41% of the contract, billing $201,401 and
having received payment for all amounts billed. FNG expects this
contract to be profitable.
Wyoming Real Estate Sale to Arrowstar
On April 26, 1996 the USECC Joint Venture sold its Wind River
Estates Mobile Home Park (including various personal property) in
Riverton, Wyoming to Arrowstar Investments, Inc., a related party,
for $804,000, the appraised value as determined by McDonald
Appraisal Service Inc. as of April 5, 1996. The total purchase
price consists of $500,000 cash; Arrowstar's unsecured 10%
promissory note due 2006 for $56,000; cancellation of USECC's
$47,934.25 promissory note issued to Arrowstar on September 1, 1995
(for real property in connection with a prior transaction); and
$161,378.34 by Arrowstar assigning to USECC its entire interest in
First-N-Last L.L.C. Additionally, USECC will credit Arrowstar
$38,687.41 for goodwill due to Arrowstar's investing in First-N-
Last. For information relating to Arrowstar (and the components of
the prior transactions which comprised part of the April 26, 1996
transaction), see the Registrant's Proxy Statement dated October
27, 1995 incorporated by reference herein. Proceeds of the sale
will be applied to working capital. See "Managements Discussion
and Analysis of Financial Condition and Results of Operations," in
Registrant's 1995 Form 10-K.
Wyoming Real Estate Sale to Third Party
On April 25, 1996, the Registrant and Crested entered into an
agreement with a non-related party to sell 10 six-plex townhouses
located in Jeffrey City, Wyoming for $500,000, conditioned upon
purchaser obtaining financing for the full amount within 60 days.
Full real estate title will be transferred to the purchaser upon
closing, however, if purchaser removes the townhouses, purchaser
must reclaim the land and the real property where the townhouses
were located will be assigned and conveyed back to USE and Crested
by quit claim deed for full consideration of $10.00. Proceeds of
the sale will be applied to working capital. See "Managements
Discussion and Analysis of Financial Condition and Results of
Operations," in Registrant's 1995 Form 10-K.
Three and Nine Months Ended February 29, 1996 Compared to Three and
Nine Months Ended February 28, 1995
Revenues for the nine month and three month periods ended
February 29, 1996 increased by $4,513,300 and $489,300,
respectively, primarily due to an increase in mineral sales, a
mineral option, and an increase in construction contract revenues.
<PAGE>
Revenues from mineral sales and option were $3,116,700 and
$942,400 for the nine and three months ended February 29, 1996.
There were no similar U3O8 deliveries or option activities for the
same period in the prior year.
Construction contract revenues for the nine and three months
ended February 29, 1996 increased by $2,450,000 and $523,400
respectively from profitable contracts awarded late in fiscal 1995
to the Registrant's subsidiary FNG.
Management fees and other revenues increased by $168,400 and
decreased by $62,300 for the nine and three months ended February
29, 1996. The increase is primarily as a result of increased
revenues generated by operations of a motel, convenience store and
restaurant at the Registrant's town of Ticaboo in southern Utah.
The costs of mineral sales were $2,766,700 for the nine months
and $942,400 for the three months ended February 29, 1996, for
which there were no corresponding costs during the same period in
1995. Cost and expenses associated with mineral operations
decreased by $403,100 and $108,400, respectively, for the nine and
three months ended February 29, 1996, compared to the nine and
three months ended February 28, 1995, primarily as a result of a
decrease in legal costs in connection with the SMP arbitration.
The cost of construction activities increased by $1,779,200, and
$437,900, respectively for the nine month and three month periods
ended February 29, 1996 compared to the same periods in 1995 as a
result of increased contract work.
General and administrative expenses increased by $496,700 and
decreased by $340,600, respectively for the nine and three months
ended February 29, 1996 compared to the comparable 1995 periods.
The increase was due to additional expenses associated with the
FNG's contracts. Additionally, interest expense which is included
in general and administrative expense increased by $46,200 during
the nine months ended February 29, 1996 as compared to the same
period in 1995. General and administration expenses also increased
due to the Christmas bonus paid in stock to certain employees
during the quarter ended February 29, 1996 and to the shares of
stock issued in February 1996 under Registrant's Restricted Stock
Bonus Plan. The total of these stock issuances was compensation of
$297,400. Officers and directors were not issued any stock
compensation (see Note 6). Commercial operations expenses remained
relatively constant.
Operations for the nine months and three months ended February
29, 1996 resulted in a loss from continuing operations of
$1,765,400 and $1,074,400, respectively, as compared to a loss of
$1,437,700 and $270,300 during the same periods of the previous
year. During the nine months and quarter ended February 29, 1996
the Registrant recorded a gain of $2,295,700 net of $50,000 in
taxes, on the sale of Brunton. No such gain was recognized in the
prior year's periods. Due to the discontinuance of operations from
Brunton during the quarter ended February 29, 1996, all income from
<PAGE>
Brunton is shown as discontinued operations on the Statements of
Operations for the quarter and nine months ended February 29, 1995.
During the nine months and quarter ended February 29, 1996 the
Registrant recognized income of $308,900 and a loss of $9,200,
respectively, from Brunton's discontinued operations as compared to
a gain of $121,900 and a loss of $58,100 for the corresponding
periods of the prior year. The Registrant therefore recognized a
net income of $839,200 ($0.14 per share) compared to a loss of
$1,315,800 ($0.27 per share) for the nine month period and net
income of $1,212,100 ($0.19 per share) compared to a loss of
$328,400 ($0.07 per share) for the three month period, of the
previous year.
Investment Banking Consulting Agreement
On January 9, 1996, Registrant retained Shamrock Partners Ltd.,
Investment Bankers ("Consultant") as a financial consultant and
advisor, on a nonexclusive basis, for a one year term subject to
renewal. As compensation for Consultant's services, Registrant has
agreed to grant Consultant Warrants to purchase 200,000 shares of
Registrant's common stock at a price of $5.00 per share. Such
Warrants were issued on March 26, 1996. The Warrants are
exercisable at any time during the term of the Consulting Agreement
and Consultant has a right to demand registration of such shares
under the Securities Act of 1933. The Warrants and underlying
shares were registered under a Form S-1 registration statement (SEC
File No. 333-6189) declared effective on June 20, 1996. As of June
28, 1996, no Warrants have been exercised.
Options and Shares Compensation Proposals
As of December 22, 1995, the Registrant's board of directors
amended the Registrant's 1989 Incentive Stock Option Plan, without
shareholder approval, to increase the number of options issuable to
employees (not including executive officers or directors of the
Registrant) from the present 275,000 options up to the increased
number of 700,000 options. All such newly authorized options will
be nonqualified under IRS regulations. Under the Plan as amended,
the board of directors has issued nonqualified options to purchase
a total of 360,000 shares, subject to continued employment and
exercisable at 20% per year, to employees; the exercise price of
the options is $4.00 (the fair market price at December 22, 1995),
subject to the market price of the shares being above $8.00 per
share for 30 days after grant date.
The board of directors also has proposed, subject to approval by
the shareholders at the next annual meeting, a stock award program
for the executive officers and directors of the Registrant, for the
award of common shares to each individual, as of March 1 of each
year of continued employment. The first award is tentatively set
to be March 1, 1997, in amounts of 20,000 shares for from three to
5 years per officer or director, however, no awards shall be made
until a formal plan is adopted and approved by the shareholders and
then only upon further decision of the compensation committee as to
<PAGE>
other features of the plan (including payment of taxes for the
grantees with pay back arrangements) which may be desirable. The
stock award plan will conform to the Commission's proposed Rule
16b-3 for purposes of complying with Sections 16(a) and (b) of the
Exchange Act regarding shortswing profit prohibitions.
The board of directors expects both the amended 1989 Incentive
Stock Option Plan, and (subject to shareholder approval) the stock
award program for officers and directors, to be registered with the
Commission on Form S-8 in calendar 1996.
EXPERTS
The consolidated financial statements of USE incorporated by
reference in this Prospectus from the Company's 1995 Form 10-K have
been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto,
and are included herein in reliance upon the authority of said firm
as experts in giving said reports. Reference is made to said
report which includes an explanatory paragraph that describes the
litigation discussed in Notes E and K to such Consolidated
Financial Statements.
LEGAL MATTERS
Stephen E. Rounds, Denver, Colorado, has acted as special counsel
to USE in connection with this offering.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 3. Incorporation of Documents by References.
Registrant hereby incorporates the documents listed in (a)
through (c) below by reference into this Form S-8 registration
statement. All documents subsequently filed by registrant pursuant
to sections 13(a), 13(d), 14 and 15(d) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), prior to the filing of a
post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference
in the registration statement and to be part thereof from the date
of filing such documents.
(a) Registrant's latest annual report (for fiscal year ended
May 31, 1995), and registrant's proxy statement for annual meeting
in November 1995.
(b) All other reports filed pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered
by the registrant document referred to in (a) above.
(c) The registrant's class of common stock is described in
the S-4 registration statement filed with the Commission on
November 29, 1993 (SEC File No. 33-72280), including any amendment
which may be filed for the purpose of updating such description.
Item 4. Description of Securities.
Not applicable (see Item 3(c) above).
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The Wyoming Business Corporation Act ("BCA"), W.S. 17-16-850
et. seq., provides for indemnification of the registrant's
officers, directors, employees, and agents against liabilities
which they may incur in such capacities. A summarization of
circumstances in which such indemnification may be available
follows, but is qualified by reference to registrant's Articles of
Incorporation and the text of the statute.
In general, any officer, director, employee, or agent may be
indemnified against expenses, fines, settlements, or judgments
arising in connection with a legal proceeding to which such person
is a party as a result of such relationship, if that person's
actions were in good faith, were believed by him or her to in (or
at least not opposed to) registrant's best interests, and in the
case of any criminal proceeding, he or she had no reasonable cause
<PAGE>
to believe his or her conduct was unlawful. Unless such person is
successful upon the merits in such an action, indemnification may
be awarded only after a determination by decision of the board of
directors (by directors not at the time parties to the proceeding)
or by majority shareholder vote (excluding shares held or
controlled by directors who are at the time parties to the
proceeding), or by opinion of special legal counsel.
The circumstances under which indemnification would be made in
connection with an action brought on behalf of the registrant are
generally the same as stated above, except that indemnification is
permitted only for reasonable expenses.
In addition, registrant has statutory authority to purchase
insurance to protect its officers, directors, employees, and agents
against any liabilities asserted against them, or incurred in
connection with their service in such capacities. Further,
registrant may advance or reimburse funds to a director who is a
party to a proceeding, for reasonable expenses incurred in
connection with a proceeding.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
2.1 Agreement and Plan of Share Exchange [5]
3.1 USE Articles of Incorporation [1]
3.1(a) USE Articles of Amendment [1]
3.2 USE Bylaws [3]
4.1(c) 1992 Stock Compensation Plan
for Outside Directors *
4.2 USE 1989 Incentive Stock Option Plan,
as amended through 12/22/95 37
4.3 USE Restricted Stock Bonus Plan,
as amended through 2/94 [6]
10.1 Sale and Lease Back Agreement and
Addendum with Brunton, dated November 2, 1992 [5]
10.2 Stock Sale and Option Agreement with Brunton
(includes Brunton Loans of $211,800 to USE
and $76,760 to Crested), dated April 30, 1993 [5]
10.3 Credit Facility (Brunton loan of $300,000
to USE, convertible to USE common stock)
dated August 3, 1993 [5]
10.6 Employment Agreement with Daniel P. Svilar [1]
10.8 Executive Officer Death Plan [3]
10.11 Memorandum of Agreement - Sweetwater Mill [2]
10.28 Memorandum of GMMV Agreement [3]
10.35 Severance Agreement [1]
10.37 Executive Compensation [1]
10.40 Stock Purchase Agreement, Plateau Resources
and filed Exhibits [4]
<PAGE>
[1] Incorporated by reference from the like-numbered exhibit to
registrant's Form 10-K for fiscal year ended May 31, 1992.
[2] Incorporated by reference from the like-numbered exhibit to
registrant's Form 10-K for fiscal year ended May 31, 1991.
[3] Incorporated by reference from the like-numbered exhibit to
registrant's Form 10-K for fiscal year ended May 31, 1990.
[4] Incorporated by reference from Exhibit A to registrant's Form
8-K, reporting an event of August 11, 1993.
[5] Incorporated by reference from the like-numbered exhibit to
registrant's Form S-4 registration statement filed November 29,
1994 (SEC File No. 33-72280).
Item 9. Undertakings.
The registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(a)(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(a)(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of this offering.
(b) That, for purposes of determining any liability under the
securities Act of 1933,each filing of the registrant's annual
report pursuant to Section 123(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona offering thereof.
(h) Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to
directors, officers, and controlling persons of the registrant, the
registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public
policy as expressed in the Act, and is, therefore, unenforceable.
<PAGE>
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of
the registrant in the successfully defense of any action suit or
proceeding) is asserted by such officer, director, or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this Post Effective Amendment to its
Form S-8 Registration Statement to be signed on its behalf by the
undersigned, duly authorized in the City of Riverton, WY on
July 15, 1996.
U.S. ENERGY CORP.
(Registrant)
Date: July 15, 1996 By: s/ John L. Larsen
__________________________
JOHN L. LARSEN, President
and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement on Form S-8 was signed by the following
persons in the capacities and on the dates stated.
Date: July 15, 1996 By: s/ John L. Larsen
__________________________
JOHN L. LARSEN, President
and Director
Date: July 15, 1996 By: s/ Max T. Evans
__________________________
MAX T. EVANS, Director
Date: July 10, 1996 By: s/ Harold F. Herron
__________________________
HAROLD F. HERRON, Director
Date: July ____, 1996 By: __________________________
DON C. ANDERSON, Director
Date: July ____, 1996 By: __________________________
DAVID W. BRENMAN, Director
Date: July 15, 1996 By: s/ Nick Bebout
__________________________
NICK BEBOUT, Director
Date: July 16, 1996 By: s/ Robert Scott Lorimer
__________________________
ROBERT SCOTT LORIMER,
Principal Financial
Officer and Chief
Accounting Officer
EXHIBIT 4.2
U.S. ENERGY CORP.
1989 STOCK OPTION PLAN
As Amended September 1, 1992, September 3, 1993,
Janaury 6, 1994 and December 22, 1995
1. Purpose. Restrictions on Amount Available Under the
Plan. This 1989 Stock Option Plan (the "Plan") is intended to
encourage stock ownership by employees, consultants and directors
of U.S. Energy Corp. (the "Corporation"), its divisions and
Subsidiary Corporations, so that they may acquire or increase their
proprietary interest in the Corporation, and to encourage such
employees and directors to remain in the employ of the Corporation
and to put forth maximum efforts for the success of the business.
It is further intended that options granted by the Committee
pursuant to Section 6 of this Plan shall constitute "incentive
stock options" ("Incentive Stock Options") within the meaning of
Section 422A of the Internal Revenue Code of 1986 and the
regulations issued thereunder (the "Code"), and options granted by
the Committee pursuant to Section 7 of this Plan shall constitute
"nonqualified stock options" ("Nonqualified Stock Options").
2. Definitions. As used in this Plan, the following words
and phrases shall have the meanings indicated:
(a) "Disability" shall mean an Optionee's inability to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be expected
to last for a continuous period of not less than 12 months.
(b) "Fair Market Value" per share as of a particular
date shall mean the last sale price of the Corporation's Common
Stock as reported on a national securities exchange or on the
NASDAQ National Market System or, if last sale reporting quotation
is not available for the Corporation's Common Stock, the average of
the bid and asked prices of the Corporation's Common Stock as
reported by NASDAQ or in the National Quotation Bureau, Inc.'s
"Pink Sheets" or, if such quotations are unavailable, the value
determined by the Committee (as hereinafter defined) in accordance
with their discretion in making a bona fide, good faith
determination of fair market value.
(c) "Parent Corporation" shall mean any corporation
(other than the employer corporation) in an unbroken chain of
corporations ending with the employer corporation if, at the time
of granting an Option, each of the corporations other than the
employer corporation owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
(d) "Subsidiary Corporation" shall mean any corporation
(other than the employer corporation) in an unbroken chain of
corporations beginning with the employer corporation if, at the
time of granting an Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
3. Administration. The Plan shall be administered by a
committee (the "Committee"), consisting of not less than two
members of the Board of Directors of the Corporation (the "Board").
The members of the Committee, who shall be selected at a duly
convened meeting of the Board of Directors, shall be persons who
have not been granted or awarded equity securities of the
Corporation under the Plan or any other plan of the Employer or its
affiliates, during the year prior to awards of securities under the
Plan by the Committee. It is the intent of this Plan that the
Committee members shall be "disinterested administrators" as that
term is used in Rule 16b-3(c)(2)(i) promulgated by the Securities
and Exchange Commission. The members of the Committee shall have
all powers, subject to compliance with the Plan, to select officers
and directors for participation in the Plan, and to make all
decisions concerning the timing, pricing and amount of a grant or
award under the Plan.
The Committee shall have the authority in its discretion,
subject to and not inconsistent with the express provisions of the
Plan, to administer the Plan and to exercise all the powers and
authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Options; to
determine which Options shall constitute Incentive Stock Options
and which Options shall constitute Nonqualified Stock Options; to
determine the purchase price of the shares of Common Stock covered
by each Option (the "Option Price"); to determine the persons to
whom, and the time or times at which, Options shall be granted; to
determine the number of shares to be covered by each Option; to
interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and
provisions of the Option Agreements (which need not be identical)
entered into in connection with Options granted under the Plan; and
to make all other determinations deemed necessary or advisable for
the administration of the Plan. The Committee may delegate to one
or more of its members or to one or more agents such administrative
duties as it may deem advisable, and the Committee or any person to
whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan.<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
The Board shall fill all vacancies, however caused, in the
Committee. The Board may from time to time appoint additional
members to the Committee, and may at any time remove one or more
Committee members and substitute others. One member of the
Committee shall be selected by the Board as chairman. The
Committee shall hold its meetings at such times and places as it
shall deem advisable. All determinations of the Committee shall be
made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written
consent. The Committee may appoint a secretary and make such rules
and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings.
No member of the Board or Committee shall be liable for any
action taken or determination made in good faith with respect to
the Plan or any Option granted hereunder.
4. Eligibility. Subject to certain limitations hereinafter
set forth, Options may be granted to employees of (including
officers) and consultants to and directors of (whether or not they
are employees) the Corporation or its present or future divisions
and Subsidiary Corporations. In determining the persons to whom
Options shall be granted and the number of shares to be covered by
each Option, the Committee shall take into account the duties of
the respective persons, their present and potential contributions
to the success of the Corporation and such other factors as the
Committee shall deem relevant in connection with accomplishing the
purpose of the Plan. A person to whom an Option has been granted
hereunder is sometimes referred to herein as an "Optionee." An
Optionee shall be eligible to receive more than one grant of an
Option during the term of the Plan, but only on the terms and
subject to the restrictions hereinafter set forth.
5. Stock. The stock subject to Options hereunder shall be
shares of the Corporation's Common Stock, $.01 par value per share
("Common Stock"). Such shares may, in whole or in part, be
authorized but unissued shares or shares that shall have been or
that may be reacquired by the Corporation. The aggregate number of
shares of Common Stock as to which Options may be granted from time
to time under the Plan shall not exceed 925,000. The maximum
number of shares which may be subject to options granted under the
Plan to the officers and directors as a group shall not exceed
275,000 shares of Common Stock. The limitations established by the
preceding sentences shall be subject to adjustment as provided in
Section 8(i) hereof.
<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
In the event that any outstanding Option under the Plan for
any reason expires or is terminated without having been exercised
in full the shares of Common Stock allocable to the unexercised
portion of such Option (unless the Plan shall have been terminated)
shall become available for subsequent grants of options under the
Plan.
6. Incentive Stock Options. Options granted pursuant to
this Section 6 are intended to constitute Incentive Stock Options
and shall be subject to the following special terms and conditions,
in addition to the general terms and conditions specified in
Section 8 hereof. Consultants and directors who are not employees
of the Corporation shall not be entitled to receive Options
pursuant to this Section 6.
The aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of Common Stock
with respect to which Options are exercisable for the first time by
an Optionee during any calendar year may not exceed $100,000.00
Incentive Stock Options granted under this Plan are intended
to satisfy all requirements for incentive stock options under the
Code and, notwithstanding any other provision of this Plan, the
Plan and all Incentive Stock Options granted under it shall be so
construed, and all contrary provisions shall be so limited in scope
and effect and, to the extent they cannot be so limited, they shall
be void.
7. Nonqualified Stock Options. Options granted pursuant to
this Section 7 are intended to constitute Nonqualified Stock
Options and shall be subject only to the general terms and
conditions specified in Section 8 hereof.
8. Terms and Conditions of Options. Each Option granted
pursuant to the Plan shall be evidenced by a written Option
Agreement between the Corporation and the Optionee, which agreement
shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares. Each Option Agreement shall state
the number of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall
specifically identify the portion, if any, of the Option which
constitutes an Incentive Stock Option and the portion, if any,
which constitutes a Nonqualified Stock Option.
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1989 Stock Option Plan
as Amended through 12/22/95
(c) Option Price. Each Option Agreement shall state the
Option Price, which shall be not less than 100% of the Fair Market
Value of the shares of Common Stock of the Corporation on the date
of grant of the Option except that any option granted under the
Plan to a person owning more than ten percent of the total combined
voting power of the Common Stock shall be at a price of 110% of
such fair market value and shall be for a term of no more than five
years, in the case of Incentive Stock Options, and not less than
80% of the Fair Market Value of the shares of Common Stock of the
Corporation on the date of grant of the Option in the case of Non-
Qualified Stock Options. The Option Price shall be subject to
adjustment as provided in Section 8(i) hereof. The date on which
the Committee adopts a resolution expressly granting an Option
shall be considered the day on which such Option is granted.
(d) Method of Exercise and Medium and Time of Payment.
Each exercise of an Option granted hereunder, whether in whole or
in part, shall be by written notice to the Secretary of the
Corporation designating the number of shares as to which the Option
is exercised, and shall be accompanied by payment in full of the
Option Price (in cash, shares or property) for the number of shares
so designated, together with any written statements required by any
applicable securities laws. The Option Price shall be paid in
cash, in shares of Common Stock having a Fair Market Value equal to
such Option Price or in property or in a combination of cash,
shares and property, and may be effected in whole or in part (i)
with monies received from the Corporation at the time of exercise
as a compensatory cash payment, or (ii) with monies borrowed from
the Corporation pursuant to repayment terms and conditions as shall
be determined from time to time by the Committee, in its
discretion, separately with respect to each exercise of Options and
each Optionee; provided, however, that each such method and time
for payment and each such borrowing and terms and conditions of
repayment shall be permitted by and be in compliance with
applicable law. The Board of Directors shall have the sole and
absolute discretion to determine whether or not property other than
cash or Common Stock may be used to purchase the shares of Common
Stock hereunder and, if so, to determine the value of the property
received.
(e) Term and Exercise of Options. Options shall be
exercisable over the exercise period as and at the times the
Committee may determine, as reflected in the Option Agreement;
provided, however, that the Committee shall have the authority to
accelerate the exercisability of any outstanding Option at such
time and under such circumstances as it, in its sole discretion,
<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
deems appropriate. The exercise period shall be determined by the
Committee; provided, however, that such exercise period shall not
exceed ten years from the date of grant of the Option. The
exercise period shall be subject to earlier termination as provided
in Sections 8(f) and 8(g) hereof. An Option may be exercised, as
to any or all full shares of Common Stock as to which the Option
has become exercisable; provided, however, that an Option may not
be exercised at any one time as to fewer than 100 shares (or such
number of shares as to which the Option is then exercisable if such
number of shares is less than 100).
(f) Termination. Except as provided in this Section
8(f) and in Section 8(g) hereof, an Option may not be exercised
unless the Optionee is then an employee or director of or
consultant to the Corporation or a division or Subsidiary
Corporation thereof (or a corporation or a Parent or Subsidiary
Corporation of such corporation issuing or assuming the option in
a transaction to which Section 425(a) of the Code applies), and
unless the Optionee has remained continuously as an employee or
director of or consultant to the Corporation since the date of
grant of the Option. In the event that the Optionee ceases to be
an employee or director of or consultant to the Corporation (other
than by reason of death, Disability or retirement), all Options of
such Optionee that are exercisable at the time of such cessation
may, unless earlier terminated in accordance with their terms, be
exercised within three months after such cessation; provided,
however, that if the employment or consulting relationship of an
Optionee shall terminate, or if a director shall be removed, for
cause, all Options theretofore granted to such Optionee shall, to
the extent not theretofore exercised, terminate forthwith. Nothing
in the Plan or in any Option granted pursuant hereto shall confer
upon an individual any right to continue in the employ of the
Corporation or any of its divisions or Subsidiary Corporations or
interfere in any way with the right of the Corporation or its
shareholders or any such division or Subsidiary Corporation to
terminate such employment or other relationship between the
individual and the Corporation or any of its divisions and
subsidiary corporations.
(g) Death Disability or Retirement of Optionee. If an
Optionee shall die while a director of, or employed by, or a
consultant to, the Corporation or a Subsidiary Corporation thereof,
or within three months after the termination of such Optionee's
employment or directorship or consulting relationship, other than
termination for cause, or if the Optionee's employment or
directorship or consulting relationship, shall terminate by reason
<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
of disability or retirement, all Options theretofore granted to
such Optionee (whether or not otherwise exercisable) may, unless
earlier terminated in accordance with their terms, be exercised by
the Optionee or by the Optionee's estate or by a person who
acquired the right to exercise such Option by bequest or
inheritance or otherwise by reason of the death or Disability of
the Optionee, at any time within one year after the date of death,
Disability or retirement of the Optionee.
(h) Nontransferability. Options granted under the Plan
shall not be transferable other than by will or by the laws of
descent and distribution, and Options may be exercised, during the
lifetime of the Optionee, only by the Optionee or by his guardian
or legal representative.
Any attempted sale, pledge, assignment, hypothecation or
other transfer of an option contrary to the provisions hereof and
the levy of any execution, attachment or similar process upon an
option shall be null and void and without force or effect.
As a condition to the transfer of any shares of Common
Stock issued under this Plan, the Corporation may require an
opinion of counsel, satisfactory to the Corporation, to the effect
that such transfer will not be in violation of the Securities Act
of 1933 or any other applicable securities laws or that such
transfer has been registered under federal and all applicable state
securities laws. Further, the Corporation shall be authorized to
refrain from delivering or transferring shares of Common Stock
issued under this Plan until the Board of Directors determines that
such delivery or transfer will not violate applicable securities
laws and the Optionee has tendered to the Corporation any federal,
state or local tax owed by the Optionee as a result of exercising
the Option, or disposing of any Common Stock, when the Corporation
has a legal liability to satisfy such tax. The Corporation shall
not be liable for damages due to delay in the delivery or issuance
of any stock certificate for any reason whatsoever, including, but
not limited to, a delay caused by listing requirements of any
securities exchange or any registration requirements under the
Securities Act of 1933, the Securities Exchange Act of 1934, or
under any other state or federal law, rule or regulation. The
Corporation is under no obligation to take any action or incur any
expense in order to register or qualify the delivery or transfer of
shares of Common Stock under applicable securities laws or to
perfect any exemption from such registration or qualification.
Furthermore, the Corporation will have no liability to any Optionee
for refusing to deliver or transfer shares of Common Stock if such
refusal is based upon the foregoing provisions of this Paragraph.
<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
(i) Effect of Certain Changes.
(1) If there is any change in the number of shares
of Common Stock through the declaration of stock dividends, or
through recapitalization resulting in stock splits, or combinations
or exchanges of such shares, the number of shares of Common Stock
available for Options, the number of such shares covered by
outstanding Options, and the price per share of such Options, shall
be proportionately adjusted by the Committee to reflect any
increase or decrease in the number of issued shares of Common
Stock; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated.
(2) In the event of the proposed dissolution or
liquidation of the Corporation, in the event of any corporate
separation or division, including, but not limited to, split-up,
split-off or spin-off, or in the event of a merger or consolidation
of the Corporation with another corporation, the Committee may
provide that the holder of each Option then exercisable shall have
the right to exercise such Option (at its then Option Price) solely
for the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such
dissolution, liquidation, or corporate separation or division, or
merger or consolidation by a holder of the number of shares of
Common Stock for which such Option might have been exercised
immediately prior to such dissolution, liquidation, or corporate
separation or division, merger or consolidation; or the Committee
may provide, in the alternative, that each Option granted under the
Plan shall terminate as of a date to be fixed by the Committee;
provided, however, that not less than 30 days' written notice of
the date so fixed shall be given to each Optionee, who shall have
the right, during the period of 30 days preceding such termination,
to exercise the Options as to all or any part of the shares of
Common Stock covered thereby, including shares as to which such
Options would not otherwise be exercisable.
(3) Paragraph (2) of this Section 8(i) shall not
apply to a merger or consolidation in which the Corporation is the
surviving corporation and shares of Common Stock are not converted
into or exchanged for stock, securities of any other corporation,
cash or any other thing of value. Notwithstanding the preceding
sentence, in case of any consolidation or merger of another
corporation into the Corporation in which the Corporation is the
surviving corporation and in which there is a reclassification or
change (including a change to the right to receive cash or other
property) of the shares of Common Stock (other than a change in par
<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in such shares
into two or more classes or series of shares), the Committee may
provide that the holder of each Option then exercisable shall have
the right to exercise such Option solely for the kind and amount of
shares of stock and other securities (including those of any new
direct or indirect parent of the Corporation), property, cash or
any combination thereof receivable upon such reclassification,
change, consolidation or merger by the holder of the number of
shares of Common Stock for which such Option might have been
exercised.
(4) In the event of a change in the Common Stock of
the Corporation as presently constituted, which is limited to a
change of all of its authorized shares with par value into the same
number of shares with a different par value or without par value,
the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.
(5) To the extent that the foregoing adjustments
relate to stock or securities of the Corporation, such adjustments
shall be made by the Committee, whose determination in that respect
shall be final, binding and conclusive, provided that each
Incentive Stock Option granted pursuant to this Plan shall not be
adjusted in a manner that causes such option to fail to continue to
qualify as an Incentive Stock Option within the meaning of Section
422A of the Code.
(6) Except as hereinbefore expressly provided in
this Section 8(i), this Optionee shall have no rights by reason of
any subdivision or consolidation of shares of stock of any class or
the payment of any stock dividend or any other increase or decrease
in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger, or consolidation or spin- off of
assets or stock of another corporation; and any issue by the
Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to the
Option. The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structures or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or part of its
business or assets.
<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
(j) Rights as Shareholder - Non-Distributive Intent.
Neither a person to whom an Option is granted, nor such person's
legal representative, heir, legatee or distributee, shall be deemed
to be the holder of, or to have any rights of a holder with respect
to, any shares subject to such Option, until after the Option is
exercised and the shares are issued to the person exercising such
Options. Upon exercise of an Option at a time when there is no
registration statement in effect under the Securities Act of 1933
relating to the shares issuable upon exercise and available for
delivery of a prospectus meeting the requirements of Section
10(a)(3) of said Act, shares may be issued to the Optionee only if
the Optionee represents and warrants in writing to the Corporation
that the shares purchased are being acquired for investment and not
with a view to the distribution thereof. No shares shall be issued
upon the exercise of an Option unless and until there shall have
been compliance with any then applicable requirements of the
Securities and Exchange Commission, or any other regulatory
agencies having jurisdiction over the Corporation. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distribution or other rights
for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 8(i) hereof.
(k) Other Provisions. The Option Agreements authorized
under the Plan shall contain such other provisions, including,
without limitation, (i) the imposition of restrictions upon the
exercise of an Option, and (ii) in the case of an Incentive Stock
Option, the inclusion of any condition not inconsistent with such
Option qualifying as an Incentive Stock Option, as the Committee
shall deem advisable.
(l) Forfeiture Provisions: All shares of Common Stock
purchased on exercise of all Nonqualified Options granted after the
date of this Plan Amendment (and all shares of Common Stock
purchased on exercise of all Nonqualified Options granted prior to
such date provided that the holder consents), shall be subject to
forfeiture back to the Corporation in the event of termination of
employee, director or consultant status with the Corporation on or
before January 5 of the second calendar year after exercise. For
example, Common Stock purchased on September 1, 1993 by exercise of
a Nonqualified Option, will be subject to forfeiture through
January 5, 1995. Provided, that upon exercise of a Nonqualified
Option at a time when there is a registration statement in effect
under the Securities Act of 1933 relating to the shares issuable
upon exercise, the preceding forfeiture provisions of this
paragraph shall immediately terminate.
<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
9. Agreement by Optionee Regarding Withholding Taxes. If
the Committee shall so require, as a condition of exercise, each
Optionee shall agree that:
(a) No later than the date of exercise of any Option
granted hereunder, the Optionee will pay to the Corporation or make
arrangements satisfactory to the Committee regarding payment of any
federal, state or local taxes of any kind required by law to be
withheld upon the exercise of such Option; and
(b) The Corporation shall, to the extent permitted or
required by law, have the right to deduct federal, state and local
taxes of any kind required by law to be withheld upon the exercise
of such Option from any payment of any kind otherwise due to the
Optionee.
The Corporation shall not be obligated to advise any
Optionee of the existence of any such tax or the amount which the
Corporation will be so required to withhold.
10. Term of Plan. Options may be granted pursuant to the
Plan from time to time within a period of ten years from the date
the Plan is adopted by the Board, or the date the Plan is approved
by the shareholders of the Corporation, whichever is earlier.
11. Amendment and Termination of the Plan. The Board at any
time and from time to time may suspend, terminate, modify or amend
the Plan; provided, however, that any amendment that would
materially increase the aggregate number of shares of Common Stock
as to which Options may be granted under the Plan or materially
increase the benefits accruing to participants under the Plan or
materially modify the requirements as to eligibility for
participation in the Plan shall be subject to the approval of the
holders of a majority of the Common Stock issued and outstanding,
except that any such increase or modification that may result from
adjustments authorized by Section 8(i) hereof shall not require
such approval. Except as provided in Section 8 hereof, no
suspension, termination, modification or amendment of the Plan may
adversely affect any Option previously granted, unless the written
consent of the Optionee is obtained.
12. Approval of Shareholders. The Plan shall take effect
upon its adoption by the Board but shall be subject to the approval
of the holders of a majority of the issued and outstanding shares
of Common Stock of the Corporation, which approval must occur
within 12 months after the date the Plan is adopted by the Board.
<PAGE>
1989 Stock Option Plan
as Amended through 12/22/95
13. Assumption. The terms and conditions of any outstanding
Options granted pursuant to this Plan shall be assumed by, be
binding upon and inure to the benefit of any successor corporation
to the Corporation and shall continue to be governed by, to the
extent applicable, the terms and conditions of this Plan. Such
successor corporation shall not otherwise be obligated to assume
this Plan.
14. Termination of Right of Action. Every right of action
arising out of or in connection with the Plan by or on behalf of
the Corporation or of any Subsidiary, or by any shareholder of the
Corporation or of any Subsidiary against any past, present or
future member of the Board, or against any employee, or by an
employee (past, present or future) against the Corporation or any
Subsidiary, will, irrespective of the place where an action may be
brought and irrespective of the place of residence of any such
shareholder, director or employee, cease and be barred by the
expiration of three years from the date of the act or omission in
respect of which such right of action is alleged to have risen.
15. Tax Litigation. The Corporation shall have the right,
but not the obligation, to contest, at its expense, any tax ruling
or decision, administrative or judicial, on any issue which is
related to the Plan and which the Board believes to be important to
holders of Options issued under the Plan and to conduct any such
contest or any litigation arising therefrom to a final decision.
IN WITNESS WHEREOF, the foregoing is the 1989 Stock Option
Plan of U.S. Energy Corp., as amended at September 1, 1992,
September 3, 1993, January 6, 1994 and December 22, 1995.
U.S. ENERGY CORP.
By: s/ Max T. Evans
_________________________
MAX T. EVANS, Secretary
