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