[COMPANY LOGO]
U.S. ENERGY CORP.
MINERALS PLAZA, GLEN L. LARSEN BUILDING
877 NORTH 8TH WEST
RIVERTON, WYOMING 82501
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, DECEMBER 8, 2000
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 Offices at 877, North 8th West, Riverton, Wyoming 82501, on Friday,
December 8, 2000 at 11:00 a.m., local time, or at any adjournments thereof (the
"Meeting"), for the purpose of acting upon:
1.The election of two directors to serve until the third succeeding annual
meeting of shareholders, and until their successors have been duly
elected or appointed and qualified;
2.Such other business as may properly come before
such meeting.
Only shareholders of record at the close of business on Wednesday, November
1, 2000 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 mailed and ends at the conclusion of the Meeting.
By Order of the Board of Directors
/s/ Max T. Evans
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 8, 2000
<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 8, 2000
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
8, 2000 (the "Meeting"). It is expected that the Notice of Meeting, Proxy
Statement and Proxy will be mailed to record shareholders on or about November
10, 2000.
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 two management nominees to the Board; and
2. 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.
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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 Wednesday, November 1,
2000 will be entitled to vote at the Meeting. On the record date, the Company
had 9,041,262 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 November 1, 2000,
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 held by
employees and non-employee directors who are not officers is shared by the
Company's Board of Directors. Voting and dispositive powers over forfeitable
shares held by the Company's five executive officers ("Officers Forfeitable
Shares") are shared by the Company's non- employee directors (Messrs. Anderson,
Bebout, Brenman and Fraser). The ESOP Trustees exercise voting powers over
non-allocated ESOP shares and dispositive powers over all ESOP shares. It should
be noted that voting and dispositive powers over certain shares are shared by
one or more of the listed holders. Such securities are reported opposite each
holder having a shared interest therein. See "Certain Other Transactions."
For information on shares held by directors and executive officers see
"Security Ownership of Nominees, Directors and Executive Officers."
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<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
--------------------------------------------------------------------
Voting Rights Dispositive Rights
Name and address ------------------- --------------------- Total Percent
of beneficial owner Sole Shared Sole Shared Beneficial Ownership of Class(1)
------------------- ---- ------ ---- ------ -------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
John L. Larsen(2) 701,118 982,919 662,263 1,465,818 2,217,507 23.7%
201 Hill Street
Riverton, WY 82501
Max T. Evans(3) 165,978 793,726 165,978 1,194,305 1,414,569 15.5%
1410 Smith Road
Riverton, WY 82501
Daniel P. Svilar(4) 238,973 517,359 238,973 517,359 827,182 9.0%
580 S. Indiana Street
Hudson, WY 82515
Michael D. Zwickl(5) 66,839 512,359 66,839 512,359 579,198 6.4%
137 North Beech Street
Casper, WY 82601
Kathleen R. Martin(6) -0- 512,359 -0- 512,359 512,359 5.7%
309 North Broadway
Riverton, WY 82501
Crested Corp. 512,359 -0- 512,359 -0- 512,359 5.7%
877 North 8th West
Riverton, WY 82501
Harold F. Herron(7) 160,255 295,560 146,486 778,459 975,958 10.7%
3425 Riverside Road
Riverton, WY 82501
U.S. Energy Corp. ESOP(8) 155,811 -0- 556,390 -0- 556,390 6.2%
877 North 8th West
Riverton, WY 82501
__________
<FN>
(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. John L. Larsen exercises sole voting powers over 243,663 directly
owned shares, 106,000 shares held in joint tenancy with his wife, 312,600 shares
underlying options and 38,855 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. He exercises shared voting rights over 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 512,359 shares held by Crested Corp. ("Crested"), 125,556 shares
held by Plateau Resources Limited ("Plateau"), 175,000 shares held by Sutter
Gold Mining Company ("SGMC"), 12,612 shares held by Ruby Mining Company ("Ruby")
and 1,581 shares held by Northwest Gold, Inc. ("NWG"). Mr. Larsen shares the
voting rights over such shares with the other directors of those 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 556,390
shares held by the ESOP, 82,320 shares held by employees and a non-employee
director of the Company which are subject to forfeiture ("Forfeitable Shares"),
the shares held by Crested, Plateau, SGMC, Ruby and NWG. The shares listed under
"Total Beneficial Ownership" also include 89,426 shares beneficially held by Mr.
Larsen which are subject to forfeiture. The Company's non-employee directors
exercise shared voting and dispositive powers over such shares. The
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<PAGE>
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) Mr. Evans exercises sole voting and dispositive powers over 5,158
directly owned shares, 37,278 shares held in joint tenancy with his wife, 16,342
shares held in an Individual Retirement Account ("IRA") for his benefit and
107,200 shares underlying options. Shares over which Mr. Evans exercises shared
voting rights consist of the shares held by Crested, Plateau and the unallocated
ESOP shares. He exercises shared dispositive rights over the shares held by
Crested, Plateau and the ESOP. Mr. Evans shares voting and dispositive powers
over the shares held by Crested and Plateau with the remaining directors of
those companies and over the ESOP shares with the other ESOP Trustees. The
shares listed under "Total Beneficial Ownership" also include 54,286 shares
beneficially held by Mr. Evans which are subject to forfeiture. The Company's
non-employee directors exercise shared voting and dispositive powers over such
shares.
(4) Mr. Svilar exercises sole voting and dispositive powers over 50,513
directly owned shares, 12,950 shares held in joint tenancy with his wife, 1,000
shares held as custodian for his minor child under the Wyoming Uniform Transfers
to Minors Act (the "Minor's shares"), 33,510 shares held in an IRA established
for his benefit, and 141,000 shares underlying options. He holds sole
dispositive power over his directly held shares, joint tenancy shares, Minor's
shares and the shares underlying his options. Mr. Svilar exercises shared voting
and dispositive rights over the 512,359 shares held by Crested with the other
directors of Crested and 5,000 shares held by a private corporation of which he
is a director with the other directors of that company. The shares listed under
"Total Beneficial Ownership" also include 70,850 shares beneficially held by Mr.
Svilar which are subject to forfeiture. The Company's non-employee directors
exercise shared voting and dispositive powers over such shares.
(5) Mr. Zwickl exercises sole voting and dispositive powers over 9,770
directly held shares, 3,444 shares held in an IRA established for his benefit
and 53,625 shares held by (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
512,359 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 48,486 directly owned
shares, 12,000 shares held for his minor children under the Wyoming Uniform
Transfers to Minors Act (the "Minor's shares"), 86,000 shares underlying
options, and 13,769 shares held in the ESOP account established for his benefit.
Sole dispositive powers are exercised over the directly held shares, the Minor's
shares and the shares underlying options. Mr. Herron exercises shared voting
rights over 125,556 shares held by Plateau, 12,612 shares held by Ruby, 1,581
shares held by NWG and the 155,811 unallocated ESOP shares. Shared dispositive
rights are exercised over the shares held by Plateau, Ruby, NWG, all ESOP shares
and the 82,320 Forfeitable Shares. Mr. Herron exercises shared dispositive and
voting powers over the shares held by Plateau, Ruby and NWG as a director of
those companies with the other directors of those companies and over the ESOP
shares in his capacity as an ESOP Trustee with the other ESOP Trustees. The
shares listed under "Total Beneficial Ownership" also include 51,013 shares
beneficially held by Mr. Herron which are subject to forfeiture. The Company's
non-employee directors exercise shared voting and dispositive powers over such
shares. The shares shown as beneficially owned by Mr. Herron do not include
2,895 shares owned directly by his wife who exercises the sole voting and
dispositive powers over those shares.
(8) The ESOP holds 556,390 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 an dispositive rights over all ESOP shares.
Plan participants exercise voting rights over allocated shares.
</FN>
</TABLE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Pursuant to the Bylaws, the Company's directors are divided into three
classes, each consisting of persons so far as is practicable. 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 term of directors John L. Larsen and Keith
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G. Larsen will expire at the Meeting and they have been nominated for
re-election. The current directors of the Company are:
Other Meeting at
Name, age and positions with Director which term
designation with the Company since will expire
----------- ----------------- ----- ------------------
John L. Larsen (68) Chairman and CEO 1966 2000
(nominee) (c)(e) Annual Meeting
Keith G. Larsen (41) President 1997 2000
(nominee) (c) Annual Meeting
Harold F. Herron (47) Vice President 1989 2001
(continuing director) (a)(b)(c)(e) Annual Meeting
David W. Brenman (43) (b) 1989 2001
(continuing director) Annual Meeting
Don C. Anderson (73) (a)(d) 1990 2002
(continuing director) Annual Meeting
Nick Bebout (49) (b)(c)(d) 1989 2002
(continuing director) Annual Meeting
H. Russell Fraser (58) (b)(c)(d) 1996 2002
(continuing director) Annual Meeting
(a) Member of the nominating committee.
(b) Member of the compensation 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.
Management recommends that the shareholders vote for
the re-election of Messrs. John L.
Larsen and Keith G. Larsen.
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.
5
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FAMILY RELATIONSHIPS.
HAROLD F. HERRON, a director and Vice-President, is the son-in-law of John
L. Larsen, a principal shareholder, Chairman and CEO. Keith G. Larsen, a
director and President, is a son of John L. Larsen. 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 Corp. for more than the past five years. Mr. Larsen is
also Chairman of the Board and Chief Executive Officer. He is also a director of
the Company's affiliates, Ruby Mining Company ("Ruby") and Northwest Gold, Inc.
("NWG"). Crested, Ruby and NWG 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, and he is a director of Rocky
Mountain Gas, Inc. and Yellow Stone Fuels Corp.
KEITH G. LARSEN has been principally employed by the Company and Crested
for more than the past five years as uranium fuels marketing director. From
November 25, 1997, he has been a director of the Company and its President and
Chief Operating Officer. Mr. K. Larsen is Chief Executive Officer and a director
of Rocky Mountain Gas, Inc.
HAROLD F. HERRON has been the Company's Vice-President since January 1989.
From 1976, Mr. Herron was 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 was its President from 1987 to April 1998, and served as its
Chairman until August 1999. Mr. Herron is a director of Ruby and NWG, which have
registered equity securities under the Exchange Act. He is also an officer and
director of Plateau and Rocky Mountain Gas, Inc. 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.
Mr. Brenman has an L.L.M. degree in taxation from New York University and a J.D.
degree from the University of Denver.
6
<PAGE>
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 a director of the Company since 1996 and a
director of Rocky Mountain Gas, Inc. since 1999. He is currently President and a
director of American Capital Access, Inc., a bond rating company in New York,
New York. Mr. Fraser was 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 PaineWebber, Inc. While a member of the board of
directors at PaineWebber, Mr. Fraser participated in both the corporate and
public finance departments and headed PaineWebber'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 started commercial paper ratings
'A-1' through 'A-3', initiating the plus and minus qualifiers and rating the
first 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.
ADVISORY BOARD
In fiscal 1998, the Board of Directors established an Advisory Board to be
comprised of individuals with experience in the area of business, financial
services, national elected office, and other areas. The members of the Advisory
Board meet to review topics of interest or concern to the Board of Directors,
and report to the Board of Directors the findings and recommendations of the
Advisory Board. The Advisory Board doe not include any directors or officers of
the Company, and none of the findings or recommendations of the Advisory Board
will be binding upon the Company.
The Chairman of the Advisory Board is the Honorable Alan K. Simpson, former
U.S. Senator for Wyoming. Harmon Watt was appointed to the Advisory Committee in
1999.
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<PAGE>
SECURITY OWNERSHIP OF NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of November 1, 2000, the shares of
Common Stock, and the $.001 par value common stock of the Company's 51%-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 held by employees and a non- employee director, is shared by
the Company's Board of Directors. Voting and dispositive powers are shared by
the Company's non-employee directors (Messrs. Anderson, Bebout, Brenman and
Fraser) over forfeitable shares held by the Company's five executive officers.
The ESOP Trustees exercise voting powers over unallocated ESOP shares and
dispositive powers over all ESOP shares. It should be noted that voting and
dispositive powers for certain shares are shared by 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.
<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 2,217,507(2) 23.7% 5,583,067(10) 53.8%
Keith G. Larsen 229,297(3) 2.5% 5,300,297(11) 51.1%
Harold F. Herron 975,958(2) 10.7% 5,424,999(12) 52.3%
Don C. Anderson 420,462(4) 4.6% 5,300,297(11) 51.1%
Nick Bebout 434,913(5) 4.8% 5,300,297(11) 51.1%
David W. Brenman 416,307(6) 4.6% 5,300,297(11) 51.1%
H. Russell Fraser 418,807(6) 4.6% 5,300,297(11) 51.1%
Max T. Evans 1,414,569(2) 15.5% 264,236(13) 2.6%
Daniel P. Svilar 827,182(2) 9.0% 281,850(14) 2.7%
R. Scott Lorimer 231,538(8) 2.5% 15,000(15) *
All officers and
directors as a
group (ten persons) 3,386,243(9) 34.0% 5,946,085(16) 57.3%
<FN>
* Less than one percent.
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(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) Consists of 1,774 directly held shares, 8,000 shares held for the minor
children of Keith G. Larsen under the Wyoming Uniform Transfers to Minors Act
(the "Minor's shares"), 19,703 shares held in an ESOP account established for
his benefit, 117,500 shares underlying options and 82,320 shares subject to
forfeiture. Mr. K. Larsen exercises sole voting powers over his directly held
shares, the ESOP shares, 8,820 shares subject to forfeiture, the Minor's shares
and the shares underlying his options. Sole dispositive powers are exercised
over the directly held shares, Minor's shares and the shares underlying his
options. He shares dispositive powers over the 82,320 held by employees and a
non-employee director of the Company which are subject to forfeiture
("Forfeitable Shares"), with the other directors of the Company.
(4) Consists of 8,679 directly held shares, 3,055 shares held in an IRA
established for Mr. Anderson's benefit, 395,128 shares subject to forfeiture and
12,500 shares underlying options. Mr. Anderson exercises sole voting and
dispositive power over the directly held shares, IRA shares and the shares
underlying his options. He exercises sole voting power over 21,000 shares he
holds which are subject to forfeiture. Mr. Anderson exercises shared dispositive
powers over the 82,320 Forfeitable Shares with the other directors of the
Company. As a non-employee director, Mr. Anderson exercises shared voting and
dispositive rights over 312,808 held by executive officers which are subject to
forfeiture ("Officers' Forfeitable Shares"), with the other non-employee
directors.
(5) Consists of 19,735 shares held directly, 50 shares held in joint
tenancy with his wife, 12,500 shares underlying options and 395,128 shares
subject to forfeiture. Mr. Bebout exercises sole voting and dispositive powers
over the directly held shares, the joint tenancy shares and the shares
underlying his options. He exercises shared dispositive powers over the 82,320
Forfeitable Shares with the other directors of the Company and as a non-employee
director, Mr. Bebout exercises shared voting and dispositive rights over the
312,808 Officers' Forfeitable Shares, with the other non-employee directors.
(6) Consists of 8,679 shares held directly, 12,500 shares underlying
options and 395,128 shares subject to forfeiture. Mr. Brenman exercises sole
voting and dispositive powers over the directly held shares and the shares
underlying his options. Mr. Brenman exercises shared dispositive powers over the
82,320 Forfeitable Shares with the other directors of the Company. As a non-
employee director, Mr. Brenman exercises shared voting and dispositive rights
over the 312,808 Officers' Forfeitable Shares, with the other non-employee
directors.
(7) Consists of 7,179 directly held shares, 4,000 shares held in an IRA for
Mr. Fraser's benefit, 12,500 shares underlying options and 395,128 shares
subject to forfeiture. Mr. Fraser exercises sole voting and dispositive rights
over the directly held shares, the IRA shares and the shares underlying his
options. Mr. Fraser exercises shared dispositive powers over the 82,320
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Forfeitable Shares with the other directors of the Company. As a non-employee
director, Mr. Fraser exercises shared voting and dispositive rights over the
312,808 Officers' Forfeitable Shares, with the other non-employee directors.
(8) Consists of 50,385 directly held shares and 104,700 shares underlying
options over which Mr. Lorimer exercises sole voting and dispositive rights, and
29,220 shares held in the ESOP account established for his benefit over which he
exercises sole voting rights. The shares listed under "Total Beneficial
Ownership" also include 47,233 shares beneficially held by Mr. Lorimer which are
subject to forfeiture. The Company's non-employee directors exercise shared
voting and dispositive powers over such shares.
(9) Consists of 1,729,903 shares over which the group members exercise sole
voting rights, including 919,000 shares underlying options and 101,547 shares
allocated to ESOP accounts established for the benefit of group members. The
listed shares include 1,598,536 shares, including 919,000 shares underlying
options, over which group members exercise sole dispositive rights. Shared
voting and dispositive rights are exercised with respect to 1,287,897 and
1,786,126 shares (including 395,128 shares subject to forfeiture), respectively.
(10) Consists of 5,300,297 Crested shares held by the Company, 100,000
shares held by SGMC, 60,000 shares held by Plateau, 53,885 shares held by Ruby,
and 3,885 shares held by NWG with respect to which shared voting and dispositive
powers are exercised as a director with the other directors of those Companies,
and 65,000 forfeitable shares held by employees, over which Mr. J. Larsen
exercises shared dispositive powers with the remaining Crested directors.
(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) Consists of 6,932 directly held shares over which Mr. Herron exercises
sole voting and investment powers, and the Crested shares held by the Company,
Ruby, NWG and Plateau, with respect to which shared voting and dispositive
powers are exercised as a USE, Ruby, NWG and Plateau director with the other
directors of those companies.
(13) Consists of 139,236 directly held shares over which Mr. Evans
exercises sole voting and dispositive rights, 60,000 shares held by Plateau,
with respect to which shared voting and dispositive powers are exercised as a
director with the other directors of Plateau, and 65,000 forfeitable shares held
by employees, over which Mr. Evans exercises shared dispositive powers with the
remaining Crested directors.
(14) Consists of 216,850 directly held shares, over which Mr. Svilar
exercises sole voting and dispositive powers and 65,000 forfeitable shares held
by employees, over which Mr. Svilar exercises shared dispositive powers with the
remaining Crested directors.
(15) Consists of 15,000 shares which are subject to forfeiture. Mr. Lorimer
exercises sole voting power over such shares, while the Crested directors share
the dispositive powers over the shares.
10
<PAGE>
(16) Consists of 378,018 shares over which the group members exercise sole
voting rights, including 15,000 shares subject to forfeiture. The listed shares
include 363,018 shares over which group members exercise sole dispositive
rights. Shared voting and dispositive rights are exercised with respect to
5,518,067 and 5,583,067 shares (including 65,000 shares subject to forfeiture),
respectively.
</FN>
</TABLE>
Each director beneficially holds the 3,664,027, 7,562,219 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 91.7%, 96.8% 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. Mr.
J. Larsen also holds 1,000 shares of NWG over which he exercises sole voting and
dispositive powers. Harold F. Herron beneficially holds 3,664,047, 7,567,794 and
265,000,000 shares of the common stock of Ruby, NWG, and FNG, respectively,
representing 91.7%, 96.9% 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 3,664,047,
7,809,794 and 284,500,000 shares of the stock of Ruby, NWG, and FNG,
representing 91.7%, 96.9% 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, Messrs. J.
Larsen, K. Larsen, Herron, Evans and Lorimer each had one late filing, and Mr.
Svilar 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 obligations, failed to file such reports on a timely basis
during fiscal 2000.
INFORMATION CONCERNING EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided pursuant to Item 401 of Reg. S-K,
regarding the executive officers of the Company who are not also directors.
INFORMATION CONCERNING EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided pursuant to Item 401 of Reg. S-K,
regarding the executive officers of the Company who are not also directors.
MAX T. EVANS, age 75, has been Secretary for USE and President of Crested
for more than the past five years. Mr. Evans had been a director of USE for more
than the past five years, prior to April 17, 1997. He is also an officer and
director of Plateau. He serves at the will of each board
11
<PAGE>
of directors. There are no understandings between Mr. Evans and any other person
pursuant to which he was named as an officer. He has no family relationships
with any of the other executive officers or directors of USE or Crested. During
the past five years, Mr. Evans has not been involved in any Reg. S-K Item 401(d)
proceeding.
DANIEL P. SVILAR, age 71, 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, and Assistant Secretary of USE. 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-K Item 401(f) proceeding.
ROBERT SCOTT LORIMER, age 49, has been Controller and Chief Accounting
Officer for both USE and Crested for more than the past five years. Mr. Lorimer
also has been Chief Financial Officer for both these companies since May 25,
1991, their Treasurer since December 14, 1990, and Vice President Finance since
April 1998. He serves at the will of each board of directors. There are no
understandings between Mr. Lorimer and any other person, pursuant to which he
was named as 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-K Item 401(f) 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 $100,000 cash in any of the three fiscal years
ended May 31, 2000. The table includes compensation paid such persons by Crested
for 1998, 1999 and 2000 for such persons' services to such subsidiaries.
12
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
---------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs(#) ($) ($)(1)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John L. Larsen 2000 $159,500 $ -0- $22,600 $ 60,000(2) -0- -- $15,879
CEO and 1999 166,700 85,000(3) -- 80,000(3) -0- -- 16,000
Chairman 1998 190,700 732,000 -- 131,200(5) -0- -- 16,000
Keith G. Larsen 2000 $ 97,800 $ -0- $11,700 $ -- -0- -- $11,433
President 1999 105,500 46,000(3) -- -- -0- -- 15,100
and COO 1998 120,200 -0- -- -- -0- -- 12,000
Daniel P. Svilar 2000 $150,900 $ -0- $ 7,800 $ 45,000(2) -0- -- $13,623
General Counsel 1999 132,700 459,400(3) -- 60,000(4) -0- -- 16,000
and Assistant 1998 134,300 -0- -- 98,400(5) -0- -- 13,400
Secretary
Harold F. Herron 2000 $128,400 $ -0- $ 3,600 $ 30,000(2) -0- -- $13,782
Vice President 1999 112,800 -0- -- 40,000(4) -0- -- 11,300
1998 36,400 -0- -- 65,600(5) -0- -- 3,600
R. Scott Lorimer 2000 $144,900 $ -0- $10,100 $ 30,000(2) -0- -- $15,990
Treasurer 1999 134,100 459,000(3) -- 40,000(4) -0- -- 16,000
and CFO 1998 132,300 -0- -- 65,600(5) -0- -- 13,200
_____
<FN>
(1) Dollar values for ESOP contributions and 401K matching contributions.
(2) Includes shares issued under the 1996 stock award program multiplied by
$3.00 the closing bid price on the issue date. These shares are subject to
forfeiture on termination of employment, except for retirement, death or
disability.
(3) Includes cash bonuses of $50,000, $25,000, $125,000 and $125,000 to
Messrs. John L. Larsen, Keith G. Larsen, Daniel P. Svilar and R. Scott Lorimer,
respectively. Also includes stock bonuses of 50,000 restricted shares of the
Company's Common Stock each to Mr. Svilar and Mr. Lorimer, at $2.94 per share,
the closing bid price of at the time of receipt. These bonuses were issued as
compensation for the extraordinary amount of work beyond the normal work load of
these individuals in the litigation with Nukem, Inc. The Board of Directors
authorized the payment of taxes on these bonuses.
(4) Includes shares issued under the 1996 stock award program multiplied by
$4.00, the closing bid price on the issue date. These shares are subject to
forfeiture on termination of employment, except for retirement, death or
disability.
13
<PAGE>
(5) Includes shares issued under the 1996 Stock Award Program multiplied by
$6.56, the closing bid price on the issue date. These shares are subject to
forfeiture on termination of employment, except for retirement, death or
disability.
</FN>
</TABLE>
EXECUTIVE COMPENSATION PLANS AND EMPLOYMENT AGREEMENTS
The Company has adopted a plan to pay the estates of Messrs. J. 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 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. John L. Larsen, Evans, Svilar and Lorimer, providing for
payment to such person upon termination of his employment with the Company,
occurring within three years after a change in control of the Company, of an
amount equal to (i) severance pay in an amount equal to three times the average
annual compensation over the prior five taxable years ending before change in
control, (ii) legal fees and expenses incurred by such persons as a result of
termination, and (iii) the difference between market value of securities
issuable on exercise of vested options to purchase securities in USE, and the
options' exercise price. These Agreements also provide that for the three years
following termination, the terminated individual will not compete with USE in
most of the western United States in regards to exploration and development
activities for uranium, molybdenum, silver or gold. For such non-compete
covenant, such person will be paid monthly over a three year period an agreed
amount for the value of such covenants. These Agreements are intended to benefit
the Company's shareholders, by enabling such persons to negotiate with a hostile
takeover offeror and assist the Board concerning the fairness of a takeover,
without the distraction of possible tenure insecurity following a change in
control. As of this Proxy Statement date, the Company is unaware of any proposed
hostile takeover.
The Company and Crested provide all of their employees with certain forms
of insurance coverage, including life and health insurance. The health insurance
plan does not discriminate in favor of executive employees; life insurance of
$50,000 is provided to each member of upper management (which includes all
persons in the compensation table), $25,000 of such coverage is provided to
middle-management employees, and $15,000 of such coverage is provided to other
employees.
14
<PAGE>
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. 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. J. 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's Common Stock.
The Company made a contribution of 123,802 shares to the ESOP for fiscal
2000, all of which were contributed under the money purchase pension plan. At
the time the shares were contributed, the market price was $3.00 per share, for
a total contribution with a market value of $371,406 (which has been funded by
the Company). Crested and the Company are each responsible for one-half of that
amount (i.e., $185,703) and Crested currently owes its one-half to the Company.
25,803 of the shares were allocated to the ESOP accounts of the executive
officers. Additionally, 1,133 shares were allocated to the ESOP accounts of the
executive officers from ESOP shares forfeited by terminated employees who were
not fully vested.
Employee interests in the ESOP are earned pursuant to a seven year vesting
schedule; after three years of service, the employee is vested to 20% of the
ESOP account, and thereafter at 20% per year. Any portion which is not vested is
forfeited upon termination of employment, other than by retirement, disability,
or death.
The maximum loan outstanding during fiscal 2000 under a loan arrangement
between the Company and the ESOP was $1,014,300 at May 31, 2000 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 $168,574.84 through the
contribution of shares by the ESOP to the ESOP in 1996. There was no similar
reduction, however, for fiscal 1997, 1998, 1999 or 2000.
STOCK OPTION PLAN. The Company has an incentive stock option plan ("ISOP"),
reserving an aggregate of 2,750,000 shares of Common Stock for issuance upon
exercise of options granted thereunder. Awards under the plan are made by a
committee of or more persons selected by the Board (presently Messrs. Herron,
Bebout, Brenman and Fraser) and ratified by the Board of Directors.
Options expire no later than ten years from the date of grant, and upon
termination of employment for cause. Subject to the ten year maximum period,
upon termination, unless terminated for cause, options are exercisable for three
months or in the case of retirement, disability or death, for one year.
15
<PAGE>
For information about options, please see Note J to the USE consolidated
Financial Statements for fiscal year ended May 31, 2000. No options were
exercised or granted in fiscal 2000. In fiscal 1998, options to purchase 5,000
shares were exercised.
The following table shows unexercised options, how much thereof were
exercisable, and the dollar values for in-the-money options, at May 31, 2000.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares FY-End (#) FY-End($)
Acquired Value Exercisable/ Exercisable
Name on Exercise (#) Realized($) Unexercisable Unexercisable
---- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
John L. Larsen, -0- -0- 100,000 $ 93,800 (1)
CEO exercisable exercisable and
unexercised
-0- -0- 100,100 $ 3,804 (2)
exercisable exercisable and
unexercised
-0- -0- 77,118 $ 72,337 (3)
exercisable exercisable and
unexercised
-0- -0- 34,782 $ 2,191 (4)
exercisable exercisable and
unexercised
Keith G. Larsen -0- -0- 10,000 $ -0- (5)
President exercisable exercisable and
unexercised
-0- -0- 52,718 $ 49,449 (3)
exercisable exercisable and
unexercised
-0- -0- 34,782 $ 2,191 (4)
exercisable exercisable and
unexercised
<CAPTION>
16
<PAGE>
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
Options/SARs at Options/SARs at
Shares FY-End (#) FY-End($)
Acquired Value Exercisable/ Exercisable
Name on Exercise (#) Realized($) Unexercisable Unexercisable
---- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Max T. Evans, -0- -0- 57,200 $ 2,174 (2)
Secretary exercisable exercisable and
unexercised
-0- -0- 15,218 $ 14,274 (3)
exercisable exercisable and
unexercised
-0- -0- 34,782 $ 2,191 (4)
exercisable exercisable and
unexercised
Harold F. Herron, -0- -0- 11,000 $ 418 (2)
Vice President exercisable exercisable and
unexercised
-0- -0- 40,218 $ 37,724 (3)
exercisable exercisable and
unexercised
-0- -0- 34,782 $ 2,191 (4)
exercisable exercisable and
unexercised
<CAPTION>
17
<PAGE>
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
Options/SARs at Options/SARs at
Shares FY-End (#) FY-End($)
Acquired Value Exercisable/ Exercisable
Name on Exercise (#) Realized($) Unexercisable Unexercisable
---- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Daniel P. Svilar -0- -0- 66,000 $ 2,508 (2)
Assistant Secretary exercisable exercisable and
unexercised
-0- -0- 40,218 $ 37,724 (3)
exercisable exercisable and
unexercised
-0- -0- 34,782 $ 2,191 (4)
exercisable exercisable and
unexercised
R. Scott Lorimer -0- -0- 29,700 $ 1,129 (2)
Treasurer exercisable exercisable and
unexercised
-0- -0- 40,218 $ 37,724 (3)
exercisable exercisable and
unexercised
-0- -0- 34,782 $ 2,191 (4)
exercisable exercisable and
unexercised
<FN>
(1)Equal to $2.938, the closing bid on last trading day in FY 2000, less $2.00
per share option exercise price, multiplied by all shares exercisable.
(2)Equal to $2.938, the closing bid on last trading day in FY 2000, less $2.90
per share option exercise price, multiplied by all shares exercisable.
(3)Equal to $2.938, the closing bid on last trading day in FY 2000, less $2.00
per share option exercise price, multiplied by all shares exercisable.
(4)Equal to $2.938, the closing bid on last trading day in FY 2000, less $2.875
per share option exercise price, multiplied by all shares exercisable.
18
<PAGE>
(5)Equal to $2.938, the closing bid on last trading day in FY 2000, less $4.00
per share option exercise price, multiplied by all shares exercisable.
</FN>
</TABLE>
1996 STOCK AWARD PROGRAM. The Company has an annual incentive compensation
arrangement for the issuance of up to 67,000 shares of Common Stock each year
(from 1997 through 2002) to executive officers of the Company, in amounts
determined each year based on earnings of the Company for the prior fiscal.
Shares are issued annually, but each officer to whom shares are to be
issued must be employed by the Company as of the issue date of the grant year,
and the Company must have been profitable in the preceding fiscal year. 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 year, the unissued balance of the
67,000 share maximum will be available for issue in subsequent years (through
2007). One-half of the compensation expense under the Program is the
responsibility of Crested. The Board of Directors determines the date each year
when shares are to be issued.
Each allocation of shares is issued in the name of the officer, and will be
earned out (vested) over 5 years, at the rate of 20% as of May 31 of each year
following the date of issue. However, none of the vested shares shall become
available to or come under the control of the officer until termination of
employment by retirement, death or disability. Upon termination, the share
certificates will be released to the officer; until termination, the
certificates are held by the Treasurer of the Company. Voting rights are
exercised over the shares by the non-employee directors of the Company;
dividends or other distributions with respect to the shares will be held by the
Treasurer for the benefit of the officers.
The number of shares to be awarded each year out of such 67,000 shares
aggregate limit is determined by the Compensation Committee, based on criteria
including the Company's earnings per share for the prior fiscal year. Other
factors may be taken into consideration by the Compensation Committee. The total
shares issued are divided among the officers based on the following percentages:
John L. Larsen 29.85%, Daniel P. Svilar 22.39%, Max T. Evans 17.91%, Harold F.
Herron 14.93% and R. Scott Lorimer 14.93%. For fiscal 1998, the Compensation
Committee awarded 67,000 shares to the officers. The award was based on the
revenues of the Company ($11,558,500) in fiscal 1998, and the finding by the
Compensation Committee that but for the $1,500,000 expense which resulted from a
writedown of the investment in the gold property in California, the Company
would have reported a $515,800 profit for fiscal 1998. For fiscal 1999, the
Compensation Committee awarded 67,000 shares to officers. The award was based on
the revenues of the Company, which were $10,853,600 in fiscal 1999, and the
finding by the Compensation Committee that the major reason for the loss
incurred during fiscal 1999 in the amount of $11,648,500, was as a result of the
impairments taken on long term assets. These impairments totaled $13,224,400.
For fiscal 2000, the Compensation Committee awarded 67,000 shares to officers.
The award was based on the revenues of the Company, which were $7,773,800 in
fiscal 2000, and the finding by the Compensation Committee that the major reason
for the loss incurred during fiscal 2000 in the amount of $10,662,600 was due
to: continued holding costs for the uranium properties; failure to receive a
final settlement amount in the Nukem litigation (still in the appeals process;
$6 million was received in fiscal 1999); non-cash compensation expense of
19
<PAGE>
$3.1 million for stock in Rocky Mountain Gas, Inc. sold to Company employees and
costs for the coalbed methane gas business.
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.
Non-employee directors are compensated for services with $400 per month,
payable each year by the issue of shares of USE Common Stock based on the
closing stock market price as of January 15. In 2000, 6,020 shares were issued
to non-employee directors for service in 1999.
In fiscal 1990, 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 arrangements would benefit the Company. At May 31, 2000, Mr.
Brenman owed the Company $56,300 including interest (due December 31, 2000) of
which $25,000 was loaned. The loan was provided as partial consideration for Mr.
Brenman's representation of the Company to the financial community in New York
City in the early 1990s.
COMMITTEES AND MEETING ATTENDANCE
During the fiscal year ended May 31, 2000, there were four Board meetings
and one Executive Committee meeting. The Executive Committee acts in place of
the Board between meetings of the Board. Except for Mr. Brenman, 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.
An Audit Committee has also been established by the Board. The Audit
Committee held one meeting in fiscal 2000. Members of the Audit Committee meet
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
members of the Audit Committee are Nick Bebout, Don Anderson and H. Russell
Fraser, each of whom is an independent director as defined under the NASD's
listing standards.
20
<PAGE>
The Compensation Committee reviews, approves and makes recommendations on
the Company's compensation policies, practices and procedures.
During the fiscal year ended May 31, 2000, the members of the Compensation
Committee had one meeting by unanimous written consent and also discussed
compensation matters on an individual basis.
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 2001 Annual Meeting must provide the nominee's name
to the Nominating Committee not later than June 30, 2001, together with a
completed questionnaire, the form of which will be supplied by the Company on
request.
CERTAIN OTHER TRANSACTIONS
TRANSACTIONS WITH ROCKY MOUNTAIN GAS, INC. ("RMG") The Company and Crested
organized RMG in fiscal 2000 to acquire and develop coalbed methane ("CBM")
properties in Wyoming and Montana. At May 31, 2000, RMG had raised $3.6 million
for start-up operations and to acquire substantial CBM leases (non-producing) in
the Powder River Basin and other coal basins in Wyoming and Montana.
USE and Crested own 82% of the voting stock of RMG, at a price of $0.005
per share; another 8.2% is owned by 29 employees, officers or directors of the
Company or Crested which they bought at $0.01 per share. USE and one of its
affiliates bought another 3.9% at $3.00 per share. The shares bought by the
individuals are held by the treasurer of RMG and are forfeitable until the
shareholder retires, is disabled or dies.
TRANSACTIONS WITH YELLOW STONE FUELS CORP. Yellow Stone Fuels Corp.,
hereafter ("YSFC") was organized on February 17, 1997 in Ontario, Canada. As of
February 17, 1997, YSFC acquired all the outstanding shares of Common Stock of
Yellow Stone Fuels, Inc. (a Wyoming corporation which was organized on June 3,
1996) in exchange for YSFC issuing the same number of shares of YSFC Stock to
the former shareholders of Yellow Stone Fuels, Inc. ("YFI"). YSFC and its
wholly-owned subsidiary Yellow Stone Fuels, Inc. will hereafter be referred to
collectively as YSFC.
YSFC has ceased operations and abandoned all of its claims, due to the
depressed market for uranium oxide. YSFC's equipment which had been stored at
the GMMV's Sweetwater Uranium Mill, has been conveyed to Kennecott as part of
the settlement agreement with Kennecott.
REGISTERED EXCHANGE OFFER WITH YSFC. In fiscal 1998, YSFC sold 1,219,000
shares of Common Stock to 94 investors in a private placement, at $2.00 per
share; net proceeds to YSFC were $2,041,060 after payment of $316,940 in
commissions to the placement agent (AFFC, Denver, Colorado) and $80,000 in legal
and accounting expenses. Most of these investors were "accredited" investors.
The securities were sold pursuant to Rule 506 of Regulation D under the
Securities Act
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of 1933, and are restricted from resale under Rule 144. In connection with the
private placement, in September 1997, USE entered into an Exchange Rights
Agreement with YSFC and AFFC.
Pursuant to the Exchange Rights Agreement between USE, YSFC and AFFC, USE
made a registered Exchange Offer to each of the YSFC shareholders who invested
in YSFC through AFFC in late 1997 and early 1998. The Exchange Offer also was
made by USE to each holder of the YSFC Warrants, who exchanged some or all of
the YSFC Warrants for USE Warrants (see below). Shareholders of YSFC who did not
invest in YSFC through AFFC were not eligible to participate in the Exchange
Offer.
The Exchange Rights Agreement was intended to provide liquidity to the YSFC
shareholders (and the holders of the YSFC Warrants), by allowing them the
opportunity to exchange their securities in a private company (YSFC) for
securities in a NASDAQ NMS public company (USE).
The Exchange Rights Agreement was negotiated at arms' length between YSFC, USE
(which had founded and organized YSFC), and AFFC (as YSFC's placement agent in
the private offering of YSFC restricted shares). Under the Exchange Rights
Agreement, if YSFC were not listed on NASDAQ NMS by the eighteenth month
anniversary of the Exchange Rights Agreement, USE would be required at that time
to make an offer to the YSFC shareholders to exchange free trading shares of USE
Common Stock for their restricted shares of YSFC. An initial listing on NASDAQ
NMS would require YSFC to meet several conditions, including having minimum net
tangible assets of $6,000,000 and at least 400 shareholders. YSFC did not meet
these conditions to listing. Therefore, USE filed a registration statement on
Form S-4 (declared effective in March 1999).
The Exchange Ratio for shares was based upon (x) the original investment
amount paid by the YSFC shareholder plus 10 percent simple annual interest,
divided by (y) the average of the closing NASDAQ NMS bid prices for a share of
USE Common Stock for the five trading days before USE received the Notice of
Election to Exchange from each YSFC shareholder.
As of May 31, 2000, the Exchange Offer had been completed. USE issued
734,919 shares in exchange for 1,219,000 YSFC shares, and USE Warrants to
purchase 67,025 USE shares (at $3.64 per share) in exchange for all the YSFC
Warrants. YSFC has 11,851,500 shares of Common Stock issued and outstanding as
of August 26, 2000, including 4,359,000 shares (36%) issued to USE and Crested.
TRANSACTIONS WITH DIRECTORS. Two of the Company's directors, Messrs. John
L. Larsen and Herron, and one of Crested's directors, Max T. Evans, are trustees
of the ESOP. Mr. J. Larsen is also a director of Crested. 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.
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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, had been living in and
caring for a house owned by the Company. 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. The maturity date
for this note has been extended to December 31, 2001. This note is secured by
30,000 shares of USE common stock owned by Mr. Herron. At May 31, 2000 he owed
$175,100 on this note.
OTHER INFORMATION. The Company has adopted a stock repurchase plan under
which it may purchase up to 500,000 shares of its Common Stock at market prices
from time to time. The shares purchased would be retired and canceled. The board
of Directors believes that the repurchase plan is in the best interest of all
shareholders while the stock is trading at low prices relative to the book value
per share. During fiscal 1999, the Company repurchased 45,700 shares of its
Common Stock. No shares were repurchased during fiscal 2000.
Three of John L. Larsen's sons, three sons-in-law and one grandson are
employed by the Company or subsidiaries (as President, President of YSFC, Vice
President, chief pilot, landman, manager of shareholder relations and a staff
employee). Mr. J. Larsen's son-in-law Harold F. Herron is an officer and
director of the Company, and former Chairman of Brunton. Collectively, the seven
individuals and John L. Larsen received $828,300 in total gross cash
compensation for services in fiscal 2000. See "Executive Compensation Plans and
Employment Agreements."
The Company and Crested provide management and administrative services for
affiliates under the terms of various management agreements. Revenues from
services by the Company from unconsolidated affiliates were $277,300 in fiscal
2000 and $584,400 in fiscal 1999. The Company provides all employee services
required by Crested, which is obligated to the Company for its share of the
costs for providing such employees.
BEN R. HOWE AGREEMENT. In August 1999, USE retained Ben R. Howe ("Howe") to
work as a consultant in providing corporate relations and analysis services to
USE, and to introduce USE to the investment community segment which seeks long
term value opportunities. The agreement with Howe expires December 31, 2002 but
either party may terminate the agreement earlier for any reason. USE has granted
Howe an option to buy up to 250,000 shares of restricted Common Stock of USE at
$4.50 per share; the option will vest (be exercisable) at the rate of 50,000
shares for every 500,000 shares of USE Common Stock which is purchased in the
open market by broker-dealer firms introduced to USE through Howe's efforts. If
the agreement is terminated, the unvested portion of Howe's option will
terminate. Shares which he purchases on exercise of vested options will have to
be registered by USE at its expense for resale to the public by Howe under the
1933 Act, by the earlier of three years from exercise or December 31, 2005. In
addition, if USE raises debt
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and/or equity financing for USE or related companies through introductions made
by Howe, USE will pay him a finder's fee based on a sliding scale of 5% of net
proceeds up to $1 million, down to 1% for all net proceeds raised which exceed
$4 million. No payments have been made to Mr. Howe to date.
CERTAIN INDEBTEDNESS
TRANSACTIONS INVOLVING USECC. The Company and Crested conduct most 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 a note receivable
of $8,377,700 from Crested at May 31, 2000 ($7,054,000 at May 31, 1999).
LOANS TO DIRECTORS. As of May 31, 2000 two of USE's directors owed the
Company as follows (each loan is secured with shares of Common Stock of the
Company owned by the individual): Harold F. Herron $11,000 (1,000 shares); and
David W. Brenman $25,000 (4,000 shares). Max T. Evans, a director of Crested,
owes USECC $26,100 (secured by 7,500 shares of USE). For information on Mr.
Brenman's loan see "Directors' Fees and Other Compensation" above. The
outstanding amounts on the remaining loans represent various loans made to the
individuals over a period of several years. The maturity dates for Mr. Herron's
and Mr. Evans' loans have been extended to December 31, 2001, and bear interest
at 10% per year. For information on an additional 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.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP has audited the Company's financial statements for the
fiscal year ended May 31, 2000. Such firm has audited the Company's financial
statements since 1990. A representative of Arthur Andersen LLP will be present
at the meeting in person or by telephone to respond to appropriate questions,
and will be provided the opportunity to make a statement at the Meeting. There
have been no disagreements between the Company and Arthur Andersen LLP
concerning any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which were not resolved to the
satisfaction of Arthur Andersen LLP.
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ANNUAL REPORT TO SHAREHOLDERS
A copy of the 2000 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 December
2001. Shareholder proposals for nominees to the Board of Directors and other
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 30, 2001.
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 8, 2000
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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 Offices at 877
North 8th West, Riverton, Wyoming 82501 on Friday, December 8, 2000 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
John L. Larsen Keith G. Larsen
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, PLEASE DRAW A LINE THROUGH THE
NAME OF THAT NOMINEE.
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
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PROXY U.S. ENERGY CORP. PROXY
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.
-----------------------------------------
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