UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant X Filed by a party other than the Registrant
----- -----
Check the appropriate box:
Preliminary Proxy Statement
-----
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
----- RULE 14A-6(E)(2))
X Definitive Proxy Statement
-----
Definitive Additional Materials
-----
Soliciting Material Pursuant to ss.240.14a-12
-----
U.S. ENERGY CORP.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
-----
Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
-----
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
U.S. ENERGY CORP.
MINERALS PLAZA, GLEN L. LARSEN BUILDING
877 NORTH 8TH WEST
RIVERTON, WYOMING 82501
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-------------------------
We are pleased to give you notice of our Annual Meeting of Shareholders:
Date: Friday, June 6, 2003
Time: 10:00 AM MST
Place: 877 North 8th West, Riverton, Wyoming 82501
Purpose: - Elect two directors to serve until the third succeeding
annual meeting of shareholders, and until their successors
have been duly elected or appointed and qualified;
- Ratify appointment of the independent auditors; and
- Transact any other business that may properly come before
the meeting.
Record Date: May 2, 2003. The stock transfer books will not be closed.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly in
the enclosed envelope. We appreciate your cooperation.
By Order of the Board of Directors
Dated: May 2, 2003 Daniel P. Svilar, Secretary
INFORMATION ABOUT ATTENDING THE ANNUAL MEETING
Only shareholders of record on May 2, 2003 may vote at the meeting. Only
shareholders of record, and beneficial owners on the record date, may attend the
meeting. If you plan to attend the meeting, please bring personal identification
and proof of ownership if your shares are held in "street name" (i.e., your
shares are held of record by brokers, banks or other institutions). Proof of
ownership means a letter or statement from your broker showing your ownership of
shares on the record date.
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.
U.S. ENERGY CORP.
MINERALS PLAZA, GLEN L. LARSEN BUILDING
877 NORTH 8TH WEST
RIVERTON, WYOMING 82501
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
ON FRIDAY, JUNE 6, 2003
The Annual Report to Shareholders, including audited financial statements
for the new fiscal year ended December 31, 2002, is mailed to shareholders
together with these proxy materials on or about May 9, 2003. The proxy materials
consist of this proxy statement and notice of annual meeting, the Annual Report,
the Audit Committee Certification and the Audit Committee Charter.
This proxy statement is provided in connection with a solicitation of
proxies by the board of directors of U.S. Energy Corp. for use at the annual
meeting of shareholders (the "meeting") to be held on Friday, June 6, 2003 and
at any adjournments of the meeting.
The last annual meeting of shareholders was held on December 16, 2003.
However, we have changed our fiscal year (formerly June 1 to May 31) to the
calendar year (January 1 to December 31), and now file our SEC reports on the
calendar year and calendar quarter basis. Therefore, we have changed our annual
shareholders' meeting date to be in June of each year.
WHO CAN VOTE
If you held any shares of common stock on the record date (May 2, 2003),
then you will be entitled to vote at the meeting. If you held stock in your own
name, you may vote directly. If you owned stock beneficially but in the record
name (street name) of an institution, you may instruct the record holder how to
vote when the record holder contacts you about voting and gives you the proxy
materials.
COMMON STOCK OUTSTANDING ON THE RECORD DATE: 12,233,776 SHARES
QUORUM AND VOTING RIGHTS
A quorum for the meeting will exist if a majority of the voting power of
the shareholders is present at the meeting, in person or represented by properly
executed proxy delivered to us prior to the meeting. Shares of common stock
present at the meeting that abstain from voting, or that are the subject of
broker non-votes, will be counted as present for determining a quorum. A broker
non-vote occurs when a nominee holding stock in street name or otherwise for a
beneficial owner does not vote on a particular matter because the nominee does
not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.
You are entitled to one vote for each share of U.S. Energy Corp. common
stock you hold, except that in the election of directors you may cumulate your
votes. 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. Nominees in number equal to the seats to be filled, who
receive a plurality of votes cast, are elected. If you abstain from voting, your
shares will not be counted for or against any director.
1
Ratification of the appointment of independent auditors will be approved if
the number of votes cast in favor exceed the number of votes opposed, in
accordance with Wyoming law.
Any other matter which properly comes before the meeting would be approved
if the number of votes cast in favor exceed the number of votes opposed, unless
Wyoming law requires a different approval ratio.
Abstentions and broker non-votes will have no effect on the election of
directors. Abstentions as to all other matters which properly may come before
the meeting will be counted as votes against those matters. Broker non-votes as
to all other matters will not be counted as votes for or against, and will not
be included in calculating the number of votes necessary for approval of these
matters.
HOW YOUR PROXY WILL BE VOTED; RECOMMENDATION OF THE BOARD
The board of directors is soliciting a proxy in the enclosed form to
provide you with the opportunity to vote on all matters scheduled to come before
the meeting, whether or not you attend in person.
The board of directors recommends you vote in favor of the nominees for
directors, and in favor of ratifying management's re-appointment of the audit
firm.
GRANTING YOUR PROXY
If you sign properly and return the enclosed form of proxy, your shares
will be voted as you specify. If you make no specifications, your proxy will be
voted in favor of both proposals.
We expect no matters to be presented for action at the meeting other than
the items described in this proxy statement. However, in accordance with SEC
rule 14a-4(c) the enclosed proxy will confer discretionary authority with
respect to any other matter that may properly come before the meeting, including
any matter of which we did not have notice (1) at least 45 days before the date
of mailing proxy materials for last year's meeting, or (2) within a reasonable
period of time before the mailing for the current meeting, as we have changed
our meeting date from December to June. The persons named as proxies intend to
vote in accordance with their judgment on any matters that may properly come
before the meeting.
REVOKING YOUR PROXY
If you submit a proxy, you may revoke it later or submit a revised proxy at
any time before it is voted. You also may attend the meeting in person and vote
by ballot, which would cancel any proxy you previously submitted.
PROXY SOLICITATION
We will pay all expenses of soliciting proxies for the meeting. In addition
to solicitations by mail, arrangements have been made for brokers and nominees
to send proxy materials to their principals, and we will reimburse them for
their reasonable expenses. We have not hired a solicitation firm for the
meeting. Our employees and directors will solicit proxies by telephone or other
means, if necessary; these people will not be paid for these services.
REQUIREMENT AND DEADLINES FOR SHAREHOLDERS TO SUBMIT PROXY PROPOSALS
Generally, we will hold the annual meeting on the first Friday of each June
(June 4 in 2004). Under the rules of the SEC, if a shareholder wants us to
include a proposal in our proxy statement and form of proxy for presentation at
our Annual Meeting of Shareholders to be held in June 2004, the proposal must be
received by us in writing at least 150 calendar days in advance of the meeting
date (which would be 120 days in advance of the mailing date), at U.S. Energy
Corp., 877 North 8th West, Riverton, Wyoming 82501; Attention: Daniel P. Svilar,
Secretary.
2
CORPORATE GOVERNANCE, AUDIT COMMITTEE REPORT AND COMPENSATION COMMITTEE
MEETINGS OF THE BOARD. The board of directors, which held five formal
meetings during the seven months ended December 31, 2002, has primary
responsibility for directing management of the business. The board currently
consists of six members. There remains one vacancy on the board. All members
attended all meetings. The board conferred informally on several other occasions
during the fiscal year. From time to time the directors also approve various
matters by consent minutes without conducting formal meetings.
AUDIT COMMITTEE. To provide effective direction and review of fiscal
matters, the board has established an audit committee. The audit committee has
the responsibility of reviewing our financial statements, exercising general
oversight of the integrity and reliability of our accounting and financial
reporting practices, and monitoring the effectiveness of our internal control
systems. The audit committee also recommends selection of an auditing firm and
exercises general oversight of the activities of our independent auditors,
principal financial and accounting officers and employees and related matters.
The members of the audit committee are Nick Bebout, Don Anderson and H. Russell
Fraser, all of whom are independent directors under criteria established by the
National Association of Securities Dealers, Inc. and the Nasdaq Stock Market
Inc. John L. Larsen is appointed as an alternate member of the audit committee
in the event one of the committee members could not attend committee meetings.
The audit committee has reviewed our financial statements for the seven
months ended December 31, 2002 and discussed them with management. The committee
also discussed with the independent audit firm the various matters required to
be so discussed in SAS 63 (Codification of Statements on Auditing Standards, AU
380). The committee received the written disclosure and the letter from the
independent audit firm as required by Independence Standards Board Standard No.
1 (Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committee), and the committee discussed with the audit firm their
independence. Based on the foregoing, the audit committee recommended to the
board of directors that the audited financial statements be included in our
Transition Annual Report on Form 10-K (for the seven month period) which was
filed with the Securities and Exchange Commission April 1, 2003.
COMPENSATION COMMITTEE. The Company has a compensation committee, whose
members are Harold F. Herron, Nick Bebout and H. Russell Fraser. This committee
met formally on one occasion during the seven months ended December 31, 2002,
and discusses compensation matters informally from time to time.
The compensation committee reviews and recommends to the board of directors
compensation packages for the officers of U.S. Energy Corp. and subsidiaries
(but not Crested Corp. which has its own compensation committee). The committee
takes into account the need for different types of executives (administrative,
financial, engineering, etc.), and the pay arrangements which corporations of
similar size have adopted in our industry on both the national and local levels.
Items considered include the experience of and contribution made (or to be made
for new hires or promotions) by each person, and the methods of paying them
(principally salary and stock options). In addition, the compensation committee
reviews and recommends to the board of directors the granting of stock options
to non-executive employees.
EXECUTIVE COMMITTEE. The executive committee members are Keith G. Larsen,
John L. Larsen, Harold F. Herron, Nick Bebout and H. Russell Fraser. This
committee helps implement the board of directors' overall directives as
necessary. This committee usually does not conduct formal meetings (none were
held in the seven month period ended December 31, 2002).
NOMINATING COMMITTEE. When needed as determined by the board of directors,
the nominating committee considers and recommends to the board of directors
individuals who may be suitable to be nominated to serve as directors. Harold F.
Herron and Don Anderson are the nominating committee members.
3
MANAGEMENT COST APPORTIONMENT COMMITTEE, established by USE and Crested in
1982, reviews the apportionment of costs between USE and Crested. John L. Larsen
and Robert Scott Lorimer are members of this committee.
PRINCIPAL HOLDERS OF VOTING SECURITIES OF THE COMPANY
The following is a list of all record holders who, as of the record date,
beneficially owned more than 5% of the outstanding shares of common stock, and
the outstanding common stock beneficially held by each director and nominee, and
by all officers and directors as a group, as reported in filings with the SEC,
or as otherwise known to us. 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 who are not officers and a non-employee
director ("Forfeitable Shares") are shared by the Company's board of directors.
Voting and dispositive powers over forfeitable shares held by the Company's five
executive officers and a former officer (now deceased) ("Officers' Forfeitable
Shares") are shared by the Company's non-employee directors (Messrs. Anderson,
Bebout and Fraser). The ESOP Trustees (John L. Larsen and Harold F. Herron)
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.
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)
------------------- ---- ------ ---- ------ -------------------- -----------
John L. Larsen*(2) 895,746 1,012,657 895,746 1,412,396 2,437,568 19.2%
201 Hill Street
Riverton, WY 82501
Keith G. Larsen*(3) 637,112 1,500 601,674 45,180 691,112 5.4%
4045 Valley Green Circle
Riverton, WY 82501
Harold F. Herron*(4) 433,841 285,843 405,986 685,582 1,162,581 9.3%
3425 Riverside Road
Riverton, WY 82501
Don C. Anderson*(5) 89,610 377,342 68,610 421,022 489,632 4.0%
P. O. Box 1556
Mesquite, NV 89024
Nick Bebout*(6) 75,561 384,842 75,561 428,522 504,083 4.1%
4424 Skylane Drive
Riverton, WY 82501
H. Russell Fraser*(7) 66,955 378,642 66,955 422,322 489,277 4.0%
3453 Southfork Road
Cody, WY 82414
4
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)
------------------- ---- ------ ---- ------ -------------------- -----------
Daniel P. Svilar**(8) 488,749 517,359 488,749 517,359 1,106,958 8.8%
580 S. Indiana Street
Hudson, WY 82515
R. Scott Lorimer**(9) 437,615 -0- 393,906 -0- 504,848 4.0%
11 Korrel Court
Riverton, WY 82501
Peter G. Schoonmaker**(10) 325,346 -0- 304,400 -0- 325,346 2.6%
1746 Meadowlark Lane
Sheridan, WY 82801
All officers and
directors as a group
(nine persons)(11) 3,450,535 1,403,194 3,301,587 1,802,933 5,104,520 34.4%
----------
* Director
** Officer (Mr. Schoonmaker is president of the Company's majority-owned
subsidiary Rocky Mountain Gas, Inc.)
(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 243,163 directly
owned shares, 106,000 shares held in joint tenancy with his wife, 500 shares
held in a street name account for his benefit, 52,183 shares held in an
Individual Retirement Account ("IRA") established for his benefit, and 493,900
shares underlying options. 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 42,350 shares held directly by his wife, 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"), 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
243,163 directly owned shares, 106,000 joint tenancy shares, 500 shares held in
street name, 52,183 shares held in his IRA, and the 493,900 shares underlying
options. Shared dispositive powers are exercised over 42,350 shares directly
held by wife, 511,870 shares held by the ESOP, 43,680 Forfeitable Shares,
512,359 shares held by Crested, 125,556 shares held by Plateau, 175,000 shares
held by SGMC and 1,581 shares held by NWG. The shares listed under "Total
Beneficial Ownership" also include 129,426 Officers' Forfeitable Shares.
(3) Mr. Keith Larsen exercises sole voting rights over 1,774 directly held
shares, 6,000 shares as custodian over shares held for his minor children under
the Wyoming Uniform Transfers to Minors Act (the "Custodial Shares"), 35,438
shares held in an ESOP account established for his benefit, 593,900 shares
underlying options. He exercises shared voting rights over 1,500 shares held
directly by his minor children. Mr. Keith Larsen exercises sole dispositive
rights over 1,774 directly held shares, 6,000 Custodial shares, and 593,900
shares underlying options. He exercises shared dispositive rights over 1,500
shares held directly by his minor children and 43,680 Forfeitable Shares. The
shares listed under "Total Beneficial Ownership" also include 8,820 Officers'
Forfeitable Shares.
5
(4) Mr. Herron exercises sole voting powers over 47,986 directly owned
shares, 11,000 shares held in an IRA established for his benefit, 7,600
Custodial Shares, 339,400 shares underlying options, and 27,855 shares held in
the ESOP account established for his benefit. Shared voting powers are exercised
over 2,895 shares held directly by his wife, 155,811 which have not been
allocated to accounts established for specific beneficiaries, 125,556 shares
held by Plateau, 1,581 shares held by NWG. Sole dispositive powers are exercised
over 47,986 directly held shares, 11,000 shares held in his IRA, 7,600 Custodial
Shares and 339,400 shares underlying options. Mr. Herron exercises shared
dispositive rights over 2,895 wife's shares, 511,870 shares held by the ESOP,
125,556 shares held by Plateau, 1,581 shares held by NWG, and 43,680 Forfeitable
Shares. Mr. Herron exercises shared dispositive and voting powers over the
shares held by Plateau 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 71,013 Officers' Forfeitable Shares.
(5) Mr. Anderson exercises sole voting powers over 11,955 directly held
shares, 3,055 shares held in an IRA established for his benefit, 1,100 shares
held in a street name account for his benefit, 21,000 Forfeitable Shares, and
52,500 shares underlying options. He exercises shared voting powers over 377,342
Officers' Forfeitable Shares. Mr. Anderson exercises dispositive power over
11,955 directly held shares, 3,055 IRA shares, 1,100 street name shares, and
52,500 shares underlying his options. He exercises shared dispositive powers
over the 43,680 Forfeitable Shares and 377,342 Officers' Forfeitable Shares.
(6) Mr. Bebout exercises sole voting rights over 23,011 shares held
directly, 50 shares held in joint tenancy with his wife, and 52,500 shares
underlying options. He exercises shared voting rights over 377,342 Officers'
Forfeitable Shares, and 7,500 shares held by private companies of which he is a
director and officer. Mr. Bebout exercises sole dispositive rights over 23,011
shares held directly, 50 joint tenancy shares, and 52,500 shares underlying his
options. He exercises shared dispositive powers over 43,680 Forfeitable Shares,
377,342 Officers' Forfeitable Shares, and 7,500 shares held by the private
companies of which he is a director and officer.
(7) Mr. Fraser exercises sole voting rights over 10,455 directly held
shares, 4,000 shares held in an IRA for his benefit, and 52,500 shares
underlying options. He exercises shared voting rights over 1,300 shares held
directly by his wife and 377,342 Officers' Forfeitable Shares. Mr. Fraser
exercises sole dispositive rights over 10,455 directly held shares, 4,000 IRA
shares and 52,500 shares underlying his options. He exercises shared dispositive
powers over 1,300 wife's shares, 43,680 Forfeitable Shares, and 377,342
Officers' Forfeitable Shares.
(8) Mr. Svilar exercises sole voting powers over 50,121 directly owned
shares, 8,375 shares held in joint tenancy with his wife, 34,723 shares held in
an IRA established for his benefit, 630 shares held in a street name account
established for his benefit, 1,000 Custodial Shares, and 393,900 shares
underlying options. He exercises shared voting over 512,359 shares held by
Crested and 5,000 shares held by a private corporation of which he is a director
and officer. He exercises sole dispositive power over 50,121 directly held
shares, 8,375 joint tenancy shares, 34,823 IRA shares, 630 street name shares,
1,000 Custodial Shares, and 393,900 shares underlying his options. Mr. Svilar
exercises shared dispositive rights over 512,359 shares held by Crested and
5,000 shares held by a private corporation of which he is a director. The shares
listed under "Total Beneficial Ownership" also include 100,850 Officers'
Forfeitable Shares.
(9) Mr. Lorimer exercises sole voting rights over 41,673 directly held
shares, 43,709 shares held in the ESOP account established for his benefit, and
352,233 shares underlying options. He exercises sole dispositive rights over
41,673 directly held shares, and 352,233 shares underlying options. The shares
listed under "Total Beneficial Ownership" also include 67,233 Officers'
Forfeitable Shares.
(10) Mr. Schoonmaker is listed in the table because he is president of
Rocky Mountain Gas, Inc. ("RMG"), a majority-owned subsidiary of the Company
through which the Company conducts its primary business. He exercises sole
voting over 9,500 shares held directly, 1,000 Custodial Shares, 20,946 shares
held
6
in the ESOP account established for his benefit, and 293,900 shares underlying
options. Mr. Schoonmaker exercises sole dispositive rights over 9,500 shares
held directly, 1,000 Custodial shares, and 293,900 shares underlying his
options.
(11) The group exercises sole voting rights over 439,638 directly held
shares, 114,425 shares held in joint tenancy, 104,961 shares held in IRAs, 2,230
shares held in street name, 15,600 Custodial Shares, 127,948 ESOP shares, 21,000
Forfeitable Shares, and 2,624,733 shares underlying options. Shared voting
rights are exercised over 46,545 shares held directly by spouses, 1,500 shares
held by minor children, 377,342 Officers' Forfeitable Shares, 155,811 shares
held in the ESOP which are not allocated to plan participants, 512,359 shares
held by Crested, 125,556 shares held by Plateau, 175,000 shares held by SGMC,
1,581 shares held by NWG, and 7,500 shares held by private corporations. The
sole dispositive shares consist of 439,638 directly held shares, 114,425 shares
held in joint tenancy, 104,961 shares held in IRAs, 2,230 shares held in street
name, 15,600 Custodial Shares, and 2,624,733 shares underlying options. The
group exercises shared dispositive rights over 46,545 shares held directly by
spouses, 1,500 shares held by minor children, 511,870 shares held in the ESOP,
512,359 shares held by Crested, 125,556 shares held by Plateau, 175,000 shares
held by SGMC, 1,581 shares held by NWG, 7,500 shares held by private
corporations, 43,680 Forfeitable Shares, and 377,342 Officers' Forfeitable
Shares.
PRINCIPAL HOLDERS OF VOTING SECURITIES OF COMPANY SUBSIDIARY - CRESTED CORP.
The following table sets forth, as of the record date, the shares of common
stock of the Company's majority-owned (70.5%) subsidiary, Crested Corp. as a
group. Unless otherwise noted, the listed record holder exercises sole voting
and dispositive powers, held by each director and nominee of U.S. Energy Corp.,
and by all officers and directors of U.S. Energy Corp. over the shares reported
as beneficially owned, excluding the shares subject to forfeiture. 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.
Amount and Nature of Beneficial Ownership
----------------------------------------------------------------------------
Voting Rights Dispositive Rights
Name of ------------------------ ----------------------- Total Percent
beneficial owner Sole Shared Sole Shared Beneficial Ownership of Class(1)
---------------- ---- ------ ---- ------ -------------------- -----------
John L. Larsen(2) -0- 12,184,733 -0- 12,184,733 12,184,733 71.2%
Keith G. Larsen(3) -0- 12,020,848 -0- 12,020,848 12,020,848 70.2%
Harold F. Herron(4) 6,932 12,084,733 6,932 12,084,733 12,091,665 70.7%
Don C. Anderson(3) -0- 12,020,848 -0- 12,020,848 12,020,848 70.2%
Nick Bebout(3) -0- 12,020,848 -0- 12,020,848 12,020,848 70.2%
H. Russell Fraser(3) -0- 12,020,848 -0- 12,020,848 12,020,848 70.2%
Daniel P. Svilar(5) 191,850 -0- 191,850 -0- 191,850 1.1%
R. Scott Lorimer(6) -0- -0- -0- -0- 15,000 *
Peter G. Schoonmaker -0- -0- -0- -0- -0- -0-
All officers and
directors as a group
(nine persons)(7) 198,782 12,184,733 198,782 12,184,733 12,398,515 72.5%
----------
7
(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) Consists of 12,020,848 Crested shares held by the Company, 100,000
shares held by SGMC, 60,000 shares held by Plateau 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.
(3) Consist of the 12,020,848 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.
(4) Consists of 6,932 directly held shares over which Mr. Herron exercises
sole voting and investment powers, and the 12,020,848 Crested shares held by the
Company, 3,885 shares held by NWG and 60,000 shares held by Plateau, with
respect to which shared voting and dispositive powers are exercised as a USE,
NWG and Plateau director with the other directors of those companies.
(5) Consists of 191,850 directly held shares, over which Mr. Svilar
exercises sole voting and dispositive powers.
(6) Consists of 15,000 shares subject to forfeiture. None of the company's
directors exercise any voting or dispositive powers over these shares. Such
powers are exercised by the Crested non-employee director.
(7) Sole voting and dispositive rights are exercised over 198,782 directly
held shares. Shared voting and dispositive rights are exercised over 12,020,848
shares held by the Company, 100,000 shares held by SGMC, 60,000 shares held by
Plateau and 3,885 shares held by NWG. The total beneficial ownership includes
15,000 shares held by an employee which are subject to forfeiture. None of the
company's directors exercise any voting or dispositive powers over these shares.
Such powers are exercised by the Crested non- employee director.
Each director beneficially holds the 6,982,219 and 255,000,000 shares of
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 89.4%
and 50.9% of the outstanding shares of 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. John L. Larsen holds 7,024,219 shares
of NWG consisting of the 6,982,219 held by the Company, 1,000 directly held
shares, 1,000 shares held directly by his wife and 40,000 shares which are
subject to forfeiture, representing 89.9% of the outstanding common stock of
NWG. Harold F. Herron beneficially holds 7,027,704 shares of NWG consisting of
the 6,982,219 shares held by the Company, 5,575 shares held directly and 40,000
shares subject to forfeiture, representing 90% of the outstanding stock of NWG.
Mr. Herron beneficially holds 265,000,000 shares of the common stock of FNG,
consisting of the 255,000,000 shares held by the Company and 10,000,000 directly
held shares, representing 52.9% of the outstanding FNG common 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. Messrs. Keith G. Larsen, Svilar, Lorimer and Schoonmaker each
hold 40,000 shares of NWG which are subject to forfeiture. None of the other
directors or officers directly hold any other shares of stock of NWG or FNG. All
executive officers and directors of the Company as a group (9 persons) hold
7,229,794 and 284,500,000 shares of the stock of NWG, and FNG, representing
92.6% and 56.2% of the outstanding shares of those companies, respectively.
8
PROPOSAL ONE - ELECTION OF DIRECTORS
The directors are divided into three classes, each consisting of two
persons so far as practicable, to be 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 directors John L.
Larsen and Keith G. Larsen expire at the meeting and they have been nominated
for re-election. Current directors are:
Other Meeting at
Name, age and positions with Director which term
designation with the company since will expire
----------- ---------------- --------- ----------------
John L. Larsen (71) Chairman and CEO 1966 2003
(nominee) Annual Meeting
Keith G. Larsen (43) President and COO 1997 2003
(nominee) Annual Meeting
Harold F. Herron (49) Senior Vice President 1989 2004
(continuing director) Annual Meeting
Don C. Anderson (75) 1990 2005
(continuing director) Annual Meeting
Nick Bebout (51) 1989 2005
(continuing director) Annual Meeting
H. Russell Fraser (60) 1996 2005
(continuing director) Annual Meeting
It is recommended that the shareholders vote for the re-election of John L.
Larsen and Keith G. Larsen.
Executive officers are elected by the board of directors at the annual
directors' meeting, which follows each Annual Shareholders' Meeting, to serve
until the officer's successor has been duly elected and qualified, or until
death, resignation or removal.
FAMILY RELATIONSHIPS.
Keith G. Larsen, a director, President and COO, is a son of John L. Larsen,
Chairman, CEO and principal shareholder. Harold F. Herron, a director and Senior
Vice-President, is the son-in-law of John L. Larsen. Nick Bebout, a director, is
a nephew of Daniel P. Svilar, a principal shareholder, Secretary 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
the Chairman of the Board and Chief Executive Officer. He is also the Chairman
and a director of Crested and Northwest Gold, Inc. ("NWG"), both of which are
9
affiliates of the Company. Crested 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. He has been a director of the Company and its
President and Chief Operating Officer since November 25, 1997. Mr. Larsen is
also the Chief Executive Officer and a director of Rocky Mountain Gas, Inc.
HAROLD F. HERRON has been the Company's Vice-President since January 1989,
and now is Senior Vice President. Mr. Herron was the President of Brunton, a
wholly owned company subsidiary until Brunton was sold in February 1996. Mr.
Herron is president and a director of NWG, President and a director of Plateau,
president and a director of Sutter Gold Mining Company, and a director of 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.
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 of the Company since 1989. He has been a
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 past President and
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.
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. 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.
10
FILING OF REPORTS UNDER SECTION 16(A)
The Company has reviewed reports on Forms 3, 4 and 5 of ownership of common
stock in the Company, which have been filed with the SEC under Section 16(a) of
the Exchange Act from June 1 2002 through December 31, 2002, and received
written representations from the filing persons. Based solely upon review of the
reports and representations, John L. Larsen, Keith G. Larsen, Harold F. Herron,
Daniel P. Svilar, R. Scott Lorimer and Peter G. Schoonmaker each reported one
transaction late. Subsequent to December 31, 2002, transactions for events
occurring prior to December 31, 2002 were reported late by John L. Larsen (7),
Keith G. Larsen (1), Harold F. Herron (4), Daniel P. Svilar (1), R. Scott
Lorimer (1) and Peter G. Schoonmaker (2). We know of no other untimely or
not-made filings related to transactions occurring during the seven month period
ended December 31, 2002.
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.
DANIEL P. SVILAR, age 74, 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. He was appointed Secretary of USE on
March 23, 2002. His positions of General Counsel to, and as officers of the
companies, are at the will of the 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 52, has been Chief Accounting Officer, Chief
Financial Officer and Treasurer for both USE and Crested for more than the past
five years. Mr. Lorimer also has been their Vice President Finance since April
1998. He serves at the will of the 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.
PETER G. SCHOONMAKER, age 43 has been president and director of Rocky
Mountain Gas, Inc. since June 1999. From March 1995 until June 1999, he was
employed at different positions by U.S. Energy Corp. and its subsidiary
companies. He serves at the will of the board of directors of Rocky Mountain
Gas, Inc. There are no understandings between Mr. Schoonmaker and any other
person, pursuant to which he was named as an officer and director, and is a
son-in-law of John L. Larsen, Chairman and CEO of U.S. Energy Corp.
EXECUTIVE COMPENSATION
Under a Management Agreement dated August 1, 1981, USE 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 USE and Crested are devoted to the business of
both companies.
All USECC personnel are employees of USE, 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.
11
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 and Peter G. Schoonmaker, president of RMG, who were paid more than
$100,000 cash in any of the two fiscal years ended May 31, 2002, and more than
$50,000 for the seven months ended December 31, 2002. The table includes
compensation paid such persons by Crested for the seven months ended December
31, 2002, and the two fiscal years ended May 31, 2001 and 2000 for such persons'
services to such subsidiaries.
SUMMARY COMPENSATION TABLE
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs(#) ($) ($)(1)
--------------------------------------------------------------------------------------------------------------------------------
John L. Larsen 2002* $ 109,500 $ 7,500(2) $ -0- $ -0- 97,000(3) $ -0- $ 11,700
CEO and 2002 152,000 18,000(4) -0- 78,000(5) 100,000(3) -0- 17,000
Chairman 2001 153,000 4,300(7) -0- 107,000(5) 184,400(6) -0- 15,700
Keith G. Larsen 2002* $ 90,000 $ 7,200(2) $ -0- $ -0- 97,000(3) $ $ 9,700
President 2002 152,300 17,700(4) -0- -0- 100,000(3) -0- 17,000
and COO 2001 153,900 3,600(7) -0- -0- 309,400(6) -0- 15,700
Daniel P. Svilar 2002* $ 86,200 $ 6,900(2) $ -0- $ -0- 97,000(3) $ -0- $ 9,300
General Counsel 2002 149,400 17,400(4) -0- 58,500(5) 100,000(3) -0- 16,700
and Secretary 2001 140,400 4,000(7) -0- 80,250(5) 121,900(6) -0- 14,400
Harold F. Herron 2002* $ 60,500 $ 27,800(8) $ -0- $ -0- 97,000(3) $ -0- $ 8,800
Sr. Vice President 2002 99,500 53,600(8) -0- 39,000(5) 100,000(3) -0- 15,300
2001 96,400 40,760(8) -0- 53,500(5) 96,900(6) -0- 13,700
R. Scott Lorimer 2002* $ 83,500 $ 6,800(2) $ -0- $ -0- 97,000(3) $ -0- $ 9,000
Treasurer 2002 141,000 17,000(4) -0- 39,000(5) 100,000(3) -0- 15,800
and CFO 2001 136,900 3,900(7) -0- 53,500(5) 121,900(6) -0- 14,100
Peter G. Schoonmaker 2002* $ 55,400 $ 23,100(9) $ -0- $ -0- 97,000(3) $ -0- $ 7,800
President of RMG 2002 96,000 46,300(9) -0- -0- 100,000(3) -0- 14,200
2001 95,100 19,200(9) -0- -0- 71,900(6) -0- 11,400
* For seven months June 1, 2002 to December 31, 2002
(1) Dollar values for ESOP contributions.
(2) Consists of Christmas bonus amounts granted to employees during the
seven month period ended December 31, 2002.
(3) Stock options granted pursuant to the Company's 2001 Incentive Stock
Option Plan. See details of the options under "Grants to Executive Officers in
2002 (Qualified and Nonqualified)" below.
(4) Consists of $10,000 bonus granted to officers and employees after the
conclusion of a coalbed methane gas transaction, and a Christmas bonus granted
to employees. The Christmas bonus amounts granted for John L. Larsen, Keith G.
Larsen, Daniel P. Svilar, Harold F. Herron, R. Scott Lorimer and Pete
12
Schoonmaker during the former fiscal year ended May 31, 2002 were $8,000,
$7,700, $7,400, $6,700, $7,000 and $6,300, respectively.
(5) Consists of shares issued under the 1996 stock award program multiplied
by$5.35 and $3.90 (the closing market price on the issue dates for former fiscal
years 2001 and 2002 respectively). These shares are subject to forfeiture on
termination of employment, except for retirement, death or disability. If the
Company were to pay a stock dividend, dividends would be paid on these shares.
The following table lists the number of shares issued to each executive each
year.
Number of Shares
----------------------------
Name 2001 2002
---- ---- ----
John L. Larsen 20,000 20,000
Keith G. Larsen -0- -0-
Daniel P. Svilar 15,000 15,000
Harold F. Herron 10,000 10,000
R. Scott Lorimer 10,000 10,000
Peter G. Schoonmaker -0- -0-
(6) Stock options granted pursuant to the Company's 1998 Incentive Stock
Option Plan. See details of the options.
(7) Consists of a Christmas bonus paid in fiscal 2001.
(8) Mr. Herron was instrumental in growing The Brunton Company to the level
that it could be sold to a third party. For his efforts the Company granted Mr.
Herron a bonus which is paid out over several years, ending in August 2004. The
amount of the bonus paid was $21,200, $36,900 and $36,900 for seven months ended
December 31, 2002, and the fiscal years ended May 31, 2002 and 2001,
respectively. The total bonus paid also includes a Christmas bonus of $6,600,
for the seven months ended December 31, 2002, and $6,700 and $3,900 for fiscal
years ended May 31, 2002 and 2001, respectively, and a $10,000 bonus paid in
2002 to officers and employees after the conclusion of a coalbed methane gas
transaction.
(9) Mr. Schoonmaker completed equity financing for Rocky Mountain Gas. In
recognition of Mr. Schoonmaker's accomplishments, the Company granted Mr.
Schoonmaker a bonus which will be paid out over several years, ending in
November 2003. The compensation that Mr. Schoonmaker received under this bonus
plan was $17,300 during the seven months ended December 31, 2002, and $30,000
and $16,500 during the fiscal years ended May 31, 2002 and 2001, respectively.
The total bonus paid also includes a Christmas bonus of $5,800 for the seven
months ended December 31, 2002, and $6,300 and $2,600 in the fiscal years ended
May 31, 2002 and 2001, respectively, and a $10,000 bonus paid in 2002 to
officers and employees after the conclusion of a coalbed methane gas
transaction.
EXECUTIVE COMPENSATION PLANS AND EMPLOYMENT AGREEMENTS
The Company has adopted a plan to pay the dependants of Messrs. J. Larsen
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 directors of the
Company and Crested.
13
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. 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, 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. During fiscal 2001, the
Company signed similar Agreements with Keith Larsen, Mark Larsen, Richard
Larsen, Harold Herron, Robin Kindle and Pete Schoonmaker. For such non-compete
covenant, such persons 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 of directors concerning the fairness of a
takeover, without the distraction of possible tenure insecurity following a
change in control. As of this proxy statement, 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, with the exception
of Messrs. John L. Larsen and Daniel P. Svilar. The Company and Crested
reimburse Messrs. John Larsen and Svilar for their medicare supplement premiums.
The health insurance plan does not discriminate in favor of executive employees;
life insurance of $200,000 is provided to each member of upper management (which
includes all persons in the compensation table), $100,000 of such coverage is
provided to middle-management employees, and $90,000 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. 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 and Herron 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 accounting year. Contributions to the money purchase pension 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 43,867 shares to the ESOP for the seven
months ended December 31, 2002, all of which were contributed under the money
purchase pension plan. At the time the shares were contributed, the market price
was $3.08 per share, for a total contribution with a market value of $135,100
(which has been funded by the Company). The Company and Crested each are
responsible for one- half of that amount. 18,315 the shares were allocated to
the ESOP accounts of the executive officers of the Company and the president of
Rocky Mountain Gas, Inc. Additionally, 4,806 shares were allocated to the
14
ESOP accounts of these same individuals 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 seven months ended December 31, 2002
under a loan arrangement between the Company and the ESOP was $927,013 at
December 31, 2002. Interest owed by the ESOP was not booked by the Company.
Crested pays one-half of the amounts contributed to the ESOP by the Company.
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 the
Company.
1998 INCENTIVE STOCK OPTION PLAN. The Company's 1998 Incentive Stock Option
Plan ("1998 ISOP") reserved an aggregate of 2,750,000 shares of common stock for
issuance upon exercise of options granted thereunder. Awards under the plan were
made by a committee of three or more persons selected by the Board (presently
Messrs. Herron, Bebout 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.
2001 INCENTIVE STOCK OPTION PLAN ("2001 ISOP"). The 2001 ISOP was approved
at the 2001 Annual Meeting of Shareholders meeting, and provides for the
issuance of options to purchase up to 3.0 million shares of common stock; the
options are intended to qualify under section 422 of the Internal Revenue Code.
Options are issued at exercise prices equal to (or for holders of 10% or more of
the outstanding stock at the time, 110% of) market price on grant dates, and
would vest (become exercisable) at various times as determined by the executive
committee and approved by the board of directors. All options are exercisable
for cash, or through other means as determined by the executive committee and
approved by the board of directors, in accordance with similar plans of public
companies.
For information about options, please see the consolidated Financial
Statements for the seven months ended December 31, 2002. During the seven months
ended December 31, 2002, options on 973,000 shares were granted, and previously
granted options on 71,167 shares were exercised during the seven months ended
December 31, 2002.
In the prior fiscal year ended May 31, 2002, options on 1,030,000 shares
were granted, and previously granted options on 253,337 shares were exercised as
of May 31, 2002.
15
OPTION GRANTS TO EXECUTIVE OFFICERS IN THE SEVEN MONTHS ENDED
DECEMBER 31, 2002 (NONQUALIFIED)
The issuance of these options was previously disclosed in the Proxy Statement
for the December 2002 Annual Shareholders' Meeting.
PERCENT
NUMBER OF OF ALL OPTIONS
SHARES UNDER- GRANTED TO
LYING OPTIONS EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED IN 2002 PRICE DATE (1) PRES. VALUE (2)
John L. Larsen 97,000 10.0% $2.25 12/07/11 $299,000
Keith G. Larsen 97,000 10.0% $2.25 12/07/11 $299,000
Harold F. Herron 97,000 10.0% $2.25 12/07/11 $299,000
Daniel P. Svilar 97,000 10.0% $2.25 12/07/11 $299,000
R. Scott Lorimer 97,000 10.0% $2.25 12/07/11 $299,000
Peter G. Schoonmaker* 97,000 10.0% $2.25 12/07/11 $299,000
* President of Rocky Mountain Gas, Inc.
(1) Options were granted on August 8, 2002.
(2) The Black-Scholes option-pricing model was used to determine the grant date
present value of the stock options that were granted to the named officer. The
following facts and assumptions were used in making this calculation: An
exercise price of $2.25 which was equal to the market value of the stock on the
grant date (August 8, 2002); a zero dividend yield; expected volatility of
62.65%, risk-free interest rate of 5.6%, and an expected life of 10 years.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
SEVEN MONTHS ENDED 12/31/02 AND OPTION/SAR VALUES AT 12/31/02
The following table shows options exercised during the seven month period
ended December 31, 2002, options exercisable at May 31, 2002, and options
exercisable and the dollar values for in-the-money options, at December 31, 2002
(closing market price on that date was $3.08).
(a) (b) (c) (d) (e) (f)
In Seven Months Ended 12/31/02 Value of
------------------------------ Number of Number of In-the-Money
Shares Options/SARS Options/SARs Options/SARs
Acquired Value at 5/31/02 at 12/31/02 at 12/31/02
Name on Exercise (#) Realized($) Exercisable Exercisable Exercisable
---- --------------- ----------- ----------- ----------- -----------
John L. Larsen, -0- -0- 77,718 77,718 $ 83,935 (1)
CEO -0- -0- 34,782 34,782 $ 7,130 (2)
-0- -0- 184,400 184,400 $125,392 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
Keith G. Larsen -0- -0- 52,718 52,718 $ 56,935 (1)
President -0- -0- 34,782 34,782 $ 7,130 (s)
-0- -0- 309,400 309,400 $210,392 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
16
(a) (b) (c) (d) (e) (f)
In Seven Months Ended 12/31/02 Value of
------------------------------ Number of Number of In-the-Money
Shares Options/SARS Options/SARs Options/SARs
Acquired Value at 5/31/02 at 12/31/02 at 12/31/02
Name on Exercise (#) Realized($) Exercisable Exercisable Exercisable
---- --------------- ----------- ----------- ----------- -----------
Harold F. Herron, -0- -0- 40,218 40,218 $ 43,435 (1)
Sr. Vice President -0- -0- 34,782 34,782 $ 7,130 (2)
29,500 $33,661(6) 96,900 67,400 $ 45,832 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
Daniel P. Svilar -0- -0- 40,218 40,218 $ 43,435 (1)
Secretary -0- -0- 34,782 34,782 $ 7,130 (2)
-0- -0- 121,900 121,900 $ 82,892 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
R. Scott Lorimer -0- -0- 40,218 40,218 $ 43,435 (1)
Treasurer -0- -0- 34,782 34,782 $ 7,130 (2)
41,667 $70,417(7) 121,900 80,233 $ 54,558 (3)
-0- -0- 100,000 100,000 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
Peter G. Schoonmaker -0- -0- 25,000 25,000 $ 5,125 (2)
President of RMG -0- -0- 71,900 71,900 $ 48,892 (3)
-0- -0- 100,000 100,00 $(82,000)(4)
-0- -0- -0- 97,000 $ 80,510 (5)
----------
(1) Equal to $3.08, the closing market price on December 31, 2002, less
$2.00 per share option exercise price, multiplied by all shares exercisable.
(2) Equal to $3.08, the closing market price on December 31, 2002, less
$2.875 per share option exercise price, multiplied by all shares exercisable.
(3) Equal to $3.08, the closing market price on December 31, 2002, less
$2.40 per share option exercise price, multiplied by all shares exercisable.
(4) Equal to $3.08, the closing market price on December 31, 2002, less
$3.90 per share option exercise price, multiplied by all shares exercisable.
(5) Equal to $3.08, the closing market price on December 31, 2002, less
$2.25 per share option exercise price, multiplied by all shares exercisable.
(6) Equal to $3.539, the closing market price on the date of exercise, less
$2.40 per share option exercise price, multiplied by the number of options
exercised. No shares acquired on exercise of these options have been sold.
(7) Equal to $4.09, the closing market price on the date of exercise, less
$2.40 per share option exercise price, multiplied by the number of options
exercised. No shares acquired on exercise of these options have been sold.
17
1996 STOCK AWARD PROGRAM. The Company had 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. A
total of 349,158 shares were issued under this plan. The compensation committee
did not award any shares under this plan during the seven months ended December
31, 2002.
One-half of the compensation expense under the Program was the
responsibility of Crested.
Each allocation of shares was issued in the name of the officer, and is
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 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 awarded each year out of such 67,000 shares aggregate
limit was determined by the compensation committee. The total shares issued were
divided among the officers based on the following percentages: John L. Larsen
29.85%, Daniel P. Svilar 22.39%, Max T. Evans 17.91% (now deceased), Harold F.
Herron 14.93% and R. Scott Lorimer 14.93%.
2001 STOCK COMPENSATION PLAN. The shareholders approved the 2001 Stock
Compensation Plan (the "plan"), at the 2001 Annual Shareholders Meeting.
The plan has an initial term of seven years, with up to 10,000 shares of
common stock to be issued in January of each year (starting 2002) to six
individuals (five officers: John L. Larsen, Keith G. Larsen, Robert Scott
Lorimer, Harold F. Herron, Daniel P. Svilar; and Peter Schoonmaker, president
and a director of Rocky Mountain Gas, Inc.). The number of shares to be issued
in any year will be determined by the executive committee and approved by the
board of directors, taking into account our public stock prices at the date of
grant and during the prior calendar year, the Company's financial condition and
business prospects, and other factors deemed appropriate. The Company will pay
the income taxes owed by recipients as a result of receipt of the stock.
The stock recipients will agree not to sell or transfer such shares during
their employment with the Company. As of December 31, 2002, no shares had been
granted under the Plan.
The 2001 Stock Compensation Plan is now the sole mechanism for compensating
management with stock, however options may be granted to management and others
under the 2001 ISOP. This plan is designed to reward executives with equity, and
encourage them to increase their ownership of the Company and not sell their
shares in the market.
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.
In addition, 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.
18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DEBT OWED BY DIRECTORS. In the early 1990s, Harold F. Herron, an officer
and director, had been living in and caring for a house owned by the Company. In
fiscal 1995, Mr. Herron purchased the house for $260,000 (equal to appraised
value), and was reimbursed by the Company for $22,830 of leasehold improvements
he had made to the property. The Company accepted a promissory note for $112,170
of the purchase price, with 7% annual interest; a payment schedule was entered
into and Mr. Herron is current in his payments on the note. This note was a
nonrecourse note secured by 30,000 shares of the Company's common stock owned by
Mr. Herron. At December 31, 2002 he owed $120,100 on the note. During fiscal
2002 and 2001 he gave up 5,000 shares, for a total of 10,000 shares, of the
collateral to reduce the debt.
FAMILY EMPLOYMENT. Three of John L. Larsen's sons, three sons-in-law and
one grandson are employed by the Company or subsidiaries. Collectively, Mr.
Larsen and these family members received $665,300 in total compensation for
services during the seven months ended December 31, 2002.
TRANSACTIONS INVOLVING USECC AND CRESTED. The Company and Crested conduct
most 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, which create intercompany debt. The party extending funds is subsequently
reimbursed by the other venturer. Crested owed the Company $8,553,900 at
December 31, 2002.
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The board of directors seeks shareholder ratification of the board's
appointment of Grant Thornton LLP, certified public accountants, to act as the
auditors of our financial statements for the fiscal year ending December 31,
2003. The audit committee has recommended that the board retain this auditing
firm for year 2003. Grant Thornton audited our financial statements for the
fiscal years ended May 31, 2002 and 2001, and the seven month period ended
December 31, 2002. The board has not determined what action, if any, would be
taken should the appointment of Grant Thornton not be ratified at the meeting.
ACCOUNTANT'S FEES. Grant Thornton billed us the following fees in the seven
month period ended December 31, 2002.
Audit and Tax Fees: $87,500*
Financial Information Systems Design and Implementation Fees: $ -0-
All Other Fees: $12,823
* Includes review of quarterly financial information filed with the
Securities and Exchange Commission on Form 10-Q, pursuant to review requirements
imposed by the Commission.
The audit committee of the board of directors considers the provision of
services described above to be compatible with Grant Thornton's independence.
19
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Grant Thornton LLP has audited the Company's financial statements for the
seven months ended December 31, 2002. A representative of Grant Thornton 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 Grant
Thornton 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 that firm.
COPIES OF OUR FORM 10-K
Promptly upon receiving a request from any shareholder, without charge we
will send to the requester a copy of our Transition Annual Report on Form 10-K
for the seven months ended December 31, 2002, with exhibits, as filed with the
Securities and Exchange Commission. Please address your request to Daniel P.
Svilar, Assistant Secretary, at U.S. Energy Corp., 877 North 8th West, Riverton,
Wyoming 82501. You also may call or fax him at T 307.856.9271, F 307.857.3050.
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
99.1 Audit Committee Charter
99.2 Certification by Audit Committee
20
PROXY U.S. ENERGY CORP. PROXY
KNOW ALL PERSONS: 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 Keith G. Larsen, 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, JUNE 6, 2003 AT 10:00 A.M., local time,
or at any adjournments thereof upon the following:
THE PROXIES WILL VOTE: (1) AS YOU SPECIFY ON THIS CARD; (2) AS THE BOARD OF
DIRECTORS RECOMMENDS WHERE YOU DO NOT SPECIFY YOUR VOTE ON A MATTER LISTED ON
THIS CARD, AND (3) AS THE PROXIES DECIDE ON ANY OTHER MATTER.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE IN FAVOR OF THE DIRECTOR NOMINEES,
AND IN FAVOR OF RATIFYING THE SELECTION OF INDEPENDENT AUDITORS.
If you wish to vote on all matters as the Board of Director recommends,
please sign, date and return this card. If you wish to vote on items
individually, please also mark the appropriate boxes below.
INSTRUCTION: Mark only one box to each item.
1. Election of Directors:
o FOR the nominee o ABSTAIN
John L. Larsen __________ Keith G. Larsen __________
YOU HAVE THE OPTION: TO VOTE FOR SOME NOMINEES(S), BUT ABSTAIN FROM VOTING FOR
OTHER NOMINEE(S). TO DO SO, (1) CHECK THE FOR BOX, AND (2) DRAW A LINE THROUGH
THE NAME OF THE NOMINEE(S) YOU WANT TO ABSTAIN FROM. TO ABSTAIN FROM VOTING FOR
ALL NOMINEES, CHECK THE ABSTAIN BOX AND DO NOT DRAW A LINE THROUGH ANY NAME.
OR,
TO VOTE FOR NOMINEES BY CUMULATING YOUR VOTES, FOLLOW THESE STEPS: (1) CHECK THE
FOR BOX; (2) MULTIPLY THE NUMBER OF SHARES YOU HOLD TIMES 2; AND (3) PRINT THE
NUMBER OF VOTES YOU WANT TO CAST ON THE LINE NEXT TO THE NOMINEE(S) YOU WANT TO
VOTE FOR, AND DRAW A LINE THROUGH THE NOMINEE(S) YOU DO NOT WANT TO VOTE FOR.
YOU MAY CAST YOUR VOTES FOR ONE NOMINEE, OR YOU MAY DISTRIBUTE YOUR VOTES AMONG
THE NOMINEES AS YOU WISH. THE TOTAL VOTES CAST MUST EQUAL THE TOTAL NUMBER OF
SHARES YOU HOLD TIMES 2.
2. Ratification of appointment of Grant Thornton LLP as independent auditors for
the current fiscal year.
o FOR the appointment o AGAINST the appointment o ABSTAIN
21
PROXY U.S. ENERGY CORP. PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES REPRESENTED
HEREBY WILL BE VOTED AS PROVIDED ON THE REVERSE SIDE.
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.
----------------------------------------------
----------------------------------------------
22