EXHIBIT 4.1
U.S. ENERGY CORP.
1989 STOCK OPTION PLAN
As Amended September 1, 1992, September 3, 1993,
Janaury 6, 1994 and December 22, 1995
1. Purpose. Restrictions on Amount Available Under the
Plan. This 1989 Stock Option Plan (the "Plan") is intended to
encourage stock ownership by employees, consultants and directors
of U.S. Energy Corp. (the "Corporation"), its divisions and
Subsidiary Corporations, so that they may acquire or increase their
proprietary interest in the Corporation, and to encourage such
employees and directors to remain in the employ of the Corporation
and to put forth maximum efforts for the success of the business.
It is further intended that options granted by the Committee
pursuant to Section 6 of this Plan shall constitute "incentive
stock options" ("Incentive Stock Options") within the meaning of
Section 422A of the Internal Revenue Code of 1986 and the
regulations issued thereunder (the "Code"), and options granted by
the Committee pursuant to Section 7 of this Plan shall constitute
"nonqualified stock options" ("Nonqualified Stock Options").
2. Definitions. As used in this Plan, the following words
and phrases shall have the meanings indicated:
(a) "Disability" shall mean an Optionee's inability to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be expected
to last for a continuous period of not less than 12 months.
(b) "Fair Market Value" per share as of a particular
date shall mean the last sale price of the Corporation's Common
Stock as reported on a national securities exchange or on the
NASDAQ National Market System or, if last sale reporting quotation
is not available for the Corporation's Common Stock, the average of
the bid and asked prices of the Corporation's Common Stock as
reported by NASDAQ or in the National Quotation Bureau, Inc.'s
"Pink Sheets" or, if such quotations are unavailable, the value
determined by the Committee (as hereinafter defined) in accordance
with their discretion in making a bona fide, good faith
determination of fair market value.
(c) "Parent Corporation" shall mean any corporation
(other than the employer corporation) in an unbroken chain of
corporations ending with the employer corporation if, at the time
of granting an Option, each of the corporations other than the
employer corporation owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(d) "Subsidiary Corporation" shall mean any corporation
(other than the employer corporation) in an unbroken chain of
corporations beginning with the employer corporation if, at the
time of granting an Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
3. Administration. The Plan shall be administered by a
committee (the "Committee"), consisting of not less than two
members of the Board of Directors of the Corporation (the "Board").
The members of the Committee, who shall be selected at a duly
convened meeting of the Board of Directors, shall be persons who
have not been granted or awarded equity securities of the
Corporation under the Plan or any other plan of the Employer or its
affiliates, during the year prior to awards of securities under the
Plan by the Committee. It is the intent of this Plan that the
Committee members shall be "disinterested administrators" as that
term is used in Rule 16b-3(c)(2)(i) promulgated by the Securities
and Exchange Commission. The members of the Committee shall have
all powers, subject to compliance with the Plan, to select officers
and directors for participation in the Plan, and to make all
decisions concerning the timing, pricing and amount of a grant or
award under the Plan.
The Committee shall have the authority in its discretion,
subject to and not inconsistent with the express provisions of the
Plan, to administer the Plan and to exercise all the powers and
authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Options; to
determine which Options shall constitute Incentive Stock Options
and which Options shall constitute Nonqualified Stock Options; to
determine the purchase price of the shares of Common Stock covered
by each Option (the "Option Price"); to determine the persons to
whom, and the time or times at which, Options shall be granted; to
determine the number of shares to be covered by each Option; to
interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and
provisions of the Option Agreements (which need not be identical)
entered into in connection with Options granted under the Plan; and
to make all other determinations deemed necessary or advisable for
the administration of the Plan. The Committee may delegate to one
or more of its members or to one or more agents such administrative
duties as it may deem advisable, and the Committee or any person to
whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan.
The Board shall fill all vacancies, however caused, in the
Committee. The Board may from time to time appoint additional
members to the Committee, and may at any time remove one or more
Committee members and substitute others. One member of the
Committee shall be selected by the Board as chairman. The
Committee shall hold its meetings at such times and places as it
shall deem advisable. All determinations of the Committee shall be
made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written
consent. The Committee may appoint a secretary and make such rules
and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings.
No member of the Board or Committee shall be liable for any
action taken or determination made in good faith with respect to
the Plan or any Option granted hereunder.
4. Eligibility. Subject to certain limitations hereinafter
set forth, Options may be granted to employees of (including
officers) and consultants to and directors of (whether or not they
are employees) the Corporation or its present or future divisions
and Subsidiary Corporations. In determining the persons to whom
Options shall be granted and the number of shares to be covered by
each Option, the Committee shall take into account the duties of
the respective persons, their present and potential contributions
to the success of the Corporation and such other factors as the
Committee shall deem relevant in connection with accomplishing the
purpose of the Plan. A person to whom an Option has been granted
hereunder is sometimes referred to herein as an "Optionee." An
Optionee shall be eligible to receive more than one grant of an
Option during the term of the Plan, but only on the terms and
subject to the restrictions hereinafter set forth.
5. Stock. The stock subject to Options hereunder shall be
shares of the Corporation's Common Stock, $.01 par value per share
("Common Stock"). Such shares may, in whole or in part, be
authorized but unissued shares or shares that shall have been or
that may be reacquired by the Corporation. The aggregate number of
shares of Common Stock as to which Options may be granted from time
to time under the Plan shall not exceed 925,000. The maximum
number of shares which may be subject to options granted under the
Plan to the officers and directors as a group shall not exceed
275,000 shares of Common Stock. The limitations established by the
preceding sentences shall be subject to adjustment as provided in
Section 8(i) hereof.
In the event that any outstanding Option under the Plan for
any reason expires or is terminated without having been exercised
in full the shares of Common Stock allocable to the unexercised
portion of such Option (unless the Plan shall have been terminated)
shall become available for subsequent grants of options under the
Plan.
6. Incentive Stock Options. Options granted pursuant to
this Section 6 are intended to constitute Incentive Stock Options
and shall be subject to the following special terms and conditions,
in addition to the general terms and conditions specified in
Section 8 hereof. Consultants and directors who are not employees
of the Corporation shall not be entitled to receive Options
pursuant to this Section 6.
The aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of Common Stock
with respect to which Options are exercisable for the first time by
an Optionee during any calendar year may not exceed $100,000.00
Incentive Stock Options granted under this Plan are intended
to satisfy all requirements for incentive stock options under the
Code and, notwithstanding any other provision of this Plan, the
Plan and all Incentive Stock Options granted under it shall be so
construed, and all contrary provisions shall be so limited in scope
and effect and, to the extent they cannot be so limited, they shall
be void.
7. Nonqualified Stock Options. Options granted pursuant to
this Section 7 are intended to constitute Nonqualified Stock
Options and shall be subject only to the general terms and
conditions specified in Section 8 hereof.
8. Terms and Conditions of Options. Each Option granted
pursuant to the Plan shall be evidenced by a written Option
Agreement between the Corporation and the Optionee, which agreement
shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares. Each Option Agreement shall state
the number of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall
specifically identify the portion, if any, of the Option which
constitutes an Incentive Stock Option and the portion, if any,
which constitutes a Nonqualified Stock Option.
(c) Option Price. Each Option Agreement shall state the
Option Price, which shall be not less than 100% of the Fair Market
Value of the shares of Common Stock of the Corporation on the date
of grant of the Option except that any option granted under the
Plan to a person owning more than ten percent of the total combined
voting power of the Common Stock shall be at a price of 110% of
such fair market value and shall be for a term of no more than five
years, in the case of Incentive Stock Options, and not less than
80% of the Fair Market Value of the shares of Common Stock of the
Corporation on the date of grant of the Option in the case of Non-
Qualified Stock Options. The Option Price shall be subject to
adjustment as provided in Section 8(i) hereof. The date on which
the Committee adopts a resolution expressly granting an Option
shall be considered the day on which such Option is granted.
(d) Method of Exercise and Medium and Time of Payment.
Each exercise of an Option granted hereunder, whether in whole or
in part, shall be by written notice to the Secretary of the
Corporation designating the number of shares as to which the Option
is exercised, and shall be accompanied by payment in full of the
Option Price (in cash, shares or property) for the number of shares
so designated, together with any written statements required by any
applicable securities laws. The Option Price shall be paid in
cash, in shares of Common Stock having a Fair Market Value equal to
such Option Price or in property or in a combination of cash,
shares and property, and may be effected in whole or in part (i)
with monies received from the Corporation at the time of exercise
as a compensatory cash payment, or (ii) with monies borrowed from
the Corporation pursuant to repayment terms and conditions as shall
be determined from time to time by the Committee, in its
discretion, separately with respect to each exercise of Options and
each Optionee; provided, however, that each such method and time
for payment and each such borrowing and terms and conditions of
repayment shall be permitted by and be in compliance with
applicable law. The Board of Directors shall have the sole and
absolute discretion to determine whether or not property other than
cash or Common Stock may be used to purchase the shares of Common
Stock hereunder and, if so, to determine the value of the property
received.
(e) Term and Exercise of Options. Options shall be
exercisable over the exercise period as and at the times the
Committee may determine, as reflected in the Option Agreement;
provided, however, that the Committee shall have the authority to
accelerate the exercisability of any outstanding Option at such
time and under such circumstances as it, in its sole discretion,
deems appropriate. The exercise period shall be determined by the
Committee; provided, however, that such exercise period shall not
exceed ten years from the date of grant of the Option. The
exercise period shall be subject to earlier termination as provided
in Sections 8(f) and 8(g) hereof. An Option may be exercised, as
to any or all full shares of Common Stock as to which the Option
has become exercisable; provided, however, that an Option may not
be exercised at any one time as to fewer than 100 shares (or such
number of shares as to which the Option is then exercisable if such
number of shares is less than 100).
(f) Termination. Except as provided in this Section
8(f) and in Section 8(g) hereof, an Option may not be exercised
unless the Optionee is then an employee or director of or
consultant to the Corporation or a division or Subsidiary
Corporation thereof (or a corporation or a Parent or Subsidiary
Corporation of such corporation issuing or assuming the option in
a transaction to which Section 425(a) of the Code applies), and
unless the Optionee has remained continuously as an employee or
director of or consultant to the Corporation since the date of
grant of the Option. In the event that the Optionee ceases to be
an employee or director of or consultant to the Corporation (other
than by reason of death, Disability or retirement), all Options of
such Optionee that are exercisable at the time of such cessation
may, unless earlier terminated in accordance with their terms, be
exercised within three months after such cessation; provided,
however, that if the employment or consulting relationship of an
Optionee shall terminate, or if a director shall be removed, for
cause, all Options theretofore granted to such Optionee shall, to
the extent not theretofore exercised, terminate forthwith. Nothing
in the Plan or in any Option granted pursuant hereto shall confer
upon an individual any right to continue in the employ of the
Corporation or any of its divisions or Subsidiary Corporations or
interfere in any way with the right of the Corporation or its
shareholders or any such division or Subsidiary Corporation to
terminate such employment or other relationship between the
individual and the Corporation or any of its divisions and
subsidiary corporations.
(g) Death Disability or Retirement of Optionee. If an
Optionee shall die while a director of, or employed by, or a
consultant to, the Corporation or a Subsidiary Corporation thereof,
or within three months after the termination of such Optionee's
employment or directorship or consulting relationship, other than
termination for cause, or if the Optionee's employment or
directorship or consulting relationship, shall terminate by reason
of disability or retirement, all Options theretofore granted to
such Optionee (whether or not otherwise exercisable) may, unless
earlier terminated in accordance with their terms, be exercised by
the Optionee or by the Optionee's estate or by a person who
acquired the right to exercise such Option by bequest or
inheritance or otherwise by reason of the death or Disability of
the Optionee, at any time within one year after the date of death,
Disability or retirement of the Optionee.
(h) Nontransferability. Options granted under the Plan
shall not be transferable other than by will or by the laws of
descent and distribution, and Options may be exercised, during the
lifetime of the Optionee, only by the Optionee or by his guardian
or legal representative.
Any attempted sale, pledge, assignment, hypothecation or
other transfer of an option contrary to the provisions hereof and
the levy of any execution, attachment or similar process upon an
option shall be null and void and without force or effect.
As a condition to the transfer of any shares of Common
Stock issued under this Plan, the Corporation may require an
opinion of counsel, satisfactory to the Corporation, to the effect
that such transfer will not be in violation of the Securities Act
of 1933 or any other applicable securities laws or that such
transfer has been registered under federal and all applicable state
securities laws. Further, the Corporation shall be authorized to
refrain from delivering or transferring shares of Common Stock
issued under this Plan until the Board of Directors determines that
such delivery or transfer will not violate applicable securities
laws and the Optionee has tendered to the Corporation any federal,
state or local tax owed by the Optionee as a result of exercising
the Option, or disposing of any Common Stock, when the Corporation
has a legal liability to satisfy such tax. The Corporation shall
not be liable for damages due to delay in the delivery or issuance
of any stock certificate for any reason whatsoever, including, but
not limited to, a delay caused by listing requirements of any
securities exchange or any registration requirements under the
Securities Act of 1933, the Securities Exchange Act of 1934, or
under any other state or federal law, rule or regulation. The
Corporation is under no obligation to take any action or incur any
expense in order to register or qualify the delivery or transfer of
shares of Common Stock under applicable securities laws or to
perfect any exemption from such registration or qualification.
Furthermore, the Corporation will have no liability to any Optionee
for refusing to deliver or transfer shares of Common Stock if such
refusal is based upon the foregoing provisions of this Paragraph.
(i) Effect of Certain Changes.
(1) If there is any change in the number of shares
of Common Stock through the declaration of stock dividends, or
through recapitalization resulting in stock splits, or combinations
or exchanges of such shares, the number of shares of Common Stock
available for Options, the number of such shares covered by
outstanding Options, and the price per share of such Options, shall
be proportionately adjusted by the Committee to reflect any
increase or decrease in the number of issued shares of Common
Stock; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated.
(2) In the event of the proposed dissolution or
liquidation of the Corporation, in the event of any corporate
separation or division, including, but not limited to, split-up,
split-off or spin-off, or in the event of a merger or consolidation
of the Corporation with another corporation, the Committee may
provide that the holder of each Option then exercisable shall have
the right to exercise such Option (at its then Option Price) solely
for the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such
dissolution, liquidation, or corporate separation or division, or
merger or consolidation by a holder of the number of shares of
Common Stock for which such Option might have been exercised
immediately prior to such dissolution, liquidation, or corporate
separation or division, merger or consolidation; or the Committee
may provide, in the alternative, that each Option granted under the
Plan shall terminate as of a date to be fixed by the Committee;
provided, however, that not less than 30 days' written notice of
the date so fixed shall be given to each Optionee, who shall have
the right, during the period of 30 days preceding such termination,
to exercise the Options as to all or any part of the shares of
Common Stock covered thereby, including shares as to which such
Options would not otherwise be exercisable.
(3) Paragraph (2) of this Section 8(i) shall not
apply to a merger or consolidation in which the Corporation is the
surviving corporation and shares of Common Stock are not converted
into or exchanged for stock, securities of any other corporation,
cash or any other thing of value. Notwithstanding the preceding
sentence, in case of any consolidation or merger of another
corporation into the Corporation in which the Corporation is the
surviving corporation and in which there is a reclassification or
change (including a change to the right to receive cash or other
property) of the shares of Common Stock (other than a change in par
value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in such shares
into two or more classes or series of shares), the Committee may
provide that the holder of each Option then exercisable shall have
the right to exercise such Option solely for the kind and amount of
shares of stock and other securities (including those of any new
direct or indirect parent of the Corporation), property, cash or
any combination thereof receivable upon such reclassification,
change, consolidation or merger by the holder of the number of
shares of Common Stock for which such Option might have been
exercised.
(4) In the event of a change in the Common Stock of
the Corporation as presently constituted, which is limited to a
change of all of its authorized shares with par value into the same
number of shares with a different par value or without par value,
the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.
(5) To the extent that the foregoing adjustments
relate to stock or securities of the Corporation, such adjustments
shall be made by the Committee, whose determination in that respect
shall be final, binding and conclusive, provided that each
Incentive Stock Option granted pursuant to this Plan shall not be
adjusted in a manner that causes such option to fail to continue to
qualify as an Incentive Stock Option within the meaning of Section
422A of the Code.
(6) Except as hereinbefore expressly provided in
this Section 8(i), this Optionee shall have no rights by reason of
any subdivision or consolidation of shares of stock of any class or
the payment of any stock dividend or any other increase or decrease
in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger, or consolidation or spin- off of
assets or stock of another corporation; and any issue by the
Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to the
Option. The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structures or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or part of its
business or assets.
(j) Rights as Shareholder - Non-Distributive Intent.
Neither a person to whom an Option is granted, nor such person's
legal representative, heir, legatee or distributee, shall be deemed
to be the holder of, or to have any rights of a holder with respect
to, any shares subject to such Option, until after the Option is
exercised and the shares are issued to the person exercising such
Options. Upon exercise of an Option at a time when there is no
registration statement in effect under the Securities Act of 1933
relating to the shares issuable upon exercise and available for
delivery of a prospectus meeting the requirements of Section
10(a)(3) of said Act, shares may be issued to the Optionee only if
the Optionee represents and warrants in writing to the Corporation
that the shares purchased are being acquired for investment and not
with a view to the distribution thereof. No shares shall be issued
upon the exercise of an Option unless and until there shall have
been compliance with any then applicable requirements of the
Securities and Exchange Commission, or any other regulatory
agencies having jurisdiction over the Corporation. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distribution or other rights
for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 8(i) hereof.
(k) Other Provisions. The Option Agreements authorized
under the Plan shall contain such other provisions, including,
without limitation, (i) the imposition of restrictions upon the
exercise of an Option, and (ii) in the case of an Incentive Stock
Option, the inclusion of any condition not inconsistent with such
Option qualifying as an Incentive Stock Option, as the Committee
shall deem advisable.
(l) Forfeiture Provisions: All shares of Common Stock
purchased on exercise of all Nonqualified Options granted after the
date of this Plan Amendment (and all shares of Common Stock
purchased on exercise of all Nonqualified Options granted prior to
such date provided that the holder consents), shall be subject to
forfeiture back to the Corporation in the event of termination of
employee, director or consultant status with the Corporation on or
before January 5 of the second calendar year after exercise. For
example, Common Stock purchased on September 1, 1993 by exercise of
a Nonqualified Option, will be subject to forfeiture through
January 5, 1995. Provided, that upon exercise of a Nonqualified
Option at a time when there is a registration statement in effect
under the Securities Act of 1933 relating to the shares issuable
upon exercise, the preceding forfeiture provisions of this
paragraph shall immediately terminate.
9. Agreement by Optionee Regarding Withholding Taxes. If
the Committee shall so require, as a condition of exercise, each
Optionee shall agree that:
(a) No later than the date of exercise of any Option
granted hereunder, the Optionee will pay to the Corporation or make
arrangements satisfactory to the Committee regarding payment of any
federal, state or local taxes of any kind required by law to be
withheld upon the exercise of such Option; and
(b) The Corporation shall, to the extent permitted or
required by law, have the right to deduct federal, state and local
taxes of any kind required by law to be withheld upon the exercise
of such Option from any payment of any kind otherwise due to the
Optionee.
The Corporation shall not be obligated to advise any
Optionee of the existence of any such tax or the amount which the
Corporation will be so required to withhold.
10. Term of Plan. Options may be granted pursuant to the
Plan from time to time within a period of ten years from the date
the Plan is adopted by the Board, or the date the Plan is approved
by the shareholders of the Corporation, whichever is earlier.
11. Amendment and Termination of the Plan. The Board at any
time and from time to time may suspend, terminate, modify or amend
the Plan; provided, however, that any amendment that would
materially increase the aggregate number of shares of Common Stock
as to which Options may be granted under the Plan or materially
increase the benefits accruing to participants under the Plan or
materially modify the requirements as to eligibility for
participation in the Plan shall be subject to the approval of the
holders of a majority of the Common Stock issued and outstanding,
except that any such increase or modification that may result from
adjustments authorized by Section 8(i) hereof shall not require
such approval. Except as provided in Section 8 hereof, no
suspension, termination, modification or amendment of the Plan may
adversely affect any Option previously granted, unless the written
consent of the Optionee is obtained.
12. Approval of Shareholders. The Plan shall take effect
upon its adoption by the Board but shall be subject to the approval
of the holders of a majority of the issued and outstanding shares
of Common Stock of the Corporation, which approval must occur
within 12 months after the date the Plan is adopted by the Board.
13. Assumption. The terms and conditions of any outstanding
Options granted pursuant to this Plan shall be assumed by, be
binding upon and inure to the benefit of any successor corporation
to the Corporation and shall continue to be governed by, to the
extent applicable, the terms and conditions of this Plan. Such
successor corporation shall not otherwise be obligated to assume
this Plan.
14. Termination of Right of Action. Every right of action
arising out of or in connection with the Plan by or on behalf of
the Corporation or of any Subsidiary, or by any shareholder of the
Corporation or of any Subsidiary against any past, present or
future member of the Board, or against any employee, or by an
employee (past, present or future) against the Corporation or any
Subsidiary, will, irrespective of the place where an action may be
brought and irrespective of the place of residence of any such
shareholder, director or employee, cease and be barred by the
expiration of three years from the date of the act or omission in
respect of which such right of action is alleged to have risen.
15. Tax Litigation. The Corporation shall have the right,
but not the obligation, to contest, at its expense, any tax ruling
or decision, administrative or judicial, on any issue which is
related to the Plan and which the Board believes to be important to
holders of Options issued under the Plan and to conduct any such
contest or any litigation arising therefrom to a final decision.
IN WITNESS WHEREOF, the foregoing is the 1989 Stock Option
Plan of U.S. Energy Corp., as amended at September 1, 1992,
September 3, 1993, January 6, 1994 and December 22, 1995.
U.S. ENERGY CORP.
By: s/ Max T. Evans
----------------------------
MAX T. EVANS, Secretary