EXHIBIT 4.2
U.S. ENERGY CORP.
1998 STOCK OPTION PLAN
As adopted by the Board of Directors on June 15, 1998 and
constituting a restatement of the 1989 Stock Option Plan,
which was Amended September 1, 1992, September 3, 1993,
January 6, 1994, December 22, 1995, and December 13, 1996.
1. Purpose. Restrictions on Amount Available Under the Plan. This 1998
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 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.
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(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.
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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 2,750,000. 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. If more than $100,000 of shares is subject to
Options held by an Optionee, the Corporation shall cause (A)the maximum number
of Options to be designated ISOs and the balance to be designated nonqualified
stock options; or (B) different share certificates to be issued on first
exercise, such that one certificate shall be issued for the shares which are
issued under the ISOs, and another certificate shall be issued for the
nonqualified stock options.
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
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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
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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
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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
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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
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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.
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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.
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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 1998 Stock Option Plan of U.S.
Energy Corp., as amended at September 1, 1992, September 3, 1993, January 6,
1994, December 22, 1995, December 13, 1996 and June 15, 1998, and as such, this
1998 Stock Option Plan constitutes a restatement of the 1989 Stock Option Plan.
This 1998 Stock Option Plan is to be submitted to the shareholders of the
Corporation for approval at the 1998 Annual Meeting of Shareholders.
U.S. ENERGY CORP.
By: /s/ Max T. Evans
------------------------------
MAX T. EVANS, Secretary
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