AMENDED AS OF JUNE 16, 2003
                            BY THE BOARD OF DIRECTORS

                        2001 INCENTIVE STOCK OPTION PLAN
                                      FOR
                               U. S. ENERGY CORP.

                                    ARTICLE I

                                    PURPOSE

This  Incentive  Stock  Option Plan (hereafter the "Plan") of U. S. Energy Corp.
(the  "Company")  for executive and other key persons and employees, is intended
to  advance  the  Company  by  providing  an  incentive  to obtain a proprietary
interest  to  those  persons  who  have  management  and  key  employment
responsibilities,  and  to  others  who  serve  the  Company.

                                   ARTICLE II

                                  DEFINITIONS

For  Plan  purposes,  except  where the context clearly indicates otherwise, the
following  terms  shall  have  the  meanings  set  forth:

a.     "Board"  shall  mean  the  Company's  Board  of  Directors.

b.     "Code"  shall mean the Internal Revenue Code of 1986 as amended from time
to  time,  and  the  rules  and  regulations  promulgated  thereunder.

c.     "Committee"  shall  mean  the  Compensation  Committee,  or  such  other
committee  of  the  Board  designated by the Board to administer the Plan. Until
such  time  as  the  Board  may  designate  such  committee,  this Plan shall be
administered  by the Board. The Committee shall be composed of not less than two
persons  appointed  by  the  Board; Committee members also may be members of the
Board.  Options  also may be granted by the Board. No member of the Committee or
of  the  Board shall vote on issuance of an Incentive Stock Option to himself or
herself.

d.     "Common  Shares"  shall mean shares of the Company's Common Stock, or, in
the  event  that  the  outstanding  Common  Shares are hereafter changed into or
exchanged  for  different shares or securities of the Company, such other shares
or  securities.

e.     "Company"  shall  mean U. S. Energy Corp., a Wyoming Corporation, and any
parent or subsidiary of such corporation, as the terms "parent" and "subsidiary"
are  defined  in  Sections  425(e)  and  (f)  of  the  Code.

f.     "Fair  Market  Value"  shall mean, with respect to the date a given stock
option  is  granted or exercised, the average of the highest and lowest reported
sales  prices  of  the Common Shares as reported in any trading market where the
Company then is listed, or if there were no transactions in the Common Shares on
such  day,  then the last preceding day on which transactions took place. If the
Common  Shares  of  the  Company  are not traded in any public market, then fair
value  may be established by reference to sales of Common Shares by the Company,
or  to  sales  by  shareholders of outstanding Common Shares held by them, or to
sales  by  third  parties  of  outstanding Common Shares which had been owned by
shareholders  of  record  (for  example,  sales  by a trustee in bankruptcy or a
secured  creditor  or  by  order  of  court  in  domestic  relations  or probate
proceedings).  The  above  notwithstanding, the Committee may determine the Fair
Market  Value  in  such  other  manner  as  it  may deem more equitable for Plan
purposes  or  as  is  required  by applicable laws or regulations. The Committee
always  shall  take  into  account and duly consider developments in the Company
since  the  date of the sale or sales being used to determine Fair Market Value,
including  without  limitation  material  changes  in earnings per Common Share,
contracts  for  new  business,  and  other  factors.

g.     "Incentive  Stock  Option" or "ISO" or "Option" shall mean a stock option
issued  under  the Plan which is intended to meet the terms of Code Section 422A
for  qualified  options  (i.e.,  a  "Qualified  Incentive  Stock  Option").

h.     "Optionee"  shall  mean  the person to whom has been granted an Incentive
Stock  Option.

i.     "Stock Option Agreement" shall mean the agreement between the Company and
the  Optionee  under  which  the  Optionee  may  purchase  Common  Shares.

j.     "Ten  Percent Shareholder" shall mean an employee who owns ten percent or
more  of  the  Common  Shares  as  such  amount is calculated under Code Section
422A(b)(6).  Attribution  rules  under  Code  Section  425(d)  are applicable to
determine  whether  the  ten  percent  ownership  rule  is  satisfied.

k.     "Vesting"  and  "vested"  shall  mean  the  times(s)  when  options  are
exercisable  as  determined  by  the Committee (or the Board if no Committee has
been  established),  subject  to  the  provisions  of  this  Plan.

                                  ARTICLE III

                                 ADMINISTRATION

3.1     The  Committee  (or  the  Board,  until a Committee is designated) shall
administer  the  Plan  with  full  power  to  grant Incentive Stock Options, and
construe and interpret the Plan, establish rules and regulations and perform all
other  acts  it  believes  reasonable  and  proper.

3.2     The  determination of those eligible to receive Incentive Stock Options,
and  the  amount and terms and conditions of such Options shall rest in the sole
discretion  of  the  Committee  (or  the  Board, if no Committee is designated),
subject  to  the  provisions  of  this  Plan.  Eligibility  and vesting shall be
determined  under  Article  V.

3.3     The  Committee  may  cancel  any  Incentive Stock Options if an Optionee
conducts  herself  or  himself  in  a  manner  which the Committee in good faith
determines  to  be  not  in  the  best interests of the Company, as set forth in
Section  11.7.

3.4     The  Board,  or  the  Committee,  may  correct  any  defect,  supply any
omission,  or  reconcile  any  inconsistency  in  the  Plan,  or  in any granted
Incentive  Stock Option, in the manner and to the extent it shall deem necessary
to  carry  it  into  effect.

3.5     Any  decision  made,  or  action  taken,  by  the Committee or the Board
arising  out  of  or in connection with the interpretation and administration of
the  Plan  shall  be  final  and  conclusive.

3.6     Meetings  of  the  Committee  shall  be held at such times and places as
shall  be  determined  by the Committee. Notice of meetings shall be made in the
same  manner  as required for Board meetings under the Bylaws. A majority of the
members  of  the  Committee  shall  constitute  a  quorum for the transaction of
business,  and  the vote of a majority of those members present shall decide any
question  brought  before  that meeting. In addition, the Committee may take any
action  otherwise  proper  under  the Plan by the signed affirmative vote, taken
without  an  actual  meeting,  of  all members. All proceedings of the Committee
shall  be  evidenced  by  complete and detailed minutes, signed by the Committee
members.

3.7     No  member  of  the Committee shall be liable for any act or omission of
any  other  member of the Committee or for any act or omission on her or his own
part,  including,  but  not  limited to, the exercise of any power or discretion
given  to  her or him under the Plan, except those resulting from her or his own
bad  faith,  gross  negligence,  or  willful  misconduct.

3.8     The  Plan shall always be administered in such a manner as to permit the
Options  to qualify as "incentive stock options" under Section 422A of the Code.
3.9     Management  of  the  Company shall supply full and timely information to
the  Committee  on  all matters relating to eligible employees, their duties and
performance,  and  current  information  on  death, retirement and disability or
other  termination  of  employment  of  Optionees,  and  such  other  pertinent
information  as  the  Committee  may  require.  The  Company  shall  furnish the
Committee  with clerical and other assistance as necessary in performance of its
duties  hereunder.

                                   ARTICLE IV

                            NUMBER OF RESERVED SHARES

4.1     RESERVED  SHARES.  The  total  number  of  Common  Shares of the Company
available  for  issuance  under  the  Plan shall be 3,000,000 shares, subject to
adjustment  under  Article VII. The reserved shares may be either authorized but
unissued,  or  previously  issued  and  subsequently  reacquired.

4.2     SHARES UNDER EXPIRED OR TERMINATED OPTIONS. If an Incentive Stock Option
or  portion thereof shall expire or terminate for any reason without having been
exercised  in  full, the unpurchased shares shall be available for future grants
of  Incentive  Stock  Options.

                                    ARTICLE V

                      ELIGIBILITY, VESTING AND ALLOCATION

5.1     ELIGIBILITY.  Qualified  Incentive  Stock  Options  may  be  granted  to
officers and employees of the Company and of the Company's parent, subsidiary or
affiliate  companies,  as  determined  by  the  Committee.
The  Compensation  Committee  shall determine the length of service required for
each  Optionee  to  be  eligible  to  participate  in  this  Plan.

5.2     VESTING. Subject to Section 6.8, Incentive Stock Options generally shall
be  exercisable  at  the  rates  established  by  the  Committee.
5.3     ALLOCATION.  The  number  of Incentive Stock Options to be issued in any
calendar  year  shall  be in the discretion of the Committee (or the Board if no
Committee  has  been  established).

                                   ARTICLE VI

                              TERMS AND CONDITIONS

6.1     FORM OF OPTION AGREEMENT. All Incentive Stock Options shall be evidenced
by  agreements  in the form of Attachment A hereto, or in such other form as may
be  duly approved pursuant to this Plan. Any such other form shall be subject to
applicable  provisions  of  the Plan, and such other provisions as the Committee
may  adopt,  but  always  shall include the provisions set forth in Sections 6.2
through  6.10  below.

6.2     PRICE.  The option price per share for Qualified Incentive Stock Options
shall  be equal to  100% of the Fair Market Value of a Common Share on the grant
date.  The  price  at  which shares may be purchased on exercise of an Incentive
Stock  Option by a Ten Percent Shareholder shall be not less than 110 percent of
the  Fair  Market  Value  on  the  grant  date.

6.3     TIME  OF  GRANT.  All  Incentive Stock Options must be granted within 10
years  from  the  date  this Plan is adopted by shareholders. An Incentive Stock
Option will remain exercisable until termination of the Option, even if the Plan
itself  has  been  terminated.

6.4     TIME  OF  EXERCISE. No Incentive Stock Option granted to any Ten Percent
Shareholder  shall  be  exercisable  after the expiration of five years from the
date  such  is  granted.  Subject  to  Article  V,  the  Committee may establish
installment  exercise  terms for an Incentive Stock Option, such that the Option
becomes  fully  exercisable  over  a  series  of  cumulating  portions.

If  an  Optionee  shall  not,  in any given installment period, purchase all the
Common  Shares  available  within such period, such Optionee's right to purchase
any  Common Shares not purchased in such installment period shall continue until
the  expiration or sooner termination of such Option, unless there is a contrary
provision  in  the  Stock  Option  Agreement.

6.5     EXERCISE.  An  Incentive  Stock Option shall be exercised by delivery of
(a)  a  written  notice  of exercise (in the form of Attachment B hereto) to the
Company  specifying the number of Common Shares to be purchased, and (b) payment
of  the  full  price  of  such  Common  Shares,  as  set  forth  in Section 6.6.

Not  less  than 100 Common Shares may be purchased at one time unless the number
purchased  is  the  total  number  at the time available for purchase. Until the
Common  Shares represented by an exercised Option are issued to an Optionee, she
or  he  shall  have  none  of  the  rights  of  a  shareholder.

6.6     METHOD  OF  PAYMENT. The purchase price for an Incentive Stock Option or
portion  thereof  may  be  paid:

     a.   In  United  States  dollars  by cashier's check, certified check, bank
          draft,  or  money  order  payable to order of the Company in an amount
          equal  to  the  option  price;  or

     b.   At the discretion of the Committee, through the delivery of fully paid
          and  non-assessable Common Shares, with an aggregate Fair Market Value
          on  the  date of the exercise equal to the option price, provided such
          tendered  shares have been owned by the Optionee for at least one year
          prior  to  such  exercise;  or

     c.   By  a  combination  of  a.  and  b.;  or

     d.   In any other lawful consideration approved by the Committee, including
          without  limitation Promissory notes, salary set-offs, and exchange of
          options  with  higher  exercise  prices.

The  Committee shall determine acceptable methods for tendering Common Shares as
payment  upon exercise, and may impose limitations on such use of Common Shares.

6.7     TRANSFERABILITY.  Except by will or the laws of descent and distribution
as  provided  by  Section  6.8(c) below, and except for transfers to a Permitted
Transferee,  no  Option, and no right or interest in any Incentive Stock Option,
shall  be  assignable or transferable. Transfers to a Permitted Transferee shall
be  authorized  only  if (i) the transfer is a bona fide gift and not payment of
anything  to  any  person,  directly  or  indirectly; (ii) the Optionee receives
nothing  of  value,  directly  or  indirectly,  for  the  gift;  and  (iii)  the
transferred Options continue to be subject to the identical terms and conditions
as  the  Options prior to such transfer. A Permitted Transferee means (and shall
be  limited  to)  an  Optionee's  Family  Members: child, stepchild, grandchild,
parent,  stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law,  father-in-law,  son-in-law,  daughter-in-law,  brother-  or
sister-in-law  (including adoptive relationships); anyone sharing the Optionee's
household (but not as a tenant or employee), or a trust or other entity in which
the  Optionee  and Family Members hold more than 50% of its beneficial or voting
interest.  It  is  intended  that  the preceding comply with General Instruction
A(l)(a)(5)  to  Form  S-8  adopted  by  the  Securities and Exchange Commission.

6.8     TERMINATION  OF  EMPLOYMENT,  DISABILITY,  OR  DEATH  OF OPTIONEE. If an
Optionee  shall cease to be employed by the Company, dies, or become permanently
or  totally  disabled (within the meaning of Section 22(e)(3) of the Code) while
he  or  she  is  holding  Options,  each  Option  shall  expire  as  follows:

     a.   If  the  Optionee's  termination  of  employment occurs for any reason
          except death, disability, or retirement pursuant to a Company approved
          retirement policy then in effect, during the first year after grant of
          the  Option,  the  Optionee's right to exercise shall terminate to the
          extent  not  theretofore  exercised

     b.   If  the  Optionee's  termination  of employment occurs for any reason,
          except  death  or  disability,  more than 12 months after grant of the
          Option,  the  Optionee shall have the right to exercise the Option for
          three  months  after termination to the extent that it was exercisable
          on  the  date  of  termination;  however, that if the employment 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.

     c.   If  at  any  time  after  date  of the grant, the Optionee (i) retires
          pursuant  to  a  Company approved retirement policy then in effect, or
          (ii)  becomes  permanently and totally disabled (within the meaning of
          Section 105(b)(4) of the Code), the Option shall become exercisable in
          full  on  the  date  of  such  retirement  or  disability  and  remain
          exercisable  for  one  year.

     d.   If  the Optionee shall die while employed by the Company, the personal
          representative  or  administrator  of  the  Optionee's  estate  or the
          person(s)  to  whom  the  Option  was  validly transferred by personal
          representative  or administrator, shall have the right to exercise the
          Option  for  one  year  after  death.

No  transfer  of an Incentive Stock Option by the will of an Optionee, or by the
laws  of probate shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and an authenticated copy of the
will and/or such other evidence as the Committee may deem necessary to establish
validity  of  the  transfer.

6.9     LEAVES  OF ABSENCE. For purposes of the Plan, it shall not be considered
a  termination  of  employment  when  an  Optionee  is  placed by the Company on
military  or  sick  leave  or  other  type  of  leave  of  absence considered as
continuing  intact  the  employment  relationship. In case of a leave of absence
other  than military leave, the employment relationship shall be continued until
the  later  of  the  date  when  such  leave equals 90 days or the date when the
Optionee's  right to reemployment with the Company shall no longer be guaranteed
by  statute  or  contract.

6.  10     ANNUAL $100,000 LIMIT ON EACH ISO OPTIONEE. Notwithstanding any other
provision  of  the  Plan,  the aggregate Fair Market Value of the Common Shares,
determined  as of the time such Option is granted, for which any Optionee may be
granted  Incentive Stock Options under the Plan shall not exceed $100,000 in any
such  same calendar year. The Compensation Committee may reclassify Options from
unqualified to qualified status under the Code from time to time to maximize the
tax  benefits  to  Optionees.

                                  ARTICLE VII

                    ADJUSTMENTS ON CHANGES IN CAPITALIZATION

7.1     In  the  event  that  the  outstanding  Common Shares of the Company are
hereafter  changed into or exchanged for a different number or kind of shares or
other  securities  of  the Company prompt, proportionate, equitable, lawful, and
adequate  adjustment  shall  be  made of the aggregate number and kind of shares
subject  to  Options  which  may have been granted, such that the Optionee shall
have  the  right to purchase such Common Shares as may be issued in exchange for
those  purchasable  on  exercise  of the Options had such merger, consolidation,
other reorganization, recapitalization, reclassification, combination of shares,
stock  split-up,  or  stock  dividend  not  taken  place.

7.2     The  foregoing  adjustments  and  their  manner  of application shall be
determined  solely by the Committee (or by the Board, if there be no committee).
No  fractional  shares  shall  be  issued  under the Plan on account of any such
adjustments.

                                  ARTICLE VIII

                            MERGER OR CONSOLIDATION

8.0     If  the  Company  shall be a party to a binding agreement to any merger,
consolidation, or reorganization of which the Company shall not be the survivor,
each  outstanding  Option  shall  pertain  and  apply  to the securities which a
shareholder of the Company would be entitled to receive pursuant to such merger,
consolidation,  or  reorganization.  Every  Optionee  shall  have  the  right
immediately prior to taking effect of such a transaction, to exercise the Option
to  the  extent not exercised by such date. If Options are not exercised by such
date,  the  unexercised  Options  shall  be  deemed exchanged for new options to
purchase  common  shares  in the successor company, adjusted as necessary (as to
price  and/or  number  of  shares) to preserve the Optionee's opportunity to buy
stock  in  the  successor  company,  in  the  proportion  that the Common Shares
(including Options as if they had been exercised before the transaction) bear to
the  total  outstanding  securities  of  the  successor  company.

                                   ARTICLE IX

                        AMENDMENT AND TERMINATION OF PLAN

9.1     The Board, without further approval of the shareholders, and at any time
and  from time to time, may suspend or terminate the Plan in whole or in part or
amend  it  in  such  respects  as  the  Board  deems appropriate and in the best
interest of the Company; provided, however, that no such amendment shall be made
which  would,  without  approval  of  the  shareholders:

     a.   Materially  modify the eligibility requirements for receiving Options;

     b.   Increase  the  total  number  of  Common  Shares  which  may be issued
          pursuant  to  Options,  except  in  accordance  with  Article  VII;

     c.   Reduce  the  minimum  exercise  price  per  Common  Share,  except  in
          accordance  with  Article  VII;

     d.   Extend  the  period  of  granting  Options;  or

     e.   Materially  modify  in  any  other  way  the  benefits  to  Optionees.

9.2     No amendment, suspension, or termination of this Plan shall, without the
Optionee's  consent,  alter  or  impair  any  of the rights or obligations under
issued  Options.

9.3     The Board may amend the Plan, subject to the limitations cited above, as
may  be  necessary to permit the granting of Incentive Stock Options meeting the
requirements  of  the  Code.

9.4     No  Option  may  be  granted  during any suspension of the Plan or after
termination  of  the  Plan.

                                    ARTICLE X

                                  REGULATIONS

10.0     The  obligation  of  the  Company  to issue Common Shares for exercised
Incentive  Stock  Options  shall  be  subject to laws and regulations, including
without  limitation (i) for citizens of the United States, the Securities Act of
1933  and  state  securities  laws,  (ii)  for  citizens  of  Canada  and  other
jurisdictions,  the securities laws of Canada and other jurisdictions, and (iii)
if  the  Company  is listed, the regulations of the NASDAQ market system, or the
requirements  of  other  exchanges  or  quotation  markets.

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

11.1     NO  RIGHT  TO EMPLOYMENT. No person shall have any claim or right to be
granted an Option under the Plan, and the grant thereof under the Plan shall not
be  construed  as giving any person the right to be employed by or retained as a
consultant  for  the  Company,  or to continue any such employment or consulting
status.

11.2     PLAN  EXPENSES. The Company will pay all expenses of administering this
Plan.

11.3     USE OF EXERCISE PROCEEDS. Money received from Optionees on the exercise
of  Options  shall  be  used  for the general corporate purposes of the Company.

11.4     FOREIGN  NATIONALS.  Without  amending  the Plan, grants may be made to
employees  of  the  Company  who  are  foreign nationals or employed outside the
United  States,  or  both,  on  terms  and conditions consistent with the Plan's
purpose  but  different  from those specified in the Plan as may be necessary or
desirable  to  create  equitable  opportunities,  given differences in tax laws.

11.5     INDEMNIFICATION. In addition to such other rights of indemnification as
they  may  have  as  members  of  the Board or the Committee, the members of the
Committee  shall  be  indemnified  by the Company against all costs and expenses
reasonably  incurred  by them in connection with any action, suit, or proceeding
to  which  they  or  any  of  them may be party by reason of any action taken or
failure  to  act  under  or  in  connection  with the Plan or any Option granted
thereunder, and against all amounts paid by them in settlement thereof (provided
such  settlement  is  approved  by  independent  legal  counsel  selected by the
Company) or paid by them in satisfaction of a judgment in any such action, suit,
or  proceeding,  except  a  judgment based upon a finding of bad faith; provided
that  upon  the institution of any such action, suit, or proceeding, a Committee
member shall, in writing, give the Company notice thereof and an opportunity, at
its  own expense, to handle and defend the same before such member undertakes to
handle  and  defend  it  on  her  or  his  own  behalf.

11.6     SUBSTITUTE OPTIONS. Options may be granted under this Plan from time to
time  in  substitution  for  options held by employees of other corporations who
become  employees  of the Company as the result of a merger or the consolidation
of  the employing corporation with the Company or the acquisition by the Company
of  the assets of the employing corporation or the acquisition by the Company of
stock  of the employing corporation as a result of which it becomes a subsidiary
of  the  Company.

11.7      FORFEITURE FOR DISHONESTY. Notwithstanding anything to the contrary in
the  Plan,  if  the Committee in good faith finds by a majority vote, after full
consideration  of  the  facts  presented  on  behalf of both the Company and the
Optionee,  that  the  Optionee  has  been engaged in fraud, embezzlement, theft,
commission  of  a felony or dishonesty in the course of her or his employment by
the  Company  or  any  subsidiary  corporation, which damaged the Company or any
subsidiary  corporation,  or  for disclosing trade secrets of the Company or any
subsidiary  corporation, the Optionee shall forfeit all unexercised Options. The
decision  of  the  Committee  as to the cause of an Optionee's discharge and the
damage  done  to  the  Company  shall  be  final.  No decision of the Committee,
however,  shall  affect  the  finality  of the discharge of such Optionee by the
Company  or  any  subsidiary  corporation  in  any  manner.

                                  ARTICLE XII

                        INFORMATION DELIVERY REQUIREMENTS

12.1     In  order  that  the  Company  complies  with its obligations under the
securities laws, an Optionee desiring to exercise his or her options will notify
the  Chief Executive Officer or Chief Financial Officer of the Company of his or
her  intention,  in  writing.  Such Officer shall direct other officer(s) of the
Company  to  meet  with  the  individual  to  deliver  and discuss the following
information:  If  the  Company  is  registered  with the SEC, copies of its last
annual  report,  quarterly  report, proxy statement and any Form 8-K reports; If
the  Company  is  not  so  registered,  then  copies  of  the  audited financial
statements  for the last fiscal year and unaudited interim financial statements;
a  summary  of  current  and  expected  contracts and overall business strategy;
copies  of  the  articles of incorporation and significant business contracts in
place; and copies of debt/credit line documents, and any other document material
to  the evaluation of an investment in the Company. Prior to the exercise of the
Option,  the  Optionee shall acknowledge receipt of the delivered information in
writing.

                                  ARTICLE XIII

     DISPOSITION OF STOCK ACQUIRED ON EXERCISE OF AN INCENTIVE STOCK OPTION

13.1     QUALIFYING  DISPOSITION.  A  disposition  of  Common  Stock acquired by
exercise  of an ISO, where the disposition occurs after two years from the grant
of  the  ISO,  will  qualify the receipt of proceeds from disposition as capital
gains  income,  provided  that at least one year has elapsed between exercise of
the  ISO  and  disposition  of  the  Common  Shares.

13.2     DISQUALIFYING  DISPOSITION.  A  disposition of Common Stock acquired by
exercise  of  an  ISO, where the disposition occurs less than two years from the
grant  of  the  ISO, will disqualify the receipt of proceeds from disposition as
capital  gains  income,  such  that  (a)  the  receipt  of such proceeds will be
recognized  as compensation income in the calendar year of disposition, equal to
the  difference  between  the  exercise  price  and the fair market value of the
Common  Shares  at  the  time  of  exercise; and (b) for purposes of calculating
capital  gains  tax  on disposition proceeds, the basis shall equal the exercise
price  plus  the  amount  of  compensation  income  recognized.

13.3     SUBJECT  TO  CHANGE.  The foregoing provisions are subject to change in
the  Code.

                                  ARTICLE XIV

                    SHAREHOLDER APPROVAL AND EFFECTIVE DATE

14.0     This  Plan  is  effective  as  of  the date of approval by the Board of
Directors,  provided  the  shareholders  approve the plan within 12 months after
that  date.

                                * * * * * * * *

This  Incentive  Stock  Option  Plan  was  presented  to the Shareholders of the
Company  and  approved  by the Shareholders on December 7, 2001 and incorporated
into  the  minutes  and  books of the Company. Upon ratification by the Board of
Directors  on  December  7,  2001 the Plan was filed in the Company minute book.
The  Board  of  Directors amended this Plan, consistent with Article IX, on June
16,  2003,  and  the  Amended  Plan  was  filed  in  the  Company  Minute  Book.

ATTEST:                                 U.S.  ENERGY  CORP.


  /s/  Daniel  P.  Svilar                 /s/  Keith  G.  Larsen
---------------------------------      -----------------------------------------
Secretary                              President


<PAGE>


                              ATTACHMENT A TO PLAN

Number  of  Shares:  ______

Date  of  Grant:  ____________,  20___



                             STOCK OPTION AGREEMENT



Agreement made this     day of          ,     , between             ("Optionee")
                   -----      ---------- -----         -------------  and  U. S.
Energy  Corp.  (the  "Company").

1.     GRANT OF OPTION. The Company, pursuant to the provisions of the Company's
Amended  2001  Incentive  Stock  Option  Plan  ("Plan"),  hereby  grants  to the
Optionee,  subject to the terms and conditions set forth or incorporated herein,
an  Option  to  purchase  from  the  Company  all or any part of an aggregate of
 Common  Shares,  at the purchase price of $           per Share. The provisions
of  the Plan governing the terms and conditions of the Option granted hereby are
incorporated  herein  by  reference.

In the event of any conflict between this Agreement and the Plan, the Plan shall
control.

2.     EXERCISE.  This  Option  shall  be  exercisable  in  whole or in part (in
multiples  of  100  Shares,  unless for the balance of this Option) on or before
..
This  Option  shall  be  exercisable  by  delivery to the Company of a notice of
election  to  exercise,  in  the  form attached hereto, specifying the number of
Shares  to be purchased and accompanied by payment of the full purchase price. A
copy of this Stock Option Agreement shall also be delivered to the Company along
with  the  notice  of  election  of  exercise,  for the Company's endorsement of
exercise  on  Schedule  I  and  return  to  the Optionee for his or her records.


U.  S.  ENERGY  CORP.



By:------------------------------------


<PAGE>


                              ATTACHMENT B TO PLAN

U.  S.  Energy  Corp.
877  N.  8th  W.
Riverton,  WY  82501

In  accordance  with  Paragraph  2  of the Stock Option Agreement evidencing the
Option granted to me on                 , I hereby elect to exercise this Option
                       -----------------
to the extent  of           Common  Shares,  by  (circle  method  used):
                  ---------

1.     A cashier's check, certified check, bank draft, or money order payable to
order  of  the  Company  in  an  amount  equal  to  the  option  price;  or

2.     Shares  I  already  own;  or

3.     A  combination  of  1  and 2: $                cash and           shares.

When the certificate for Common Shares which I have elected to purchase has been
issued,  please deliver it to me, along with my endorsed Stock Option Agreement,
in the event there remains an unexercised balance of Shares under the Option, at
the  following  address:

Very  truly  yours,


Optionee  Signature
                   ------------------------------

Print  Name:
            -------------------------------------


<PAGE>


                                   SCHEDULE I



                                             UNEXERCISED     ISSUING
     DATE          SHARES       PAYMENT         SHARES       OFFICER
                  PURCHASED     RECEIVED       REMAINING     INITIALS