exhibit4_3.htm


    
      

    

     

     

    
      2008
Stock Option Plan for U. S. Energy Corp.

      Indpendent
Directors and Advisory Board Members

      


      


      Article
I

      


      Purpose

      


      This
Stock Option Plan (hereafter the "Plan") of U. S. Energy Corp. (the "Company")
for Independent Directors and Advisory Board members, is intended to advance the
Company by providing an  to obtain a proprietary interest to those
persons who serve as Independent Directors or Advisory Board members for 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.           For
purposes of this Plan, "Board” or “Committee" shall mean the Company's Board of
Director members who are not Independent Directors or Advisory Board members as
defined by NASDAQ.  The Committee shall be composed of not less than
three persons.  No Independent Board or Advisory Board members are
allowed to vote on the issuance of options under this Plan.

      


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

      


      c.           "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.

      


      d.           "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.

      


      e.           "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.

       

       

       

      
        
           

        

        
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      f.           "
Stock Option" or "Option" shall mean a non-qualified stock option issued under
the Plan which is not intended to meet the terms of Code Section 422A for
qualified options (i.e., a "Non-Qualified Stock Option").

      


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

      


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

      


      i.           "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  shall administer the Plan with full power to grant 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 Options, and the amount and terms and
conditions of such Options shall rest in the sole discretion of the Committee,
subject to the provisions of this Plan. Eligibility and vesting shall be
determined under Article V.

      


      3.3           The
Committee may cancel any 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
Committee, may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, or in any granted 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 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           It
is understood that the options granted hereunder shall be non-qualified options,
i.e., options that do not qualify as "incentive stock options" under Section
422A of the Code.

       

       

      
        
           

        

        
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      3.9           Management
of the Company shall supply full and timely information to the Committee on all
matters relating to eligible Independent Directors and Advisory Board members,
their duties and performance, and current information on death, retirement and
disability or other termination of service 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 always be equal to one percent (1%) of the Company’s total issued and
outstanding shares of Common Shares.  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 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 Stock Options.

      


      Article
V

      


      Eligibility,
Vesting and Allocation

      


      5.1           Eligibility. Stock Options may
be granted to Independent Directors and Advisory Board members of the Company as
determined by the Committee.

      


      The
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, Stock Options generally shall be exercisable at the rates established by
the Committee.

      


      5.3           Allocation. The number of
Stock Options to be issued in any calendar year shall be in the discretion of
the Committee.

      


      Article
VI

      


      Terms
and Conditions

      


      6.1           Form of Option Agreement. All
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 Stock Options shall be equal to or more than 100% of the Fair Market
Value of a Common Share on the grant date.

       

       

      
        
           

        

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

      


      6.4           Time of Exercise. No Stock
Option  shall be exercisable after the expiration of ten years from
the date such is granted. Subject to Article V, the Committee may establish
installment exercise terms for an 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 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 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 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 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 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


       

       

       

       

      
        
           

        

        
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      Exchange
Commission.

       

       

      
        
           

        

        
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      6.8           Termination of Service as an
Independent Director or Advisory Board member, Disability, or Death of Optionee.
If an Optionee shall cease service to the Company as an Independent
Director or Advisory Board member, 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 service 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 service 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 of service; however, that if the service 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 from service
      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 serving 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 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 service 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 service relationship. In
case of a leave of absence other than military leave, the service 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 serve the Company shall no longer be
guaranteed by statute or contract.

      


      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, 

       

       

       

      
        
           

        

        
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      combination
of shares, stock split-up, or stock dividend not taken place;

       

       

       

      
        
           

        

        
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      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
Committee, 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 Committee 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
      increase 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           No
Option may be granted during any suspension of the Plan or after termination of
the Plan.

       

       

       

      
        
           

        

        
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      Article
X

      


      Regulations

      


      10.0           The
obligation of the Company to issue Common Shares for exercised Stock Options
shall be subject to all applicable 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, on the NASDAQ market system, or the requirements of other changes or
quotation markets.

      


      Article
XI

      


      Miscellaneous
Provisions

      


      11.1 No Right to Service as an Independent
Director or Advisory Board member. 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 serve as an
Independent Board or Advisory Board member of the Company, or to continue any
such service 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 Independent Board and Advisory Board
members 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 Independent Board and Advisory Board members of other corporations who
become Independent Board and or Advisory Board members 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.

       

       

       

      
        
           

        

        
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      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 service to 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
shall be final.

      


      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 fine 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

      


      Shareholder
Approval and Effective Date

      


      14.0           This
Plan is effective as of the date it is approved by the
shareholders.

      


      * * * * *
* * *

      


       

       

      
        
           

        

        
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      This Plan
was presented to the Shareholders of the Company and approved by the
Shareholders on June 27, 2008 and incorporated into the minutes and books of the
Company.

      


      ATTEST:                                                                           U.S.
ENERGY CORP.

      


      


      


      /s/  Steven R.
Youngbauer                /s/
Mark J Larsen        
Secretary                                                                           President

       

      
 

      
        
           

        

        
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