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EXECUTIVE SEVERANCE AND NON-COMPETE AGREEMENT

This Executive Severance and Non-compete Agreement (the “Agreement”) made
effective this 6th day of September, 2013, between U.S. Energy Corp, a Wyoming
corporation (the "Company") and Steven D. Richmond, the ("Executive").

WHEREAS, the Executive is presently employed by the Company as Chief Financial
Officer (“CFO”);

WHEREAS, there previously existed both an Employment Agreement and an earlier
version of this Agreement;

WHEREAS, this Agreement is intended to replace the aforementioned documents;

WHEREAS, the Board of Directors of the Company ("the Board") recognizes that the
Executive's efforts have been among the most important factors to the growth and
success of the Company, and the Board wishes to ensure continuing access to the
Executive's services to the benefit of the Company's employees and shareholders;

WHEREAS, this Agreement will benefit the Company's shareholders by placing the
Executive in a neutral position with respect to any proposed merger,
consolidation, sale of substantially all assets, change in control or similar
substantial corporate change of the Company, and accordingly enable the
Executive to better represent the Company and its shareholders in evaluating and
responding to any such transaction;

WHEREAS, this Agreement will serve to secure certain benefits for the Executive
to which the Board believes the Executive is entitled, as a result of services
rendered and services anticipated to be provided to the Company; and

WHEREAS, this Agreement will benefit the Company by ensuring that the efforts of
the Executive will be applied to the Company's activities without the
distractions which might arise if the Executive were subjected to ordinary
concerns about his personal welfare in the face of proposed mergers,
consolidations, sales of all assets, changes in control or similar substantial
corporate changes.

NOW THEREFORE, in order to effect the foregoing, the Company and the Executive
wish to enter into this Agreement on the terms and conditions set forth below,
and in consideration of the promises and the respective covenants and agreements
of the parties herein contained, it is agreed as follows:

1.           Definitions.  As used in this Agreement:

(a)           Beneficial Owner shall mean any Person who directly or through any
contract, arrangement, understanding, relationship, or otherwise has or shares
voting power (which includes the power to vote or to direct the voting) and/or
investment power
 
 
 
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(which includes the power to dispose or to direct the disposition) of a security
issued by the Company.

b)           Cause shall mean:
(i)           the negligent and continued failure by the Executive to
substantially perform his duties with the Company (other than any such failure
resulting from Disability) after a written demand for substantial performance is
delivered to the Executive, identifying the manner in which the Executive has
not substantially performed his duties, or describing his participation in
misconduct which is materially injurious to the Company, monetarily or
otherwise, unless done or omitted to be done, in good faith and with a
reasonable belief that the action or omission was in the best interest of the
Company;

(ii)  that the Executive shall have committed an intentional act of fraud,
embezzlement or theft in connection with his duties with, or in the course of
his employment with, the Company, or been convicted of a felony or other crime
involving moral turpitude;

(iii)           intentional wrongful damage to or misappropriation of property
of the Company;

(iv)           an intentional or grossly negligent refusal or failure to perform
Executive’s duties, or to carry out the reasonable directions of the Company’s
Board of Directors (other than on account of illness or other physical or mental
disability), which refusal or failure is not remedied within the 10 calendar
days after receipt by the Executive of written notice from the Company thereof,
or insubordination; or

(v)           a material breach of any of the provisions of this Agreement
applicable to Executive, which breach is not remedied within the 10 calendar
days after receipt by the Executive of written notice from the Company of such
breach; and in any case any such act or failure to act shall be determined by
the Board of Directors of the Company to have been materially harmful to the
Company. For purposes of this Agreement, no act, or failure to act, on the part
of the Executive shall be deemed “intentional” unless done, or omitted to be
done, by the Executive not in good faith and without a reasonable belief that
his action or omission was in the best interests of the Company, as determined
by the Board of Directors of the Company in its sole but reasonable discretion.

(c)           Change in Control shall mean a change in the control of the
Company of a nature which would be required to be reported in response to Item
6(e) of Schedule 14a to Regulation 14A, as promulgated under the Exchange Act
(or any successors thereto); provided that, without limitation, a Change in
Control shall be deemed to have occurred if:
 
 
 
 
 
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(i) any Person is or becomes the Beneficial Owner directly or indirectly, of 25%
or more of a class of equity securities of the Company, or of securities which
in the aggregate provide such Beneficial Owner with 25% or more of the votes
entitled to be cast with respect to the election of members of the Board of
Directors;

(ii) during any period of two consecutive years, the individuals who at the
beginning of such period constituted the Board of Directors cease for any reason
to constitute a majority thereof;

(iii) any Person acquires, directly or indirectly, more than 25% of the
outstanding shares of voting securities of the Company, coupled with or followed
by the election of directors of the Company of persons who were not directors at
the time of such acquisition, if such directors comprise a majority of the
Board;

(iv) as a result of a tender offer, merger, consolidation, sale of assets,
contested election or any combination of those or similar transactions, the
directors of the Company immediately before such transaction(s) shall cease to
constitute a majority of the Board or of any successor to the Company;

(v) the acquisition, directly or indirectly, by another person or entity, in a
single transaction or series of related transactions of all or substantially all
(greater than 50%) of the Company’s assets; or

(vi) the Company’s shareholders approve a plan of liquidation of the Company.

(d)           Date of Termination shall be the effective date of the Notice of
Termination.

(e)           Disability shall mean absence from the Executive's duties with the
Company on a full-time basis for 60 days, as a result of incapacity due to
physical or mental illness, unless within 30 days after Notice of Termination is
given following such absence the Executive shall have returned to the full-time
performance of duties as CFO of the Company.

(f)           Exchange Act means the Securities Exchange Act of 1934, as
amended.

(g)           Good Reason shall mean termination subsequent to a Change in
Control of the Company within one hundred and twenty (120) days after the
occurrence of any of the following events:

(i)           a significant and material adverse change in the nature or scope
of Executive’s duties and responsibilities or other working conditions with
Company including job classification change from that of an Executive,
 
 
 
 
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(ii)           the assignment to the Executive of any duties inconsistent with
the positions, responsibilities and status of the Executive with the Company
immediately prior to the Change in Control, or a change in the Executive's
reporting responsibilities, titles or offices, as in effect immediately prior to
the Change in Control;

(iii)           any removal of the Executive from, or any failure to re-elect
the Executive to, any of such positions, except in connection with termination
of employment for Cause, Disability, Retirement or as a result of the
Executive's death or termination by the Executive, other than for Good Reason;

(iv)           a reduction by the Company in the Executive's base salary as in
effect immediately prior to the Change in Control;

(v)           reassignment of the Executive to offices more than 25, miles from
the location of the Company's principal executive offices immediately prior to
the Change in Control, except for required travel on the Company's business to
an extent substantially consistent with the Executive's business travel
obligations prior to the Change in Control;

(vi)           failure by the Company to continue in effect any benefit or
compensation plan, stock ownership plan, stock purchase plan, stock option plan,
life insurance plan, health and accident plan, or disability plan in which the
Executive is participating immediately prior to the Change in Control (or a plan
providing the Executive substantially similar benefits), the taking of any
action by the Company which would adversely affect the Executive's participation
in or materially reduce his benefits under any such plan, deprive the Executive
of any material fringe benefit enjoyed immediately prior to the Change in
Control, including, but not limited to any failure by the Company to provide the
Executive with the number of vacation days to which the Executive is entitled in
accordance with the Company's normal vacation policy in effect immediately prior
to the Change in Control; provided, that if the Company or a successor seeks to
provide the Executive with substantially similar benefits under a different
plan, the Company must solicit and obtain the Executive's written consent to the
substitution of such plan, which consent shall not be unreasonably withheld;

(vii)           a failure by the Company to make timely payment to the Executive
of any amounts to which he is entitled hereunder or to otherwise provide
Executive with any of the benefits to which he is entitled hereunder on the
terms provided herein or any other breach of the covenants contained herein, any
of which is not remedied within 10 calendar days after receipt by the Company of
written notice from the Executive of Executive’s objection to such change,
failure, reduction or breach, as the case may be; or

(viii)           any purported termination of the Executive's employment by the
Company which is not affected pursuant to a Notice of Termination.

 
 
 
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In the event the Executive believes that any of the events set forth in
subparagraphs (i), (ii), (iv), (v), (vii), (viii) or (ix) have occurred, the
Executive shall promptly give written notice to the Company of his belief that
such event has occurred.

(h)           Market Value shall mean the closing price for a security reported
by the principal stock exchange on which such security is traded, or if the
security is not listed for trading on a stock exchange, the closing price
reported by the National Market System ("NMS"), or if the security is not listed
for trading on a stock exchange or included in the NMS, the mean of the closing
bid and asked prices reported by NASDAQ, or if the security is not listed for
trading on a stock exchange, included in the NMS or included in the NASDAQ
system, the average of the bid and asked prices reported by market makers for
the security to the National Quotation Bureau, all at the close of business on
the applicable date.

(i)           Notice of Termination shall mean a written notice whereby the
Company or a successor advises the Executive that his employment with the
Company is or shall be terminated, which document shall indicate the specific
termination provision in this Agreement relied upon by the Company or the
successor and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
those provisions.

(j)           Person shall mean any natural person, corporation, partnership,
limited partnership, limited liability company, joint venture, trust,
association, syndicate, business entity, governmental body or any combination
thereof

(k)           Retirement shall mean termination in accordance with a Company
retirement policy in effect prior to the Change in Control.

2.           Termination

(a) Termination for any reason (including but not limited to retirement). Except
for termination for cause and except as otherwise provided for in the remaining
sections of this Paragraph 2, in the event of the termination of the Executive’s
employment the Executive shall be entitled to receive, and the Company shall pay
the Executive (i) the base salary owing to the Executive hereunder through the
date of termination, (ii) accrued vacation, and (iii) any business expenses
which were properly reimbursable to the Executive through the date of
termination. Such amounts shall be paid to the Executive in a lump-sum not later
than seventy-five (75) days after the date of termination.  termination.  The
Company shall also provide 18 months of COBRA health insurance coverage to the
Executive for the Executive and his spouse from the date of termination.   In
the event that the Executive becomes eligible for health insurance from another
source, the obligation of the Company hereunder shall cease.
 
 
 
 
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(b)           Termination without Cause.  In the event of the termination of the
Executive’s employment by the Company without Cause (except following a Change
in Control), then the Executive shall be entitled to receive, and the Company
shall pay the Executive, in addition to the amounts described in 2(a) above:

(1)           severance equal one (1) times the Executive’s current annual Base
Salary and current year target bonus at the date of termination; and

(2)           cash equal to the excess of the Market Value of securities
underlying the vested options held by the Executive immediately prior to
termination (after application of Paragraph 2(b)(2)), less the exercise price of
such options, multiplied by the number of shares underlying the options, in
exchange for termination of such options, provided however, the Executive shall
have the right in lieu of such cash payment, to have any unvested options,
restricted stock or other equity awards to be immediately vested and the right
to exercise such options for the term of the option period;

Such amounts shall be conditioned upon the Executive’s execution of a separation
agreement and general release in a form acceptable to the Company.  Such
payments shall be paid to the Executive in a lump-sum not later than
seventy-five (75) days after the date of termination, and if the Executive has
not executed a binding release by such date, the Executive shall forfeit all
rights to such payments; provided however, that if such seventy-five day period
begins in a first taxable year and ends in a second taxable year, such payments
shall be made in the second taxable year.

(c)           Termination without Cause, or by the Executive for Good Reason, in
connection with a Change in Control.  If any Change in Control shall occur, the
Executive shall be entitled to the following benefits, upon the subsequent
termination of the Executive's employment within one year following  the Change
in Control, unless such termination is because of the Executive's death or
Retirement, by the Company for Cause or Disability, or by the Executive other
than for Good Reason, then the Executive shall be entitled to receive, and the
Company shall pay the Executive, in addition to the amounts described in 2(a)
and (b)(2) above:

(1)           any bonus for a past or the current fiscal year which has been
awarded or otherwise earned but not yet paid under any Bonus Plan(s). The
Executive shall be considered to have earned the right to participate in bonus
Plans of the Company for any fiscal year for which service of more than six
months has been provided, and the bonus ultimately owed for any such period
shall be adjusted proportionately to reflect the service of the Executive for
the applicable portion of the year;

(2)           severance pay in an amount equal to three (3) times the
Executive’s current year annual Base Salary and the current year target bonus;
 
 
 
 
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(3)           accelerated vesting of any unvested options, restricted stock, or
other equity awards and the right to exercise such options for the term of the
option period;

(4)           all reasonable legal fees and expenses incurred by the Executive
as a result of such termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement), such fees and
expenses being payable on or before the expiration of ten days from the
presentation of applicable invoices by the Executive to the Company or any
successor;

(5)           coverage under all life insurance, medical, health, accident, and
disability programs or arrangements in which the Executive was entitled to
participate immediately prior to the Change in Control for a period of two
years, if the Executive's continued participation is possible under the general
terms and provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is barred by virtue of
non-employee status, the Company shall promptly arrange to provide benefits
substantially similar to those which the Executive was entitled to receive under
such plans and programs immediately before the Change in Control, or two years
from the termination;

(6)           (i) if it is determined that the payment or benefit provided to or
for the benefit of the Executive under this Paragraph 2(c) (a “Payment”),
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise, would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code (“Code”) or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, shall be referred to as the “Excise Tax”), the Payment
shall be reduced if and to the extent that a reduction in the Payment would
result in the Executive retaining a larger amount, on an after-tax basis (taking
into account federal, state, and local income taxes and the Excise Tax), than he
would have retained had he been entitled to receive all of the Payment (such
reduced amount is hereinafter referred to as the “Limited Payment Amount”).  The
Company shall reduce the Payment by first reducing or eliminating payments or
benefits which are not payable in cash and then by reducing or eliminating cash
payments, in each case in reverse order beginning with payments or benefits
which are to be paid the farthest in time from the date the “Determination” (as
hereinafter defined) is delivered to the Company and the Executive.

(ii)  The determination as to whether the Payment shall be reduced to the
Limited Payment Amount and the amount of such Limited Payment Amount (the
“Determination”) shall be made at the Company’s expense by a firm selected by
the Company and reasonably acceptable to the Executive (the “Tax Firm”).  The
agreed upon Tax Firm shall provide the Determination in writing, together with
detailed supporting calculations and documentation, to the Company and the
Executive on or prior to the effective date of termination of the Executive’s
 
 
 
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employment if applicable, or at such other time as requested by the Company or
by the Executive.  Within ten (10) days of the delivery of the Determination to
the Executive, the Executive shall have the right to dispute the Determination
(the “Dispute”) in writing setting forth the precise basis of the dispute.  If
there is no Dispute, the Determination shall be binding, final and conclusive
upon the Company and the Executive.

(iii)  Any Excise Tax with respect to the Executive’s Payment shall be the sole
obligation of the Executive, subject to any tax withholding obligation imposed
on the Company with respect thereto.

(d)           Notwithstanding the foregoing, if the Executive is a “specified
employee” (within the meaning of Section 409A(a)(2)(B) of the Internal Revenue
Code of 1986, as amended) and if Section 409A is applicable to any amounts
payable hereunder, all such amounts that would have been paid to the Executive
under this Paragraph 2 during the 6-month period following the termination of
his employment shall instead be paid in a lump sum on the first day of the 7th
month after the month of such termination of employment.

(e)           The amounts payable to the Executive under this Paragraph 2 shall
be in addition to and not in lieu of any benefit payable to the Executive
pursuant to the Company’s Executive Officer Retirement Plan.

(f)           In the event that the Executive dies while employed as CFO and
this Agreement has not been terminated, the benefits under Paragraph 2(c) will
inure to the benefit of the Executive’s designated beneficiary or his estate.

Any amounts owing to the Executive by the Company or any successor under this
Paragraph 2 shall bear interest at the rate of 18% per annum, compounded daily
from the due date.

3.           Procedures for Certain Terminations by Company.  Within three years
following any Change in Control, the employment of the Executive may be
terminated by the Company only after a Notice of Termination has been given in
accordance with this agreement. The date on which the Notice of Termination is
effective shall be as follows:

(a)           Disability: Termination because of Disability shall be effective
30 days after Notice of Termination is given, provided the Executive shall not
have returned to the performance of his duties on a full-time basis during such
30 day period;

(b)            Cause: Termination for Cause shall occur only after an
opportunity has been provided for the Executive, and counsel of his choice, to
be heard before the Board. Termination for Cause shall be effective on the date
specified in the Notice of Termination, which shall be no earlier than the
conclusion of such hearing, and

(c)           Other Termination: If the Executive is terminated for any other
reason, the termination shall be effective on the date the Notice of Termination
is given, but if the
 
 
 
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 Executive notifies the Company, within five business days after such Notice of
Termination is given, that a dispute exists concerning the reasons or basis of
the termination, the notice shall be effective on the date on which the dispute
is finally resolved, either by mutual agreement of the parties, by a binding and
final arbitration award, or by final judgment, order or decree of a court of
competent jurisdiction entered upon such arbitration award (the time and appeal
therefrom having expired with no appeal having been perfected).

4.           Non-compete Covenant.  In consideration of the Company’s
obligations to Executive delineated herein, during the three (3) years following
the Date of Termination of the Executive by the Company or a successor, the
Executive will not, directly compete with U.S. Energy in acquiring any oil and
gas properties that the Company is participating in and or the Board is
considering participating in at the time of the Executive
termination.  Notwithstanding anything set forth in this paragraph, the
Executive shall not be in any way restricted in seeking employment with an oil
and gas company

5.           Covenant Not to Solicit.  In consideration of the company’s
obligations delineated herein, the Executive shall not, during his employment by
the Company and the three (3) year period following the termination of the
Executive’s employment with the Company (the “Restriction Period”), directly or
indirectly solicit, entice, persuade, induce or cause any employee, officer,
manager, director, consultant, agent or independent contractor of the Company to
terminate his, her or its employment, consultancy or other engagement by the
Company to become employed by or engaged by any individual, entity, corporation,
partnership, association, or other organization (collectively, “Person”) other
than the Company, or approach any such employee, officer, manager, director,
consultant, agent or independent contractor for any of the foregoing purposes,
or authorize or assist in the taking of any of such actions by any Person.

The Executive shall not, during the Restriction Period, directly or indirectly,
solicit, entice, persuade, induce or cause (i) any Person who is a customer of
the Company at any time during the Restriction Period; or (ii) any lessee,
vendor or supplier to, or any other Person who had or has a business
relationship with, the Company at any time during the Restriction Period (the
Persons referred to in items (i) and (ii) above, collectively, the “Prohibited
Persons”) to enter into a business relationship with any other Person for the
same or similar services, activities or goods that any such Prohibited Person
purchased from, was engaged in or provided to, the Company or to reduce or
terminate such Prohibited Person’s business relationship with the Company; and
the Executive shall not, directly or indirectly, approach any such Prohibited
Person for any such purpose, or authorize or assist in the taking of any of such
actions by any Person.

For purposes of this Paragraph 5, the terms “employee”, “consultant”, “agent”,
and “independent contractor” shall include any Persons with such status at any
time during the one (1) month preceding any solicitation in question.

6.           Restrictions on Certain Actions Following Employment
Termination.  The Executive agrees that during any period while he is subject to
the non-compete covenants under Paragraph 4, he will not perform or do any other
act which is prejudicial or injurious to the business or goodwill of the
Company. In furtherance of the foregoing, but not in limitation thereof, the
Executive agrees
 
 
 
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that during such period he will refrain from making public comments concerning
the Company which are adverse to or critical of the Company.

7.           Reasonableness Of Scope; Non-Compete Agreement.  The Company and
Executive agree that the duration and geographic scope for the non-compete
covenants contained in Paragraph 4 have been selected by mutual agreement of the
Company and the Executive. It is further agreed by both parties that the
duration and geographic scope of such covenant is reasonable, and does not
significantly impede competition in the industry in which the Company intends to
engage, nor does the scope of the non-compete agreement significantly restrict
the Executive's ability to support himself and employ his skills as an
entrepreneur and manager.

The Executive agrees that in the event it is necessary for the Company to seek
judicial enforcement of the non-compete agreement of Paragraph 4, he will not
resist enforcement of the non-compete provisions on the basis that they are
over-broad or violate public policy by virtue of their duration or geographic
scope. Furthermore, the Company and the Executive agree that in the event the
non-compete agreement contained in Paragraph 4 is found by a court to be
unenforceable for any reason, the provisions thereon shall be modified by the
court, to the minimum extent possible, so as to ensure the protection to the
Company or its successor sought to be obtained through the non-compete
agreement, while avoiding any unacceptable impairment of competition, freedom of
employment of the Executive, or other overly broad, believed by such court to
make the non-compete provisions unenforceable as originally written.

8.           Certain Additional Considerations.  The Executive agrees that it is
a legitimate interest of the Company and reasonable and necessary for the
protection of the goodwill and business of the Company, which are valuable to
the Company, that the Executive make the covenants contained in Paragraphs 4 and
5 of this Agreement.

The Company shall indemnify and hold Executive harmless to the maximum extent
permitted by law and by the bylaws of the Company, and shall purchase indemnity
insurance, including directors’ and officers’ liability insurance, if available,
to protect the Executive from and against any and all claims, damages,
judgments, settlements, reasonable attorney’s fees, and other expenses
reasonably incurred by the Executive in connection with any proceeding arising
out of or in connection with the Executive’s employment by the Company.

The parties acknowledge that (i) the type and periods of restriction imposed in
the provisions of Paragraphs 4, 5, and 6 of this Agreement are fair and
reasonable and are reasonably required to protect and maintain the proprietary
and other legitimate business interests of the Company, as well as the goodwill
associated with the Business conducted by the Company, (ii) the Business
conducted by the Company extends throughout the Restricted Territory, and (iii)
the time, scope, geographic area and other provisions of Paragraphs 4, 5, and 6
of this Agreement have been specifically negotiated by sophisticated commercial
parties represented by experienced legal counsel.

In the event that any covenant contained in this Agreement, including, without
limitation, any covenant contained in Paragraphs 4, 5, and 6 of this Agreement
shall be determined by any court of competent jurisdiction to be illegal,
invalid or unenforceable by reason of its extending for
 
 
 
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too great a period of time or over too great a geographical area or by reason of
its being too extensive in any other respect, (i) such covenant shall be
interpreted to extend over the maximum period of time for which it may be legal,
valid and enforceable, as applicable, and/or over the maximum geographical area
as to which it may be legal, valid and enforceable, as applicable, and/or to the
maximum extent in all other respects as to which it may be legal, valid and
enforceable, as applicable, all as determined by such court making such
determination, and (ii) in its reduced form, such covenant shall then be legal,
valid and enforceable, as applicable, but such reduced form of covenant shall
only apply with respect to the operation of such covenant in the particular
jurisdiction in or for which such adjudication is made. It is the intention of
the parties that such covenants shall be enforceable to the maximum extent
permitted by applicable law.

9.           Modification of Agreement.  This Agreement shall continue in effect
until its amendment, modification or rescission, which must be in writing
executed by each of the parties hereto.

10.           Successors.  The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise), to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive and his counsel, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place.  Failure of the Company to obtain such agreement
prior to any such succession shall be a breach of this Agreement and shall
entitle the Executive to compensation from the Company in the same amount and on
the same terms as the Executive would be entitled hereunder if he terminates his
employment for Good Reason.  For purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.  As used in this Agreement “Company” shall mean the Company as
hereinabove defined and any successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in the Paragraph or which
otherwise becomes bound by all the terms and provisions of the Agreement by
operation of law.

11.           Binding Agreement: Successors to Executive.  The Agreement shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to him hereunder, if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee or other designee,
or if there be no such designee, to the Executive's estate.

12.           Miscellaneous.  All notices, demands, consents, requests,
instructions and other communications to be given or delivered or permitted
under or by reason of the provisions of this Agreement or in connection with the
transactions contemplated hereby shall be in writing and shall be deemed to be
delivered and received by the intended recipient as follows:  (i) if personally
delivered, on the business day of such delivery (as evidenced by the receipt of
the personal delivery service), (ii) if mailed certified or registered mail
return receipt requested, four (4) business days after being mailed, (iii) if
delivered by overnight courier (with all charges having been prepaid), on the
business day of such delivery (as evidenced by the receipt of the overnight
courier service of recognized standing), or (iv) if delivered by facsimile
 
 
 
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transmission or email, on the business day of such delivery if sent by 5:00 p.m.
in the time zone of the recipient, or if sent after that time, on the next
succeeding business day (as evidenced by the printed confirmation of delivery
generated by the sending party’s facsimile machine). If any notice, demand,
consent, request, instruction or other communication cannot be delivered because
of a changed address of which no notice was given (in accordance with this
Paragraph 11), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit of the
sender). All such notices, demands, consents, requests, instructions and other
communications will be sent to the following addresses or facsimile numbers as
applicable:

If to the Company, to:

U.S. Energy Corp.
Attn: Legal Department
877 North 8th West
Riverton, WY 82501
(307) 856-9271

If to the Executive, to:

Steve Richmond
877 North 8th West
Riverton, WY  82501

13.           Implied Waiver. No waiver by either party hereto of any breach by
the other party hereto, or failure to comply with any condition or provision of
the Agreement required to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or actions at the same or at any
prior or subsequent time.

14.           Agreement. This Agreement constitutes the entire understanding of
the parties with respect to the subject matter hereof. No agreements or
representations, oral or otherwise, express or implied, with respect hereto have
been made by either party which is not expressly set forth in the Agreement.

15.           Validity. The unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of the
Agreement, which shall remain in full force and effect.

16.           Arbitration. Any dispute or controversy arising with respect to or
in connection with this Agreement (including, without limitation, any
controversies concerning the formation thereof) shall be settled by final and
binding arbitration in a location mutually agreed upon by the parties in
accordance with the Rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The arbitrator(s) shall have the power to award equitable as well
as legal relief against a defaulting party.
 
 
 
 
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17.           Governing Law; Jurisdiction.  This Agreement shall be governed by
and construed in accordance with the laws of the State of Wyoming applicable to
agreements made and to be performed in that state, without regard to any of its
principles of conflicts of laws or other laws that would result in the
application of the laws of another jurisdiction.

18.           Specific Performance.  It is agreed that in the event of a breach
of the provisions of this Agreement, the non-defaulting party may not be
satisfactorily compensated through payment of damages, and in the event of any
breach or anticipated breach thereof, the non-defaulting party will be entitled,
without proof of damages, to an award specifically prohibiting the breach
thereof or providing such other equitable relief as may be deemed appropriate.
Such equitable relief shall be in addition to any legal remedies to which the
non-defaulting may be entitled.

19.           Third Parties.  Nothing herein is intended or shall be construed
to confer upon or give to any Person, other than the parties hereto, any rights,
privileges or remedies under or by reason of this Agreement.

20.           Headings.  The section headings contained in this Agreement are
inserted for reference purposes only and shall not affect in any way the
meaning, construction or interpretation of this Agreement. Any reference to the
masculine, feminine, or neuter gender shall be a reference to such other gender
as is appropriate. References to the singular shall include the plural and vice
versa.

21.           Counterparts.  This Agreement may be executed in two (2) or more
counterparts (including by facsimile or electronic signature, which shall
constitute a legal and valid signature), and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original, and all of which, when taken together, shall constitute one and the
same document. This Agreement shall become effective when one or more
counterparts, taken together, shall have been executed and delivered by all of
the parties.

22.           Code Section 409A.

(a)           The parties intend that any amount payable and benefits provided
under this Agreement and the exercise of authority or discretion by the Company
or the Executive shall comply with the provisions of Code Section 409A (“Section
409A”) and the provisions of this Agreement shall be construed and administered
consistent with such intent; provided that any excise tax under Section 409A
required to be paid by the Executive with respect to this Agreement shall be the
sole responsibility of the Executive.  Each of the amounts payable to the
Executive under this Agreement (including each salary continuation payment)
shall constitute a separate payment for purposes of Section 409A.

(b)           Notwithstanding anything in this Agreement to the contrary, if the
Executive is determined by the Company at the time of the Executive’s
“separation from service” to be a “specified employee” (both as determined under
Section 409A), any non-exempt deferred compensation which would otherwise be
payable shall not be paid until the first business day following the required
six-month delay period after the Executive’s separation from service (or if
 
 
 
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earlier, the Executive’s death).  Such delay in payment shall only apply with
respect to each separate payment of non-exempt deferred compensation to the
extent required to avoid adverse tax treatment to the Executive under Section
409A.  Any payments not subject to such delay shall be paid pursuant to the time
and form of payment specified above.  Any compensation which would otherwise
have been paid during the delay period shall be paid to the Executive (or his
beneficiary or estate) in a lump-sum payment on the first business day following
the expiration of the delay period.

IN WITNESS WHEEREOF the parties hereto have executed this Agreement, as of the
day and year first above written.

U.S.ENERGY CORP.
 
EXECUTIVE
     
By:   /s/  Keith G. Larsen
 
By:   /s/ Steven D. Richmond
     
Title:   CEO and Chairman
 
Title:   CFO

 
 
 
 
 
 
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CONFIDENTIAL SEVERANCE AGREEMENT
AND GENERAL RELEASE OF ALL CLAIMS

1.         Parties.  The Severance Agreement and General Release of All Claims
(" Agreement") is entered into by and between _____________ ("Executive”) and US
Energy Corp.  ("Company").

2.         Purpose of Agreement.  The Company has decided to terminate the
Executive’s employment as its _______________, effective ___________.   The
parties now desire to amicably and completely resolve any and all issues, claims
and disputes that may exist between them and have, therefore, entered into the
Agreement.

3.         Company's Severance Payments.  The Company has a severance policy
(the “Executive Severance and Non-Compete Agreement”, hereby incorporated by
reference).  As such, contingent on the execution of this Agreement within the
required timeframe, the Company agrees to pay to the Executive any amounts owed
pursuant to Section 2 of the Executive Severance and Non-Compete Agreement.

4.         Acknowledgment of Additional Consideration.  Executive acknowledges
that the payments described above in paragraph 3 will not only fully discharge
and satisfy all of Company's obligations for monies due to Executive by reason
of his employment with Company, but will also provide him with additional monies
and undertakings which are not otherwise due to him now, or in the future, and
which constitute valuable consideration for Executive’s release of claims and
other promises herein.

5.         General Release. In exchange for Company's payments and other
undertakings as described herein, Executive, for himself and his heirs, legal
representatives, successors and assigns, does hereby completely release and
forever discharge Company, its parent, subsidiary and affiliated companies, and
their respective shareholders, officers, directors, representatives, employees,
former employees, agents, attorneys, successors and assigns (herein collectively
"the Releasees") from all claims, rights, demands, actions, obligations and
causes of action of any and every kind, nature and character, known or unknown,
that Executive may now have or has ever had against them, arising from or in any
way connected with the employment relationship between the parties, any actions
taken by any of the Releasees during the employment relationship, the
termination of that relationship, and any other dealings of any kind between
Executive and any of the Releasees up to the effective date of the Agreement,
including but not limited to (a) any and all claims of "wrongful discharge,"
breach of express or implied contract, breach of the implied covenant of good
faith and fair dealing, wrongful discharge in violation of public policy,
intentional infliction of emotional distress, negligent infliction of emotional
distress, fraud and defamation; (b) any tort of any nature; (c) any and all
claims arising under any federal, state, county or municipal statute,
constitution or ordinance, including but not limited to Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act, the Older Workers Benefit Protection Act, the Americans with
Disabilities Act, the Employee Retirement Income Security Act of 1974 (excluding
claims for benefits under a plan or program subject thereto), and any other laws
and regulations relating to employment discrimination; and (d) any and all
claims for compensation, bonuses, severance pay, vacation
 
 
 
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 pay, expense reimbursement, attorneys' fees and costs, except to the extent
provided in the Executive Severance and Non-Compete Agreement.

6.         Covenant Not to Sue. At no time in the future will Executive file or
maintain any charge, claim or action of any kind, nature and character
whatsoever against any of the Releasees, (except to enforce the Agreement) or
cause or knowingly permit any such charge, claim or action to be filed or
maintained, in any federal, state or municipal court, administrative agency,
arbitral forum or other tribunal, arising out of any of the matters covered by
paragraphs 5 above.  Executive further agrees that he will not initiate, join,
participate, encourage, or actively assist in the pursuit of any
employment-related legal claims against Company or its Executives or agents,
whether the claims are brought on Executive's own behalf or on behalf of any
other person or entity.  Nothing in the paragraph shall preclude Executive from
testifying truthfully in any legal proceeding pursuant to subpoena or other
legal process. In the event Executive files a lawsuit, charge, administrative
complaint or other legal action in breach of the covenant not to sue, or
otherwise initiates any legal steps to invalidate the release contained in
paragraph 5 herein, Executive shall immediately return to Company the
consideration described above in paragraph 3, in its entirety, by tendering a
payment to Company in the amount of $_________. Company's entitlement to the
payment shall be in addition to any other remedies it might have arising from
the breach of the Agreement.

7.         Non-Admission of Liability.  By entering into the Agreement, Company
does not admit, expressly or impliedly, that it has engaged in any wrongdoing
whatsoever or has violated Executive's rights in any way. To the contrary,
Company expressly denies any such liability or wrongdoing.

8.         Cooperation in Transitional Matters. Executive shall make himself
available to Company in the future to answer questions, provide information and
otherwise cooperate with Company in any pending or transitional matters on which
he worked or about which he may have personal knowledge, including any
investigations, audits, legal proceedings or other business matters.

9.         Return of Property.  To the extent he has not already done so,
Executive shall immediately return to Company all Company property, including
all keys, credit cards, files, documents, business records, customer records,
computer discs and other Company property and assets that may be in his
possession or control.

10.         Executive's Organizational Memberships. Executive agrees that,
effective immediately, Company shall have no further obligation to sponsor or
pay for his membership in any professional organizations or societies.

11.         Mutual Non-Disparagement Covenant. Executive agrees that he will
not, at any time in the future, in any way disparage Company or its current and
former officers, directors and employees, verbally or in writing, or make any
statements to the press or to third parties that may be derogatory or
detrimental to Company's good name or business reputation. Likewise, the
officers and directors of Company will not, at any time in the future, make any
derogatory or disparaging statements to any third parties about Executive,
verbally or in writing. Nothing in the
 
 
 
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paragraph shall preclude either party from responding truthfully to inquiries
made in connection with any legal or governmental proceeding pursuant to
subpoena or other legal process.

12.         Non-Disclosure Covenant. Executive further agrees that the terms and
conditions of the Agreement will be held strictly confidential. Executive will
not disclose, discuss or reveal the monetary or other terms of the Agreement to
any other persons, entities or organizations, except his immediate family
members, attorneys, tax preparers, financial advisors, and any agency to which
he is required to report his income, unless disclosure is compelled by subpoena
or other legal process or is necessary to enforce his rights under the
Agreement. In the event Executive discloses the terms of the Agreement to any of
the aforementioned individuals to whom disclosure is permitted, Executive shall
specifically advise the recipient of the confidentiality provision herein and
shall expressly condition the disclosure upon the recipient's agreement to
maintain the confidentiality of the Agreement. If at any time in the future
Executive believes that he may be required by subpoena or other legal process to
disclose the terms of the Agreement, he will provide written notification to
Company's Chief Compliance Officer immediately, and in no event less than 72
hours before any such compelled disclosure is due to be made.

13.         Remedies for Breach of Nondisclosure and Non-Disparagement
Covenants.  Any violation of the Non-disclosure and Non-disparagement Covenants
set forth in paragraphs 11 and 12 above shall be a material breach of the
Agreement. The parties acknowledge that in the event of such a violation, it
will be impracticable or extremely difficult to calculate the resulting damages
and, therefore, the parties agree that upon a breach, the non-breaching party
shall have the following rights and remedies, in addition to any provable
monetary damages:

(a)         If Executive should breach the Nondisclosure Covenant set forth in
paragraph 12 above prior to _____________, Executive shall no longer be eligible
to receive any payments referred to above in paragraph 3, and the right to such
payments be forfeited.

(b)         For each breach by Executive of the Nondisclosure Covenant set forth
in paragraph 12 occurring after _____________, and each repetition thereof,
Executive will pay to Company as liquidated damages, and not as a penalty, the
sum of $____________ (i.e., the amount of consideration described above in
paragraph 3).

(c)         In the event of a breach by either party of the Non-disparagement
Covenant set forth in paragraph 11 above, the breaching party shall pay to the
other party as liquidated damages, and not as a penalty, the sum of $___________
for each such breach and each repetition thereof.

14.         Arbitration. Any and all controversies arising out of or relating to
the validity, interpretation, enforceability, or performance of the Agreement
will be solely and finally settled by means of binding arbitration. Any
arbitration shall be conducted in accordance with the then-current Labor
Arbitration (or other) Rules of the American Arbitration Association. The
arbitration will be final, conclusive and binding upon the parties. All
arbitrator's fees and related expenses shall be divided equally between the
parties, unless otherwise provided in the Labor Arbitration Rules.  The
arbitration will be administered by the American Arbitration Association.
 
 
 
 
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15.         Governing Law.  The Agreement shall be construed in accordance with
the laws of the State of Wyoming. In addition, Executive is provided all rights
and protections provided under the Older Workers Benefit Protection Act.

16.         Entire Agreement.  The Agreement constitutes the entire agreement
between the parties and supersedes all other agreements and understandings
between them that may have related to the subject matters contained herein. No
modification, amendment or waiver of any of the provisions of the Agreement
shall be effective unless approved in writing by both parties.

17.         Severability.  The provisions of the Agreement shall be considered
to be separable and independent of each other. In the event any provision of the
Agreement is found by an arbitrator or a court of competent jurisdiction to be
invalid, such finding shall not affect the validity or effectiveness of any or
all of the remaining provisions of the Agreement.

18.         Construction of Agreement.  The Agreement shall not be construed in
favor of or against any of the parties hereto, regardless of which party
initially drafted it. The Agreement was reached through arms-length negotiations
by the parties and their respective counsel, and it represents a final,
mutually-agreeable compromise.

19.         Time to Consider and Revoke Agreement.  Executive has been given the
opportunity to consider this Agreement for a period of at least twenty-one (21)
days.  In the event that Executive has executed this Agreement with less than
twenty-one (21) days of the date of its delivery to him, he acknowledges that
such decision was entirely voluntary and that he had the opportunity to consider
this Agreement for the entire twenty-one (21) day period.  For a period of seven
(7) days from the date of the execution of this Agreement (the “Revocation
Period”), Executive shall retain the right to revoke this agreement by providing
written notice to US Energy Corp., 877 North 8th West, Riverton, WY 82501.
Provided that this Agreement is not revoked pursuant to the preceding sentence,
Executive and Company agree that this Agreement shall become effective and
enforceable on the date immediately following the last day of the Revocation
Period (the “Effective Date”).

20.         Additional Warranties. Executive expressly warrants that he has read
and fully understands the Agreement; that the severance payments and other
undertakings of Company herein constitute valuable consideration for the
Agreement; that he has been given a reasonable period of time to consider the
Agreement; that he has had the opportunity to consult with legal counsel of his
own choosing and to have the terms of the Agreement fully explained to him; that
he is not executing the Agreement in reliance on any promises, representations
or inducements other than those contained herein; and that he is executing the
Agreement voluntarily, free of any duress or coercion.

21.         Effective Date.  The Agreement shall become effective on the eighth
day after the date on which it is executed by Executive, provided that he has
not previously revoked it.

22.         Counterparts.  The Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument.
 
 
 
 
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U.S. Energy Corp.
       
DATED:
 
By:
                       
(Name)
                     
(Title)
       
DATED:
                           
(Name – Executive)

 
 
 
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