U.S. Energy corp.

amended and restated 2012 equity and performance incentive plan

OPTION AGREEMENT

 

THIS OPTION AGREEMENT (this “Agreement”) is made and entered into as of
_______________, _____ by and between U.S. Energy Corp., a Wyoming corporation
(the “Company”) and _____________ (the “Participant”).

 

Grant Date:       Exercise Price Per Share:       Number of Option Shares:      
Expiration Date:  

 

ARTICLE I

Grant of Option

 

Section 1.01. Grant; Type of Option. The Company hereby grants to the
Participant an option (the “Option”) to purchase the total number of shares of
Common Stock of the Company set forth above, at the Exercise Price set forth
above. The Option is being granted pursuant to the terms of the Company’s
Amended and Restated 2012 Equity and Performance Incentive Plan (the “Plan”).

 

Section 1.02. Consideration; Subject to Plan. The grant of the Option is made in
consideration of the services to be rendered by the Participant to the Company
and is subject to the terms and conditions of the Plan. Capitalized terms used
but not defined herein will have the meanings ascribed to them in the Plan.

 

ARTICLE II

Exercise Period; Vesting

 

Section 2.01. Vesting Schedule. The Option will become vested and exercisable in
accordance with the following Vesting Schedule until the Option is 100% vested:

 

Dates   Percentage Vested      

 

A Participant shall vest according to the above schedule as of each anniversary
provided the Participant is in Continuous Service (as defined below) on that
Date. The unvested portion of the Option will not be exercisable on or after the
Participant’s termination of Continuous Service. Continuous Service means that
the Participant’s service with the Company, whether as an employee, officer or
Director, is not interrupted or terminated.

 

   

 

 

Section 2.02. Expiration. The Option will expire on the Expiration Date set
forth above, or earlier as provided in this Agreement or the Plan.

 

ARTICLE III

Termination of Continuous Service

 

Section 3.01. Termination for Reasons Other Than Cause, Death, Disability. If
the Participant’s Continuous Service is terminated for any reason other than
Cause (as defined below), death or Disability, the Participant may exercise the
vested portion of the Option, but only within such period of time ending on the
earlier of (a) the date three months following the termination of the
Participant’s Continuous Service, or (b) the Expiration Date.

 

Section 3.02. Termination for Cause. If the Participant’s Continuous Service is
terminated for cause, the Option (whether vested or unvested) shall immediately
terminate and cease to be exercisable. Cause means, with respect to any
employee, consultant or Director: (a) if the employee or consultant is a party
to an employment or service agreement with the Company and such agreement
provides for a definition of Cause, the definition contained therein, or (b) if
no such agreement exists, or if such agreement does not define Cause: (i) the
commission of, or plea of guilty or no contest to, a felony or a crime involving
moral turpitude or the commission of any other act involving willful malfeasance
or material fiduciary breach with respect to the Company; (ii) gross negligence
or willful misconduct with respect to the Company; or (iii) material violation
of state or federal securities laws.

 

Section 3.03. Termination Due to Disability. If the Participant’s Continuous
Service terminates as a result of the Participant’s Disability (as defined
below), the Participant may exercise the vested portion of the Option, but only
within such period of time ending on the earlier of (a) the date 12 months
following the Participant’s termination of Continuous Service, or (b) the
Expiration Date. Disability means that the Participant is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment.

 

Section 3.04. Termination Due to Death. If the Participant’s Continuous Service
terminates as a result of the Participant’s death, or the Participant dies
within a period following termination of the Participant’s Continuous Service
during which the vested portion of the Option remains exercisable, the vested
portion of the Option may be exercised by the Participant’s estate, by a person
who acquired the right to exercise the Option by bequest or inheritance or by
the person designated to exercise the Option upon the Participant’s death, but
only within the time period ending on the earlier of (a) the date 12 months
following the Participant’s death, or (b) the Expiration Date.

 

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Section 3.05. Extension of Termination Date. Generally, the exercise period may
not be extended. However, if following the Participant’s termination of
Continuous Service the exercise of the Option would violate applicable law or
jeopardize the ability of the Company to continue as a going concern, then the
Option shall terminate on the earlier of (a) the Expiration Date, or (b) not
more than 30 days following the end of the period during which the exercise of
the Option would be in violation of applicable law or jeopardize the ability of
the Company to continue as a going concern. The exercise period may also be
extended in compliance with Section 409A of the Code when the Option Price
equals or exceeds the Market Value per Share of the Common Stock.

 

ARTICLE IV

Manner of Exercise

 

Section 4.01. Election To Exercise. To exercise the Option, the Participant (or
in the case of exercise after the Participant’s death or incapacity, the
Participant’s executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed exercise election in the form attached to
this Agreement as Exhibit A.

 

Section 4.02. Payment of Exercise Price. The entire Exercise Price of the Option
shall be payable in full at the time of exercise in the manner designated by the
Board. A cash payment by certified or bank check at the time the Option is
exercised is always acceptable.

 

Section 4.03. Withholding. Prior to the issuance of Common Stock upon the
exercise of the Option, the Participant must make arrangements satisfactory to
the Company to pay or provide for any applicable federal, state and local
withholding obligations of the Company. The Participant may satisfy any federal,
state or local tax withholding obligation relating to the exercise of the Option
by any of the following means:

 

(a)       tendering a cash payment;

 

(b)       authorizing the Company to withhold Common Stock from the Common Stock
otherwise issuable to the Participant as a result of the exercise of the Option;
provided, however, that no Common Stock is withheld with a value exceeding the
minimum amount of tax required to be withheld by law; or

 

(c)       delivering to the Company previously owned and unencumbered Common
Stock.

 

The Company also has the right to withhold from any compensation paid to a
Participant.

 

Section 4.04. Issuance of Shares. Provided that the exercise election and
payment are in form and substance satisfactory to the Company, the Company shall
issue the Common Stock registered in the name of the Participant, the
Participant’s authorized assignee, or the Participant’s legal representative.

 

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ARTICLE V

No Right to Continued service;
No Rights as shareholder

 

Neither the Plan nor this Agreement shall confer upon the Participant any right
to be retained in any position, as an employee, consultant or director of the
Company. Further, nothing in the Plan or this Agreement shall be construed to
limit the discretion of the Company to terminate the Participant’s service at
any time, with or without cause. The Participant shall not have any rights as a
shareholder with respect to any Common Stock subject to the Option prior to the
date of exercise of the Option.

 

ARTICLE VI

Transferability

 

Except as otherwise provided in the Plan, the Option is not transferable by the
Participant other than to a designated beneficiary upon the Participant’s death
or by will or the laws of descent and distribution, and is exercisable during
the Participant’s lifetime only by him or her. No assignment or transfer of the
Option, or the rights represented thereby, whether voluntary or involuntary, by
operation of law or otherwise (except to a designated beneficiary upon death by
will or the laws of descent or distribution) will vest in the assignee or
transferee any interest or right herein whatsoever, but immediately upon such
assignment or transfer the Option will terminate and become of no further
effect.

 

ARTICLE VII

Change in Control.

 

Section 7.01. Reserved.

 

Section 7.02. Cash-out. In the event of a Change in Control, the Board may, in
its discretion and upon at least 10 days’ advance notice to the Participant,
cancel the Option and pay to the Participant the value of the Option based upon
the price per Common Stock received or to be received by other shareholders of
the Company in the event. Notwithstanding the foregoing, if at the time of a
Change in Control the Exercise Price of the Option equals or exceeds the price
paid for a share of Common Stock in connection with the Change in Control, the
Board may cancel the Option without the payment of consideration therefor.

 

ARTICLE VIII

Adjustments; Clawback

 

The Common Stock subject to the Option may be adjusted or terminated in any
manner as contemplated by Section 15 of the Plan. In addition, if the
Participant receives any amount (or number of Common Stock) in excess of what
the Participant should have received under the terms of this Option for any
reason (including, but not limited to, by reason of a financial restatement,
mistake in calculations or other administrative error), then the Participant
shall be required to repay any such excess amount (or transfer such excess
Common Stock) to the Company.

 

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ARTICLE IX

Tax Liability and Withholding

 

Notwithstanding any action the Company takes with respect to any or all income
tax, social insurance, payroll tax, or other tax-related withholding
(“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and
remains the Participant’s responsibility and the Company (a) makes no
representation or undertakings regarding the treatment of any Tax-Related Items
in connection with the grant, vesting, or exercise of the Option or the
subsequent sale of any shares acquired on exercise; and (b) does not commit to
structure the Option to reduce or eliminate the Participant’s liability for
Tax-Related Items.

 

ARTICLE X

Compliance with Law

 

The exercise of the Option and the issuance and transfer of Common Stock shall
be subject to compliance by the Company and the Participant with applicable law,
all applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange on which the Company’s equity
securities may be listed. No Common Stock shall be issued pursuant to this
Option unless and until any then applicable requirements of state or federal
laws and regulatory agencies have been fully complied with to the satisfaction
of the Company and its counsel. The Participant understands that the Company is
under no obligation to register the Common Stock with the Securities and
Exchange Commission, any state securities commission or any stock exchange to
effect such compliance. Further, the Company shall have no obligation to
indemnify any Person against any taxes, interest, or penalties attributable to
the transfer, exercise, ownership, disposition of, or any transaction involving
the Options or the Common Stock.

 

ARTICLE XI

Notices

 

Any notice required to be delivered to the Company under this Agreement shall be
in writing and addressed to the Secretary of the Company at the Company’s
principal corporate offices. Any notice required to be delivered to the
Participant under this Agreement shall be in writing and addressed to the
Participant at the Participant’s address as shown in the records of the Company.
Either party may designate another address in writing (or by such other method
approved by the Company) from time to time.

 

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ARTICLE XII

Governing Law

 

This Agreement will be construed and interpreted in accordance with the laws of
the State of Wyoming without regard to conflict of law principles.

 

ARTICLE XIII

Interpretation

 

Any dispute regarding the interpretation of this Agreement shall be submitted by
the Participant or the Company to the Board of Directors of the Company for
review. The resolution of such dispute by the Board of Directors of the Company
shall be final and binding on the Participant and the Company.

 

ARTICLE XIV

Options Subject to Plan

 

This Agreement is subject to the Plan. The terms and provisions of the Plan as
it may be amended from time to time are hereby incorporated herein by reference.
In the event of a conflict between any term or provision contained herein and a
term or provision of the Plan, the applicable terms and provisions of the Plan
will govern and prevail.

 

ARTICLE XV

Successors and Assigns

 

The Company may assign any of its rights under this Agreement. This Agreement
will be binding upon and inure to the benefit of the successors and assigns of
the Company. Subject to the restrictions on transfer set forth herein, this
Agreement will be binding upon the Participant and the Participant’s
beneficiaries, executors, administrators and the person(s) to whom the Option
may be transferred by will or the laws of descent or distribution.

 

ARTICLE XVI

Severability

 

The invalidity or unenforceability of any provision of the Plan or this
Agreement shall not affect the validity or enforceability of any other provision
of the Plan or this Agreement, and each provision of the Plan and this Agreement
shall be severable and enforceable to the extent permitted by law.

 

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ARTICLE XVII

Discretionary Nature of Plan

 

The Plan is discretionary and may be amended, cancelled or terminated by the
Company at any time, in its discretion. The grant of the Option in this
Agreement does not create any contractual right or other right to receive any
Options or other Awards in the future. Future Awards, if any, will be at the
sole discretion of the Company. Any amendment, modification, or termination of
the Plan shall not constitute a change or impairment of the terms and conditions
of the Participant’s employment with the Company.

 

ARTICLE XVIII

Amendment

 

Subject to the terms of the Plan, the Board has the right to amend, alter,
suspend, discontinue or cancel the Option, prospectively or retroactively;
provided, that, no such amendment shall adversely affect the Participant’s
material rights under this Agreement without the Participant’s consent. However,
in no event shall the Participant be able to defer or accelerate payment under
the Plan.

 

ARTICLE XIX

No Impact on Other Benefits

 

The value of the Participant’s Option is not part of his or her normal or
expected compensation for purposes of calculating any severance, retirement,
welfare, insurance or similar employee benefit.

 

ARTICLE XX

Counterparts

 

This Agreement may be executed in counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
Counterpart signature pages to this Agreement transmitted by facsimile
transmission, by electronic mail in portable document format (.pdf), or by any
other electronic means intended to preserve the original graphic and pictorial
appearance of a document, will have the same effect as physical delivery of the
paper document bearing an original signature.

 

ARTICLE XXI

Acceptance

 

The Participant hereby acknowledges receipt of a copy of the Plan and this
Agreement. The Participant has read and understands the terms and provisions
thereof, and accepts the Option subject to all of the terms and conditions of
the Plan and this Agreement. The Participant acknowledges that there may be
adverse tax consequences upon exercise of the Option or disposition of the
underlying Common Stock and that the Participant should consult a tax advisor
prior to such exercise or disposition.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

  U.S. ENERGY CORP.         By:                          Name:     Title:      
    PARTICIPANT         By:     Name:     Title:  

 

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EXHIBIT A

U.S. Energy corp.
OPTION EXERCISE FORM

 

THIS OPTION EXERCISE FORM (this “Exercise Form”) is made and entered into as of
___________, 20__ by and between U.S. ENERGY CORP., a Wyoming corporation (the
“Company”) and the PARTICIPANT NAMED BELOW. Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Company’s Amended
and Restated 2012 Equity and Performance Incentive Plan (the “Plan”).

 

Participant Name:       Address:                   Social Security Number:  

 

Section 1. Option. The Participant was granted an option (the “Option”) to
purchase Common Stock pursuant to the terms of the Plan and the Option Agreement
between the Company and the Participant dated ____________, 20___, as follows:

 

Grant Date:   Number of Common Stock:   Exercise Price Per Share:   Expiration
Date: 10th anniversary of the Grant Date

 

Section 2. Exercise of Option. The Participant hereby elects to exercise the
Option to purchase ________ Common Stock (“Shares”), all of which are vested
pursuant to the terms of the Option Agreement.

 

The total Exercise Price for all of the Shares is _____________ (total Shares
times Exercise Price per Share).

 

Section 3. Payment of the Exercise Price; Delivery of Required Documents. The
Participant encloses payment in full of the total Exercise Price for the Shares
in the following form(s), as authorized by the Option Agreement (check and
complete as appropriate):

 

____ In cash (by certified or bank check) in the amount of $_________, receipt
of which is acknowledged by the Company.

 

____ By such other method of payment as may be designated by the Board.

 

Section 4. Acknowledgement. The Participant understands that he or she is
purchasing the Shares pursuant to the terms and conditions of the Plan and the
Option Agreement, copies of which the Participant has read and understands.

 

  PARTICIPANT         By                       Name     Title  

 

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