Exhibit 10.2 Registration Rights Agreement


    
      

    

     

    

       

       

      REGISTRATION
        RIGHTS AGREEMENT

       

      REGISTRATION
        RIGHTS AGREEMENT
        (this
“Agreement”),
        dated
        as of April 11, 2006, by and between U.S.
        ENERGY CORP.,
        a
        Wyoming corporation (the “Company”),
        and
CORNELL
        CAPITAL PARTNERS, LP,
        a
        Delaware limited partnership (the “Investor”).

       

      WHEREAS:

       

      A. In
        connection with the Standby Equity Distribution Agreement by and between
        the
        parties hereto of even date herewith (the “Standby
        Equity Distribution Agreement”),
        the
        Company has agreed, upon the terms and subject to the conditions of the Standby
        Equity Distribution Agreement, to issue and sell to the Investor that number
        of
        shares of the Company’s common stock, par value $0.01 per share (the
“Common
        Stock”),
        which
        can be purchased pursuant to the terms of the Standby Equity Distribution
        Agreement for an aggregate purchase price of up to Fifty Million
        Dollars ($50,000,000). Capitalized terms not defined herein shall have the
        meaning ascribed to them in the Standby Equity Distribution
        Agreement.

       

      B. To
        induce
        the Investor to execute and deliver the Standby Equity Distribution Agreement,
        the Company has agreed to provide certain registration rights under the
        Securities Act of 1933, as amended, and the rules and regulations thereunder,
        or
        any similar successor statute (collectively, the “Securities
        Act”),
        and
        applicable state securities laws.

       

      NOW,
        THEREFORE,
        in
        consideration of the premises and the mutual covenants contained herein and
        other good and valuable consideration, the receipt and sufficiency of which
        are
        hereby acknowledged, the Company and the Investor hereby agree as
        follows:

       

      1.  DEFINITIONS.

       

      As
        used
        in this Agreement, the following terms shall have the following
        meanings:

       

      a.  “Person”
means
        a
        corporation, a limited liability company, an association, a partnership,
        an
        organization, a business, an individual, a governmental or political subdivision
        thereof or a governmental agency.

       

      b.  “Register,”
        “registered,”
and
        “registration”
refer
        to a registration effected by preparing and filing one or more Registration
        Statements (as defined below) in compliance with the Securities Act and pursuant
        to Rule 415 under the Securities Act or any successor rule providing for
        offering securities on a continuous or delayed basis (“Rule
        415”),
        and
        the declaration or ordering of effectiveness of such Registration Statement(s)
        by the United States Securities and Exchange Commission (the “SEC”).

       

      c.  “Registrable
        Securities”
means
        the Investor’s Shares, as defined in the Standby Equity Distribution Agreement,
        the Warrant Shares, as defined in the Standby Equity Distribution Agreement,
        the
        shares of Common Stock issuable to Investors pursuant to the Standby Equity
        Distribution Agreement, and
        the
        Placement Agent’s Shares issued under the Placement Agreement. The Registration
        Statement shall cover the Investor’s Shares, plus three times (i) 

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      the
        number of shares issuable to Investors under the Standby Equity Distribution
        Agreement (at $7.15 per share), and (ii) the number of Warrant Shares.
        Registrable Securities also shall include three (3) times the number of shares
        of Common Stock issuable on exercise of the Milestone Warrants (if such warrants
        are issued under the Standby Equity Distribution Agreement), at the Exercise
        Price set for the Milestone Warrants..

       

      d.  “Registration
        Statement”
means
        a
        registration statement under the Securities Act which covers the Registrable
        Securities.

       

      2.  REGISTRATION.

       

      a.  Mandatory
        Registration.
        The
        Company shall prepare and file with the SEC a Registration Statement on Form
        S-2, S-3 or on such other form as is available for resale of the Registrable
        Securities. The Company shall cause such Registration Statement to be declared
        effective by the SEC prior to the first sale to the Investor of the Company’s
        Common Stock pursuant to the Standby Equity Distribution Agreement. The Company
        shall cause the Registration Statement to remain effective until the later
        to
        occur of full completion of the Commitment Period (as such term is defined
        in
        the Standby Equity Distribution Agreement) or
        expiration of the Warrants and the Milestone Warrants . The Company shall
        file
        and see to effectiveness one or more additional Registration Statements to
        cover
        resale of the shares issuable on exercise of the Milestone Warrants.
 

       

      b.  Sufficient
        Number of Shares Registered.
        In the
        event the number of shares available under a Registration Statement filed
        pursuant to Section 2(a) is insufficient to cover all of the Registrable
        Securities pursuant to the Standby Equity Distribution Agreement, the Company
        shall amend the Registration Statement, or file a new Registration Statement
        (on
        the short form available therefore, if applicable), or both, so as to cover
        all
        of such Registrable Securities pursuant to the Standby Equity Distribution
        Agreement and/or the Warrants, as soon as practicable, but in any event not
        later than thirty (30) days after the necessity therefore arises. The Company
        shall use it best efforts to cause such amendment and/or new Registration
        Statement to become effective as soon as practicable following the filing
        thereof. For purposes of the foregoing provision, the number of shares available
        under a Registration Statement shall be deemed “insufficient to cover all of the
        Registrable Securities” if at any time the number of Registrable Securities
        issuable on an Advance Notice Date is greater than the number of shares
        available for resale under such Registration Statement.

       

      3.  RELATED
        OBLIGATIONS.

       

      a.  The
        Company shall keep the Registration Statement effective pursuant to Rule
        415 at
        all times until the later to occur of completion of the Commitment Period
        (as
        such term is defined in the Standby Equity Distribution Agreement) or
        the
        one (1) year anniversary of the termination of that Agreement , and for
        Registration Statements relating to the Milestone Warrants, until the one
        (1)
        year anniversary of the last exercise of the last Milestone Warrant (the
        “Registration
        Period”),
        which
        Registration Statement (including any amendments or supplements thereto and
        prospectuses contained therein) shall not contain any untrue statement of
        a
        material fact or omit to state a material fact required to be stated therein,
        or
        necessary to make the statements therein, in light of the circumstances in
        which
        they were made, not misleading.

       

       

       

      
        
          
          

        

        
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      b.  The
        Company shall prepare and file with the SEC such amendments (including
        post-effective amendments) and supplements to a Registration Statement and
        the
        prospectus used in connection with such Registration Statement, which prospectus
        is to be filed pursuant to Rule 424 promulgated under the Securities Act,
        as may
        be necessary to keep such Registration Statement effective at all times during
        the Registration Period, and, during such period, comply with the provisions
        of
        the Securities Act with respect to the disposition of all Registrable Securities
        of the Company covered by such Registration Statement. In case the Company
        become’s ineligible to use Form S-2 or S-3, the Company shall file on another
        Form and keep that Registration Statement effective by promptly filing
        amendments thereto for information included in the Company’s periodic and other
        reports and proxy statements filed under the Securities Exchange Act of 1934,
        as
        amended (the “Exchange
        Act”).

       

      c.  The
        Company shall furnish to the Investor without charge, (i) at least one copy
        of
        such Registration Statement as declared effective by the SEC and any
        amendment(s) thereto, including financial statements and schedules, all
        documents incorporated therein by reference, all exhibits and each preliminary
        prospectus, (ii) ten (10) copies of the final prospectus included in such
        Registration Statement and all amendments and supplements thereto (or such
        other
        number of copies as such Investor may reasonably request) and (iii) such
        other
        documents as such Investor may reasonably request from time to time in order
        to
        facilitate the disposition of the Registrable Securities owned by such
        Investor.

       

      d.  The
        Company shall use its best efforts to (i) register and qualify the Registrable
        Securities covered by a Registration Statement under such other securities
        or
“blue sky” laws of such jurisdictions in the United States as the Investor
        reasonably requests, (ii) prepare and file in those jurisdictions, such
        amendments (including post-effective amendments) and supplements to such
        registrations and qualifications as may be necessary to maintain the
        effectiveness thereof during the Registration Period, (iii) take such other
        actions as may be necessary to maintain such registrations and qualifications
        in
        effect at all times during the Registration Period, and (iv) take all other
        actions reasonably necessary or advisable to qualify the Registrable Securities
        for sale in such jurisdictions; provided, however, that the Company shall
        not be
        required in connection therewith or as a condition thereto to (w) make any
        change to its certificate of incorporation or by-laws, (x) qualify to do
        business in any jurisdiction where it would not otherwise be required to
        qualify
        but for this Section 3(d), (y) subject itself to general taxation in any
        such
        jurisdiction, or (z) file a general consent to service of process in any
        such
        jurisdiction. The Company shall promptly notify the Investor of the receipt
        by
        the Company of any notification with respect to the suspension of the
        registration or qualification of any of the Registrable Securities for sale
        under the securities or “blue sky” laws of any jurisdiction in the United States
        or its receipt of actual notice of the initiation or threat of any proceeding
        for such purpose.

       

      e.  As
        promptly as practicable after becoming aware of such event or development,
        the
        Company shall notify the Investor in writing of the happening of any event
        as a
        result of which the prospectus included in a Registration Statement, as then
        in
        effect, includes an untrue statement of a material fact or omission to state
        a
        material fact required to be stated therein or necessary to make the statements
        therein, in light of the circumstances under which they were made, not
        misleading (provided that in no event shall such notice contain any material,
        nonpublic information), and promptly prepare a supplement or amendment to
        such
        Registration 

       

       

      
        
          
          

        

        
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      Statement
        to correct such untrue statement or omission, and deliver ten (10) copies
        of
        such supplement or amendment to each Investor. The Company shall also promptly
        notify the Investor in writing (i) when a prospectus or any prospectus
        supplement or post-effective amendment has been filed, and when a Registration
        Statement or any post-effective amendment has become effective (notification
        of
        such effectiveness shall be delivered to the Investor by facsimile on the
        same
        day of such effectiveness), (ii) of any request by the SEC for amendments
        or
        supplements to a Registration Statement or related prospectus or related
        information, and (iii) of the Company’s reasonable determination that a
        post-effective amendment to a Registration Statement would be appropriate.
        

       

      f.  The
        Company shall use its best efforts to prevent the issuance of any stop order
        or
        other suspension of effectiveness of a Registration Statement, or the suspension
        of the qualification of any of the Registrable Securities for sale in any
        jurisdiction within the United States of America and, if such an order or
        suspension is issued, to obtain the withdrawal of such order or suspension
        at
        the earliest possible moment and to notify the Investor of the issuance of
        such
        order and the resolution thereof or its receipt of actual notice of the
        initiation or threat of any proceeding for such purpose.

       

      g.  At
        the
        reasonable request of the Investor, the Company shall furnish to the Investor,
        on the date of the effectiveness of the Registration Statement and thereafter
        from time to time on such dates as the Investor may reasonably request (i)
        a
        letter, dated such date, from the Company’s independent certified public
        accountants in form and substance as is customarily given by independent
        certified public accountants to underwriters in an underwritten public offering,
        and (ii) an opinion, dated as of such date, of counsel representing the Company
        for purposes of such Registration Statement, in form, scope and substance
        as is
        customarily given in an underwritten public offering, addressed to the
        Investor.

       

      h.  The
        Company shall make available for inspection by (i) the Investor and (ii)
        one
        firm of accountants or other agents retained by the Investor (collectively,
        the
“Inspectors”) all pertinent financial and other records, and pertinent corporate
        documents and properties of the Company (collectively, the “Records”), as shall
        be reasonably necessary to enable them to exercise their due diligence
        responsibility, and cause the Company’s officers, directors and employees to
        supply all information which any Inspector may reasonably request in connection
        with the Registration Statement. The Investor agrees that Records obtained
        by it
        as a result of such inspections which is conspicuously marked by the Company
        as
        "Confidential" (subject to the Company’s obligations with respect to material
        non-public information set forth in Section 8.1(a) herein) shall be deemed
        confidential and held in strict confidence by the Investor, unless (a) the
        disclosure of such Records is necessary to avoid or correct a misstatement
        or
        omission in any Registration Statement or is otherwise required under the
        Securities Act, (b) the release of such Records is ordered pursuant to a
        final,
        non-appealable subpoena or order from a court or government body of competent
        jurisdiction, or (c) the information in such Records has been made generally
        available to the public other than by disclosure in violation of this or
        any
        other agreement of which the Inspector and the Investor has knowledge. The
        Investor agrees that it shall, upon learning that disclosure of such Records
        is
        sought in or by a court or governmental body of competent jurisdiction or
        through other means, give prompt notice to the Company and allow the Company,
        at
        its expense, to undertake appropriate action to prevent disclosure of, or
        to
        obtain a protective order for, the Records deemed confidential.

       

       

       

      
        
          
          

        

        
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      i.  The
        Company shall hold in confidence and not make any disclosure of information
        concerning the Investor provided to the Company unless (i) disclosure of
        such
        information is necessary to comply with federal or state securities laws,
        (ii)
        the disclosure of such information is necessary to avoid or correct a
        misstatement or omission in any Registration Statement, (iii) the release
        of
        such information is ordered pursuant to a subpoena or other final,
        non-appealable order from a court or governmental body of competent
        jurisdiction, or (iv) such information has been made generally available
        to the
        public other than by disclosure in violation of this Agreement or any other
        agreement. The Company agrees that it shall, upon learning that disclosure
        of
        such information concerning the Investor is sought in or by a court or
        governmental body of competent jurisdiction or through other means, give
        prompt
        written notice to the Investor and allow the Investor, at the Investor’s
        expense, to undertake appropriate action to prevent disclosure of, or to
        obtain
        a protective order for, such information.

       

      j.  The
        Company shall use its best efforts either to cause all the Registrable
        Securities covered by a Registration Statement (i) to be listed on each
        securities exchange on which securities of the same class or series issued
        by
        the Company are then listed, if any, if the listing of such Registrable
        Securities is then permitted under the rules of such exchange or to secure
        the
        inclusion for quotation on the National Association of Securities Dealers,
        Inc.
        OTC Bulletin Board for such Registrable Securities. The Company shall pay
        all
        fees and expenses in connection with satisfying its obligation under this
        Section 3(j).

       

      k.  The
        Company shall cooperate with the Investor to the extent applicable, to
        facilitate the timely preparation and delivery of certificates (not bearing
        any
        restrictive legend) representing the Registrable Securities to be offered
        pursuant to a Registration Statement and enable such certificates to be in
        such
        denominations or amounts, as the case may be, as the Investor may reasonably
        request and registered in such names as the Investor may request.

       

      l.  The
        Company shall use its best efforts to cause the Registrable Securities covered
        by the applicable Registration Statement to be registered with or approved
        by
        such other governmental agencies or authorities as may be necessary to
        consummate the disposition of such Registrable Securities.

       

      m.  Each
        year, the Company shall make generally available to its security holders
        its
        annual report to shareholders for each annual meeting of shareholders, which
        shall contain an annual earnings statement (in form complying with the
        provisions of Rule 158 under the Securities Act). 

       

      n.  The
        Company shall otherwise use its best efforts to comply with all applicable
        rules
        and regulations of the SEC in connection with any registration
        hereunder.

       

      o.  Within
        two (2) business days after a Registration Statement which covers Registrable
        Securities is ordered effective by the SEC, the Company shall deliver, and
        shall
        cause legal counsel for the Company to deliver, to the transfer agent for
        such
        Registrable Securities (with copies to the Investor) confirmation that such
        Registration Statement has been declared effective by the SEC in the form
        attached hereto as Exhibit
        A.

       

       

       

      
        
          
          

        

        
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      p.  The
        Company shall take all other reasonable actions necessary to expedite and
        facilitate disposition by the Investor of Registrable Securities pursuant
        to a
        Registration Statement.

       

      4.  OBLIGATIONS
        OF THE INVESTOR.

       

      The
        Investor agrees that, upon receipt of any notice from the Company of the
        happening of any event of the kind described in Section 3(f) or the first
        sentence of 3(e), the Investor will immediately discontinue disposition of
        Registrable Securities pursuant to any Registration Statement(s) covering
        such
        Registrable Securities until the Investor’s receipt of the copies of the
        supplemented or amended prospectus contemplated by Section 3(e) or receipt
        of
        notice that no supplement or amendment is required. Notwithstanding anything
        to
        the contrary, the Company shall cause its transfer agent to deliver unlegended
        certificates for shares of Common Stock to a transferee of the Investor in
        accordance with the terms of the Standby Equity Distribution Agreement in
        connection with any sale of Registrable Securities with respect to which
        the
        Investor has entered into a contract for sale prior to the Investor’s receipt of
        a notice from the Company of the happening of any event of the kind described
        in
        Section 3(f) or the first sentence of 3(e) and for which the Investor has
        not
        yet settled.

       

      5.  EXPENSES
        OF REGISTRATION.

       

      All
        expenses incurred in connection with registrations, filings or qualifications
        pursuant to Sections 2 and 3, including, without limitation, all registration,
        listing and qualifications fees, printers, legal and accounting fees shall
        be
        paid by the Company. 

       

      6.  INDEMNIFICATION.

       

      With
        respect to Registrable Securities which are included in a Registration Statement
        under this Agreement:

       

      a.  To
        the
        fullest extent permitted by law, the Company will, and hereby does, indemnify,
        hold harmless and defend the Investor, the directors, officers, partners,
        employees, agents, representatives of, and each Person, if any, who controls
        the
        Investor within the meaning of the Securities Act or the Exchange Act (each,
        an
“Indemnified
        Person”),
        against any losses, claims, damages, liabilities, judgments, fines, penalties,
        charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
        expenses, joint or several (collectively, “Claims”)
        incurred in investigating, preparing or defending any action, claim, suit,
        inquiry, proceeding, investigation or appeal taken from the foregoing by
        or
        before any court or governmental, administrative or other regulatory agency,
        body or the SEC, whether pending or threatened, whether or not an indemnified
        party is or may be a party thereto (“Indemnified
        Damages”),
        to
        which any of them may become subject insofar as such Claims (or actions or
        proceedings, whether commenced or threatened, in respect thereof) arise out
        of
        or are based upon: (i) any untrue statement or alleged untrue statement of
        a
        material fact in a Registration Statement or any post-effective amendment
        thereto or in any filing made in connection with the qualification of the
        offering under the securities or other “blue sky” laws of any jurisdiction in
        which Registrable Securities are offered (“Blue
        Sky Filing”),
        or
        the omission or alleged omission to state a material fact required to be
        stated
        therein or necessary to make the statements therein not misleading;
        (ii) any untrue 

       

       

      
        
          
          

        

        
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      statement
        or alleged untrue statement of a material fact contained in any final prospectus
        (as amended or supplemented, if the Company files any amendment thereof or
        supplement thereto with the SEC) or the omission or alleged omission to state
        therein any material fact necessary to make the statements made therein,
        in
        light of the circumstances under which the statements therein were made,
        not
        misleading; or (iii) any violation or alleged violation by the Company of
        the
        Securities Act, the Exchange Act, any other law, including, without limitation,
        any state securities law, or any rule or regulation there under relating
        to the
        offer or sale of the Registrable Securities pursuant to a Registration Statement
        (the matters in the foregoing clauses (i) through (iii) being, collectively,
        “Violations”).
        The
        Company shall reimburse the Investor and each such controlling person promptly
        as such expenses are incurred and are due and payable, for any legal fees
        or
        disbursements or other reasonable expenses incurred by them in connection
        with
        investigating or defending any such Claim. Notwithstanding anything to the
        contrary contained herein, the indemnification agreement contained in this
        Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
        out of or based upon a Violation which occurs in reliance upon and in conformity
        with information furnished in writing to the Company by such Indemnified
        Person
        expressly for use in connection with the preparation of the Registration
        Statement or any such amendment thereof or supplement thereto; (y) shall
        not be
        available to the extent such Claim is based on a failure of the Investor
        to
        deliver or to cause to be delivered the prospectus made available by the
        Company, if such prospectus was timely made available by the Company pursuant
        to
        Section 3(e); and (z) shall not apply to amounts paid in settlement of any
        Claim
        if such settlement is effected without the prior written consent of the Company,
        which consent shall not be unreasonably withheld. Such indemnity shall remain
        in
        full force and effect regardless of any investigation made by or on behalf
        of
        the Indemnified Person.

       

      b.  In
        connection with a Registration Statement, the Investor agrees to indemnify,
        hold
        harmless and defend, to the same extent and in the same manner as is set
        forth
        in Section 6(a), the Company, each of its directors, each of its officers
        who
        signs the Registration Statement and each Person, if any, who controls the
        Company within the meaning of the Securities Act or the Exchange Act (each
        an
“Indemnified
        Party”),
        against any Claim or Indemnified Damages to which any of them may become
        subject, under the Securities Act, the Exchange Act or otherwise, insofar
        as
        such Claim or Indemnified Damages arise out of or is based upon any Violation,
        in each case to the extent, and only to the extent, that such Violation occurs
        in reliance upon and in conformity with written information furnished to
        the
        Company by the Investor expressly for use in connection with such Registration
        Statement; and, subject to Section 6(d), the Investor will reimburse any
        legal
        or other expenses reasonably incurred by them in connection with investigating
        or defending any such Claim; provided, however, that the indemnity agreement
        contained in this Section 6(b) and the agreement with respect to contribution
        contained in Section 7 shall not apply to amounts paid in settlement of any
        Claim if such settlement is effected without the prior written consent of
        the
        Investor, which consent shall not be unreasonably withheld; provided, further,
        however, that the Investor shall be liable under this Section 6(b) for only
        that
        amount of a Claim or Indemnified Damages as does not exceed the net proceeds
        to
        the Investor as a result of the sale of Registrable Securities pursuant to
        such
        Registration Statement. Such indemnity shall remain in full force and effect
        regardless of any investigation made by or on behalf of such Indemnified
        Party.
        Notwithstanding anything to the contrary contained herein, the indemnification
        agreement contained in this Section 6(b) with respect to any prospectus shall
        not inure to the benefit of any Indemnified Party if the untrue statement
        or
        omission of material fact contained in the prospectus was corrected and such
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      prospectus
        was delivered to the Investor prior to the Investor’s use of the prospectus to
        which the Claim relates.

       

      c.  Promptly
        after receipt by an Indemnified Person or Indemnified Party under this Section
        6
        of notice of the commencement of any action or proceeding (including any
        governmental action or proceeding) involving a Claim, such Indemnified Person
        or
        Indemnified Party shall, if a Claim in respect thereof is to be made against
        any
        indemnifying party under this Section 6, deliver to the indemnifying party
        a
        written notice of the commencement thereof, and the indemnifying party shall
        have the right to participate in, and, to the extent the indemnifying party
        so
        desires, jointly with any other indemnifying party similarly noticed, to
        assume
        control of the defense thereof with counsel mutually satisfactory to the
        indemnifying party and the Indemnified Person or the Indemnified Party, as
        the
        case may be; provided, however, that an Indemnified Person or Indemnified
        Party
        shall have the right to retain its own counsel with the fees and expenses
        of not
        more than one counsel for such Indemnified Person or Indemnified Party to
        be
        paid by the indemnifying party, if, in the reasonable opinion of counsel
        retained by the indemnifying party, the representation by such counsel of
        the
        Indemnified Person or Indemnified Party and the indemnifying party would
        be
        inappropriate due to actual or potential differing interests between such
        Indemnified Person or Indemnified Party and any other party represented by
        such
        counsel in such proceeding. The Indemnified Party or Indemnified Person shall
        cooperate fully with the indemnifying party in connection with any negotiation
        or defense of any such action or claim by the indemnifying party and shall
        furnish to the indemnifying party all information reasonably available to the
        Indemnified Party or Indemnified Person which relates to such action or claim.
        The indemnifying party shall keep the Indemnified Party or Indemnified Person
        fully apprised at all times as to the status of the defense or any settlement
        negotiations with respect thereto. No indemnifying party shall be liable
        for any
        settlement of any action, claim or proceeding effected without its prior
        written
        consent, provided, however, that the indemnifying party shall not unreasonably
        withhold, delay or condition its consent. No indemnifying party shall, without
        the prior written consent of the Indemnified Party or Indemnified Person,
        consent to entry of any judgment or enter into any settlement or other
        compromise which does not include as an unconditional term thereof the giving
        by
        the claimant or plaintiff to such Indemnified Party or Indemnified Person
        of a
        release from all liability in respect to such claim or litigation. Following
        indemnification as provided for hereunder, the indemnifying party shall be
        subrogated to all rights of the Indemnified Party or Indemnified Person with
        respect to all third parties, firms or corporations relating to the matter
        for
        which indemnification has been made. The failure to deliver written notice
        to
        the indemnifying party within a reasonable time of the commencement of any
        such
        action shall not relieve such indemnifying party of any liability to the
        Indemnified Person or Indemnified Party under this Section 6, except to the
        extent that the indemnifying party is prejudiced in its ability to defend
        such
        action.

       

      d.  The
        indemnification required by this Section 6 shall be made by periodic payments
        of
        the amount thereof during the course of the investigation or defense, as
        and
        when bills are received or Indemnified Damages are incurred.

       

      e.  The
        indemnity agreements contained herein shall be in addition to (i) any cause
        of
        action or similar right of the Indemnified Party or Indemnified Person against
        the 

       

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

       

      indemnifying
        party or others, and (ii) any liabilities the indemnifying party may be subject
        to pursuant to the law.

       

      7.  CONTRIBUTION.

       

      To
        the
        extent any indemnification by an indemnifying party is prohibited or limited
        by
        law, the indemnifying party agrees to make the maximum contribution with
        respect
        to any amounts for which it would otherwise be liable under Section 6 to
        the
        fullest extent permitted by law; provided, however, that: (i) no seller of
        Registrable Securities guilty of fraudulent misrepresentation (within the
        meaning of Section 11(f) of the Securities Act) shall be entitled to
        contribution from any seller of Registrable Securities who was not guilty
        of
        fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
        Securities shall be limited in amount to the net amount of proceeds received
        by
        such seller from the sale of such Registrable Securities.

       

      8.  REPORTS
        UNDER THE EXCHANGE ACT.

       

      With
        a
        view to making available to the Investor the benefits of Rule 144 promulgated
        under the Securities Act or any similar rule or regulation of the SEC that
        may
        at any time permit the Investors to sell securities of the Company to the
        public
        without registration (“Rule
        144”)
        the
        Company agrees tomake and keep public information available, as those terms
        are
        understood and defined in Rule 144 by filing with the SEC in a timely manner
        all
        reports and other documents required of the Company under the Exchange Act
        so
        long as the Company remains subject to such requirements (it being understood
        that nothing herein shall limit the Company’s obligations under Section 6.3 of
        the Standby Equity Distribution Agreement) 

       

      


       

      9.  AMENDMENT
        OF REGISTRATION RIGHTS.

       

      Provisions
        of this Agreement may be amended and the observance thereof may be waived
        (either generally or in a particular instance and either retroactively or
        prospectively), only by a written agreement between the Company and the
        Investor. Any amendment or waiver effected in accordance with this Section
        9
        shall be binding upon the Investor and the Company. No consideration shall
        be
        offered or paid to any Person to amend or consent to a waiver or modification
        of
        any provision of any of this Agreement unless the same consideration also
        is
        offered to all of the parties to this Agreement.

       

      10.  MISCELLANEOUS.

       

      a.  A
        Person
        is deemed to be a holder of Registrable Securities whenever such Person owns
        or
        is deemed to own of record such Registrable Securities. If the Company receives
        conflicting instructions, notices or elections from two or more Persons with
        respect to the same Registrable Securities, the Company shall act upon the
        basis
        of instructions, notice or election received from the registered owner of
        such
        Registrable Securities.

       

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

       

       

      b.  Any
        notices, consents, waivers or other communications required or permitted
        to be
        given under the terms of this Agreement must be in writing and will be deemed
        to
        have been delivered: (i) upon receipt, when delivered personally; (ii) upon
        receipt, when sent by facsimile (provided confirmation of transmission is
        mechanically or electronically generated and kept on file by the sending
        party);
        or (iii) one business day after deposit with a nationally recognized overnight
        delivery service, in each case properly addressed to the party to receive
        the
        same. The addresses and facsimile numbers for such communications shall
        be:

       

      
        	
                If
                  to the Company, to:

              	
                U.S.
                  Energy Corp.

              
	 	
                877
                  North 8th
                  West

              
	 	
                Glen
                  L. Larsen Building

              
	 	
                Riverton,
                  WY 82501

              
	 	
                Attention:
                  Mark J. Larsen

              
	 	
                Telephone:
                  (307) 856-9271

              
	 	
                Facsimile:
                  (307)
                  857-3050

              
	 	 
	
                With
                  a copy to:

              	
                The
                  Law Office of Stephen E. Rounds

              
	 	
                1544
                  York Street, Suite 110

              
	 	
                Denver,
                  CO 80206

              
	 	
                Attention
                  : Stephen E. Rounds

              
	 	
                Telephone:
                  (303) 377-6997

              
	 	
                Facsimile:
                  (303) 377-0231

              
	 	 
	
                If
                  to the Investor, to:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, New Jersey 07302

              
	 	
                Attention: Mark
                  Angelo

              
	 	
                                   
                  Portfolio Manager

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 
	
                With
                  a copy to:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Attention: 
                  David Gonzalez, Esq.

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 
	 	 


      

       

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

       

      Any
        party
        may change its address by providing written notice to the other parties hereto
        at least five days prior to the effectiveness of such change. Written
        confirmation of receipt (A) given by the recipient of such notice, consent,
        waiver or other communication, (B) mechanically or electronically generated
        by
        the sender’s facsimile machine containing the time, date, recipient facsimile
        number and an image of the first page of such transmission or (C) provided
        by a
        courier or overnight courier service shall be rebuttable evidence of personal
        service, receipt by facsimile or receipt from a nationally recognized overnight
        delivery service in accordance with clause (i), (ii) or (iii) above,
        respectively.

       

      c.  Failure
        of any party to exercise any right or remedy under this Agreement or otherwise,
        or delay by a party in exercising such right or remedy, shall not operate
        as a
        waiver thereof.

       

      d.  The
        corporate laws of the State of New Jersey shall govern all issues concerning
        the
        relative rights of the Company and the Investor. All other questions concerning
        the construction, validity, enforcement and interpretation of this Agreement
        shall be governed by the internal laws of the State of New Jersey, without
        giving effect to any choice of law or conflict of law provision or rule (whether
        of the State of New Jersey or any other jurisdiction) that would cause the
        application of the laws of any jurisdiction other than the State of New Jersey.
        Each party hereby irrevocably submits to the non-exclusive jurisdiction of
        the
        Superior Courts of the State of New Jersey, sitting in Hudson County, New
        Jersey
        and the Federal District Court for the District of New Jersey sitting in
        Newark,
        New Jersey, for the adjudication of any dispute hereunder or in connection
        herewith or with any transaction contemplated hereby or discussed herein,
        and
        hereby irrevocably waives, and agrees not to assert in any suit, action or
        proceeding, any claim that it is not personally subject to the jurisdiction
        of
        any such court, that such suit, action or proceeding is brought in an
        inconvenient forum or that the venue of such suit, action or proceeding is
        improper. Each party hereby irrevocably waives personal service of process
        and
        consents to process being served in any such suit, action or proceeding by
        mailing a copy thereof to such party at the address for such notices to it
        under
        this Agreement and agrees that such service shall constitute good and sufficient
        service of process and notice thereof. Nothing contained herein shall be
        deemed
        to limit in any way any right to serve process in any manner permitted by
        law.
        If any provision of this Agreement shall be invalid or unenforceable in any
        jurisdiction, such invalidity or unenforceability shall not affect the validity
        or enforceability of the remainder of this Agreement in that jurisdiction
        or the
        validity or enforceability of any provision of this Agreement in any other
        jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
        AND
        AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
        HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
        TRANSACTION CONTEMPLATED HEREBY.

       

      e.  This
        Agreement, the Standby Equity Distribution Agreement, the Escrow Agreement,
        and
        the Placement Agent Agreement constitute the entire agreement among the parties
        hereto with respect to the subject matter hereof and thereof. There are no
        restrictions, promises, warranties or undertakings, other than those set
        forth
        or referred to herein and therein. This Agreement, the Standby Equity
        Distribution Agreement, the Escrow Agreement, and the Placement Agent Agreement
        supersede all prior agreements and understandings among the parties hereto
        with
        respect to the subject matter hereof and thereof.

       

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

       

       

      f.  This
        Agreement shall inure to the benefit of and be binding upon the permitted
        successors and assigns of each of the parties hereto.

       

      g.  The
        headings in this Agreement are for convenience of reference only and shall
        not
        limit or otherwise affect the meaning hereof.

       

      h.  This
        Agreement may be executed in identical counterparts, each of which shall
        be
        deemed an original but all of which shall constitute one and the same agreement.
        This Agreement, once executed by a party, may be delivered to the other party
        hereto by facsimile transmission of a copy of this Agreement bearing the
        signature of the party so delivering this Agreement.

       

      i.  Each
        party shall do and perform, or cause to be done and performed, all such further
        acts and things, and shall execute and deliver all such other agreements,
        certificates, instruments and documents, as the other party may reasonably
        request in order to carry out the intent and accomplish the purposes of this
        Agreement and the consummation of the transactions contemplated
        hereby.

       

      j.  The
        language used in this Agreement will be deemed to be the language chosen
        by the
        parties to express their mutual intent and no rules of strict construction
        will
        be applied against any party.

       

      k.  This
        Agreement is intended for the benefit of the parties hereto and their respective
        permitted successors and assigns, and is not for the benefit of, nor may
        any
        provision hereof be enforced by, any other Person.

       

      


      


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          12

          
            

          

        

        
          
          

        

      


      


      IN
        WITNESS WHEREOF,
        the
        parties have caused this Registration Rights Agreement to be duly executed
        as of
        day and year first above written.

       

      
        	 	
                U.S.
                  Energy Corp.

              
	 	 
	 	
                By: /s/
                  Mark J. Larsen   

              
	 	
                Name: Mark
                  J. Larsen

              
	 	
                Title: President

              
	 	 
	 	 
	 	
                Cornell
                  Capital Partners, LP

              
	 	 
	 	
                By: Yorkville
                  Advisors, LLC

              
	 	
                Its: General
                  Partner

              
	 	 
	 	
                By: /s/
                  Mark Angelo   

              
	 	
                Name: Mark
                  Angelo

              
	 	
                Title: Portfolio
                  Manager

              
	 	 


      

      


      


      


      



      
        
          
             

            


             

            


          

          
          

        

        
          13

          
            

          

        

        
          
          

          
          

        

      



      


      EXHIBIT
        A

      FORM
        OF NOTICE OF EFFECTIVENESS

       

      OF
        REGISTRATION STATEMENT

       

      


      


      Attention: 

      


      Re: U.S.
        ENERGY CORP.

      


      Ladies
        and Gentlemen:

      


      We
        are
        counsel to U.S. Energy Corp. (the “Company”),
        and
        have represented the Company in connection with that certain Standby Equity
        Distribution Agreement (the “Standby
        Equity Distribution Agreement”)
        entered into by and between the Company and Cornell Capital Partners, LP
        (the
“Investor”)
        pursuant to which the Company issued to the Investor shares of its Common
        Stock,
        par value $0.01 per share (the “Common
        Stock”).
        Pursuant to the Standby Equity Distribution Agreement, the Company also has
        entered into a Registration Rights Agreement with the Investor (the
“Registration
        Rights Agreement”)
        pursuant to which the Company agreed, among other things, to register the
        Registrable Securities (as defined in the Registration Rights Agreement)
        under
        the Securities Act of 1933, as amended (the “Securities
        Act”).
        In
        connection with the Company’s obligations under the Registration Rights
        Agreement, on ____________ ____, the Company filed a Registration Statement
        on
        Form ________ (File No. 333-_____________) (the “Registration
        Statement”)
        with
        the Securities and Exchange Commission (the “SEC”)
        relating to the Registrable Securities which names the Investor as a selling
        stockholder thereunder.

       

      In
        connection with the foregoing, we advise you that a member of the SEC’s staff
        has advised us by telephone that the SEC has entered an order declaring the
        Registration Statement effective under the Securities Act at [ENTER
        TIME OF EFFECTIVENESS]
        on
[ENTER
        DATE OF EFFECTIVENESS]
        and we
        have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
        any stop order suspending its effectiveness has been issued or that any
        proceedings for that purpose are pending before, or threatened by, the SEC
        and
        the Registrable Securities are available for resale under the Securities
        Act
        pursuant to the Registration Statement.

       

      Very
        truly yours,

      


      


      


      By:      

      


      cc: Cornell
        Capital Partners, LP