Exhibit 10.1 Standby Equity Distribution Agreement


    
      

    

     

    


     

     

    STANDBY
      EQUITY DISTRIBUTION AGREEMENT

     

    THIS
      AGREEMENT
      dated as
      of the 11th day of April 2006 (the “Agreement”)
      between CORNELL
      CAPITAL PARTNERS, LP,
      a
      Delaware limited partnership (the “Investor”),
      and
U.S.
      ENERGY CORP.,
      a
      corporation organized and existing under the laws of the State of Wyoming (the
      “Company”).

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Investor, from time to time
      as
      provided herein, and the Investor shall purchase from the Company up to Fifty
      Million Dollars ($50,000,000) of the Company’s common stock, par value
      $0.01 per share (the “Common
      Stock”);
      and

     

    WHEREAS,
      such
      investments will be made in reliance upon the provisions of Regulation D
      (“Regulation
      D”)
      of the
      Securities Act of 1933, as amended, and the regulations promulgated thereunder
      (the “Securities
      Act”),
      and
      or upon such other exemption from the registration requirements of the
      Securities Act as may be available with respect to any or all of the investments
      to be made hereunder.

     

    WHEREAS,
      the
      Company has engaged Newbridge Securities Corporation (the “Placement
      Agent”),
      to
      act as the Company’s exclusive placement agent in connection with the sale of
      the Company’s Common Stock to the Investor hereunder pursuant to the Placement
      Agent Agreement dated the date hereof by and among the Company, the Placement
      Agent and the Investor (the “Placement
      Agent Agreement”).

     

    NOW,
      THEREFORE,
      the
      parties hereto agree as follows:

     

     

    ARTICLE
      I.

     

     

    Certain
      Definitions

     

    Section
      1.1. “Advance”
shall
      mean the portion of the Commitment Amount requested by the Company in the
      Advance Notice.

     

    Section
      1.2. “Advance
      Date”
shall
      mean the first (1st)
      Trading
      Day after expiration of the applicable Pricing Period for each
      Advance.

     

    Section
      1.3. “Advance
      Notice”
shall
      mean a written notice in the form of Exhibit
      A
      attached
      hereto to the Investor executed by an officer of the Company and setting forth
      the Advance amount that the Company requests from the Investor.

     

    Section
      1.4. “Advance
      Notice Date”
shall
      mean each date the Company delivers (in accordance with Section 2.2(b) of this
      Agreement) to the Investor an Advance Notice requiring the Investor to advance
      funds to the Company, subject to the terms of this Agreement. No Advance Notice
      Date shall be less than five (5) Trading Days after the prior Advance Notice
      Date.

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    Section
      1.5. “Bid
      Price”
shall
      mean, on any date, the closing bid price (as reported by Bloomberg L.P.) of
      the
      Common Stock on the Principal Market or if the Common Stock is not traded on
      a
      Principal Market, the highest reported bid price for the Common Stock, as
      furnished by the National Association of Securities Dealers, Inc.

     

    Section
      1.6. “Closing”
shall
      mean one of the closings of a purchase and sale of Common Stock pursuant to
      Section 2.3.

     

    Section
      1.7. “Commitment
      Amount”
shall
      mean the aggregate amount of up to Fifty Million Dollars ($50,000,000) which
      the
      Investor has agreed to provide to the Company in order to purchase the Company’s
      Common Stock pursuant to the terms and conditions of this Agreement ,
provided
      that,
      the Company shall not effect any sale under this Agreement and the Investor
      shall not have the right or the obligation to purchase shares of Common Stock
      under this Agreement to the extent that after giving effect to such purchase
      and
      sale the aggregate number of shares issued under this Agreement and the shares
      acquired under the Securities Purchase Agreement dated the date hereof would
      exceed 3,911,255 shares of Common Stock (which is less than 20% of the
      19,556,281 outstanding shares of Common Stock as of the date of this Agreement)
      unless or until the Company obtains any necessary shareholder approval or
      consent in accordance with Nasdaq rules prior to such issuance.

     

    Section
      1.8. “Commitment
      Period”
shall
      mean the period commencing on the earlier to occur of (i) the Effective Date,
      or
      (ii) such earlier date as the Company and the Investor may mutually agree in
      writing, and expiring on the earliest to occur of (x) the date on which the
      Investor shall have made payment of Advances pursuant to this Agreement in
      the
      aggregate amount of the Commitment Amount, (y) the date this Agreement is
      terminated pursuant to Section 10.2 or (z) the date occurring thirty six (36)
      months after the Effective Date, provided, that if the Registration Statement
      is
      filed on a form other than Form S-2 or S-3, the date under (z) shall be that
      date occurring thirty six (36) months after the Effective Date only if twenty
      four (24) months after the Effective Date, the Company files either an amendment
      to the then effective registration statement or a new registration statement
      is
      declared effective incorporating the Company’s current financial
      statements.

     

    Section
      1.9. “Common
      Stock”
shall
      mean the Company’s common stock, par value $0.01 per share.

     

    Section
      1.10. “Condition
      Satisfaction Date”
shall
      have the meaning set forth in Section 7.2.

     

    Section
      1.11. “Damages”
shall
      mean any loss, claim, damage, liability, costs and expenses (including, without
      limitation, reasonable attorney’s fees and disbursements and costs and expenses
      of expert witnesses and investigation).

     

    Section
      1.12. “Effective
      Date”
shall
      mean the date on which the SEC first declares effective a Registration Statement
      registering the resale of the Registrable Securities as set forth in Section
      7.2(a). 

     

    Section
      1.13. “Exchange
      Act”
shall
      mean the Securities Exchange Act of 1934, as amended, and the rules and
      regulations promulgated thereunder.

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    Section
      1.14. “Material
      Adverse Effect”
shall
      mean any condition, circumstance, or situation that would prohibit or otherwise
      materially interfere with the ability of the Company to enter into and perform
      any of its obligations under this Agreement or the Registration Rights Agreement
      in any material respect.

     

    Section
      1.15. “Market
      Price”
shall
      mean the lowest VWAP of the Common Stock during the Pricing Period.

     

    Section
      1.16. “Maximum
      Advance Amount”
shall
      be Five Million Dollars ($5,000,000) per Advance Notice subject to the
      limitations set forth in Section 1.7 of this Agreement. 

     

    Section
      1.17. “NASD”
shall
      mean the National Association of Securities Dealers, Inc.

     

    Section
      1.18. “Person”
shall
      mean an individual, a corporation, a partnership, an association, a trust or
      other entity or organization, including a government or political subdivision
      or
      an agency or instrumentality thereof.

     

    Section
      1.19. “Placement
      Agent”
shall
      mean Newbridge Securities Corporation, a registered broker-dealer.

     

    Section
      1.20. “Pricing
      Period”
shall
      mean the five (5) consecutive Trading Days after the Advance Notice
      Date.

     

    Section
      1.21. “Principal
      Market”
shall
      mean the Nasdaq National Market, the Nasdaq Capital Market, Nasdaq SmallCap
      Market, the American Stock Exchange, the OTC Bulletin Board or the New York
      Stock Exchange, whichever is at the time the principal trading exchange or
      market for the Common Stock.

     

    Section
      1.22. “Purchase
      Price”
shall
      be set at ninety eight percent (98%) of the Market Price during the Pricing
      Period.

     

    Section
      1.23. “Registrable
      Securities”
shall
      mean the shares of Common Stock to be issued hereunder (i)
      in
      respect of which the Registration Statement has not been declared effective
      by
      the SEC, (ii) which have not been sold under circumstances meeting all of the
      applicable conditions of Rule 144 (or any similar provision then in force)
      under
      the Securities Act (“Rule
      144”)
      or
      (iii) which have not been otherwise transferred to a holder who may trade such
      shares without restriction under the Securities Act, and the Company has
      delivered a new certificate or other evidence of ownership for such securities
      not bearing a restrictive legend.

     

    Section
      1.24. “Registration
      Rights Agreement”
shall
      mean the Registration Rights Agreement dated the date hereof, regarding the
      filing of the Registration Statement for the resale of the Registrable
      Securities, entered into between the Company and the Investor.

     

    Section
      1.25. “Registration
      Statement”
shall
      mean a registration statement on Form S-2 or S-3 (if use of such form is then
      available to the Company pursuant to the rules of the SEC and, if not, on such
      other form promulgated by the SEC for which the Company then qualifies and
      which
      counsel for the Company shall deem appropriate, and which form shall be
      available for the resale of the Registrable Securities to be registered
      thereunder in accordance with the 

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    provisions
      of this Agreement and the Registration Rights Agreement, and in accordance
      with
      the intended method of distribution of such securities), for the registration
      of
      the resale by the Investor of the Registrable Securities under the Securities
      Act.

     

    Section
      1.26. “Regulation
      D”
shall
      have the meaning set forth in the recitals of this Agreement.

     

    Section
      1.27. “SEC”
shall
      mean the United States Securities and Exchange Commission.

     

    Section
      1.28. “Securities
      Act”
shall
      have the meaning set forth in the recitals of this Agreement.

     

    Section
      1.29. “SEC
      Documents”
shall
      mean Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
      Reports on Form 8-K and Proxy Statements of the Company as supplemented to
      the
      date hereof, filed by the Company for a period of at least twelve (12) months
      immediately preceding the date hereof or the Advance Date, as the case may
      be,
      until such time as the Company no longer has an obligation to maintain the
      effectiveness of a Registration Statement as set forth in the Registration
      Rights Agreement.

     

    Section
      1.30. “Trading
      Day”
shall
      mean any day during which the New York Stock Exchange shall be open for
      business.

     

    Section
      1.31. “VWAP”
shall
      mean the volume weighted average price of the Company’s Common Stock as quoted
      by Bloomberg, LP.

     

     

    ARTICLE
      II.

    Advances

     

    Section
      2.1. Advances.

     

    Subject
      to the terms and conditions of this Agreement (including, without limitation,
      the provisions of Article VII hereof), the Company, at its sole and exclusive
      option, may issue and sell to the Investor, and the Investor shall purchase
      from
      the Company, shares of the Company’s Common Stock by the delivery, in the
      Company’s sole discretion, of Advance Notices. The number of shares of Common
      Stock that the Investor shall purchase pursuant to each Advance shall be
      determined by dividing the amount of the Advance by the Purchase Price. No
      fractional shares shall be issued. Fractional shares shall be rounded to the
      next higher whole number of shares. The aggregate maximum amount of all Advances
      that the Investor shall be obligated to make under this Agreement shall not
      exceed the Commitment Amount.

     

    Section
      2.2. Mechanics.

     

    (a) Advance
      Notice.
      At any
      time during the Commitment Period, the Company may require the Investor to
      purchase shares of Common Stock by delivering an Advance Notice to the Investor,
      subject to the conditions set forth in Section 7.2; provided, however, the
      amount for each Advance as designated by the Company in the applicable Advance
      Notice shall not be more than the Maximum Advance Amount and the aggregate
      amount of the Advances pursuant to this Agreement shall not exceed the
      Commitment Amount. The Company 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    acknowledges
      that the Investor may sell shares of the Company’s Common Stock corresponding
      with a particular Advance Notice after the Advance Notice is received by the
      Investor. There shall be a minimum of five (5) Trading Days between each Advance
      Notice Date.

     

    (b) Date
      of Delivery of Advance Notice.
      An
      Advance Notice shall be deemed delivered on (i) the Trading Day it is received
      by facsimile or otherwise by the Investor if such notice is received prior
      to
      5:00 pm Eastern Time, or (ii) the immediately succeeding Trading Day if it
      is
      received by facsimile or otherwise after 5:00 pm Eastern Time on a Trading
      Day
      or at any time on a day which is not a Trading Day. No Advance Notice may be
      deemed delivered on a day that is not a Trading Day. 

     

    Section
      2.3. Closings.
      On each
      Advance Date (i) the Company shall deliver to the Investor such number of shares
      of the Common Stock registered in the name of the Investor as shall equal (x)
      the amount of the Advance specified in such Advance Notice pursuant to Section
      2.1 herein, divided by (y) the Purchase Price and (ii) upon receipt of such
      shares, the Investor shall deliver to the Company the amount of the Advance
      specified in the Advance Notice by wire transfer, on the Advance Date, of
      immediately available funds. In addition, on or prior to the Advance Date,
      each
      of the Company and the Investor shall deliver to the other all documents,
      instruments and writings required to be delivered by either of them pursuant
      to
      this Agreement in order to implement and effect the transactions contemplated
      herein. To the extent the Company has not paid the fees, expenses, and
      disbursements of the Investor in accordance with Section 12.4, the amount of
      such fees, expenses, and disbursements may be deducted by the Investor (and
      shall be paid to the relevant party) directly out of the proceeds of the Advance
      with no reduction in the amount of shares of the Company’s Common Stock to be
      delivered on such Advance Date. 

     

    
      	(a)  	
              Company’s
                Obligations Upon Closing.

            


    

     

    (i) The
      Company shall deliver to the Investor the shares of Common Stock applicable
      to
      the Advance in accordance with Section 2.3. The certificates evidencing such
      shares shall be free of restrictive legends.

     

    (ii) the
      Company’s Registration Statement with respect to the resale of the shares of
      Common Stock delivered in connection with the Advance shall have been declared
      effective by the SEC;

     

    (iii) the
      Company shall have obtained all material permits and qualifications required
      by
      any applicable state for the offer and sale of the Registrable Securities,
      or
      shall have the availability of exemptions therefrom. The sale and issuance
      of
      the Registrable Securities shall be legally permitted by all laws and
      regulations to which the Company is subject; 

     

    (iv) the
      Company shall have filed with the SEC in a timely manner all reports, notices
      and other documents required of a “reporting company” under the Exchange Act and
      applicable Commission regulations;

     

    (v) the
      fees
      as set forth in Section 12.4 below shall have been paid or can be withheld
      as
      provided in Section 2.3; and

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    (vi) The
      Company’s transfer agent shall be DWAC eligible.

     

    (b) Investor’s
      Obligations Upon Closing.  Upon
      receipt of the shares referenced in Section 2.3(a)(i) above and provided the
      Company is in compliance with its obligations in Section 2.3, the Investor
      shall
      deliver to the Company the amount of the Advance specified in the Advance Notice
      by wire transfer of immediately available funds. 

     

     

    Section
      2.4. Hardship.
      In the
      event the Investor sells shares of the Company’s Common Stock after receipt of
      an Advance Notice and the Company fails to perform its obligations as mandated
      in Section 2.3, and specifically the Company fails to deliver to the Investor
      on
      the Advance Date the shares of Common Stock corresponding to the applicable
      Advance pursuant to Section 2.3(a)(i), the Company acknowledges that the
      Investor shall suffer financial hardship and therefore shall be liable for
      any
      and all losses, commissions, fees, or financial hardship caused to the
      Investor.

     

     

    ARTICLE
      III.

    Representations
      and Warranties of Investor

     

    Investor
      hereby represents and warrants to, and agrees with, the Company that the
      following are true and correct as of the date hereof and as of each Advance
      Date:

     

    Section
      3.1. Organization
      and Authorization.
      The
      Investor is duly incorporated or organized and validly existing in the
      jurisdiction of its incorporation or organization and has all requisite power
      and authority to purchase and hold the securities issuable hereunder. The
      decision to invest and the execution and delivery of this Agreement by such
      Investor, the performance by such Investor of its obligations hereunder and
      the
      consummation by such Investor of the transactions contemplated hereby have
      been
      duly authorized and requires no other proceedings on the part of the Investor.
      The undersigned has the right, power and authority to execute and deliver this
      Agreement and all other instruments (including, without limitations, the
      Registration Rights Agreement), on behalf of the Investor. This Agreement has
      been duly executed and delivered by the Investor and, assuming the execution
      and
      delivery hereof and acceptance thereof by the Company, will constitute the
      legal, valid and binding obligations of the Investor, enforceable against the
      Investor in accordance with its terms.

     

    Section
      3.2. Evaluation
      of Risks.
      The
      Investor has such knowledge and experience in financial, tax and business
      matters as to be capable of evaluating the merits and risks of, and bearing
      the
      economic risks entailed by, an investment in the Company and of protecting
      its
      interests in connection with this transaction. It recognizes that its investment
      in the Company involves a high degree of risk.

     

    Section
      3.3. No
      Legal Advice From the Company.
      The
      Investor acknowledges that it had the opportunity to review this Agreement
      and
      the transactions contemplated by this Agreement with his or its own legal
      counsel and investment and tax advisors. The Investor is relying solely on
      such
      counsel and advisors and not on any statements or representations of the Company
      or any of its representatives or agents for legal, tax or investment advice
      with
      respect

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    to
      this
      investment, the transactions contemplated by this Agreement or the securities
      laws of any jurisdiction.

     

    Section
      3.4. Investment
      Purpose.
      The
      securities are being purchased by the Investor for its own account, and for
      investment purposes. The Investor agrees not to assign or in any way transfer
      the Investor’s rights to the securities or any interest therein and acknowledges
      that the Company will not recognize any purported assignment or transfer except
      in accordance with applicable Federal and state securities laws. No other person
      has or will have a direct or indirect beneficial interest in the securities.
      The
      Investor agrees not to sell, hypothecate or otherwise transfer the Investor’s
      securities unless the securities are registered under Federal and applicable
      state securities laws or unless, in the opinion of counsel satisfactory to
      the
      Company, an exemption from such laws is available.

     

    Section
      3.5. Accredited
      Investor.
      The
      Investor is an “Accredited
      Investor”
as
      that
      term is defined in Rule 501(a)(3) of Regulation D of the Securities
      Act.

     

    Section
      3.6. Information.
      The
      Investor and its advisors (and its counsel), if any, have been furnished with
      all materials relating to the business, finances and operations of the Company
      and information it deemed material to making an informed investment decision.
      The Investor and its advisors, if any, have been afforded the opportunity to
      ask
      questions of the Company and its management. Neither such inquiries nor any
      other due diligence investigations conducted by such Investor or its advisors,
      if any, or its representatives shall modify, amend or affect the Investor’s
      right to rely on the Company’s representations and warranties contained in this
      Agreement. The Investor understands that its investment involves a high degree
      of risk. The Investor is in a position regarding the Company, which, based
      upon
      economic bargaining power, enabled and enables such Investor to obtain
      information from the Company in order to evaluate the merits and risks of this
      investment. The Investor has sought such accounting, legal and tax advice,
      as it
      has considered necessary to make an informed investment decision with respect
      to
      this transaction.

     

    Section
      3.7. Receipt
      of Documents.
      The
      Investor and its counsel have received and read in their entirety: (i) this
      Agreement and the Exhibits annexed hereto; (ii) all due diligence and other
      information necessary to verify the accuracy and completeness of such
      representations, warranties and covenants; (iii) the Company’s Form 10-K for the
      year ended December 31, 2005 and Form 10-Q/A for the period ended September
      30,
      2005; and (iv) answers to all questions the Investor submitted to the
      Company regarding an investment in the Company; and the Investor has relied
      on
      the information contained therein and has not been furnished any other
      documents, literature, memorandum or prospectus. 

     

    Section
      3.8. Registration
      Rights Agreement.
      The
      parties have entered into the Registration Rights Agreement dated the date
      hereof.

     

    Section
      3.9. No
      General Solicitation.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has engaged in any form of general solicitation or general advertising
      (within the meaning of Regulation D under the Securities Act) in connection
      with
      the offer or sale of the shares of Common Stock offered hereby.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      3.10. Not
      an
      Affiliate.
      The
      Investor is not an officer, director or a person that directly, or indirectly
      through one or more intermediaries, controls or is controlled by, or is under
      common control with the Company or any “Affiliate”
of
      the
      Company (as that term is defined in Rule 405 of the Securities Act).


     

    Section
      3.11. Trading
      Activities.
      The
      Investor’s trading activities with respect to the Company’s Common Stock shall
      be in compliance with all applicable federal and state securities laws, rules
      and regulations and the rules and regulations of the Principal Market on which
      the Company’s Common Stock is listed or traded. Neither
      the Investor nor its affiliates has an open short position in the Common Stock
      of the Company, the Investor agrees that it shall not, and that it will cause
      its affiliates not to, engage in any short sales of or hedging transactions
      with
      respect to the Common Stock, provided
      that the
      Company acknowledges and agrees that upon receipt of an Advance Notice the
      Investor has the right to sell the shares to be issued to the Investor pursuant
      to the Advance Notice
      during
      the applicable Pricing Period. 

     

     

    ARTICLE
      IV.

    Representations
      and Warranties of the Company

     

    Except
      as
      stated below, on the disclosure schedules attached hereto or in the SEC
      Documents (as defined herein), the Company hereby represents and warrants to,
      and covenants with, the Investor that the following are true and correct as
      of
      the date hereof:

     

    Section
      4.1. Organization
      and Qualification.
      The
      Company is duly incorporated or organized and validly existing in the
      jurisdiction of its incorporation or organization and has all requisite
      corporate power to own its properties and to carry on its business as now being
      conducted. Each of the Company and its subsidiaries is duly qualified as a
      foreign corporation to do business and is in good standing in every jurisdiction
      in which the nature of the business conducted by it makes such qualification
      necessary, except to the extent that the failure to be so qualified or be in
      good standing would not have a Material Adverse Effect on the Company and its
      subsidiaries taken as a whole.

     

    Section
      4.2. Authorization,
      Enforcement, Compliance with Other Instruments.
      (i) The
      Company has the requisite corporate power and authority to enter into and
      perform this Agreement, the Registration Rights Agreement, the Placement Agent
      Agreement and any related agreements, in accordance with the terms hereof and
      thereof, (ii) the execution and delivery of this Agreement, the Registration
      Rights Agreement, the Placement Agent Agreement and any related agreements
      by
      the Company and the consummation by it of the transactions contemplated hereby
      and thereby, have been duly authorized by the Company’s Board of Directors and
      no further consent or authorization is required by the Company, its Board of
      Directors or its stockholders, (iii) this Agreement, the Registration
      Rights Agreement, the Placement Agent Agreement and any related agreements
      have
      been duly executed and delivered by the Company, (iv) this Agreement, the
      Registration Rights Agreement, the Placement Agent Agreement and assuming the
      execution and delivery thereof and acceptance by the Investor and any related
      agreements constitute the valid and binding obligations of the Company
      enforceable against the Company in accordance with their terms, except as such
      enforceability may be limited by general principles of equity or applicable
      bankruptcy, insolvency, reorganization, moratorium, 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    liquidation
      or similar laws relating to, or affecting generally, the enforcement of
      creditors’ rights and remedies.

     

    Section
      4.3. Capitalization.
      The
      authorized capital stock of the Company consists of an unlimited number of
      shares of Common Stock and 100,000 shares of Preferred Stock, $0.01 par value
      per share (“Preferred
      Stock”),
      of
      which 19,520,430 shares of Common Stock and no shares of Preferred Stock are
      issued and outstanding as of March 31, 2006. All of such outstanding shares
      have
      been validly issued and are fully paid and nonassessable. Except as disclosed
      in
      the SEC Documents, no shares of Common Stock are subject to preemptive rights
      or
      any other similar rights or any liens or encumbrances suffered or permitted
      by
      the Company. Except as disclosed in the SEC Documents and Schedule 4.3, as
      of
      the date hereof, (i) there are no outstanding options, warrants, scrip,
      rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities or rights convertible into, any shares of capital
      stock of the Company, or contracts, commitments, understandings or arrangements
      by which the Company is or may become bound to issue additional shares of
      capital stock of the Company or options, warrants, scrip, rights to subscribe
      to, calls or commitments of any character whatsoever relating to, or securities
      or rights convertible into, any shares of capital stock of the Company, (ii)
      there are no outstanding debt securities (iii) there
      are no outstanding registration statements other than on Form S-8 (except
      as stated at the end of this Section 4.3) and
      (iv)
      there are no agreements or arrangements under which the Company is obligated
      to
      register the sale of any of their securities under the Securities Act (except
      pursuant to the Registration Rights Agreement). There are no securities or
      instruments containing anti-dilution or similar provisions that will be
      triggered by this Agreement or any related agreement or the consummation of
      the
      transactions described herein or therein. The Company has furnished to the
      Investor true and correct copies of the Company’s Certificate of Incorporation,
      as amended and as in effect on the date hereof (the “Certificate
      of Incorporation”),
      and
      the Company’s By-laws, as in effect on the date hereof (the “By-laws”).
      The
      terms of all the Company’s securities convertible into or exercisable for Common
      Stock and the material rights of the holders thereof in respect thereto are
      shown on Schedule 4.3.

     

    For
      purposes of clause (iii) above, the Company has on file re-sale registration
      statements as follows: 

     

    
      	(A)  	
              Form
                S-1/A (333-115477, filed October 25, 2005) for 1,509,562 shares (including
                764,226 shares issuable on exercise of warrants and options). This
                registration statement is not effective and will be withdrawn. A
                new
                registration statement on Form S-3 will be filed in April 2006, to
                cover
                resale of approximately 3,870,731 shares (the Form S-1/A shares plus
                additional shares issuable on exercise of outstanding warrants and
                options); and 

            


    

     

    
      	(B)  	
              Form
                S-3 (333-124277, filed April 22, 2005) for 4,520,375 shares (2,913,582
                shares issuable on conversion of debentures, all converted (and believed
                to have been sold)); plus 1,606,793 shares issuable on exercise of
                warrants, such number being 150% (for price decline protection) of
                shares
                issuable on exercise (most exercised and believed to have been sold).
                

            


    

     

    


     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    


    Section
      4.4. No
      Conflict.
      The
      execution, delivery and performance of this Agreement by the Company and the
      consummation by the Company of the transactions contemplated hereby will not
      (i)
      result in a violation of the Certificate of Incorporation, any certificate
      of
      designations of any outstanding series of preferred stock of the Company or
      By-laws or (ii) conflict with or constitute a default (or an event which with
      notice or lapse of time or both would become a default) under, or give to others
      any rights of termination, amendment, acceleration or cancellation of, any
      agreement, indenture or instrument to which the Company or any of its
      subsidiaries is a party, or result in a violation of any law, rule, regulation,
      order, judgment or decree (including federal and state securities laws and
      regulations and the rules and regulations of the Principal Market on which
      the
      Common Stock is quoted) applicable to the Company or any of its subsidiaries
      or
      by which any material property or asset of the Company or any of its
      subsidiaries is bound or affected and which would cause a Material Adverse
      Effect. Except as disclosed in the SEC Documents, neither the Company nor its
      subsidiaries is in violation of any term of or in default under its Articles
      of
      Incorporation or By-laws or their organizational charter or by-laws,
      respectively, or any material contract, agreement, mortgage, indebtedness,
      indenture, instrument, judgment, decree or order or any statute, rule or
      regulation applicable to the Company or its subsidiaries. The business of the
      Company and its subsidiaries is not being conducted in violation of any material
      law, ordinance, regulation of any governmental entity. Except as specifically
      contemplated by this Agreement and as required under the Securities Act and
      any
      applicable state securities laws, the Company is not required to obtain any
      consent, authorization or order of, or make any filing or registration with,
      any
      court or governmental agency in order for it to execute, deliver or perform
      any
      of its obligations under or contemplated by this Agreement or the Registration
      Rights Agreement in accordance with the terms hereof or thereof. All consents,
      authorizations, orders, filings and registrations which the Company is required
      to obtain pursuant to the preceding sentence have been obtained or effected
      on
      or prior to the date hereof. The Company and its subsidiaries are unaware of
      any
      fact or circumstance which might give rise to any of the foregoing.

     

    Section
      4.5. SEC
      Documents; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by it with the SEC under the Exchange Act since December
      31, 2005. The Company has delivered to the Investor or its representatives,
      or
      made available through the SEC’s website at http://www.sec.gov, true and
      complete copies of the SEC Documents. As of their respective dates, the
      financial statements of the Company disclosed in the SEC Documents (the
“Financial
      Statements”)
      complied as to form in all material respects with applicable accounting
      requirements and the published rules and regulations of the SEC with respect
      thereto. Such financial statements have been prepared in accordance with
      generally accepted accounting principles, consistently applied, during the
      periods involved (except (i) as may be otherwise indicated in such financial
      statements or the notes thereto, or (ii) in the case of unaudited interim
      statements, to the extent they may exclude footnotes or may be condensed or
      summary statements) and, fairly present in all material respects the financial
      position of the Company as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments). No other
      information provided by or on behalf of the Company to the Investor which is
      not
      included in the SEC Documents contains any untrue statement of a material fact
      or omits to state any material fact necessary in order to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading.

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    Section
      4.6. 10b-5.
      The SEC
      Documents do not include any untrue statements of material fact, nor do they
      omit to state any material fact required to be stated therein necessary to
      make
      the statements made, in light of the circumstances under which they were made,
      not misleading.

     

    Section
      4.7. No
      Default.
      Except
      as disclosed in the SEC Documents, the Company is not in default in the
      performance or observance of any material obligation, agreement, covenant or
      condition contained in any indenture, mortgage, deed of trust or other material
      instrument or agreement to which it is a party or by which it is or its property
      is bound and neither the execution, nor the delivery by the Company, nor the
      performance by the Company of its obligations under this Agreement or any of
      the
      exhibits or attachments hereto will conflict with or result in the breach or
      violation of any of the terms or provisions of, or constitute a default or
      result in the creation or imposition of any lien or charge on any assets or
      properties of the Company under its Certificate of Incorporation, By-Laws,
      any
      material indenture, mortgage, deed of trust or other material agreement
      applicable to the Company or instrument to which the Company is a party or
      by
      which it is bound, or any statute, or any decree, judgment, order, rules or
      regulation of any court or governmental agency or body having jurisdiction
      over
      the Company or its properties, in each case which default, lien or charge is
      likely to cause a Material Adverse Effect on the Company’s business or financial
      condition.

     

    Section
      4.8. Absence
      of Events of Default.
      Except
      for matters described in the SEC Documents and/or this Agreement, no Event
      of
      Default, as defined in the respective agreement to which the Company is a party,
      and no event which, with the giving of notice or the passage of time or both,
      would become an Event of Default (as so defined), has occurred and is
      continuing, which would have a Material Adverse Effect on the Company’s
      business, properties, prospects, financial condition or results of
      operations.

     

    Section
      4.9. Intellectual
      Property Rights.
      The
      Company and its subsidiaries own or possess adequate rights or licenses to
      use
      all material trademarks, trade names, service marks, service mark registrations,
      service names, patents, patent rights, copyrights, inventions, licenses, trade
      secrets and other intellectual property rights necessary to conduct their
      respective businesses as now conducted. The Company and its subsidiaries do
      not
      have any knowledge of any infringement by the Company or its subsidiaries of
      trademark, trade name rights, patents, patent rights, copyrights, inventions,
      licenses, service names, service marks, service mark registrations, trade secret
      or other similar rights of others, and, to the knowledge of the Company, there
      is no claim, action or proceeding being made or brought against, or to the
      Company’s knowledge, being threatened against, the Company or its subsidiaries
      regarding trademark, trade name, patents, patent rights, invention, copyright,
      license, service names, service marks, service mark registrations, trade secret
      or other infringement; and the Company and its subsidiaries are unaware of
      any
      facts or circumstances which might give rise to any of the foregoing.


     

    Section
      4.10. Employee
      Relations.
      Neither
      the Company nor any of its subsidiaries is involved in any labor dispute nor,
      to
      the knowledge of the Company or any of its subsidiaries, is any such dispute
      threatened. None of the Company’s or its subsidiaries’ employees is a member of
      a union and the Company and its subsidiaries believe that their relations with
      their employees are good.

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    Section
      4.11. Environmental
      Laws.
      To its
      and their knowledge, the Company and its subsidiaries are (i) in compliance
      with
      any and all applicable material foreign, federal, state and local laws and
      regulations relating to the protection of human health and safety, the
      environment or hazardous or toxic substances or wastes, pollutants or
      contaminants (“Environmental
      Laws”),
      (ii)
      have received all permits, licenses or other approvals required of them under
      applicable Environmental Laws to conduct their respective businesses and (iii)
      are in compliance with all terms and conditions of any such permit, license
      or
      approval. Provided,
      that
      this representation and warranty is limited to the level of operations now
      being
      conducted; the Company’s and its subsidiaries’ compliance with Environmental
      Laws are consistent with the current level of operations. No permits have been
      issued for the operation of the Shootaring Canyon uranium mill, or for any
      mining activities.

     

    Section
      4.12. Title.
      Except
      as set forth in the SEC Documents, to
      its
      and their best knowledge, the
      Company (including
      its subsidiaries) has
      good
      and marketable title to its properties and material assets owned by it, free
      and
      clear of any pledge, lien, security interest, encumbrance, claim or equitable
      interest other than such as are not material to the business of the Company.
      Any
      real property and facilities held under lease by the Company and its
      subsidiaries are held by them under valid, subsisting and enforceable leases
      with such exceptions as are not material and do not interfere with the use
      made
      and proposed to be made of such property and buildings by the Company and its
      subsidiaries.

     

    Section
      4.13. Insurance.
      The
      Company and each of its subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its subsidiaries are engaged. Neither the Company
      nor
      any such subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that would not materially and
      adversely affect the condition, financial or otherwise, or the earnings,
      business or operations of the Company and its subsidiaries, taken as a
      whole.

     

    Section
      4.14. Regulatory
      Permits.
      To
      its and
      their best knowledge, the
      Company and its subsidiaries possess all material certificates, authorizations
      and permits issued by the appropriate federal, state or foreign regulatory
      authorities necessary to conduct their respective businesses, and neither the
      Company nor any such subsidiary has received any notice of proceedings relating
      to the revocation or modification of any such certificate, authorization or
      permit. Provided,
      that
      this representation and warranty is limited to the level of operations now
      being
      conducted.

     

    Section
      4.15. Internal
      Accounting Controls.
      The
      Company and each of its subsidiaries maintain a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management’s general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset accountability, (iii) access to assets is permitted only in
      accordance with management’s general or specific authorization and (iv) the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals and appropriate action is taken with respect to any
      differences.

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    Section
      4.16. No
      Material Adverse Breaches, etc.
      Except
      as set forth in the SEC Documents, neither the Company nor any of its
      subsidiaries is subject to any charter, corporate or other legal restriction,
      or
      any judgment, decree, order, rule or regulation which in the judgment of the
      Company’s officers has or is expected in the future to have a Material Adverse
      Effect on the business, properties, operations, financial condition, results
      of
      operations or prospects of the Company or its subsidiaries. Except as set forth
      in the SEC Documents, neither the Company nor any of its subsidiaries is in
      breach of any contract or agreement which breach, in the judgment of the
      Company’s officers, has or is expected to have a Material Adverse Effect on the
      business, properties, operations, financial condition, results of operations
      or
      prospects of the Company or its subsidiaries. Provided,
      that no
      representation or warranty is made that regulatory permits for mining and
      milling operations will be obtained in the future.

     

    Section
      4.17. Absence
      of Litigation.
      Except
      as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry
      or investigation before or by any court, public board, government agency,
      self-regulatory organization or body pending against or affecting the Company,
      the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable
      decision, ruling or finding would (i) have a Material Adverse Effect on the
      transactions contemplated hereby (ii) adversely affect the validity or
      enforceability of, or the authority or ability of the Company to perform its
      obligations under, this Agreement or any of the documents contemplated herein,
      or (iii) except as expressly disclosed in the SEC Documents, have a Material
      Adverse Effect on the business, operations, properties, financial condition
      or
      results of operation of the Company and its subsidiaries taken as a
      whole.

     

    Section
      4.18. Subsidiaries.
      Except
      as disclosed in the SEC Documents, the Company does not presently own or
      control, directly or indirectly, any interest in any other corporation,
      partnership, association or other business entity.

     

    Section
      4.19. Tax
      Status.
      Except
      as disclosed in the SEC Documents, the Company and each of its subsidiaries
      has
      made or filed all federal and state income and all other tax returns, reports
      and declarations required by any jurisdiction to which it is subject and (unless
      and only to the extent that the Company and each of its subsidiaries has set
      aside on its books provisions reasonably adequate for the payment of all unpaid
      and unreported taxes) has paid all taxes and other governmental assessments
      and
      charges that are material in amount, shown or determined to be due on such
      returns, reports and declarations, except those being contested in good faith
      and has set aside on its books provision reasonably adequate for the payment
      of
      all taxes for periods subsequent to the periods to which such returns, reports
      or declarations apply. There are no unpaid taxes in any material amount claimed
      to be due by the taxing authority of any jurisdiction, and the officers of
      the
      Company know of no basis for any such claim.

     

    Section
      4.20. Certain
      Transactions.
      Except
      as set forth in the SEC Documents none of the officers, directors, or employees
      of the Company is presently a party to any transaction with the Company (other
      than for services as employees, officers and directors), including any contract,
      agreement or other arrangement providing for the furnishing of services to
      or
      by, providing for rental of real or personal property to or from, or otherwise
      requiring payments to or from any officer, director or such employee or, to
      the
      knowledge of the Company, any corporation, partnership, trust or other entity
      in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner.

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    Section
      4.21. Fees
      and Rights of First Refusal.
      The
      Company is not obligated to offer the securities offered hereunder on a right
      of
      first refusal basis or otherwise to any third parties including, but not limited
      to, current or former shareholders of the Company, underwriters, brokers, agents
      or other third parties.

     

    Section
      4.22. Use
      of
      Proceeds.
      The
      Company shall use the net proceeds from this offering for general corporate
      purposes, including, without limitation, the payment of loans incurred by the
      Company. However, in no event shall the Company use the net proceeds from this
      offering for the payment (or loan to any such person for the payment) of any
      judgment, or other liability, incurred by any executive officer, officer,
      director or employee of the Company, except for any liability owed to such
      person for services rendered, or for any judgment or other liability incurred
      by
      such person originating from services rendered to the Company, if the Company
      has indemnified such person from liability.

     

    Section
      4.23. Further
      Representation and Warranties of the Company.
      For so
      long as any securities issuable hereunder held by the Investor remain
      outstanding, the Company acknowledges, represents, warrants and agrees that
      it
      will maintain the listing of its Common Stock on the Principal
      Market.

     

    Section
      4.24. Opinion
      of Counsel.
      Investor shall receive an opinion letter from counsel to the Company on the
      date
      hereof.

     

    Section
      4.25. Opinion
      of Counsel.
      The
      Company will obtain for the Investor, at the Company’s expense, any and all
      opinions of counsel which may be reasonably required in order to sell the
      securities issuable hereunder without restriction.

     

    Section
      4.26. Dilution.
      The
      Company is aware and acknowledges that issuance of shares of the Company’s
      Common Stock could cause dilution to existing shareholders and could
      significantly increase the outstanding number of shares of Common Stock.


     

     

    ARTICLE
      V.

    Indemnification

     

    The
      Investor and the Company represent to the other the following with respect
      to
      itself:

     

    Section
      5.1. Indemnification.

     

    (a) In
      consideration of the Investor’s execution and delivery of this Agreement, and in
      addition to all of the Company’s other obligations under this Agreement, the
      Company shall defend, protect, indemnify and hold harmless the Investor, and
      all
      of its officers, directors, partners, employees and agents (including, without
      limitation, those retained in connection with the transactions contemplated
      by
      this Agreement) (collectively, the “Investor
      Indemnitees”)
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such Investor Indemnitee is a party to the action
      for which indemnification hereunder is sought), and including reasonable
      attorneys’ fees and disbursements (the “Indemnified
      Liabilities”),
      incurred by the Investor Indemnitees or any of them as a result of, or arising
      out of, or relating to (a) any misrepresentation or breach of any representation
      or warranty 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    made
      by
      the Company in this Agreement or the Registration Rights Agreement or any other
      certificate, instrument or document contemplated hereby or thereby, (b) any
      breach of any covenant, agreement or obligation of the Company contained in
      this
      Agreement or the Registration Rights Agreement or any other certificate,
      instrument or document contemplated hereby or thereby, or (c) any cause of
      action, suit or claim brought or made against such Investor Indemnitee not
      arising out of any action or inaction of an Investor Indemnitee, and arising
      out
      of or resulting from the execution, delivery, performance or enforcement of
      this
      Agreement or any other instrument, document or agreement executed pursuant
      hereto by any of the Investor Indemnitees. To the extent that the foregoing
      undertaking by the Company may be unenforceable for any reason, the Company
      shall make the maximum contribution to the payment and satisfaction of each
      of
      the Indemnified Liabilities, which is permissible under applicable
      law.

     

    (b) In
      consideration of the Company’s execution and delivery of this Agreement, and in
      addition to all of the Investor’s other obligations under this Agreement, the
      Investor shall defend, protect, indemnify and hold harmless the Company and
      all
      of its officers, directors, shareholders, employees and agents (including,
      without limitation, those retained in connection with the transactions
      contemplated by this Agreement) (collectively, the “Company
      Indemnitees”)
      from
      and against any and all Indemnified Liabilities incurred by the Company
      Indemnitees or any of them as a result of, or arising out of, or relating to
      (a)
      any misrepresentation or breach of any representation or warranty made by the
      Investor in this Agreement, the Registration Rights Agreement, or any instrument
      or document contemplated hereby or thereby executed by the Investor, (b) any
      breach of any covenant, agreement or obligation of the Investor(s) contained
      in
      this Agreement, the Registration Rights Agreement or any other certificate,
      instrument or document contemplated hereby or thereby executed by the Investor,
      or (c) any cause of action, suit or claim brought or made against such Company
      Indemnitee based on misrepresentations or due to a breach by the Investor and
      arising out of or resulting from the execution, delivery, performance or
      enforcement of this Agreement or any other instrument, document or agreement
      executed pursuant hereto by any of the Company Indemnitees. To the extent that
      the foregoing undertaking by the Investor may be unenforceable for any reason,
      the Investor shall make the maximum contribution to the payment and satisfaction
      of each of the Indemnified Liabilities, which is permissible under applicable
      law.

     

    (c) The
      obligations of the parties to indemnify or make contribution under this Section
      5.1 shall survive termination.

     

     

    ARTICLE
      VI.

    Covenants
      of the Company

     

    Section
      6.1. Registration
      Rights.
      The
      Company shall cause the Registration Rights Agreement to remain in full force
      and effect and the Company shall comply in all material respects with the terms
      thereof.

     

    Section
      6.2. Listing
      of Common Stock.
      The
      Company shall maintain the Common Stock’s authorization for quotation on the
      Principal Market. 

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    Section
      6.3. Exchange
      Act Registration.
      The
      Company will cause its Common Stock to continue to be registered under Section
      12(g) of the Exchange Act, will file in a timely manner all reports and other
      documents required of it as a reporting company under the Exchange Act and
      will
      not take any action or file any document (whether or not permitted by Exchange
      Act or the rules thereunder) to terminate or suspend such registration or to
      terminate or suspend its reporting and filing obligations under said Exchange
      Act.

     

    Section
      6.4. Transfer
      Agent Instructions.
      Upon
      effectiveness of the Registration Statement the Company shall deliver
      instructions to its transfer agent to issue shares of Common Stock to the
      Investor free of restrictive legends on or before each Advance
      Date.

     

    Section
      6.5. Corporate
      Existence.
      The
      Company will take all steps necessary to preserve and continue the corporate
      existence of the Company.

     

    Section
      6.6. Notice
      of Certain Events Affecting Registration; Suspension of Right to Make an
      Advance.
      The
      Company will immediately notify the Investor upon its becoming aware of the
      occurrence of any of the following events in respect of a registration statement
      or related prospectus relating to an offering of Registrable Securities: (i)
      receipt of any request for additional information by the SEC or any other
      Federal or state governmental authority during the period of effectiveness
      of
      the Registration Statement for amendments or supplements to the registration
      statement or related prospectus; (ii) the issuance by the SEC or any other
      Federal or state governmental authority of any stop order suspending the
      effectiveness of the Registration Statement or the initiation of any proceedings
      for that purpose; (iii) receipt of any notification with respect to the
      suspension of the qualification or exemption from qualification of any of the
      Registrable Securities for sale in any jurisdiction or the initiation or
      threatening of any proceeding for such purpose; (iv) the happening of any event
      that makes any statement made in the Registration Statement or related
      prospectus of any document incorporated or deemed to be incorporated therein
      by
      reference untrue in any material respect or that requires the making of any
      changes in the Registration Statement, related prospectus or documents so that,
      in the case of the Registration Statement, it will not contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary to make the statements therein not misleading,
      and
      that in the case of the related prospectus, it will not contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary to make the statements therein, in the light of
      the
      circumstances under which they were made, not misleading; and (v) the Company’s
      reasonable determination that a post-effective amendment to the Registration
      Statement would be appropriate; and the Company will promptly make available
      to
      the Investor any such supplement or amendment to the related prospectus. The
      Company shall not deliver to the Investor any Advance Notice during the
      continuation of any of the foregoing events.

     

    Section
      6.7. Restriction
      on Sale of Capital Stock.
      During
      the Commitment Period, the Company shall not, without the prior written consent
      of the Investor, (i) issue or sell any Common Stock or Preferred Stock without
      consideration or for a consideration per share less than the Bid Price of the
      Common Stock determined
      immediately prior to its issuance (unless pursuant to the exercise of options,
      warrants, or other instruments which are outstanding at the date hereof as
      outlined on Schedule 4.3 attached hereto), or (ii) issue or sell any
      Preferred Stock
      warrant, option, right, contract, call, or other security or instrument granting
      the holder thereof 

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    the
      right
      to acquire Common Stock without consideration or for a consideration per share
      less than the Bid
      Price
      of the Common Stock determined
      immediately prior to its issuance, or (iii) file any registration statement
      on
      Form S-8 other than for bonafide employee stock option plans to be filed or
      now
      existing.

     

    Section
      6.8. Consolidation;
      Merger.
      The
      Company shall not, at any time after the date hereof, effect any merger or
      consolidation of the Company with or into, or a transfer of all or substantially
      all the assets of the Company to another entity (a “Consolidation
      Event”)
      unless
      the resulting successor or acquiring entity (if not the Company) assumes by
      written instrument the obligation to deliver to the Investor such shares of
      stock and/or securities as the Investor is entitled to receive pursuant to
      this
      Agreement.

     

    Section
      6.9. Issuance
      of the Company’s Common Stock.
      The sale
      of the shares of Common Stock shall be made in accordance with the provisions
      and requirements of Regulation D and any applicable state securities
      law.

     

    Section
      6.10. Review
      of Public Disclosures.
      All SEC
      filings (including, without limitation, all filings required under the Exchange
      Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other
      public disclosures made by the Company, including, without limitation, all
      press
      releases, investor relations materials, and scripts of analysts meetings and
      calls, shall be reviewed and approved for release by the Company’s attorneys
      and, if containing financial information, the Company’s independent certified
      public accountants. 

     

    Section
      6.11. Market
      Activities. The
      Company will not, directly or indirectly, (i) take any action designed to cause
      or result in, or that constitutes or might reasonably be expected to constitute,
      the stabilization or manipulation of the price of any security of the Company
      to
      facilitate the sale or resale of the Common Stock or (ii) sell, bid for or
      purchase the Common Stock, or pay anyone any compensation for soliciting
      purchases of the Common Stock.

     

     

    ARTICLE
      VII.

    Conditions
      for Advance and Conditions to Closing

     

    Section
      7.1. Conditions
      Precedent to the Obligations of the Company.
      The
      obligation hereunder of the Company to issue and sell the shares of Common
      Stock
      to the Investor incident to each Closing is subject to the satisfaction, or
      waiver by the Company, at or before each such Closing, of each of the conditions
      set forth below.

     

    (a) Accuracy
      of the Investor’s Representations and Warranties.
      The
      representations and warranties of the Investor shall be true and correct in
      all
      material respects.

     

    (b) Performance
      by the Investor.
      The
      Investor shall have performed, satisfied and complied in all respects with
      all
      covenants, agreements and conditions required by this Agreement and the
      Registration Rights Agreement to be performed, satisfied or complied with by
      the
      Investor at or prior to such Closing.

     

    Section
      7.2. Conditions
      Precedent to the Right of the Company to Deliver an Advance
      Notice.
      The
      right of the Company to deliver an Advance Notice is subject to the fulfillment
      by 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    the
      Company, on such Advance Notice (a “Condition
      Satisfaction Date”),
      of
      each of the following conditions:

     

    (a) Registration
      of the Common Stock with the SEC.
      The
      Company shall have filed with the SEC a Registration Statement with respect
      to
      the resale of the Registrable Securities in accordance with the terms of the
      Registration Rights Agreement. As set forth in the Registration Rights
      Agreement, the Registration Statement shall have previously become effective
      and
      shall remain effective on each Condition Satisfaction Date and (i) neither
      the
      Company nor the Investor shall have received notice that the SEC has issued
      or
      intends to issue a stop order with respect to the Registration Statement or
      that
      the SEC otherwise has suspended or withdrawn the effectiveness of the
      Registration Statement, either temporarily or permanently, or intends or has
      threatened to do so (unless the SEC’s concerns have been addressed and the
      Investor is reasonably satisfied that the SEC no longer is considering or
      intends to take such action), and (ii) no other suspension of the use or
      withdrawal of the effectiveness of the Registration Statement or related
      prospectus shall exist. The Registration Statement must have been declared
      effective by the SEC prior to the first Advance Notice Date.

     

    (b) Authority.
      The
      Company shall have obtained all permits and qualifications required by any
      applicable state in accordance with the Registration Rights Agreement for the
      offer and sale of the shares of Common Stock, or shall have the availability
      of
      exemptions therefrom. The sale and issuance of the shares of Common Stock shall
      be legally permitted by all laws and regulations to which the Company is
      subject.

     

    (c) Fundamental
      Changes.
      There
      shall not exist any fundamental changes to the information set forth in the
      Registration Statement which would require the Company to file a post-effective
      amendment to the Registration Statement. 

     

    (d) Performance
      by the Company.
      The
      Company shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by this Agreement and
      the
      Registration Rights Agreement to be performed, satisfied or complied with by
      the
      Company at or prior to each Condition Satisfaction Date.

     

    (e) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction that prohibits or directly and adversely
      affects any of the transactions contemplated by this Agreement, and no
      proceeding shall have been commenced that may have the effect of prohibiting
      or
      adversely affecting any of the transactions contemplated by this
      Agreement.

     

    (f) No
      Suspension of Trading in or Delisting of Common Stock.
      The
      trading of the Common Stock is not suspended by the SEC or the Principal Market
      (if the Common Stock is traded on a Principal Market). The issuance of shares
      of
      Common Stock with respect to the applicable Closing, if any, shall not violate
      the shareholder approval requirements of the Principal Market (if the Common
      Stock is traded on a Principal Market). The Company shall not have received
      any
      notice threatening the continued listing of the Common Stock on the Principal
      Market (if the Common Stock is traded on a Principal Market).

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    (g) Maximum
      Advance Amount.
      The
      amount of an Advance requested by the Company shall not exceed the Maximum
      Advance Amount. In addition, in no event shall the number of shares issuable
      to
      the Investor pursuant to an Advance cause the aggregate number of shares of
      Common Stock beneficially owned by the Investor and its affiliates to exceed
      nine and 9/10 percent (9.9%) of the then outstanding Common Stock of the
      Company. For the purposes of this section beneficial ownership shall be
      calculated in accordance with Section 13(d) of the Exchange Act.

     

    (h) No
      Knowledge.
      The
      Company has no knowledge of any event which would be more likely than not to
      have the effect of causing such Registration Statement to be suspended or
      otherwise ineffective.

     

    (i) Executed
      Advance Notice.
      The
      Investor shall have received the Advance Notice executed by an officer of the
      Company and the representations contained in such Advance Notice shall be true
      and correct as of each Condition Satisfaction Date.

     

     

    ARTICLE
      VIII.

    Due
      Diligence Review; Non-Disclosure of Non-Public Information

     

    Section
      8.1. Non-Disclosure
      of Non-Public Information.

     

    (a) The
      Company covenants and agrees that it shall refrain from disclosing, and shall
      cause its officers, directors, employees and agents to refrain from disclosing,
      any material non-public information to the Investor without also disseminating
      such information to the public, unless prior to disclosure of such information
      the Company identifies such information as being material non-public information
      and provides the Investor with the opportunity to accept or refuse to accept
      such material non-public information for review.

     

    (b) Nothing
      herein shall require the Company to disclose non-public information to the
      Investor or its advisors or representatives, and the Company represents that
      it
      does not disseminate non-public information to any investors who purchase stock
      in the Company in a public offering, to money managers or to securities
      analysts, provided, however, that notwithstanding anything herein to the
      contrary, the Company will, as hereinabove provided, immediately notify the
      advisors and representatives of the Investor and, if any, underwriters, of
      any
      event or the existence of any circumstance (without any obligation to disclose
      the specific event or circumstance) of which it becomes aware, constituting
      non-public information (whether or not requested of the Company specifically
      or
      generally during the course of due diligence by such persons or entities),
      which, if not disclosed in the prospectus included in the Registration Statement
      would cause such prospectus to include a material misstatement or to omit a
      material fact required to be stated therein in order to make the statements,
      therein, in light of the circumstances in which they were made, not misleading.
      Nothing contained in this Section 8.2 shall be construed to mean that such
      persons or entities other than the Investor (without the written consent of
      the
      Investor prior to disclosure of such information) may not obtain non-public
      information in the course of conducting due diligence in accordance with the
      terms of this Agreement and nothing herein shall prevent any such persons or
      entities from notifying the Company of their opinion that based on such due
      diligence by such persons or entities, that the Registration Statement contains
      an untrue statement of material fact or omits a material fact 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    required
      to be stated in the Registration Statement or necessary to make the statements
      contained therein, in light of the circumstances in which they were made, not
      misleading.

     

     

    ARTICLE
      IX.

    Choice
      of Law/Jurisdiction

     

    Section
      9.1. Governing
      Law.
      This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New Jersey without regard to the principles of conflict of laws.
      The parties further agree that any action between them shall be heard in Hudson
      County, New Jersey, and expressly consent to the jurisdiction and venue of
      the
      Superior Court of New Jersey, sitting in Hudson County, New Jersey and the
      United States District Court of New Jersey, sitting in Newark, New Jersey,
      for
      the adjudication of any civil action asserted pursuant to this
      paragraph.

     

     

    ARTICLE
      X.

    Assignment;
      Termination

     

    Section
      10.1. Assignment.
      Neither
      this Agreement nor any rights of the Company hereunder may be assigned to any
      other Person. 

     

    Section
      10.2. Termination.
      

     

    (a) The
      obligations of the Investor to make Advances under Article II hereof shall
      terminate twenty-four (24) months after the Effective Date or thirty six (36)
      months after the Effective Date provided that twenty four (24) months after
      the
      Effective Date the Company has filed either an amendment to the then effective
      registration statement or a new registration statement is declared effective
      incorporating the Company’s current financial statements. Provided, that the
      termination shall be thirty six (36) months after the Effective Date if the
      registration statement is on Form S3 or S-2.

     

    (b) The
      obligation of the Investor to make an Advance to the Company pursuant to this
      Agreement shall terminate permanently (including with respect to an Advance
      Date
      that has not yet occurred) in the event that (i) there shall occur any stop
      order or suspension of the effectiveness of the Registration Statement for
      an
      aggregate of fifty (50) Trading Days, other than due to the acts of the
      Investor, during the Commitment Period, or (ii) the Company shall at any time
      fail materially to comply with the requirements of Article VI and such failure
      is not cured within thirty (30) days after receipt of written notice from the
      Investor, provided,
      however,
      that
      this termination provision shall not apply to any period commencing upon the
      filing of a post-effective amendment to such Registration Statement and ending
      upon the date on which such post effective amendment is declared effective
      by
      the SEC.

     

     

    ARTICLE
      XI.

    Notices

     

    Section
      11.1. Notices.
      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 a copy is mailed by U.S. certified
      mail, return receipt 

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    requested;
      (iii) three (3) days after being sent by U.S. certified mail, return receipt
      requested, or (iv) one (1) 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(s):

            	
              Cornell
                Capital Partners, LP

            
	 	
              101
                Hudson Street -Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Attention: Mark
                Angelo

            
	 	
                                 
                Portfolio Manager

            
	 	
              Telephone: (201)
                985-8300 

            
	 	
              Facsimile: (201)
                985-8266 

            
	 	 
	
              With
                a Copy to:

            	
              David
                Gonzalez, Esq.

            
	 	
              101
                Hudson Street - Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Telephone: (201)
                985-8300

            
	 	
              Facsimile: (201)
                985-8266

            
	 	 


    

    


    Each
      party shall provide five (5) days’ prior written notice to the other party of
      any change in address or facsimile number.

     

     

    ARTICLE
      XII.

    Miscellaneous

     

    Section
      12.1. Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party.
      In
      the event any signature page is delivered by facsimile transmission, the party
      using such means of delivery shall cause four (4) additional original executed
      signature pages to be physically 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    delivered
      to the other party within five (5) days of the execution and delivery hereof,
      though failure to deliver such copies shall not affect the validity of this
      Agreement.

     

    Section
      12.2. Entire
      Agreement; Amendments.
      This
      Agreement supersedes all other prior oral or written agreements between the
      Investor, the Company, their affiliates and persons acting on their behalf
      with
      respect to the matters discussed herein, and this Agreement and the instruments
      referenced herein contain the entire understanding of the parties with respect
      to the matters covered herein and therein and, except as specifically set forth
      herein or therein, neither the Company nor the Investor makes any
      representation, warranty, covenant or undertaking with respect to such matters.
      No provision of this Agreement may be waived or amended other than by an
      instrument in writing signed by the party to be charged with
      enforcement.

     

    Section
      12.3. Reporting
      Entity for the Common Stock.
      The
      reporting entity relied upon for the determination of the trading price or
      trading volume of the Common Stock on any given Trading Day for the purposes
      of
      this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
      mutual consent of the Investor and the Company shall be required to employ
      any
      other reporting entity.

     

    Section
      12.4. Fees
      and Expenses.
      The
      Company hereby agrees to pay the following fees:

     

    (a) Structuring
      Fees.
      Each of
      the parties shall pay its own fees and expenses (including the fees of any
      attorneys, accountants, appraisers or others engaged by such party) in
      connection with this Agreement and the transactions contemplated hereby, except
      that (i) on the date hereof the Company shall pay a structuring fee of Fifteen
      Thousand Dollars ($15,000) to Yorkville Advisors, LLC and (ii) On each
      Advance Date, the Company shall pay Yorkville Advisors, LLC a structuring fee
      of
      Five Hundred Dollars ($500) directly out the gross proceeds of each
      Advance.

     

    (b) Due
      Diligence Fee.
      Company
      shall pay the Investor a non-refundable due diligence fee of Five Thousand
      Dollars ($5,000) upon submission of the due diligence documents to the
      Investor.

     

    (c) Commitment
      Fees.

     

    (i) On
      each
      Advance Date the Company shall pay to the Investor, directly out of the gross
      proceeds of each Advance, an amount equal to two percent (2%) of the amount
      of
      each Advance. The Company hereby agrees that if such payment, as is described
      above, is not made by the Company on the Advance Date, such payment shall be
      made as outlined and mandated by Section 2.3 of this Agreement. 

     

    (ii) Upon
      the
      execution of this Agreement the Company shall issue to the Investor sixty eight
      thousand five hundred thirty one (68,531) shares of Common Stock (the
“Investor’s
      Shares”).

     

    (iii) Upon
      the
      execution of this Agreement the Company shall issue to the Investor a warrant
      to
      purchase one hundred thousand (100,000) shares of the Company’s Common Stock for
      a period of three (3) years at an exercise price of $0.7.15 per share (the
      

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    “Warrant”).
      The
      shares of Common Stock issuable under the Warrant shall collectively be referred
      to as the “Warrant
      Shares”.
      Additionally each time the Company has taken Advances hereunder in an aggregate
      amount of Five Million Dollars ($5,000,000) the Company shall issue to the
      Investor on the Advance Date of the Advance hereunder which when aggregated
      with
      all Advances issued by the Company hereunder equal Five Million Dollars
      ($5,000,000) additional warrants, in the same form of Warrant issued hereunder
      (except for the exercise price), to purchase one hundred thousand (100,000)
      shares of the Company’s Common Stock for a period of three (3) years at an
      exercise price equal to the average VWAP of the Company’s Common Stock for the
      ten (10) Trading Days immediately preceding the Advance Date of the Advance
      hereunder which when aggregated with all Advances issued by the Company
      hereunder equal Five Million Dollars ($5,000,000) (the “Milestone
      Warrants”).
      The
      shares of Common Stock issuable under the Milestone Warrants shall collectively
      be referred to as the “Milestone
      Warrant Shares”.
      

     

    (iii) Fully
      Earned.
      The
      Investor’s Shares and the Warrant Shares shall be deemed fully earned as of the
      date hereof. Each Milestone Warrants shall be earned on the date the Company
      takes an Advance hereunder when aggregated with all Advances issued by the
      Company hereunder equal Five Million Dollars ($5,000,000).

     

    (iv) Registration
      Rights.
      The
      Investor’s Shares, the Warrant Shares and the Milestone Warrant Shares will have
“piggy-back” registration rights.

     

    Section
      12.5. Brokerage.
      Each of
      the parties hereto represents that it has had no dealings in connection with
      this transaction with any finder or broker who will demand payment of any fee
      or
      commission from the other party. The Company on the one hand, and the Investor,
      on the other hand, agree to indemnify the other against and hold the other
      harmless from any and all liabilities to any person claiming brokerage
      commissions or finder’s fees on account of services purported to have been
      rendered on behalf of the indemnifying party in connection with this Agreement
      or the transactions contemplated hereby.

     

    Section
      12.6. Confidentiality.
      If for
      any reason the transactions contemplated by this Agreement are not consummated,
      each of the parties hereto shall keep confidential any information obtained
      from
      any other party (except information publicly available or in such party’s domain
      prior to the date hereof, and except as required by court order) and shall
      promptly return to the other parties all schedules, documents, instruments,
      work
      papers or other written information without retaining copies thereof, previously
      furnished by it as a result of this Agreement or in connection
      herein.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    


    


    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Standby Equity Distribution Agreement to be
      executed by the undersigned, thereunto duly authorized, as of the date first
      set
      forth above.

     

    
      	 	
              COMPANY:

            
	 	
              U.S.
                Energy Corp.

            
	 	 
	 	
              By: /s/
                Mark J. Larsen    

            
	 	
              Name: 
                Mark J. Larsen

            
	 	
              Title: 
                President

            
	 	 
	 	 
	 	
              INVESTOR:

            
	 	
              Cornell
                Capital Partners, LP

            
	 	 
	 	
              By: Yorkville
                Advisors, LLC

            
	 	
              Its: General
                Partner

            
	 	 
	 	
              By: /s/
                Mark Angelo    

            
	 	
              Name: Mark
                Angelo

            
	 	
              Title: Portfolio
                Manager

            
	 	 


    

    


    


    


    


    


    
      
        
          
             

            


             

            


          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

    

    



     

    EXHIBIT
      A

     

     

    ADVANCE
      NOTICE

     

     

    U.S.
      ENERGY CORP.

     

    The
      undersigned, _______________________ hereby certifies, with respect to the
      sale
      of shares of Common Stock of U.S.
      ENERGY CORP.
      (the
“Company”)
      issuable in connection with this Advance Notice, delivered pursuant to the
      Standby Equity Distribution Agreement (the “Agreement”),
      as
      follows: 

     

    1. The
      undersigned is the duly elected ______________ of the Company.

     

    2. There
      are
      no fundamental changes to the information set forth in the Registration
      Statement which would require the Company to file a post effective amendment
      to
      the Registration Statement. 

     

    3.
       The
      Company has performed in all material respects all covenants and agreements
      to
      be performed by the Company and has complied in all material respects with
      all
      obligations and conditions contained in the Agreement on or prior to the Advance
      Notice Date, and shall continue to perform in all material respects all
      covenants and agreements to be performed by the Company through the applicable
      Advance Date. All conditions to the delivery of this Advance Notice are
      satisfied as of the date hereof.

     

    4. The
      undersigned hereby represents, warrants and covenants that it has made all
      filings (“SEC
      Filings”)
      required to be made by it pursuant to applicable securities laws (including,
      without limitation, all filings required under the Securities Exchange Act
      of
      1934, which include Forms 10-Q, or 10-K, 8-K, etc.). All SEC Filings and other
      public disclosures made by the Company, including, without limitation, all
      press
      releases, analysts meetings and calls, etc. (collectively, the “Public
      Disclosures”),
      have
      been reviewed and approved for release by the Company’s attorneys and, if
      containing financial information, the Company’s independent certified public
      accountants. None of the Company’s Public Disclosures contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary to make the statements therein, in the light of
      the
      circumstances under which they were made, not misleading.

     

    5. The
      Advance requested is $_____________________.

     

    The
      undersigned has executed this Certificate this ____ day of
      _________________.

     

    U.S.
      ENERGY CORP.

    


    


    By:      

    Name: 

    Title: 

     

     

    

      If
        Returning This Advance Notice via Facsimile Please Send To: (201) 946-0851
        

      


      If
        by
        Mail, via Federal Express To:  Cornell
        Capital Partners, LP

                                                                   
        101
        Hudson Street, Suite 3700, Jersey City, NJ 07302