Exhibit 10.1


 


EXECUTION VERSION


 





 



 


SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT


 


by and between


 


U.S. ENERGY CORP.


 


and


 


MT. EMMONS MINING COMPANY


 


Dated as of February 11, 2016


 





 



 




     


     


    

 


Table of
Contents


 


	 	 	Page
	 	 	 
	ARTICLE I DEFINITIONS	2
	Section 1.1	Definitions	2
	Section 1.2	Other Defined Terms	3
	Section 1.3	Interpretative Provisions	4
	 	 	 
	ARTICLE II PURCHASE AND SALE	4
	Section 2.1	Authorization of Shares	4
	Section 2.2	Purchase and Sale	4
	Section 2.3	Closing	4
	Section 2.4	Deliveries	5
	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY	6
	Section 3.1	Subsidiaries	6
	Section 3.2	Organization and Qualification	6
	Section 3.3	Authorization; Enforcement	6
	Section 3.4	No Conflicts	7
	Section 3.5	Filings, Consents and Approvals	7
	Section 3.6	Issuance of the Securities	7
	Section 3.7	Capitalization	7
	Section 3.8	SEC Reports; Financial Statements	8
	Section 3.9	Material Changes; Undisclosed Events, Liabilities or Developments	9
	Section 3.10	Litigation	9
	Section 3.11	Labor	10
	Section 3.12	Compliance with Laws; Permits	10
	Section 3.13	Title to Assets; Properties	11
	Section 3.14	Reserve Reports	11
	Section 3.15	Transactions with Affiliates and Employees	11
	Section 3.16	Sarbanes-Oxley; Internal Accounting Controls	12
	Section 3.17	No Brokers	12
	Section 3.18	Private Placement	12
	Section 3.19	Investment Company	12
	Section 3.20	Registration Rights	13
	Section 3.21	Listing and Maintenance Requirements	13
	Section 3.22	Application of Takeover Protections	13
	Section 3.23	Full Disclosure	13
	Section 3.24	No Integrated Offering	13
	Section 3.25	Accountants	14
	Section 3.26	Company Stock Plans	14
	Section 3.27	Tax Status	14


 




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	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER	14
	Section 4.1	Organization; Authority	14
	Section 4.2	Absence of Conflicts	15
	Section 4.3	Own Account	15
	Section 4.4	Purchaser Status	15
	Section 4.5	General Solicitation	15
	 	 	 
	ARTICLE V RESTRICTIONS ON TRANSFERS	15
	Section 5.1	Resales	15
	Section 5.2	Rule 144	15
	Section 5.3	Legends	15
	Section 5.4	Legend Removal	16
	 	 	 
	ARTICLE VI OTHER AGREEMENTS	16
	Section 6.1	Acknowledgement of No Set Off	16
	Section 6.2	Survival	16
	Section 6.3	Integration	17
	Section 6.4	Reservation and Listing of Securities	17
	Section 6.5	Securities Laws Disclosure; Publicity	17
	Section 6.6	Integrated Agreements	17
	Section 6.7	Confidentiality	18
	 	 	 
	ARTICLE VII MISCELLANEOUS	18
	Section 7.1	Fees and Expenses	18
	Section 7.2	Entire Agreement	18
	Section 7.3	Notices	18
	Section 7.4	Amendments; Waivers	19
	Section 7.5	Headings; Gender	19
	Section 7.6	Successors and Assigns	19
	Section 7.7	No Third-Party Beneficiaries	20
	Section 7.8	Governing Law	20
	Section 7.9	Severability	20
	Section 7.10	Remedies Cumulative	20
	Section 7.11	Mutual Drafting	20
	Section 7.12	Legal Fees and Costs	20
	Section 7.13	Enforcement of Agreement	20
	Section 7.14	Execution; Counterparts	20


 


Disclosure Schedules


 


Exhibit A – Certificate of Designations
of Series A Convertible Preferred Stock


 


Exhibit B – Form of Investor Rights
Agreement


 




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SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT


 


THIS SERIES A CONVERTIBLE
PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”), dated and effective as of February 11, 2016 (the “Effective
Date”), is entered into by and between U.S. Energy Corp., a Wyoming corporation (the “Company”), and
Mt. Emmons Mining Company, a Delaware corporation (“Purchaser”). The Company and Purchaser are hereinafter at
times referred to individually as a “Party” and collectively as the “Parties.”


 


WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”), the Company desires to issue and sell to Purchaser, and Purchaser desires to purchase
from the Company, 50,000 shares (the “Shares”) of the Series A Convertible Preferred Stock, par value $0.01
per share, of the Company (the “Preferred Stock”).


 


WHEREAS, contemporaneous
with the execution of this Agreement, the Parties have entered into an Acquisition Agreement (the “Acquisition Agreement”)
pursuant to which, among other things and subject to the terms and conditions therein and herein, Purchaser has agreed (at the
Company’s request) to accept the transfer of the property and rights specified therein, including the Project (as defined
therein), and to replace the Company as the permittee and operator of the WTP (as defined therein).


 


WHEREAS, the Company
has offered the Preferred Stock to Purchaser in order to induce Purchaser to enter into the Acquisition Agreement and, subject
to the terms and conditions set forth therein and herein, accept the transfer from the Company of the property and rights specified
therein, including the Project, and replace the Company as the permittee and operator of the WTP.


 


WHEREAS, subject to
the terms and conditions set forth in this Agreement and in the Acquisition Agreement, the sale of the Shares by the Company to
Purchaser shall be made in exchange for Purchaser’s payment of $500 to the Company and Purchaser’s acceptance of the
transfer of the property and rights specified in the Acquisition Agreement, including the Mine, and Purchaser’s replacement
of the Company as the permittee and operator of the WTP.


 


WHEREAS, the board
of directors of the Company (the “Board of Directors”) has determined that the transactions contemplated by
this Agreement and the other Transaction Documents (defined below) are in the best interests of the Company and its shareholders
and creditors and that the consideration to be received for the Shares is adequate, has approved the transactions contemplated
by this Agreement and the other Transaction Documents, and has approved the issuance of the Shares and Conversion Shares (defined
below) for purposes of Section 17-18-104 of the Wyoming Management Stability Act.


 


WHEREAS, the sole director
of Purchaser has determined that the transactions contemplated by this Agreement and the other Transaction Documents are in the
best interests of Purchaser and its shareholder and has approved the transactions contemplated by this Agreement.


 


NOW, THEREFORE, in
consideration of the mutual agreements and covenants contained in this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and Purchaser agree as follows:


 




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ARTICLE
I

DEFINITIONS


 


Section 1.1           Definitions.
Initially capitalized terms used in this Agreement shall have the meanings assigned to them in this Section 1.1 or
the applicable Section referenced in Section 1.2, unless the context otherwise indicates:


 


“Affiliate”
shall have the meaning set forth in the Acquisition Agreement.


 


“Commission”
means the United States Securities and Exchange Commission.


 


“Common Stock”
means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities
may hereafter be reclassified or changed.


 


“Confidentiality
Agreement” means that certain Confidentiality Agreement, dated June 24, 2015, by and among the Company, Purchaser,
Freeport Minerals Corporation and Cyprus Amax Minerals Company.


 


“Contracts”
shall have the meaning set forth in the Acquisition Agreement.


 


“Disclosure
Schedules” means the Disclosure Schedules attached hereto.


 


“Environmental
Laws” shall have the meaning set forth in the Acquisition Agreement.


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended.


 


“Governmental
Entity” shall have the meaning set forth in the Acquisition Agreement.


 


“Hazardous
Materials” shall have the meaning set forth in the Acquisition Agreement.


 


“Investor
Rights Agreement” means the Investor Rights Agreement by and between the Company and Purchaser, a form of which is attached
as Exhibit B hereto.


 


“Knowledge
of the Company” shall have the meaning set forth in the Acquisition Agreement.


 


“Laws”
shall have the meaning set forth in the Acquisition Agreement.


 


“Lien”
shall have the meaning set forth in the Acquisition Agreement.


 


“NASDAQ”
means the NASDAQ Capital Market.


 


“Order”
shall have the meaning set forth in the Acquisition Agreement.


 




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“Permits”
shall have the meaning set forth in the Acquisition Agreement.


 


“Permitted
Lien” shall have the meaning set forth in the Acquisition Agreement.


 


“Person”
shall have the meaning set forth in the Acquisition Agreement.


 


“Proceeding”
shall have the meaning set forth in the Acquisition Agreement.


 


“Purchased
Assets” shall have the meaning set forth in the Acquisition Agreement.


 


“Securities”
means the Shares and the Conversion Shares.


 


“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1 and shall, where applicable, also include any direct
or indirect subsidiary of the Company formed or acquired after the date hereof.


 


“Transaction
Documents” means this Agreement, the Investor Rights Agreement, the Certificate of Designations, the Acquisition Agreement,
all exhibits and schedules to such documents and any other documents or agreements executed in connection with the transactions
contemplated by such documents.


 


“Transfer
Agent” means Computershare Trust Company, Inc., the current transfer agent of the Company, with a mailing address 350
Indiana Street, Suite 800, Golden, Colorado 80401, and any successor transfer agent of the Company.


 


Section 1.2           Other
Defined Terms. In addition, each of the following terms is defined in the Section set forth opposite such term:


 


	Term	 	Section
	Acquisition Agreement	 	Preamble
	Agreement	 	Preamble
	Action	 	3.10
	Board of Directors	 	Preamble
	Certificate of Designations	 	2.1
	Company	 	Preamble
	Company Reserve Reports	 	3.14
	Company Stock Plan	 	3.26
	Conversion Shares	 	2.1
	Closing	 	2.3
	Effective Date	 	Preamble
	Evaluation Date	 	3.16
	GAAP	 	3.8
	Material Adverse Effect	 	3.2
	Parties	 	Preamble
	Party	 	Preamble
	Preferred Stock	 	Preamble
	Purchaser	 	Preamble
	Report Preparer	 	3.14
	Required Approvals	 	3.5
	Rule 144	 	5.2
	SEC Reports	 	3.8
	Securities Act	 	Preamble
	Shares	 	Preamble
	Stock Award	 	3.26


 






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Section 1.3           Interpretative
Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used
in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Any initially
capitalized terms used in any exhibit, annex or schedule but not otherwise defined therein, shall have the meaning as defined
in this Agreement. Whenever the words “include”, “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact
followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing,
typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract
are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and
thereof. References to any Person include the successors and permitted assigns of that Person.


 


ARTICLE
II

PURCHASE AND SALE


 


Section 2.1           Authorization
of Shares. The Company has authorized (a) the sale and issuance to Purchaser of the Shares, and (b) the issuance
of shares of Common Stock to be issued upon conversion of the Shares (the “Conversion Shares”). Upon issuance
of the Preferred Stock, the Preferred Stock and the Common Stock shall have the rights, preferences, privileges and restrictions
set forth in the Restated Articles of Incorporation of the Company, as amended by the Certificate of Designations in the form
attached hereto as Exhibit A (the “Certificate of Designations”), which the Company shall file
with the Secretary of State of Wyoming prior to the Closing.


 


Section 2.2           Purchase
and Sale. Upon the terms and subject to the conditions set forth herein, at the Closing, the Company hereby agrees to issue
and sell to Purchaser, and Purchaser agrees to purchase from the Company, the Shares in exchange for $500 and Purchaser’s
performance of its obligations under the Acquisition Agreement, including accepting the Purchased Assets and replacing the Company
as the permittee and operator of the WTP.


 


Section 2.3           Closing.
The closing of the sale and purchase of the Shares (the “Closing”) shall occur at the offices of Hogan Lovells
US LLP in Denver, Colorado on the date hereof contemporaneously with the execution and delivery of this Agreement and the Acquisition
Agreement.


 






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Section 2.4           Deliveries.


 


(a)          At
the Closing, the Company shall deliver or cause to be delivered to Purchaser the following:


 


(i)          the
Investor Rights Agreement duly executed by the Company;


 


(ii)         a
certificate representing the Shares (in the form approved by the Board of Directors and prepared and executed in compliance with
the Wyoming Business Corporation Act and the Corporation’s Restated Articles of Incorporation and Bylaws), registered in
the name of Purchaser;


 


(iii)        a
certified copy of evidence of filing of the Certificate of Designations with the Secretary of State of Wyoming;


 


(iv)        written
evidence of the approval by NASDAQ of the Listing of Additional Shares Notification Form related to the Conversion Shares; and


 


(v)         a
certificate of the Secretary of the Company certifying as complete and accurate as of the Closing and having attached thereto (A) the
Company’s Restated Articles of Incorporation (including the Certificate of Designations) as in effect on the Effective Date,
(B) the Company’s bylaws as in effect on the Effective Date, (C) resolutions approved by the Board of Directors
authorizing the transactions contemplated hereby and the other Transaction Documents and duly authorizing and reserving for issuance
the Conversion Shares, and (D) good standing certificates with respect to the Company from the applicable authority(ies) in
Wyoming and any other jurisdiction in which the Company is qualified to do business, dated as of the Effective Date or a recent
date before the Effective Date, and certifying to the incumbency and signatures of the Company’s officers executing the Transaction
Documents.


 


(b)          At
the Closing, Purchaser shall deliver or cause to be delivered to the Company, as applicable, the following:


 


(i)          the
Investor Rights Agreement duly executed by Purchaser;


 


(ii)         $500
in immediately available funds; and


 


(iii)        a
certificate of the Secretary of Purchaser certifying all requisite resolutions or actions of Purchaser’s board of directors
approving the execution and delivery of this Agreement and the Acquisition Agreement and the transactions contemplated hereby and
thereby, and certifying to the incumbency and signatures of the officers of Purchaser executing this Agreement and the Acquisition
Agreement and any other document relating to the transactions contemplated hereby and thereby.


 






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ARTICLE
III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


Except as set forth
in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation made
herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company represents
and warrants as of the date hereof and as of the Closing to Purchaser as follows (unless as of a specific date therein):


 


Section 3.1           Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1. The Company owns, directly
or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the
issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.


 


Section 3.2           Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, has not resulted in and could not reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect on the results of operations,
cash flow, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole;
or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no
Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail
such power and authority or qualification.


 


Section 3.3           Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company, the Board of Directors or the Company’s shareholders
in connection herewith or therewith other than the Required Approvals. This Agreement and each other Transaction Document to which
it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of creditors’ rights generally; and (ii) as
limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.


 






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Section 3.4           No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or charter documents; (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any
Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is bound or affected; or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as has not resulted in and could not reasonably be expected to
result in a Material Adverse Effect.


 


Section 3.5           Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other Governmental Entity or other Person in connection with the execution,
delivery and performance by the Company of this Agreement, the Investor Rights Agreement and the Certificate of Designations,
other than: (i) the listing application to be filed with NASDAQ pursuant to Section 2.4(a)(iv), (ii) disclosures
required to be made under the Exchange Act as contemplated by Section 6.5, and (iii) the filing of the Certificate
of Designations with the Secretary of State of Wyoming (collectively, the “Required Approvals”).


 


Section 3.6           Issuance
of the Securities. The Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens other than any restrictions
on transfer under federal or state securities laws and as set forth in Article V. The Conversion Shares, when issued in
accordance with the terms of the Certificate of Designations, will be validly issued, fully paid and nonassessable, free and clear
of all Liens other than any restrictions on transfer under federal or state securities laws and as set forth in Article V.


 






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Section
3.7           Capitalization.


 


(a)          The
authorized capital stock of the Company consists of an unlimited number of shares of Common Stock and 100,000 shares of preferred
stock, par value $0.01 per share, of which 50,000 have been designated as Series P Preferred Stock. As of the date of this Agreement,
there were 28,233,068 shares of Common Stock issued and outstanding, and no shares of preferred stock issued and outstanding. Since
the date of this Agreement until the Closing, no additional shares of Common Stock or other securities will have been issued other
than the issuance of shares of Common Stock upon the exercise or settlement of Stock Awards under a Company Stock Plan as disclosed
herein. All of the outstanding shares of capital stock of the Company are, and all Securities which may be issued as contemplated
or permitted by the Transaction Documents will be, when issued, duly authorized and validly issued, fully paid and non-assessable
and not subject to any pre-emptive rights. No Subsidiary of the Company owns any shares of capital stock of the Company.


 


(b)          As
of the date of this Agreement, 66,667 shares of restricted stock had been granted to an officer of the Company and such shares
are excluded from issued and outstanding shares of Common Stock, and 2,343,022 shares of Common Stock were authorized for and subject
to issuance upon exercise of outstanding stock options (of which 2,227,355 were exercisable). There are no Contracts to which the
Company is a party obligating the Company to accelerate the vesting of any Stock Award as a result of the transactions contemplated
by the Transaction Documents. Other than the Stock Awards, there are no outstanding (i) securities of the Company or any Subsidiary
convertible into or exchangeable for shares of capital stock of the Company or any Subsidiary, (ii) options, warrants or other
agreements or commitments to acquire from the Company or any of its Subsidiaries, or obligations of the Company or any of its Subsidiaries
to issue, any shares of capital stock of (or securities convertible into or exchangeable for shares of capital stock of) the Company
or any Subsidiary or (iii) restricted shares, restricted stock units, stock appreciation rights, performance shares, profit
participation rights, contingent value rights, "phantom" stock or similar securities or rights that are derivative of,
or provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital stock of the Company
or any Subsidiary, in each case that have been issued by the Company or any Subsidiary. All outstanding shares of Common Stock,
all outstanding Stock Awards, and all outstanding shares of capital stock, voting securities or other ownership interests in any
Subsidiary of the Company, have been issued or granted, as applicable, in compliance in all material respects with all applicable
securities Laws.


 


(c)          There
are no outstanding Contracts requiring the Company or any Subsidiary to repurchase, redeem or otherwise acquire any capital stock
of the Company or any Subsidiary. Neither the Company nor any Subsidiary is a party to any voting agreement or shareholders agreement
with respect to any capital stock of the Company or any Subsidiary and to the Knowledge of the Company there are no such agreements
between or among any of the Company’s shareholders.


 


(d)          No
bonds, debentures, notes or other indebtedness issued by the Company or any Subsidiary (i) having the right to vote on any
matters on which shareholders, members or equityholders of the Company or any Subsidiary may vote (or which is convertible into,
or exchangeable for, securities having such right), or (ii) the value of which is directly based upon or derived from the
capital stock, voting securities or other ownership interests of the Company or any Subsidiary, are issued or outstanding.


 






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Section 3.8           SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act for the two years preceding the date of this Agreement,
and will file such documents through the Closing (the foregoing materials, including the exhibits thereto and documents incorporated
by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has
received or will receive a valid extension of such time of filing and has filed or will file any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports complied or will comply in all material respects
with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
or will contain any untrue statement of a material fact or omitted or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading
(except to the extent superseded by subsequently filed SEC Reports filed prior to January 1, 2016). The financial statements
of the Company included in the SEC Reports comply or will comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements
have been or will be prepared in accordance with United States generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present
or will fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of
and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.


 


Section 3.9           Material
Changes; Undisclosed Events, Liabilities or Developments. Since December 31, 2014, except as specifically disclosed in
an SEC Report filed after December 31, 2014 and prior to January 1, 2016: (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to result in a Material Adverse Effect; and (ii) the Company
and its Subsidiaries have not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s consolidated financial statements pursuant to GAAP or disclosed in filings made with the Commission.


 


Section 3.10         Litigation.
Except as disclosed in Schedule 3.10, there is no Proceeding pending or, to the Knowledge of the Company, threatened
against, related to or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
or Governmental Entity (collectively, an “Action”) which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary duty. There has not been, and, to the Knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or
officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. Neither the Company nor any of
its Subsidiaries is subject to any proceeding or action under any applicable Law relating to bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance or preferential transfers, or similar Law relating to or affecting creditors’ rights generally.
There is no Proceeding pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of their
Affiliates, directors, officers or employees, involving any challenge to or seeking damages or other relief in connection with
any of the transactions contemplated by this Agreement, the Acquisition Agreement or the other Transaction Documents or that may,
to the Knowledge of the Company, have the effect of preventing, delaying, making illegal or otherwise interfering with the transactions
contemplated by this Agreement, the Acquisition Agreement or the other Transaction Documents.


 






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Section 3.11         Labor.
Schedule 3.11 sets forth the names and titles of all of the Company’s executive officers as of the Effective Date.
To the Knowledge of the Company, no current or former executive officer of the Company or any Subsidiary, is, or is now expected
to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement
or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and
the continued employment of each such currently employed executive officer does not subject the Company or any of its Subsidiaries
to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all Laws
relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure
to be in compliance has not had and could not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect.


 


Section 3.12         Compliance
with Laws; Permits. Except as set forth in the SEC Reports filed prior to January 1, 2016, or in each case as has not
resulted in and could not reasonably be expected to result in a Material Adverse Effect, since December 31, 2014:


 


(a)          To
the Knowledge of the Company, the operations and activities of the Company comply and have complied, in all material respects,
with all applicable Laws and Permits;


 


(b)          To
the Knowledge of the Company, the Company possesses all Permits that are required by Law to permit the operations and activities
of the Company as currently conducted or operated; all such Permits are valid and are in full force and effect; all applications
or notices required to have been filed for the renewal or extensions of such Permits have been duly filed on a timely basis with
the appropriate Governmental Entity, and the Company has not been notified in writing that such renewals or extensions will be
withheld or delayed.


 


(c)          To
the Knowledge of the Company, except as set forth on Schedule 3.12(c), the Company has not received any written notice
from any Governmental Entity or Third Party regarding (i) any violation of or failure to comply with, in any material respect,
any Law or Permit, (ii) any withdrawal, suspension, cancellation, termination of, or modification to any Permit held by the Company
or any employee of the Company, or (iii) any obligation on the part of the Company to undertake, or to bear all or any portion
of the cost of, any remedial action; and


 






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(d)          To
the Knowledge of the Company, no event has occurred that, with or without notice or lapse of time or both, could reasonably be
expected to result in the revocation, suspension, lapse or limitation of any Permit.


 


Section 3.13         Title
to Assets; Properties. The Company and the Subsidiaries have good and marketable title in fee simple to all real property
owned by them except for unpatented mining claims and good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Permitted Liens.
Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting
and enforceable leases with which the Company and the Subsidiaries, and to the Knowledge of the Company the lessor(s), are in
compliance.


 


Section 3.14         Reserve
Reports. The Company has delivered or otherwise made available to Purchaser true and correct copies of all material written
reports requested or commissioned by the Company or any Subsidiary and delivered to the Company or any Subsidiary in writing on
or before the date of this Agreement estimating the Company’s and such Subsidiaries’ proved oil and gas reserves prepared
by any unaffiliated person (each, a “Report Preparer”) concerning the oil and gas interests of the Company
and such Subsidiaries as of December 31, 2014 (the “Company Reserve Reports”). The factual, non-interpretive
data provided by the Company and the Subsidiaries to each Report Preparer in connection with the preparation of the Company Reserve
Reports that was material to such Report Preparer’s estimates of the proved oil and gas reserves set forth in the Company
Reserve Reports was, to the Knowledge of the Company, as of the time provided (or as modified or amended prior to the issuance
of the Company Reserve Reports) accurate, and to the Knowledge of the Company there were no material errors in the assumptions
and estimates provided by the Company and its Subsidiaries to any Report Preparer in connection with their preparation of the
Company Reserve Reports. The Company’s internal proved reserve estimates prepared by management prior to the date of this
Agreement and prior to the Closing, copies of which have been provided to Purchaser were not, taken as a whole, materially lower
than the conclusions in such Company Reserve Reports. Except for changes generally affecting the oil and gas exploration, development
and production industry (including changes in commodity prices) and normal depletion by production, there has been no change in
respect of the matters addressed in the Company Reserve Reports that has resulted in and could reasonably be expected to result
in a Material Adverse Effect.


 


Section 3.15         Transactions
with Affiliates and Employees. Except as set forth in the SEC Reports filed prior to January 1, 2016, none of the officers
or directors of the Company or any Subsidiary and, to the Knowledge of the Company, none of the employees of the Company or any
Subsidiary is presently a party to any transaction with the Company or any Subsidiary (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 providing for the borrowing of money from or lending of money to, or otherwise
requiring payments to or from any officer, director or such employee or, to the Knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, shareholder, member
or partner, in each case involving an amount in excess of $120,000 other than for: (i) payment of salary for services rendered;
(ii) reimbursement for expenses incurred on behalf of the Company; and (iii) other employee benefits, including Stock
Awards under a Company Stock Plan.


 






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Section 3.16         Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in compliance with any and all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are applicable to the Company and are effective as of the date of this Agreement and as
of the Effective Date, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective
as of the date hereof and as of the Effective Date. The Company and the 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 GAAP 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. The Company and the Subsidiaries
have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange
Act) for the Company and the Subsidiaries and designed such disclosure controls and procedures to provide reasonable assurance
that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s
certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries
as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation
Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation
Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is
defined in the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the internal control
over financial reporting of the Company and its Subsidiaries.


 


Section 3.17         No
Brokers. No broker, finder, investment banker, financial advisor or other person is entitled to any brokerage, finder’s,
or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.


 


Section 3.18         Private
Placement. Assuming the accuracy of Purchaser’s representations and warranties set forth in Article IV of this
Agreement, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to Purchaser
as contemplated hereby. The issuance and sale of the Securities does not contravene the rules and regulations of NASDAQ.


 


Section 3.19         Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.


 






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Section 3.20         Registration
Rights. Except for any rights granted to Purchaser in the Transaction Documents, no Person has any right to cause the Company
to effect the registration under the Securities Act of any securities of the Company or any Subsidiaries.


 


Section 3.21         Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act,
and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating
terminating such registration. Except as disclosed in the Company’s Current Report on Form 8-K filed with the Commission
on July 14, 2015, the Company has not, in the twelve (12) months preceding the date hereof, received notice from NASDAQ to
the effect that the Company is not in compliance with NASDAQ’s listing or maintenance requirements.


 


Section 3.22         Application
of Takeover Protections. No poison pill (including any distribution under a rights agreement) or other similar anti-takeover
provision or arrangement is in effect, and no shares of the Company’s Series P Preferred Stock are issued and outstanding.
The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under a rights agreement) or other anti-takeover provision
under the Company’s Restated Articles of Incorporation, Bylaws, and the laws of the State of Wyoming including but not limited
to the Wyoming Management Stability Act, that is or could become applicable to Purchaser as a result of Purchaser and the Company
fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result
of the Company’s issuance of the Securities and Purchaser’s ownership of the Securities.


 


Section 3.23         Full
Disclosure. No representation or warranty by the Company in this Agreement and no statement contained in the Disclosure Schedules
to this Agreement or any certificate or other document furnished or to be furnished to Purchaser pursuant to this Agreement contains
any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The Company has disclosed to Purchaser, in the SEC Reports
filed prior to filed prior to January 1, 2016, and in this Agreement and the Acquisition Agreement (including the Disclosure
Schedules), all information regarding the Company and its Subsidiaries material to Purchaser’s decision to purchase the
Shares.


 


Section 3.24         No
Integrated Offering. Assuming the accuracy of Purchaser’s representations and warranties set forth in Article IV
of this Agreement, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with other offerings by the Company for purposes of the exemption
of the offer and sale of the Securities to Purchaser from registration under the Securities Act and state securities laws, and
any applicable shareholder approval provisions of NASDAQ.


 






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Section 3.25         Accountants.
Hein & Associates LLP, who have audited certain consolidated financial statements of the Company and its Subsidiaries are
independent public accountants with respect to the Company and its Subsidiaries within the applicable rules and regulations adopted
by the Commission and the Public Company Accounting Oversight Board (United States) and as required by the Securities Act.


 


Section 3.26         Company
Stock Plans. All benefit, compensation and award plans administered by the Company that provide for the award of rights of
any kind to receive shares of Common Stock or benefits measured in whole or in part by reference to shares of Common Stock (each
a “Company Stock Plan”) are listed on Schedule 3.26 of the Disclosure Schedules. Each award granted
by the Company under a Company Stock Plan (each a “Stock Award”) was granted (i) in accordance with the
terms of the applicable Company Stock Plan and (ii) if applicable, with an exercise price at least equal to the fair market
value of the Common Stock on the date such Stock Award would be considered granted under GAAP and applicable law. No Stock Award
granted under a Company Stock Plan has been backdated. The Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, Stock Awards prior to, or otherwise knowingly coordinate the grant or vesting of
Stock Awards with, the release or other public announcement of material information regarding the Company or its Subsidiaries
or their financial results or prospects.


 


Section 3.27         Tax
Status. Except for matters that could not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company (i) has made or filed all United States federal, state and local income and all foreign
income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) 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 and (iii) has set aside on its books provision reasonably adequate for the payment of all
material 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 to the Knowledge of the Company
no basis for any such claim exists.


 


ARTICLE
IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER


 


Purchaser represents
and warrants as of the date hereof and as of the Closing to the Company as follows:


 


Section 4.1           Organization;
Authority. Purchaser is an entity duly incorporated, validly existing and in good standing under the laws of the State of
Delaware with full right, corporate power and authority to enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents
and performance by Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary
corporate action, as applicable, on the part of Purchaser, and no further action is required by Purchaser, its board of directors
or its stockholder in connection herewith or therewith. Each Transaction Document to which it is a party has been (or upon delivery
will have been) duly executed by Purchaser, and when delivered by Purchaser in accordance with the terms hereof, will constitute
the valid and legally binding obligation of Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally; and (ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies.


 






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Section 4.2           Absence
of Conflicts. The execution and delivery of this Agreement by Purchaser does not, and the consummation of the transactions
contemplated hereby will not, (i) conflict with or violate the articles of incorporation or bylaws of Purchaser or (ii) conflict
with or violate in any material respect any Law or Governmental Order applicable to Purchaser.


 


Section 4.3           Own
Account. Purchaser understands that the Shares are “restricted securities” and have not been registered under
the Securities Act or any applicable state securities law and is acquiring the Shares as principal for its own account and not
with a view to or for distributing or reselling the Securities or any part thereof in violation of the Securities Act or any applicable
state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this
representation and warranty not limiting Purchaser’s right to sell the Securities in compliance with applicable federal
and state securities laws).


 


Section 4.4           Purchaser
Status. At the time Purchaser was offered the Shares, it was, and as of the date hereof it is an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) promulgated under the Securities Act.


 


Section 4.5           General
Solicitation. Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication
regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented
at any seminar or any other general solicitation or general advertisement.


 


ARTICLE
V

RESTRICTIONS ON TRANSFERS


 


Section 5.1           Resales.
Purchaser agrees that the Securities may only be sold or transferred (i) pursuant to an effective registration statement
under the Securities Act (including the Registration Statement (as defined in the Investor Rights Agreement)); (ii) pursuant
to an exemption from registration under the Securities Act; or (iii) in a transaction not subject to the registration requirements
of the Securities Act.


 


Section 5.2           Rule 144.
Purchaser is aware of Rule 144 promulgated under the Securities Act (as such rule may be amended or interpreted from time
to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect
as such rule, “Rule 144”) and the restrictions imposed thereby.


 


Section 5.3           Legends.
Purchaser agrees to the imprinting, so long as is required by this Article V, of a legend on any of the certificates
representing the Securities in substantially the following form:


 






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“THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF
WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”


 


Section 5.4           Legend
Removal. The Company shall instruct the Transfer Agent, and shall cause its counsel to promptly issue a legal opinion to the
Transfer Agent, to remove the legend set forth in Section 5.3, (i) following any sale of such Securities pursuant
to an effective registration statement; (ii) following any sale of such Securities pursuant to Rule 144; and (iii) upon
request by the holder of such Securities and upon delivery to the Company of appropriate representations as to the non-affiliate
status of holder under Rule 144 when such Securities may be sold under Rule 144, without the requirement for the Company
to be in compliance with the current public information required under Rule 144 as to such Securities and without volume
or manner-of-sale restrictions.


 


ARTICLE
VI

OTHER AGREEMENTS


 


Section 6.1           Acknowledgement
of No Set Off. The Company acknowledges that its obligations under the Transaction Documents to issue the Conversion Shares
pursuant to the Certificate of Designations are unconditional and absolute and not subject to any right of set off, counterclaim,
delay or reduction, regardless of or any claim the Company may have against Purchaser and regardless of the dilutive effect that
such issuance may have on the ownership of the other shareholders of the Company.


 


Section 6.2           Survival.


 


(a)          All
representations, warranties, covenants and obligations in this Agreement, the Disclosure Schedules, and any other document, certificate
or instrument delivered pursuant to this Agreement shall survive the Closing and the consummation of the transactions contemplated
by this Agreement, subject to Section 6.2(b).


 


(b)          The
Company will have liability pursuant to this Agreement with respect to any breach of a representation or warranty in this Agreement
only if Purchaser notifies the Company of a claim in writing, specifying the factual basis of the claim in reasonable detail to
the extent then known by Purchaser, on or before August 10, 2017, except for claims of breaches of the representations and warranties
set forth in Sections 3.2, 3.3, 3.4, and 3.7, which shall survive indefinitely and as to which Purchaser
may notify the Company at any time after the Effective Date.


 


Section 6.3           Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or
sale of the Securities for purposes of the rules and regulations of NASDAQ such that it would require shareholder approval prior
to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.


 


Section 6.4           Reservation
and Listing of Securities.


 


(a)          The
Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance upon conversion of the Shares pursuant
to the Certificate of Designations in such amount as may then be required to fulfill its obligations in full under the Certificate
of Designations.


 


(b)          The
Company shall take all steps necessary to (i) cause the Conversion Shares to be approved for listing or quotation on NASDAQ;
(ii) provide to Purchaser at the Closing evidence of such approval for listing or quotation; and (iii) use its reasonable
best efforts to maintain the listing or quotation of such Conversion Shares on NASDAQ or another national securities exchange.


 


Section 6.5           Securities
Laws Disclosure; Publicity. The Company shall file all required Current Reports on Form 8-K relating to the transactions
contemplated by the Transaction Documents, including all required exhibits thereto, with the Commission within the time required
by the Exchange Act; provided that the Company shall submit a draft of such Form 8-K(s) to Purchaser and provide Purchaser
with reasonable time to review and comment on such Form 8-K(s). The Parties shall consult with each other prior to issuing
any press releases with respect to the transactions contemplated by the Transaction Documents, and neither Party shall issue any
press release nor otherwise make any public statement with respect to the transactions contemplated by the Transaction Documents
without the prior consent of the other Party, which consent shall not unreasonably be withheld or delayed, except if such disclosure
is required by Law or NASDAQ, in which case the disclosing Party shall provide the other Party with notice of such press release
or public statement as promptly as possible. Notwithstanding anything else contained in this Section 6.5, except for any
press releases or public statements regarding the transactions contemplated by the Transaction Documents made in connection with
and immediately following the Closing, Purchaser shall not be required to consult with the Company regarding any press release
or other public statement after the Closing.


 


Section 6.6           Integrated
Agreements. The Parties acknowledge and agree that although this Agreement, the Acquisition Agreement and the other Transaction
Documents are separate documents, they form an integrated contract and the closing of one is contingent upon and subject to the
closing of all others. The Company will not issue, and Purchaser will not accept, the Shares if the Company is subject to any
proceeding or action under any applicable Law relating to bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance
or preferential transfers, or similar Law relating to or affecting creditors’ rights generally, and if Purchaser does not
accept the Shares, Purchaser shall not be obligated to close the Acquisition Agreement or the other Transaction Documents.


 






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Section 6.7           Confidentiality    The
Parties acknowledge and agree that the Confidentiality Agreement shall terminate at the Closing. From and after the Closing, the
Company shall, and shall cause its Affiliates to, hold, and shall use its reasonable best efforts to cause its or their respective
representatives to hold, in confidence any and all information, whether written or oral, related to the Project and the Transaction
Documents, except to the extent that the Company can show that such information (a) is generally available to and known by the
public through no fault of the Company, any of its Affiliates or their respective representatives; or (b) is lawfully acquired
by the Company, any of its Affiliates or their respective representatives from and after the Closing from sources which are not
prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If the Company or any of its Affiliates
or their respective representatives are compelled to disclose any such information by judicial or administrative process or by
other requirements of Law, the Company shall promptly notify Purchaser in writing and shall disclose only that portion of such
information which the Company is advised by its counsel in writing is legally required to be disclosed; provided, that the Company
shall use reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment
will be accorded such information.


 


ARTICLE
VII

MISCELLANEOUS


 


Section 7.1           Fees
and Expenses. Each Party shall pay the fees and expenses of its own advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such Party incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with
the delivery of the Shares to Purchaser.


 


Section 7.2           Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, and the Confidentiality Agreement,
taken together, are expressly intended by the Parties to be, shall be and constitute the Parties’ single, entire, non-severable,
indivisible and integrated agreement, and none of the Parties would have entered into any of the Transaction Documents but for
the totality of terms and provisions of the Transaction Documents and the Confidentiality Agreement. The Transaction Documents,
together with the exhibits and schedules thereto, and the Confidentiality Agreement contain the entire understanding of the Parties
with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the Parties acknowledge have been merged into such documents, exhibits and schedules.


 


Section 7.3           Notices.
All notices, demands, and other communications hereunder shall be in writing, and shall be deemed to have been duly given if delivered
personally, or if mailed by certified mail, return receipt requested, postage prepaid, or sent by nationally recognized overnight
carrier, as follows:


 






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	If to Purchaser:	Mt. Emmons Mining Company
	 	Attention:  Scott Statham, Deputy General Counsel
	 	333 North Central Avenue
	 	Phoenix, Arizona  85004-2189
	 	 
	with a copy to:	Jones Walker, L.L.P.
	 	Attention:  Dionne Rousseau
	 	8555 United Plaza Boulevard, Suite 500
	 	Baton Rouge, Louisiana  70809
	 	 
	If to the Company:	U.S. Energy Corp.
	 	Attention:  David Veltri
	 	4643 S. Ulster Street, Suite 970
	 	Denver, Colorado  80237
	 	 
	with a copy to:	Davis Graham & Stubbs LLP
	 	Attention:  John Elofson
	 	1550 Seventeenth Street, Suite 500
	 	Denver, Colorado 80202


 


or to such other address and with such
other copies as such Party may hereafter reasonably specify for the purpose by notice to the other Party. Each such notice, demand
or other communication shall be effective upon delivery or refusal of delivery at the address specified in this Section 7.3.


 


Section 7.4           Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed
by the Company and Purchaser. No waiver of any default with respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair
the exercise of any such right.


 


Section 7.5           Headings;
Gender. When a reference is made in this Agreement to a section, exhibit or schedule, such reference shall be to a section,
exhibit or schedule of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All personal
pronouns used in this Agreement shall include the other genders, whether used in the masculine, feminine or neuter gender, and
the singular shall include the plural and vice versa, whenever and as often as may be appropriate.


 


Section 7.6           Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
Purchaser. Purchaser may assign any or all of its rights under this Agreement to any Person to whom Purchaser assigns or transfers
any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to “Purchaser.”


 






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Section 7.7           No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity.


 


Section 7.8           Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed
by the internal laws of the State of Wyoming, United States of America, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of Wyoming or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Wyoming.


 


Section 7.9           Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or invalidated, and the Parties shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction.


 


Section 7.10         Remedies
Cumulative. The rights and remedies of the Parties are cumulative and not alternative.


 


Section 7.11         Mutual
Drafting. This Agreement is the mutual product of the Parties and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of each of the Parties, and shall not be construed for or against any Party hereto.


 


Section 7.12         Legal
Fees and Costs. In the event a Party elects to incur legal expenses to enforce or interpret any provision of this Agreement
by judicial proceedings, the prevailing Party shall be entitled to recover such legal expenses, including reasonable attorneys’
fees, costs, and necessary disbursements at all court levels, in addition to any other relief to which such Party shall be entitled.


 


Section 7.13         Enforcement
of Agreement. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the Parties shall
be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of competent jurisdiction, this being in addition to any other remedy to which they are entitled at law or
in equity.


 


Section 7.14         Execution;
Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together 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, it being understood that the Parties need not sign the same counterpart. In the event that any signature is delivered by
e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party
executing (or on whose behalf such signature is executed) with the same force and effect as if such “.pdf” signature
page were an original thereof.


 


* * * * * * * * * *


 




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IN WITNESS WHEREOF,
this Agreement has been executed by the parties hereto as of the day and year first written above.


 


	 	COMPANY:
	 	 	 
	 	U.S. ENERGY CORP.
	 	 	 
	 	By:	/s/ David Veltri
	 	Name:	David Veltri
	 	Title:	Chief Executive Officer and President
	 	 	 
	 	PURCHASER:
	 	 	 
	 	MT. EMMONS MINING COMPANY
	 	 	 
	 	By:	/s/ William E. Cobb
	 	Name:	William E. Cobb
	 	Title:	Vice President


 


[Signature Page to Series A Convertible
Preferred Stock Purchase Agreement]