Document:

Exhibit 10.1 Termination Agreement

    
      

    

     

    

      TERMINATION
        AGREEMENT

      

      THIS
        TERMINATION AGREEMENT (the
        “Agreement”)
        is
        made and entered into effective as of May 5, 2006, by and between U.S.
        ENERGY CORP, a
        Wyoming
        corporation (the “Company”),
        and
CORNELL
        CAPITAL PARTNERS, LP,
        a
        Delaware limited partnership (the “Investor”).

      

      Recitals:

      

      WHEREAS,
        the
        Company and the Investor entered into an Standby Equity Distribution Agreement
        (the “Standby
        Equity Distribution”);
        a
        Registration Rights Agreement (the “Registration
        Rights Agreement”);
        a
        Placement Agent Agreement (the “Placement
        Agent Agreement”),
        and a
        Warrant, all of which are dated April 11, 2006 (collectively, the Standby
        Equity
        Distribution Agreement, the Registration Rights Agreement, Placement Agent
        Agreement and the Warrant are referred to as the “Transaction
        Documents.”

      

      NOW,
        THEREFORE, in
        consideration of the promises and the mutual promises, conditions and covenants
        contained herein and in the Transaction Documents and other good and valuable
        consideration, receipt of which is hereby acknowledged, the parties hereto
        agree
        as follows:

      

      	1.  	
              Termination.
                Each of the parties to this Agreement hereby terminate the Transaction
                Documents and the respective rights and obligations contained therein.
                As
                a result of this provision, none of the parties shall have any rights
                or
                obligations under or with respect to the Transaction Documents.
                

            

      

      	2.  	
              Fees.
                The
                Investor shall retain any and all fees, including without limitation
                the
                Investor’s Shares and the Structuring Fees. The Placement agent shall
                retain the Placement Agent Shares.

            

      

      

      

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      IN
        WITNESS WHEREOF,
        the
        parties have signed and delivered this Termination Agreement on the date
        first
        set forth above.

      

      
        	 	
                CORNELL
                  CAPITAL PARTNERS, LP

              
	 	 
	 	
                By:
                  Yorkville Advisors, LLC

              
	 	
                Its:
                  General Partner

              
	 	 
	 	
                By: /s/
                  Mark A. Angelo    

              
	 	
                Name: Mark
                  A. Angelo

              
	 	
                Title: Portfolio
                  Manager

              
	 	 
	 	
                U.S.
                  Energy Corp.

              
	 	 
	 	
                By: /s/
                  Mark J. Larsen    

              
	 	
                Name: Mark
                  J. Larsen

              
	 	
                Title: President

              
	 	 
	 	
                Newbridge
                  Securities Corporation

              
	 	 
	 	
                By: 
                  /s/ Guy
                  S. Amico     

              
	 	
                Name: Guy
                  S. Amico

              
	 	
                Title: PresidentExhibit 10.2 Standby Equity Distribution Agreement

    
      

    

     

    

       

       

      STANDBY
        EQUITY DISTRIBUTION AGREEMENT

       

      THIS
        AGREEMENT
        dated as
        of the 5th  day
        of
        May 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.

       

      
        
           

          
          

        

        
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      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 

       

       

      
        
          
          

        

        
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      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 

       

       

      
        
          
          

        

        
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      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

       

       

      
        
          
          

        

        
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      (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. 

       

      (c) Minimum
        Acceptable Price. The
        minimum price (“Minimum
        Acceptable Price”),
        below
        which no purchase or sale of Common Stock shall occur, shall, in connection
        with
        each Advance Notice delivered by the Company, be equal to an amount not less
        than ninety five percent (95%) of the VWAP of the Common Stock on the Trading
        Day immediately preceding the Advance Notice Date for each Advance Notice.
        Upon
        the issuance by the Company of an Advance Notice along with a Minimum Acceptable
        Price, (i) the Company shall automatically reduce the amount of the Advance
        set
        forth in such Advance Notice by twenty percent (20%) for each Trading Day
        during
        the Pricing Period the VWAP of the Common Stock is below the Minimum Acceptable
        Price (each such day, an “Excluded
        Day”)
        and
        (ii) each Excluded Day shall be excluded from the Pricing Period for purposes
        of
        determining the Market Price. The number of shares of Common Stock to be
        delivered to the Investor at the Closing (in accordance with Section 2.3
        of this
        Agreement) shall correspond with the reduced Advance Notice amount. The Company,
        and only the Company, may waive the Minimum Acceptable Price with respect
        to any
        particular Advance Notice by provided the Investor with written notice of
        waiver
        on or prior to the Advance Notice Date. 

      

       

       

       

      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 

       

       

      
        
          
          

        

        
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      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.

       

       

      
        
          
          

        

        
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      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.

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

       

      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 19,556,281 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: 

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

       

       

       

      	(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 

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

       

      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 

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

       

      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.

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

       

       

      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 

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

       

      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.
        

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

       

      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

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

       

      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 

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

       

      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.

       

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

       

      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 

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

       

      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

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

       

      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.

       

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

       

      (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 

              

      

      

       

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      
 

       

      
        	 	 
	
                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 April 11, 2006 the Company paid 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.

       

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

       

       

       

      (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) On
        April
        11, 2006 the Company issued 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 shall be deemed fully earned as of April 11, 2006 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 

       

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

       

      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]

      

      

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      

      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

              
	 	 

      

      

      

      

      

      
        
          
             

            

             

            

          

          
          

        

        
          25

          
            

          

        

        
          
          

          
          

        

      

       

      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

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