Document:

Production Services Agreement

 Exhibit 10.7 
 PRODUCTION SERVICES AGREEMENT
  

THIS MASTER PRODUCTION SERVICES AGREEMENT (“Agreement”) is entered into as of July 20, 2009 between Audience Productions, Inc. a Washington corporation (“Financier”) and Bridge Productions, Inc., a Washington state corporation (“Service Company”). During the Term of this Agreement separate and distinct Statements of Work (“SOWs”) for each project to be covered by this Agreement shall be approved and executed by the parties and attached hereto, as Exhibit A for the first SOW, Exhibit B for the second SOW and continuing alphabetically thereafter.

 

RECITALS
  

WHEREAS, Financier desires to finance and arrange for the production of one or more Pictures and Service Company desires to furnish services thereon, pursuant to the terms and conditions set forth herein and as supplemented and/or revised in each mutually approved SOW, and;
 

WHEREAS, the parties desire that each SOW shall include the following mutually approved attachments: (i) Attachment 1 to each SOW shall be copy of the screenplay that is the subject of the SOW (the “Screenplay”); (ii) Attachment 2 to each SOW shall be a detailed schedule for performance of the production services that Service Company is to provide on the Screenplay (the “Production Schedule”); (iii) Attachment 3 to each SOW shall be the budget for the Service Company’s production of a motion picture (the “Picture”) based on the Screenplay (the “Budget”); (iv) Attachment 4 to each SOW shall be the schedule for the transfer of funds from Financier to Service Company (the “Cash Flow Schedule”); and Attachment 5 to each SOW shall be a list of the deliverables that Service Company shall deliver to Financier in fulfillment of Service Company’s obligations on the Picture (the “Deliverables”).
 

NOW, THEREFORE, in consideration of the promises and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

	 	1.	PRODUCTION OF THE PICTURE.

  

	 	(a)	Subject to the terms and conditions hereinafter set forth and in the applicable SOW, Financier agrees to furnish or cause a third party to furnish to Service Company, on a mutually approved cash flow schedule (“Cash Flow Schedule”), attached to the applicable SOW as Attachment 4, the amount of financing which Service Company represents, to the best of its ability, is the sum that will be required to finance the production of the Picture, and Service Company shall use all sums advanced hereunder for the sole purpose of furnishing the production services for the Picture in accordance with the approved screenplay, budget and production schedule, subject only to material deviations therefrom which are approved in writing by Financier under an applicable SOW. All obligations of Financier shall be subject to Financier first obtaining a completion bond from a reputable company, if necessary, as determined jointly by Financier and Service Company, which in form and substance shall be subject to Financier’s and Service Company’s approval, and the cost of which shall be added to the approved budget as an additional cost. All sums advanced hereunder shall be deposited in a production account, in accordance with the agreed upon Cash Flow Schedule, which has been designated, approved, and is controlled by Financier.

 

	 	(b)	Service Company’s obligations shall be complete upon its delivery to Financier of the Deliverables.

 

	 	(c)	Financier shall have the right of designation and approval of the following parties and/or entities engaged by Service Company on each Picture: writers, director, all producers (including producers, executive producers, co-producers, co-executive producers, line producers and associate producers), casting director, “star” talent, director of photography, editor, composer, production accountant and insurance company. Financier and Service Company shall jointly approve the location by Country and State or Province where all production and post production activities will take place taking into account the Budget and government sponsored production and/or tax incentives. All other parties and entities engaged on each Picture shall be selected and engaged by Service Company in consultation with Financier, provided that all such engagements (i) shall be with professional parties experienced in the respective fields in which they are each engaged, (ii) do not attach signatory status to any collective

 

	 	(c)	bargaining agreement that would create executory obligations for Financier or Service Company unless signatory status is agreed to in advance by Financier or as such status may be required by law; (iii) are upon terms and conditions standard within a reasonable range in the industry for such services, and (iv) provide for compensation to such parties in conformance with the Budget.

 

	 	(d)	During production, Service Company may reasonably reallocate expenses, up to five percent (5%), within the Budget due to cost shifts and needs arising from exigencies of production provided that total costs do not exceed the approved Budget. Any reallocation of budget expenses in excess of five percent (5%) shall be mutually agreed to between Financier and Service Company.

 

	 	(e)	Service Company shall perform all of its obligations hereunder to the best of its ability and in a workmanlike manner. Financier, or its assignee, shall own all right, title, and interest in and to all items that are conceived, made, discovered, written or created by Service Company personnel alone or jointly with third parties under this Agreement, including the Deliverables, whether completed or works-in-progress.  Without limiting the previous sentence, all Deliverables and other results and proceeds of Service Company’s services on a Picture, in whole and in part, shall be deemed “works made for hire” for Financier for all purposes of copyright law, and the copyright shall belong solely to Financier.  To the extent that any such Deliverables or other results and proceeds do not fall within the specifically enumerated works that constitute “works made for hire” under the United States copyright laws, and to the extent that any Deliverables or other results and proceeds include materials subject to copyright, trade secret, or other proprietary right protection then by virtue of this provision Service Company hereby immediately and irrevocably assigns, without further action, to Financier all its right, title and interest that it may be deemed to have in and to any of the Picture’s elements, which shall include, without limitation, all literary material written for the Picture, all stills, artwork and designs used in connection with the Picture, all film clips, recordings, trailers, sound tracks, and all other tangible and intangible property relating to the Picture, and all rights in and to the foregoing, exercisable throughout the universe, in perpetuity, and all subsidiary, ancillary and related rights, performing rights, publishing rights, merchandising and commercial tie-up rights, and the right to use the names, likenesses, and voices of all persons rendering services in connection with the Picture.  Service Company shall obtain, at its expense, such assignments for Financier, from Service Company’s employees, agents, and contractors as necessary to effectuate the purposes of the previous sentence.  Service Company also agrees not to assert any moral rights under applicable copyright law with regard to such items and Deliverables and to require its employees to do the same.  Service Company’s rights under any Agreement in connection with the Picture shall be freely assignable to Financier and upon Financier’s request, Service Company agrees to acknowledge, perform, execute, and deliver such assignments and other documents and instruments as may be necessary or appropriate to evidence Financier’s acquisition of rights hereunder. The Picture shall contain such production or presentation or release credit to Financier as Financier shall determine. Additionally, the end titles shall contain a copyright notice in the following form: “Copyright 20__, Audience Productions, Inc. All rights reserved,” or such other copyright notice as Financier shall designate.

 

	 	(f)	Upon Financier’s acquisition of all right, title and interest in and to the Picture as provided above, Financier shall assume, or cause the distributor of the Picture to contractually adhere to, the executory obligations of all contracts undertaken by Service Company in the normal course of business to produce the Picture, and Service Company shall be relieved of any liabilities arising therefrom.

 

	 	(g)	If Service Company, upon reasonable notice, shall fail to execute any instrument or document, which Financier requires to implement any term hereof or to perfect its rights hereunder, Financier shall have the right to execute such document or instrument on Service Company’s behalf, such right being an irrevocable power coupled with an interest. Copies of any such documents or instruments shall be immediately provided to Service Company.

 

 

	 	2.	PRODUCTION CONTRACTS. All contracts for personnel (including casting and directing), studio hire, purchase of goods and services, laboratory work and all other licenses, contracts and obligations in connection with the production of the Picture by Service Company, shall be made and entered into by Service Company in its own name as principal and not as agent for Financier and no obligations whatsoever shall be imposed upon Financier thereunder. All such contracts or undertakings shall be consistent with the provisions of this Agreement and industry custom and practice, which in no event shall be less restrictive than the requirements of Service Company under this Agreement. Such contracts and undertakings shall not be terminated, canceled, modified or rescinded in any manner which would or might prejudice the rights of Financier hereunder. All such contracts shall be assignable to Financier without restriction except only for obligations arising from approved artist agreements and collective bargaining agreements. Service Company shall have all responsibilities of an employer with respect to those personnel locally engaged by Service Company, including those arising under any present or future legal requirements relating to workers' compensation, insurance, social security, tax withholding, pension, health and welfare plans under any legal requirements or any applicable collective bargaining agreement, including foreign country equivalents of the foregoing, if any, although upon delivery of the Picture and completion of all obligations required hereunder of Service Company, Financier shall assume or cause the distributor of the Picture to assume such obligations and hold Service Company harmless therefrom. Service Company shall use due care in the selection and purchase of any items to be used in connection with the production of the Picture and shall assign Financier on demand all rights which Service Company shall obtain, by warranty and otherwise, from the supplier of such items.

 

	 	3.	CREDIT. Provided that Service Company fulfills its material obligations with regard to each SOW, then Service Company shall receive a single card “In Association With” production credit in the main titles of the Picture, in the next position immediately following Financier’s on-screen credit, or if Financier does not take an on-screen credit then in no later than second position after the distributor’s on-screen credit. Service Company’s credit shall be equal in size, font and prominence as to any other production or distribution company credit. Service Company shall also have a closing credit in the credit roll of the Picture to include Service Company’s logo with placement and all other elements of the closing credit at Financier’s discretion. Service Company shall be credited in all print and Internet ads in which any other production company credit appears, except for standard industry exclusions. In addition, as to each Picture on which he provides services, Eugene Mazzola shall be individually credited as a “Producer” in the main credits, either on a single card or in first position on a shared card, equal in size, font and prominence as to any other on-screen producer credit and in all print and Internet ads in which any other Producer credit appears, except for standard industry exclusions. No accidental or inadvertent failure to accord credit as provided for herein shall be deemed a material breach of this Agreement provided that Financier undertakes reasonable steps to correct such failure on a prospective basis.

 

	 	4.	INSURANCE. Service Company shall carry and pay for production insurance consistent with the Budget and the Cash Flow Schedule to cover all customary risks in connection with the production of motion pictures and the parties’ performance of their respective obligations hereunder, including without limitation, general liability, cast, and Workers’ Compensation insurance, which insurance shall specifically name Financier as an insured party and beneficiary. Service Company shall furnish Financier with certificates of insurance stating and certifying the amount and type of insurance and that Financier is an insured party and beneficiary thereunder along with copies of all said policies. If Financier or its  licensees or assignees require Errors and Omissions Insurance, and such insurance is not part of the Budget, the policy shall be secured and paid for by Financier prior to the first public exhibition of the Picture and such policy shall specifically name both Financier, Service Company and Eugene Mazzola as insured parties and beneficiaries.

 

	 	5.	CONTRACT PRICE. Time is of the essence with regard to Financier’s timely release of funds pursuant to the applicable Cash Flow Schedule. Except as provided in Paragraph 16 below, on the condition that Service Company is not in breach of its material obligations hereunder or under an SOW, Financier shall pay Service Company for services rendered an aggregate sum equal to the Budget inclusive of sums budgeted as “contingency” if and as used to produce and deliver the Picture, all in accordance with the Cash Flow Schedule. Supplemental payments will be made by Financier to Service Company for additional costs incurred during production of the Picture that are in excess of the budgeted “contingency” line item and arise from decisions, choices and/or delays arising from acts or failures to act of Financier.

 

 

	 	6.	PRODUCTION SCHEDULE AND FORCE MAJEURE EVENTS. Service Company shall provide the production services and deliver the Picture and all other Deliverables in accordance with the Production Schedule, subject only to delays arising from Financier’s failure to make timely payment or Force Majeure Events. If either party’s performance is prevented, hindered or delayed by fire, flood, earthquake, elements of nature or acts of God, acts of war, terrorism, riots, civil disorders, rebellions or revolutions, strikes, or any other similar cause beyond the reasonable control of such party (each, a “Force Majeure Event”), and such non-performance, hindrance or delay could not have been prevented by reasonable precautions, then the non-performing, hindered or delayed party will be excused for such non-performance, hindrance or delay, as applicable, of those obligations affected by the Force Majeure Event for as long as such Force Majeure Event continues and such party continues to use its best efforts to recommence performance whenever and to whatever extent possible without delay, including through the use of alternate sources, workaround plans or other means.  The party whose performance is prevented, hindered or delayed by a Force Majeure Event will immediately notify the other party of the occurrence of the Force Majeure Event, describe in reasonable detail the nature of the Force Majeure Event and shall exercise best efforts to mitigate delays and costs arising from the Force Majeure Event.

 

	 	7.	DISTRIBUTION. Financier shall have sole authority over the distribution of the Picture, without limitation, including whether the Picture is distributed at all.

 

	 	8.	REPRESENTATIONS AND WARRANTIES.

  

	 	
	Service Company hereby represents, warrants and agrees as follows:

  

	 	(a)	Service Company is a corporation duly organized and existing under the laws of the State of Washington and has the right to grant all rights granted herein, and is free to enter into and fully perform this Agreement.

 

	 	(b)	No liens, encumbrances, attachments or other matters constituting or possibly constituting any impediment to the clear marketable title and unrestricted commercial exploitation or disposition of the Picture as delivered, or any rights therein or pertaining thereto shall be permitted to occur (other than executory obligations arising from collective bargaining agreements, talent agreements, music rights clearances and/or  other clearance agreements) which shall or may arise by reason of any acts, omissions or activities of Service Company in connection with the performance or enforcement of this Agreement, any applicable SOW, or attachments by Service Company in connection with any litigation which Service Company shall be plaintiff against Financier or any other party whatsoever. Service Company will not create, make, cause or permit any lien, encumbrance, pledge (except as may be required by a film processing laboratory), hypothecation or assignment of or claim against the Picture, or any rights therein, or upon the copyrights thereof, or upon the literary material upon which the Picture is based, or the release, distribution, exploitation or exhibition rights therein, or upon any proceeds therefrom or any other rights, interests or property therein or pertaining thereto.

 

	 	(c)	Service Company shall at all times indemnify, defend, and hold harmless Financier, and the partners, officers, directors, employees, licensees, shareholders, subsidiaries, and agents of each of the foregoing, and their heirs, executors, administrators, successors and assigns, from and against any and all claims, damages, liabilities, actions, causes of action, costs and expenses, including reasonable attorneys’ fees, judgments, penalties of any kind or nature whatsoever arising out of (i) Service Company’s production and delivery of the Picture; (ii) any act or omission by Service Company or any person whose services or facilities shall be furnished by Service Company in connection with the Picture; and (iii) any breach by Service Company of any representation, warranty or agreement made by Service Company hereunder.

 

	 	
	Financier hereby represents, warrants and agrees as follows:

  

	 	(d)	Financier is a corporation duly organized and existing under the laws of the State of Washington and has the right to grant all rights granted herein, and is free to enter into and fully perform this Agreement.

 

 

	 	(e)	Financier controls all rights in and to the Screenplay and /or underlying literary material upon which the Screenplay is based or to be based, including changes, supplemental material and elements incorporated into the Screenplay or Picture during or after Production pursuant to direct instructions from Financier, and Financier indemnifies Service Company from any claims (including legal fees and costs) arising therefrom.

 

	 	9.	GOOD FAITH ASSURANCE. Neither party has nor will without the other’s prior written consent: (i) enter into any agreement, commitment or other arrangement, grant any rights or do any act or thing which reasonably could or might prevent or interfere with the production and completion of the Picture or prevent or impede the performance of all of the respective party’s obligations hereunder; (ii) do or fail to do any act which reasonably might or could interfere with or otherwise prevent such party from fully complying with all of the terms hereof; or (iii) engage in any conduct materially inconsistent with this Agreement or the other party’s rights hereunder. The foregoing shall not be interpreted as impairing or preventing Financier’s absolute right to abandon production of the Picture at anytime and/or to refrain from or cause the termination of the distribution of the Picture, all as provided in Paragraphs 12 and 16 below.

 

	 	10.	DEFAULT. Service Company specifically waives all rights and remedies, if available to Service Company, of rescission, injunction, restraint and specific performance and agrees in this regard that it shall have no right to revoke, terminate or rescind any rights acquired by Financier hereunder nor to restrain production, completion or distribution of the Picture and shall have no right to compel specific performance of any of Financier's obligations hereunder. Service Company understands and agrees that its sole remedy hereunder shall be for monetary damages, if any, in the event of breach by Financier.

 

	 	11.	SECURITY INTEREST. As security for the delivery of the Picture hereunder, Service Company hereby mortgages, sells, assigns, pledges, hypothecates, and sets over to Financier as collateral all of Service Company’s right, title and interest, if any, in and to the following:

  

	 	(a)	The Picture, in whatever form it may now exist or hereafter exist, including the negative, sound material and copyright thereto.

 

	 	(b)	The literary, dramatic and music material upon which the Picture is based or to be based, including without limitation, the Screenplay and all of Service Company’s right, title and interest in and to the copyrights to the foregoing.

 

	 	(c)	All of Service Company’s right, title and interest in and to any properties or things of value pertaining to rights, contract rights, claims, properties and material set forth in (a) and (b) above, whether now in existence or hereafter acquired by Service Company.

 

	 	(d)	Any other rights Service Company may have in or relating to the Picture.

 

	 	
	It is intended that the security granted above is and shall be a “security interest” as such term is defined in the Uniform Commercial Code and Service Company hereby agrees to execute and deliver a financing statement in form and substance which complies with the Uniform Commercial Code of any and all states which Financier may hereafter require. Service Company hereby authorizes Financier or its representative to file such financing statement(s) and to execute any continuation statements as well as to perform any and all other acts Financier may deem appropriate to perfect and continue Financier’s security interest in the collateral. Service Company represents and warrants that there shall be no lien or charge or encumbrance in whole or in part upon the collateral (other than a customary laboratory lien for processing services or liens required to secure obligations under collective bargaining agreements) or proceeds derived therefrom which are equal or superior to the lien and security interest above granted and that Financier’s security interest shall at all times be and remain a first and continuing lien and security interest on the collateral until Financier is repaid the entire sum herein elsewhere provided. Service Company shall at all times keep Financier advised as to the location of all collateral herein pledged. For clarity, liens arising from third party payment obligations duly incurred by Service Company in good faith pursuant to this Agreement and an SOW that are not released by the lien holder due to Financier’s failure to issue funds to Service Company pursuant to the Budget and Cash Flow Schedule shall be Financier’s responsibility.

  

 

	 	12.	TAKEOVER RIGHTS. At any time after the occurrence of any of the events hereinafter set forth, Financier shall have the right either to issue directions and instructions regarding production of the Picture, or to take over production of the Picture. The events entitling Financier to exercise the aforesaid rights shall be the following:

  

	 	(a)	If after commencement of production, the final projected cost of production in Financier’s best judgment, after consulting with Service Company, the production accountant and the completion bond company (or if there is no completion bond company, than with at least one experienced third party motion picture producer) that total Budget will exceed the then-current Budget by five percent (5%) excluding, (i) over-Budget costs that are reimbursed by insurance; (ii) over-Budget costs caused by a direct consequence of a third party breach of contract that is not with a subcontractor of Service Company; or (iii) additional costs induced, encouraged or arising from acts of Financier; or

 

	 	(b)	Financier or Service Company’s receipt of notice from the completion bond company, if any, of concerns that must be resolved to the completion bond company’s satisfaction to prevent the completion bond company’s exercise of its take-over rights and Service Company does not take immediate action to satisfactorily address such concerns in a timely fashion.

 

	 	
	If Financier exercises its right to issue directions and instruction in keeping with the foregoing, Service Company shall fully and faithfully abide by and follow all such instructions issued in connection with the production of the Picture and Service Company shall have no further creative approval and/or other production rights concerning production, post-production and/or distribution of the Picture. If Financier exercises its takeover rights as aforesaid, Service Company shall immediately do all that is necessary to place at Financier’s disposal and under Financier’s control, all persons, production funds and other items of and concerning production of the Picture. Service Company specifically acknowledges that if Financier takes over the Picture in keeping with the foregoing, Financier may abandon the Picture or complete production as Financier may at such time determine. Notwithstanding the foregoing to the contrary, Financier’s rights concerning production of the Picture shall be subject to payment obligations, creative and other approvals, and controls that are contained in those agreements between Service Company and third parties that were entered with Financier’s knowledge which are not terminated and Service Company shall be entitled to a pro rata (based on percentage of budget spent) payment of its budgeted service fees, reduced by 15%.

  

 

	 	
	If Financier exercises its takeover rights as aforesaid, Service Company shall immediately assign to Financier all third party agreements necessary to place at Financier’s disposal and under Financier’s control, all persons, contracts and other items necessary to allow for Financier’s continued production or abandonment of the Picture. Service Company shall immediately, after receipt of such notice, exercise best efforts to settle all its accounts and third party contractual obligations. Upon  the sooner of fifteen (15) days after Financier’s exercise of its takeover rights, or Service Company’s settlement of its accounts and obligations, Service Company shall repay to Financier one hundred percent (100%) of the balance of funds remaining in the Picture’s segregated bank account. Service Company specifically acknowledges that if Financier takes over the Picture in keeping with the foregoing, Financier may abandon the Picture or complete production as Financier may at such time determine. Financier’s rights concerning production of the Picture shall be subject to payment obligations, creative and other approvals, and controls that are contained in those agreements between Service Company and third parties engaged on the Picture and Service Company shall be entitled to a pro rata (based on weeks) payment of its budgeted service fees.

  

	 	13.	TERM, MINIMUM ORDER, OPPORTUNITY TO CURE AND TERMINATION. The term of this Agreement will commence on the date first set forth above (the “Effective Date”) for a term of two (2) years (the “Term”). The Term may be extended pursuant to the parties’ mutual written agreement or as extended in an SOW. As to Financier’s payment obligations only, if Financier materially defaults in its payment obligations to Service Company, then Service Company shall give written notice to the Financier and Financier shall have forty eight hours (48) hours to cure such default. If the default is not materially cured within such

 

	 	13.	period, then Service Company, upon written notice, may terminate this Agreement and the applicable SOW. If Service Company materially defaults in the performance of any of its material obligations under this Agreement, or an SOW, then Financier shall give written notice to Service Company describing in reasonable detail the nature of the default and the Service Company shall have five (5) days to cure such default. If the default is not materially cured within such stated period, then Financier, upon written notice, may terminate this Agreement and the applicable SOW. Upon the earlier of termination as provided for herein or delivery of a completed Picture, Financier shall assume all payment obligations, creative and other approvals, and controls that are contained in third party agreements entered into by Service Company in good faith in accordance with the Budget and Production Schedule.

  

	 	14.	STATUS OF PARTIES. The parties hereto expressly agree, each for the other, that the relationship between them hereunder is that of two principals dealing with each other as independent contractors for the sole and specific purpose that Service Company shall produce and deliver the Picture, subject to the terms and conditions of this Agreement. At no time, past, present or future, shall the relationship of the parties herein be deemed or intended to constitute a relationship with the characteristics of an agency, partnership, joint venture, or of a collaboration for the purposes of sharing any profits or ownership in common. Neither party shall have the right, power or authority at any time to act on behalf of, or represent, the other party, but each party hereto shall be separately and entirely liable for its own respective debts in all respects. This Agreement is not for the benefit of any person who is not a party signatory hereto or specifically named as a beneficiary herein. Financier may assign or license its rights hereunder in whole or in part to any person, firm or corporation. Except for assignment to Financier, Service Company may not assign or license any of its rights or obligations hereunder, or under any agreement entered into by Service Company with any third party. Subject to the foregoing, the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, administrators, executors, successors and assigns, and any past, present or future parent, subsidiary or affiliate company.

 

	 	15.	NOTICES. Any and all notices, communications and demands required or desired to be given hereunder by either party hereto shall be in writing and shall be validly given or made if served either personally or if deposited in the United States mail, certified or registered, postage prepaid, return receipt requested. If such notice or demand be served personally, service shall be conclusively deemed made at the time of such personal service. If such notice or demand be served by registered or certified mail in the manner herein provided, service shall be conclusively deemed made two business days after the deposit thereof in the United States mail addressed to the party to whom such notice or demand is to be given as hereinafter set forth:

 

	 	
	          To Financier:
          Audience Productions, Inc.
          2311 N 45th Street, Suite #310
          Seattle, WA 98103
          Attn: Jay Schwartz

          To Service Company:
          Bridge Productions, Inc.
          14208 160th Avenue NE
          Woodinville, WA  98072
          Attn: Eugene Mazzola

  

	 	
	Any party hereto may change its address for the purpose of receiving notices or demands as herein provided by a written notice given in the manner aforesaid to the other party hereto, which notice of change of address shall not become effective, however, until the actual receipt thereof by the other party.

  

 

	 	16.	ABANDONMENT. Financier shall have no obligation to finance, release, broadcast, distribute, complete production of, not abandon or otherwise exploit the Picture, provided Financier indemnifies Service Company against any loss from contracts entered into with Financier’s prior consent and knowledge. In the event Financier abandons the Picture, Service Company shall be entitled to a pro rata (based on percentage of budget spent) payment of its budgeted service fees.

 

 

	 	17.	MISCELLANEOUS.

 

	 	(a)	This Agreement shall be construed, interpreted and enforced in accordance with and shall be governed by the laws of the State of Washington applicable to agreements entered into and wholly to be performed therein. In the event of any conflict between any provisions hereof and any applicable laws to the contrary, the latter shall prevail, but this Agreement shall be deemed modified only to the extent necessary to remove such conflicts.

 

	 	(b)	Each of the parties hereto shall execute and deliver any and all additional documents, and shall do any and all acts and things reasonably required in connection with the performance of the obligations undertaken hereunder and to effectuate the extent of the parties thereto.

 

	 	(c)	This Agreement constitutes the entire agreement of the parties hereto and supersedes all oral and written agreements and understandings made or entered into by the parties hereto prior to the date hereof. No amendment, change or modification of this Agreement shall be valid unless it is made in writing and signed by both parties hereto, and any waiver of a failure to perform or breach shall not operate to waive any subsequent failure to perform or breach.

 

	 	(d)	The captions appearing at the commencement of the paragraphs hereof are descriptive only and for convenience in reference to this Agreement and should there be any conflict between any such heading and the paragraph at the head of which it appears, the paragraph thereof and not such heading shall control and govern in the construction of this Agreement.

 

	 	(e)	Execution by Counterpart/Facsimile:  This Agreement, and applicable SOWs, may be executed by fax or by counterpart, which, when taken together, shall constitute one entire, complete, and binding Agreement.

 

	 	(f)	In the event of a conflict between terms of the Agreement and any of its SOWs, the terms of the SOW shall prevail and this Agreement shall be deemed modified to the minimum extent necessary to conform therewith.

 

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

	BRIDGE PRODUCTIONS, INC.
	  		 	
				
	By:	  	 /s/ EUGENE MAZZOLA
	  		 	Date: JULY 20, 2009
	Name:	  	Eugene Mazzola	  		 	
	Title:	  	President	  		 	
				
	AUDIENCE PRODUCTIONS, INC.
	  		 	
				
	By:	  	 /s/ JAY T. SCHWARTZ
	  		 	Date: JULY 20, 2009
	Name:	  	Jay T Schwartz	  		 	
	Title:	  	President	  		 	

Exhibit A
 Statement of Work For Production Services
Related To The Feature Film “Lydia Slotnick Unplugged”
  

This SOW, dated as of  July 20, 2009 is between Audience Productions, Inc. and Bridge Productions, Inc.  This SOW is incorporated into and forms a part of the Agreement dated July 20, 2009, and is subject to all terms and conditions of that Agreement.  Terms that are capitalized in this SOW have the meanings set forth in the Agreement.

Attachment 1
 Screenplay and Author(s)
  

See Exhibit 99.3 of the Prospectus for the complete script.
  

Screenplay: “Lydia Slotnick Unplugged”
  

Author(s): Andrew Craft and Michael Zam
  

Attachment 2
 Approved Budget Amount
  

				
	 ACCOUNT
	  	BUDGET
	 Story and Other Rights
	  	$	196,600
		
	 Producer’s Unit
	  	$	554,600
		
	 Director’s Unit
	  	$	369,700
		
	 Talent
	  	$	739,500
		
	 Travel/Living
	  	$	184,900
		
	 TOTAL STORY, PRODUCER, DIRECTOR, TALENT, T/L
	  	$	2,045,300
		
	 Production Staff
	  	$	517,600
		
	 Art Direction
	  	$	110,900
		
	 Set Construction
	  	$	37,000
		
	 Set Decoration
	  	$	147,900
		
	 Property Department
	  	$	73,900
		
	 Camera Operations
	  	$	258,800
		
	 Electric Operations
	  	$	184,900
		
	 Grip Operations
	  	$	147,900
		
	 Production Sound
	  	$	73,900
		
	 Mechanical Effects
	  	$	37,000
		
	 Set Operations
	  	$	37,000
		
	 Wardrobe Department
	  	$	147,900
		
	 Makeup & Hair Department
	  	$	129,400
		
	 Location Department
	  	$	428,200
		
	 Transportation Department
	  	$	431,700
		
	 Atmosphere
	  	$	110,900
		
	 Production and Film Lab
	  	$	295,800
		
	 TOTAL PRODUCTION
	  	$	3,170,700
		
	 Editing
	  	$	295,800

  

 

				
	 ACCOUNT
	  	BUDGET
	 Post-Production Film/Lab
	  	$	73,900
		
	 Post-Production Sound
	  	$	147,900
		
	 Music
	  	$	110,900
		
	 Titles
	  	$	37,000
		
	 Opticals
	  	$	18,500
		
	 Post-Production Travel/Living
	  	$	18,500
		
	 TOTAL POST PRODUCTION
	  	$	702,500
		
	 Legal Costs
	  	$	185,000
		
	 Delivery Requirements
	  	$	110,900
		
	 Production Management Fee
	  	$	600,000
		
	 Accounting
	  	$	64,400
		
	 Registration Fees
	  	$	40,300
		
	 On line Marketing:
	  	$	37,000
		
	 Bank Fees
	  	$	64,400
		
	 Miscellaneous
	  	$	37,000
		
	 TOTAL OTHER
	  	$	1,139,000
		
	 TOTAL STORY, PRODUCER, DIRECTOR, TALENT, TRAVEL/LIVING
	  	$	2,045,300
		
	 TOTAL PRODUCTION
	  	$	3,170,700
		
	 TOTAL POST PRODUCTION
	  	$	702,500
		
	 TOTAL OTHER
	  	$	1,139,000
		
	 SUB-TOTAL
	  	$	7,057,500
		
	 Completion Bond
	  	$	195,000
		
	 Insurance
	  	$	97,600
		
	 Contingency
	  	$	649,900
		
	 TOTAL
	  	$	8,000,000

   

Attachment 3
 Production Schedule
  

The following is a preliminary production schedule and will be updated once the Budget is raised.
  

 

						
	PRODUCTION SCHEDULE 
			
	  Time 
	  	  Project Milestone 

	  t = 0 
	  	 First Day of Pre-Production 
	  t + 21 days 
	  	 Middle of Pre-Production 
	  t + 42 days 
	  	 Beginning of Principal Photography 
	  t + 59 days 
	  	 Middle of Principal Photography 
	  t + 76 days 
	  	 End of Principal Photography and Beginning of Post-Production 
	  t + 196 days 
	  	 Delivery of Final Print 
	  
  DEFINITIONS 
	  		  		
		
	 Pre-Production 	  	 Pre-production will commence immediately after the production services agreement is signed with Bridge Productions. We anticipate executing the agreement within 30 days after the offering is declared effective. If we are unable to execute an agreement with Bridge Productions, another reputable production company, capable of securing a completion bond, will be selected to produce the Film.
During pre-production, the Film will be broken down into individual scenes and all the locations, props, cast members, costumes, special effects and visual effects will be identified. Sets will be constructed, the crew are hired, and a start date for the beginning of principal photography will be set. At some point in pre-production there will be a read through of the script, which will be attended by all cast members with speaking parts, the producer, and the director.

The screenplay will be finalized and all of the scenes will be numbered at the beginning of pre-production to avoid confusion. This means that even though additions and deletions may still be made, any particular scene will always fall on the same page and have the same scene number. 

		
	 Principal Photography 	  	 The filming of major components of the movie involving the lead actors. This is the phase of production where the Film is actually shot. 

		
	 Post-Production 	  	 Post production is the general term for all stages of production occurring after principal photography and is also the stage that consumes the greatest amount of time.
Post-production includes:

Editing the Film (60 days)

Recording the soundtrack (30 days)

Editing the soundtrack (15 days)

Adding visual, sound, and special effects (10 days)

Transfer of the Film to video or data (5 days)

		
	 Final Print 	  	 Final, fully-edited version of the film that is ready for sale or distribution. 

Attachment 4
 Cash Flow Schedule
  

The following is a preliminary Cash Flow Schedule and will be updated once the Budget is raised.
  

						
	 FUNDS DISTRIBUTION SCHEDULE 
			
	  Time 
	  	  Project Milestone 
	  	 Amount Distributed 
	  t = 0 
	  	 First Day of Pre-Production 	  	 $ 	 600,000 
	  t + 21 days 
	  	 Middle of Pre-Production 	  	 $	 1,100,000 
	  t + 42 days 
	  	 Beginning of Principal Photography 	  	 $ 	 1,700,000 
	  t + 59 days 
	  	 Middle of Principal Photography 	  	 $ 	 2,300,000 
	  t + 76 days 
	  	 End of Principal Photography and Beginning of Post-Production 	  	 $ 	 1,700,000 
	  t + 196 days 
	  	 Delivery of Final Print 	  	 $ 	 600,000 

Attachment 5
 Deliverables
  

The following is a preliminary Deliverables list and will be updated once the Budget is raised.
  

	 	Film	

 

	 	Original cut picture negative	
	 	Fine grain interpositive, and/or duplicate negative	
	 	Textless background original negative	
	 	Textless background interpositive	
	 	Trims and outs	

 

	 	Video	

 

	 	HD Master, Full Image (e.g. 1.85:1 or 16x9) Master	
	 	HD Master, Full Frame (4:3) Master	
	 	NTSC Full Frame DigiBeta Master	
	 	NTSC Letter Box DigiBeta Master	
	 	NTSC 16x9 DigiBeta Master	
	 	PAL Full Frame DigiBeta Master	
	 	PAL Letterbox DigiBeta Master	
	 	PAL 16x9 DigiBeta Master	

 

	 	Audio	

 

	 	DA88 of DM&E	
	 	DA88 of 2-Track Printmaster in Stereo and/or Dolby Surround 5.1	
	 	DA88 of Dialog & Music (M&E)	
	 	DA88 of Stems	
	 	DA88 of Music Masters	
	 	Optical Sound Track, Dialog, Music & Effects (DM&E)	

 

	 	Documents	

 

	 	Approved Billing Block	
	 	Cast Contracts	
	 	Cast List	
	 	Chain of Title / Writer’s Contract	
	 	Chronology of Production	
	 	Clearance Procedures Letter	
	 	Clearance Report	
	 	Composer’s Agreement	
	 	Combined Dialog Continuity/Spotting List	
	 	Credit Obligations	
	 	Crew List	
	 	Director’s Contract	
	 	Dolby License	
	 	Dubbing Restrictions Voice / Supervision	
	 	E&O Insurance Certificate	
	 	Employment List	
	 	Feature Dialog List, Disc & Hard Copy	
	 	Guild Approvals	
	 	Lab Access Letters	
	 	Literary Materials (Final Draft Screenplay)	
	 	Literary Assignment of Rights	

 

	 	Location Agreements	
	 	Main and End Credits	
	 	Motion Picture Copyright Certificate (Form PA)	
	 	MPAA Rating Certificate	
	 	Music Cue Sheet	
	 	Music Licenses	
	 	Paid Advertising Statement	
	 	Photo Identifications and Clearances	
	 	Principal Photography Start and End Dates	
	 	Procedure for Unsolicited Material	
	 	Producer’s Contract	
	 	Release of Liens	
	 	Still and Likeness Approvals	
	 	Synopsis	
	 	Title Report	
	 	Titles	
	 	Trailer Dialog List, Disc & Hard Copy	

 

	 	Other	

 

	 	Advertising Materials, if Budgeted	
	 	Publicity Materials / Press Kit, if Budgeted	
	 	Still Photographs, if Budgeted	

 

The parties have caused this SOW to be executed and each individual whose signature appears below hereby warrants that he/she is duly authorized to execute this Agreement on behalf of the Party he/she represents.
  

	BRIDGE PRODUCTIONS, INC.
	  		 	
				
	By:	  	 /s/ EUGENE MAZZOLA
	  		 	Date: JULY 20, 2009
	Name:	  	Eugene Mazzola	  		 	
	Title:	  	President	  		 	
				
	AUDIENCE PRODUCTIONS, INC.
	  		 	
				
	By:	  	 /s/ JAY T. SCHWARTZ
	  		 	Date: JULY 20, 2009
	Name:	  	Jay T Schwartz	  		 	
	Title:	  	Presidentexhibi4_1.htm

 

    
      

    

     

     

    EXHIBIT
4.1

      RESTATED

      ARTICLES
OF INCORPORATION

      OF

      U.S
ENERGY CORP.

      AS
AMENDED

      

      

      Pursuant
to the provisions of Section 17-16-202 of the Wyoming Business Corporation Act
and a Resolution adopted by its Board of Directors, U.S. Energy Corp. hereby
adopts the following Restated Articles of Incorporation, which sets forth all of
the operative provisions of the Articles of Incorporation and supersedes the
original Articles of Incorporation, all Restated Articles of Incorporation and
all amendments thereto.

      

      

      ARTICLE  I

      

      Name

      

      The name
of the Corporation shall be U.S. ENERGY CORP.

      

      

      ARTICLE  II

      

      Duration

      

      The
period of duration of the Corporation shall be perpetual.

      

      

      ARTICLE  III

      

      Objects, Purposes and
Powers

      

      The
purposes for which the Corporation is organized are to engage in any activity or
business not in conflict with the laws of the State of Wyoming or of the United
States and, without limiting the generality of the foregoing,
specifically:

      

      
        	
                 
      

              	
                1.

              	
                To
      engage in exploring, prospecting, drilling for, developing, mining,
      extracting, producing, milling, refining, and otherwise processing for its
      own account and for the account of others any and every type of mineral
      substance of whatever nature, including but not limited to oil, gas, and
      other hydrocarbon substances, base and precious metals, and fissionable
      materials.

              

      

      

      
        	
                 
      

              	
                2.

              	
                To
      market any and all mineral substances, including all hydrocarbon
      substances, before or after
refinement.

              

      

       

       

       

      
        
           

        

        
          -1-

          
            

          

        

        
           

        

      

       

      
 

      
        	
                 
      

              	
                3.

              	
                To
      manufacture, buy, sell, and generally deal in any article, product, or
      commodity produced as the result of or through the use of any inventions,
      devices, processes, discoveries, formulae, improvements, and/or
      modifications of any thereof, or any articles, products, commodities,
      supplies, and materials used or suitable to be used in connection
      therewith or in any manner applicable or incidental thereto:  to
      grant licenses, sub-licenses rights, interests, and/or privileges in
      respect of any of the foregoing; to supervise or otherwise exercise such
      control over its licensees or grantees and the business conducted by them,
      as may be agreed upon in its contracts or agreements with such licensees
      or grantees, for the protection of its rights and interests therein; and
      to secure to it the payment of agreed royalties or other
      considerations.

              

      

      

      
        	
                 
      

              	
                4.

              	
                To
      form, promote, and assist, financially or otherwise, corporations,
      syndicates, partnerships, companies, and associations of all kinds; to
      give any lawful guarantee in connection therewith or otherwise for the
      payment of money or for the performance of any obligations or
      undertakings; and to achieve the purposes and exercise the power specified
      herein, either directly or through subsidiary corporations, syndicates,
      partnerships, companies, or other
associations.

              

      

      

      
        	
                 
      

              	
                5.

              	
                To
      acquire, own, hold, develop, maintain, operate, manage, lease, sell,
      exchange, convey, mortgage, dispose of, and otherwise deal in property of
      every nature and description, both real and personal, whether situated in
      the United States or elsewhere, so far as permissible by law; to pay for
      the same in cash, the stock of this Corporation, bonds, or otherwise; to
      hold, exploit, and develop or in any manner to dispose of or assign the
      whole or any part of the property so purchased; and to produce, refine,
      and market any and all minerals or other products from any such
      operations.

              

      

      

      
        	
                 
      

              	
                6.

              	
                To
      advance or negotiate the advance of money or interest on securities or
      otherwise; to lend money or negotiate loans; to draw, accept, endorse,
      discount, buy, sell, and deliver bills of exchange, promissory notes,
      bonds, debentures, coupons, and other negotiable instruments and
      securities; and to issue on commission, subscribe for, take, acquire, and
      hold, sell exchange, and deal in shares, stock, bonds, obligations, and
      securities of any government or authority or
  company.

              

      

      

      
        	
                 
      

              	
                7.

              	
                Generally,
      to carry on and undertake any business, undertaking, transaction, or
      operation commonly carried on or undertaken by promoters and financiers;
      and to engage in any other business which may seem to the Corporation
      capable of being conveniently carried on in connection with the above or
      calculated, directly or indirectly, to enhance the value of or render
      profitable any of the Corporation’s activities or
  business.

              

      

      

      
        
          
             

          

           

        

        
          -2-

          
            

          

        

        
           

        

      

      

      
        	
                 
      

              	
                8.

              	
                To
      have one or more offices to carry on all or any of its business and,
      without restrictions or limits, to purchase or otherwise acquire, and to
      own, hold, maintain, work, develop, sell, trade, exchange, convey,
      mortgage, lease, or otherwise dispose of, without limit as to amount, and
      in any part of the world, any property, real, personal, or mixed, and any
      interests and rights, in whole or in part,
  therein.

              

      

      

      
        	
                 
      

              	
                9.

              	
                To
      apply for, obtain, register, lease, purchase, or otherwise acquire, hold,
      use, sell, trade, exchange, assign, mortgage, or otherwise dispose of
      trademarks, copyrights, inventions, trade names, formulae, secret
      processes, and all improvements and processes used in connection with or
      secured under letters patent of the United States or of other countries or
      otherwise, and to grant licenses in respect thereto, and otherwise turn
      the same to account.

              

      

      

      
        	
                 
      

              	
                10.

              	
                To
      contract with the United States, or any agency thereof, or any of the
      states or political subdivisions thereof, or with any persons in
      authority, municipalities, boards, bureaus, or departments, or any
      political subdivisions of any state of the United States or colonies or
      territories thereof, or any foreign countries, or any political
      subdivisions thereof, and all corporations, firms, associations, and
      individuals in relation to or in connection with any of the objects,
      purposes, or business of the
Corporation.

              

      

      

      
        	
                 
      

              	
                11.

              	
                To
      act as a dealer for the sale of its own stocks and bonds and to execute
      all instruments incident to the above; to enter into underwriting
      agreements for the sale of its stocks and bonds or other securities; and
      to make and enter into options for the sale of its stock upon such terms
      and conditions as are permitted by the laws of the State of Wyoming and
      the United States.

              

      

      

      
        	
                 
      

              	
                12.

              	
                To
      indemnify officers, directors, and employees against harm or loss
      resulting from their actions in their capacities as
  such.

              

      

      

      
        	
                 
      

              	
                13.

              	
                To
      purchase or otherwise acquire and to hold, mortgage, pledge, sell,
      exchanges, or otherwise dispose of securities (which term includes,
      without limitation of the generality thereof, any shares of stock, bonds
      debentures, notes, mortgages, or other obligations, and any
      certifications, receipts, or other instruments representing rights to
      receive, purchase, or subscribe for the same, or representing any other
      rights or interests therein or in any property or assets) created or
      issued by such persons, firms, associations, corporations, or governments
      or subdivisions thereof; to make payment therefore in any lawful manner;
      and to exercise, as owner or holder of any securities, any and all rights,
      powers, and privileges in respect
thereof.

              

      

      

      
        	
                 
      

              	
                14.

              	
                To
      lend its uninvested fund s from time to time to such extent to such
      persons, firms, associations, corporations, governments, or subdivisions
      thereof, and on such terms and on such security, if any, as the Board of
      Directors of the Corporation, may
determine.

              

      

      

      
        
          
             

          

           

        

        
          -3-

          
            

          

        

        
           

        

      

      

      
        	
                 
      

              	
                15.

              	
                To
      endorse or guarantee the payment of principal, interest, or dividends
      upon, and to guarantee the performance, of, sinking-fund or other
      obligations of any securities, and to guaranteed in any way permitted by
      law the performance of any of the contracts or other undertaking in which
      the Corporation may otherwise be or become interested, of any persons,
      firms, associations, corporation, government or subdivision thereof, or of
      any other combination, organization, or entity
  whatsoever.

              

      

      

      
        	
                 
      

              	
                16.

              	
                To
      conduct is business in Wyoming, other states, the District of Columbia,
      the territories and colonies of the United States, and foreign countries
      and territories and colonies thereof; to have one or more officers outside
      of this state; and to acquire, purchase, hold, mortgage, pledge, assign,
      transfer, and convey real and personal property out of
      Wyoming.

              

      

      

      
        	
                 
      

              	
                17.

              	
                In
      furtherance of and not in limitation of the powers conferred by the laws
      of the State of Wyoming, the Board of Directors is expressly authorized
      without the assent or the vote of the stockholders to issue bonds,
      debentures, or other obligations of the Corporation, secured or unsecured,
      from time to time, for any of the objects or purposes of the Corporation
      and to include therein such provisions as the redeemability,
      convertibility into stock, or otherwise, and to sell or to otherwise
      dispose of any or all of them, all in such manner and upon such terms as
      the Board of Directors may deem property and as shall be fixed and stated
      in a resolution or resolutions adopted by the Board of
      Directors.

              

      

      

      
        	
                 
      

              	
                18.

              	
                To
      such extent as a corporation organized under the laws of the State of
      Wyoming may now or thereafter lawfully do, to do, either as principal or
      agent and either alone or in connection with other corporations, firms or
      individuals, all and everything necessary, suitable, convenient, or proper
      for, in connection with, or incident to the accomplishment of any of the
      purposes or the attainment of any one or more of the object herein
      enumerated or designed directly or indirectly to promote the interest of
      the Corporation or to enhance the value of its properties; and, in
      general, to do any and all things and exercise any and all powers, rights,
      and privileges which a corporation may now or thereafter be organized to
      do or to exercise under the laws of the State of Wyoming or under any act
      amendatory thereof, supplemental thereto, or substituted
      therefor.

              

      

      

      
        	
                 
      

              	
                19.

              	
                To
      become a member of one or more partnerships, limited partnerships, joint
      ventures, or similar associations.

              

      

      

      The
several clauses contained in this statement of purposes shall be construed as
both purposes and powers; and the statement contained in each clause shall be in
nowise limited or restricted, by reference to or inference form the terms of any
other clause, but shall be regarded as independent purposes and
powers.  No recitation, expression, or declaration of specific
purposes or special powers herein enumerated shall be deemed to be exclusive;
but it is hereby expressly declared that all other lawful powers not
inconsistent herewith are hereby included.

      

      
        
          
             

          

           

        

        
          -4-

          
            

          

        

        
           

        

      

      

      ARTICLE  IV

      

      Capital
Stock

      

      The total
number of shares of each class of capital stock which the corporation shall have
to authority to issue shall be divided into two classes as follows:

      

      100,000 shares of preferred stock with
a par value of $.01 per share, and

      

      
        	
                 
      

              	
                An
      unlimited number of shares of common stock with a par value of $.01 per
      share.

              

      

      

      Any stock
of the Corporation may be issued for money, property, services rendered, labor
done, cash advances to the Corporation or for any other assets of value in
accordance with the action of the Board of Directors whose judgment as to value
received in return therefor shall be conclusive and said stock when issued shall
be fully paid and nonassessable.

      

      The
preferred stock shall be classified, divided and issued in
series.  Each series of preferred stock may be issued as determined
from time to time by the Board of Directors and stated in the resolution or
resolutions providing for the issuance of such stock adopted by the Board of
Directors pursuant to authority vested in it.  Each series is to be
appropriately designated prior to the issue of any shares thereof by some
distinguishable letter, number or title.  All shares of preferred
stock shall be of equal rank and have the same powers, preferences and rights,
and shall be subject to the same qualifications, limitation and restrictions,
without distinction between the shares of different series thereof, except in
regard to the following particulars, which may be different in different
series:

      

      1.      The
rate of Dividends.

      2.      The
price at the terms and conditions on which shares may be redeemed.

      
        	
                 
      

              	
                3.

              	
                The
      amount payable upon shares in the event of voluntary or involuntary
      liquidation.

              

      

      
        	
                 
      

              	
                4.

              	
                Sinking
      fund provisions for the redemption or purchaser of
  shares.

              

      

      
        	
                 
      

              	
                5.

              	
                The
      terms and conditions on which shares may be converted if the shares of any
      series are issued with the privilege of
  conversion.

              

      

      
        	
                 
      

              	
                6.

              	
                Voting
      rights, if any.

              

      

      

      The Board
of Directors may, from time to time, increase the number of shares of any series
of preferred stock already created by providing that any unissued shares of
preferred stock shall constitute part of such series, or may decrease (but not
below the number of shares thereof then outstanding) the number of shares of any
series of any preferred stock already created providing that any unissued shares
previously assigned to such series shall no longer constitute a part
thereof.  The Board of Directors is hereby empowered to classify or
reclassify any unissued preferred stock by fixing or altering the terms thereof
in respect to the above-mentioned particulars and by assigning the same to an
existing or newly-created series from time to time before the issuance of such
stock.

       

       

       

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

       

      
 

      There is
established the series P Preferred Stock.  The number of shares in the
series, its designation thereof, and the rights, preferences, privileges and
restrictions of the shares of such series, all are fixed and established as
follow:

      

      I.           Designation
and Amount

      

      The
series is designated the "Series P Preferred Stock."  The number of
shares constituting the Series P Preferred Stock is fifty thousand
(50,000).  Such number of shares may be increased or decreased by
resolution of the board of directors, but no decrease shall reduce the number of
shares of Series P Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series P
Preferred Stock.

      

      II.           Dividends
and Distributions

      

      (A)           Subject
to the rights of the holders of any shares of any series of Preferred Stock (or
any similar stock) ranking prior and superior to the Series P Preferred Stock
with respect to dividends, the holders of shares of Series P Preferred Stock, in
preference to the holders of Common Stock of the Corporation, shall be entitled
to receive, when, as and if declared by the board of directors out of funds
legally available for the purpose, quarterly dividends payable in cash on the
first day of March, June, September and December in each year (a "Quarterly
Dividend Payment Date"), starting on the first Quarterly Dividend Payment Date
after the first issuance of a share of Series P Preferred Stock, in an amount
per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b)
subject to the provision for  adjustment hereinafter set forth, 1,000
times the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share of Series P Preferred
Stock.  If the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount to which holders of shares of Series P Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.

      

      
        
          
             

          

           

        

        
          -6-

          
            

          

        

        
           

        

      

      

      (B)           The
Corporation shall declare a dividend or distribution on the Series P Preferred
Stock as provided in paragraph (A) of this Section immediately after it declares
a dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock);  PROVIDED that, if no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series P Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.

      

      (C)           Dividends
shall begin to accrue and be cumulative on outstanding shares of Series P
Preferred Stock from the Quarterly Dividend Payment Date next preceding the date
of issue of such shares, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
P Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date.  Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series P Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding.  The board of directors may fix a record date for the
determination of holders of shares of Series P Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.

      

      III.           Voting
Rights

      

      The
holders of shares of Series P Preferred Stock shall have the following voting
rights:

      

      (A)           Subject
to the provision for adjustment hereinafter set forth, each share of Series P
Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters
submitted to a vote of the stockholders of the Corporation.

      

      (B)           Except
as otherwise provided herein, or in any other resolutions of the board of
directors creating a series of Preferred Stock or any similar stock, or by law,
the holders of shares of Series P Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.

      

      (C)           Except
as set forth herein, in the Corporation's articles of incorporation or as
otherwise provided by law, holders of Series P Preferred Stock shall have no
voting rights.

      

      
        
          
             

          

           

        

        
          -7-

          
            

          

        

        
           

        

      

      

      IV.           Certain
Restrictions

      

      (A)           Whenever
quarterly dividends or other dividends or distributions payable on the Series P
Preferred Stock as provided in Section II are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series P Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:

      

      (i)      declare
or pay dividends, or make any other distributions, on any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series P  Preferred Stock;

      

      (ii)       
declare or pay dividends, or make any other distributions, on any shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series P Preferred Stock, except dividends
paid ratably on the Series P Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;

      

      (iii)         redeem
or purchase or otherwise acquire for consideration shares of any stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series P Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such stock in exchange for
shares of any stock of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series P Preferred Stock;
or

      

      (iv)         redeem
or purchase or otherwise acquire for consideration any shares of Series P
Preferred Stock, or any shares of stock ranking on a parity with the Series P
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the board of directors) to all holders of such
shares upon such terms as the board of directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or
classes.

      

      (B)           The
Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (A) of this Section IV purchase or
otherwise acquire such shares at such time and in such manner.

      

      V.           Reacquired
Shares

       

      Any
shares of Series P Stock purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof.  All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the articles of incorporation, any
other Certificate of Designations creating a series of Preferred Stock or any
similar stock or as otherwise required by law.

       

      
 

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

       

       

      VI.           Liquidation,
Dissolution, or Winding Up

      

      Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series P
Preferred Stock unless, prior thereto, the holders of shares of Series P
Preferred Stock shall have received $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series P
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series P Preferred Stock, except distri-butions made ratably on the Series P
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. If the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series P
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

      

      VII.                      Consolidation,
Merger, Etc.

      

      In case
the Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or changed
into other stock or securities, cash and/or any other property, then in any such
case each share of Series P Preferred Stock shall at the same time be similarly
exchanged or changed into an amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged.  If the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series P Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

      

      
        
          
             

          

           

        

        
          -9-

          
            

          

        

        
           

        

      

      

      VIII.           Redemption

      

      The
shares of Series P Preferred Stock shall not be redeemable.

      

      IX.           Rank

      

      The
Series P Preferred Stock shall rank, with respect to the payment of dividends
and the distribution of assets, junior to all series of any other class of the
Corporation's Preferred Stock.

      

      X.           Amendment

      

      The
articles of incorporation of the Corporation shall not be amended in any manner
which would alter or change the powers, preferences or special rights of the
Series P Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of Series P
Preferred Stock, voting together as a single class.

      

      Dividends
shall be payable upon the preferred or common stock at the discretion of the
Board of Directors of the Corporation at such times and in such amounts as it
deems advisable, subject, however, to the provisions of any applicable law;
provided further however, that any dividends which may be declared by the Board
of Directors of the Corporation shall be paid in cash or property only out of
the unreserved and unrestricted earned surplus of the Corporation, except as
otherwise provided by the applicable laws of the State of Wyoming and except
that the Board of Directors of the Corporation , from time to time, may
distribute to its shareholders in partial liquidation, out of capital surplus of
the Corporation, a portion of its assets, in cash or property, subject to the
following provisions:

      

      
        	
                 
      

              	
                1.

              	
                No
      such distribution shall be made at a time when the corporation is
      insolvent or when such distribution would render the Corporation
      insolvent; and

              

      

      

      
        	
                 
      

              	
                2.

              	
                Each
      such distribution when made shall be identified as a distribution in
      partial liquidation and the amount per share disclosed to the shareholders
      receiving the same concurrently with the distribution
    thereof.

              

      

      

      Each
outstanding share of common stock, $.01 par value, shall be entitled to one vote
at shareholders’ meetings, either by person or by proxy.

      

      In all
elections for directors, every holder of the common stock shall have the right
to vote in person, by proxy or by voting trustee under any voting trust, the
number of shares of stock owned by him for as many persons as there are
directors to be elected, or to cumulate such shares and to give one candidate as
many votes as shall be equal to the number of directors multiplied by the number
of his shares of stock or to distribute them on the same principle among as many
candidates as he shall think fit; and directors shall not be elected in any
other manner.  Holders of preferred stock shall have such voting
rights as are established by the Board of Directors in accordance with the terms
hereof.

       

       

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

       

      
 

      No holder
of shares of common or preferred stock or any other securities which the
Corporation may now or hereafter be authorized to issue shall be entitled to any
preemptive or preferential right to subscribe to any unissued common or
preferred stock or any other securities which the Corporation may now or
hereafter be authorized to issue.  The Board of Directors of the
Corporation, however, in its discretion by resolution, may determine that any
unissued securities of the Corporation shall be offered for subscription solely
to the holders of its common or preferred stock or solely to the holders of any
class or classed of such stock, which the corporation may now or hereafter be
authorized to issue, in such proportions based on stock ownership as the Board
of Directors in its discretion may determine.

      

      The Board
of Directors may restrict the transfer of any of the Corporation’s common or
preferred stock or any other securities which the Corporation may now or
hereafter authorize to issue by giving the Corporation or any shareholder “first
right of refusal to purchase” the stock, by making the stock redeemable or by
restricting the transfer of the stock under such terms and in such manner as the
directors may deem necessary and as are not inconsistent with the laws of the
State of Wyoming.  Any stock so restricted must carry a conspicuous
legend noting the restriction and the place where such restriction may be found
in the records of the Corporation.

      

      

      ARTICLE  V

      

      Place of
Business

      

      The
address of the Corporation’s principal office is 877 North 8th
West, Riverton, WY.  The agent for service of process at that address
will be Keith G. Larsen.

      

      

      ARTICLE  VI

      

      Directors

      

      The
affairs of the Corporation shall be governed by a Board of Directors of not less
than three (3) nor more than seven (7) directors who shall be elected in
accordance with the By-Laws of the Corporation and the statutes of the State of
Wyoming now or hereafter in effect.  The number of directors shall be
increased to decreased in accordance with the By-Laws of the Corporation and the
laws of the State of Wyoming as now or hereafter in effect.

      

      Directors
of the Corporation need not be residents of the State of Wyoming and need not
own shares of the Corporation’s stock.

      

      
        
          
             

          

           

        

        
          -11-

          
            

          

        

        
           

        

      

      

      Meetings
of the Board of Directors, regular or special, may be held within or without the
State of Wyoming upon such notice as may be prescribed by the By-Laws of the
Corporation.  Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends such meeting
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened.  Neither the business
to be transacted at nor the purpose of any regular or special meeting of the
Board of Directors needs to be specified in the notice of waiver of notice of
any such meeting unless the By-Laws of the Corporation otherwise
require.

      

      A
majority of the number of directors at any time constituting the Board of
Directors shall constitute a quorum for the transaction of business; and the
action of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.

      

      Any
vacancy occurring in the Board of Directors may be filled by the affirmative
vote of a majority of the remaining directors, though less than a quorum of the
Board of Directors.  A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office.  Any
directorship to be filled by reason of any increase in the number of directors
shall be filled by election at an annual meeting of shareholders of the
Corporation or a special meeting of such shareholders called for that
purpose.

      

      Pursuant
to section 17-16-808(a) of the Wyoming Business Corporation Act, a director of
the Company shall be removed by the shareholders only for cause.

      

      The Board
of Directors shall have the power to designate, by resolution passed by a
majority of the whole board, not less than two (2) of its members to constitute
an Executive Committee which, to the extent provided in said resolution or in
the By-Laws of the Corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business, affairs, and property of
the Corporation during the intervals between the meetings of the directors,
including the power to authorize the seal of the Corporation to be affixed to
all papers that may require it; and when the seal has been so affixed pursuant
to such authority, it shall be deemed to have been affixed by order of the Board
of Directors.

      

      The Board
of Director of the Corporation may, from time to time, distribute to its
shareholders in partial liquidation, out of capital surplus of the Corporation,
a portion of its assets, in cash or property, subject to the following
provisions:

      

      
        	
                 
      

              	
                1.

              	
                No
      such distribution shall be made at a time when the Corporation is
      insolvent or when such distribution would render the Corporation
      insolvent.

              

      

      

      
        	
                 
      

              	
                2.

              	
                Each
      such distribution, when made, shall be identified as a distribution in
      partial liquidation and the amount per share disclosed to the shareholders
      receiving the same concurrently with the distribution
    thereof.

              

      

      

      
        
          
             

          

           

        

        
          -12-

          
            

          

        

        
           

        

      

      

      ARTICLE  VII

      

      By-Laws

      

      The
By-Laws of the Corporation shall be adopted by its Board of
Directors.  The power to alter, amend, or repeal the By-Laws, or to
adopt new By-Laws, shall be vested in the Board of Directors, except as may
otherwise be specifically provided in the By-Laws.

      

      

      ARTICLE  VIII

      

      Transactions with Directors
and other Interested Parties

      

      No
contract or other transaction between the Corporation and any other corporation,
whether or not a majority of the shares of the capital stock of such other
corporation is owned by this Corporation, and no act of this Corporation shall
in any way be affected or invalidated by the fact that any of the directors of
this Corporation are pecuniarily or otherwise interested in, or are directors or
officers of, such other corporation.  Any director of this
Corporation, individually, or any firm of which such director may be a member,
may be a party to, or may be pecuniarily or otherwise interested in, any
contract or transaction of the Corporation; provided, however, that the fact
that he or such firm is so interested shall be disclosed or shall have been
known to the Board of Directors of this Corporation or a majority thereof; and
any director of this Corporation who is also a director or officer of such other
corporation, or who is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of this
Corporation that shall authorize such a contract or transaction and may vote
there at to authorize such contract or transaction with like force and effect as
if he were not such director or officer of such other corporation or not so
interested.

      

      

      ARTICLE  IX

      

      Section  1.                           Upon
the adoption of this provision to the Articles of Incorporation, the Board of
Directors shall be divided into three classes, as equal in number as the total
number of members of the Board of Directors provided in the By-Laws
permits.  The Board of Directors shall be separated into three classes
which shall be denominated as Class one, Class Two and Class Three.

      

      
        
          
             

          

           

        

        
          -13-

          
            

          

        

        
           

        

      

      

      Section  2.                           In
the voting upon the election of members of the Corporation’s Board of Directors
which first occurs after the filing of an amendment to the Corporation’s
Articles of Incorporation containing these provisions for a classified Board of
Directors, the persons nominated as Class One directors shall be elected to hold
office for a term expiring at the third succeeding annual meeting and until
their successors have been duly elected or appointed and qualified or until
death, resignation or removal.  Persons nominated for election as
Class Two directors shall be elected to hold office for a term expiring at the
second succeeding annual meeting and until their successors have been duly
elected or appointed and qualified or until death, resignation or
removal.  Persons nominated for election as Class Three directors
shall be elected to hold office for a term expiring at the next succeeding
annual meeting and until their successors have been duly elected or until death,
resignation or removal.  At all meetings thereafter, directors then
being elected shall be elected to hold office for a term expiring at the third
succeeding annual meeting and until their successors have been duly elected or
appointed and qualified or until death, resignation or removal, except for
directors being elected solely by a series of preferred stock, if the resolution
defining the rights of such series specifically state that the directors being
elected by the holders of that series of preferred stock shall be elected to
serve only until the next annual meeting of shareholders  and until
their successors have been duly elected or until death, resignation or
removal.  Any vacancies in the Board of Directors for any reason and
any newly created directorships resulting from any increase in the number of
created directorships resulting from any increase in the number of directors may
be filled by the Board of Directors acting by a majority of the directors then
in office, although less than a quorum, and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen and until their successors shall be elected or appointed and
qualified or until death, resignation or removal.  No decrease in the
number of directors shall shorten the term of any incumbent
director.

      

      Section  3.                           Notwithstanding
any other provision of these Articles of Incorporation or the By-Laws of the
Corporation (and notwithstanding the fact that some lesser percentage may be
specified by law, these Articles of Incorporation or the By-Laws of the
Corporation), the affirmative vote of the holders of 75% of the total votes of
the shares entitled to vote generally in the election of directors (considered
for this purpose as one class) shall be require to amend, alter, change or
repeal this Article IX of the Articles of Incorporation.

      

      
        
          
             

          

           

        

        
          -14-

          
            

          

        

        
           

        

      

      

      ARTICLE  X

      

      No
Director shall be personally liable to the Corporation or any shareholder for
monetary damages for breach of fiduciary duty as a director, except for any
matter in respect of which such director shall be liable under Section 17-16-833
of the Wyoming Statutes, or any amendment thereto or successor provision
thereto, and except for any matter in respect of which such director shall be
liable by reason that he (i) has breached his duty of loyalty to the corporation
of its shareholders, (ii) has not acted in good faith or, in failing to act, has
not acted in good faith, (iii) has acted in a manner involving intentional
misconduct or a knowing violation of law, in failing to act, as acted in a
manner involving intentional misconduct or a knowing violation of law, or (iv)
has derived an improper personal benefit.  Neither the amendment nor
repeal of this Article X, nor the adoption of any provision of the Articles of
Incorporation inconsistent with the Article X, shall eliminate or reduce the
effect of this Article X in respect of any matter occurring or any cause of
action, suit in respect of any matter occurring, or any cause of action, suit or
claim that, but the this Article X would accrue or arise prior to such
amendment, repeal or adoption of an inconsistent provision.

      

      

      ARTICLE  XI

      

      Voting of Company Securities
Held By Majority-Owned Subsidiaries

      

      Notwithstanding
Wyoming Statues Section 17-16-721(b) or any successor provision, shares of a
voting class of the Corporation’s stock that are owned by a subsidiary of the
Corporation may be voted even though the Corporation holds a majority of the
shares entitled to vote for the directors of the subsidiary holding such shares;
provided, however, that the voting rights held by any single such
majority-controlled subsidiary with respect to a class of voting stock shall be
limited to 40% of the total outstanding shares of that class.

      

      Executed
in duplicate original this 13th day
of October, 2009.

      

      U.S.
ENERGY CORP.

      

      By  /s/ 
Keith G. Larsen

      Keith G.
Larsen,

      CEO &
Chairman

      

      ATTEST:

      

      

      /s/
Steven R. Youngbauer

      Steven R.
Youngbauer,

      Secretary

      

      
        
          
             

          

           

        

        
          -15-

          
            

          

        

        
           

        

      

      

      STATE OF
WYOMING                              )

      )  ss.

      COUNTY OF
FREMONT                            )

      

      The foregoing was subscribed and sworn
to before me by Keith G. Larsen, CEO & Chairman of U.S. Energy Corp. this
13th day of October, 2009.

      

      WITNESS my hand and official
seal.

      

      

      

      

      __________________________________________
NOTARY
PUBLIC

      

      

      
        
          
             

          

           

        

        
          -16-

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