Document:

woof-ex101_80.htm

Exhibit 10.1

PETCO HEALTH AND WELLNESS COMPANY, INC.

2021 EQUITY INCENTIVE PLAN

GRANT NOTICE FOR

PERFORMANCE STOCK UNIT AWARD

FOR GOOD AND VALUABLE CONSIDERATION, Petco Health and Wellness Company, Inc. (the “Company”), hereby grants to the Participant named below the target number of performance stock units (the “PSUs”) specified below (the “Award”) as performance-based Restricted Stock Units under the Petco Health and Wellness Company, Inc. 2021 Equity Incentive Plan (as amended from time to time, the “Plan”). Each Earned PSU represents the right to receive one share of Common Stock, upon the terms and subject to the conditions set forth in this Grant Notice (including Exhibit C), the Plan and the Standard Terms and Conditions (the “Standard Terms and Conditions”) promulgated under such Plan and attached hereto as Exhibit A, and the Confidentiality and Inventions Agreement attached hereto as Exhibit B. This Award is granted pursuant to the Plan and is subject to and qualified in its entirety by the Standard Terms and Conditions. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan.

		
	
Name of Participant:
	
 

	
Grant Date:
	
 

	
Target Number of PSUs:
	
[●] (the “Target PSUs”)

	
Award Type:
	
The Award represents the right to receive shares of Common Stock in an amount from [●]% to [●]% of the Target PSUs. The Award shall vest and become earned and nonforfeitable upon (i) the Participant’s satisfaction of the Service Requirement (as defined below) and (ii) the Committee’s certification of the final level of achievement of the Performance Goal (as defined below). PSUs that become earned upon satisfaction of the Service Requirement and the Performance Goal are referred to herein as “Earned PSUs.”

	
Performance Period:
	
 

	
Service Requirement:
	
The “Service Requirement” is set forth on Exhibit C attached hereto.

	
Performance Goal:
	
The “Performance Goal” is set forth on Exhibit C attached hereto. 

 

 

 

 

IN ORDER TO RECEIVE THE BENEFITS OF THIS AGREEMENT, PARTICIPANT MUST EXECUTE AND RETURN THIS GRANT NOTICE (THE “ACCEPTANCE REQUIREMENTS”). IF YOU FAIL TO SATISFY THE ACCEPTANCE REQUIREMENTS WITHIN 60 DAYS AFTER THE GRANT DATE, THEN (1) THIS GRANT NOTICE WILL BE OF NO FORCE OR EFFECT AND THIS AWARD WILL BE AUTOMATICALLY FORFEITED TO THE COMPANY WITHOUT CONSIDERATION, AND (2) NEITHER PARTICIPANT NOR THE COMPANY WILL HAVE ANY FUTURE RIGHTS OR OBLIGATIONS UNDER THIS GRANT NOTICE OR THE STANDARD TERMS AND CONDITIONS.

By accepting this Grant Notice, Participant acknowledges that Participant has received and read, and agrees that this Award shall be subject to, the terms of this Grant Notice (including Exhibit C), the Plan, and the Standard Terms and Conditions and the Confidentiality and Inventions Agreement.

 

 

PETCO HEALTH AND WELLNESS COMPANY, INC.

 

 

 

By:

Name:

Title:

 

PARTICIPANT

 

 

 

 

[Name]

 

 

Signature Page to 

Grant Notice for

Performance Stock Unit Award

 

 

EXHIBIT A

 

PETCO HEALTH AND WELLNESS COMPANY, INC.
2021 EQUITY INCENTIVE PLAN

 

STANDARD TERMS AND CONDITIONS FOR
PERFORMANCE STOCK UNITS

These Standard Terms and Conditions apply to the Award of performance stock units granted pursuant to the Petco Health and Wellness Company, Inc. 2021 Equity Incentive Plan (the “Plan”), which are evidenced by a Grant Notice or an action of the Committee that specifically refers to these Standard Terms and Conditions. In addition to these Standard Terms and Conditions, the performance stock units shall be subject to the terms of the Plan, which are incorporated into these Standard Terms and Conditions by this reference. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.

	
1.
	
TERMS OF PERFORMANCE STOCK UNITS

Petco Health and Wellness Company, Inc. (the “Company”) has granted to the Participant named in the Grant Notice provided to said Participant herewith (the “Grant Notice”) an award of performance stock units (the “Award” or “PSUs”) specified in the Grant Notice, with each Earned PSU representing the right to receive one share of Common Stock. The Award is subject to the conditions set forth in the Grant Notice, these Standard Terms and Conditions and the Plan. For purposes of these Standard Terms and Conditions and the Grant Notice, any reference to the Company shall include a reference to any Subsidiary.

	
2.
	
VESTING AND SETTLEMENT OF PERFORMANCE STOCK UNITS

(a)The Award shall not be vested as of the Grant Date set forth in the Grant Notice and shall be forfeitable unless and until otherwise vested pursuant to the terms of the Grant Notice and these Standard Terms and Conditions. After the Grant Date, subject to termination or acceleration as provided in these Standard Terms and Conditions and the Plan, the Award shall become vested and earned as described in the Grant Notice with respect to the Target PSUs as set forth in the Grant Notice. 

(b)As soon as administratively practicable following the date a PSU becomes an Earned PSU pursuant to the Grant Notice and this Section 2, but in no event later than two and one-half months following the Vesting Date, the Company shall deliver to the Participant a number of shares of Common Stock equal to the number of Earned PSUs.

(c)If the Participant experiences a Termination of Employment as a result of the Participant’s death or Disability, then, subject to the Participant’s (or the Participant’s personal representative’s) execution and nonrevocation of a general release of claims in a form provided by the Company, (i) with respect to any completed fiscal year during the Performance Period for which the Vesting Date has not occurred, the outstanding Target PSUs allocated to such fiscal year will remain outstanding and eligible to become Earned PSUs based on achievement of the Performance Goals and settlement of such Earned PSUs shall not be accelerated; and (ii) with respect to any incomplete fiscal year during the Performance Period, the outstanding Target PSUs 

Exhibit A

Standard Terms and Conditions for

Performance Stock Units

 

 

allocated to such fiscal year shall become Earned PSUs effective as of the date of such Termination of Employment.

(d)If the Participant experiences a Termination of Employment as a result of the Participant’s Retirement (as defined below), then, subject to the Participant’s execution and nonrevocation of a general release of claims in a form provided by the Company, (i) with respect to any completed fiscal year during the Performance Period for which the Vesting Date has not occurred, the outstanding Target PSUs allocated to such fiscal year will remain outstanding and eligible to become Earned PSUs based on achievement of the Performance Goals and settlement of such Earned PSUs shall not be accelerated; (ii) with respect to the fiscal year during the Performance Period in which the Termination of Employment occurs, the Pro-Rata Portion of the Target PSUs allocated to such fiscal year shall remain outstanding and eligible to become Earned PSUs based on achievement of the Performance Goals and settlement of such Earned PSUs shall not be accelerated; and (iii) the Target PSUs allocated to any fiscal year during the Performance Period that commences after the Termination of Employment shall be forfeited and canceled as of the Termination Date. 

(e)Upon the consummation of a Change in Control prior to the end of the Performance Period, (i) with respect to any completed fiscal year during the Performance Period for which the Vesting Date has not occurred, the outstanding Target PSUs allocated to such fiscal year will become Earned PSUs based on achievement of the Performance Goal for such fiscal year effective immediately prior to such Change in Control, and (ii) with respect to any incomplete fiscal year during the Performance Period, the Target PSUs allocated to such fiscal year shall remain outstanding and become Earned PSUs on the last day of such fiscal year, subject to the Participant’s continued employment by or service to the Company or its Subsidiaries through such date.

(f)Notwithstanding Section 2(e) above, if the Participant experiences a Termination of Employment as a result of an Involuntary Termination (as defined below) at any time following a Change in Control, then subject to the Participant’s execution and nonrevocation of a general release of claims in a form provided by the Company, any Target PSUs that remain outstanding shall become Earned PSUs effective as of the date of such Termination of Employment.

(g)Upon the Participant’s Termination of Employment for any other reason not set forth in Section 2(c), 2(d) or 2(f), any PSUs that have not become Earned PSUs shall be forfeited and canceled as of the Termination Date.

(h)As used in this Section 2:

(i)“Good Reason” has the meaning set forth in the written employment, offer, services or severance agreement or letter between the Participant and the Company or an Affiliate, or if there is no such agreement or no such term is defined in such agreement, means, without the Participant’s consent: (A) a material diminution in the Participant’s authority, duties or responsibilities with the Company or an Affiliate; (B) a material diminution in the Participant’s base salary; (C) a relocation of the Participant’s principal place of employment by more than 50 miles; or (D) a material breach by the Company of any of its obligations under these Standard Terms and Conditions. Notwithstanding the foregoing, any assertion by the Participant of a 

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termination for Good Reason shall not be effective unless (1) the Participant provides written notice to the Company of the existence of one or more of the foregoing conditions within 30 days after the initial occurrence of such condition(s); (2) the condition(s) specified in such notice must remain uncorrected for 30 days following the Company’s receipt of such written notice; and (3) the date of the termination of the Participant’s employment must occur within 90 days after the initial occurrence of the condition(s) specified in such notice.

(ii)“Involuntary Termination” means a Termination of Employment by the Company without Cause (and not as a result of death or Disability) or by the Participant for Good Reason.

(iii)“Pro-Rata Portion” means (A) the Target PSUs allocated to the applicable fiscal year, multiplied by (B) a fraction, the numerator of which is the number of days between the start of such fiscal year and the Termination Date and the denominator of which is the number of days in the applicable fiscal year.

(iv)“Retirement” means a Termination of Employment by the Participant upon achieving (A) 55 or more years of age and (B) 10 or more years of service with the Company and its Affiliates.

(v)“Termination Date” means the date of the Participant’s Termination of Employment.

	
3.
	
RIGHTS AS STOCKHOLDER; DIVIDEND EQUIVALENTS

(a)Participant shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any PSUs unless and until shares of Common Stock settled for Earned PSUs shall have been issued by the Company to Participant (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). 

(b)Notwithstanding the foregoing, from and after the Grant Date and until the earlier of (i) the Participant’s receipt of Common Stock upon payment of Earned PSUs and (ii) the time when the Participant’s right to receive Common Stock upon payment of PSUs is forfeited, on the date that the Company pays a cash dividend (if any) to holders of Common Stock generally, the Participant shall be entitled, as a Dividend Equivalent, to a number of additional whole Target PSUs determined by dividing (i) the product of (A) the dollar amount of the cash dividend paid per share of Common Stock on such date and (B) the total number of Target PSUs (including dividend equivalents paid thereon) previously credited to the Participant as of such date, by (ii) the Fair Market Value per share of Common Stock on such date. Such Dividend Equivalents (if any) shall be subject to the same terms and conditions and shall be settled or forfeited in the same manner and at the same time as the Target PSUs to which the Dividend Equivalents were credited.

	
4.
	
RESTRICTIONS ON RESALES OF SHARES

The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any shares of Common Stock issued pursuant to Earned PSUs, including (a) restrictions under an insider trading policy, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and other holders and (c) restrictions as to the use of a 

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specified brokerage firm for such resales or other transfers.

	
5.
	
INCOME TAXES

To the extent required by applicable federal, state, local or foreign law, the Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise by reason of the grant or vesting of the PSUs. The Company shall not be required to issue shares or to recognize the disposition of such shares until such obligations are satisfied.

	
6.
	
NON­TRANSFERABILITY OF AWARD

The Participant understands, acknowledges and agrees that, except as otherwise provided in the Plan or as permitted by the Committee, the Award may not be sold, assigned, transferred, pledged or otherwise directly or indirectly encumbered or disposed of other than by will or the laws of descent and distribution. Notwithstanding the foregoing, (a) the Participant shall be permitted to transfer the Award as a gift to an Assignee Entity in accordance with and subject to the limits of Section 17 of the Plan and (b) if not previously so transferred, any shares of Common Stock that become issuable hereunder but which otherwise remain unissued at the time of the Participant’s death shall be transferred to the Participant’s designated beneficiary or, if none, to the Participant’s estate.

	
7.
	
OTHER AGREEMENTS SUPERSEDED

The Grant Notice, these Standard Terms and Conditions, the Confidentiality and Inventions Agreement and the Plan constitute the entire understanding between the Participant and the Company regarding the Award. Any prior agreements, commitments or negotiations concerning the Award are superseded; provided, however, that the terms of the Confidentiality and Inventions Agreement are in addition to and complement (and do not replace or supersede) all other agreements and obligations between the Company and any of its affiliates and the Participant with respect to confidentiality and intellectual property.

	
8.
	
LIMITATION OF INTEREST IN SHARES SUBJECT TO PERFORMANCE STOCK UNITS

Neither the Participant (individually or as a member of a group) nor any beneficiary or other person claiming under or through the Participant shall have any right, title, interest, or privilege in or to any shares of Common Stock allocated or reserved for the purpose of the Plan or subject to the Grant Notice or these Standard Terms and Conditions except as to such shares of Common Stock, if any, as shall have been issued to such person in connection with the Award. Nothing in the Plan, in the Grant Notice, these Standard Terms and Conditions or any other instrument executed pursuant to the Plan shall confer upon the Participant any right to continue in the Company’s employ or service nor limit in any way the Company’s right to terminate the Participant’s employment at any time for any reason.

	
9.
	
GENERAL

(a)In the event that any provision of these Standard Terms and Conditions is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of these Standard Terms and Conditions shall 

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not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision.

(b)The headings preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of these Standard Terms and Conditions, nor shall they affect its meaning, construction or effect. Words in the masculine gender shall include the feminine gender, and where appropriate, the plural shall include the singular and the singular shall include the plural.  The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter.  References herein to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by the Plan or these Standard Terms and Conditions.

(c)These Standard Terms and Conditions shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors and assigns.

(d)These Standard Terms and Conditions shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to principles of conflicts of law.

(e)In the event of any conflict between the Grant Notice, these Standard Terms and Conditions and the Plan, the Grant Notice and these Standard Terms and Conditions shall control. In the event of any conflict between the Grant Notice and these Standard Terms and Conditions, the Grant Notice shall control.

(f)All questions arising under the Plan or under these Standard Terms and Conditions shall be decided by the Committee in its total and absolute discretion.

	
10.
	
CLAWBACK

The PSUs and any shares of Common Stock issued pursuant to the Earned PSUs will be subject to recoupment in accordance with any clawback policy adopted by the Company. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company. By accepting the Award, the Participant is agreeing to be bound by any such clawback policy, as in effect or as may be adopted and/or modified from time to time by the Company in its discretion.

	
11.
	
ELECTRONIC DELIVERY

By executing the Grant Notice, the Participant hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Participant pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, and the PSUs via Company web site or other electronic delivery.

 

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EXHIBIT B

 

CONFIDENTIALITY AND INVENTIONS AGREEMENT

As a condition to the receipt of the Award granted pursuant to the Grant Notice to which this Confidentiality and Inventions Agreement is attached and in consideration of the Participant’s continued employment with the Company, the Participant hereby confirms the Participant’s agreement as follows: 

1.General

The Participant’s employment by the Company is in a capacity in which he or she may have access to, or contribute to the production of, Confidential Information and the Company Work Product (both as defined below).  The Participant’s employment creates a relationship of confidence and trust between the Company and the Participant with respect to the Confidential Information and the Company Work Product as set forth herein.  This Confidentiality and Inventions Agreement are subject to the terms of the Standard Terms and Conditions attached as Exhibit A to the Grant Notice to which this Confidentiality and Inventions Agreement is attached; provided however, that in the event of any conflict between the Standard Terms and Conditions and this Confidentiality and Inventions Agreement, this Confidentiality and Inventions Agreement shall control.

2.Definitions 

Capitalized terms not otherwise defined herein shall have the meaning set forth in the Petco Health and Wellness Company, Inc. 2021 Equity Incentive Plan, as amended from time to time. For purposes of this Confidentiality and Inventions Agreement:

(a)“Confidential Information” shall mean information or material (i) that is proprietary to the Company or confidential to the Company, whether or not designated or labeled as such, and (ii) that the Participant creates, discovers or develops, or of which the Participant obtains knowledge of or access to, in the course of the Participant’s employment with the Company.  Confidential Information may include, but is not limited to, designs, works of authorship, formulae, ideas, concepts, techniques, inventions, devices, improvements, know-how, methods, processes, drawings, specifications, models, data, diagrams, flow charts, research, procedures, computer programs, marketing techniques and materials, business, marketing, development and product plans, financial information, customer lists and contact information, personnel information, and other confidential business or technical information created on behalf of the Company or obtained as a result of or in the course of employment with the Company. For purposes of this Confidentiality and Inventions Agreement, the “Company” shall mean the Company or any of its Affiliates.  To the extent that the participant can demonstrate by competent proof that one of the following exceptions applies, the Participant shall have no obligation under this Confidentiality and Inventions Agreement to maintain in confidence any: (I) INFORMATION THAT IS OR BECOMES GENERALLY PUBLICLY KNOWN OTHER THAN AS A RESULT OF THE PARTICIPANT’S DISCLOSURE IN VIOLATION OF THIS AGREEMENT, (II) INFORMATION THAT WAS KNOWN BY THE PARTICIPANT OR AVAILABLE TO THE PARTICIPANT WITHOUT RESTRICTION PRIOR TO DISCLOSURE TO THE PARTICIPANT BY THE COMPANY, (III) INFORMATION THAT BECOMES AVAILABLE TO THE PARTICIPANT ON A NON-CONFIDENTIAL BASIS FROM A THIRD PARTY 

Exhibit B

Confidentiality and Inventions Agreement

 

 

THAT IS NOT SUBJECT TO CONFIDENTIALITY OBLIGATIONS IN FAVOR, OR THAT INURE TO THE BENEFIT, OF THE COMPANY, AND (IV) INFORMATION THAT WAS DEVELOPED INDEPENDENTLY BY OR FOR THE PARTICIPANT WITHOUT REFERENCE TO THE CONFIDENTIAL INFORMATION, USE OF COMPANY RESOURCES OR BREACH OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE “PRE-EMPLOYMENT WORK PRODUCT” (AS DEFINED BELOW). 

(b)“Work Product” shall mean inventions, data, ideas, designs, drawings, works of authorship, trademarks, service marks, trade names, service names, logos, developments, formulae, concepts, techniques, devices, improvements, know-how, methods, processes, programs and discoveries, whether or not patentable or protectable under applicable copyright or trademark law, or under other similar law, and whether or not reduced to practice or tangible form, together with any improvements thereon or thereto, derivative works therefrom, and intellectual property rights therein created on behalf of the Company as part of the obligation of employment in performing work for the Company or otherwise in the course of employment with the Company.

3.Confidentiality

(a)During the term of the Participant’s employment by the Company and at all times thereafter, The Participant will keep in strict confidence and trust all Confidential Information, and the Participant will not, directly or indirectly, disclose, distribute, sell, transfer, use, lecture upon or publish any Confidential Information, except as may be necessary in the course of performing the Participant’s duties as an employee of the Company or as the Company authorizes or permits.  Notwithstanding the foregoing, the Participant shall be entitled to continue to use Confidential Information of the Company transferred to a purchaser (“Purchaser”) of all or substantially all of the assets of a business (“Business”) of Company (an “Acquisition”) solely to the extent that the Participant becomes an employee of such Purchaser or Purchaser’s designated affiliate upon consummation of the Acquisition and such Confidential Information is used in the Business prior to consummation of the Acquisition.  The Participant acknowledges and agrees that, upon consummation of the Acquisition, the Confidential Information shall be deemed the Confidential Information of the Purchaser and subject to the Participant’s applicable employment, confidentiality and inventions assignment agreement with such Purchaser.

(b)The Participant recognizes that the Company has received and in the future will receive information from third parties which is subject to an obligation on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes.  The Participant agrees, during the term of the Participant’s employment and thereafter, to hold all such confidential or proprietary information of third parties in the strictest confidence and not to disclose or use it, except as necessary in performing the Participant’s duties as an employee of the Company consistent with the Company’s agreement with such third party.  The Participant agrees that such information will be subject to the terms of this Confidentiality and Inventions Agreement as Confidential Information.

(c)Trade Secrets Disclosure.  18 U.S.C. § 1833(b) provides: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(A) is made—(i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or 

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investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b). Accordingly, the parties to this Agreement have the right to disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The parties also have the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.  Nothing in this Confidentiality and Inventions Agreement prevents the Participant from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that the Participant has reason to believe is unlawful.

4.Company Property 

All apparatus, computers, computer files and media, notes, data, documents, reference materials, sketches, memoranda, records, drawings, engineering log books, equipment, lab/inventor notebooks, programs, prototypes, samples, equipment, tangible embodiments of information, and other physical property, whether or not pertaining to Confidential Information, furnished to the Participant or produced by the Participant or others in connection with the Participant’s employment, shall be and remain the sole property of the Company and any such property actually in the Participant’s possession or control shall be returned promptly to the Company as and when requested in writing by the Company.  Should the Company not so request, the Participant shall return and deliver all such property to the Company upon termination of the Participant’s employment.  The Participant may not retain any such property or any reproduction of such property upon such termination.  The Participant further agrees that any property situated on the Company’s premises and owned, leased, maintained or otherwise contracted for by the Company, including, but not limited to, computers, computer files, e-mail, voicemail, disks and other electronic storage media, filing cabinets, desks or other work areas, are subject to inspection by the Company’s representatives at any time with or without notice.

5.Company Work Product

Subject to Section 6 and 7 below, the Participant agrees that any Work Product, in whole or in part, conceived, developed, made or reduced to practice by the Participant (either solely or in conjunction with others) during the term of his or her employment with the Company (collectively, the “Company Work Product”) shall be owned exclusively by the Company (or, to the extent applicable, a Purchaser pursuant to an Acquisition).  Without limiting the foregoing, the Participant agrees that any of the Company Work Product shall be deemed to be “works made for hire” as defined in U.S. Copyright Act §101, and all right, title, and interest therein shall vest solely in the Company from conception.  The Participant hereby irrevocably assigns and transfers, and agrees to assign and transfer in the future on the Company’s request, to the Company all right, title and interest in and to any Company Work Product, including, but not limited to, patents, copyrights and other intellectual property rights therein.  The Participant shall treat any such Company Work Product as Confidential Information.  The Participant will execute all applications, assignments, instruments and other documents and perform all acts consistent herewith as the Company or its counsel may deem necessary or desirable to obtain, perfect or enforce any patents, copyright registrations or other protections on such Company Work Product and to otherwise protect the 

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interests of the Company therein.  The Participant’s obligation to reasonably assist the Company in obtaining and enforcing the intellectual property and other rights in the Company Work Product in any and all jurisdictions shall continue beyond the termination of the Participant’s employment.  The Participant acknowledges that the Company may need to secure the Participant’s signature for lawful and necessary documents required to apply for, maintain or enforce intellectual property and other rights with respect to the Company Work Product (including, but not limited to, renewals, extensions, continuations, divisions or continuations in part of patent applications).  The Participant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents, as the Participant’s agents and attorneys-in-fact, to act for and on the Participant’s behalf and instead of the Participant, to execute and file any such document(s) and to do all other lawfully permitted acts to further the prosecution, issuance and enforcement of patents, copyright registrations and other protections on the Company Work Product with the same legal force and effect as if executed by the Participant.  The Participant further hereby waives and relinquishes any and all moral rights that the Participant may have in the Company Work Product.

6.Exception to Assignments

Pursuant to Section 2870 of the California Labor Code, the requirements set forth in Section 5 of this Agreement shall not apply to an invention that the Participant develops entirely on his or her own time without using the Company’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (i) relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company; or (ii) result from any work performed by the Participant for the Company.

7.Pre-Employment Work Product

(a)Work Product includes only things done for the Company in performing work for the Company. 

(b)The Participant acknowledges that the Company has a strict policy against using proprietary information belonging to any other person or entity without the express permission of the owner of that information.  The Participant represents and warrants that the Participant’s performance of all of the terms of this Confidentiality and Inventions Agreement and as an employee of the Company does not and will not result in a breach of any duty owed by the Participant to a third party to keep in confidence any information, knowledge or data.  The Participant has not brought or used, and will not bring to the Company, or use, induce the Company to use, or disclose in the performance of the Participant’s duties, nor has the Participant used or disclosed in the performance of any services for the Company prior to the effective date of the Participant’s employment with the Company (if any), any equipment, supplies, facility, electronic media, software, trade secret or other information or property of any former employer or any other person or entity, unless the Participant has obtained their written authorization for its possession and use.

8.Records

The Participant agrees that he or he or she will keep and maintain adequate and current written records (in the form of notes, sketches, drawings or such other form(s) as may be specified by the 

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Company) of all the Company Work Product made by the Participant during the term of his or his or her employment with the Company, which records shall be available at all times to the Company and shall remain the sole property of the Company.

9.Presumption

If any application for any United States or foreign patent related to or useful in the business of the Company or any customer of the Company shall be filed by or for the Participant during the period of one year after the Participant’s employment is terminated, the subject matter covered by such application shall be presumed to have been conceived during the Participant’s employment with the Company.  

10.Agreements with Third Parties or the U.S. Government.  

The Participant acknowledges that the Company from time to time may have agreements with other persons or entities, or with the U.S. Government or agencies thereof, which impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work.  The Participant agrees to be bound by all such obligations and restrictions of which the Participant has been made aware of by the Company and to take all action necessary to discharge the obligations of the Company thereunder.

11.Injunctive Relief

Because of the unique nature of the Confidential Information and the Company Work Product, the Participant understands and agrees that the Company may suffer immediate and irreparable harm if the Participant fails to comply with any of his or her obligations under this Confidentiality and Inventions Agreement and that monetary damages may be inadequate to compensate the Company for such breach.  Accordingly, the Participant agrees that in the event of a breach or threatened breach of this Confidentiality and Inventions Agreement, in addition to any other remedies available to it at law or in equity, the Company will be entitled, without posting bond or other security, to seek injunctive relief to enforce the terms of this Confidentiality and Inventions Agreement, including, but not limited to, restraining the Participant from violating this Confidentiality and Inventions Agreement or compelling the Participant to cease and desist all unauthorized use and disclosure of the Confidential Information and the Company Work Product.  The Participant will indemnify the Company against any costs, including, but not limited to, reasonable outside legal fees and costs, incurred in obtaining relief against the Participant’s breach of this Confidentiality and Inventions Agreement.  Nothing in this Section 11 shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including, but not limited to, recovery of damages.

12.Disclosure of Obligations

The Participant is hereby permitted and the Participant authorizes the Company to provide a copy of this Confidentiality and Inventions Agreement and any exhibits hereto to any of the Participant’s future employers, and to notify any such future employers of the Participant’s obligations and the Company’s rights hereunder, provided that neither party is under any obligation to do so.

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13.Jurisdiction and Venue

This Confidentiality and Inventions Agreement will be governed by the laws of the State of California without regard to any conflicts-of-law rules. To the extent that any lawsuit is permitted under this Confidentiality and Inventions Agreement, the Participant hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in San Diego, California for any lawsuit filed against the Participant by the Company. Nothing herein shall limit the right of the Company to seek and obtain injunctive relief in any jurisdiction for violation of the portions of this Confidentiality and Inventions Agreement dealing with protection of Confidential Information or the Company Work Product.

14.Assignment; Inurement

Neither this Confidentiality and Inventions Agreement nor any duties or obligations under this Confidentiality and Inventions Agreement may be assigned by the Participant without the prior written consent of the Company.  The Participant understands and agrees that the Company may freely assign this Confidentiality and Inventions Agreement.  This Agreement shall inure to the benefit of, and shall be binding upon, the permitted assigns, successors in interest (including any Purchaser upon consummation of an Acquisition), personal representatives, estates, heirs, and legatees of each of the parties hereto. Any assignment in violation of this Section 14 shall be null and void.

15.Survivorship

The rights and obligations of the parties to this Confidentiality and Inventions Agreement will survive termination of my employment with the Company.

16.Miscellaneous

In the event that any provision hereof or any obligation or grant of rights by the Participant hereunder is found invalid or unenforceable pursuant to judicial decree or decision, any such provision, obligation or grant of rights shall be deemed and construed to extend only to the maximum permitted by law, the invalid or unenforceable portions shall be severed, and the remainder of this Confidentiality and Inventions Agreement shall remain valid and enforceable according to its terms.  This Confidentiality and Inventions Agreement may not be amended, waived or modified, except by an instrument in writing executed by the Participant and a duly authorized representative of the Company.

17.Acknowledgment

EMPLOYEE ACKNOWLEDGES THAT, IN EXECUTING THE GRANT NOTICE TO WHICH THIS CONFIDENTIALITY AND INVENTIONS AGREEMENT IS ATTACHED, EMPLOYEE HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND EMPLOYEE HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS CONFIDENTIALITY AND INVENTIONS AGREEMENT.  THIS CONFIDENTIALITY AND INVENTIONS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.

 

B-6

 

 

EXHIBIT C

PERFORMANCE GOALS AND SERVICE REQUIREMENT

Exhibit C

Performance Goals and Service RequirementExhibit
4.2

 

Option Number XX-XXXX-X

 

U.S.
ENERGY CORP.

 

2022
EQUITY INCENTIVE PLAN

 

STOCK
OPTION AGREEMENT

 

Unless
otherwise defined herein, the terms in the Stock Option Agreement (the “Option Agreement”) have the same meanings
as defined in the U.S. Energy Corp. 2022 (the “Company”) Equity Incentive Plan (as amended from time to time)(the
“Plan”).

 

	 	I.	NOTICE
    OF STOCK OPTION GRANT

 

Optionee:
___________________________________

 

Address:
___________________________________

 

You
have been granted an Option to purchase common stock (the “Common Stock”) of the Company (the “Option”
and the “Shares”), subject to the terms and conditions of the Plan and this Option Agreement, as follows:

 

Grant
Date: ___________________________________

 

Vesting
Commencement Date: ___________________________________

 

Exercise
Price per Share: $___________________________________

 

Total
Number of Shares Granted: ___________________________________

 

Total
Exercise Price: $___________________________________

 

Type
of Option: Incentive ☐        OR         Non-Qualified ☐

 

Expiration
Date: ___________________________________

 

Vesting
Schedule: ___________________________________, subject to the Optionee’s continued service to the Company. Notwithstanding
the above, all of the unvested Options shall vest immediately upon Optionee’s death or Disability, termination of employment without
cause or a termination of Optionee for good reason (each as defined and described in Optionee’s employment agreement), a Change
in Control of the Company.

 

To
the extent vested, this Option will be exercisable for three (3) months following the termination of service of Optionee, unless termination
is due to Optionee’s Disability, in which case this Option will be exercisable for twelve (12) months, and except in the event
termination is due to Optionee’s death, in which case this Option will be exercisable for eighteen (18) months, in each case following
the termination of service of Optionee. In the event of termination due to Optionee’s death, the Company shall use commercially
reasonable efforts to notify Optionee’s estate of the exercisability of the Option following Optionee’s death. Notwithstanding
the foregoing sentence, in no event may this Option be exercised following the termination of service of Optionee as determined by the
Company’s Board to be for Cause or after the Expiration Date as provided above and this Option may be subject to earlier termination
as provided in the Plan.

 

    	 

    	 

    

 

“Cause”
has the meaning ascribed to such term or words of similar import in Optionee’s written employment or service contract with the
Company or its parent or any subsidiary and, in the absence of such agreement or definition, means Optionee’s (i) conviction of,
or plea of nolo contendere to, a felony or any other crime involving moral turpitude; (ii) fraud on or misappropriation of any funds
or property of the Company or its subsidiaries, or any affiliate, customer or vendor; (iii) personal dishonesty, incompetence, willful
misconduct, willful violation of any law, rule or regulation (other than minor traffic violations or similar offenses), or breach of
fiduciary duty which involves personal profit; (iv) willful misconduct in connection with Optionee’s duties or willful failure
to perform Optionee’s responsibilities in the best interests of the Company or its subsidiaries; (v) illegal use or distribution
of drugs; (vi) violation of any material rule, regulation, procedure or policy of the Company or its subsidiaries, the violation of which
could have a material detriment to the Company; or (vii) material breach of any provision of any employment, non-disclosure, non-competition,
non-solicitation or other similar agreement executed by Optionee for the benefit of the Company or its subsidiaries, all as reasonably
determined by the Plan Administrator, which determination will be conclusive.

 

Legends.

 

(a)
All certificates representing the Shares issued upon exercise of this Option shall, prior to such date as the Plan and Company Common
Stock hereunder are covered by a valid Form S-8 or similar U.S. federal registration statement, where applicable, have endorsed thereon
the following legend:

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE
RELEVANT PROVISIONS OF U.S. FEDERAL, STATE AND FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S. FEDERAL, STATE AND FOREIGN SECURITIES LAWS IS NOT REQUIRED.

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 2 of 12

    	 

    

 

(b)
If the Option is an incentive stock option (ISO), then the following legend will be included:

 

THE
SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED UPON EXERCISE OF AN INCENTIVE STOCK OPTION, AND THE COMPANY MUST BE NOTIFIED IF THE
SHARES SHALL BE TRANSFERRED BEFORE THE LATER OF THE TWO (2) YEAR ANNIVERSARY OF THE DATE OF GRANT OF THE OPTION OR THE ONE (1) YEAR ANNIVERSARY
OF THE DATE ON WHICH THE OPTION WAS EXERCISED. THE REGISTERED HOLDER MAY RECOGNIZE ORDINARY INCOME IF THE SHARES ARE TRANSFERRED BEFORE
SUCH DATE.

 

		II.	AGREEMENT

 

1.
Grant of Option. The Plan Administrator grants to the Optionee named in the Notice of Stock Option Grant in Part I of this
Option Agreement, an Option to purchase the number of Shares set forth in the Notice of Stock Option Grant, at the exercise price per
Share set forth in the Notice of Stock Option Grant (the “Exercise Price”), and subject to the terms and conditions
of the Plan, which is incorporated herein by reference. In the event of a conflict between the terms and conditions of the Plan and this
Option Agreement, the terms and conditions of the Plan prevail.

 

If
designated in the Notice of Stock Option Grant as an Incentive Stock Option, this Option is intended to qualify as an Incentive Stock
Option as defined in Code section 422. Nevertheless, to the extent that it exceeds the $100,000 rule of Code section 422(d), this Option
will be treated as a Nonstatutory/Non-Qualified Stock Option.

 

2.
Exercise of Option.

 

(a)
Right to Exercise. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of
Stock Option Grant and with the applicable provisions of the Plan and this Option Agreement.

 

(b)
Method of Exercise. This Option is exercisable by (i) delivery of an exercise notice in the form attached as Exhibit A
(the “Exercise Notice”) or in a manner and pursuant to procedures as the Plan Administrator may determine,
which will state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and other
representations and agreements as may be required by the Company and (ii) paying the Company in full the aggregate Exercise Price as
to all Shares being acquired, together with any applicable tax withholding.

 

This
Option will be deemed to be exercised upon receipt by the Company of a fully executed Exercise Notice accompanied by the aggregate Exercise
Price, together with any applicable tax withholding.

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 3 of 12

    	 

    

 

No
Shares will be issued pursuant to the exercise of an Option unless the issuance and exercise of Shares complies with applicable state
and federal laws (“Applicable Laws”). Assuming compliance, for income tax purposes the Shares will be considered
transferred to the Optionee on the date on which the Option is exercised with respect to the Shares.

 

3.
Method of Payment. The aggregate Exercise Price may be paid by any of the following, or a combination thereof, at the election
of the Optionee:

 

(a)
cash;

 

(b)
check;

 

(c)
to the extent not prohibited by Section 402 of the Sarbanes-Oxley Act of 2002, a promissory note;

 

(d)
other shares of Company Common Stock, provided Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option will be exercised;

 

(e)
by asking the Company to withhold Shares from the total Shares to be delivered upon exercise equal to the number of Shares having a value
equal to the aggregate Exercise Price of the Shares being acquired;

 

(f)
any combination of the foregoing methods of payment; or

 

(g)
such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

 

4.
Restrictions on Exercise. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any Applicable Laws. The Company will be relieved of any liability
with respect to any delayed issuance of shares or its failure to issue shares if such delay or failure is necessary to comply with Applicable
Laws.

 

5.
Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent
or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement
are binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

 

6.
Term of Option. This Option may be exercised only within the term set out in the Notice of Stock Option Grant, and may be exercised
during the term only in accordance with the Plan and the terms of this Option.

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 4 of 12

    	 

    

 

7.
Tax Obligations.

 

(a)
Withholding Taxes. Optionee agrees to arrange for the satisfaction of all Federal, state, local and foreign income and employment
tax withholding requirements applicable to the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor
the exercise and refuse to deliver the Shares if withholding amounts are not delivered at the time of exercise.

 

(b)
Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee is an Incentive Stock Option (“ISO”),
and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date
two (2) years after the Grant Date, or (ii) the date one (1) year after the date of exercise, the Optionee must immediately notify
the Company of the disposition in writing. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the
compensation income recognized by the Optionee.

 

(c)
Code Section 409A. Under Code section 409A, an Option that was granted with a per Share exercise price that is determined by the
Internal Revenue Service (the “IRS”) to be less than the Fair Market Value of a Share on the Grant Date (a
“discount option”) may be considered deferred compensation. An Option that is a discount option may result
in (i) income recognition by the Optionee prior to the exercise of the Option, (ii) an additional twenty percent (20%) tax, and (iii)
potential penalty and interest charges. Optionee acknowledges that the Company cannot and has not guaranteed that the IRS will agree
that the per Share Exercise Price of this Option equals or exceeds Fair Market Value of a Share on the Grant Date in a later examination.
Optionee agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market
Value of a Share on the Grant Date, Optionee will be solely responsible for any and all resulting tax consequences.

 

8.
No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE
HEREOF IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE AND/OR DIRECTOR (AS APPLICABLE) AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY
EMPLOYING OR RETAINING OPTIONEE) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH
HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE AND/OR DIRECTOR (AS APPLICABLE) FOR THE
VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE RIGHT OF THE COMPANY
(OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING OPTIONEE) TO TERMINATE OPTIONEE’S RELATIONSHIP AS AN EMPLOYEE, SERVICE PROVIDER
OR DIRECTOR AT ANY TIME, WITH OR WITHOUT CAUSE.

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 5 of 12

    	 

    

 

9.
Notices. All notices or other communications which are required or permitted hereunder will be in writing and sufficient if (i)
personally delivered or sent by telecopy, (ii) sent by nationally-recognized overnight courier or (iii) sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:

 

(a)
if to the Optionee, to the address (or telecopy number) set forth on the Notice of Stock Option Grant; and

 

(b)
if to the Company, to its principal executive office as specified in any report filed by the Company with the Securities and Exchange
Commission or to such address as the Company may have specified to the Optionee in writing, Attention: Corporate Secretary;

 

or
to any other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.
Any communication will be deemed to have been given (i) when delivered, if personally delivered, or when telecopied, if telecopied, (ii)
on the first Business Day (as hereinafter defined) after dispatch, if sent by nationally-recognized overnight courier and (iii) on the
fourth Business Day following the date on which the piece of mail containing the communication is posted, if sent by mail. As used herein,
“Business Day” means a day that is not a Saturday, Sunday or a day on which banking institutions in the city
to which the notice or communication is to be sent are not required to be open.

 

10.
Specific Performance. Optionee expressly agrees that the Company will be irreparably damaged if the provisions of this Option
Agreement and the Plan are not specifically enforced. Upon a breach or threatened breach of the terms, covenants and/or conditions of
this Option Agreement or the Plan by the Optionee, the Company will, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or decree for specific performance, in accordance with the provisions hereof
and thereof. The Plan Administrator has the power to determine what constitutes a breach or threatened breach of this Option Agreement
or the Plan. The Plan Administrator’s determinations will be final and conclusive and binding upon the Optionee.

 

11.
No Waiver. No waiver of any breach or condition of this Option Agreement will be deemed to be a waiver of any other or subsequent
breach or condition, whether of like or different nature.

 

12.
Optionee Undertaking. The Optionee agrees to take whatever additional actions and execute whatever additional documents the Company
may in its reasonable judgment deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions
imposed on the Optionee pursuant to the express provisions of this Option Agreement.

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 6 of 12

    	 

    

 

13.
Modification of Rights. The rights of the Optionee are subject to modification and termination in certain events as provided in
this Option Agreement and the Plan.

 

14.
Governing Law. This Agreement is governed by, and construed in accordance with, the laws of the State of Delaware, without giving
effect to its conflict or choice of law principles that might otherwise refer construction or interpretation of this Agreement to the
substantive law of another jurisdiction.

 

15.
Counterparts; Facsimile Execution. This Option Agreement may be executed in one or more counterparts, each of which will be deemed
to be an original, but all of which together constitute one and the same instrument. Facsimile execution and delivery of this Option
Agreement is legal, valid and binding execution and delivery for all purposes.

 

16.
Entire Agreement. The Plan, this Option Agreement, and upon execution, the Exercise Notice, constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by
means of a writing signed by the Company and Optionee.

 

17.
Severability. In the event one or more of the provisions of this Option Agreement should, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provisions of this
Option Agreement, and this Option Agreement will be construed as if such invalid, illegal or unenforceable provision had never been contained
herein.

 

18.
Language. You acknowledge that you are proficient in the English language, or have consulted with an advisor who is proficient
in the English language, so as to enable you to understand the provisions of this Agreement and the Plan. If you have received this Agreement
or any other document related to the Plan translated into a language other than English and if the meaning of the translated version
is different than the English version, the English version will control.

 

19.
Electronic Delivery and Participation. The Company may, in its sole discretion, decide to deliver any documents related to current
or future participation in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree
to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated
by the Company.

 

20.
Imposition of Other Requirement. The Company reserves the right to impose other requirements on your participation in the Plan,
on the Option and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable
for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish
the foregoing.

 

21.
No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations
regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Common Stock. You should consult with
your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the
Plan.

 

22.
Other Documents. You hereby acknowledge receipt of or the right to receive a document providing the information required by Rule
428(b)(1) promulgated under the Securities Act, which includes the Prospectus.

 

23.
WAIVER OF JURY TRIAL. THE OPTIONEE EXPRESSLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS OPTION AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

[Remainder
of page left intentionally blank.]

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 7 of 12

    	 

    

 

Optionee
acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and accepts
this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has
had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option.
Optionee agrees to accept as binding, conclusive and final all decisions or interpretations of the Plan Administrator upon any questions
arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated
below.

 

	OPTIONEE 	 	U.S.
    Energy Corp.
	 	 	 	 	 
	Signature	      

    
	 	By:	   

    

	 	 	 	 	 
	Print Name:		 	Print Name:	    

    

	 	 	 	 	 
	Address:	   

    
	 	Address:	

       

	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	Date Signed: 	    

    
	 	Date Signed:	   

    

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 8 of 12

    	 

    

 

EXHIBIT
A

 

2022
Equity Incentive Plan

 

EXERCISE
NOTICE

 

U.S.
Energy Corp.

[_____________________]

[_____________________]

 

Attention:
U.S. Energy Corp., Corporate Secretary

 

1.
Exercise of Option. Effective as of today, _____________, _____,

______________ (“Optionee”) elects to exercise Optionee’s option to purchase ___________ shares of the
Company Common Stock (the “Shares”) of U.S. Energy Corp. (the “Company”) under and
pursuant to the U.S. Energy Corp. 2022 Equity Incentive Plan (as amended from time to time, the “Plan”) and
the Stock Option Agreement effective ____________ (the “Option Agreement”).

 

2.
Delivery of Payment. Optionee herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option
Agreement, and any and all withholding taxes due in connection with the exercise of the Option.

 

3.
Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.

 

4.
Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder exists
with respect to the Shares, notwithstanding the exercise of the Option. Subject to the requirements of Section 6 below, the Shares
will be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment
will be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in the Plan.

 

5.
Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase
or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection
with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

 

6.
Refusal to Transfer. The Company will not (i) transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Notice, or (ii) be required to treat as owner of such Shares or to accord the right
to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 9 of 12

    	 

    

 

7.
Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and
this Exercise Notice inures to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein
set forth, this Exercise Notice is binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

 

8.
Interpretation. Any dispute regarding the interpretation of this Exercise Notice will be submitted by Optionee or by the Company
forthwith to the Plan Administrator for review at its next regular meeting. The resolution of disputes by the Plan Administrator will
be final and binding on all parties.

 

9.
Governing Law; Severability. This Exercise Notice is governed by, and construed in accordance with, the laws of the State of Delaware,
without giving effect to its conflict or choice of law principles that might otherwise refer construction or interpretation of this Exercise
to the substantive law of another jurisdiction. In the event that any provision hereof becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Exercise Notice will continue in full force and effect.

 

	 	10.	Optionee Representations.

 

(a)
With respect to a transaction occurring prior to such date as the Plan and Company Common Stock thereunder are covered by a valid Form
S-8 or similar U.S. federal registration statement, Optionee agrees that in no event shall Optionee make a disposition of any of the
Company Common Stock, unless and until: (i) Optionee shall have notified the Company of the proposed disposition and shall have furnished
the Company with a statement of the circumstances surrounding the proposed disposition; and (ii) Optionee shall have furnished the Company
with an opinion of counsel satisfactory to the Company to the effect that (A) such disposition will not require registration or qualification
of such Company Common Stock under applicable U.S. federal, state or foreign securities laws or (B) appropriate action necessary for
compliance with the U.S. federal, state or foreign securities laws has been taken; or (iii) the Company shall have waived, expressly
and in writing, its rights under clauses (i) and (ii) of this Subsection.

 

(b)
Optionee understands that if a registration statement covering the Company Common Stock under the Securities Act is not in effect when
Optionee desires to sell the Company Common Stock, Optionee may be required to hold the Company Common Stock for an indeterminate period.
Optionee also acknowledges that Optionee understands that any sale of the Company Common Stock which might be made by Optionee in reliance
upon Rule 144 under the Securities Act may be made only in limited amounts in accordance with the terms and conditions of that Rule.

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 10 of 12

    	 

    

 

11.
Other Documents. Optionee hereby acknowledges receipt or the right to receive a document providing the information required by
Rule 428(b)(1) promulgated under the Securities Act of 1933, as amended, including, but not limited to, the information required by Part
I of Form S-8, if applicable.

 

12.
Notices. Any notice required or permitted hereunder will be provided in writing and deemed effective if provided in the manner
specified in the Option Agreement.

 

13.
Further Instruments. The parties agree to execute any further instruments and to take any further action as may be reasonably
necessary to carry out the purposes and intent of the Option Agreement and this Exercise Notice.

 

14.
No Advice Regarding Exercise. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations
regarding your exercise of the options set forth in the Option Agreement, or your acquisition or sale of the underlying shares of Common
Stock. You should consult with your own personal tax, legal and financial advisors regarding your exercise of the options, before taking
any action related to the Shares or the Plan.

 

15.
Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, and the
Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee.

 

[Signature
page follows.]

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 11 of 12

    	 

    

 

	Submitted by: 	 	 	Accepted by: 	 
	 	 	 	 	 
	Optionee	 	 	U.S. Energy Corp.
	 	 	 	 	 
	Signature	 	 	By:	 
	 	 	 	 	 
	Print
Name: 	 	 	Print Name:	 
	 	 	 	 	 
	Address:
	 	 	Date
Received:	 

 

    	U.S. Energy Corp.
2022 Stock Option Agreement
Option Number XXXXXX
Page 12 of 12

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