Document:

Exhibit 10.3 Registration Rights Agreement

    
      

    

     

     

    

       

       

      REGISTRATION
        RIGHTS AGREEMENT

       

      REGISTRATION
        RIGHTS AGREEMENT
        (this
“Agreement”),
        dated
        as of May 5, 2006, by and between U.S.
        ENERGY CORP.,
        a
        Wyoming corporation (the “Company”),
        and
CORNELL
        CAPITAL PARTNERS, LP,
        a
        Delaware limited partnership (the “Investor”).

       

      WHEREAS:

       

      A. In
        connection with the Standby Equity Distribution Agreement by and between
        the
        parties hereto of even date herewith (the “Standby
        Equity Distribution Agreement”),
        the
        Company has agreed, upon the terms and subject to the conditions of the Standby
        Equity Distribution Agreement, to issue and sell to the Investor that number
        of
        shares of the Company’s common stock, par value $0.01 per share (the
“Common
        Stock”),
        which
        can be purchased pursuant to the terms of the Standby Equity Distribution
        Agreement for an aggregate purchase price of up to Fifty Million
        Dollars ($50,000,000). Capitalized terms not defined herein shall have the
        meaning ascribed to them in the Standby Equity Distribution
        Agreement.

       

      B. To
        induce
        the Investor to execute and deliver the Standby Equity Distribution Agreement,
        the Company has agreed to provide certain registration rights under the
        Securities Act of 1933, as amended, and the rules and regulations thereunder,
        or
        any similar successor statute (collectively, the “Securities
        Act”),
        and
        applicable state securities laws.

       

      NOW,
        THEREFORE,
        in
        consideration of the premises and the mutual covenants contained herein and
        other good and valuable consideration, the receipt and sufficiency of which
        are
        hereby acknowledged, the Company and the Investor hereby agree as
        follows:

       

      1.  DEFINITIONS.

       

      As
        used
        in this Agreement, the following terms shall have the following
        meanings:

       

      a.  “Person”
means
        a
        corporation, a limited liability company, an association, a partnership,
        an
        organization, a business, an individual, a governmental or political subdivision
        thereof or a governmental agency.

       

      b.  “Register,”
        “registered,”
and
        “registration”
refer
        to a registration effected by preparing and filing one or more Registration
        Statements (as defined below) in compliance with the Securities Act and pursuant
        to Rule 415 under the Securities Act or any successor rule providing for
        offering securities on a continuous or delayed basis (“Rule
        415”),
        and
        the declaration or ordering of effectiveness of such Registration Statement(s)
        by the United States Securities and Exchange Commission (the “SEC”).

       

      c.  “Registrable
        Securities”
means
        the Investor’s Shares, as defined in the Standby Equity Distribution Agreement,
        the Warrant Shares, as defined in the Standby Equity Distribution Agreement,
        the
        shares of Common Stock issuable to Investors pursuant to the Standby Equity
        Distribution Agreement, and
        the
        Placement Agent’s Shares issued under the Placement Agreement. The Registration
        Statement shall cover the Investor’s Shares, plus three times (i) 

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      the
        number of shares issuable to Investors under the Standby Equity Distribution
        Agreement (at $7.15 per share), and (ii) the number of Warrant Shares.
        Registrable Securities also shall include three (3) times the number of shares
        of Common Stock issuable on exercise of the Milestone Warrants (if such warrants
        are issued under the Standby Equity Distribution Agreement), at the Exercise
        Price set for the Milestone Warrants..

       

      d.  “Registration
        Statement”
means
        a
        registration statement under the Securities Act which covers the Registrable
        Securities.

       

      2.  REGISTRATION.

       

      a.  Mandatory
        Registration.
        The
        Company shall prepare and file with the SEC a Registration Statement on Form
        S-2, S-3 or on such other form as is available for resale of the Registrable
        Securities. The Company shall cause such Registration Statement to be declared
        effective by the SEC prior to the first sale to the Investor of the Company’s
        Common Stock pursuant to the Standby Equity Distribution Agreement. The Company
        shall cause the Registration Statement to remain effective until the later
        to
        occur of full completion of the Commitment Period (as such term is defined
        in
        the Standby Equity Distribution Agreement) or
        expiration of the Warrants and the Milestone Warrants . The Company shall
        file
        and see to effectiveness one or more additional Registration Statements to
        cover
        resale of the shares issuable on exercise of the Milestone Warrants.
 

       

      b.  Sufficient
        Number of Shares Registered.
        In the
        event the number of shares available under a Registration Statement filed
        pursuant to Section 2(a) is insufficient to cover all of the Registrable
        Securities pursuant to the Standby Equity Distribution Agreement, the Company
        shall amend the Registration Statement, or file a new Registration Statement
        (on
        the short form available therefore, if applicable), or both, so as to cover
        all
        of such Registrable Securities pursuant to the Standby Equity Distribution
        Agreement and/or the Warrants, as soon as practicable, but in any event not
        later than thirty (30) days after the necessity therefore arises. The Company
        shall use it best efforts to cause such amendment and/or new Registration
        Statement to become effective as soon as practicable following the filing
        thereof. For purposes of the foregoing provision, the number of shares available
        under a Registration Statement shall be deemed “insufficient to cover all of the
        Registrable Securities” if at any time the number of Registrable Securities
        issuable on an Advance Notice Date is greater than the number of shares
        available for resale under such Registration Statement.

       

      3.  RELATED
        OBLIGATIONS.

       

      a.  The
        Company shall keep the Registration Statement effective pursuant to Rule
        415 at
        all times until the later to occur of completion of the Commitment Period
        (as
        such term is defined in the Standby Equity Distribution Agreement) or
        the
        one (1) year anniversary of the termination of that Agreement , and for
        Registration Statements relating to the Milestone Warrants, until the one
        (1)
        year anniversary of the last exercise of the last Milestone Warrant (the
        “Registration
        Period”),
        which
        Registration Statement (including any amendments or supplements thereto and
        prospectuses contained therein) shall not contain any untrue statement of
        a
        material fact or omit to state a material fact required to be stated therein,
        or
        necessary to make the statements therein, in light of the circumstances in
        which
        they were made, not misleading.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      b.  The
        Company shall prepare and file with the SEC such amendments (including
        post-effective amendments) and supplements to a Registration Statement and
        the
        prospectus used in connection with such Registration Statement, which prospectus
        is to be filed pursuant to Rule 424 promulgated under the Securities Act,
        as may
        be necessary to keep such Registration Statement effective at all times during
        the Registration Period, and, during such period, comply with the provisions
        of
        the Securities Act with respect to the disposition of all Registrable Securities
        of the Company covered by such Registration Statement. In case the Company
        become’s ineligible to use Form S-2 or S-3, the Company shall file on another
        Form and keep that Registration Statement effective by promptly filing
        amendments thereto for information included in the Company’s periodic and other
        reports and proxy statements filed under the Securities Exchange Act of 1934,
        as
        amended (the “Exchange
        Act”).

       

      c.  The
        Company shall furnish to the Investor without charge, (i) at least one copy
        of
        such Registration Statement as declared effective by the SEC and any
        amendment(s) thereto, including financial statements and schedules, all
        documents incorporated therein by reference, all exhibits and each preliminary
        prospectus, (ii) ten (10) copies of the final prospectus included in such
        Registration Statement and all amendments and supplements thereto (or such
        other
        number of copies as such Investor may reasonably request) and (iii) such
        other
        documents as such Investor may reasonably request from time to time in order
        to
        facilitate the disposition of the Registrable Securities owned by such
        Investor.

       

      d.  The
        Company shall use its best efforts to (i) register and qualify the Registrable
        Securities covered by a Registration Statement under such other securities
        or
“blue sky” laws of such jurisdictions in the United States as the Investor
        reasonably requests, (ii) prepare and file in those jurisdictions, such
        amendments (including post-effective amendments) and supplements to such
        registrations and qualifications as may be necessary to maintain the
        effectiveness thereof during the Registration Period, (iii) take such other
        actions as may be necessary to maintain such registrations and qualifications
        in
        effect at all times during the Registration Period, and (iv) take all other
        actions reasonably necessary or advisable to qualify the Registrable Securities
        for sale in such jurisdictions; provided, however, that the Company shall
        not be
        required in connection therewith or as a condition thereto to (w) make any
        change to its certificate of incorporation or by-laws, (x) qualify to do
        business in any jurisdiction where it would not otherwise be required to
        qualify
        but for this Section 3(d), (y) subject itself to general taxation in any
        such
        jurisdiction, or (z) file a general consent to service of process in any
        such
        jurisdiction. The Company shall promptly notify the Investor of the receipt
        by
        the Company of any notification with respect to the suspension of the
        registration or qualification of any of the Registrable Securities for sale
        under the securities or “blue sky” laws of any jurisdiction in the United States
        or its receipt of actual notice of the initiation or threat of any proceeding
        for such purpose.

       

      e.  As
        promptly as practicable after becoming aware of such event or development,
        the
        Company shall notify the Investor in writing of the happening of any event
        as a
        result of which the prospectus included in a Registration Statement, as then
        in
        effect, includes an untrue statement of a material fact or omission to state
        a
        material fact required to be stated therein or necessary to make the statements
        therein, in light of the circumstances under which they were made, not
        misleading (provided that in no event shall such notice contain any material,
        nonpublic information), and promptly prepare a supplement or amendment to
        such
        Registration 

       

      
        
           

          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      Statement
        to correct such untrue statement or omission, and deliver ten (10) copies
        of
        such supplement or amendment to each Investor. The Company shall also promptly
        notify the Investor in writing (i) when a prospectus or any prospectus
        supplement or post-effective amendment has been filed, and when a Registration
        Statement or any post-effective amendment has become effective (notification
        of
        such effectiveness shall be delivered to the Investor by facsimile on the
        same
        day of such effectiveness), (ii) of any request by the SEC for amendments
        or
        supplements to a Registration Statement or related prospectus or related
        information, and (iii) of the Company’s reasonable determination that a
        post-effective amendment to a Registration Statement would be appropriate.
        

       

      f.  The
        Company shall use its best efforts to prevent the issuance of any stop order
        or
        other suspension of effectiveness of a Registration Statement, or the suspension
        of the qualification of any of the Registrable Securities for sale in any
        jurisdiction within the United States of America and, if such an order or
        suspension is issued, to obtain the withdrawal of such order or suspension
        at
        the earliest possible moment and to notify the Investor of the issuance of
        such
        order and the resolution thereof or its receipt of actual notice of the
        initiation or threat of any proceeding for such purpose.

       

      g.  At
        the
        reasonable request of the Investor, the Company shall furnish to the Investor,
        on the date of the effectiveness of the Registration Statement and thereafter
        from time to time on such dates as the Investor may reasonably request (i)
        a
        letter, dated such date, from the Company’s independent certified public
        accountants in form and substance as is customarily given by independent
        certified public accountants to underwriters in an underwritten public offering,
        and (ii) an opinion, dated as of such date, of counsel representing the Company
        for purposes of such Registration Statement, in form, scope and substance
        as is
        customarily given in an underwritten public offering, addressed to the
        Investor.

       

      h.  The
        Company shall make available for inspection by (i) the Investor and (ii)
        one
        firm of accountants or other agents retained by the Investor (collectively,
        the
“Inspectors”) all pertinent financial and other records, and pertinent corporate
        documents and properties of the Company (collectively, the “Records”), as shall
        be reasonably necessary to enable them to exercise their due diligence
        responsibility, and cause the Company’s officers, directors and employees to
        supply all information which any Inspector may reasonably request in connection
        with the Registration Statement. The Investor agrees that Records obtained
        by it
        as a result of such inspections which is conspicuously marked by the Company
        as
        "Confidential" (subject to the Company’s obligations with respect to material
        non-public information set forth in Section 8.1(a) herein) shall be deemed
        confidential and held in strict confidence by the Investor, unless (a) the
        disclosure of such Records is necessary to avoid or correct a misstatement
        or
        omission in any Registration Statement or is otherwise required under the
        Securities Act, (b) the release of such Records is ordered pursuant to a
        final,
        non-appealable subpoena or order from a court or government body of competent
        jurisdiction, or (c) the information in such Records has been made generally
        available to the public other than by disclosure in violation of this or
        any
        other agreement of which the Inspector and the Investor has knowledge. The
        Investor agrees that it shall, upon learning that disclosure of such Records
        is
        sought in or by a court or governmental body of competent jurisdiction or
        through other means, give prompt notice to the Company and allow the Company,
        at
        its expense, to undertake appropriate action to prevent disclosure of, or
        to
        obtain a protective order for, the Records deemed confidential.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

       

      i.  The
        Company shall hold in confidence and not make any disclosure of information
        concerning the Investor provided to the Company unless (i) disclosure of
        such
        information is necessary to comply with federal or state securities laws,
        (ii)
        the disclosure of such information is necessary to avoid or correct a
        misstatement or omission in any Registration Statement, (iii) the release
        of
        such information is ordered pursuant to a subpoena or other final,
        non-appealable order from a court or governmental body of competent
        jurisdiction, or (iv) such information has been made generally available
        to the
        public other than by disclosure in violation of this Agreement or any other
        agreement. The Company agrees that it shall, upon learning that disclosure
        of
        such information concerning the Investor is sought in or by a court or
        governmental body of competent jurisdiction or through other means, give
        prompt
        written notice to the Investor and allow the Investor, at the Investor’s
        expense, to undertake appropriate action to prevent disclosure of, or to
        obtain
        a protective order for, such information.

       

      j.  The
        Company shall use its best efforts either to cause all the Registrable
        Securities covered by a Registration Statement (i) to be listed on each
        securities exchange on which securities of the same class or series issued
        by
        the Company are then listed, if any, if the listing of such Registrable
        Securities is then permitted under the rules of such exchange or to secure
        the
        inclusion for quotation on the National Association of Securities Dealers,
        Inc.
        OTC Bulletin Board for such Registrable Securities. The Company shall pay
        all
        fees and expenses in connection with satisfying its obligation under this
        Section 3(j).

       

      k.  The
        Company shall cooperate with the Investor to the extent applicable, to
        facilitate the timely preparation and delivery of certificates (not bearing
        any
        restrictive legend) representing the Registrable Securities to be offered
        pursuant to a Registration Statement and enable such certificates to be in
        such
        denominations or amounts, as the case may be, as the Investor may reasonably
        request and registered in such names as the Investor may request.

       

      l.  The
        Company shall use its best efforts to cause the Registrable Securities covered
        by the applicable Registration Statement to be registered with or approved
        by
        such other governmental agencies or authorities as may be necessary to
        consummate the disposition of such Registrable Securities.

       

      m.  Each
        year, the Company shall make generally available to its security holders
        its
        annual report to shareholders for each annual meeting of shareholders, which
        shall contain an annual earnings statement (in form complying with the
        provisions of Rule 158 under the Securities Act). 

       

      n.  The
        Company shall otherwise use its best efforts to comply with all applicable
        rules
        and regulations of the SEC in connection with any registration
        hereunder.

       

      o.  Within
        two (2) business days after a Registration Statement which covers Registrable
        Securities is ordered effective by the SEC, the Company shall deliver, and
        shall
        cause legal counsel for the Company to deliver, to the transfer agent for
        such
        Registrable Securities (with copies to the Investor) confirmation that such
        Registration Statement has been declared effective by the SEC in the form
        attached hereto as Exhibit
        A.

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

       

      p.  The
        Company shall take all other reasonable actions necessary to expedite and
        facilitate disposition by the Investor of Registrable Securities pursuant
        to a
        Registration Statement.

       

      4.  OBLIGATIONS
        OF THE INVESTOR.

       

      The
        Investor agrees that, upon receipt of any notice from the Company of the
        happening of any event of the kind described in Section 3(f) or the first
        sentence of 3(e), the Investor will immediately discontinue disposition of
        Registrable Securities pursuant to any Registration Statement(s) covering
        such
        Registrable Securities until the Investor’s receipt of the copies of the
        supplemented or amended prospectus contemplated by Section 3(e) or receipt
        of
        notice that no supplement or amendment is required. Notwithstanding anything
        to
        the contrary, the Company shall cause its transfer agent to deliver unlegended
        certificates for shares of Common Stock to a transferee of the Investor in
        accordance with the terms of the Standby Equity Distribution Agreement in
        connection with any sale of Registrable Securities with respect to which
        the
        Investor has entered into a contract for sale prior to the Investor’s receipt of
        a notice from the Company of the happening of any event of the kind described
        in
        Section 3(f) or the first sentence of 3(e) and for which the Investor has
        not
        yet settled.

       

      5.  EXPENSES
        OF REGISTRATION.

       

      All
        expenses incurred in connection with registrations, filings or qualifications
        pursuant to Sections 2 and 3, including, without limitation, all registration,
        listing and qualifications fees, printers, legal and accounting fees shall
        be
        paid by the Company. 

       

      6.  INDEMNIFICATION.

       

      With
        respect to Registrable Securities which are included in a Registration Statement
        under this Agreement:

       

      a.  To
        the
        fullest extent permitted by law, the Company will, and hereby does, indemnify,
        hold harmless and defend the Investor, the directors, officers, partners,
        employees, agents, representatives of, and each Person, if any, who controls
        the
        Investor within the meaning of the Securities Act or the Exchange Act (each,
        an
“Indemnified
        Person”),
        against any losses, claims, damages, liabilities, judgments, fines, penalties,
        charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
        expenses, joint or several (collectively, “Claims”)
        incurred in investigating, preparing or defending any action, claim, suit,
        inquiry, proceeding, investigation or appeal taken from the foregoing by
        or
        before any court or governmental, administrative or other regulatory agency,
        body or the SEC, whether pending or threatened, whether or not an indemnified
        party is or may be a party thereto (“Indemnified
        Damages”),
        to
        which any of them may become subject insofar as such Claims (or actions or
        proceedings, whether commenced or threatened, in respect thereof) arise out
        of
        or are based upon: (i) any untrue statement or alleged untrue statement of
        a
        material fact in a Registration Statement or any post-effective amendment
        thereto or in any filing made in connection with the qualification of the
        offering under the securities or other “blue sky” laws of any jurisdiction in
        which Registrable Securities are offered (“Blue
        Sky Filing”),
        or
        the omission or alleged omission to state a material fact required to be
        stated
        therein or necessary to make the statements therein not misleading; (ii)
        any
        untrue 

       

      
        
           

          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      statement
        or alleged untrue statement of a material fact contained in any final prospectus
        (as amended or supplemented, if the Company files any amendment thereof or
        supplement thereto with the SEC) or the omission or alleged omission to state
        therein any material fact necessary to make the statements made therein,
        in
        light of the circumstances under which the statements therein were made,
        not
        misleading; or (iii) any violation or alleged violation by the Company of
        the
        Securities Act, the Exchange Act, any other law, including, without limitation,
        any state securities law, or any rule or regulation there under relating
        to the
        offer or sale of the Registrable Securities pursuant to a Registration Statement
        (the matters in the foregoing clauses (i) through (iii) being, collectively,
        “Violations”).
        The
        Company shall reimburse the Investor and each such controlling person promptly
        as such expenses are incurred and are due and payable, for any legal fees
        or
        disbursements or other reasonable expenses incurred by them in connection
        with
        investigating or defending any such Claim. Notwithstanding anything to the
        contrary contained herein, the indemnification agreement contained in this
        Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
        out of or based upon a Violation which occurs in reliance upon and in conformity
        with information furnished in writing to the Company by such Indemnified
        Person
        expressly for use in connection with the preparation of the Registration
        Statement or any such amendment thereof or supplement thereto; (y) shall
        not be
        available to the extent such Claim is based on a failure of the Investor
        to
        deliver or to cause to be delivered the prospectus made available by the
        Company, if such prospectus was timely made available by the Company pursuant
        to
        Section 3(e); and (z) shall not apply to amounts paid in settlement of any
        Claim
        if such settlement is effected without the prior written consent of the Company,
        which consent shall not be unreasonably withheld. Such indemnity shall remain
        in
        full force and effect regardless of any investigation made by or on behalf
        of
        the Indemnified Person.

       

      b.  In
        connection with a Registration Statement, the Investor agrees to indemnify,
        hold
        harmless and defend, to the same extent and in the same manner as is set
        forth
        in Section 6(a), the Company, each of its directors, each of its officers
        who
        signs the Registration Statement and each Person, if any, who controls the
        Company within the meaning of the Securities Act or the Exchange Act (each
        an
“Indemnified
        Party”),
        against any Claim or Indemnified Damages to which any of them may become
        subject, under the Securities Act, the Exchange Act or otherwise, insofar
        as
        such Claim or Indemnified Damages arise out of or is based upon any Violation,
        in each case to the extent, and only to the extent, that such Violation occurs
        in reliance upon and in conformity with written information furnished to
        the
        Company by the Investor expressly for use in connection with such Registration
        Statement; and, subject to Section 6(d), the Investor will reimburse any
        legal
        or other expenses reasonably incurred by them in connection with investigating
        or defending any such Claim; provided, however, that the indemnity agreement
        contained in this Section 6(b) and the agreement with respect to contribution
        contained in Section 7 shall not apply to amounts paid in settlement of any
        Claim if such settlement is effected without the prior written consent of
        the
        Investor, which consent shall not be unreasonably withheld; provided, further,
        however, that the Investor shall be liable under this Section 6(b) for only
        that
        amount of a Claim or Indemnified Damages as does not exceed the net proceeds
        to
        the Investor as a result of the sale of Registrable Securities pursuant to
        such
        Registration Statement. Such indemnity shall remain in full force and effect
        regardless of any investigation made by or on behalf of such Indemnified
        Party.
        Notwithstanding anything to the contrary contained herein, the indemnification
        agreement contained in this Section 6(b) with respect to any prospectus shall
        not inure to the benefit of any Indemnified Party if the untrue statement
        or
        omission of material fact contained in the prospectus was corrected and such
        new

       

      
         

        
          7

        

        
          
          

        

      

      prospectus
        was delivered to the Investor prior to the Investor’s use of the prospectus to
        which the Claim relates.

       

      c.  Promptly
        after receipt by an Indemnified Person or Indemnified Party under this Section
        6
        of notice of the commencement of any action or proceeding (including any
        governmental action or proceeding) involving a Claim, such Indemnified Person
        or
        Indemnified Party shall, if a Claim in respect thereof is to be made against
        any
        indemnifying party under this Section 6, deliver to the indemnifying party
        a
        written notice of the commencement thereof, and the indemnifying party shall
        have the right to participate in, and, to the extent the indemnifying party
        so
        desires, jointly with any other indemnifying party similarly noticed, to
        assume
        control of the defense thereof with counsel mutually satisfactory to the
        indemnifying party and the Indemnified Person or the Indemnified Party, as
        the
        case may be; provided, however, that an Indemnified Person or Indemnified
        Party
        shall have the right to retain its own counsel with the fees and expenses
        of not
        more than one counsel for such Indemnified Person or Indemnified Party to
        be
        paid by the indemnifying party, if, in the reasonable opinion of counsel
        retained by the indemnifying party, the representation by such counsel of
        the
        Indemnified Person or Indemnified Party and the indemnifying party would
        be
        inappropriate due to actual or potential differing interests between such
        Indemnified Person or Indemnified Party and any other party represented by
        such
        counsel in such proceeding. The Indemnified Party or Indemnified Person shall
        cooperate fully with the indemnifying party in connection with any negotiation
        or defense of any such action or claim by the indemnifying party and shall
        furnish to the indemnifying party all information reasonably available to
        the
        Indemnified Party or Indemnified Person which relates to such action or claim.
        The indemnifying party shall keep the Indemnified Party or Indemnified Person
        fully apprised at all times as to the status of the defense or any settlement
        negotiations with respect thereto. No indemnifying party shall be liable
        for any
        settlement of any action, claim or proceeding effected without its prior
        written
        consent, provided, however, that the indemnifying party shall not unreasonably
        withhold, delay or condition its consent. No indemnifying party shall, without
        the prior written consent of the Indemnified Party or Indemnified Person,
        consent to entry of any judgment or enter into any settlement or other
        compromise which does not include as an unconditional term thereof the giving
        by
        the claimant or plaintiff to such Indemnified Party or Indemnified Person
        of a
        release from all liability in respect to such claim or litigation. Following
        indemnification as provided for hereunder, the indemnifying party shall be
        subrogated to all rights of the Indemnified Party or Indemnified Person with
        respect to all third parties, firms or corporations relating to the matter
        for
        which indemnification has been made. The failure to deliver written notice
        to
        the indemnifying party within a reasonable time of the commencement of any
        such
        action shall not relieve such indemnifying party of any liability to the
        Indemnified Person or Indemnified Party under this Section 6, except to the
        extent that the indemnifying party is prejudiced in its ability to defend
        such
        action.

       

      d.  The
        indemnification required by this Section 6 shall be made by periodic payments
        of
        the amount thereof during the course of the investigation or defense, as
        and
        when bills are received or Indemnified Damages are incurred.

       

      e.  The
        indemnity agreements contained herein shall be in addition to (i) any cause
        of
        action or similar right of the Indemnified Party or Indemnified Person against
        the 

       

      
        
           

          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      indemnifying
        party or others, and (ii) any liabilities the indemnifying party may be subject
        to pursuant to the law.

       

      7.  CONTRIBUTION.

       

      To
        the
        extent any indemnification by an indemnifying party is prohibited or limited
        by
        law, the indemnifying party agrees to make the maximum contribution with
        respect
        to any amounts for which it would otherwise be liable under Section 6 to
        the
        fullest extent permitted by law; provided, however, that: (i) no seller of
        Registrable Securities guilty of fraudulent misrepresentation (within the
        meaning of Section 11(f) of the Securities Act) shall be entitled to
        contribution from any seller of Registrable Securities who was not guilty
        of
        fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
        Securities shall be limited in amount to the net amount of proceeds received
        by
        such seller from the sale of such Registrable Securities.

       

      8.  REPORTS
        UNDER THE EXCHANGE ACT.

       

      With
        a
        view to making available to the Investor the benefits of Rule 144 promulgated
        under the Securities Act or any similar rule or regulation of the SEC that
        may
        at any time permit the Investors to sell securities of the Company to the
        public
        without registration (“Rule
        144”)
        the
        Company agrees tomake and keep public information available, as those terms
        are
        understood and defined in Rule 144 by filing with the SEC in a timely manner
        all
        reports and other documents required of the Company under the Exchange Act
        so
        long as the Company remains subject to such requirements (it being understood
        that nothing herein shall limit the Company’s obligations under Section 6.3 of
        the Standby Equity Distribution Agreement) 

       

      

       

      9.  AMENDMENT
        OF REGISTRATION RIGHTS.

       

      Provisions
        of this Agreement may be amended and the observance thereof may be waived
        (either generally or in a particular instance and either retroactively or
        prospectively), only by a written agreement between the Company and the
        Investor. Any amendment or waiver effected in accordance with this Section
        9
        shall be binding upon the Investor and the Company. No consideration shall
        be
        offered or paid to any Person to amend or consent to a waiver or modification
        of
        any provision of any of this Agreement unless the same consideration also
        is
        offered to all of the parties to this Agreement.

       

      10.  MISCELLANEOUS.

       

      a.  A
        Person
        is deemed to be a holder of Registrable Securities whenever such Person owns
        or
        is deemed to own of record such Registrable Securities. If the Company receives
        conflicting instructions, notices or elections from two or more Persons with
        respect to the same Registrable Securities, the Company shall act upon the
        basis
        of instructions, notice or election received from the registered owner of
        such
        Registrable Securities.

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

       

       

      b.  Any
        notices, consents, waivers or other communications required or permitted
        to be
        given under the terms of this Agreement must be in writing and will be deemed
        to
        have been delivered: (i) upon receipt, when delivered personally; (ii) upon
        receipt, when sent by facsimile (provided confirmation of transmission is
        mechanically or electronically generated and kept on file by the sending
        party);
        or (iii) one business day after deposit with a nationally recognized overnight
        delivery service, in each case properly addressed to the party to receive
        the
        same. The addresses and facsimile numbers for such communications shall
        be:

       

      
        	
                If
                  to the Company, to:

              	
                U.S.
                  Energy Corp.

              
	 	
                877
                  North 8th
                  West

              
	 	
                Glen
                  L. Larsen Building

              
	 	
                Riverton,
                  WY 82501

              
	 	
                Attention:
                  Mark J. Larsen

              
	 	
                Telephone:
                  (307) 856-9271

              
	 	
                Facsimile:
                  (307)
                  857-3050

              
	 	 
	
                With
                  a copy to:

              	
                The
                  Law Office of Stephen E. Rounds

              
	 	
                1544
                  York Street, Suite 110

              
	 	
                Denver,
                  CO 80206

              
	 	
                Attention
                  : Stephen E. Rounds

              
	 	
                Telephone:
                  (303) 377-6997

              
	 	
                Facsimile:
                  (303) 377-0231

              
	 	 
	
                If
                  to the Investor, to:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, New Jersey 07302

              
	 	
                Attention: Mark
                  Angelo

              
	 	
                Portfolio
                  Manager

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 
	
                With
                  a copy to:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Attention: 
                  David Gonzalez, Esq.

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 
	 	 

      

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

       

       

       

      Any
        party
        may change its address by providing written notice to the other parties hereto
        at least five days prior to the effectiveness of such change. Written
        confirmation of receipt (A) given by the recipient of such notice, consent,
        waiver or other communication, (B) mechanically or electronically generated
        by
        the sender’s facsimile machine containing the time, date, recipient facsimile
        number and an image of the first page of such transmission or (C) provided
        by a
        courier or overnight courier service shall be rebuttable evidence of personal
        service, receipt by facsimile or receipt from a nationally recognized overnight
        delivery service in accordance with clause (i), (ii) or (iii) above,
        respectively.

       

      c.  Failure
        of any party to exercise any right or remedy under this Agreement or otherwise,
        or delay by a party in exercising such right or remedy, shall not operate
        as a
        waiver thereof.

       

      d.  The
        corporate laws of the State of New Jersey shall govern all issues concerning
        the
        relative rights of the Company and the Investor. All other questions concerning
        the construction, validity, enforcement and interpretation of this Agreement
        shall be governed by the internal laws of the State of New Jersey, without
        giving effect to any choice of law or conflict of law provision or rule (whether
        of the State of New Jersey or any other jurisdiction) that would cause the
        application of the laws of any jurisdiction other than the State of New Jersey.
        Each party hereby irrevocably submits to the non-exclusive jurisdiction of
        the
        Superior Courts of the State of New Jersey, sitting in Hudson County, New
        Jersey
        and the Federal District Court for the District of New Jersey sitting in
        Newark,
        New Jersey, for the adjudication of any dispute hereunder or in connection
        herewith or with any transaction contemplated hereby or discussed herein,
        and
        hereby irrevocably waives, and agrees not to assert in any suit, action or
        proceeding, any claim that it is not personally subject to the jurisdiction
        of
        any such court, that such suit, action or proceeding is brought in an
        inconvenient forum or that the venue of such suit, action or proceeding is
        improper. Each party hereby irrevocably waives personal service of process
        and
        consents to process being served in any such suit, action or proceeding by
        mailing a copy thereof to such party at the address for such notices to it
        under
        this Agreement and agrees that such service shall constitute good and sufficient
        service of process and notice thereof. Nothing contained herein shall be
        deemed
        to limit in any way any right to serve process in any manner permitted by
        law.
        If any provision of this Agreement shall be invalid or unenforceable in any
        jurisdiction, such invalidity or unenforceability shall not affect the validity
        or enforceability of the remainder of this Agreement in that jurisdiction
        or the
        validity or enforceability of any provision of this Agreement in any other
        jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
        AND
        AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
        HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
        TRANSACTION CONTEMPLATED HEREBY.

       

      e.  This
        Agreement, the Standby Equity Distribution Agreement, the Escrow Agreement,
        and
        the Placement Agent Agreement constitute the entire agreement among the parties
        hereto with respect to the subject matter hereof and thereof. There are no
        restrictions, promises, warranties or undertakings, other than those set
        forth
        or referred to herein and therein. This Agreement, the Standby Equity
        Distribution Agreement, the Escrow Agreement, and the Placement Agent Agreement
        supersede all prior agreements and understandings among the parties hereto
        with
        respect to the subject matter hereof and thereof.

       

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

       

      f.  This
        Agreement shall inure to the benefit of and be binding upon the permitted
        successors and assigns of each of the parties hereto.

       

      g.  The
        headings in this Agreement are for convenience of reference only and shall
        not
        limit or otherwise affect the meaning hereof.

       

      h.  This
        Agreement may be executed in identical counterparts, each of which shall
        be
        deemed an original but all of which shall constitute one and the same agreement.
        This Agreement, once executed by a party, may be delivered to the other party
        hereto by facsimile transmission of a copy of this Agreement bearing the
        signature of the party so delivering this Agreement.

       

      i.  Each
        party shall do and perform, or cause to be done and performed, all such further
        acts and things, and shall execute and deliver all such other agreements,
        certificates, instruments and documents, as the other party may reasonably
        request in order to carry out the intent and accomplish the purposes of this
        Agreement and the consummation of the transactions contemplated
        hereby.

       

      j.  The
        language used in this Agreement will be deemed to be the language chosen
        by the
        parties to express their mutual intent and no rules of strict construction
        will
        be applied against any party.

       

      k.  This
        Agreement is intended for the benefit of the parties hereto and their respective
        permitted successors and assigns, and is not for the benefit of, nor may
        any
        provision hereof be enforced by, any other Person.

       

      

      

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

      

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      

      IN
        WITNESS WHEREOF,
        the
        parties have caused this Registration Rights Agreement to be duly executed
        as of
        day and year first above written.

       

      
        	 	
                U.S.
                  Energy Corp.

              
	 	 
	 	
                By: /s/
                  Mark J. Larsen   

              
	 	
                Name: Mark
                  J. Larsen

              
	 	
                Title: President

              
	 	 
	 	 
	 	
                Cornell
                  Capital Partners, LP

              
	 	 
	 	
                By: Yorkville
                  Advisors, LLC

              
	 	
                Its: General
                  Partner

              
	 	 
	 	
                By: /s/
                  Mark Angelo   

              
	 	
                Name: Mark
                  Angelo

              
	 	
                Title: Portfolio
                  Manager

              
	 	 

      

      

      

      

      

      
        
          
             

            

             

            

          

          
          

        

        
          13

          
            

          

        

        
          
          

          
          

        

      

      

      EXHIBIT
        A

      FORM
        OF NOTICE OF EFFECTIVENESS

       

      OF
        REGISTRATION STATEMENT

       

      

      

      Attention: 

      

      Re: U.S.
        ENERGY CORP.

      

      Ladies
        and Gentlemen:

      

      We
        are
        counsel to U.S. Energy Corp. (the “Company”),
        and
        have represented the Company in connection with that certain Standby Equity
        Distribution Agreement (the “Standby
        Equity Distribution Agreement”)
        entered into by and between the Company and Cornell Capital Partners, LP
        (the
“Investor”)
        pursuant to which the Company issued to the Investor shares of its Common
        Stock,
        par value $0.01 per share (the “Common
        Stock”).
        Pursuant to the Standby Equity Distribution Agreement, the Company also has
        entered into a Registration Rights Agreement with the Investor (the
“Registration
        Rights Agreement”)
        pursuant to which the Company agreed, among other things, to register the
        Registrable Securities (as defined in the Registration Rights Agreement)
        under
        the Securities Act of 1933, as amended (the “Securities
        Act”).
        In
        connection with the Company’s obligations under the Registration Rights
        Agreement, on ____________ ____, the Company filed a Registration Statement
        on
        Form ________ (File No. 333-_____________) (the “Registration
        Statement”)
        with
        the Securities and Exchange Commission (the “SEC”)
        relating to the Registrable Securities which names the Investor as a selling
        stockholder thereunder.

       

      In
        connection with the foregoing, we advise you that a member of the SEC’s staff
        has advised us by telephone that the SEC has entered an order declaring the
        Registration Statement effective under the Securities Act at [ENTER
        TIME OF EFFECTIVENESS]
        on
[ENTER
        DATE OF EFFECTIVENESS]
        and we
        have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
        any stop order suspending its effectiveness has been issued or that any
        proceedings for that purpose are pending before, or threatened by, the SEC
        and
        the Registrable Securities are available for resale under the Securities
        Act
        pursuant to the Registration Statement.

       

      Very
        truly yours,

      

      

      

      By:      

      

      cc: Cornell
        Capital Partners, LPExhibit 10.4 Warrant

    
      

    

     

     

    

       

       

      WARRANT

       

      THE
        SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
        SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
        THE
        SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
        SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
        OR
        APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
        SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
        OR
        APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
        SAID
        ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
        WITH A BONA FIDE MARGIN ACCOUNT.

       

       

      U.S.
        ENERGY CORP.

       

       

      Warrant
        To Purchase Common Stock

       

      Warrant
        No.: CCP-001Number
        of
        Shares: 100,000

      

      Date
        of
        Issuance: May 5, 2006 

      

      U.S.
        Energy Corp., a Wyoming corporation (the “Company”),
        hereby certifies that, for good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, Cornell
        Capital Partners, LP
        (the
“Holder”),
        the
        registered holder hereof or its permitted assigns, is entitled, subject to
        the
        terms set forth below, to purchase from the Company upon surrender of this
        Warrant, at any time or times on or after the date hereof, but not after
        11:59 P.M. Eastern Time on the Expiration Date (as defined herein) One
        Hundred Thousand (100,000) fully paid and nonassessable shares of Common
        Stock
        (as defined herein) of the Company (the “Warrant
        Shares”)
        at the
        exercise price per share provided in Section 1(b) below or as subsequently
        adjusted; provided, however, that in no event shall the holder be entitled
        to
        exercise this Warrant for a number of Warrant Shares in excess of that number
        of
        Warrant Shares which, upon giving effect to such exercise, would cause the
        aggregate number of shares of Common Stock beneficially owned by the holder
        and
        its affiliates to exceed 4.99% of the outstanding shares of the Common Stock
        following such exercise, except within sixty (60) days of the Expiration
        Date
        (however, such restriction may be waived by Holder (but only as to itself
        and
        not to any other holder) upon not less than 65 days prior notice to the
        Company). For purposes of the foregoing proviso, the aggregate number of
        shares
        of Common Stock beneficially owned by the holder and its affiliates shall
        include the number of shares of Common Stock issuable upon exercise of this
        Warrant with respect to which the determination of such proviso is being
        made,
        but shall exclude shares of Common Stock which would be issuable upon
        (i) exercise of the remaining, unexercised Warrants beneficially owned by
        the holder and its affiliates and (ii) exercise or conversion of the
        unexercised or unconverted portion of any other securities of the Company
        beneficially owned by the holder and its affiliates (including, without
        limitation, any convertible 

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

       

      notes
        or
        preferred stock) subject to a limitation on conversion or exercise analogous
        to
        the limitation contained herein. Except as set forth in the preceding sentence,
        for purposes of this paragraph, beneficial ownership shall be calculated
        in
        accordance with Section 13(d) of the Securities Exchange Act of 1934, as
        amended. For purposes of this Warrant, in determining the number of outstanding
        shares of Common Stock a holder may rely on the number of outstanding shares
        of
        Common Stock as reflected in (1) the Company’s most recent Form 10-QSB or Form
        10-KSB, as the case may be, (2) a more recent public announcement by the
        Company
        or (3) any other notice by the Company or its transfer agent setting forth
        the
        number of shares of Common Stock outstanding. Upon the written request of
        any
        holder, the Company shall promptly, but in no event later than one (1) Business
        Day following the receipt of such notice, confirm in writing to any such
        holder
        the number of shares of Common Stock then outstanding. In any case, the number
        of outstanding shares of Common Stock shall be determined after giving effect
        to
        the exercise of Warrants (as defined below) by such holder and its affiliates
        since the date as of which such number of outstanding shares of Common Stock
        was
        reported.

       

      Section
        1.  

       

      (a)  This
        Warrant is the common stock purchase warrant (the “Warrant”)
        issued
        pursuant to the Standby Equity Distribution Agreement (“Standby
        equity Distribution Agreement”)
        the
        date hereof between the Company and Cornell.

       

      (b)  Definitions.
        The
        following words and terms as used in this Warrant shall have the following
        meanings:

       

      (i)  “Approved
        Stock Plan”
means
        any employee benefit plan which has been approved by the Board of Directors
        of
        the Company, pursuant to which the Company’s securities may be issued to any
        employee, officer or director for services provided to the Company.

       

      (ii)  “Business
        Day”
means
        any day other than Saturday, Sunday or other day on which commercial banks
        in
        the City of New York are authorized or required by law to remain
        closed.

       

      (iii)  “Closing
        Bid Price”
means
        the closing bid price of Common Stock as quoted on the Principal Market (as
        reported by Bloomberg Financial Markets (“Bloomberg”)
        through its “Volume at Price” function).

       

      (iv)  “Common
        Stock”
means
        (i) the Company’s common stock, par value $0.01 per share, and
        (ii) any capital stock into which such Common Stock shall have been changed
        or any capital stock resulting from a reclassification of such Common
        Stock.

       

      (v)  “Excluded
        Securities”
means,
        provided such security is issued at a price which is greater than or equal
        to
        the arithmetic average of the Closing Bid Prices of the Common Stock for
        the ten
        (10) consecutive trading days immediately preceding the date of issuance,
        any of
        the following: (a) any issuance by the Company of securities in connection
        with
        a strategic partnership or a joint venture (the primary purpose of which
        is not
        to raise equity capital), (b) any issuance by the Company of securities as
        consideration for a merger or consolidation or the acquisition of a business,
        product, license, or other assets of another person 

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      or
        entity, (c) options to purchase shares of Common Stock, provided the exercise
        price of such options is not less than the Closing Bid Price of the Common
        Stock
        on the date of issuance of such option and (d) issuances of shares of the
        Company’s Common Stock pursuant to the Standby Equity Distribution Agreement,
        regardless of the per share price.

       

      (vi)  “Expiration
        Date”
means
        the date three (3) years from the Issuance Date of this Warrant or, if such
        date
        falls on a Saturday, Sunday or other day on which banks are required or
        authorized to be closed in the City of New York or the State of New York
        or on
        which trading does not take place on the Principal Exchange or automated
        quotation system on which the Common Stock is traded (a “Holiday”),
        the
        next date that is not a Holiday.

       

      (vii)  “Issuance
        Date”
means
        the date hereof.

       

      (viii)  “Options”
means
        any rights, warrants or options to subscribe for or purchase Common Stock
        or
        Convertible Securities. 

       

      (ix)  “Other
        Securities”
means
        (i) those options and warrants of the Company issued prior to, and
        outstanding on, the Issuance Date of this Warrant, (ii) the shares of Common
        Stock issuable on exercise of such options and warrants, provided such options
        and warrants are not amended after the Issuance Date of this Warrant (provided
        that an extension of the exercise period of shall be allowed without taking
        such
        options and warrants out of this definition of “Other Securities”) and
        (iii) the shares of Common Stock issuable upon exercise of this Warrant.

       

      (x)  “Person”
means
        an individual, a limited liability company, a partnership, a joint venture,
        a
        corporation, a trust, an unincorporated organization and a government or
        any
        department or agency thereof.

       

      (xi)  “Principal
        Market”
means
        the New York Stock Exchange, the American Stock Exchange, the Nasdaq National
        Market, the Nasdaq SmallCap Market, whichever is at the time the principal
        trading exchange or market for such security, or the over-the-counter market
        on
        the electronic bulletin board for such security as reported by Bloomberg
        or, if
        no bid or sale information is reported for such security by Bloomberg, then
        the
        average of the bid prices of each of the market makers for such security
        as
        reported in the “pink sheets” by the National Quotation Bureau,
        Inc.

       

      (xii)  “Securities
        Act”
means
        the Securities Act of 1933, as amended. 

       

      (xiii)  “Warrant”
means
        this Warrant and all Warrants issued in exchange, transfer or replacement
        thereof. 

       

      (xiv)  “Warrant
        Exercise Price”
shall
        be $7.15 or as subsequently adjusted as provided in Section 8 hereof.

       

      (xv)  “Warrant
        Shares”
means
        the shares of Common Stock issuable at any time upon exercise of this Warrant.
        

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

       

       

      (c)  Other
        Definitional Provisions. 

       

      (i)  Except
        as
        otherwise specified herein, all references herein (A) to the Company shall
        be deemed to include the Company’s successors and (B) to any applicable law
        defined or referred to herein shall be deemed references to such applicable
        law
        as the same may have been or may be amended or supplemented from time to
        time.

       

      (ii)  When
        used
        in this Warrant, the words “herein”,
        “hereof”,
        and
“hereunder”
        and
        words of similar import, shall refer to this Warrant as a whole and not to
        any
        provision of this Warrant, and the words “Section”,
        “Schedule”,
        and
“Exhibit”
shall
        refer to Sections of, and Schedules and Exhibits to, this Warrant unless
        otherwise specified. 

       

      (iii)  Whenever
        the context so requires, the neuter gender includes the masculine or feminine,
        and the singular number includes the plural, and vice versa. 

       

      Section
        2.  Exercise
        of Warrant.
        

       

      Subject
        to the terms and conditions hereof, this Warrant may be exercised by the
        holder
        hereof then registered on the books of the Company, pro rata as hereinafter
        provided, at any time on any Business Day on or after the opening of business
        on
        such Business Day, commencing with the first day after the date hereof, and
        prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by delivery of
        a written notice, in the form of the subscription notice attached as
Exhibit
        A
        hereto
        (the “Exercise
        Notice”),
        of
        such holder’s election to exercise this Warrant, which notice shall specify the
        number of Warrant Shares to be purchased, payment to the Company of an
        amount equal to the Warrant Exercise Price(s) applicable to the Warrant Shares
        being purchased, multiplied by the number of Warrant Shares (at the
        applicable Warrant Exercise Price) as to which this Warrant is being
        exercised (plus any applicable issue or transfer taxes) (the “Aggregate
        Exercise Price”)
        in
        cash or wire transfer of immediately available funds and the surrender of
        this
        Warrant (or an indemnification undertaking with respect to this Warrant in
        the
        case of its loss, theft or destruction) to a common carrier for overnight
        delivery to the Company as soon as practicable following such date
        (“Cash
        Basis”)
        

      

      In
        the
        event of any exercise of the rights represented by this Warrant in compliance
        with this Section 2, the Company shall on or before the fifth (5th)
        Business Day following the date of receipt of the Exercise Notice, the Aggregate
        Exercise Price and this Warrant (or an indemnification undertaking with respect
        to this Warrant in the case of its loss, theft or destruction) and the receipt
        of the representations of the holder specified in Section 6 hereof, if requested
        by the Company (the “Exercise
        Delivery Documents”),
        and
        if the Common Stock is DTC eligible, credit such aggregate number of shares
        of
        Common Stock to which the holder shall be entitled to the holder’s or its
        designee’s balance account with The Depository Trust Company; provided, however,
        if the holder who submitted the Exercise Notice requested physical delivery
        of
        any or all of the Warrant Shares, or, if the Common Stock is not DTC eligible
        then the Company shall, on or before the fifth (5th)
        Business Day following receipt of the Exercise Delivery Documents, issue
        and
        surrender to a common carrier for overnight delivery to the address specified
        in
        the Exercise Notice, a certificate, registered in the name of the holder,
        for
        the number of shares of Common Stock to which the holder shall be entitled
        pursuant to such request. Upon delivery of the Exercise Notice and Aggregate
        Exercise Price 

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

       

      referred
        to in clause (i) or (ii) above the holder of this Warrant shall be deemed
        for all corporate purposes to have become the holder of record of the Warrant
        Shares with respect to which this Warrant has been exercised. In the case
        of a
        dispute as to the determination of the Warrant Exercise Price, the Closing
        Bid
        Price or the arithmetic calculation of the Warrant Shares, the Company shall
        promptly issue to the holder the number of Warrant Shares that is not disputed
        and shall submit the disputed determinations or arithmetic calculations to
        the
        holder via facsimile within one (1) Business Day of receipt of the holder’s
        Exercise Notice. 

       

      (a)  If
        the
        holder and the Company are unable to agree upon the determination of the
        Warrant
        Exercise Price or arithmetic calculation of the Warrant Shares within one
        (1)
        day of such disputed determination or arithmetic calculation being submitted
        to
        the holder, then the Company shall immediately submit via facsimile (i) the
        disputed determination of the Warrant Exercise Price or the Closing Bid Price
        to
        an independent, reputable investment banking firm or (ii) the disputed
        arithmetic calculation of the Warrant Shares to its independent, outside
        accountant. The Company shall use its best efforts to cause the investment
        banking firm or the accountant, as the case may be, to perform the
        determinations or calculations and notify the Company and the holder of the
        results no later than forty-eight (48) hours from the time it receives the
        disputed determinations or calculations. Such investment banking firm’s or
        accountant’s determination or calculation, as the case may be, shall be deemed
        conclusive absent manifest error.

       

      (b)  Unless
        the rights represented by this Warrant shall have expired or shall have been
        fully exercised, the Company shall, but only if requested by the Holder,
        as soon
        as practicable and in no event later than ten (10) Business Days after any
        exercise and at its own expense, issue a new Warrant identical in all respects
        to this Warrant exercised except it shall represent rights to purchase the
        number of Warrant Shares purchasable immediately prior to such exercise under
        this Warrant exercised, less the number of Warrant Shares with respect to
        which
        such Warrant is exercised.

       

      (c)  No
        fractional Warrant Shares are to be issued upon any pro rata exercise of
        this
        Warrant, but rather the number of Warrant Shares issued upon such exercise
        of
        this Warrant shall be rounded up or down to the nearest whole
        number.

       

      (d)  If
        the
        Company or its Transfer Agent shall fail for any reason or for no reason
        to
        issue to the holder within ten (10) days of receipt of the Exercise
        Delivery Documents, a certificate for the number of Warrant Shares to which
        the
        holder is entitled or to credit the holder’s balance account with The Depository
        Trust Company for such number of Warrant Shares to which the holder is entitled
        upon the holder’s exercise of this Warrant, the Company shall, in addition to
        any other remedies under this Warrant or the Placement Agent Agreement or
        otherwise available to such holder, pay as additional damages in cash to
        such
        holder on each day the issuance of such certificate for Warrant Shares is
        not
        timely effected an amount equal to 0.025% of the product of (A) the sum of
        the
        number of Warrant Shares not issued to the holder on a timely basis and to
        which
        the holder is entitled, and (B) the Closing Bid Price of the Common Stock
        for
        the trading day immediately preceding the last possible date which the Company
        could have issued such Common Stock to the holder without violating this
        Section 2.

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

       

      (e)  If
        within
        ten (10) days after the Company’s receipt of the Exercise Delivery Documents,
        the Company has been requested to, but fails to deliver a new Warrant to
        the
        holder for the number of Warrant Shares to which such holder is entitled
        pursuant to Section 2 hereof, then, in addition to any other available remedies
        under this Warrant, or otherwise available to such holder, the Company shall
        pay
        as additional damages in cash to such holder on each day after such tenth
        (10th)
        day
        that such delivery of such new Warrant is not timely effected in an amount
        equal
        to 0.25% of the product of (A) the number of Warrant Shares represented by
        the portion of this Warrant which is not being exercised and (B) the
        Closing Bid Price of the Common Stock for the trading day immediately preceding
        the last possible date which the Company could have issued such Warrant to
        the
        holder without violating this Section 2.

       

      (f)  Forced
        Exercise.Provided
        that the shares issuable upon exercise this Warrant are registered pursuant
        to
        an effective registration statement, in the event that the Company’s
Closing
        Bid Price
        as
        quoted by Bloomberg, LP is equal to or greater than one hundred fifty percent
        (150%) of the then applicable Warrant Exercise Price for ten (10) consecutive
        Trading Days, the Holder shall, commencing on such first (1st)
        Trading
        day after such tenth (10th)
        consecutive Trading Day, exercise this Warrant in whole at the then applicable
        Exercise Price within the next twenty (20) consecutive Trading Days
        (“Forced
        Exercise Period”).
        During the Forced Exercise Period if the Holder does not exercise this Warrant
        or exercises only a portion of this Warrant the Holder shall forfeit this
        Warrant, either in whole or such unexercised portion of this Warrant, as
        the
        case may be, at the end of the Forced Exercise Period, unless otherwise agreed
        to by the Company. Provided however in the event that the Closing Bid Price
        of
        the Company’s Common Stock during the Forced Exercise Period is equal to or
        lower than the applicable Warrant Exercise Price the Holder shall not be
        forced
        to exercise this Warrant, in whole or in part, as provided for herein and
        shall
        therefore not forfeit such portion of this Warrant which was not exercised
        during the Forced Exercise Period. . 

       

      Section
        3.  Covenants
        as to Common Stock.
        The
        Company hereby covenants and agrees as follows:

       

      (a)  This
        Warrant is, and any Warrants issued in substitution for or replacement of
        this
        Warrant will upon issuance be, duly authorized and validly issued.

       

      (b)  All
        Warrant Shares which may be issued upon the exercise of the rights represented
        by this Warrant will, upon issuance, be validly issued, fully paid and
        nonassessable and free from all taxes, liens and charges with respect to
        the
        issue thereof.

       

      (c)  During
        the period within which the rights represented by this Warrant may be exercised,
        the Company will at all times have authorized and reserved at least one hundred
        percent (100%) of the number of shares of Common Stock needed to provide
        for the
        exercise of the rights then represented by this Warrant and the par value
        of
        said shares will at all times be less than or equal to the applicable Warrant
        Exercise Price. If at any time the Company does not have a sufficient number
        of
        shares of Common Stock authorized and available, then the Company shall call
        and
        hold a special meeting of its stockholders within sixty (60) days of that
        time for the sole purpose of increasing the number of authorized shares of
        Common Stock.

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

       

       

      (d)  If
        at any
        time after the date hereof the Company shall file a registration statement,
        the
        Company shall include the Warrant Shares issuable to the holder, pursuant
        to the
        terms of this Warrant and shall maintain, so long as any other shares of
        Common
        Stock shall be so listed, such listing of all Warrant Shares from time to
        time
        issuable upon the exercise of this Warrant; and the Company shall so list
        on
        each national securities exchange or automated quotation system, as the case
        may
        be, and shall maintain such listing of, any other shares of capital stock
        of the
        Company issuable upon the exercise of this Warrant if and so long as any
        shares
        of the same class shall be listed on such national securities exchange or
        automated quotation system.

       

      (e)  The
        Company will not, by amendment of its Articles of Incorporation or through
        any
        reorganization, transfer of assets, consolidation, merger, dissolution, issue
        or
        sale of securities, or any other voluntary action, avoid or seek to avoid
        the
        observance or performance of any of the terms to be observed or performed
        by it
        hereunder, but will at all times in good faith assist in the carrying out
        of all
        the provisions of this Warrant and in the taking of all such action as may
        reasonably be requested by the holder of this Warrant in order to protect
        the
        exercise privilege of the holder of this Warrant against dilution or other
        impairment, consistent with the tenor and purpose of this Warrant. The Company
        will not increase the par value of any shares of Common Stock receivable
        upon
        the exercise of this Warrant above the Warrant Exercise Price then in effect,
        and (ii) will take all such actions as may be necessary or appropriate in
        order that the Company may validly and legally issue fully paid and
        nonassessable shares of Common Stock upon the exercise of this
        Warrant.

       

      (f)  This
        Warrant will be binding upon any entity succeeding to the Company by merger,
        consolidation or acquisition of all or substantially all of the Company’s
        assets.

       

      Section
        4.  Taxes.
        The
        Company shall pay any and all taxes, except any applicable withholding, which
        may be payable with respect to the issuance and delivery of Warrant Shares
        upon
        exercise of this Warrant.

       

      Section
        5.  Warrant
        Holder Not Deemed a Stockholder.
        Except
        as otherwise specifically provided herein, no holder, as such, of this Warrant
        shall be entitled to vote or receive dividends or be deemed the holder of
        shares
        of capital stock of the Company for any purpose, nor shall anything contained
        in
        this Warrant be construed to confer upon the holder hereof, as such, any
        of the
        rights of a stockholder of the Company or any right to vote, give or withhold
        consent to any corporate action (whether any reorganization, issue of stock,
        reclassification of stock, consolidation, merger, conveyance or otherwise),
        receive notice of meetings, receive dividends or subscription rights, or
        otherwise, prior to the issuance to the holder of this Warrant of the Warrant
        Shares which he or she is then entitled to receive upon the due exercise
        of this
        Warrant. In addition, nothing contained in this Warrant shall be construed
        as
        imposing any liabilities on such holder to purchase any securities (upon
        exercise of this Warrant or otherwise) or as a stockholder of the Company,
        whether such liabilities are asserted by the Company or by creditors of the
        Company. Notwithstanding this Section 5, the Company will provide the holder
        of
        this Warrant with copies of the same notices and other information given
        to the
        stockholders of the Company generally, contemporaneously with the giving
        thereof
        to the stockholders.

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

       

       

       

      Section
        6.  Representations
        of Holder.
        The
        holder of this Warrant, by the acceptance hereof, represents that it is
        acquiring this Warrant and the Warrant Shares for its own account for investment
        only and not with a view towards, or for resale in connection with, the public
        sale or distribution of this Warrant or the Warrant Shares, except pursuant
        to
        sales registered or exempted under the Securities Act; provided, however,
        that
        by making the representations herein, the holder does not agree to hold this
        Warrant or any of the Warrant Shares for any minimum or other specific term
        and
        reserves the right to dispose of this Warrant and the Warrant Shares at any
        time
        in accordance with or pursuant to a registration statement or an exemption
        under
        the Securities Act. The holder of this Warrant further represents, by acceptance
        hereof, that, as of this date, such holder is an “accredited investor” as such
        term is defined in Rule 501(a)(1) of Regulation D promulgated by the
        Securities and Exchange Commission under the Securities Act (an “Accredited
        Investor”).
        Upon
        exercise of this Warrant the holder shall, if requested by the Company, confirm
        in writing, in a form satisfactory to the Company, that the Warrant Shares
        so
        purchased are being acquired solely for the holder’s own account and not as a
        nominee for any other party, for investment, and not with a view toward
        distribution or resale and that such holder is an Accredited Investor. If
        such
        holder cannot make such representations because they would be factually
        incorrect, it shall be a condition to such holder’s exercise of this Warrant
        that the Company receive such other representations as the Company considers
        reasonably necessary to assure the Company that the issuance of its securities
        upon exercise of this Warrant shall not violate any United States or state
        securities laws.

       

      Section
        7.  Ownership
        and Transfer.

       

      (a)  The
        Company shall maintain at its principal executive offices (or such other
        office
        or agency of the Company as it may designate by notice to the holder hereof),
        a
        register for this Warrant, in which the Company shall record the name and
        address of the person in whose name this Warrant has been issued, as well
        as the
        name and address of each transferee. The Company may treat the person in
        whose
        name any Warrant is registered on the register as the owner and holder thereof
        for all purposes, notwithstanding any notice to the contrary, but in all
        events
        recognizing any transfers made in accordance with the terms of this
        Warrant.

       

      Section
        8.  Adjustment
        of Warrant Exercise Price and Number of Shares.
        The
        Warrant Exercise Price and the number of shares of Common Stock issuable
        upon
        exercise of this Warrant shall be adjusted from time to time as
        follows:

       

      (a)  Adjustment
        of Warrant Exercise Price and Number of Shares upon Issuance of Common
        Stock.
        If and
        whenever on or after the Issuance Date of this Warrant, the Company issues
        or
        sells, or is deemed to have issued or sold, any shares of Common
        Stock (other than (i) Excluded Securities, (ii) shares of Common Stock
        which are issued or deemed to have been issued by the Company in connection
        with
        an Approved Stock Plan, or (iii) the Other Securities) for a consideration
        per
        share less than a price (the “Applicable
        Price”)
        equal
        to the Warrant Exercise Price in effect immediately prior to such issuance
        or
        sale, then immediately after such issue or sale the Warrant Exercise Price
        then
        in effect shall be reduced to an amount equal to such consideration per share.
        For purposes of the preceding sentence the extension of the exercise period
        for
        any options (employee or otherwise) of for any warrants, shall not be deemed
        to
        be the issuance of new options or warrants. Upon each such adjustment of
        the
        Warrant Exercise Price hereunder, the number of Warrant Shares issuable upon
        exercise of this Warrant 

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

       

      shall
        be
        adjusted to the number of shares determined by multiplying the Warrant Exercise
        Price in effect immediately prior to such adjustment by the number of Warrant
        Shares issuable upon exercise of this Warrant immediately prior to such
        adjustment and dividing the product thereof by the Warrant Exercise Price
        resulting from such adjustment.

       

      (b)  Effect
        on Warrant Exercise Price of Certain Events.
        For
        purposes of determining the adjusted Warrant Exercise Price under Section
        8(a)
        above, the following shall be applicable:

       

      (i)  Issuance
        of Options.
        If
        after the date hereof, the Company in any manner grants any Options and the
        lowest price per share for which one share of Common Stock is issuable upon
        the
        exercise of any such Option or upon conversion or exchange of any convertible
        securities issuable upon exercise of any such Option is less than the Applicable
        Price, then such share of Common Stock shall be deemed to be outstanding
        and to
        have been issued and sold by the Company at the time of the granting or sale
        of
        such Option for such price per share. For purposes of this Section 8(b)(i),
        the
        lowest price per share for which one share of Common Stock is issuable upon
        exercise of such Options or upon conversion or exchange of such Convertible
        Securities shall be equal to the sum of the lowest amounts of consideration
        (if
        any) received or receivable by the Company with respect to any one share
        of
        Common Stock upon the granting or sale of the Option, upon exercise of the
        Option or upon conversion or exchange of any convertible security issuable
        upon
        exercise of such Option. No further adjustment of the Warrant Exercise Price
        shall be made upon the actual issuance of such Common Stock or of such
        convertible securities upon the exercise of such Options or upon the actual
        issuance of such Common Stock upon conversion or exchange of such convertible
        securities.

       

      (ii)  Issuance
        of Convertible Securities.
        If the
        Company in any manner issues or sells any convertible securities and the
        lowest
        price per share for which one share of Common Stock is issuable upon the
        conversion or exchange thereof is less than the Applicable Price, then such
        share of Common Stock shall be deemed to be outstanding and to have been
        issued
        and sold by the Company at the time of the issuance or sale of such convertible
        securities for such price per share. For the purposes of this
        Section 8(b)(ii), the lowest price per share for which one share of Common
        Stock is issuable upon such conversion or exchange shall be equal to the
        sum of
        the lowest amounts of consideration (if any) received or receivable by the
        Company with respect to one share of Common Stock upon the issuance or sale
        of
        the convertible security and upon conversion or exchange of such convertible
        security. No further adjustment of the Warrant Exercise Price shall be made
        upon
        the actual issuance of such Common Stock upon conversion or exchange of such
        convertible securities, and if any such issue or sale of such convertible
        securities is made upon exercise of any Options for which adjustment of the
        Warrant Exercise Price had been or are to be made pursuant to other provisions
        of this Section 8(b), no further adjustment of the Warrant Exercise Price
        shall
        be made by reason of such issue or sale. 

       

      (iii)  Change
        in Option Price or Rate of Conversion.
        If the
        purchase price provided for in any Options, the additional consideration,
        if
        any, payable upon the issue, conversion or exchange of any convertible
        securities, or the rate at which any convertible securities are convertible
        into
        or exchangeable for Common Stock changes at any time, the 

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

       

       

      Warrant
        Exercise Price in effect at the time of such change shall be adjusted to
        the
        Warrant Exercise Price which would have been in effect at such time had such
        Options or convertible securities provided for such changed purchase price,
        additional consideration or changed conversion rate, as the case may be,
        at the
        time initially granted, issued or sold and the number of Warrant Shares issuable
        upon exercise of this Warrant shall be correspondingly readjusted. For purposes
        of this Section 8(b)(iii), if the terms of any Option or convertible security
        that was outstanding as of the Issuance Date of this Warrant are changed
        in the
        manner described in the immediately preceding sentence, then such Option
        or
        convertible security and the Common Stock deemed issuable upon exercise,
        conversion or exchange thereof shall be deemed to have been issued as of
        the
        date of such change. No adjustment pursuant to this Section 8(b) shall be
        made if such adjustment would result in an increase of the Warrant Exercise
        Price then in effect.

       

      (c)  Effect
        on Warrant Exercise Price of Certain Events.
        For
        purposes of determining the adjusted Warrant Exercise Price under
        Sections 8(a) and 8(b), the following shall be applicable:

       

      (i)  Calculation
        of Consideration Received.
        If any
        Common Stock, Options or convertible securities are issued or sold or deemed
        to
        have been issued or sold for cash, the consideration received therefore will
        be
        deemed to be the net amount received by the Company therefore. If any Common
        Stock, Options or convertible securities are issued or sold for a consideration
        other than cash, the amount of such consideration received by the Company
        will
        be the fair value of such consideration, except where such consideration
        consists of marketable securities, in which case the amount of consideration
        received by the Company will be the market price of such securities on the
        date
        of receipt of such securities. If any Common Stock, Options or convertible
        securities are issued to the owners of the non-surviving entity in connection
        with any merger in which the Company is the surviving entity, the amount
        of
        consideration therefore will be deemed to be the fair value of such portion
        of
        the net assets and business of the non-surviving entity as is attributable
        to
        such Common Stock, Options or convertible securities, as the case may be.
        The
        fair value of any consideration other than cash or securities will be determined
        jointly by the Company and the holders of Warrants representing at least
        two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
        then
        outstanding. If such parties are unable to reach agreement within ten (10)
        days after the occurrence of an event requiring valuation (the “Valuation
        Event”),
        the
        fair value of such consideration will be determined within five (5) Business
        Days after the tenth (10th)
        day
        following the Valuation Event by an independent, reputable appraiser jointly
        selected by the Company and the holders of Warrants representing at least
        two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
        then
        outstanding. The determination of such appraiser shall be final and binding
        upon
        all parties and the fees and expenses of such appraiser shall be borne jointly
        by the Company and the holders of Warrants.

       

      (ii)  Integrated
        Transactions.
        In case
        any Option is issued in connection with the issue or sale of other securities
        of
        the Company, together comprising one integrated transaction in which no specific
        consideration is allocated to such Options by the parties thereto, the Options
        will be deemed to have been issued for a consideration of $.01.

       

      (iii)  Treasury
        Shares.
        The
        number of shares of Common Stock outstanding at any given time does not include
        shares owned or held by or for the account of the 

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

       

      Company,
        and the disposition of any shares so owned or held will be considered an
        issue
        or sale of Common Stock.

       

      (iv)  Record
        Date.
        If the
        Company takes a record of the holders of Common Stock for the purpose of
        entitling them (1) to receive a dividend or other distribution payable in
        Common Stock, Options or in convertible securities or (2) to subscribe for
        or purchase Common Stock, Options or convertible securities, then such record
        date will be deemed to be the date of the issue or sale of the shares of
        Common
        Stock deemed to have been issued or sold upon the declaration of such dividend
        or the making of such other distribution or the date of the granting of such
        right of subscription or purchase, as the case may be.

       

      (d)  Adjustment
        of Warrant Exercise Price upon Subdivision or Combination of Common
        Stock.
        If the
        Company at any time after the date of issuance of this Warrant subdivides
        (by
        any stock split, stock dividend, recapitalization or otherwise) one or more
        classes of its outstanding shares of Common Stock into a greater number of
        shares, any Warrant Exercise Price in effect immediately prior to such
        subdivision will be proportionately reduced and the number of shares of Common
        Stock obtainable upon exercise of this Warrant will be proportionately
        increased. If the Company at any time after the date of issuance of this
        Warrant
        combines (by combination, reverse stock split or otherwise) one or more classes
        of its outstanding shares of Common Stock into a smaller number of shares,
        any
        Warrant Exercise Price in effect immediately prior to such combination will
        be
        proportionately increased and the number of Warrant Shares issuable upon
        exercise of this Warrant will be proportionately decreased. Any adjustment
        under
        this Section 8(d) shall become effective at the close of business on the
        date the subdivision or combination becomes effective.

       

      (e)  Distribution
        of Assets.
        If the
        Company shall declare or make any dividend or other distribution of its assets
        (or rights to acquire its assets) to holders of Common Stock, by way of return
        of capital or otherwise (including, without limitation, any distribution
        of
        cash, stock or other securities, property or options by way of a dividend,
        spin
        off, reclassification, corporate rearrangement or other similar transaction)
        (a
“Distribution”),
        at
        any time after the issuance of this Warrant, then, in each such
        case:

       

      (i)  any
        Warrant Exercise Price in effect immediately prior to the close of business
        on
        the record date fixed for the determination of holders of Common Stock
        entitled to
        receive the Distribution shall be reduced, effective as of the close of business
        on such record date, to a price determined by multiplying such Warrant Exercise
        Price by a fraction of which (A) the numerator shall be the Closing Sale
        Price
        of the Common Stock on the trading day immediately preceding such record
        date
        minus the value of the Distribution (as determined in good faith by the
        Company’s Board of Directors) applicable to one share of Common Stock, and (B)
        the denominator shall be the Closing Sale Price of the Common Stock on the
        trading day immediately preceding such record date; and

       

      (ii)  either
        (A) the number of Warrant Shares obtainable upon exercise of this Warrant
        shall
        be increased to a number of shares equal to the number of shares of Common
        Stock
        obtainable immediately prior to the close of business on the record date
        fixed
        for the determination of holders of Common Stock entitled to receive the
        Distribution multiplied by the reciprocal of the fraction set forth in the
        immediately preceding clause (i), or (B) in the event 

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

       

      that
        the
        Distribution is of common stock of a company whose common stock is traded
        on a
        national securities exchange or a national automated quotation system, then
        the
        holder of this Warrant shall receive an additional warrant to purchase Common
        Stock, the terms of which shall be identical to those of this Warrant, except
        that such warrant shall be exercisable into the amount of the assets that
        would
        have been payable to the holder of this Warrant pursuant to the Distribution
        had
        the holder exercised this Warrant immediately prior to such record date and
        with
        an exercise price equal to the amount by which the exercise price of this
        Warrant was decreased with respect to the Distribution pursuant to the terms
        of
        the immediately preceding clause (i).

       

      (f)  Certain
        Events.
        If any
        event occurs of the type contemplated by the provisions of this Section 8
        but not expressly provided for by such provisions (including, without
        limitation, the granting of stock appreciation rights, phantom stock rights
        or
        other rights with equity features), then the Company’s Board of Directors will
        make an appropriate adjustment in the Warrant Exercise Price and the number
        of
        shares of Common Stock obtainable upon exercise of this Warrant so as to
        protect
        the rights of the holders of the Warrants; provided, except as set forth
        in
        section 8(d),that no such adjustment pursuant to this Section 8(f) will increase
        the Warrant Exercise Price or decrease the number of shares of Common Stock
        obtainable as otherwise determined pursuant to this Section 8.

       

      (g)  Notices.

       

      (i)  Immediately
        upon any adjustment of the Warrant Exercise Price, the Company will give
        written
        notice thereof to the holder of this Warrant, setting forth in reasonable
        detail, and certifying, the calculation of such adjustment.

       

      (ii)  The
        Company will give written notice to the holder of this Warrant at least ten
        (10)
        days prior to the date on which the Company closes its books or takes a record
        (A) with respect to any dividend or distribution upon the Common Stock,
        (B) with respect to any pro rata subscription offer to holders of Common
        Stock or (C) for determining rights to vote with respect to any Organic
        Change (as defined below), dissolution or liquidation, provided that such
        information shall be made known to the public prior to or in conjunction
        with
        such notice being provided to such holder.

       

      (iii)  The
        Company will also give written notice to the holder of this Warrant at least
        ten
        (10) days prior to the date on which any Organic Change, dissolution or
        liquidation will take place, provided that such information shall be made
        known
        to the public prior to or in conjunction with such notice being provided
        to such
        holder.

       

      Section
        9.  Purchase
        Rights; Reorganization, Reclassification, Consolidation, Merger or
        Sale.

       

      (a)  In
        addition to any adjustments pursuant to Section 8 above, if at any time the
        Company grants, issues or sells any Options, Convertible Securities or rights
        to
        purchase stock, warrants, securities or other property pro rata to the record
        holders of any class of Common Stock (the “Purchase
        Rights”),
        then
        the holder of this Warrant will be entitled to acquire, upon the terms
        applicable to such Purchase Rights, the aggregate Purchase Rights which such
        holder 

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

       

       

      could
        have acquired if such holder had held the number of shares of Common Stock
        acquirable upon complete exercise of this Warrant immediately before the
        date on
        which a record is taken for the grant, issuance or sale of such Purchase
        Rights,
        or, if no such record is taken, the date as of which the record holders of
        Common Stock are to be determined for the grant, issue or sale of such Purchase
        Rights.

       

      (b)  Any
        recapitalization, reorganization, reclassification, consolidation, merger,
        sale
        of all or substantially all of the Company’s assets to another Person or other
        transaction in each case which is effected in such a way that holders of
        Common
        Stock are entitled to receive (either directly or upon subsequent liquidation)
        stock, securities or assets with respect to or in exchange for Common Stock
        is
        referred to herein as an “Organic
        Change.”
Prior
        to the consummation of any (i) sale of all or substantially all of the Company’s
        assets to an acquiring Person or (ii) other Organic Change following which
        the
        Company is not a surviving entity, the Company will secure from the Person
        purchasing such assets or the successor resulting from such Organic Change
        (in
        each case, the “Acquiring
        Entity”)
        a
        written agreement (in form and substance satisfactory to the holders of Warrants
        representing at least two-thirds (iii) of the Warrant Shares issuable upon
        exercise of the Warrants then outstanding) to deliver to each holder of Warrants
        in exchange for such Warrants, a security of the Acquiring Entity evidenced
        by a
        written instrument substantially similar in form and substance to this Warrant
        and satisfactory to the holders of the Warrants (including an adjusted warrant
        exercise price equal to the value for the Common Stock reflected by the terms
        of
        such consolidation, merger or sale, and exercisable for a corresponding number
        of shares of Common Stock acquirable and receivable upon exercise of the
        Warrants without regard to any limitations on exercise, if the value so
        reflected is less than any Applicable Warrant Exercise Price immediately
        prior
        to such consolidation, merger or sale). Prior to the consummation of any
        other
        Organic Change, the Company shall make appropriate provision (in form and
        substance satisfactory to the holders of Warrants representing a
        majority of
        the
        Warrant Shares issuable upon exercise of the Warrants then outstanding) to
        insure that each of the holders of the Warrants will thereafter have the
        right
        to acquire and receive in lieu of or in addition to (as the case may be)
        the
        Warrant Shares immediately theretofore issuable and receivable upon the exercise
        of such holder’s Warrants (without regard to any limitations on exercise),
        such shares of stock, securities or assets that would have been issued or
        payable in such Organic Change with respect to or in exchange for the number
        of
        Warrant Shares which would have been issuable and receivable upon the exercise
        of such holder’s Warrant as of the date of such Organic Change (without taking
        into account any limitations or restrictions on the exercisability of this
        Warrant).

       

      Section
        10.  Lost,
        Stolen, Mutilated or Destroyed Warrant.
        If this
        Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly,
        on
        receipt of an indemnification undertaking (or, in the case of a mutilated
        Warrant, the Warrant), issue a new Warrant of like denomination and tenor
        as
        this Warrant so lost, stolen, mutilated or destroyed.

       

      Section
        11.  Notice.
        Any
        notices, consents, waivers or other communications required or permitted
        to be
        given under the terms of this Warrant must be in writing and will be deemed
        to
        have been delivered: (i) upon receipt, when delivered personally;
        (ii) upon receipt, when sent by facsimile (provided confirmation of receipt
        is received by the sending party transmission is mechanically or electronically
        generated and kept on file by the sending party); or (iii) one Business Day
        after deposit with a nationally recognized overnight delivery service, in
        each
        case 

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

       

       

      properly
        addressed to the party to receive the same. The addresses and facsimile numbers
        for such communications shall be:

       

      
        	
                If
                  to Holder:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Attention: Mark
                  A. Angelo

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 
	
                With
                  Copy to:

              	
                David
                  Gonzalez, Esq.

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Telephone: (201)
                  985-8300

              
	 	
                Facsimile: (201)
                  985-8266

              
	 	 
	
                If
                  to the Company, to:

              	
                U.S.
                  Energy Corp.

              
	 	
                877
                  North 8th
                  West

              
	 	
                Glen
                  L. Larsen Building

              
	 	
                Riverton,
                  WY 82501

              
	 	
                Attention:
                  Mark J. Larsen

              
	 	
                Telephone:
                  (307) 856-9271

              
	 	
                Facsimile:
                  (307)
                  857-3050

              
	 	 
	
                With
                  a copy to:

              	
                The
                  Law Office of Stephen E. Rounds

              
	 	
                1544
                  York Street, Suite 110

              
	 	
                Denver,
                  CO 80206

              
	 	
                Attention
                  : Stephen E. Rounds

              
	 	
                Telephone:
                  (303) 377-6997

              
	 	
                Facsimile:
                  (303) 377-0231

              

      

      

      If
        to a
        holder of this Warrant, to it at the address and facsimile number set forth
        on
Exhibit C
        hereto,
        with copies to such holder’s representatives as set forth on Exhibit C,
        or at
        such other address and facsimile as shall be delivered to the Company upon
        the
        issuance or transfer of this Warrant. Each party shall provide five days’ prior
        written notice to the other party of any change in address or facsimile number.
        Written confirmation of receipt (A) given by the recipient of such notice,
        consent, facsimile, waiver or other communication, (or (B) provided by a
        nationally recognized overnight delivery service shall be rebuttable evidence
        of
        personal service, receipt by facsimile or receipt from a nationally recognized
        overnight delivery service in accordance with clause (i), (ii) or (iii) above,
        respectively.

       

      Section
        12.  Date.
        The
        date of this Warrant is set forth on page 1 hereof. This Warrant, in all
        events, shall be wholly void and of no effect after the close of business
        on the
        Expiration Date, except that notwithstanding any other provisions hereof,
        the
        provisions of Section 8(b) shall continue in full force and effect after
        such date as to any Warrant Shares or other securities issued upon the exercise
        of this Warrant.

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

       

      Section
        13.  Amendment
        and Waiver.
        Except
        as otherwise provided herein, the provisions of the Warrants may be amended
        and
        the Company may take any action herein prohibited, or omit to perform any
        act
        herein required to be performed by it, only if the Company has obtained the
        written consent of the holders of Warrants representing at least two-thirds
        of
        the Warrant Shares issuable upon exercise of the Warrants then outstanding;
        provided that, except for Section 8(d), no such action may increase the Warrant
        Exercise Price or decrease the number of shares or class of stock obtainable
        upon exercise of any Warrant without the written consent of the holder of
        such
        Warrant.

       

      Section
        14.  Descriptive
        Headings; Governing Law.
        The
        descriptive headings of the several sections and paragraphs of this Warrant
        are
        inserted for convenience only and do not constitute a part of this Warrant.
        The
        corporate laws of the State of New Jersey shall govern all issues concerning
        the
        relative rights of the Company and its stockholders. All other questions
        concerning the construction, validity, enforcement and interpretation of
        this
        Agreement shall be governed by the internal laws of the State of New Jersey,
        without giving effect to any choice of law or conflict of law provision or
        rule
        (whether of the State of New Jersey or any other jurisdictions) that would
        cause
        the application of the laws of any jurisdictions other than the State of
        New
        Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction
        of
        the state and federal courts sitting in Hudson County and the United States
        District Court for the District of New Jersey, for the adjudication of any
        dispute hereunder or in connection herewith or therewith, or with any
        transaction contemplated hereby or discussed herein, and hereby irrevocably
        waives, and agrees not to assert in any suit, action or proceeding, any claim
        that it is not personally subject to the jurisdiction of any such court,
        that
        such suit, action or proceeding is brought in an inconvenient forum or that
        the
        venue of such suit, action or proceeding is improper. Each party hereby
        irrevocably waives personal service of process and consents to process being
        served in any such suit, action or proceeding by mailing a copy thereof to
        such
        party at the address for such notices to it under this Agreement and agrees
        that
        such service shall constitute good and sufficient service of process and
        notice
        thereof. Nothing contained herein shall be deemed to limit in any way any
        right
        to serve process in any manner permitted by law. 

       

      Section
        15.  Waiver
        of Jury Trial.
        AS
        A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
        PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
        RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
        ASSOCIATED WITH THIS TRANSACTION.

       

      

      REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      
        
           

          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        the
        Company has caused this Warrant to be signed as of the date first set forth
        above.

       

      
        	 	
                U.S.
                  ENERGY CORP.

              
	 	 
	 	
                By:       
                  /s/ Mark J. Larsen      

              
	 	
                Name: 
                  Mark J. Larsen

              
	 	
                Title: 
                  President

              

      

       

      

       

      
        
          
             

          

          
          

        

        
          16

          
            

          

        

        
          
          

          
          

        

      

       

      EXHIBIT
        A TO WARRANT

       

       

      EXERCISE
        NOTICE

       

       

      TO
        BE EXECUTED 

       

       

      BY
        THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

       

       

      U.S.
        ENERGY CORP.

       

      The
        undersigned holder hereby exercises the right to purchase ______________
        of the
        shares of Common Stock (“Warrant
        Shares”)
        of
        U.S. Energy Corp. (the “Company”),
        evidenced by the attached Warrant (the “Warrant”).
        Capitalized terms used herein and not otherwise defined shall have the
        respective meanings set forth in the Warrant.

       

      (a)
        Payment
        of Warrant Exercise Price.
        The
        holder shall pay the Aggregate Exercise Price of $______________ to the Company
        in accordance with the terms of the Warrant. 

       

      (b)
        Delivery
        of Warrant Shares.
        The
        Company shall deliver to the holder _________
        Warrant
        Shares in accordance with the terms of the Warrant. 

       

      

       

       

       

      

      Date:
        _______________ __, ______

      

      Name
        of
        Registered Holder

      

      By:     

      Name:     

      Title:     

      

      
        
          
            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      

       

      EXHIBIT
        B TO WARRANT

       

       

      FORM
        OF WARRANT POWER

       

      FOR
        VALUE RECEIVED,
        the
        undersigned does hereby assign and transfer to ________________, Federal
        Identification No. __________, a warrant to purchase ____________ shares of
        the capital stock of U.S. Energy Corp. represented by warrant certificate
        no. _____, standing in the name of the undersigned on the books of said
        corporation. The undersigned does hereby irrevocably constitute and appoint
        ______________, attorney to transfer the warrants of said corporation, with
        full
        power of substitution in the premises.

       

      
        	
                Dated:      

              	 
	 	 
	 	
                By:      

              
	 	
                Name:      

              
	 	
                Title:      

              
	 	 

      

      

      

      

      
        
          B-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}]]