UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported): September 24, 2020

 

U.S. ENERGY CORP.

 

(Exact Name of Company as Specified in its Charter)

 

Wyoming   000-06814   83-0205516

(State or other jurisdiction

of incorporation or organization)

 

(Commission

File No.)

 

(I.R.S. Employer

Identification No.)

 

675 Bering Drive, Suite 100, Houston, Texas   77057
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (303) 993-3200

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):

 

[  ] Written communications pursuant to Rule 425 under the Securities Act
   
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
   
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
   
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of exchange on which registered
Common Stock, $0.01 par value   USEG  

The NASDAQ Stock Market LLC

(Nasdaq Capital Market)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).

 

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On September 25, 2020, U.S. Energy Corp. (“U.S. Energy”, “we”, “us” or the “Company”), entered into an Asset Purchase Agreement (the “APA”) with Randolph N. Osherow, as Chapter 7 trustee, for FieldPoint Petroleum Corporation’s Chapter 7 bankruptcy proceedings (the “Seller”).

 

Pursuant to the APA, we acquired all of the Seller’s rights to, and interest in, both operated and non-operated properties primarily in Lea County, New Mexico, and Converse County, Wyoming (the “Properties”). The Properties encompass approximately 21 total wells of which 14 are currently producing. The Properties also include approximately 500 net acres in Lea County, New Mexico, which are held by production.

 

We paid $25,000 as a deposit in connection with the acquisition and paid the remaining amount of the $500,000 aggregate purchase price (i.e., $475,000), on September 25, 2020, upon the closing of the acquisition, which was subject to the approval of the bankruptcy court.

 

The APA contained customary representations and warranties of the parties.

 

The foregoing summary description of the material terms of the APA does not purport to be complete and is qualified in its entirety by reference to the full text of the APA, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference in this Item 1.01.

 

A total of $375,000 of the funds paid by the Company under the APA was raised by the entry into the APEG Note as discussed below under Item 2.03, which description is incorporated by reference in this Item 1.01 by reference in its entirety.

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

The disclosures set forth in Item 1.01 above relating to the APA are incorporated by reference into this Item 2.01 in their entirety, to the extent required by Item 2.01.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On September 24, 2020, we borrowed $375,000 from APEG Energy II, L.P., which entity Patrick E. Duke, a director of the Company, has shared voting power and shared investment power over (“APEG”). To evidence the amounts borrowed, we issued APEG a $375,000 Secured Promissory Note (the “APEG Note”).

 

The APEG Note accrues 10% annual interest (18% upon the occurrence of an event of default), compounded monthly, through the maturity date, September 24, 2021, with all interest payable on the maturity date (or earlier as discussed below). The note may be prepaid at any time before maturity, provided that upon any prepayment of the note, we are required to pay APEG the amount of interest which would have accrued through maturity (at 10% per annum)(the “Minimum Interest”). The note contains customary representations and covenants of the Company (relating to maintaining our corporate existence and complying with the terms of the note), and standard events of default, including the failure to pay amounts under the note when due (subject to a 10 day cure period, after notice of such failure has been provided in writing by APEG), material breaches of the terms of the note (subject to a ten business day cure period, after notice of such breach has been provided in writing by APEG), and the occurrence of any material adverse effect, affecting the Company, the note or our ability to perform our obligations under the note, or an event of default under any agreement that is in place regarding the Company which exceeds $100,000 in value (which are not cured within 10 business days’ of notice of the same by APEG). Upon the occurrence of an event of default under note (subject to our right to cure such event of default, where applicable), APEG can demand the immediate repayment of the APEG, together with the Minimum Interest.

 

 

 

 

Our obligations under the APEG Note are secured by APEG’s rights, and the security interests created under, that certain Mortgage, Mortgage – Collateral Real Estate Mortgage, Deed of Trust, Assignment of as-Extracted Collateral, Security Agreement, Fixture Filing and Financing Statement, from Energy One LLC, our wholly-owned subsidiary, to Russell Otts, as Trustee, for the Benefit of BNP Paribas, as administrative agent, and the other secured persons, entered into on or around July 2010, and all Uniform Commercial Code (UCC) financing statements filed in connection therewith, the rights pursuant to which have previously assigned to APEG.

 

The foregoing summary description of the material terms of the APEG Note does not purport to be complete and is qualified in its entirety by reference to the full text of the APEG Note, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated by reference in this Item 2.03.

 

Item 8.01 Other Events.

 

On September 29, 2020, the Company published a press release disclosing the APA. A copy of the press release is included herewith as Exhibit 99.1 and the information in the press release is incorporated by reference into this Item 8.01.

 

Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.   Description
     
10.1*#   Asset Purchase Agreement dated September 25, 2020, by and among U.S. Energy Corp, as Buyer, and Mr. Randolph N. Osherow, as Chapter 7 trustee in the Bankruptcy Case of FieldPoint Petroleum Corporation
10.2*   $375,000 Secured Promissory Note entered into by U.S. Energy Corp., to evidence amounts owed to APEG Energy II, L.P.
99.1*   Press Release dated September 29, 2020

 

* Filed herewith.

# Certain schedules, annexes, and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however, that U.S. Energy Corp. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  U.S. ENERGY CORP.
   
  By: /s/ Ryan Smith
    Ryan Smith
    Chief Executive Officer
     
  Dated: September 29, 2020

 

 

 

 

EXHIBIT INDEX

 

Exhibit No.   Description
     
10.1*#   Asset Purchase Agreement dated September 25, 2020, by and among U.S. Energy Corp, as Buyer, and Mr. Randolph N. Osherow, as Chapter 7 trustee in the Bankruptcy Case of FieldPoint Petroleum Corporation
10.2*   $375,000 Secured Promissory Note entered into by U.S. Energy Corp., to evidence amounts owed to APEG Energy II, L.P.
99.1*   Press Release dated September 29, 2020

 

* Filed herewith.

# Certain schedules, annexes, and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however, that U.S. Energy Corp. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.

 

 

 

Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is made as of September 25, 2020 by and between Randolph N. Osherow, as Chapter 7 trustee in the Bankruptcy Case (as defined below) (the “Seller”), on the one hand, and US Energy Corporation, a Texas corporation (the “Buyer,” and together with Seller, the “Parties,” and each, a “Party”), on the other hand.

 

WHEREAS, on June 24, 2020, a voluntary petition was filed under Chapter 7 of Title 11 of the United States Code (the “Bankruptcy Code”) by FieldPoint Petroleum Corporation, a Texas corporation (the “Debtor”).

 

WHEREAS, the Debtor’s bankruptcy case is pending in the United States Bankruptcy Court for the Western District of Texas (the “Bankruptcy Court”) styled In re FieldPoint Petroleum Corporation, Case Number 1:20-bk-10726 (the “Bankruptcy Case”).

 

WHEREAS, Seller was appointed as Chapter 7 trustee for the Debtor’s estate (the “Estate”) in the Bankruptcy Case on June 24, 2020.

 

WHEREAS, Buyer desires to purchase and Seller desires to sell to Buyer, or a successful overbidder, as the case may be, substantially all of the Debtor’s assets, except the Excluded Assets as hereafter defined, free and clear of all liens, claims, encumbrances, licenses and interests in accordance with Section 363 of the Bankruptcy Code, and otherwise on the terms and conditions set forth herein.

 

IN CONSIDERATION OF the premises and mutual covenants contained in this Agreement, and for good and valuable consideration, the Parties agree as follows:

 

1. Purchase and Sale of Assets. On the Closing Date (as hereinafter defined), Seller will transfer, sell, assign and convey to Buyer, and Buyer will purchase and acquire from Seller, free and clear of all liens, claims, licenses, encumbrances and interests, in accordance with Section 363 of the Bankruptcy Code, all of the Estate’s right, title and interest in and to all of the assets of the Debtor, including those set forth on Exhibit A attached hereto, but excluding only those Excluded Assets identified on Exhibit B (collectively referred to herein as the “Assets”). The Assets shall not include the excluded assets set forth in Exhibit B attached hereto (collectively referred to herein as the “Excluded Assets”). To the extent the Assets include any books, records and/or other documents (whether in electronic, hard copy or any other form) (collectively, the “Records”), Buyer shall retain copies of the Records or the originals thereof as may be reasonably necessary; and Buyer agrees to provide reasonable access to Seller to the Records as may be necessary to administer the Estate and/or wind-up the affairs of the Debtor and the Estate or otherwise relating thereto. To the extent the Excluded Assets include any Records, Seller agrees that Buyer shall be permitted to access such Records with Seller’s consent, which consent shall not be unreasonably withheld. Buyer understands and acknowledges that Seller has limited Records in his possession and Buyer shall be responsible for obtaining possession of any Records it has acquired, and records it seeks to review that are defined as Excluded Assets (provided that if the Records are Excluded Assets, Buyer must first obtain Seller’s consent, which consent shall not be unreasonably withheld). Buyer and Seller agree that no records of the Debtor may be destroyed without the written consent of the other for a period of at least two years after the sale is closed. After such two-year period has lapsed, the holder of such records shall be entitled to destroy them after notice to the non-custodial party. If any such records are held by the other, but the non-holding party seeks to retain such records, the non-holding party must request such records and pay the cost of delivering such records to the non-holding entity before two years after the Closing Date. If a party desires to destroy records within two years of the closing date and the other party refuses to consent to such destruction, the party seeking to destroy the records may deliver such records to the offices of the non-consenting party and the non-consenting party shall be obligated to accept delivery of such records.

 

2. Purchase Price. The purchase price (the “Purchase Price”) of the Assets shall be Five Hundred Thousand Dollars ($500,000.00), subject to adjustment if Buyer submits an overbid at the Auction (as hereafter defined) payable by Buyer as follows:

 

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2.1 Cash Deposit at Execution of Agreement. Buyer has paid to Seller the cash sum of Twenty-Five Thousand Dollars ($25,000.00) by wire transfer (the “Deposit”), as a deposit against the Purchase Price. The Deposit shall be held directly by Seller and may be cashed by Seller. Any interest earned on the Deposit shall be for the account of Seller. The Deposit shall be refunded promptly to Buyer if: (i) the Bankruptcy Court does not approve Seller’s entry into this Agreement and/or this Agreement by the Outside Date; (ii) Buyer is neither the Successful Bidder (as hereafter defined) nor the Backup Bidder (as hereafter defined); (iii) Buyer is the Backup Bidder but Seller closes the sale to the Successful Bidder; or (iv) the Closing (as hereinafter defined) fails to occur within the time specified in this Agreement for any reason other than Buyer’s breach of this Agreement or any of its obligations hereunder. If the Closing fails to occur as a result of Buyer’s breach of this Agreement, Seller shall be entitled to receive and retain the Deposit as liquidated damages as provided below.

 

BUYER AND SELLER AGREE THAT: (A) IF BUYER FAILS TO COMPLETE THE PURCHASE OF THE ASSETS PURSUANT TO THIS AGREEMENT BY REASON OF BUYER’S BREACH OF THIS AGREEMENT, THEN SELLER’S SOLE AND EXCLUSIVE REMEDY SHALL BE TO TERMINATE THIS AGREEMENT AND RECEIVE AND RETAIN THE DEPOSIT TO THE EXTENT THAT IT HAS BECOME NONREFUNDABLE TO BUYER PURSUANT TO THIS AGREEMENT AS LIQUIDATED DAMAGES AND NOT AS A PENALTY, AND UNDER SUCH CIRCUMSTANCES, SELLER WAIVES ALL RIGHTS TO OBTAIN BUYER’S SPECIFIC PERFORMANCE; AND (B) BECAUSE OF THE NATURE OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT, IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO FIX SELLER’S ACTUAL DAMAGES IF SUCH A BREACH OCCURS AND THEREFORE THE AMOUNT OF LIQUIDATED DAMAGES SPECIFIED ABOVE SHALL BE PRESUMED TO BE THE AMOUNT OF DAMAGES SELLER WOULD SUSTAIN BY REASON OF SUCH A BREACH AND REPRESENTS A REASONABLE ESTIMATE OF THOSE DAMAGES, TAKING INTO ACCOUNT, AMONG OTHER FACTORS, THE CIRCUMSTANCES EXISTING AS OF THE TIME OF ENTRY INTO THIS AGREEMENT.

 

2.2 Cash at Closing. Buyer shall deliver to Seller the balance of the Purchase Price at the Closing via wire transfer. Said sum shall be paid to Seller prior to or on the Closing Date.

 

2.3 Reimbursement of Buyer’s Expenses. In the event that: (i) Buyer is neither the Successful Bidder nor the Backup Bidder or (ii) Buyer is the Backup Bidder, and in each such case, Seller closes a sale of the Assets to the Successful Bidder or the Backup Bidder (but in each such case not Buyer), Seller shall, as promptly as practicable after the Closing, reimburse Buyer, from the sale proceeds, for its reasonable actual fees and expenses not to exceed Twenty-Five Thousand Dollars ($25,000.00) incurred in connection with acting as the “Stalking Horse Bidder,” including, without limitation, due diligence expenses, negotiation of this Agreement, review of the Sale Motion (as hereafter defined), and appearance at the hearing on the Sale Motion (the “Expense Reimbursement”). For the avoidance of doubt, the Expense Reimbursement: (i) shall only be payable from the sale proceeds received by Seller from a sale of the Assets and neither Seller nor the Estate shall have any liability for the Expense Reimbursement and no claim shall exist therefor unless a Closing occurs; and (ii) is subject to Bankruptcy Court approval (which is being sought concurrently with and not prior to the approval of the sale) and shall only be payable if the Bankruptcy Court approves the Expense Reimbursement. Failure of the Bankruptcy Court to approve the Expense Reimbursement provided in this Section 2.3 shall not act to invalidate this Agreement nor give rise to any rights, remedies or claims in favor of Buyer (including any right to terminate this Agreement). The provisions of this Section 2.3 shall be for the benefit of Buyer only and no other person or entity.

 

2.4 Sales Tax Payable by Buyer. Buyer shall pay the sales tax due, if any, with respect to the transactions contemplated hereby.

 

3. Title. Seller shall convey title to the Assets to Buyer by bill of sale (the “Bill of Sale”) and quitclaim assignment (“Quitclaim Assignment”) in substantially the forms attached hereto as Exhibit C and Exhibit D, and as approved by the Bankruptcy Court, free and clear of all liens, claims, licenses, encumbrances and interests pursuant to Section 363 of the Bankruptcy Code.

 

4. Reserved.

 

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5. No Representations; Indemnity.

 

5.1 EXCEPT AS EXPRESSLY PROVIDED HEREIN OR IN THE SALE ORDER (AS HEREAFTER DEFINED), BUYER AGREES AND ACKNOWLEDGES THAT THE TRANSFER OF THE ASSETS IS MADE PURSUANT TO ORDER OF THE BANKRUPTCY COURT AND IS MADE “AS IS” AND “WHERE IS”, AND ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER WITH RESPECT TO THE ASSETS OR OTHERWISE, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY REPRESENTATION OR WARRANTY REGARDING THE TITLE OR CONDITION OF THE ASSETS OR THE FITNESS, DESIRABILITY, OR MERCHANTABILITY THEREOF OR SUITABILITY THEREOF FOR ANY PARTICULAR PURPOSE, OR ANY BUSINESS PROSPECTS, OR VALUATION OF THE ASSETS, OR THE COMPLIANCE OF THE ASSETS IN THEIR CURRENT OR FUTURE STATE WITH APPLICABLE LAWS OR ANY VIOLATIONS THEREOF. BUYER FURTHER ACKNOWLEDGES THAT SELLER SHALL DELIVER TO THE BUYER ALL ASSETS IN SELLER’S OR ITS COUNSEL’S POSSESSION; BUT THAT SELLER DOES NOT HAVE POSSESSION OF ALL OF THE ASSETS, AND THAT TO THE EXTENT THE SELLER IS NOT IN POSSESSION OF AN ASSET SOLD HEREUNDER, BUYER WILL HAVE SOLE RESPONSIBILITY TO OBTAIN POSSESSION OF THE ASSETS, AT ITS SOLE EXPENSE. BUYER AGREES THAT SELLER HAS NO OBLIGATION OR LIABILITY WHATSOEVER WITH RESPECT TO ANY SEPARATE AGREEMENTS, INDEMNITIES, REPRESENTATIONS OR WARRANTIES ENTERED INTO BY BUYER, UNLESS THE SELLER HAS ACTUAL KNOWLEDGE OF SUCH MATTERS BEFORE THE CLOSING DATE AND FAILS TO DISCLOSE SUCH MATTERS TO THE BUYER PRIOR TO THE CLOSING DATE. AS TO ALL SUCH MATTERS THAT ARE NOT KNOWN TO EITHER THE BUYER OR THE SELLER AS OF THE CLOSING DATE, ANY RISK OF LOSS SHALL BE BORNE SOLELY BY BUYER.

 

5.2 BUYER FURTHER ACKNOWLEDGES AND REPRESENTS THAT IT ENTERS INTO THIS AGREEMENT AFTER ITS INDEPENDENT INVESTIGATION OF THE FACTS AND CIRCUMSTANCES RELATING TO THE ASSETS AND THE TRANSACTION DESCRIBED HEREIN. WITHOUT LIMITING THE FOREGOING, BUYER IS NOT RELYING ON SELLER OR THE ESTATE FOR ANY INFORMATION REGARDING THE ASSETS OR OTHERWISE; EXCEPT THAT SELLER HAS REPRESENTED AND WARRANTS THAT IT HAS PROVIDED BUYER WITH ALL DOCUMENTS (WITH THE EXCEPTION OF ANY DOCUMENTS SUBJECT TO ANY APPLICABLE PRIVILEGE, INCLUDING, WITHOUT LIMITATION, ATTORNEY CLIENT AND WORK PRODUCT) IN ITS POSSESSION RELATIVE TO THE ASSETS BEING SOLD.

 

5.3 Buyer assumes responsibility for obtaining all required licenses, copyrights, patents, trademarks, permits and/or other agreements and/or rights as may be required so that Buyer may lawfully use, sell, distribute or dispose of any of the Assets.

 

5.4 BUYER HEREBY AGREES TO INDEMNIFY, DEFEND AND HOLD SELLER AND ITS, ATTORNEYS, CONSULTANTS, INDEPENDENT CONTRACTORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “INDEMNITEES”) HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, DEMANDS, CLAIMS, ACTIONS OR CAUSES OF ACTION, ASSESSMENTS, LOSSES, COSTS, DAMAGES OR PENALTIES OR EXPENSES, INCLUDING ATTORNEYS’ FEES, IMPOSED ON, ACCRUED AGAINST, ASSERTED AGAINST, SUSTAINED OR INCURRED BY INDEMNITEES, DIRECTLY OR INDIRECTLY, RESULTING FROM, ARISING OUT OF, RELATED TO, OR BY VIRTUE OF: (A) ANY LIABILITY OR OBLIGATION OF BUYER ARISING PRIOR TO, ON OR AFTER THE CLOSING DATE, WHETHER OR NOT RELATED TO THE OWNERSHIP OR USE OF THE ASSETS; (B) BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF BUYER CONTAINED HEREIN OR IN ANY AGREEMENT EXECUTED IN CONNECTION HEREWITH; AND (C) THE OWNERSHIP, SALE, USE, OR DISTRIBUTION OF THE ASSETS FROM AND AFTER THE CLOSING DATE.

 

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6. Seller’s Representations and Warranties. Seller makes the following representations and warranties, which shall survive execution of this Agreement and which shall survive the Closing:

 

6.1 Authority. Seller is the Chapter 7 trustee in the Bankruptcy Case. Subject to entry of the Sale Order, Seller has the authority to enter into this Agreement and to consummate the transactions contemplated thereby.

 

6.2 Notice of Motion for Sale Confirmation Order. Seller has filed a Sale Motion seeking entry of the Sale Order. Promptly following execution of this Agreement, Seller shall amend the Sale Motion to include notice of this Agreement.

 

7. Buyer’s Representations and Warranties. Buyer makes the following representations, warranties and covenants (including, without limitation, those made elsewhere in this Agreement), which shall survive execution of this Agreement and which shall survive the Closing:

 

7.1 Authority. Buyer has the power and authority to enter into this Agreement and consummate the transactions contemplated thereby.

 

7.2 Investigations. Buyer acknowledges that Seller, as recently appointed Chapter 7 trustee in the Bankruptcy Case, has limited information and documents concerning the Assets; Buyer has made its own investigation concerning Assets, the condition of title or any other matter pertaining to the Assets; and, other than the express representations made by Seller pursuant to this Agreement. Buyer is not relying on any representations, warranties or inducements of Seller (or any agent of Seller) with respect to the Assets, the condition of title to the Assets or any other matter pertaining to the Assets, the transaction contemplated herein or otherwise.

 

8. Conditions Precedent to Closing for Benefit of Seller. As independent conditions precedent for the benefit of Seller, Seller’s obligations hereunder, including the obligation to transfer the Assets to Buyer, are contingent upon satisfaction of each of the following conditions unless otherwise waived by Seller in writing on or before the Closing:

 

8.1 Receipt by Seller of Buyer’s Deliveries. Seller shall have received at the Closing the deliveries required by Section 10 of this Agreement.

 

8.2 Compliance with Covenants. Buyer shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by Buyer on or prior to the Closing.

 

8.3 Sale Order and Findings. This Agreement and the transactions contemplated herein shall have been approved by the Bankruptcy Court and the Bankruptcy Court shall have entered the Sale Order in the Bankruptcy Case so approving, concurrently with findings of fact and conclusions of law (in form and substance reasonably acceptable to Seller) (the “Findings”), and such Sale Order shall be final with no appeal having been filed (or if any appeal has been filed, no stay shall have been issued either preventing this Agreement from becoming enforceable or the Sale closing).

 

8.4 Buyer is Successful Bidder or Backup Bidder. Buyer shall be either: (i) the Successful Bidder at the Auction; or (ii) Buyer shall be the Backup Bidder at the Auction and the Successful Bidder shall have failed to close.

 

8.5 No Violation of Orders. No preliminary or permanent injunction or other order that would prevent the consummation of the transactions contemplated by this Agreement shall be in effect.

 

9. Conditions Precedent to Buyer’s Closing. As independent conditions precedent for the benefit of Buyer, Buyer’s obligations hereunder, including the obligation to pay the Purchase Price, are contingent upon satisfaction of each of the following conditions unless otherwise waived by Buyer in writing on or before the Closing:

 

9.1 Receipt by Buyer of Seller’s Deliveries. Buyer shall have received at the Closing the deliveries required under Section 10 of this Agreement.

 

9.2 Compliance with Covenants. Seller shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by Seller on or prior to the Closing.

 

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9.3 Sale Order and Findings. This Agreement and the transactions contemplated herein shall have been approved by the Bankruptcy Court and the Bankruptcy Court shall have entered the Sale Order in the Bankruptcy Case so approving, concurrently with the Findings (in form and substance reasonably acceptable to Seller) and such Sale Order shall be final with no appeal having been filed (or if any appeal has been filed, no stay shall have been issued either preventing this Agreement from becoming enforceable or the Sale closing).

 

9.4 Buyer is Successful Bidder or Backup Bidder. Buyer shall be either: (i) the Successful Bidder at the Auction; or (ii) Buyer shall be the Backup Bidder at the Auction and the Successful Bidder shall have failed to close.

 

9.5 No Violation of Orders. No preliminary or permanent injunction or other order that would prevent the consummation of the transactions contemplated by this Agreement shall be in effect.

 

10. Deliveries at Closing. The Parties shall make the following deliveries at Closing:

 

10.1 Purchase Price. Buyer shall deliver to Seller a cashier’s check or deliver funds via wire transfer to the account of Seller in the amount of the Purchase Price, less the Deposit.

 

10.2 Bill of Sale: Quitclaim Assignment. Seller shall deliver to Buyer a Bill of Sale and Quitclaim Assignment, substantially in the forms attached as Exhibit C and Exhibit D.

 

10.3 Corporate Documents. At Seller’s request, Buyer shall deliver to Seller a certified copy of its resolution authorizing the purchase of the Assets and an incumbency certificate and such other corporate related documents as Seller shall reasonably request.

 

11. Closing. Closing of the sale (the “Closing”) shall occur at the offices of R. Reese & Associates, PPLC, 5225 Katy Freeway, Suite 430, Houston, Texas 77007, or such other location as mutually agreed upon by the Parties, on a date to be mutually agreed upon by the Parties (the “Closing Date”), but in no event later than five (5) business days after the Sale Order is final with no appeal having been filed (or if any appeal has been filed, no stay shall have been issued either preventing this Agreement from becoming enforceable or the Sale closing); provided, however, that in the event that the Closing has failed to occur by October 1, 2020 (the “Outside Date”), this Agreement may be terminated as provided in and subject to the terms of Section 13. The Parties may mutually agree in writing to effect the Closing on an earlier or a later date at their sole discretion. The existence of the Outside Date for the Closing in this Section 11 shall not relieve either Party of their respective obligations under this Agreement to use commercially reasonable efforts to perform and satisfy all conditions to their respective obligations to consummate the transactions contemplated by this Agreement.

 

11.1 Backup Bidder Closing. If the Successful Bidder shall fail to close, (i) the Backup Bidder shall be obligated to close within ten (10) business days of being notified that the Closing with the Successful Bidder has failed to close due to breach by the Successful Bidder; and (ii) the Outside Date shall be extended by thirty (30) calendar days.

 

12.Overbid Procedure; Bankruptcy Court Approval; Sale Order. Buyer acknowledges that:

 

[12.1 Overbid Auction Procedure. The sale of the Assets to Buyer is subject to an overbid auction (the “Auction”) by sealed bid to be submitted to Seller by Monday, August 3rd, 2020, at 4 p.m. or as otherwise required by the Bankruptcy Court. The initial overbid purchase price must be in the amount of at least Five Hundred Fifty Thousand Dollars ($550,000.00). To qualify as a bidder at the Auction, any bidder, other than the named Buyer hereunder, must deliver to Seller: (i) evidence of financial ability to consummate a sale for at least Five Hundred Fifty Thousand Dollars ($550,000.00); (ii) an executed version of this Agreement in substantially the same form hereof but reflecting a Purchase Price of at least Five Hundred Fifty Thousand Dollars ($550,000.00) binding on such bidder (provided, if any bidder proposes to make any changes to the form of this Agreement, such bidder shall highlight any such proposed changes); and (iii) a deposit in the amount of at least Fifty Thousand Dollars ($50,000.00) by cashier’s check made payable to Seller, (any such bidder who has satisfied such conditions, together with Buyer, a “Qualified Bidder”). At the conclusion of the Auction, Seller shall request that the Bankruptcy Court approve the sale of the Assets to the highest Qualified Bidder taking into account such terms of sale as Seller may consider in his reasonable business judgment and determined by the Bankruptcy Court (the “Successful Bidder”) and, in the event the Successful Bidder fails to close, the sale of the Assets to the second highest Qualified Bidder taking into account such terms of sale as Seller may consider in his reasonable business judgment and determined by the Bankruptcy Court (the “Backup Bidder”). Any overbid shall be subject to all other terms and conditions of this Agreement, as applicable and as required by the Bankruptcy Court. The Backup Bidder shall be legally obligated to close the transaction, as if such Backup Bidder had been the Successful Bidder; and shall be subject to the same forfeiture of its deposit and liquidated damages provisions as would apply to the Successful Bidder. No bidder other than the two highest bidders shall be bound to close the transaction. If both the Successful Bidder and the Backup Bidder fail to close, Seller, in his sole discretion, may conduct a new auction sale to the extent there is any buyer willing to be a bidder at such auction.

 

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12.2 Bankruptcy Court Approval; Sale Order. The sale to Buyer by Seller and the other transactions contemplated by this Agreement are expressly subject to approval of the Bankruptcy Court. Seller has filed with the Bankruptcy Court a motion (the “Sale Motion”) for entry of an order in form and substance reasonably acceptable to Seller and Buyer (the “Sale Order”) providing that, among other things: (i) the sale of the Assets to Buyer in accordance with this Agreement shall be pursuant to Sections 363(b) and 363(f) of the Bankruptcy Code, free and clear of all liens, claims, licenses, encumbrances and interests except as provided in Section 3; (ii) the Sale Order is final with no appeal having been filed (or if any appeal has been filed, no stay shall have been issued preventing this Agreement from becoming enforceable); (iii) Buyer shall be entitled to the Expense Reimbursement if authorized by this Agreement (provided the failure of the Bankruptcy Court to approve such Expense Reimbursement shall not give rise to a right of Buyer to terminate this Agreement); and (iv) the Bankruptcy Court shall retain jurisdiction with respect to any matters relating to the Sale Order or the transactions contemplated by this Agreement. Notwithstanding the foregoing, the Bankruptcy Court’s failure to approve the requests set forth in (iii) or (iv) of this Section 12.2 shall not be a basis to object to the form and substance of the Sale Order.

 

13. Termination. This Agreement may be terminated by the mutual written consent of the Parties. Either Seller or Buyer may also terminate this Agreement by written notice to the other if the Closing shall not have occurred by the Outside Date contemplated in Section 11 due to no breach by the terminating Party. Buyer may also terminate this Agreement by written notice to Seller, if any of the conditions in Section 9 are not satisfied by the Outside Date, or Seller shall breach any of its obligations under this Agreement. Seller may also terminate this Agreement by written notice to Buyer if any of the conditions in Section 8 are not satisfied by the Outside Date, or Buyer shall breach any of its obligations under this Agreement. No termination under this Section 13 shall release either Party from or act as a waiver of any claim against the other Party, at law or in equity (except as limited by Section 2.1) as a result of such termination or as a result of any breach or default under this Agreement. This Agreement may be terminated as provided herein without further order of the Bankruptcy Court.

 

14. Commissions. Buyer and Seller each represent and warrant to the other that no person or entity has been engaged by it as a broker, agent or finder, licensed or otherwise, in connection with the transaction contemplated by this Agreement. If any claim is made for a commission or finder’s fee in connection with the transaction contemplated by this Agreement, then the Party upon whose alleged statement, representation or agreement that claim arises shall indemnify, defend, protect and hold harmless the other Party from and against all liability, damage and cost (including actual attorneys’ fees) the other Party incurs as a result thereof. For avoidance of doubt, this Section 14 does not apply to any fee or expense payable to Seller as trustee in the Bankruptcy Case.

 

15. Miscellaneous.

 

15.1 Entire Agreement. This Agreement and the written agreements referred to herein and executed in connection herewith constitute the entire understanding among the parties with respect to the subject matter hereof, and supersede all negotiations, prior discussions or other agreements, oral or written.

 

15.2 Governing Law; Venue. This Agreement has been negotiated and entered into in the State of Texas, and shall be governed by, and construed in accordance with, the laws of State of Texas in effect at the time of its execution, without reference or regard to the principles of conflict of laws. Any action arising out of this Agreement must be brought and maintained in the Bankruptcy Court, and the Parties hereto consent to the jurisdiction of the Bankruptcy Court; provided, after the Bankruptcy Case is closed, any action may be brought in a court located in Travis County, Texas with jurisdiction.

 

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15.3 Independent Contractors. The parties hereto are independent contractors and nothing contained in this Agreement shall be construed to place them in the relationship of partners, principal and agent, employer/employee or joint venturer. The parties agree that they shall neither have the power or right to bind or obligate the other, nor shall either hold itself out as having such authority.

 

15.4 Counterparts. This Agreement may be executed in counterparts. In the event that any signature to this Agreement or any amendment hereto is delivered by facsimile transmission, by e-mail delivery of a “.pdf or by other electronic format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile, “.pdf’ or other electronic format data file signature page were an original thereof (and the same shall be deemed as originals).

 

15.5 Fees and Costs. If any action, including any arbitration proceeding, is instituted to enforce the terms or provisions of this Agreement (except as provided in Section 8.3), including an action instituted after the bankruptcy of a party, the prevailing party in such action shall be entitled to collect as part of its recovery all reasonable costs, charges and fees, including but not limited to its expert witness fees and attorneys’ fees and costs, incurred in connection with such action.

 

15.6 Amendment. This Agreement may only be amended or modified by the written agreement of the Parties.

 

15.7 Severability. If any of the provisions of this Agreement are held invalid under any law, such invalidity shall not affect the remainder of the Agreement.

 

15.8 No Assignment. Neither this Agreement nor any rights or obligations hereunder shall be assigned by any Party without the prior written consent of the other Parties hereto.

 

15.9 Successors and Assigns. Subject to Section 15.8, this Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Parties.

 

15.10 Headings; Construction. The headings of the various Sections of this Agreement are for convenience only and are not intended to explain or modify any of the provisions of this Agreement. No rule of strict construction will be applied in the interpretation or construction of this Agreement. When used in this Agreement, “including” means “including without limitation.” In the event of any conflict or ambiguity between this Agreement and any Exhibit, this Agreement will control. Whenever the context requires: (a) the singular number shall include the plural, and vice versa; (b) the masculine gender shall include the feminine and neuter genders; (c) the feminine gender shall include the masculine and neuter genders; and (d) the neuter gender shall include the masculine and feminine genders.

 

15.11 Notices. All notices to be given by any Party to this Agreement to the other Party shall be in writing, and shall be given by certified United States mail, return receipt requested, postage prepaid, to the other, sent by telefax or facsimile transmission, or personally delivered, at the addresses set forth below (or at such other address for a Party has specified by like notice) and shall be deemed given when received if sent by facsimile transmission or personally delivered, or if mailed as provided herein, on the second day after it is so placed in the mail.

 

The addresses referred to above are:

 

  Buyer: Ryan Smith
    US Energy Corp.
    675 Bering St., Suite 100
    Houston, TX 77057
    Ph: 303-993-3200

 

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  With a courtesy copy to: Rachel Reese
    R. Reese & Associates, PLLC
   

5225 Katy Freeway, Suite 430,

Houston, Texas 77007

    Ph: 832-831-2289

 

  Seller: Mr. Randolph N. Osherow
    Trustee
    342 W. Woodlawn, Suite 100
    San Antonio, TX 78212
    Ph: 210-738-3001

 

  With a courtesy copy to:  
   

____________________

____________________

____________________

____________________

Ph: _________________

 

Any Party at any time may give notice to the other Party of a different address other than that set forth above in accordance with the provisions of this Section 15.11. Failure of any Party to provide courtesy-only copies of notices, demands and other communications shall not impair, modify, limit or otherwise affect any Party’s rights or remedies nor any Party’s obligations under this Agreement.

 

15.12 Interpretation. Each Party has had an opportunity to review and revise this Agreement and consult with counsel, and any rule of contract interpretation to the effect that ambiguities or uncertainties are to be interpreted against the drafting party or the party who caused it to exist shall not be employed in the interpretation of this Agreement or any document executed in connection herewith.

 

15.13 Survival of Obligations. All obligations of the Parties set forth in this Agreement shall survive the Closing and Closing Date.

 

15.14 Waiver. No Party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Party; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

 

15.15 Further Assurances. Buyer and Seller shall each promptly sign and deliver all additional documents and perform all acts reasonably necessary to perform its obligations and carry out the intent expressed in this Agreement. Without limiting the foregoing, at Seller’s request, Buyer shall enter into an amendment to this Agreement, or enter into a superseding asset purchase agreement, to reflect any changes in terms (including any change to the Purchase Price) as may occur as part of the Bankruptcy Court approval, the Auction or the New Auction, if applicable.

 

15.16 No Waiver. A waiver by either Party of a default by the other Party is effective only if it is in writing and shall not be construed as a waiver of any other default.

 

15.17 No Beneficiaries. No person or entity besides Buyer, Seller and their permitted successors and assigns has any rights or remedies under this Agreement.

 

15.18 Incorporation. Any exhibits attached hereto and referred to herein are incorporated into this Agreement.

 

15.19 Effect of Course of Dealing. No course of dealing between the Parties in exercising any of their respective rights under this Agreement shall operate as a waiver of any such rights, except where expressly waived in writing. Further, nothing herein shall require either Party to terminate this Agreement upon breach or default of this Agreement by the other Party.

 

15.20 Time. Time is of the essence of this Agreement and each and every provision hereof.

 

15.21 Seller Capacity as Trustee of the Estate; Limitation on Liability. Buyer acknowledges and understands that Seller is the Chapter 7 trustee of the Estate and that Seller enters this Agreement solely in his capacity as Chapter 7 trustee of the Estate and not in his personal capacity, and no liability or obligations shall accrue to him personally as a result of this Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be fully executed as of the day and year first above written.

 

  SELLER
     
By:    
  Name:  
  Title:

 

  BUYER
     
By:
  Name:
  Title:

 

 

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EXHIBIT A

ASSETS

 

All of the Estate’s right, title and interest in the following real and personal property of the Debtor, excluding only the Excluded Assets set forth at Exhibit B, including, without limitation:

 

[to be provided.]

 

Collectively, the “Assets”.

 

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EXHIBIT B

EXCLUDED ASSETS

 

Notwithstanding the other provisions of the Agreement or any other exhibit, the Assets do not include the following assets owned by the Estate or in which it has or had any interest (collectively, the “Excluded Assets”): (a) tax attributes, including, but not limited to net operating loss carryovers; (b) tax refunds, insurance refunds or other refunds (except as described on Exhibit A); (c) any property owned by third parties; (d) workers’ compensation refunds; (e) utility, security or similar deposits; (f) cash, deposit accounts, certificates of deposit or other cash equivalents (except as described on Exhibit A); (g) the corporate minute book and related corporate governance records; (h) insurance policies; (i) assets which are not assignable by Seller to Buyer as a matter of law; (j) accounts, accounts receivable and/or money owed, including, without limitation, under a promissory note or proceeds of production attributable to any time prior to the Closing Date; (k) causes of action or claims (including, without limitation, any causes of action, claims or avoidance actions under Chapter 5 of the Bankruptcy Code and/or applicable state law) that Seller would be or may be entitled to bring as the Chapter 7 trustee or to use as an offset or defense to any claim; (l) commercial leases; (m) personnel records, and/or any other records or documents required to be kept confidential or private under agreement or applicable law, in any form (whether in hard copies, electronic files or otherwise) (confidential documents made confidential by agreement, only (not confidential by operation of law, but only by agreement), shall be disclosed to Buyer subject to a confidentiality agreement in a form reasonably acceptable to the Seller); (n) assets operated by Trivista Operating, LLC, in the Ranger and Taylor Serbin Fields in which Debtor owns a working interest, more specifically the wells; (o) licenses, franchises, software, copyrights, patents, trademarks or other intellectual property with respect to which the Debtor is or was the licensee or franchisee and which may not be transferred by Trustee to Buyer under applicable law or without third party consent (including any consent by a licensor or franchisor); (p) any attorney client privilege or similar privilege; and (q) proceeds of any of the foregoing.

 

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EXHIBIT C

FORM OF BILL OF SALE

 

[to be provided.]

 

12

 

 

EXHIBIT D

FORM OF QUITCLAIM ASSIGNMENT

 

[to be provided.]

 

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Exhibit 10.2

 

SECURED PROMISSORY NOTE

 

$375,000   September 24, 2020

 

NOW THEREFORE FOR VALUE RECEIVED, the undersigned, U.S. Energy Corp., a Wyoming corporation (the “Borrower”), hereby promises to pay to the order of APEG Energy II, L.P. (the “Holder”), Three Hundred and Seventy-Five Thousand dollars ($375,000) (the “Principal”), plus Interest thereon and as applicable, the Prepayment Amount due thereon, as discussed below, in lawful money of the United States of America, which shall be legal tender, bearing interest and payable as provided herein. This Note evidences $375,000 loaned by the Holder to the Borrower on the Effective Date (defined below)

 

1. Effective Date. This Secured Promissory Note (this “Note” or “Promissory Note”) is entered into on, and effective on, September 24, 2020 (the “Effective Date”).

 

2. Defined Terms. Certain capitalized terms used below have the meanings given to such terms in Section 16.

 

3. Interest. The Principal amount of this Note shall accrue interest based on the Standard Interest Rate, compounded at the end of each calendar month (“Standard Interest”). If not paid in full on the Maturity Date and/or if an Event of Default occurs hereunder, the Principal and Accrued Interest shall accrue interest at the Default Interest Rate, compounded monthly (at the end of each calendar month), until paid in full (“Default Interest” and together with Standard Interest, “Interest”). All computations of Interest shall be made on the basis of twelve 30-day months and where applicable, for the actual number of days elapsed. Accrued and unpaid Interest shall be payable on the earlier of (a) the Maturity Date; (b) the Prepayment Date (as to the portion of the Principal prepaid); and (c) the date of Acceleration.

 

4. Prepayment Penalty. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of this Note and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. Upon payment of this Note by the Borrower, prior to the Maturity Date (whether as a result of a Prepayment (defined below) or Acceleration), Holder is entitled to a prepayment penalty (the “Prepayment Amount”) equal to (a) 10% of the portion of the Principal of this Note subject to such Prepayment, minus (b) the total amount of Accrued Interest on such portion of the Principal amount of this Note being prepaid through such prepayment date (“Total Accrued Interest”), provided that if the Prepayment Amount is less than the Total Accrued Interest, the Total Accrued Interest (or such portion thereof which has not previously been paid by the Borrower to the Holder) shall instead be paid, and the Prepayment Amount shall not apply. Nothing herein shall limit or discharge the Borrower’s obligation to pay any unpaid portion of the Total Accrued Interest upon Prepayment or Acceleration. The intent of the Prepayment penalty set forth in this Section 4 is that the Holder shall never receive interest on the Principal amount of this Note of less than 10% of the Principal amount hereof, even if this Note is prepaid prior to maturity.

 

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5. Maturity Date. The “Maturity Date” of this Note shall be the earlier of (a) September 24, 2021; and (b) the date that the Holder has provided Borrower written notice of an Acceleration (or if applicable, the date the amount due hereunder is automatically subject to Acceleration).

 

6. Optional Prepayments. This Note may be prepaid in whole or in part, at any time and from time to time, subject to the requirements of Section 4 hereof (each a “Prepayment”).

 

7. Application of Payments. Unless an Event of Default under this Note has occurred and is continuing, all payments made by Borrower under this Note will be applied: (i) first, to late charges, costs of collection or enforcement, and similar amounts due, if any, under the Note; (ii) second to any Prepayment Amount due hereunder; (iii) third, to Accrued Interest that is due and payable under this Note, if any; and (iii) fourth, the remainder to Principal due and payable under this Note. If an Event of Default under this Note has occurred and is continuing, all payments made by Borrower under this Note will be applied to the sums due under this Note in any order or combination that Holder may determine, in its sole discretion. Holder’s records shall be conclusive evidence, absent manifest error, of the amount outstanding under this Note at any time.

 

8. Payments Due on Non-Business Days. If any payment of Principal or Interest on this Note shall become due on a non-Business Day, such payment shall be made on the preceding Business Day.

 

9. No Impairment of Obligations of Borrower. No provision of this Note shall alter or impair the obligation of Borrower to pay the Principal of and Interest on this Note at the times, places and rates, and in the coin or currency, herein prescribed.

 

10. Maximum Rate Limitation. Notwithstanding anything to the contrary in this Note or any other agreement entered into in connection herewith, whether now existing or hereafter arising and whether written or oral, it is agreed that the aggregate of all Interest and any other charges constituting interest, or adjudicated as constituting interest, and contracted for, chargeable or receivable under this Note or otherwise in connection with this loan transaction, shall under no circumstances exceed the Maximum Rate.

 

11. Representations and Warranties of Borrower. The Borrower represents and warrants to Holder as of the date of this Note, as follows:

 

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(a) The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its jurisdiction of organization and has the requisite power and authority, and the legal right, to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.

 

(b) The Borrower has the power and authority, and the legal right, to execute and deliver this Note and to perform its obligations hereunder.

 

(c) No consent or authorization of, filing with, notice to or other act by, or in respect of, any Governmental Authority or any other Person is required in order for the Borrower to execute, deliver, or perform any of its obligations under this Note, except for consents previously obtained and any filings with Governmental Authorities which may be made after the date of this Note.

 

(d) The execution and delivery of this Note and the consummation by the Borrower of the transactions contemplated hereby do not and will not (a) violate any provision of the Borrower’s organizational documents; (b) violate any law or order applicable to the Borrower or by which any of its properties or assets may be bound; or (c) constitute a default under any Material Agreement by which the Borrower may be bound.

 

(e) The execution and delivery by the Borrower of this Note (i) are within the Borrower’s power and authority, and (ii) have been duly authorized by all necessary action.

 

(f) This Note is a legally binding obligation of the Borrower, enforceable against the Borrower in accordance with the terms hereof, except to the extent that (i) such enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights, and (ii) the availability of the remedy of specific performance or injunctive or other equitable relief is subject to the discretion of the court before which any proceeding therefore may be brought.

 

(g) Borrower has no Knowledge of any current Event of Default (as defined below) under this Note or any matter which with the passing of time could become an Event of Default.

 

(h) No litigation, action, investigation, event, or proceeding is pending or, to Borrower’s Knowledge is threatened, by any Person or Governmental Authority against the Borrower.

 

12. Affirmative Covenants of Borrower. Until all amounts outstanding in this Note have been paid in full, the Borrower shall:

 

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(a) (i) Preserve, renew and maintain in full force and effect its corporate existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; except in each case where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

(b) Comply with (i) all of the terms and provisions of its organizational documents; (ii) its obligations under this Note; and (iii) all laws and orders applicable to it and its business; except in each case where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

(c) Promptly execute and deliver such further instruments and do or cause to be done such further acts as may be reasonably necessary or advisable, upon advice of counsel to the Borrower, to carry out the intent and purpose of this Note.

 

13. Events of Defaults. If an Event of Default (as defined herein) occurs (unless all Events of Default have been cured or waived by Holder), the Principal and Accrued Interest under this Note shall accrue Interest at the Default Interest Rate, (a) Holder may, by written notice to the Borrower, declare the Principal amount then outstanding of, and the Accrued Interest, if any, and all other amounts payable on, this Note to be immediately due and payable, if an Event of Default is triggered by any section below other than any of Sections (e)(ii) through (vi), and (b) if the Event of Default is triggered by any of Sections (e)(ii) through (vi) below, the Principal amount then outstanding of, and the Accrued Interest, if any, and all other amounts payable on, this Note, shall be immediately due and payable (as applicable (a) or (b), an “Acceleration”). An Acceleration shall be subject to the prepayment requirements of Section 4 hereof. The following events and/or any other Events of Default defined elsewhere in this Note are “Events of Default” under this Note:

 

(a) the Borrower shall fail to pay, when and as due, the Principal or Interest (including, but not limited to any Prepayment Amount, as applicable), payable hereunder, and such failure shall not have been cured within ten (10) days following the written notice thereof from the Holder to the Borrower; or

 

(b) the Borrower shall have breached in any material respect any term, condition or covenant in this Note, and, with respect to breaches capable of being cured, such breach shall not have been cured within ten (10) Business Days following the written notice thereof from the Holder to the Borrower, as applicable; or

 

(c) any material representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect as of the date made; or

 

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(d) the occurrence of a Material Adverse Effect which is not cured by the Borrower within ten (10) Business Days; or

 

(e) the Borrower shall: (i) make an assignment for the benefit of creditors, file a petition in bankruptcy, petition or apply to any tribunal for the appointment of a custodian, receiver or a trustee for it or a substantial portion of its assets; (ii) commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation or statute of any jurisdiction, whether now or hereafter in effect; (iii) have filed against it any such petition or application in which an order for relief is entered or which remains undismissed for a period of ninety (90) days or more; (iv) indicate its consent to, approval of or acquiescence in any such petition, application, proceeding or order for relief or the appointment of a custodian, receiver or trustee for it or a substantial portion of its assets; or (v) suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of ninety (90) days or more; or

 

(f) the dissolution or liquidation of Borrower; or

 

(g) the Borrower shall take any action authorizing, or in furtherance of, any of the foregoing.

 

14. Rights Upon the Occurrence of an Event of Default. In case any one or more Events of Default shall occur and be continuing, Holder may proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or for an injunction against a violation of any of the terms hereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. In case of a default in the payment of any Principal of or premium, if any, or Interest on this Note, the Borrower will pay to Holder such further amount as shall be sufficient to cover the reasonable cost and expenses of collection, including, without limitation, reasonable attorneys’ fees, expenses and disbursements. No course of dealing and no delay on the part of Holder in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice Holder’s rights, powers or remedies. No right, power or remedy conferred by this Note upon Holder shall be exclusive of any other right, power or remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise. The Borrower may also seek to enforce the Security Agreements.

 

15. Maximum Rate. If from any circumstance any holder of this Note shall ever receive Interest or any other charges constituting interest, or adjudicated as constituting interest, the amount, if any, which would exceed the Maximum Rate shall be applied to the reduction of the Principal amount owing on this Note, and not to the payment of Interest; or if such excessive interest exceeds the unpaid balance of Principal hereof, the amount of such excessive interest that exceeds the unpaid balance of Principal hereof shall be refunded to Borrower. In determining whether or not the interest paid or payable exceeds the Maximum Rate, to the extent permitted by applicable law (i) any non-Principal payment shall be characterized as an expense, fee or premium rather than as Interest; and (ii) all Interest at any time contracted for, charged, received or preserved in connection herewith shall be amortized, prorated, allocated and spread in equal parts during the period of the full stated term of this Note.

 

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16. Definitions. Unless otherwise required by the context in which a defined term appears, or otherwise set forth, the following terms shall have the meanings specified in this Section 16. Terms that are defined in other Sections of this Note shall have the meanings given to such terms in those Sections.

 

(a) “Accrued Interest” means any and all accrued and unpaid Interest on this Note.

 

(b) “Business Day” means any day except Saturday, Sunday or any day on which banks are authorized by Law to be closed in the state of Texas.

 

(c) “Default Interest Rate” means the rate of eighteen percent (18%) per annum.

 

(d) “Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government.

 

(e) “Knowledge” means the actual knowledge of the Principal Persons of the referenced party or any knowledge which should have been obtained by any of the Principal Persons of such party upon reasonable investigation and inquiry.

 

(f) “Material Adverse Effect” means a material adverse effect on (a) the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise) of the Borrower; (b) the validity or enforceability of this Note; (c) the rights or remedies of the Holder hereunder; or (d) the Borrower’s ability to perform any of its material obligations hereunder.

 

(g) “Material Agreement” means each agreement, contract or understanding to which the Borrower is a party, which has an aggregate value, relates to aggregate possible payments, aggregate possible liability to the Borrower to the counterparty, or an aggregate value of services to be rendered by the Borrower or the counterparty, in each case during the term (including any possible extension terms called for in such agreement, contract or understanding) in excess of $100,000.

 

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(h) “Maximum Rate” shall mean the maximum rate of non-usurious interest allowed by applicable federal or state law.

 

(i) “Person” means any individual, corporation, limited liability company, trust, joint venture, association, company, limited or general partnership, unincorporated organization, Governmental Authority or other entity.

 

(j) “Principal Persons” means any officer, director, owner, key employee or other Person with primary management or supervisory responsibilities with respect to a party, or any other Person.

 

(k) “Security Agreements” means that certain Mortgage, Mortgage – Collateral Real Estate Mortgage, Deed of Trust, Assignment of as-Extracted Collateral, Security Agreement, Fixture Filing and Financing Statement, from Energy One LLC, the Borrower’s wholly-owned subsidiary, to Russell Otts, as Trustee, for the Benefit of BNP Paribas, as administrative agent, and the other secured persons, entered into on or around July 2010, and all Uniform Commercial Code (UCC) financing statements filed in connection therewith, each as such has been amended or assigned from time to time, including as previously assigned to Holder.

 

(l) “Standard Interest Rate” means 10% per annum.

 

17. Waiver of Demand and Presentment. Except as provided herein, Borrower and any sureties, guarantors and endorsers of this Note, jointly and severally waive demand, presentment, notice of nonpayment or dishonor, notice of intent to accelerate, notice of acceleration, diligence in collecting, grace, notice and protest, and consent to all extensions without notice for any period or periods of time and partial payments, before or after maturity, without prejudice to the Holder. The Holder shall similarly have the right to deal in anyway, at any time, with one or more of the foregoing parties without notice to any other party, and to grant any such party any extensions of time for payment of any of said indebtedness, or to grant any other indulgences or forbearance whatsoever, without notice to any other party and without in any way affecting the personal liability of any party hereunder. If any efforts are made to collect or enforce this Note or any installment due hereunder, the undersigned agrees to pay all collection costs and fees, including reasonable attorney’s fees.

 

18. Counterparts, Effect of Facsimile, Emailed and Photocopied Signatures. This Note and any signed agreement or instrument entered into in connection with this Note, and any amendments hereto or thereto, may be executed in one or more counterparts, all of which shall constitute one and the same instrument. Any such counterpart, to the extent delivered by means of a facsimile machine or by .pdf, .tif, .gif, .jpeg or similar attachment to electronic mail (email) or downloaded from a website or data room (any such delivery, an “Electronic Delivery”) shall be treated in all manner and respects as an original executed counterpart and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party, each other party shall re execute the original form of this Note and deliver such form to all other parties. No party shall raise the use of Electronic Delivery to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of Electronic Delivery as a defense to the formation of a contract, and each such party forever waives any such defense, except to the extent such defense relates to lack of authenticity.

 

Secured Promissory Note
Page 7 of 10

 

 

19. Governing Law; Venue and Waiver of Jury Trial. It is the intention of the parties hereto that the terms and provisions of this Note are to be construed in accordance with and governed by the laws of the State of Texas. The parties hereby consent and agree that, in any actions predicated upon this Note, venue is properly laid in Texas and that the Circuit Court in and for Harris County, Texas, shall have full subject matter and personal jurisdiction over the parties to determine all issues arising out of or in connection with the execution and enforcement of this Note. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS NOTE (EACH PARTY HAVING HAD OPPORTUNITY TO CONSULT COUNSEL), EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS NOTE.

 

20. Successors and Assigns. This Note shall be binding upon the Borrower, and Borrower’s heirs, executors, administrators, successors and permitted assigns and inure to the benefit of the Holder named herein and Holder’s respective successors and assigns. Each holder of this Note, by accepting the same, agrees to and shall be bound by all of the provisions of this Note. Holder may assign this Note or any of its rights, interests or obligations to this Note without the prior written approval of Borrower, but with written notice to, the Borrower. The term “Borrower” as used herein in every instance shall include the Borrower’s successors, heirs, executors, administrators, legal representatives and assigns, including all subsequent grantees, either voluntarily by act of the Borrower or involuntarily by operation of law and shall denote the singular and/or plural and the masculine and/or feminine and natural and/or artificial persons, whenever and wherever the contexts so requires or properly applies. The term “Holder” as used herein in every instance shall include the Holder’s successors, legal representatives and assigns, as well as all subsequent assignees and endorsees of this Note, either voluntarily by act of the parties or involuntarily by operation of law, subject where applicable to applicable law. Captions and paragraph headings in this Note are for convenience only and shall not affect its interpretation.

 

21. Attorneys’ Fees. Anything else in this Note to the contrary notwithstanding, in any action arising out of this Note, the prevailing party shall be entitled to collect from the non-prevailing party all of its attorneys’ fees. For the purposes of this Note, the party who receives or is awarded a substantial portion of the damages or claims sought in any proceeding shall be deemed the “prevailing” party and attorneys’ fees shall mean the reasonable fees charged by an attorney or a law firm for legal services and the services of any legal assistants, and costs of litigation, including, but not limited to, fees and costs at trial and appellate levels.

 

Secured Promissory Note
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22. Severability. In the event any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

23. Amendments and Modifications. This Note may not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

 

24. Entire Agreement. This Note constitutes the entire agreement of the parties regarding the matters contemplated herein and therein, or related thereto, and supersedes all prior and contemporaneous agreements, and understandings of the parties in connection therewith.

 

25. Construction. Wherever the context hereof shall so require, the singular shall include the plural, the masculine gender shall include the feminine gender and the neuter and vice versa. The headings, captions and arrangements used in this Note are for convenience only and shall not affect the interpretation of this Note.

 

26. Notices. All notices, approvals, consents, requests, and other communications hereunder shall be in writing and shall be delivered (i) by personal delivery, or (ii) by national overnight courier service, or (iii) by certified or registered mail, return receipt requested, or (iv) via facsimile transmission, with confirmed receipt, or (v) via email. Notice shall be effective upon receipt except for notice via fax (as discussed above) or email, which shall be effective only when the recipient, by return or reply email or notice delivered by other method provided for in this Section 26, acknowledges having received that email (with an automatic “read receipt” or similar notice not constituting an acknowledgement of an email receipt for purposes of this Section 26, but which acknowledgement of acceptance shall include cases where recipient ‘replies’ to such prior email, including the body of the prior email in such ‘reply’). Such notices shall be sent to such party’s address as set forth on the signature page hereof, subject to notice of changes thereof from any party with at least ten (10) Business Days’ notice to the other party. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver.

 

27. Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

28. Security. The Borrower’s obligations under this Note, including all Principal, Interest and the Prepayment Amount, shall be deemed secured by, and subject to all of the terms and conditions of, the Security Agreements. Borrower confirms and agrees that Security Agreements held by Holder with respect to Borrower’s Assets and Property are valid and enforceable.

 

Secured Promissory Note
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IN WITNESS WHEREOF, Borrower has duly executed this Secured Promissory Note on September 24, 2020.

 

  Borrower
     
  U.S. Energy Corp.
                  
  By:  
  Name:  
  Title:  

 

  Address for notice:
   
  675 Bering Dr, Suite 100
  Houston, Texas 77057
  Attn: Mr. Ryan Smith
  Email: Ryan@usnrg.com

 

Holder  
     
APEG Energy II, L.P.  
           
By:    
Name:    
Title:    

 

Address for notice:

 

2808 Flintrock Trace Suite 373

 

Austin, Texas 78738

Attn:__________________

Email:___________________

 

Secured Promissory Note
Page 10 of 10

 

Exhibit 99.1

 

 

U.S. Energy Corp. Announces Asset Acquisition

 

HOUSTON, TX – September 29, 2020 — U.S. Energy Corp. (NASDAQCM: USEG) (“U.S. Energy” or the “Company”) today announced that the Company has entered into an Asset Purchase Agreement and closed a transaction (the “Transaction”) to acquire operated and non-operated producing assets (the “Properties”) primarily located in Lea County, New Mexico and Converse County, Wyoming. The acquired Properties consist of select upstream assets of FieldPoint Petroleum Corporation (“FieldPoint”) and were acquired pursuant to Fieldpoint’s Chapter 7 bankruptcy process.

 

Acquisition Highlights

 

Proved Developed Producing (PDP) reserves estimated at approximately 237,263 barrel of oil equivalent (Boe) (63% oil).
Proved Developed Producing PV-10 estimated at $2.5 million.
Lea County, New Mexico assets comprise approximately 82% of total Proved Developed Producing volumes.
Converse County, Wyoming assets comprise approximately 15% of total Proved Developed Producing volumes.
Assets acquired for $500,000 in cash.

 

“We are pleased to announce this acquisition, which represents U.S. Energy’s second acquisition of 2020 and follows our previously stated strategy of seeking to acquire assets that represent mature, PDP heavy properties which we believe have significant upside potential from existing operations,” said Ryan Smith, Chief Executive Officer of U.S. Energy, who continued, “The Properties, acquired at an approximate 80% discount to their current proved developed producing reserve value, add reserves and immediate free cash flow, with operated acreage positions that are held by production to provide optionality for future opportunities. As we continue to execute our consolidation strategy moving forward in 2020 and into 2021, U.S. Energy will continue to pursue attractive opportunities that allow for capital efficient growth and increased shareholder value, while maintaining a low-cost corporate structure and clean balance sheet.”

 

Acquired Properties Overview

 

As of August 1, 2020, the Properties had total estimated proved reserves of approximately 237,263 Boe (63% oil), all of which are proved developed producing reserves (“PDP”), and had a present value of estimated future net revenues before income taxes discounted at 10% (“PV10”) value of approximately $2.5 million. The properties are 59% non-operated and 41% operated, with the non-operated assets being operated primarily by Cimarex Energy and ConocoPhillips in Lea County, New Mexico.

 

The consideration paid at closing by U.S. Energy consisted of $500,000 in cash.

 

  

Acquired Assets

Estimated As of August 1, 2020**

 
Proved Developed Oil Reserves (barrels (Bbls))   149,940 
Proved Undeveloped Oil Reserves (Bbls)   - 
Total Proved Oil Reserves (Bbls)   149,940 
      
Proved Developed Gas Reserves (thousand cubic feet (Mcf))   523,940 
Proved Undeveloped Gas Reserves (Mcf)   - 
Total Proved Gas Reserves (Mcf)   523,940 
      
Total Proved Reserves (Boe)   237,263 
      
PV10($000’s)*  $2,459 

 

*Strip Pricing as of September 9, 2020.

** Estimated pursuant to the August 1, 2020 report of the Company’s 3rd party reserve engineer, On Point Resources, LLC.

 

 

 

 

Promissory Note

 

U.S. Energy also announced that the Company entered into a $375,000 Secured Promissory Note (the “Note”) with the Company’s largest shareholder, APEG Energy II, L.P., which entity is controlled by a member of the Board of Directors. All proceeds from the financing were used to fund the Company’s recent acquisition. For more information on the acquisition and the Note, please see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 29, 2020.

 

About U.S. Energy Corp.

 

U.S. Energy is an independent energy company focused on the acquisition and development of oil and gas producing properties in the United States. Our business is currently focused on targeting mature, low decline assets with existing infrastructure that allows us to maximize our return on capital in a cost effective and sustainable manner. More information about U.S. Energy Corp. can be found at www.usnrg.com.

 

Forward-Looking Statements

 

Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “would,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets” and other words of similar meaning are intended to identify forward-looking statements but are not the exclusive means of identifying these statements. Forward-looking statements in this document may include statements regarding the Company’s expectations regarding the Company’s operational, exploration and development plans; expectations regarding the nature and amount of the Company’s reserves; and expectations regarding production, revenues, cash flows and recoveries. Forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, fluctuations in oil and natural gas prices, uncertainties inherent in estimating quantities of oil and natural gas reserves and projecting future rates of production and timing of development activities, competition, operating risks, acquisition risks, liquidity and capital requirements, the effects of governmental regulation, adverse changes in the market for the Company’s oil and natural gas production, dependence upon third-party vendors, and the duration, effects and governmental responses to, COVID-19, among others. Such risks, uncertainties, and other factors also include, but are not necessarily limited to, those set forth under Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and subsequently filed Quarterly Reports on Form 10-Q under the heading “Risk Factors”. The Company operates in a highly competitive and rapidly changing environment, thus new or unforeseen risks may arise. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results. The Company disclaims any intention to, and undertakes no obligation to, update or revise any forward-looking statements, except as otherwise required by law, and also takes no obligation to update or correct information prepared by third parties that are not paid for by the Company. Readers are also urged to carefully review and consider the other various disclosures in the Company’s public filings with the Securities Exchange Commission (SEC), including, but not limited to, the risk factors discussed above. The Company’s SEC filings are available at http://www.sec.gov.

 

Petroleum engineering is a process of estimating underground accumulations of oil, natural gas and natural gas liquids (NGLs) that cannot be measured in an exact way. The accuracy of any resource estimate depends on the availability of data, the interpretation of such data and price and cost assumptions made by petroleum engineers. Such estimates are also subject to actual drilling, testing and production activities. Accordingly, resource estimates included in this press release may differ significantly from the quantities of oil, natural gas and NGLs that are ultimately recovered.

 

Corporate Contact:

 

U.S. Energy Corp.

Ryan Smith

Chief Executive Officer

(303) 993-3200

www.usnrg.com