EXHIBIT 10.53
EXCHANGE RIGHTS AGREEMENT
This Exchange Rights Agreement (the "Agreement") is
entered into as of September 17, 1997 by and between Yellow
Stone Fuels Corporation ("YSFC"), an Ontario, Canada
corporation with offices at 877 North 8th West, Riverton,
Wyoming 82501, U.S. Energy Corp. ("USE"), a Wyoming corporation
with offices at 877 North 8th West, Riverton, Wyoming 82501,
and R A F Financial Corporation ("RAF"), a corporation with
offices at 1700 Lincoln Street, 32nd Floor, Denver, Colorado
80203.
RECITALS
Whereas, USE and its affiliated corporation, Crested Corp.
("Crested"), own shares of Common Stock of YSFC and have the
right to convert indebtedness to additional shares of Common
Stock of YSFC; and
Whereas, USE has taken the initiative in founding and
organizing YSFC and may be deemed to be a founder and promoter
of YSFC; and
Whereas, YSFC has or will enter into an Selling Agent
Agreement ("Agent Agreement") with RAF under which RAF has
agreed to or will agree to use its best efforts, as agent for
YSFC, to place (sell) shares of Common Stock of YSFC for YSFC
in a private offering (the "Private Offering") for up to US$3
million in gross proceeds; provided that, YSFC and RAF prior to
the end of the Private Offering may mutually agree to increase
the size of the Private Offering up to a maximum of US$5
million in gross proceeds. Hereafter, the shares of Common
Stock which will be sold in the Private Offering are referred
to as the "Private Offering Shares" and the information about
YSFC and the Private Offering to be delivered to the purchasers
("Investors") in the Private Offering is referred to as the
"Private Placement Memorandum"; and
Whereas, RAF will receive, as a part of its compensation
for sale of the Private Offering Shares, Warrants to Purchase
Common Shares of YSFC ("Agent's Warrants", and the future
holders of such Agent's Warrants are referred to as the
"Warrantholders"); and
Whereas, the offer and sale of the Private Offering Shares
will not be registered with the Securities and Exchange
Commission ("SEC") pursuant to Section 5 of the Securities Act
of 1933 ("1933 Act") or any state securities laws and,
therefore, the Private Offering Shares will constitute
"restricted securities" under SEC Rule 144 and state securities
laws; and
Whereas, USE, YSFC and RAF have negotiated the terms and
conditions under which the Investors and their assignees will
have the opportunity to exchange all or a part of their Private
Offering Shares for USE Shares if YSFC is not listed on, and
the Common Stock of YSFC is not available for quotation on, the
Nasdaq National Market System ("NNM") by the eighteen month
anniversary of the date of the Private Placement Memorandum
(the "Listing Period"); and
Whereas, USE, YSFC and RAF have negotiated the terms and
conditions under which the Warrantholders and the holders of
Common Stock of YSFC acquired upon the exercise of the Agent's
Warrants ("Exercise Shares") will have the opportunity to
exchange all or a part of their Agent's Warrants or Exercise
Shares for USE Warrants or for USE Shares, respectively, if
YSFC is not listed on, and the Common Stock of YSFC is not
available for quotation on, NNM during the Listing Period; and
Whereas, the Common Stock of USE is listed on NNM.
AGREEMENT
Now, therefore, the parties agree as follows:
1. Definitions. In addition to the terms defined above,
the following terms shall have the following meanings:
"Exchange Date" shall mean the date when the
Investor's Exchange Shares, the Warrantholder's Agent's
Warrants or the Exercise Shares and a duly completed and
executed notice of election to exchange relating thereto
are received by USE.
"Exchange Offer Documents" shall mean (i) the
prospectus included in the Registration Statement on Form
S-1 or other appropriate SEC form, which prospectus is to
be delivered by USE ("USE Prospectus") as a part of the
Exchange Offer Documents pursuant to paragraph 2 of this
Agreement and which registration statement shall have
registered and/or qualified by the first day of the
Exchange Period the offers to sell (exchange) and the sale
(exchange) of the USE Shares and USE Warrants by USE and
the exercise of the USE Warrants to purchase the USE
Shares underlying the USE Warrants with the SEC and the
states in which the Investors, the Investors' assignees,
the Warrantholders and the holders of the Exercise Shares
reside and (ii) such accompanying documents, including the
form of notice of election to exchange, as are necessary
to effect the exchange pursuant to this Agreement.
"Exchange Period" shall mean the period of time
beginning on the date when the Exchange Offer Documents
are first mailed pursuant to Paragraph 2 of this Agreement
to the Investors, to the Investors' assignees, to the
Warrantholders and to those persons who have Exercise
Shares, and ending on the six-month anniversary of the
date of such mailing, or the next business day if the six-
month anniversary falls on a bank holiday; provided, that
the Exchange Offer Documents must be mailed to the
Investors, to the Investors' assignees, to the
Warrantholders and to those persons who have Exercise
Shares not later than the first business day after the
expiration of the Listing Period.
"Investor's Exchange Shares" shall mean the Private
Offering Shares owned by an Investor or an Investor's
assignee at the beginning of the Exchange Period;
provided, that USE will only recognize and this Agreement
only shall be enforceable with respect to an Investor's
assignee of an Investor's Exchange Shares if (i) the
Investor's Exchange Shares have been assigned or otherwise
transferred in compliance with the 1933 Act and such
compliance is established to the reasonable satisfaction
of YSFC before such assignment or transfer is approved by
YSFC; and (ii) the assignee or transferee did not acquire
the Investor's Exchange Shares in a United States or
Canadian stock market or stock exchange transaction.
"Investor's Exchange Value" shall mean the total
original cash cost to the Investor of the Private Offering
Shares owned by the Investor or the Investor's assignee,
plus annual interest at the rate of 10% calculated on a
360 day year basis starting the day after the Investor's
Subscription Agreement was accepted and approved by YSFC
for the Investor's purchase of the Private Offering Shares
in the Private Offering and ending on the Exchange Date.
"USE Shares" shall mean shares of Common Stock of
USE, $0.01 par value and any other class of securities
ranking on a parity with such Common Stock.
"USE Share Value" shall mean the average of the
closing bid prices for a share of USE Common Stock on NNM
for the five trading days before the Exchange Date, as
reported by NNM. If USE is not listed on, or the USE
Shares are not available for quotation on, NNM on the
Exchange Date, the USE Share Value shall be based on the
average of the closing bid prices for such five day period
of the USE Shares on a national securities exchange if the
USE Shares are listed on a national securities exchange or
admitted to unlisted trading privileges on such an
exchange, or, if not, based upon the average of the
closing bid prices for such five day period if the USE
Shares are listed for trading on another trading system of
the National Association of Securities Dealers, Inc. If
the USE Shares are not so listed on such exchange or
system or admitted to unlisted trading privileges, the USE
Share Value shall be the average of the closing bid prices
reported by the National Quotation Bureau, Inc. for the
five
trading days before the Exchange Date. If the USE Shares are
not so listed or admitted to unlisted trading privileges and if
bid prices are not so reported, the current value shall be an
amount, not less than book value, determined in such reasonable
manner as may be prescribed by the board of directors of the
Company.
"USE Warrants" shall mean warrants to purchase shares
of Common Stock of USE, with the same terms, including but
not limited to registration rights, as the Agent's
Warrants surrendered in exchange therefor, except that the
USE Warrants shall be (i) exercisable only for the
unexpired term of the Agent's Warrants and (ii)
exercisable to purchase that number of USE Shares equal to
(a) the product of (x) the number of shares of Common
Stock underlying the Agent's Warrants multiplied by (z)
the price per share of Common Stock of YSFC in the Private
Offering divided by (b) the USE Share Value and except
that the exercise price per share of the USE Warrants
shall be equal to the USE Share Value.
2. YSFC Notice to USE and RAF of No NNM Listing;
Exchange Offer Documents. At least 30 days before the
expiration of the Listing Period, YSFC shall give written
notice to RAF and USE as to whether or not YSFC will be listed
on, and the Common Stock of YSFC available for quotation on,
NNM at the end of the Listing Period. If not, not later than
the first business day after the end of the Listing Period, USE
shall mail the Exchange Offer Documents to Investors, to
Investors' assignees, to the Warrantholders and to those
persons who have Exercise Shares.
3. Exchange Offer Terms.
a. To Investors. During the Exchange Period, each
Investor and each Investor's assignee shall have the right
to exchange all of part of the Investor's Exchange Shares
for the number of fully paid and nonassessable USE Shares
which equals the Investor's Exchange Value divided by the
USE Share Value.
b. To Warrantholders and Holders of Exercise Shares.
During the Exchange Period, each Warrantholder and each
holder of Exercise Shares shall have the right to exchange
(i) all or part of the Agent's Warrants owned by the
Warrantholder for USE Warrants, and/or (ii) all or part of
the Exercise Shares for USE Shares on the same basis as
the Investor's Exchange Shares are exchangeable as
provided in paragraph 3.a above.
c. Receipt During Exchange Period; No Fractions;
Irrevocable Election. No notice of election to exchange
which is given after the expiration of the Exchange Period
will be accepted by USE. No fractional USE Shares or USE
Warrants shall be issued; any fractional USE Share or USE
Warrant which would otherwise result shall be rounded up
to the next whole USE Share or USE Warrant. Each
Investor, each Investor's assignee, each Warrantholder and
each holder of Exercise Shares shall have the right, one
time only, to exchange some or all of the Investor's
Exchange Shares, the Warrantholder's Agent's Warrants or
the Exercise Shares for USE Shares or USE Warrants, as
applicable. On the Exchange Date, the notices of election
to exchange shall be irrevocable and shall not be changed
to increase or decrease the number of Investor's Exchange
Shares, Agent's Warrants or Exercise Shares to be
exchanged.
d. Certificates for USE Shares and USE Warrants.
From time to time during the Exchange Period (i)
certificates for the USE Shares shall be issued by USE to
the persons exercising their right of exchange for USE
Shares, and (ii) USE Warrants shall be issued by USE to
the persons who have exchanged Agent's Warrants for USE
Warrants.
4. Current Registration Statement; Expenses of
Registration and Qualification. USE shall keep the
registration statement current until the day after the last day
of the Exchange Period. USE shall pay for all expenses
incurred in connection with such registration statement and, in
addition, for all expenses incurred in connection with
registering or qualifying the offer and sale of the USE Shares,
USE Warrants and underlying USE Shares under the securities
laws of the states wherein the Investors, Investors' assignees,
Warrantholders and each holder of Exercise Shares reside.
USE shall not pay any commissions or other compensation to any
person in connection with such offers and sales.
5. Adjustments for Recapitalizations; No Termination.
In the event that between the date of the Private Placement
Memorandum and the day after the last day of the Exchange
Period, YSFC or USE declares any stock dividend or effectuates
any stock split or undergoes a capital reorganization or other
transaction which changes the kind or number of shares of
Common Stock of YSFC or USE, then full and equitable adjustment
in the number of USE Shares and USE Warrants shall be made with
the objective of maintaining after the transaction the relative
values of the Investor's Exchange Value and the USE Share Value
before such stock dividend or other capital reorganization or
other transaction as if such transaction had not occurred,
taking into account changes in USE Share Value which have
resulted otherwise than from such stock dividend or stock
split, etc.
USE and YSFC agree that from the date of this Agreement
until the day after the last day of the Exchange, neither USE
nor YSFC will take or permit any action, including, but not
limited to, a merger, reorganization or sale of assets, which
would terminate or diminish the rights of the Investors,
Investors' assignees, Warrantholders or holders of Exercise
Shares under this Agreement.
6. Injunctive Relief. USE irrevocably grants RAF and
its assignees, in addition to other legal remedies available,
the right to apply for an injunction, without bond exceeding
$500, to enforce USE's covenants herein and USE's sole remedy
in the event of the entry of such injunctive relief shall be
the dissolution of such injunctive relief, if warranted, upon
hearing duly held (all claims for damages by reason of the
wrongful issuance of such injunction being expressly waived
hereby).
7. Complete Agreement; Governing Law and Expenses of
Resolution; Notice. This Agreement represents the complete
agreement among the parties with respect to the subject matter
hereof, except for the Agent Agreement and the Agent's Warrants
the terms of which shall control in the event of any conflict
with this Agreement. This Agreement shall be construed and
interpreted under the laws of the State of Colorado; this
Agreement is entered into in Denver, Colorado. In the event of
litigation to enforce the rights of the parties hereto, the
party which prevails shall be entitled to recover from the
other parties the costs and expenses (including reasonable
attorney's fees) of such litigation. Notice to the parties
hereto shall be given by first class mail to the address of the
party stated in this Agreement; notice to the Investors,
Investor assignees, Warrantholders and holders of Exercise
Shares shall be by first class mail to the addresses of such
persons as reflected in the records of the Company. Unless
otherwise stated in this Agreement, all notices under this
Agreement shall be given when postmarked after having been
deposited in the U.S. Mail, postage prepaid.
8. Binding Nature. This Agreement shall be binding upon
the parties hereto, and inure to the benefit of the parties,
their respective heirs, administrators, executors, successors
and assigns. Further, RAF shall have the right, in its sole
discretion, to enforce this Agreement on behalf of the
Investors, Investor assignees, Warrantholders and holders of
Exercise Shares or to assign the rights to enforcement hereof
to one or more of the Investors, Investor assignees,
Warrantholders and holders of Exercise Shares.
This Agreement is effective as of the date first stated
above.
YELLOW STONE FUELS CORP. U.S. ENERGY CORP.
By: /s/ Mark J. Larsen By: /s/ John L. Larsen
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Mark J. Larsen, President John L. Larsen, Chairman
RAF FINANCIAL CORPORATION
/s/ Robert L. Long
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Robert L. Long,
Senior Vice President, Corporate Finance