EXHIBIT "C"
WARRANT AGREEMENT
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF COMMON
STOCK ISSUABLE UPON ITS EXERCISE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS PURSUANT
TO REGISTRATION UNDER THE SECURITIES ACT OR IN COMPLIANCE WITH AN
EXEMPTION
THEREFROM ESTABLISHED BY AN OPINION OF COUNSEL OR OTHERWISE
TO THE REASONABLE
SATISFACTION OF THE COMPANY.
Warrant. Number of Shares: AS CALCULATED BELOW
Date of Issuance: July 30, 2004
ROCKY MOUNTAIN GAS, INC.
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COMMON STOCK PURCHASE WARRANT
-----------------------------
THIS IS TO
CERTIFY THAT, for value received, GEDDES AND COMPANY, an
Arizona
company (the "Registered Holder"), or its permitted assigns, is entitled
to
purchase from ROCKY MOUNTAIN GAS, INC., a
Wyoming corporation (the "Company" or
"RMG"), pursuant to a Credit Agreement dated July
30, 2004 between U.S. Energy
Corp. and Geddes and Company, at the purchase price
per share provided by the
following table, the following number(s) of common shares of the
Company The
"Warrant Shares"):
AMOUNT
OF LOAN DRAWN DOWN
<TABLE>
<CAPTION>
$ 0
$1,000,001 $2,000,001
Terms
to
to
to
Total
and
$1,000,000 $2,000,000
$3,000,000 Warrants
Exercise Price
---------- ----------
---------- --------
----------------------------
150,000
+75,000
+75,000 300,000
5 year
warrants @3.00/share*
<C> <C>
<C>
<C>
<S>
50,000
+25,000
+25,000 100,000
5 year
warrants @3.25/share*
50,000
+25,000
+25,000 100,000
5 year
warrants @3.50/share*
50,000
+25,000
+25,000 100,000
5 year
warrants @3.75/share*
------- -------
------- -------
------------------------------
300,000 150,000
150,000 600,000
Total
Warrants
</TABLE>
* The "Exercise Price" shall mean the lesser of
$3.00 per share or the lowest
purchase price per share actually paid to and received by
RMG from investors
after the date hereof in RMG private
placements until $20 million (of which at
least $15 million must be cash and of which up to $5 million
[determined in
accordance with generally accepted accounting
principles] may be in the form of
producing properties) is cumulatively received (the "Offer
Completion Date").
The above listed prices of $ 3.25 to $
3.75 shall also be adjusted accordingly.
For example, if the Exercise Price were $ 2.90
then the $ 3.25 would become $
3.14 (8% above $ 2.90), $ 3.50 would
become $ 3.38 and $ 3.75 would then become
$ 3.63. The number of Warrant Shares will be determined by the aggregate
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amount of advances pursuant to the Loan as described in the
table above, and
shall consist of duly authorized, validly
issued, fully paid and nonassessable
shares of Common Stock, $0.01 par value per
share, of the Company. The number of
shares subject to purchase hereunder and the Exercise Price are subject
to
adjustment as provided herein. The Warrants
shall expire at 5:00 p.m., C.S.T.,
on the fifth anniversary of the Offer
Completion Date, but no later than July
30, 2019 ("Expiration Date").
ARTICLE I
---------
Exercise of Warrant
-------------------
1.1 Method of Exercise. This Warrant may be exercised by
the Registered
--------------------
Holder as a whole or in part from time to time until
the Expiration Date, at
which time this Warrant shall expire and be
of no further force or effect. The
minimum number of Warrant Shares that may be purchased on a single
exercise
shall be 10,000 or the entire number of
shares remaining available for exercise
hereunder, whichever is less. To exercise
this Warrant, the Registered Holder or
permitted assignees of all rights of the
Registered Holder shall deliver to the
Company, at the Warrant Office designated
in Section 2.1(a), a written notice in
the form of the Purchase Form attached
as Exhibit A hereto, stating therein the
election of the Registered Holder or such
permitted assignees of the Registered
Holder to exercise this Warrant in the
manner provided in the Purchase Form, (b)
payment in full of the Exercise Price for
the Warrant Shares purchased, and (c)
this Warrant. Subject to compliance
with Section 3.1(a)(vi), this Warrant shall
be deemed to be exercised on the date
of receipt by the Company of the Purchase
Form, accompanied by payment for the Warrant Shares to be purchased and
surrender of this Warrant, and such date is
referred to as the "Exercise Date."
-------------
Upon such exercise, the Company shall issue
and deliver to the Registered Holder
a certificate for the full number of the Warrant Shares purchasable
by the
Registered Holder hereunder, against the receipt by the Company of the
total
Exercise Price payable hereunder for all such Warrant Shares in cash or
by
certified or cashier's check. The Person in whose name
the certificate(s) for
Common Stock is to be issued shall be deemed to
have become a holder of record
of the Common Stock on the Exercise Date.
In case such exercise is in part only,
a new warrant or warrants (dated the
date hereof) of like tenor, calling in the
aggregate on the face or faces thereof for
the number of Warrant Shares equal to
the number of such shares called for
by this Warrant minus the number of shares
of Common Stock purchased by the Registered Holder upon
exercise as provided
herein.
1.2 Fractional
Shares. No fractional shares of Common Stock shall be issued
-----------------
upon exercise of this Warrant.
ARTICLE II
Warrant Office; Transfer
------------------------
2.1 Warrant Office. The Company shall maintain an office for certain
---------------
purposes specified herein (the "Warrant Office"),
which office shall initially
--------------
be the Company's office at 877 North
8th West, Riverton, Wyoming 82501, and may
subsequently be such other
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office of the Company or of any transfer agent of the
Common Stock of which
written notice has previously been given to the
Registered Holder. The Company
shall maintain, at the Warrant Office, a register
for the Warrant in which the
Company shall record the name and address of the
Registered Holder, as well as
the name and address of each permitted
assignee of the rights of the Registered
Holder.
2.2 Ownership of Warrant. The Company may deem and treat the
Registered
----------------------
Holder as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company) for
all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer.
2.3 Transfer of Warrants. The Company agrees to maintain at
the Warrant
----------------------
Office books for the registration and
transfer of this Warrant. This Warrant may
be transferred in whole or in part only in
compliance with the applicable law.
The Company, from time to time, shall register
the transfer of this Warrant in
such books upon surrender of this Warrant at the Warrant Office,
properly
endorsed, together with a written assignment of this
Warrant, substantially in
the form of the Assignment attached as Exhibit
B hereto. Upon transfer, a new
Warrant shall be issued to the transferee, and the Company
shall cancel the
surrendered Warrant. The Registered Holder shall pay all taxes and all
other
expenses and charges payable in connection with the transfer of Warrants
pursuant to this Section 2.3.
2.4 No Rights as Shareholder Until
Exercise. This Warrant does not entitle
---------------------------------------
the Registered Holder to any voting rights or
other rights as a shareholder of
the Company prior to exercise. Upon the surrender of this Warrant and
the
payment of the aggregate Exercise Price, the
Warrant Shares so purchased shall
be issued to the Registered Holder as
the record owner of such shares as of the
close of business on the later of the date
of such surrender or payment. Warrant
Shares shall be issued subject to no
restrictions upon transfer or sale, except
applicable securities laws.
2.5 Registration Rights. The Company agrees that at the request of
the
--------------------
Registered Holder (or Registered Holders,
provided request is made by Registered
Holders with 60% of the Warrants Shares
issuable on exercise of this Warrant),
made at any time after the Company has a class of stock
registered with the
Securities and Exchange Commission under the Securities
Exchange Act of 1934,
public resale of the Warrant Shares shall
be covered by a registration statement
on an appropriate form to be filed with
the Securities and Exchange Commission
under the Securities Act.
Once public, the
Company shall use its commercially reasonable best efforts
to file the registration statement as
soon as possible after receipt of request
from the Registered Holder, it being understood that a request for filing
received in the first quarter may result in
a delay of filing until the Company
has filed its annual report with the Securities and
Exchange Commission. The
Company will file the registration
statement at its sole cost and expense, have
it declared effective as soon as practicable, and maintain
such registration
statement in effect until the first to occur of the
following: (a) the third
anniversary of effective date, (b) the date
when all of the Warrant Shares have
been sold;
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or (c) the date the Registered
Holder(s) is or are able to immediately sell the
Warrant Shares pursuant to Rule 144. The benefits of this section
2.5 shall
extend to each Registered Holder.
When, pursuant
to this Section, the Company shall take any action to permit
a public offering or sale or other distribution of the Warrant
Shares, the
Company shall:
(a) furnish, without charge, to each Registered Holder
of Warrant Shares
(i) a reasonable number of copies of such registration statement
(including any
exhibits thereto other than exhibits incorporated
by reference), and
each amendment and supplement thereto as such
Registered Holder
may request,
(ii) such number
of copies of the prospectus included in such
registration statement (including each preliminary prospectus
and
any other prospectus filed under Rule 424 under the
Securities
Act) as such Registered Holder may request, in
conformity with
the requirements
of the Securities Act, and
(iii) such
other documents as such Registered
Holder may reasonably
request in
order to facilitate the disposition of the
Warrant
Shares.
(b) bear the complete cost and expense of such registrations or
qualifications.
(c) indemnify and hold harmless each Registered Holder and each
underwriter, within
the meaning of the Securities Act, who may
purchase from
or sell for a Registered Holder, any
Warrant Shares,
from and against any
and all losses, claims, damages, and liabilities
(including but
not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing, defending or
settling
any claim)
arising from
(i) any untrue or alleged untrue statement of a material fact
contained in
any registration statement furnished pursuant
to
this Section,
or any prospectus included herein or
(ii) any omission or alleged omission to state therein a material
fact
required to be stated therein or necessary to make the
statements
therein not
misleading.
The Company shall not be liable for
amounts paid
in settlement of any such litigation if such
settlement was
effected without the
consent of the Company. The
indemnity agreement of
the Company herein shall not inure to the
benefit of any such
underwriter (or to the benefit of any person
who controls such
underwriter) on
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account of
any losses, claims,
damages, liabilities (or actions
or proceedings
in respect thereof)
arising from the sale of any
of such Warrant Shares by such underwriter to a
person if such
underwriter failed
to send or give a copy of the prospectus
furnished pursuant
to this Section, as the same may then be
supplemented or
amended (if such supplement or amendment
shall
have been
furnished
