<SEC-DOCUMENT>0001615774-17-006082.txt : 20171031
<SEC-HEADER>0001615774-17-006082.hdr.sgml : 20171031
<ACCEPTANCE-DATETIME>20171031170101
ACCESSION NUMBER:		0001615774-17-006082
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20171227
FILED AS OF DATE:		20171031
DATE AS OF CHANGE:		20171031
EFFECTIVENESS DATE:		20171031

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			US ENERGY CORP
		CENTRAL INDEX KEY:			0000101594
		STANDARD INDUSTRIAL CLASSIFICATION:	CRUDE PETROLEUM & NATURAL GAS [1311]
		IRS NUMBER:				830205516
		STATE OF INCORPORATION:			WY
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-06814
		FILM NUMBER:		171166404

	BUSINESS ADDRESS:	
		STREET 1:		4643 S. ULSTER STREET
		STREET 2:		SUITE 970
		CITY:			DENVER
		STATE:			CO
		ZIP:			80237
		BUSINESS PHONE:		303 993 3200

	MAIL ADDRESS:	
		STREET 1:		4643 S. ULSTER STREET
		STREET 2:		SUITE 970
		CITY:			DENVER
		STATE:			CO
		ZIP:			80237

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	WESTERN STATES MINING INC
		DATE OF NAME CHANGE:	19851229
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>s107926_def14a.htm
<DESCRIPTION>DEF 14A
<TEXT>
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     <TITLE></TITLE>
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<P STYLE="margin-top: 0; text-align: center; margin-bottom: 0">&nbsp;<FONT STYLE="font-family: Times New Roman, Times, Serif"><B>UNITED STATES</B></FONT><BR>
<FONT STYLE="font-family: Times New Roman, Times, Serif"><B>SECURITIES AND EXCHANGE COMMISSION</B></FONT><BR>
<FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Washington, D.C. 20549</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>SCHEDULE
14A</B><BR>
<BR>
Proxy Statement Pursuant to Section 14(a) of the Securities<BR>
Exchange Act of 1934</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP COLSPAN="3" STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Filed by the Registrant &#9746;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP COLSPAN="3" STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Filed by a Party other than
    the Registrant &#9744;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP COLSPAN="3" STYLE="font-family: Times New Roman, Times, Serif"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
                                                                              <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Check
the appropriate box:</FONT></P>
                                                                              <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="width: 2%; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</FONT></TD>
    <TD NOWRAP STYLE="width: 2%; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 96%; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Preliminary Proxy
    Statement</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Confidential,
        for Use of the Commission Only </B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>(as
        permitted by Rule 14a-6(e)(2))</B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Definitive Proxy Statement</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Definitive Additional Materials</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Soliciting Material Pursuant to &sect;240.14a-12</FONT></TD></TR>
</TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><IMG SRC="img001_v1.jpg" ALT="">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="width: 2%; text-align: center; font-family: Times New Roman, Times, Serif; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 96%; border-bottom: black 1pt solid; text-align: center; font-family: Times New Roman, Times, Serif"><BR CLEAR="ALL"></TD>
    <TD NOWRAP STYLE="width: 2%; border-bottom: black 1pt solid; text-align: center; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font-family: Times New Roman, Times, Serif">
    <TD STYLE="text-align: center; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Name of Registrant
    as Specified In Its Charter)</FONT></TD>
    <TD STYLE="text-align: center; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; text-align: center; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="text-align: center; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="text-align: center; font-family: Times New Roman, Times, Serif"><P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Name of Person(s) Filing Proxy Statement, if other than the Registrant)</FONT></P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P></TD>
    <TD NOWRAP STYLE="text-align: center; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP COLSPAN="5" STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Payment of Filing Fee (Check
    the appropriate box):</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="text-align: left; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</FONT></TD>
    <TD NOWRAP STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="3" STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">No fee required.</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="text-align: left; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</FONT></TD>
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fee computed on table below per
    Exchange Act Rules 14a-6(i)(1) and 0-11.</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 2%; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 2%; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 2%; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 93%; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="padding-bottom: 1pt; text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title of each class of securities to which transaction
    applies:</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-bottom: black 1pt solid; text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2)</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Aggregate number of securities to which transaction
    applies:</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3)</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Per unit price or other underlying value of
    transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state
    how it was determined):</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">4)</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Proposed maximum aggregate value of transaction:</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5)</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total fee paid:</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</FONT></TD>
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fee paid previously with preliminary
    materials.</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</FONT></TD>
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Check
    box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
    fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
    of its filing.</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="text-align: right; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1)</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amount Previously Paid:</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2)</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form, Schedule
    or Registration Statement No.:</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3)</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Filing Party:</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; padding-bottom: 1pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">4)</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="padding-top: 4pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Date Filed:</FONT></TD></TR>
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    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>U.S.
ENERGY CORP.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 199.05pt 0pt 199.75pt; text-indent: 14.15pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">950
S. Cherry Street, Suite 1515</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 199.05pt 0pt 163.75pt; text-indent: 16.25pt"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.05pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">Denver,
Colorado 80246</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.05pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><BR CLEAR="ALL"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.05pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">Notice
of Special Meeting of Shareholders</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.05pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.05pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 437.7pt; margin-bottom: 0pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">October
31, 2017</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 437.7pt 0pt 5.85pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 437.7pt; margin-bottom: 0pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">Dear
Shareholders:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 437.7pt 0pt 5.85pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 10.35pt; margin-bottom: 0pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">We
are pleased to provide you with notice of Special Meeting of Shareholders, and we invite you to attend the meeting in person,
if possible. The timing, location and summary of each of the proposals to be voted upon are as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 10.35pt 0pt 5.85pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 10.35pt 0pt 5.85pt"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="width: 10%">Date:</TD>
    <TD NOWRAP STYLE="width: 30%">Wednesday,
December 27, 2017</TD>
    <TD STYLE="width: 15%">Time:</TD>
    <TD STYLE="width: 45%">8:30 AM MST</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>Place:</TD>
    <TD NOWRAP COLSPAN="2">950 S. Cherry Street, Suite 1515, Denver, Colorado 80246</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 10.35pt 0pt 5.85pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 5.8pt; margin-bottom: 0pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 49.55pt">Purposes:</TD><TD STYLE="width: 14.6pt; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">1.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">To
approve the issuance of shares of Common Stock in connection with the Exchange Agreement (as defined below) under NASDAQ Stock
Market Rules 5635(b) (the &ldquo;Exchange Proposal&rdquo;);</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 64.15pt; text-align: justify; text-indent: -58.35pt"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 49.55pt; font-family: Times New Roman, Times, Serif"></TD><TD STYLE="width: 14.6pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">2.</FONT></TD><TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><P STYLE="margin: 0">To approve an amendment, at the discretion of the Board of Directors, to the Company&rsquo;s articles of incorporation
to implement a reverse stock split of the Company&rsquo;s outstanding Common Stock at a reverse split ratio of 1-for-5, without
reducing the authorized number of shares of our Common Stock (the &ldquo;Reverse Stock Split&rdquo;); and</P>


</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 49.65pt; font-family: Times New Roman, Times, Serif"></TD><TD STYLE="width: 14.55pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">3.</FONT></TD><TD STYLE="font-family: Times New Roman, Times, Serif; text-align: justify">To approve an adjournment of the Special
Meeting, if necessary or appropriate, to establish a quorum or to permit further solicitation of proxies if there are not sufficient
votes at the time of the Special Meeting cast in favor of the Exchange Proposal or the Reverse Stock Split.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">We
are submitting the Exchange Proposal to our shareholders to facilitate a proposed recapitalization of the Company to reduce our
debt, leverage and cash interest expense, increase our financial flexibility and better position ourselves to return to growth
in the event of a potential recovery in commodity prices. We intend to accomplish this through:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font-family: Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">an
                                         Exchange Agreement (the &ldquo;Exchange Agreement&rdquo;) with APEG Energy II, L.P.,
                                         (&ldquo;APEG&rdquo;), an entity controlled by Angelus Private Equity Group, LLC. APEG
                                         currently holds $6,000,000 in principal amount of loans under the Credit Agreement by
                                         and between the Company&rsquo;s wholly owned subsidiary, Energy One LLC (&ldquo;Energy
                                         One&rdquo;), and APEG dated as of July 30, 2010, as amended (the &ldquo;Credit Facility&rdquo;),
                                         comprising the entire principal balance outstanding under the Credit Facility (the &ldquo;Balance&rdquo;).
                                         Pursuant to the Exchange Agreement APEG will exchange $4,463,380 of the Balance for 5,819,270
                                         shares of the Company&rsquo;s Common Stock, par value $0.01 per share, representing approximately
                                         49.3% of the Company&rsquo;s Common Stock (the &ldquo;Exchange&rdquo;); and</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font-family: Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">on
                                         the closing of the Exchange Agreement, the use of cash otherwise dedicated to interest
                                         expense to (i) increase our capital budget and resume growing our production base, and
                                         (ii) further pay down our existing debt.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Exchange is conditioned upon, among other things, shareholder approval of the Exchange Proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Company&rsquo;s board of directors (the &ldquo;Board&rdquo;) considered the effects that the Exchange is expected to have on the
Company, and unanimously determined that the substantial debt reduction, cash interest expense savings and decreased leverage
contemplated by the Exchange is critical to unlocking shareholder value in the Company and position the Company to take advantage
of a potential recovery in commodity prices. Although the Company is currently operating substantially within its cash flow, its
business is one of natural production declines. We believe that to enhance shareholder value over the long term, we will need
to deploy capital to maintain and grow our asset base. To do that, the Company must reduce its debt and leverage and put itself
in a position to access additional capital if commodity prices rise.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
the Company is unable to complete the proposed Exchange, and substantially reduce its debt, it would need to pursue alternative
strategies, which may include discounted equity issuances, asset sales, alternative debt for equity exchanges or other debt reduction
or restructuring transactions. In the Board&rsquo;s view, none of these alternatives are as actionable, or are as likely to result
in a significant reduction of leverage and preserve value for existing shareholders, as the Exchange.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Our
Board unanimously believes that the Exchange Proposal, is in the best interests of the Company and its shareholders and, therefore,
recommends that you vote &ldquo;FOR&rdquo; the Exchange Proposal</B>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">We
are submitting the Reverse Stock Split to our shareholders to maintain the listing of the Company&rsquo;s Common Stock on
The NASDAQ Capital Market. In order to maintain our NASDAQ Capital Market listing, our Common Stock must achieve a closing
bid price of $1.00 per share or more for 10 consecutive trading days. The Reverse Stock Split is one method for achieving
this result. The Company values its listing on The NASDAQ Capital Market and, conditioned on shareholder approval, will, in
the discretion of the Board of Directors, implement the Reverse Stock Split by the filing of articles of amendment to our
Restated Articles of Incorporation with the Secretary of the State of Wyoming.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
the Company is unable to complete the Reverse Stock Split, the Company&rsquo;s Common Stock may be delisted from The
NASDAQ Capital Market and, as a result, shareholders would likely find it more difficult to obtain accurate quotations as to the
price of our Common Stock, and the liquidity of our Common Stock would likely be reduced, making it difficult for shareholders
to buy or sell our Common Stock at competitive market prices, or at all. In addition, support from institutional investors and/or
market makers that currently buy and sell the Company&rsquo;s stock may decline, possibly resulting in a decrease in the trading
price of our Common Stock.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Our
Board unanimously believe that the Reverse Stock Split is in the best interests of the Company and its shareholders and, therefore,
recommends that you vote &ldquo;FOR&rdquo; the Reverse Stock Split</B>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">Details
of the business to be conducted as the Special Meeting are provided in the attached Notice of Special Meeting and Proxy Statement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">Only
shareholders of record at the close of business on November 1, 2017 are entitled to receive notice of and to vote at the Special
Meeting.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Securities and Exchange Commission (&ldquo;SEC&rdquo;) allows companies to furnish proxy materials over the Internet, which reduces
environmental impact as well as printing and mailing costs. Unless otherwise requested by the shareholder, we are mailing to each
shareholder a Notice of Internet Availability of Proxy Materials (the &ldquo;Notice of Availability&rdquo;) instead of mailing
paper copies of the proxy materials. The Notice of Availability contains instructions on how to access the proxy materials on
the Internet, and also on how to request a paper copy of the proxy materials. All shareholders who do not receive a Notice of
Availability will receive a paper copy of the proxy materials by mail.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 20.4pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">Whether
or not you plan to attend the meeting, please take the time to vote:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 20.4pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font-family: Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">Via
                                         the internet &ndash; Go to the website shown on your proxy card or the Notice of Availability;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font-family: Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">Via
                                         telephone &ndash; Call the toll free number shown on the Notice of Availability; or</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font-family: Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">Via
                                         mail &ndash; Complete, sign and date your proxy card and mail it in the postage paid
                                         envelope.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
you are a shareholder of record of the Company at the close of business on November 1, 2017, you may attend and vote at the meeting.
The names of shareholders of record entitled to vote at the Special Meeting will be available for review at the Special Meeting
and during regular business hours at our headquarters in Denver, Colorado.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
you wish to attend the Special Meeting and vote in person, but you hold your shares through a broker or other nominee (i.e., your
shares are held in &ldquo;street name&rdquo;), contact your broker or nominee promptly to obtain a &ldquo;legal proxy&rdquo; which
you must bring to the Special Meeting in order to vote in person at the Special Meeting. Thank you for your support for the recommendation
of our Board of Directors.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 5.85pt; text-align: justify; text-indent: 14.55pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 3%">By</TD>
    <TD STYLE="width: 47%">Order of the Board of Directors</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">/s/
David A. Veltri<BR>
Chief
Executive Officer</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 107.45pt 0pt 108.35pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>IMPORTANT
NOTICE REGARDING THE INTERNET AVAILABILITY</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 107.45pt 0pt 108.35pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;<B>OF
PROXY MATERIALS FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 27, 2017</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 107.45pt 0pt 108.5pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 16.25pt 0pt 5.85pt; text-indent: 19.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">This
Notice of Special Meeting of Shareholders, and the accompanying Proxy Statement are available on our website www.usnrg.com
and www.proxyvote.com.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 16.25pt 0pt 5.85pt; text-indent: 19.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Table
of Contents</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 90%; padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt"><B>Page</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a001_v1"><FONT STYLE="font-size: 10pt">GENERAL</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">1</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a002_v1"><FONT STYLE="font-size: 10pt">CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">5</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a003_v1"><FONT STYLE="font-size: 10pt">THE EXCHANGE</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">6</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a004_v1"><FONT STYLE="font-size: 10pt">Background of the Exchange Agreement</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">6</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a005_v1"><FONT STYLE="font-size: 10pt">Reasons for the Exchange Agreement</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">6</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a006_v1"><FONT STYLE="font-size: 10pt">Analysis of the Exchange</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">8</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a007_v1"><FONT STYLE="font-size: 10pt">THE EXCHANGE AGREEMENT</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">9</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a008_v1"><FONT STYLE="font-size: 10pt">Exchange Agreement</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">9</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a009_v1"><FONT STYLE="font-size: 10pt">Standstill Agreement</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">9</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a010_v1"><FONT STYLE="font-size: 10pt">THE SPECIAL MEETING</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">10</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a011_v1"><FONT STYLE="font-size: 10pt">Time, Place, and Purpose of the Special Meeting</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">10</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a012_v1"><FONT STYLE="font-size: 10pt">Recommendation of the Board of Directors</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">10</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a013_v1"><FONT STYLE="font-size: 10pt">Record Date and Quorum</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">10</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a014_v1"><FONT STYLE="font-size: 10pt">Vote Required for Approval</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">10</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a015_v1"><FONT STYLE="font-size: 10pt">Shares Held by Company Directors and Executive Officers</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">10</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a016_v1"><FONT STYLE="font-size: 10pt">Voting of Proxies</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">10</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a017_v1"><FONT STYLE="font-size: 10pt">Revocability of Proxies</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">11</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a018_v1"><FONT STYLE="font-size: 10pt">Adjournments and Postponements</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">11</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a019_v1"><FONT STYLE="font-size: 10pt">Other Matters</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">11</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a020_v1"><FONT STYLE="font-size: 10pt">Questions and Additional Information</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">11</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a021_v1"><FONT STYLE="font-size: 10pt"> PROPOSAL 1: APPROVAL OF ISSUANCE THAT MAY RESULT IN A CHANGE OF CONTROL UNDER NASDAQ LISTING RULE 5635(b)</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">12</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a022_v1"><FONT STYLE="font-size: 10pt">Purpose and Effect of Approving the NASDAQ Proposal</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">12</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a023_v1"><FONT STYLE="font-size: 10pt">Board Recommendation</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">12</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a024_v1"><FONT STYLE="font-size: 10pt">PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO IMPLEMENT A REVERSE STOCK SPLIT OF THE COMPANY&rsquo;S OUTSTANDING COMMON STOCK AT A REVERSE STOCK SPLIT RATIO OF ONE-FOR- FIVE</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">13</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a025_v1"><FONT STYLE="font-size: 10pt">PROPOSAL 3: ADJOURNMENT PROPOSAL</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">18</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.25in; text-indent: -0.125in"><A HREF="#a026_v1"><FONT STYLE="font-size: 10pt">Board Recommendation</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">18</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a028_v1">PRINCIPAL HOLDERS OF VOTING SECURITIES AND OWNERSHIP BY OFFICERS AND DIRECTORS</A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">19</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 0.125in; text-indent: -0.125in"><A HREF="#a027_v1"><FONT STYLE="font-size: 10pt">OTHER MATTERS</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right; vertical-align: bottom"><FONT STYLE="font-size: 10pt">20</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 15%"><FONT STYLE="font-size: 10pt">APPENDIX A</FONT></TD>
    <TD STYLE="width: 85%"><FONT STYLE="font-size: 10pt">EXCHANGE AGREEMENT</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">APPENDIX B</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">STANDSTILL AGREEMENT</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">APPENDIX C</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">LETTER AGREEMENT</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">APPENDIX D</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">FORM OF AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION</FONT></TD></TR>
</TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.5pt 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.
ENERGY CORP.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.45pt 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">950
S. Cherry Street, Suite 1515</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.5pt 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Denver,
Colorado 80246</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1.5pt 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.05pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>PROXY
STATEMENT</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.15pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>FOR
SPECIAL MEETING OF SHAREHOLDERS ON</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.15pt; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>WEDNESDAY, DECEMBER 27, 2017</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.15pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
proxy statement (&ldquo;Proxy Statement&rdquo;) is provided in connection with a solicitation of proxies by the Board of Directors
(the &ldquo;Board&rdquo;) of U.S. Energy Corp. (&ldquo;U.S. Energy&rdquo;, the &ldquo;Company&rdquo;, &ldquo;we&rdquo;, &ldquo;our&rdquo;,
or &ldquo;us&rdquo;) for the Special Meeting of shareholders to be held on Wednesday, December 27, 2017, at 8:30 am MST at the corporate
offices of U.S. Energy, 950 S. Cherry Street, Suite 1515, Denver, Colorado 80246 (the &ldquo;Special Meeting&rdquo;), and at any
adjournments of the meeting. On or about November 17, 2017, we began mailing the Notice of Availability and a full set of proxy
materials to shareholders who requested delivery of the materials in paper form.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify; text-indent: 14.55pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.05pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A NAME="a001_v1"></A>GENERAL</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 152.1pt 0pt 152.05pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Q.
<B>Why am I receiving these proxy materials?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A.
</B>On October 3, 2017, the Company entered into an Exchange Agreement (the &ldquo;Exchange Agreement&rdquo;) with the Company&rsquo;s
wholly owned subsidiary Energy One LLC and APEG Energy II, L.P., (&ldquo;APEG&rdquo;), an entity controlled by Angelus Private
Equity Group, LLC, pursuant to which, on the terms and subject to the conditions of the Exchange Agreement, APEG will exchange
$4,463,380 of outstanding borrowings under the Company&rsquo;s Credit Facility, for 5,819,270 new shares of Common Stock of the
Company, par value $0.01 per share (the &ldquo;Exchange&rdquo;), at an exchange price of $0.767 representing a 1.3% premium over
the 30-day volume weighted average price of the Company&rsquo;s Common Stock on September 20, 2017 (the &ldquo;Exchange Shares&rdquo;).
In addition, at the closing of the Exchange, the Company will pre-pay, in cash, $600,000 of the outstanding principal under the
Credit Facility, leaving approximately $937,000 outstanding. Also, accrued, unpaid interest on the Credit Facility held by APEG
will be paid in cash at the closing of the transaction. Immediately following the close of the transaction, APEG will hold approximately
49.3% of the outstanding Common Stock of U.S. Energy. The terms of the Exchange Agreement are more fully described below under
the caption &ldquo;The Exchange Agreement.&rdquo;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Exchange requires shareholder approval of the issuance of shares of Common Stock under NASDAQ Stock Market Rule 5635(b) (the &ldquo;Exchange
Proposal&rdquo;). The Exchange is expected to occur following satisfaction of the closing conditions in the Exchange Agreement,
including shareholder approval of the Exchange Proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Exchange is being pursued to reduce the Company&rsquo;s debt, leverage and cash interest expense, and increase the Company&rsquo;s
financial flexibility during the current period of volatile commodity prices in the oil and gas industry, which has had a significant,
adverse effect on the Company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
the completion of the Exchange the Company will have significantly reduced interest expense as a result of the decrease in its
outstanding debt, and we intend to use cash that we previously used for interest expense to increase our capital budget and resume
growing our production base. In addition, the reduction of our debt will increase the Company&rsquo;s ability to access additional
capital and grow its asset base.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A.
</B>Our Common Stock is listed on The NASDAQ Capital Market, and in order for us to maintain the listing, our Common Stock must
maintain a minimum bid price of $1.00 as set forth in NASDAQ Stock Market Rule 5550(a)(2) (the &ldquo;Rule&rdquo;). If the closing
bid price of the Common Stock is below $1.00 for 30 consecutive trading days, then the closing bid price of the Common Stock must
be $1.00 or more for 10 consecutive trading days during a 180-day grace period to regain compliance with the rule.&nbsp; On March
23, 2017, NASDAQ notified the Company that the bid price of its listed security had closed at less than $1 per share over the
previous 30 consecutive business days, and, as a result, did not comply with the Rule. In accordance with Listing Rule 5810(c)(3)(A),
the Company was provided 180 calendar days, or until September 19, 2017, to regain compliance with the Rule.&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has not regained compliance with the Rule and is not eligible for a second 180-day period. Specifically, the Company does
not meet the minimum $5 million shareholders&rsquo; equity, $50 million Market Value of Listed Securities, or $750,000 net income
from continuing operations initial listing requirements for The NASDAQ Capital Market. Accordingly, unless the Company had requested
an appeal of this determination as described in further detail below, the Company&rsquo;s securities would have been scheduled
for delisting from The NASDAQ Capital Market and would have been suspended at the opening of business on September 29, 2017. A
Form 25-NSE would have been filed with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;) to remove the Company&rsquo;s
securities from listing and registration on The NASDAQ Stock Market.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company timely requested an appeal, which delayed the delisting of the Company&rsquo;s securities from NASDAQ until
resolution of the appeal or meeting the listing standard of $1.00/share price for 10 (ten) consecutive days prior to the
hearing. A hearing on the appeal was held on October 26, 2017. In connection with the appeal, the Company
submitted a business plan to NASDAQ and will continue to work with NASDAQ to attempt to comply with all continued listing
standards.&nbsp; The appeal may result in an award of additional time up to 180 days to comply with the listing standards as
requested in the appeal. A Reverse Stock Split will increase the trading price of the Company&rsquo;s Commons Stock above
$1.00 per share and, accordingly, should allow the Company to maintain its listing on The NASDAQ Capital Market. However, if
the Company meets NASDAQ&rsquo;s listing requirements prior to the Special Meeting, the Board, in its discretion, may elect
not to effect the Reverse Stock Split.</FONT></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0.1pt 0 0 5.85pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
permit the Company to complete the Exchange and the Reverse Stock Split, it is providing these proxy materials in connection with
the solicitation by our Board of proxies to be voted at the Special Meeting on the Exchange Proposal and Reverse Stock Split.
If the Exchange Proposal is approved by the Company&rsquo;s shareholders, it will complete the Exchange, subject to satisfaction
or waiver of other closing conditions. If the Reverse Stock Split is approved by the Company&rsquo;s shareholders, and if the
Board, in its discretion elects to effect the Reverse Stock Split, the Company will file articles of amendment to its Amended
and Restated Articles of Incorporation with the Secretary of the State of Wyoming.</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
Who is APEG and why is it interested in an investment in U.S. Energy Corp.?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
APEG (APEG Energy II, L.P.) was formed by Angelus Private Equity Group, LLC (&ldquo;Angelus&rdquo;), a private equity firm headquartered
in Austin, TX, to make energy investments across the capital structure through multiple platforms. Angelus specializes in investments
primarily in development stage real estate properties and growth oriented domestic energy assets. On May 2, 2017, the Amended
and Restated Credit Agreement dated July 30, 2010, as amended (the &ldquo;Credit Agreement&rdquo;), between Energy One and Wells
Fargo Bank, N.A. (&ldquo;WFB&rdquo;), was sold, assigned and transferred to APEG. APEG purchased and assumed all of WFB&rsquo;s
rights and obligations as the lender to Energy One in the Credit Agreement. Angelus has stated that it is extremely excited about
the opportunity to strategically partner with the shareholders and management of the Company. Angelus further stated, with a transformed
and deleveraged balance sheet and an experienced management team like the Company&rsquo;s, Angelus sees tremendous opportunities
for growth and value expansion for both the Company and Angelus investors.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What is the purpose of the Exchange and why is it important?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
The Exchange is conditioned on, among other things, shareholder approval of the Exchange Proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
completed in its entirety, the Exchange would reduce the principal amount of the Company&rsquo;s long-term debt by approximately
$5.1 million, or 84%, as of September 30, 2017, and total cash interest expense would decrease by up to $0.9 million over the
remaining life of the Credit Facility. Moreover, our annual cash interest expense would decline by approximately $0.6 million.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reducing
the Company&rsquo;s debt and cash interest expense will allow it to increase its capital investment using cash freed up by interest
savings, enabling it to return to growth. A de-levered balance sheet also will allow the Company access to additional capital
that could be used to grow the business or otherwise enhance shareholder value through mergers or acquisitions.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the Exchange is completed, the Company would reduce its leverage from $6.0 million at September 30, 2017 to approximately $0.9
million, at July 30, 2019, the maturity date of the Credit Facility.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the Company is unable to complete the proposed Exchange and substantially reduce its debt, the Company will need to pursue alternative
strategies, which may include discounted equity issuances, asset sales, alternative debt for equity exchanges or other debt reduction
or restructuring transactions. Each of these alternatives involves uncertainties, potential delays and litigation risks. In such
an event, the Company expects that the end result would be more dilutive or less value-enhancing to existing shareholders than
the Exchange, and leave the Company less well positioned to resume growth and take advantage of a recovery in commodity prices.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What is the purpose of the Reverse Stock Split and why is it important?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A.
</B>The Reverse Stock Split would allow the Company to maintain its listing on The NASDAQ Capital Market. If the shareholders
do not approve the Reverse Stock Split, the Company will be delisted from The NASDAQ Capital Market and the Company&rsquo;s shareholders
may experience decreased liquidity and/or increased volatility in the Company&rsquo;s Common Stock, and a diminution of institutional
investor interest. The Board also believes that such delisting could cause a loss of confidence of industry partners, customers,
lenders and potential employees, which could harm our business and its future prospects.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What will happen to the Company if the Exchange is completed?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A.
</B>If the Exchange is completed, the Company&rsquo;s leverage, cash flow and liquidity will be improved, which the Company believes
will provide it with more time to realize the benefits of any commodity price recovery. The Company will be able to use cash previously
dedicated to interest expense on its capital expenditures budget for future growth, or for further debt reduction.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the Exchange is completed, 5,819,270 shares of Common Stock will be issued to APEG.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What will happen if the Reverse Stock Split is approved?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A.
</B>If the Reverse Stock Split is approved, and if the Board, in its discretion, elects to effect the Reverse Stock Split, the
Company will file articles of amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of Wyoming.&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of the Reverse Stock Split, every five shares of existing Common Stock will be combined into one share of Common Stock.
As of October 31, 2017, the approximate number of outstanding shares of Common Stock that would result from the 1-for-5 reverse
stock split ratio, based on 5,983,510 shares of Common Stock issued and outstanding as of October 31, 2017, would be 1,196,702.
If the Exchange Proposal is approved, based on 11,802,780 shares of Common Stock issued and outstanding, the approximate number
of outstanding shares of Common Stock that would result from the 1-for-5 reverse stock split ratio would be 2,360,556.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What are the recommendations of the Board?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
The Board unanimously recommends that you vote FOR the approval of the Exchange Proposal. The reasons for this recommendation
are more fully described below under the caption &ldquo;Reasons for the Exchange Agreement.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Board unanimously recommends that you vote FOR the approval of the Reverse Stock Split. The reasons for this recommendation are
more fully described below under the caption &ldquo;Reasons for the Reverse Stock Split.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Board unanimously recommends that you vote FOR the adjournment proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
When and where is the Special Meeting?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
The Special Meeting will be held at 950 S. Cherry Street, Suite 1515, in Denver, Colorado, on December 27, 2017, at 8:30 a.m.
Mountain Time.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
Who Can Vote</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
Only holders of our Common Stock at the close of business on the record date of November 1, 2017 are entitled to receive notice
of and to vote at the Special Meeting. As of October 31, 2017, there were 5,983,510 shares of our Common Stock issued and outstanding.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
may hold your shares &ldquo;of record&rdquo; or in &ldquo;street name.&rdquo; The difference between shareholders of record and
street name holders is:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 17.95pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 17.1pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shareholder
                                         of Record. If your shares are registered directly in your own name with our transfer
                                         agent, Computershare Trust Company, Inc., you are considered to be the holder of record
                                         of those shares and you may vote directly via internet, by telephone, by mail or in person.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 17.95pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 17.1pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Street
                                         Name Shareholder. If your shares are held in a stock brokerage account or by a broker
                                         or other nominee, you are considered the &ldquo;street name&rdquo; holder, and the beneficial
                                         owner, of those shares and you have the right to direct your broker or nominee how to
                                         vote. However, since you are not the shareholder of record, you may not vote those shares
                                         in person at the Annual Meeting unless you obtain a &ldquo;legal proxy,&rdquo; which
                                         you must bring to the meeting in order to vote in person at the meeting.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What is a Quorum and what are my Voting Rights?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
A quorum for the meeting will exist if a majority of the voting power of the shareholders is present at the meeting, in person
or represented by properly executed proxies delivered to us prior to the meeting. Shares of Common Stock present at the meeting
that abstain/withhold from voting, or that are the subject of &ldquo;broker non-votes,&rdquo; will be counted as present for determining
a quorum.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">New
York Stock Exchange (&ldquo;NYSE&rdquo;) Rule 452 governs discretionary voting by brokers of shares held in street name when beneficial
owners have not instructed how such shares should be voted. Because the rule governs all brokers who are members of the NYSE,
it affects all public companies that have shares held in street name, not just companies listed on the NYSE. Under the rule, such
brokers have discretionary authority to vote street name shares on &ldquo;routine&rdquo; items such as the ratification of the
Company&rsquo;s appointment of auditors, but not on other matters, including the election of directors. Accordingly, if your broker
does not receive instructions from you, your broker will not be able to vote your shares on the Exchange Proposal or the Reverse
Stock Split, and a &ldquo;broker non-vote&rdquo; will occur with respect to that matter.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
are entitled to one vote for each share of U.S. Energy Common Stock you hold.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
How Many Votes are Needed?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
The Exchange Proposal will be approved if the number of votes cast in favor of the Exchange Proposal exceeds the number of votes
cast against the Exchange Proposal. Abstentions and broker non-votes are not considered votes cast and they will have no effect
on the Exchange Proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Reverse Stock Split will be approved if the number of votes cast in favor of the Reverse Stock Split exceeds the number of votes
cast against the Reverse Stock Split. Abstentions and broker non-votes are not considered votes cast and they will have no effect
on the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
adjournment proposal will be approved if the number of votes cast in favor of the adjournment proposal exceeds the number of votes
cast against the adjournment proposal. Abstentions and broker non-votes are not considered votes cast and they will have no effect
on the adjournment proposal</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
How Will My Proxy Be Voted</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
The Board is soliciting a proxy to provide you with the opportunity to vote on all matters scheduled to come before the meeting
(as stated in the Notice of Special Meeting which accompanies this Proxy Statement), whether or not you attend in person.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Your
shares will be voted as you specify if you properly complete and return the appropriate form of proxy. If you make no specifications,
your proxy will be voted in favor of the Exchange Proposal, the Reverse Stock Split, and the adjournment proposal as listed above.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
Can I Revoke My Proxy</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
If you are a shareholder of record and submit a proxy, you may revoke it later or submit a revised proxy at any time before it
is voted. You also may attend the meeting in person and vote by ballot, which would cancel any proxy you previously submitted.
If you are a street name shareholder and you vote by proxy, you may change your vote by submitting new voting instructions to
your broker or other nominee in accordance with that entity&rsquo;s procedures.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What happens if I do not respond or if I respond and fail to indicate my voting preference or if I abstain from voting?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
If you fail to sign, date and return your proxy card or fail to vote by telephone or Internet as provided on your proxy card,
your shares will not be counted toward establishing a quorum for the Special Meeting.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
you submit your proxy but abstain from voting on the Exchange Proposal, the Reverse Stock Split and / or the adjournment proposal,
your shares will be counted as present at the meeting for the purpose of determining if a quorum exists.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
your shares are held in street name and you do not provide voting instructions to your broker as described above, your broker
does not have the discretionary authority to vote your shares regarding the Exchange Proposal or the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What will happen if the Exchange Proposal is not approved?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
If the Exchange Proposal is not approved, the proposed Exchange will not be completed. If the Company is unable to complete the
proposed Exchange and substantially reduce its debt, it will need to pursue alternative strategies, which may include equity issuances,
asset sales, alternative debt for equity exchanges or other debt reduction or restructuring transactions, with each alternative
potentially resulting in significantly less value to existing shareholders.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What will happen if the Reverse Stock Split is not approved?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
If the Reverse Stock Split is not approved the Company may be be delisted from The NASDAQ Capital Market and the Company&rsquo;s
shareholders may experience decreased liquidity and/or increased volatility in the Company&rsquo;s Common Stock, and a diminution
of institutional investor interest. The Board also believes that such delisting could cause a loss of confidence of industry partners,
customers, lenders and potential employees, which could harm our business and its future prospects</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
Who is Soliciting my Proxy and what are the Costs?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
The Company will pay all expenses of its solicitation of proxies for the Special Meeting. In addition to solicitations by mail,
arrangements have been made for brokers and other nominees to send proxy materials to beneficial owners, and we will reimburse
those brokers and other nominees for their reasonable expenses. We have not hired a solicitation firm for the meeting. Our employees
and directors will solicit proxies by telephone or other means, if necessary; they will not receive additional compensation for
these services.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
Am I Entitled To Appraisal Rights</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
No action is proposed at the Special Meeting for which the laws of the State of Wyoming or our charter documents provide a right
of our shareholders to dissent and obtain appraisal of or payment for their Common Stock.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
Can I vote on other matters?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
The Company does not expect any other matter to come before the meeting. If any other matter is properly presented at the Special
Meeting, the signed proxy gives the individuals named as proxies authority to vote the shares on that matter at their discretion.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
Can I obtain an electronic copy of the proxy material?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
Yes, this Proxy Statement, the accompanying notice of Special Meeting and the proxy card are available on the Internet at <U>www.proxyvote.com</U>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What happens if the Special Meeting is adjourned or postponed?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
Although it is not expected, the Special Meeting may be adjourned or postponed for the purpose of soliciting additional proxies.
Any adjournment or postponement may be made without notice, other than by an announcement made at the Special Meeting, by approval
of the holders of a majority of the outstanding shares of our Common Stock present in person or represented by proxy at the Special
Meeting, whether or not a quorum exists. Any adjournment or postponement of the Special Meeting for the purpose of soliciting
additional proxies will allow shareholders who have already sent in their proxies to revoke them at any time before their use.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
What do I need to do now?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
We urge you to read this Proxy Statement carefully. Then return your completed, dated and signed proxy card as soon as possible
so that your shares can be voted at the Special Meeting. Holders of record also may vote by telephone or Internet by following
the instructions on the proxy card.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.
Who can help answer my other questions?</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A</B>.
If you have more questions about the Exchange Proposal, the Reverse Stock Split, or voting, you should contact Ryan Smith, Chief
Financial Officer of the Company, by calling 303-993-3200. If your shares are held in an account at a broker, dealer, commercial
bank, trust company or other nominee, you also should call that broker or other nominee for additional information.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A NAME="a002_v1"></A>CAUTIONARY
STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
statements contained in or incorporated by reference into this Proxy Statement, or filings with the Securities and Exchange Commission
(the &ldquo;SEC&rdquo;) and our public releases contain forward looking statements intended to qualify for the safe harbors from
liability established by the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;) and the Securities Exchange
Act of 1934, as amended (the &ldquo;Exchange Act&rdquo;). These forward-looking statements include information concerning the
Exchange, the Reverse Stock Split, future financial results, future production and reserves, schedules, plans, timing of development,
contributions from oil and natural gas properties and marketing and midstream activities, and also include those statements accompanied
by or that otherwise include the words &ldquo;will,&rdquo; &ldquo;may,&rdquo; &ldquo;could,&rdquo; &ldquo;believes,&rdquo; &ldquo;expects,&rdquo;
&ldquo;anticipates,&rdquo; &ldquo;intends,&rdquo; &ldquo;estimates,&rdquo; &ldquo;projects,&rdquo; &ldquo;predicts,&rdquo; &ldquo;target,&rdquo;
&ldquo;goal,&rdquo; &ldquo;plans,&rdquo; &ldquo;objective,&rdquo; &ldquo;potential,&rdquo; &ldquo;should,&rdquo; or similar expressions
or variations on such expressions that convey the uncertainty of future events or outcomes. For such statements, we claim the
protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995,
including Section 27A of the Securities Act and Section 21E of the Exchange Act. We have based these forward-looking statements
on our current expectations and assumptions about future events. These statements are based on certain assumptions and analyses
made by us because of our experience and our perception of historical trends, current conditions and expected future developments
as well as other factors we believe are appropriate under the circumstances. Although we believe that the expectations reflected
in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct.
We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information,
future events or otherwise.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
forward-looking statements involve risk and uncertainties. Important factors that could cause actual results to differ materially
from our expectations include, but are not limited to, the following risk and uncertainties:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                         inability to complete the Exchange or the Reverse Stock Split due to the failure to obtain
                                         approval of our shareholders of the Exchange Proposal and the Reverse Stock Split, or
                                         the failure of other conditions to closing of the Exchange;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                         ability to recognize the anticipated benefits of the Exchange or otherwise address our
                                         near term liquidity needs;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                         ability to recognize the anticipated benefits of the Reverse Stock Split or otherwise
                                         address the NASDAQ listing requirements;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">costs
                                         related to the Exchange and the Reverse Stock Split;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                         ability to comply with the financial covenants in our debt instruments and our available
                                         liquidity even if the Exchange is successfully implemented, particularly if oil, natural
                                         gas liquid (&ldquo;NGL&rdquo;) and natural gas prices remain depressed;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">uncertainties
                                         in drilling, exploring for and producing oil and gas;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">oil,
                                         NGL and natural gas prices;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">overall
                                         United States and global economic and financial market conditions;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">domestic
                                         and foreign demand and supply for oil, NGLs, natural gas and the products derived from
                                         these hydrocarbons;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                         willingness and ability of the Organization of Petroleum Exporting Countries to set and
                                         maintain oil price and production controls;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                         ability to obtain additional financing necessary to fund our operations and capital expenditures
                                         and to meet our other obligations;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                         ability to maintain a sound financial position;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                         cash flows and liquidity;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                         effects of government regulation and permitting and other legal requirements, including
                                         laws or regulations that could restrict or prohibit hydraulic fracturing;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">disruption
                                         of credit and capital markets;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">disruptions
                                         to, capacity constraints in or other limitations on the pipeline systems that deliver
                                         our oil, NGLs and natural gas and other processing and transportation considerations;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">marketing
                                         of oil, NGLs and natural gas;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">high
                                         costs, shortages, delivery delays or unavailability of drilling and completion equipment,
                                         materials, labor or other services;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">competition
                                         in the oil and gas industry;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">uncertainty
                                         regarding our future operating results;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">profitability
                                         of drilling locations;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">interpretation
                                         of 3-D seismic data;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">replacing
                                         our oil, NGL and natural gas reserves;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                         ability to retain and attract key personnel;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                         business strategy;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">development
                                         of our current asset base or property acquisitions;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">estimated
                                         quantities of oil, NGLs and natural gas reserves and present value thereof;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">plans,
                                         objectives, expectations and intentions contained in this Proxy Statement that are not
                                         historical; and</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 23.85pt; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 18pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">other
                                         factors discussed in &ldquo;Risk Factors&rdquo; and in &ldquo;Management&rsquo;s Discussion
                                         and Analysis of Financial Condition and Results of Operations&rdquo; included in our
                                         Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, our Annual
                                         Report on Form 10-K and 10-K/A for the year ended December 31, 2016, and in our other
                                         public filings, press releases and discussions with our management.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
of these factors and other factors in this Proxy Statement or any documents incorporated by reference could cause our actual results
to differ materially from the results implied by these or any other forward-looking statements made by us. Although we believe
our plans, intentions and expectations reflected in the forward-looking statements we make are reasonable, we can give no assurance
that we will achieve these plans, intentions or expectations. Our assumptions about future events may prove to be inaccurate.
We caution you that the forward-looking statements contained in this Proxy Statement are not guarantees of future performance,
and we cannot assure you that those statements will be realized or the forward-looking events and circumstances will occur. All
forward-looking statements speak only as of the date of this Proxy Statement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise,
except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting
on our behalf.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A NAME="a003_v1"></A>THE
EXCHANGE</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A NAME="a004_v1"></A>Background
of the Exchange Agreement</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May 2, 2017, APEG purchased and assumed all of Wells Fargo Bank N.A.&rsquo;s rights and obligations as the lender to Energy One
under the Credit Facility. Concurrently with the purchase of the Credit Facility by APEG, the Company, Energy One and APEG entered
into a limited forbearance agreement (the &ldquo;Forbearance Agreement&rdquo;), pursuant to which APEG agreed not to exercise
its rights and remedies arising as a result of certain existing and prospective events of default under the Credit Facility until
July 30, 2017. Commencing on May 2, 2017, interest accrued on the outstanding principal balance of the loans under the Credit
Agreement at a rate of 8.75% per annum;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company&rsquo;s management met with APEG on June 2, 2017 and June 13, 2017 at both the Company&rsquo;s offices and APEG&rsquo;s
offices, respectively, to discuss potential transactions to extend the maturity of the Credit Facility and amend the financial
covenant ratios. During these meetings, both parties discussed the possibility of exploring a deleveraging transaction through
a refinance of the existing Credit Facility or a debt for equity exchange. During both meetings APEG representatives requested
additional information to perform due diligence.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
a period of due diligence on the part of APEG and negotiations between the Company and APEG, on June 29, 2017 the Company announced
a two-year extension of the Credit Facility through July 30, 2019, along with an amendment of the financial covenant ratios governing
the Credit Facility.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Board held a meeting on July 17, 2017, at which Mr. Veltri updated the Board on the status of discussions with APEG, and other
potential acquisition and divestiture opportunities for the Company. The Board discussed strategic options with management, including
the status of negotiations with APEG, and instructed management to continue such discussions and report results back to the Board,
if appropriate.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 2, 2017, Company representatives met with APEG to further discuss the economic terms of a proposed debt for equity exchange
and the terms of a proposed standstill agreement. The Company and APEG exchanged drafts of documents although no agreement was
reached on an exchange ratio or the details of the standstill agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 4, 2017 the Company exchanged financial terms of a potential transaction with APEG, however no agreement was reached on
the terms presented.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">During
August 2017 the Company and its outside legal counsel, Kutak Rock LLP, further negotiated with APEG and its counsel and revised
the terms of the proposed debt for equity exchange and discussed the economic and legal terms of the potential transaction.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company and APEG continued to negotiate and exchange revised drafts of definitive transaction documents throughout September.
During this time, management worked closely with the Company&rsquo;s outside legal counsel to negotiate terms with APEG and keep
the Board apprised of their progress.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
September 28, 2017, Company representatives met with APEG in Austin, Texas, and reached an agreement, subject to the Board&rsquo;s
approval, on the economic terms of a transaction, for an exchange of $4,463,380 of the outstanding indebtedness under the Credit
Facility for 5,819,270 new shares of Common Stock of the Company, at an exchange price of $0.767, representing a 1.3% premium
over the 30-day volume weighted average price of the Company&rsquo;s Common Stock on September 20, 2017. In addition, at the Closing
of the Exchange, the Company will pre-pay, in cash, $600,000 of the outstanding principal under the Credit Facility, leaving approximately
$937,000 outstanding. Also, accrued, unpaid interest on the Credit Facility held by APEG will be paid in cash at the closing of
the transaction.</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 3, 2017, the Board held a meeting, at which Mr. Veltri updated the Board on the status of the Exchange Agreement and the
other definitive agreements, copies of which were provided to the Board in advance of the meeting, which, subject to Board approval,
had been finalized on September 28, 2017. Mr. Veltri informed the Board that based on the exchange price, the financial position
of the Company and other matters, the terms of the Exchange Agreement and the transactions contemplated by the Exchange Agreement,
taken in the aggregate, were fair from a financial point of view to the Company and to its shareholders. Following discussion
among the Board, the Board (i) unanimously resolved that the Exchange Agreement and the transactions contemplated by the Exchange
Agreement were fair to, and in the best interests of, the Company and its shareholders, and (ii) authorized and approved the execution,
delivery and performance of the Exchange Agreement by the Company and the transactions contemplated by the Exchange Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
October 5, 2017, the Company issued a press release and filed a Form 8-K announcing the Exchange Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A NAME="a005_v1"></A>Reasons
for the Exchange Agreement</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Board, in evaluating the Exchange Agreement and the transactions contemplated by the Exchange Agreement, consulted with the Company&rsquo;s
management and legal counsel. In reaching its unanimous resolution (i) that entering into the Exchange Agreement is in the best
interests of the Company and its shareholders; (ii) to submit the Exchange Proposal to the Company&rsquo;s shareholders; and (iii)
recommending that the Company&rsquo;s shareholders adopt the Exchange Proposal, the Board considered and evaluated a number of
factors.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the course of its deliberations, the Board considered the following substantive factors as being generally positive or favorable,
each of which the Board believed supported a decision to proceed with the Exchange Agreement, including, but not limited to, the
following:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Improved
                                         Capital Structure</I>. The positive effects the Exchange would likely have on the Company&rsquo;s
                                         capital structure and the holders of Common Stock, respectively, including:</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 1in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9675;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                         reduction in debt versus substantial dilution to shareholders expected to result from
                                         the Exchange;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 1in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9675;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                         material reduction of cash interest expense paid on the Company&rsquo;s debt;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 1in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9675;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                         ability to reallocate cash previously dedicated to interest expense to further reduce
                                         debt and increase the Company&rsquo;s capital budget; and</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0">&nbsp;</P>

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<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 1in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9675;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                         ability to re-position the Company&rsquo;s balance sheet and restore access to capital
                                         markets to take advantage of value-enhancing acquisition opportunities.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Financial
                                         Impact of the Exchange Agreement</I>. The likely impact of the Exchange on the Company&rsquo;s
                                         future results of operations, including:</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 1in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9675;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                         elimination of annual cash interest expense of up to $0.6 million, preserving liquidity
                                         in the near-term;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 1in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9675;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">allowing
                                         re-allocation of cash interest expense to resume growth and maximize enterprise value;
                                         and</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 1in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9675;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">reduction
                                         of leverage.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Offer
                                         Price of the Initial Exchange</I>. The Exchange represents a 1.3% premium over the 30
                                         day volume weighted average price of the Company&rsquo;s Common Stock on September 20,
                                         2017.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>The
                                         Standstill Agreement</I>. The terms of the Standstill Agreement, including the voting
                                         restrictions, the limitation on the ability of APEG to acquire additional voting securities
                                         of the Company and the &ldquo;standstill,&rdquo; as more fully described below under
                                         the caption &ldquo;Standstill Agreement&rdquo;.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Arm&rsquo;s-Length
                                         Negotiations&#894; Board Process</I>. The terms of the Exchange Agreement, including
                                         the parties&rsquo; representations, warranties and covenants, and the conditions to their
                                         respective obligations to close the Exchange, are the product of lengthy, arm&rsquo;s-length
                                         negotiations between the Company and APEG, each with the assistance of their respective
                                         advisors. In addition, the process followed by the Company in recommending the approval
                                         of the Exchange Proposal included a Board comprised of a majority independent and disinterested
                                         directors.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Business
                                         Reputation of APEG</I>. The business reputation and capabilities of APEG and its management
                                         team, which the Board believed supported the conclusion that a transaction with APEG
                                         would provide the Company with the opportunity to partner with a strategic investor.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Timing</I>.
                                         The timing of the Exchange and the current financial condition of the Company. The Board
                                         considered that negotiating a transaction while in compliance with the Credit Agreement
                                         and associated credit covenants and the ability to live within the Company&rsquo;s cash
                                         flow would result in a better deal for existing shareholders than waiting and accepting
                                         the risk of potentially attempting to negotiate a deleveraging transaction from a position
                                         of greater financial weakness in the future.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Consequences
                                         if the Company is Unable to Complete the Exchange</I>. The likely impact on the Company
                                         if it is unable to complete the Exchange, including:</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 1in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9675;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                         Company would have to rely on a commodity price recovery and capital availability to
                                         continue the Company&rsquo;s current production levels;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 1in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9675;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                         Company may determine it necessary to accomplish the debt reduction contemplated by the
                                         Exchange through alternative means, including additional equity issuances, asset sales,
                                         alternative debt for equity exchanges or other debt reduction or restructuring transactions,
                                         with each alternative potentially resulting in significantly less value to existing shareholders.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Required
                                         Price Recovery Scenario</I>. The Company&rsquo;s ability to reduce its debt and maintain
                                         or grow its production base, in various commodity-pricing scenarios. The Board considered
                                         that without a significant transaction, a commodity price recovery would have to be significant,
                                         and beyond what the Board expected in the short to medium-term, to materially reduce
                                         the Company&rsquo;s debt, or to reduce the Company&rsquo;s debt in an amount equivalent
                                         to the Exchange.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the course of its deliberations, the Board also considered a variety of material risks and other countervailing factors related
to entering into the Exchange Agreement, including, but not limited to, the following:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Dilutive
                                         Impact</I>. The issuance of Common Stock pursuant to the Exchange will dilute the ownership
                                         of current shareholders, and reduce the ability of current shareholders to influence
                                         future significant corporate decisions requiring shareholder approval.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Significant
                                         Shareholder</I>. The Exchange will concentrate a significant amount of Common Stock in
                                         the hands of one entity.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Time
                                         and Expense Commitment. </I>The significant costs involved with the Exchange Agreement
                                         and the Exchange, the substantial time and effort of management required to complete
                                         the Exchange and related disruptions to the operation the Company&rsquo;s business.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Litigation
                                         Risk</I>. The inherent risk of litigation in relation to the Exchange, including potential
                                         litigation in connection with the execution of the Exchange Agreement and the closing
                                         of the Exchange.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Risk
                                         Associated with Failure to Complete the Exchange Transactions</I>. The risks and costs
                                         to the Company if the Exchange is not completed, including the diversion of management
                                         and employee attention, potential employee attrition and the potential disruptive effect
                                         on vendor relationships, and the expenses associated with the Exchange.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Lack
                                         of Other Attractive Alternatives. </I>If the Company is unable to complete the Exchange,
                                         it may pursue alternative strategies to reduce debt and associated interest payments,
                                         including equity issuances, asset sales, alternative debt for equity exchanges or other
                                         debt reduction or restructuring transactions. In the Board&rsquo;s view, none of these
                                         alternatives are as likely to result in as significant a reduction of leverage, and value
                                         to existing shareholders, as the Exchange.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
<TD STYLE="width: 0.5in; font: 10pt Times New Roman, Times, Serif"></TD><TD STYLE="width: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Tax
                                         Effect</I>. Future use of the Company&rsquo;s federal net operating loss carryforwards
                                         (&ldquo;NOLS&rdquo;) may be limited if the Company experiences an &ldquo;ownership change&rdquo;
                                         in which stock held by the Company&rsquo;s 5-percent shareholders increases by more than
                                         50 percentage points over the lowest percentage of stock held by such shareholders during
                                         the three-year period preceding such ownership change. The issuance of Common Stock to
                                         APEG pursuant to the Exchange may result in such an ownership change. If there is an
                                         ownership change, a substantial portion of the Company&rsquo;s NOLs may be eliminated
                                         or restricted. In particular, the use of the Company&rsquo;s NOLS on a going forward
                                         basis generally will be limited to amount equal to the value of the Company as of the
                                         ownership change date multiplied by the applicable long-term tax exempt rate as determined
                                         by the Internal Revenue Service. Moreover, the Company would need to reduce its deferred
                                         tax assets reflecting the restricted use of these NOLs when such an ownership change
                                         occurs.</FONT></TD></TR></TABLE>

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<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
above discussion of the information and factors considered by the Board is not intended to be exhaustive and may not include all
of the information and factors considered by the Board. The Board, in making its determination regarding the Exchange Agreement,
did not find it useful to and did not quantify or assign any relative or specific weights to the various factors that it considered.
Rather, the Board views its determination and recommendation as being based on an overall analysis and on the totality of the
information presented to, and factors considered by, the Board. In addition, in considering the factors described above, individual
members of the Board may have given differing weights to different factors, and may have viewed some factors relatively more positively
or negatively than others.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A NAME="a006_v1"></A>Analysis
of the Exchange</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Effects
of the Exchange on the Company&rsquo;s Capital Structure and Capital Stock</I>:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table shows the pro forma impact the Exchange would have on the Company&rsquo;s outstanding debt as of September 30,
2017.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">9/30/2017</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Transaction Adjustment</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Pro-Forma</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>9/30/2017</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 41%; text-align: left; padding-left: 1.45pt">Outstanding Borrowings under Credit Facility</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">6,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(4,463,380</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,536,620</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: underline; text-align: left; padding-bottom: 1pt; padding-left: 1.45pt">Cash Payment*</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(600,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(600,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 1.45pt">Total Outstanding Borrowings under Credit Facility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">936,620</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">*Represents
a cash paydown to outstanding borrowings under the Credit Facility which is contingent on the successful completion of the Exchange.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Following table show the pro forma impact the Exchange would have on the ownership of the Company&rsquo;s Common Stock as of September
30, 2017.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Shares
Outstanding</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Transaction
Adjustment</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Pro-Forma</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Shares
Outstanding</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Pro-Forma</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Ownership</B></FONT></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 38%; text-align: left; padding-left: 1.45pt">Common Stock Outstanding</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">5,983,510</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&mdash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">5,983,510</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">50.7</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: underline; text-align: left; padding-bottom: 1pt; padding-left: 1.45pt">APEG Energy II, L.P. Shares Owned</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,819,270</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,819,270</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">49.3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 1.45pt">Total Shares Outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,983,510</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,802,780</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100.0</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="margin: 0; text-align: justify; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a007_v1"></A>THE
EXCHANGE AGREEMENT</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0.1pt 0 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Effective
October 3, 2017, the Company, the Company&rsquo;s wholly owned subsidiary Energy One and APEG entered into the Exchange Agreement,
pursuant to which, on the terms and subject to the conditions of the Exchange Agreement, APEG will exchange $4,463,380 of outstanding
borrowings under the Company&rsquo;s Credit Facility for 5,819,270 new shares of Common Stock of the Company, par value $0.01
per share, at an exchange price of $0.767, representing a 1.3% premium over the 30-day volume weighted average price of the Company&rsquo;s
Common Stock on September 20, 2017. In addition, at the Closing of the Exchange, the Company will pre-pay, in cash, $600,000 of
the outstanding principal under the Credit Facility, leaving approximately $937,000 outstanding. Also, accrued, unpaid interest
on the Credit Facility held by APEG will be paid in cash at the closing of the transaction. Immediately following the close of
the transaction, APEG will hold approximately 49.3% of the outstanding Common Stock of the Company.</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a008_v1"></A>Exchange
Agreement</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">In
connection with the Exchange Agreement, APEG agreed to certain lock-up provisions limiting APEG&rsquo;s ability to (a) lend, offer,
pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option
right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly any shares of Common Stock of the Company;
or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences
of ownership of Common Stock, whether an such transaction described in (a) or (b) is to be settled by delivery of Commons Stock
or other securities, in cash or otherwise for a period of twelve (12) months following the closing of the Exchange.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
closing of the Exchange is subject to the satisfaction of certain conditions, including: (i) the affirmative vote of the holders
of a majority of Common Stock present or represented by proxy at the Special Meeting for the purpose of approving the Exchange
Proposal; and (ii) the listing of the share issuance by NASDAQ. In addition, each of the Company&rsquo;s and APEG&rsquo;s obligations
to complete the Exchange is subject to certain other conditions, including (a) subject to the standards described in the Exchange
Agreement, the accuracy of the representations and warranties of the other party and (b) compliance of the other party with its
covenants in all material respects.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Exchange Agreement requires the Company to use its commercially reasonable efforts to file a registration statement on Form S-1
by December 31, 2017, providing for the registration of the Exchange Shares issuable pursuant to the Exchange Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a009_v1"></A>Standstill
Agreement</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">In
connection with the Exchange Agreement the Company and APEG entered into a Standstill Agreement pursuant to which APEG agreed
to vote its shares received pursuant to the Exchange in the same proportion as shares of Common Stock that are not held by APEG
or over which APEG does not have voting control with respect to (i) any board of directors approved motions, objectives, directives,
proposals or proxy initiatives, and (ii) each nominee for the Company&rsquo;s board of directors who is nominated and approved
by the board of directors&rsquo; nominating committee.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">In
addition, the Standstill Agreement contains certain restrictions on APEG&rsquo;s ability to acquire additional shares of Common
Stock in excess of the amount they hold immediately following the Exchange. APEG is restricted from acquiring additional loans,
debt securities, equity securities or assets of the Company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">APEG
is also restricted from proposing or offering to the Board or any shareholder: (i) any business combination, asset acquisition,
merger, tender offer, exchange offer or similar transaction involving the Company or any of its subsidiaries; (ii) any restructuring,
recapitalization, liquidation or similar transaction involving the Company or any of its subsidiaries; (iii) any acquisition of
any of the Company&rsquo;s loans, debt securities, equity securities or assets, or rights or options to acquire interests in any
of the Company&rsquo;s loans, debt securities, equity securities or assets not currently owned; or (iv) any proposal to seek representation
on the board of directors of the Company or otherwise seek to control the management, board of directors or policies of the Company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Further,
APEG cannot call a special meeting of the shareholders of the Company during the term of the Standstill Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Standstill Agreement restrictions are effective for a period of one (1) year following closing of the Exchange.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0 5.8pt 0 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>THIS
SUMMARY OF THE TERMS OF THE EXCHANGE AGREEMENT AND THE STANDSTILL AGREEMENT IS INTENDED TO PROVIDE YOU WITH BASIC INFORMATION
CONCERNING THE EXCHANGE&#894; HOWEVER, IT IS NOT INTENDED AS A SUBSTITUTE FOR REVIEWING THE EXCHANGE AGREEMENT, THE STANDSTILL
AND THE LETTER AGREEMENT IN THEIR ENTIRETY. THE EXCHANGE AGREEMENT, THE STANDSTILL AGREEMENT, AND THE LETTER AGREEMENT ARE INCLUDED
AS <U>APPENDIX A</U>, <U>APPENDIX B</U> AND <U>APPENDIX C,</U> RESPECTIVELY, TO THIS PROXY STATEMENT. YOU SHOULD READ THIS SUMMARY
TOGETHER WITH THESE DOCUMENTS.</B></FONT></P>



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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a010_v1"></A>THE
SPECIAL MEETING</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a011_v1"></A>Time,
Place, and Purpose of the Special Meeting</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">This
Proxy Statement is being furnished to our shareholders for the solicitation of proxies by our Board for use at our Special Meeting
of shareholders to be held at 950 S. Cherry Street, Suite 1515 in Denver, Colorado, on December 27, 2017, at 8:30 a.m. Mountain
Time, and at any adjournments or postponements of the meeting.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Special Meeting is being called to request approval by our shareholders of:</FONT></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
                                         issuance of shares of Common Stock in connection with the Exchange under NASDAQ Stock
                                         Market Rules 5635(b);</FONT></TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
                                         approval of an amendment to the Company&rsquo;s articles of incorporation to implement
                                         a reverse stock split of the Company&rsquo;s outstanding Common Stock at a reverse split
                                         ratio of 1-for-5, without reducing the authorized number of shares of our Common Stock;
                                         and</FONT></TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
                                         adjournment of the Special Meeting, if necessary or appropriate, to establish a quorum
                                         or to permit further solicitation of proxies if there are not sufficient votes at the
                                         time of the Special Meeting cast in favor of the Exchange Proposal.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a012_v1"></A>Recommendation
of the Board of Directors</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Our
Board unanimously recommends that you vote &ldquo;<B>FOR</B>&rdquo; the Exchange Proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Our
Board unanimously recommend that you vote &ldquo;<B>FOR</B>&rdquo; the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Our
Board unanimously recommends that you vote &ldquo;<B>FOR</B>&rdquo; the adjournment proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a013_v1"></A>Record
Date and Quorum</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Shareholders
as of the close of business on November 1, 2017 are entitled to attend and vote at the Special Meeting.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">There
must be a quorum for the Special Meeting to be held. A quorum is the presence at the Special Meeting, in person or by proxy, of
the holders of a majority of the shares of Common Stock issued and outstanding and entitled to vote at the Special Meeting. Proxies
that are voted &ldquo;FOR,&rdquo; &ldquo;AGAINST&rdquo; or &ldquo;ABSTAIN&rdquo; on a matter are treated as being present at the
Special Meeting for purposes of establishing a quorum and also treated as shares &ldquo;represented and voting&rdquo; at the Special
Meeting with respect to such matter.</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Any
abstentions will be counted in determining whether a quorum is present at the Special Meeting.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">As
of the close of business on October 31, 2017 there were 5,983,510 shares of our Common Stock outstanding and entitled to vote
at the Special Meeting.</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a014_v1"></A>Vote
Required for Approval</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
approval of the Exchange Proposal, the Reverse Stock Split, and the adjournment proposal, requires the affirmative vote of a majority
of the shares of Common Stock present at the Special Meeting, in person or represented by proxy. Abstentions will have the same
effect as a vote against the Exchange Proposal, the Reverse Stock Split, and the adjournment proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a015_v1"></A>Shares
Held by Company Directors and Executive Officers</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">As
of the close of business on October 31, 2017, the Company&rsquo;s directors and executive officers held and are entitled to vote,
in the aggregate, 77,872 shares of Common Stock, representing approximately 1.3% of the total number of shares of Common Stock
outstanding as of October 31, 2017.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
directors and executive officers of the Company intend to vote their shares &ldquo;<B>FOR</B>&rdquo; the Exchange Proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
directors and executive officers of the Company intend to vote their shares &ldquo;<B>FOR</B>&rdquo; the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
directors and executive officers of the Company intend to vote their shares &ldquo;<B>FOR</B>&rdquo; the adjournment proposal.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a016_v1"></A>Voting
of Proxies</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
your shares are held in your name, you may vote your shares or submit a proxy to have your shares voted by one of the following
methods:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif"><U>By
                                         Internet</U>. You may submit a proxy electronically by the Internet at <I><U>www.proxyvote.com</U></I>.
                                         Please have your Notice of Availability or proxy card, which includes your personal control
                                         number, on hand when you log onto the website.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif"><U>By
                                         Telephone</U>. You may submit a proxy by telephone using the toll-free number listed
                                         on the proxy card or your Notice of Availability. Please have your proxy card or Notice
                                         of Availability in hand when you call.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif"><U>By
                                         Mail</U>. If you request paper copies of the proxy materials by mail, you may submit
                                         a proxy by signing, dating and returning your proxy card in the pre-addressed envelope
                                         provided.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif"><U>In
                                         Person</U>. You may vote in person at the special meeting by completing a ballot; however,
                                         attending the meeting without completing a ballot will not count as a vote.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"></P>

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<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
you vote by granting a proxy, the proxy holders will vote the shares according to your instructions. If you submit a proxy
without giving specific voting instructions, the proxy holders will vote those shares as recommended by our Board. If you
plan to vote in person at the Special Meeting and your shares are held in your name, please bring proof of identification.
Even if you currently plan to attend the Special Meeting, we recommend that you also submit your proxy as described above so
that your vote will be counted if you later decide not to attend the Special Meeting.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
your shares are held in &ldquo;street name&rdquo; by your broker, bank or other nominee, you will receive instructions from your
broker, bank or other nominee that you must follow for your shares to be voted. We expect Internet and telephone voting to be
offered to street name shareholders. You also may vote in person at the Special Meeting if you obtain a legal proxy from your
broker, bank or other nominee. Please consult the voting instruction form or other information sent to you by your broker, bank
or other nominee to determine how to obtain a legal proxy in order to vote in person at the Special Meeting. If you plan to vote
in person at the Special Meeting and you have obtained a legal proxy from your broker, bank or other nominee, please bring proof
of identification. If your shares are held in street name in a brokerage account or by a bank or other nominee, you must provide
your broker with instructions on how to vote your shares on Proposals 1, 2, and 3. If you do not instruct your broker on how to
vote these proposals, your shares will not be voted.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a017_v1"></A>Revocability
of Proxies</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">You
have the right to change or revoke your proxy at any time before the vote taken at the special meeting by:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">Attending
                                         the Special Meeting and voting in person;</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">Properly
                                         submitting a later-dated proxy either by mail, the Internet or telephone; or</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
<TD STYLE="width: 38.4pt; font-family: Times New Roman, Times, Serif; text-align: justify"></TD><TD STYLE="width: 18pt; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&#9679;</FONT></TD><TD STYLE="text-align: justify; padding-right: 5.8pt; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif">Delivering
                                         a written notice to our Corporate Secretary before the vote at the Special Meeting.</FONT></TD></TR></TABLE>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Please
note that if you hold your shares in &ldquo;street name&rdquo; through a broker, bank or other nominee and you have instructed
your broker, bank or other nominee to vote your shares, the above-described options for changing your vote do not apply, and instead
you must follow the instructions received from your broker, bank or other nominee to change your vote.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a018_v1"></A>Adjournments
and Postponements</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Although
we do not expect this, we may adjourn or postpone the Special Meeting for the purpose of soliciting additional proxies. Any adjournment
or postponement may be made without notice, other than by an announcement made at the Special Meeting, by the Chairman of the
meeting, or by approval of the holders of a majority of the outstanding shares of our Common Stock present in person or represented
by proxy at the Special Meeting, whether or not a quorum exists. Any adjournment or postponement of the Special Meeting to solicit
additional proxies will allow shareholders who already have sent in their proxies to revoke them at any time before their use.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Rights
of Dissenting Stockholders</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Stockholders
have no right under Wyoming law to seek appraisal of their Common Stock in connection with Proposals 1, 2, and 3.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a019_v1"></A>Other
Matters</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Board knows of no other matters to be brought before the Special Meeting. If any other matters are properly brought before the
Special Meeting, the persons appointed in the accompanying proxy intend to vote the shares represented by the proxy in accordance
with their best judgment on such matters, under applicable laws.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a020_v1"></A>Questions
and Additional Information</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
you have more questions about the Proposals or Exchange Transaction, need assistance in submitting your proxy or voting your shares
or need additional copies of this Proxy Statement or the enclosed proxy card, you should contact us in writing at:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">U.S.
Energy Corp.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;Attn:
Chief Financial Officer</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;950
S. Cherry Street, Suite 1515</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;Denver,
Colorado 80246</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;(303)-993-3200</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;<U>ryan@usnrg.com</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a021_v1"></A>PROPOSAL
1: APPROVAL OF ISSUANCE THAT <BR>
MAY RESULT IN A CHANGE OF CONTROL <BR>
UNDER NASDAQ LISTING RULE 5635(b)</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Our
Common Stock is listed on NASDAQ and we are subject to NASDAQ&rsquo;s rules and regulations. NASDAQ Listing Rule 5635(b) requires
us to obtain shareholder approval before certain issuances of Common Stock or securities convertible into Common Stock.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a022_v1"></A>Purpose
and Effect of Approving the Exchange Proposal</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">NASDAQ
Listing Rule 5635(b) requires shareholder approval before the issuance of securities when the issuance or potential issuance of
securities will result in a change of control of the Company. NASDAQ defines a change of control as occurring when, as a result
of an issuance, an investor or a group would own, or have the right to acquire, 20% or more of the outstanding shares of Common
Stock or voting power of a company, and such ownership or voting power would be the largest ownership position. The Exchange will
result in APEG owning in excess of 20% of our Common Stock and APEG having the largest ownership position in the Company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a023_v1"></A>Board
Recommendation</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Board recommends you vote for Proposal 1. For the reasons provided in this Proxy Statement, we are asking shareholders to vote
&ldquo;FOR&rdquo; the following resolution:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&ldquo;<B>RESOLVED</B>,
that the shareholders approve the issuance of shares of Common Stock in connection with the Exchange Agreement that may result
in a change of control under NASDAQ Stock Market Rule 5635(b).&rdquo;</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>PROPOSAL
2: <FONT STYLE="text-transform: uppercase"><A NAME="a024_v1"></A>ApprovAL OF the amendment, AT THE DISCRETION OF THE BOARD OF DIRECTORS, to the ARTICLES
of incorporation to implement a reverse stock split of the Company&rsquo;s outstanding Common Stock at a reverse split ratio of
one-for-five, without reducing the authorized number of shares of our Common Stock</FONT></B></FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Introduction</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-size: 10pt">Our
Board of Directors has unanimously approved and recommended to our shareholders an amendment, subject to the Board&rsquo;s discretion
as explained below, to our Amended and Restated Articles of Incorporation through the filing of Articles of Amendment to the Amended
and Restated Articles of Incorporation (the &ldquo;Articles of Amendment&rdquo;) to effect a reverse stock split of our Common
Stock at a reverse split ratio of 1-for-5 (the &ldquo;Reverse Stock Split&rdquo;). If this Proposal is approved, our Board will
cause the filing of the Articles of Amendment with the Secretary of State of the State of Wyoming promptly following the Special
Meeting, provided that if the Company meets NASDAQ&rsquo;s listing requirements prior to the Special Meeting, the Board, in its
discretion, may elect not to effect the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Reverse Stock Split will have no effect on the par value per share of our Common Stock and will not reduce the number of authorized
shares of Common Stock but will have the effect of reducing the number of issued and outstanding shares of Common Stock by the
chosen ratio. Other than as described below, the Company will pay cash in lieu of fractional shares resulting from the Reverse
Stock Split. The Articles of Amendment in substantially the form expected to be filed by the Board to implement the Reverse Stock
Split are attached to this proxy statement as Appendix D.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Reasons
for the Reverse Stock Split</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">Our Common Stock is listed on The NASDAQ Capital Market, and in order for us to maintain the listing, our
Common Stock must maintain a minimum bid price of $1.00 as set forth in NASDAQ Stock Market Rule&nbsp;5550(a)(2) (the &ldquo;Rule&rdquo;).
If the closing bid price of the Common Stock is below $1.00 for 30 consecutive trading days, then the closing bid price of the
Common Stock must be $1.00 or more for 10 consecutive trading days during a 180-day grace period to regain compliance with the
rule.&nbsp; On March 23, 2017, NASDAQ notified the Company that the bid price of its listed security had closed at less than $1
per share over the previous 30 consecutive business days, and, as a result, did not comply with the Rule. In accordance with Listing
Rule 5810(c)(3)(A), the Company was provided 180 calendar days, or until September 19, 2017, to regain compliance with the Rule.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Company has not regained compliance with the Rule and is not eligible for a second 180 day period. Specifically, the Company does
not meet the minimum $5 million shareholders&rsquo; equity, $50 million Market Value of Listed Securities, or $750,000 net income
from continuing operations initial listing requirements for The NASDAQ Capital Market. Accordingly, unless the Company had requested
an appeal of this determination as described in further detail below, the Company&rsquo;s securities would have been scheduled
for delisting from The NASDAQ Capital Market and would have been suspended at the opening of business on September 29, 2017. A
Form 25-NSE would have been required to be filed with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;) to remove
the Company&rsquo;s securities from listing and registration on The NASDAQ Stock Market.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">In
accordance with NASDAQ procedures, the Company appealed the determination and submitted a business plan to
NASDAQ demonstrating how it intends to regain compliance with the continued listing standards set forth in in Listing
Rule 5550(a)(2). The hearing request will stay the suspension of the Company&rsquo;s securities and the filing of the Form
25-NSE pending the NASDAQ&rsquo;s decision. The hearing was held on October 26, 2017. The Company submitted a
business plan (including the Reverse Stock Split) within the required time frame and will continue to work with NASDAQ to
attempt to comply with all continued listing standards. Assuming that NASDAQ accepts the plan, the Company will be subject to
quarterly monitoring for compliance with the business plan and the Company&rsquo;s Common Stock will continue to trade on the
NASDAQ Capital Market, subject to the Company&rsquo;s compliance with other NASDAQ continued listing requirements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">In order to maintain our NASDAQ Capital Market listing, our Common Stock must achieve a closing bid price
of $1.00 per share or more for 10 consecutive trading days. The Reverse Stock Split is one method for achieving this result. We
value our listing on The NASDAQ Capital Market and, upon obtaining shareholder approval, we intend to implement the Reverse Stock
Split promptly following the Special Meeting in order to assist in maintaining such listing. We do not intend to effect a going
private transaction as a result of the Reverse Stock Split. However, if the Company meets NASDAQ&rsquo;s listing requirements prior
to the Special Meeting, the Board, in its discretions, may elect not to effect the Reverse Stock Split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Our
Board believes that the delisting of our Common Stock from The NASDAQ Capital Market would likely result in decreased liquidity
and/or increased volatility in our Common Stock, and a diminution of institutional investor interest. The Board also believes
that such delisting could cause a loss of confidence of industry partners, customers, lenders and potential employees, which could
harm our business and its future prospects.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
our Common Stock is delisted from The NASDAQ Capital Market, it would likely qualify for quotation on the OTC Bulletin Board or
on the &ldquo;pink sheets,&rdquo; a price discovery platform maintained by the National Quotation Bureau, Inc. The Board believes
that, in this event, shareholders would likely find it more difficult to obtain accurate quotations as to the price of our Common
Stock, and the liquidity of our Common Stock would likely be reduced, making it difficult for shareholders to buy or sell our
Common Stock at competitive market prices, or at all. In addition, support from institutional investors and/or market makers that
currently buy and sell the Company&rsquo;s stock may decline, possibly resulting in a decrease in the trading price of our Common
Stock.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">In
evaluating whether or not to recommend that shareholders authorize a reverse stock split, in addition to the considerations described
above, the Board took into account various negative factors associated with a reverse stock split. These factors include: the
negative perception of reverse stock splits held by some investors, analysts, and other stock market participants; the fact that
the stock price of some companies that have effected reverse stock splits has subsequently declined, with a corresponding decline
in market capitalization; the adverse effect on liquidity that might be caused by a reduced number of shares outstanding; and
the costs associated with implementing a reverse stock split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Conversely,
we believe the current low market price of our Common Stock impairs its acceptability to important segments of the
institutional investor community and the investing public. Many investors look upon low-priced stock as unduly speculative in
nature and, as a matter of policy, avoid investment in such stocks. We believe that the low market price of our Common Stock
has reduced the effective marketability of our shares because of the reluctance of many brokerage firms to recommend
low-priced stock to their clients. Further, a variety of brokerage house policies and practices tend to discourage individual
brokers within those firms from dealing in low-priced stocks. Some of those policies and practices pertain to the payment of
brokers&rsquo; commissions and to time-consuming procedures that function to make the handling of low-priced stocks
unattractive to brokers from an economic standpoint. In addition, the structure of trading commissions also tends to have an
adverse impact upon holders of low-priced stock because the brokerage commission on a sale of low-priced stock generally
represents a higher percentage of the sales price than the commission on a relatively higher-priced issue.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Our
Board has determined that, based upon current business and market factors, continued listing on The NASDAQ Capital Market is in
the best interests of the Company and its shareholders, and that the Reverse Stock Split is likely necessary to maintain the listing
of the Company&rsquo;s Common Stock on The NASDAQ Capital Market.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Board believes that the reverse split ratio of 1-for-5 maximizes the anticipated benefits for our shareholders. In determining
whether to recommend and approve the Reverse Stock Split and selecting the reverse split ratio, the Board considered several factors,
such as:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 0.75in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The total number
    of shares of Common Stock outstanding;</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 0.75in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The status of our
    Common Stock listing on The NASDAQ Capital Market and the listing standards and rule-making process of NASDAQ and other stock
    exchanges;</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 0.75in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The historical trading
    price and trading volume of our Common Stock;</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 0.75in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The then prevailing
    trading price and trading volume for our Common Stock;</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 0.75in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The anticipated
    impact of the Reverse Stock Split on the trading price of and market for our Common Stock; and</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 0.75in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The outlook for
    oil price volatility and other prevailing general market and economic conditions.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Reducing
the number of outstanding shares of our Common Stock through a reverse stock split is intended, absent other factors, to increase
the per share market price of our Common Stock. However, other factors, such as our financial results, market conditions, and
the market perception of our business may adversely affect the market price of our Common Stock. As a result, there can be no
assurance that the Reverse Stock Split, if approved and implemented, will result in the intended benefits described above, or
that the market price of our Common Stock will not decrease in the future. Additionally, we cannot assure you that the market
price per share of our Common Stock after a reverse stock split will increase in proportion to the reduction in the number of
shares of our Common Stock outstanding before the Reverse Stock Split. Accordingly, the total market capitalization of our Common
Stock after the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
if the Company meets NASDAQ&rsquo;s listing requirements prior to the Special Meeting, the Board, in its discretion, may elect
not to effect the Reverse Stock Split.&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Effect
of the Reverse Stock Split on Our Common Stock</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">As
a result of the Reverse Stock Split, every five shares of existing Common Stock will be combined into one share of Common Stock.
As of October 31, 2017, the approximate number of outstanding shares of Common Stock that would result from the 1-for-5 reverse
stock split ratio (without giving effect to the treatment of fractional shares), based on 5,983,510 shares of Common Stock issued
and outstanding as of October 31, 2017, would be 1,196,702.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
the Exchange is approved, based on approximately 11,802,780 shares of Common Stock issued and outstanding, the approximate number
of outstanding shares of Common Stock that would result from the 1-for-5 reverse stock split ratio (without giving effect to the
treatment of fractional shares) would be 2,360,556. The actual number of shares outstanding after giving effect to the Reverse
Stock Split, if approved and implemented, will depend on the actual number of shares of Common Stock outstanding on the date the
Reverse Stock Split takes effect.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Reverse Stock Split will affect all holders of our Common Stock uniformly and will not change any shareholder&rsquo;s percentage
ownership interest in the Company, except that, as described below under &ldquo;Fractional Shares,&rdquo; our intent is that record
holders of Common Stock otherwise entitled to a fractional share as a result of the Reverse Stock Split will receive cash in lieu
of such fractional share. In addition, our current expectation is that the Reverse Stock Split will not affect any shareholder&rsquo;s
proportionate voting power, subject to the treatment of fractional shares and the matters discussed below under &ldquo;Fractional
Shares.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Reverse Stock Split may result in some shareholders owning &ldquo;odd lots&rdquo; of less than 100 shares of Common Stock. Odd
lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally
somewhat higher than the costs of transactions in &ldquo;round lots&rdquo; of even multiples of 100 shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">We
currently have an unlimited number of common shares authorized for issuance and 100,000 shares of Preferred Stock are authorized
for issuance, of which 50,000 shares are issued and outstanding. The Reverse Stock Split will not affect the number of authorized
shares of capital stock. Authorized but unissued shares of our Common Stock and preferred stock are available for future issuance
as may be determined by our Board without further action by our shareholders, unless shareholder approval is required by applicable
law or securities exchange listing requirements in connection with a particular transaction. These additional shares may be issued
in the future for a variety of corporate purposes, including, but not limited to, raising additional capital, corporate acquisitions,
and equity incentive plans. Except for a stock split or stock dividend, future issuances of common shares will dilute the voting
power and ownership of our existing shareholders and, depending on the amount of consideration received in connection with the
issuance, could also reduce shareholders&rsquo; equity on a per share basis.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Procedure
for Implementing the Reverse Stock Split</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">We expect that the Reverse Stock Split, if approved by our shareholders and implemented by our Board of Directors,
would become effective promptly following the filing of the Articles of Amendment to the Amended and Restated Articles of Incorporation
with the Secretary of State of the State of Wyoming (the &ldquo;Effective Time&rdquo;). If this proposal is approved by the shareholders
at the Special Meeting, the Board will cause the filing the Articles of Amendment promptly following the Special Meeting, provided
that if the Company meets NASDAQ listing requirements prior to the Special Meeting, the Board, in its  discretion, may elect
not to effect the Reverse Stock Split.&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">After
the Effective Time, our Common Stock will have a new Committee on Uniform Securities Identification Procedures (&ldquo;CUSIP&rdquo;)
number, which is a number used to identify our equity securities, and stock certificates with the older CUSIP number will need
to be exchanged for stock certificates with the new CUSIP number by following the procedures described below.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Beneficial
Holders of Common Stock (i.e., shareholders who hold in street name)</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Upon
the implementation of the Reverse Stock Split, and other than as described under &ldquo;Fractional Shares&rdquo; below, we intend
to treat shares held by shareholders through a bank, broker, custodian, or other nominee in the same manner as registered shareholders
whose shares are registered in their names. Banks, brokers, custodians, or other nominees will be instructed to effect the Reverse
Stock Split for their beneficial holders holding our Common Stock in street name. However, these banks, brokers, custodians, or
other nominees may have different procedures than registered shareholders for processing the Reverse Stock Split. Shareholders
who hold shares of our Common Stock with a bank, broker, custodian, or other nominee and who have any questions in this regard
are encouraged to contact their banks, brokers, custodians, or other nominees.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Registered
&ldquo;Book-Entry&rdquo; Holders of Common Stock (i.e., shareholders that are registered on the transfer agent&rsquo;s books and
records but do not hold stock certificates)</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Certain
of our registered holders of Common Stock may hold some or all of their shares electronically in book-entry form with the transfer
agent. These shareholders do not have stock certificates evidencing their ownership of the Common Stock. They are, however, provided
with a statement reflecting the number of shares registered in their accounts. Shareholders who hold shares electronically in
book-entry form with the transfer agent will not need to take action (the exchange will be automatic) to receive whole shares
of post-Reverse Stock Split Common Stock, subject to adjustment for treatment of fractional shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Exchange
of Stock Certificates and Elimination of Fractional Share Interests</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">As
soon as practicable after filing the Articles of Amendment to the Amended and Restated Articles of Incorporation effecting the
Reverse Stock Split with the Secretary of State of the State of Wyoming, shareholders will receive instructions for the exchange
of their Common Stock certificates for new certificates representing the appropriate number of shares of Common Stock after the
Reverse Stock Split. However, if permitted, the Company may elect to effect the exchange in the ordinary course of trading as
certificates are returned for transfer. In either event, each current certificate representing shares of Common Stock will, until
so exchanged, be deemed for all corporate purposes after the filing date to evidence ownership of our Common Stock in the proportionately
reduced number. An exchange agent may be appointed to act for shareholders in effecting the exchange of their certificates.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>SHAREHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATES OR SUBMIT THEIR STOCK CERTIFICATES NOW. YOU SHOULD SUBMIT THEM ONLY AFTER YOU RECEIVE
INSTRUCTIONS FROM US OR OUR EXCHANGE AGENT.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">No
service charges, brokerage commissions, or transfer taxes will be payable by any shareholder, except that if any new stock certificates
are to be issued in a name other than that in which the surrendered certificate(s) are registered it will be a condition of such
issuance that (i) the person requesting such issuance pays all applicable transfer taxes resulting from the transfer (or prior
to transfer of such certificate, if any) or establishes to our satisfaction that such taxes have been paid or are not payable,
(ii) the transfer complies with all applicable federal and state securities laws, and (iii) the surrendered certificate is properly
endorsed and otherwise in proper form for transfer.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Fractional
Shares</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">We
do not intend to issue fractional shares in connection with the Reverse Stock Split. In lieu of issuing fractions of shares, we
intend to pay cash as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 0.75in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If a shareholder&rsquo;s
    shares are held in street name, payment for the fractional shares will be deposited directly into the shareholder&rsquo;s
    account with the organization holding the shareholder&rsquo;s shares.</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 0.75in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If the shareholder&rsquo;s
    shares are registered directly in the shareholder&rsquo;s name, payment for the fractional shares will be made by check, sent
    to the shareholder directly from our transfer agent upon receipt of the properly completed and executed transmittal letter
    and original stock certificates.</FONT></TD></TR>
</TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 0.75in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; font-family: Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The amount of cash
    to be paid for fractional shares will be equal to the product obtained by multiplying (i) the average closing price of our
    Common Stock as reported by The NASDAQ Capital Market for the five (5) trading days immediately preceding the date of the
    Reverse Stock Split (or if our Common Stock is not at such time traded on The NASDAQ Capital Market, then as reported on the
    primary trading market for our Common Stock) times (ii) the amount of the fractional share.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">We
currently expect that those shareholders who hold less than five shares would be eliminated as a result of the payment of cash
in lieu of any fractional share interest in connection with the Reverse Stock Split. The Board reserves the right, however, to
issue fractional shares to some or all registered holders who would otherwise be eliminated as a result of the Reverse Stock Split,
or alternatively, to round up fractional shares to the nearest whole share of Common Stock for some or all of such registered
holders, if the Board shall determine that doing so would be in the Company&rsquo;s best interests, including in order to avoid
effecting a going private transaction as described in Rule 13e-3 of the Securities Exchange Act of 1934. The Board also reserves
the right to aggregate fractional shares for cash and arrange for their sale, with the aggregate proceeds from such sale being
distributed to the holders of fractional shares on a pro rata basis.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Effect
of the Reverse Stock Split on our Equity Compensation Plans, Options, and Restricted Stock Awards</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">In
connection with certain adjustment to our Common Stock, including adjustment resulting from a reverse stock split,
proportionate adjustments are generally required to be made to the number of shares reserved for future issuance under the
Company&rsquo;s Amended and Restated 2012 Equity and Performance Incentive Plan (the &ldquo;Plan&rdquo;), as well as the per
share exercise price and the number of shares issuable upon the exercise of all outstanding options (including outstanding
option grants under the Plan and our prior 2001 Incentive Stock Option Plan and 2008 Stock Option Plan for Independent
Directors and Advisory Board Members). This would result in approximately the same aggregate price being required to be paid
under such options upon exercise, and approximately the same value of shares of Common Stock being delivered upon such
exercise, immediately following the Reverse Stock Split as was the case immediately preceding the Reverse Stock Split. The
number of shares deliverable upon settlement or vesting of restricted stock awards will be similarly adjusted, subject to our
treatment of fractional shares. The number of shares reserved for </FONT>issuance pursuant to these securities will be
proportionately adjusted based upon the 1-for-5 reverse stock split ratio, subject to our treatment of fractional shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Effects
of the Reverse Stock Split on our Preferred Stock</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">In
connection with the Reverse Stock Split, we also will make any necessary adjustment to the Series A Convertible Preferred Stock
to reflect the Reverse Stock Split of our Common Stock at a reverse split ratio of 1-for-5. The current certificate of designations
for our Series A Convertible Preferred Stock contains a provision whereby the conversion price for the conversion of shares of
Series A Convertible Preferred Stock into shares of Common Stock is automatically proportionately adjusted in the event of a reverse
split of the outstanding shares of Common Stock. Each share of Series A Convertible Preferred Stock will continue to have one
vote on those matters subject to the vote of the Series A Convertible Preferred Stock as set forth in the Certificate of Designation.
The Series A Convertible Preferred Stock is not permitted to vote on the election of directors and in general does not vote with
the Common Stock as a class. Accordingly, the voting power of the outstanding shares of Series A Convertible Preferred Stock will
not change as a result of the Reverse Stock Split. The amendment will not change the number of authorized shares of Series A Convertible
Preferred Stock.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Accounting
Matters</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
proposed amendment to our Amended and Restated Articles of Incorporation will not affect the per share par value of our Common
Stock, which will remain at the current par value of $0.01 per share. As a result, the stated capital on our balance sheet attributable
to the Common Stock will be reduced proportionately based on the 1-for-5 reverse stock split ratio, and capital in excess of par
value on our balance sheet will be increased by the amount by which stated capital is reduced. Reported per share net income or
loss will be higher because there will be fewer shares of Common Stock outstanding. In future financial statements, net income
or loss per share and other per share amounts for periods ending before the Reverse Stock Split would be recast to give retroactive
effect to the Reverse Stock Split. As described above under &ldquo;Effects of the Reverse Stock Split on our Equity Compensation
Plans, Options, and Restricted Stock Awards,&rdquo; the per share exercise price of outstanding options would increase proportionately,
and the number of shares of our Common Stock issuable upon the exercise of outstanding options would decrease proportionately,
in each case based on the 1-for-5 reverse stock split ratio. We do not anticipate that any other accounting consequences would
arise as a result of the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Certain
Federal Income Tax Consequences</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
following summary describes certain material U.S. federal income tax consequences of the Reverse Stock Split to holders of our
Common Stock.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Unless
otherwise specifically indicated herein, this summary addresses the tax consequences only to a beneficial owner of our Common
Stock that is a citizen or individual resident of the United States, or a corporation organized in or under the laws of the United
States or any state thereof or the District of Columbia (a &ldquo;U.S. holder&rdquo;). A trust may also be a U.S. holder if (i)
a U.S. court is able to exercise primary supervision over administration of such trust and one or more U.S. persons have the authority
to control all substantial decisions of the trust or (ii) it has a valid election in place to be treated as a U.S. person. An
estate whose income is subject to U.S. federal income taxation regardless of its source may also be a U.S. holder.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">This
summary does not address all of the tax consequences that may be relevant to any particular investor, including tax considerations
that arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed
to be known by investors. This summary also does not address the tax consequences to (i) persons that may be subject to special
treatment under U.S. federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies,
real estate investment trusts, tax-exempt organizations, U.S. expatriates, persons subject to the alternative minimum tax, traders
in securities that elect to mark to market and dealers in securities or currencies, (ii) persons that hold our Common Stock as
part of a position in a &ldquo;straddle&rdquo; or as part of a &ldquo;hedging,&rdquo; &ldquo;conversion,&rdquo; or other integrated
investment transaction for federal income tax purposes, (iii) persons that do not hold our Common Stock as &ldquo;capital assets&rdquo;
(generally, property held for investment), or (iv) foreign entities and nonresident alien individuals. If a partnership (or other
entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our Common Stock, the U.S.
federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities
of the partnership. Partnerships that hold our Common Stock, and partners in such partnerships, should consult their own tax advisors
regarding the U.S. federal income tax consequences of the Reverse Stock Split. This summary does not address the tax consequences
of transactions occurring prior to or after the Reverse Stock Split, including, without limitation, the exercise of options or
rights to purchase Common Stock in anticipation of the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">This
summary is based on the provisions of the Internal Revenue Code of 1986, as amended, U.S. Treasury regulations, administrative
rulings and judicial authority, all as in effect as of the date of this proxy statement. Subsequent developments in U.S. federal
income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material
effect on the U.S. federal income tax consequences of the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>PLEASE
CONSULT YOUR OWN TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE REVERSE
STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Reverse Stock Split should be treated as a recapitalization for U.S. federal income tax purposes. In certain circumstances, we
may elect to issue some or all of our shareholders fractional shares, or alternatively to round up fractional shares to the nearest
whole share, rather than paying cash in lieu of fractional shares. Although there is limited authority on the matter, we do not
believe that the issuance of fractional shares or rounding up to whole shares should cause the Reverse Stock Split to fail to
be treated as a tax-free recapitalization, except to the extent described below. Therefore, a shareholder generally will not recognize
gain or loss on the Reverse Stock Split, except to the extent of cash, if any, received in lieu of a fractional share interest
in the post-Reverse Stock Split shares. The aggregate tax basis of the post-split shares received will be equal to the aggregate
tax basis of the pre-split shares exchanged therefor (excluding any portion of the holder&rsquo;s basis allocated to fractional
shares or for which an additional fraction of a share is rounded up to a whole share), and the holding period of the post-split
shares received generally will include the holding period of the pre-split shares exchanged.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">A
holder of the pre-split shares who receives cash will generally recognize gain or loss equal to the difference between the portion
of the tax basis of the pre-split shares allocated to the fractional share interest and the cash received. Such gain or loss will
be a capital gain or loss and will be short term if the pre-split shares were held for one year or less and long-term if held
more than one year. The deductibility of net capital losses by individuals and corporations is subject to limitations.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Although
the treatment of a shareholder who receives an additional fraction of a share to round up to a whole share is not clear, a holder
who receives round-up shares in lieu of a fractional share of our Common Stock pursuant to the Reverse Stock Split should recognize
capital gain or loss in an amount equal to the difference between the amount of additional shares received and the shareholder&rsquo;s
tax basis in the shares of our Common Stock surrendered that is allocated to such fractional share of our Common Stock. Such gain
or loss will be a capital gain or loss and will be short-term if the pre-split shares were held for one year or less and long-term
if held more than one year. The deductibility of net capital losses by individuals and corporations is subject to limitations.
Some round-up shares may have a new holding period.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Information
returns may be required to be filed with the Internal Revenue Service with respect to the receipt of cash or round-up shares in
lieu of a fractional share of our Common Stock pursuant to the Reverse Stock Split in the case of certain shareholders.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">No
gain or loss will be recognized by us as a result of the Reverse Stock Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>No
Appraisal Rights</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Shareholders
have no rights under Wyoming law or under our charter documents to exercise appraisal rights with respect to the Reverse Stock
Split.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Board
Recommendation</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Board recommends you vote for Proposal 2. For the reasons provided in this Proxy Statement, we are asking shareholders to vote
&ldquo;FOR&rdquo; the following resolution:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&ldquo;<B>RESOLVED</B>,
that the shareholders approve the amendment to the articles of incorporation to implement a reverse stock split of the Company&rsquo;s
outstanding Common Stock at a reverse stock split ratio of 1-for-5, provided that if the Company meets NASDAQ&rsquo;s listing
requirements prior to the Special Meeting, the Board, in its discretion, may elect not to effect the Reverse Stock Split.&rdquo;</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a025_v1"></A>PROPOSAL
3: ADJOURNMENT PROPOSAL</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">At
the Special Meeting, we may adjourn, or ask shareholders to vote to adjourn, the Special Meeting to solicit additional proxies
in favor of the approval of the Exchange Proposal and the Reverse Stock Split if we have not obtained sufficient votes to approve
the proposals. Approval of the adjournment proposal requires the affirmative vote of a majority of the votes cast on the matter.
Because this vote is a non-routine matter under applicable rules, your bank, broker or other nominee cannot vote without instructions
from you.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a026_v1"></A>Board
Recommendation</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Board recommends you vote for Proposal 3. For the reasons provided in this Proxy Statement, we are asking shareholders to vote
&ldquo;FOR&rdquo; the following resolution:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&ldquo;<B>RESOLVED</B>,
that the shareholders approve the adjournment of the Special Meeting, if necessary, to solicit additional proxies for the Exchange
Proposal and / or the Reverse Stock Split.&rdquo;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><A NAME="a028_v1"></A><B>Principal Holders of Voting Securities and Ownership by Officers
and Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0in; text-indent: 0in; text-align: justify">The following
table sets forth certain information regarding the beneficial ownership of our common stock as of October 31, 2017, by (a) each
stockholder who is known to us to own beneficially 5.0% or more of our outstanding common stock; (b) each of our directors; (c)
our sole executive officer, and (d) all directors and our executive officer as a group. This information is based on SEC reports
or as otherwise known by us. Except as otherwise indicated, and for shares subject to forfeiture, all persons listed below have
(i) sole voting power and investment power with respect to their shares of common stock, except to the extent that authority is
shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their shares of common stock.
David A. Veltri, as Trustee of our 1989 Employee Stock Ownership Plan (the &ldquo;ESOP&rdquo;) exercises voting powers over any
non-allocated shares owned by the ESOP and dispositive powers over all ESOP shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.8pt 0pt 20.15pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0in; text-indent: 0in; text-align: justify">For
purposes of this table, a person or group of persons is deemed to have &ldquo;beneficial ownership&rdquo; of any shares of common
stock that such person has the right to acquire within 60 days of October 31, 2017. For purposes of computing the percentage of
outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons
has the right to acquire within 60 days of October 31, 2017 is deemed to be outstanding, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. Such options are assumed to be exercised for purposes of
these calculations. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial
ownership. Unless otherwise identified, the address of our directors and officer is c/o U.S. Energy Corp., 950 S. Cherry Street,
Suite 1515, Denver, Colorado 80246.&nbsp;</P>

<P STYLE="margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Title of Class</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">Name of Beneficial Owner</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">Position with Company</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center">Beneficial <BR> Ownership</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center"><SUP>&nbsp;</SUP></TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">Percent <BR>
of Class</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD><P STYLE="margin: 0pt 0">Directors and Executive Officers:&nbsp;</P>


</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 15%; text-align: left; vertical-align: top">Common</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 25%; text-align: left; vertical-align: top">David A. Veltri</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 25%; text-align: left">Chairman of Board and Chief Executive Officer</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">103,038</TD><TD STYLE="width: 1%; text-align: left"><SUP>(1)</SUP></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">1.7</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Common</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Ryan L. Smith</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Chief Financial Officer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left"><SUP>(2)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common</TD><TD>&nbsp;</TD>
    <TD>J. Weldon Chitwood</TD><TD>&nbsp;</TD>
    <TD>Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left"><SUP>(3)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">.33</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Common</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">John G. Hoffman</TD><TD>&nbsp;</TD>
    <TD>Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left"><SUP>(4)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">.33</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Javier F. Pico</TD><TD>&nbsp;</TD>
    <TD>Director</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">20,000</TD><TD STYLE="text-align: left; border-bottom: Black 1pt solid"><SUP>(5)</SUP></TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">.33</TD><TD STYLE="text-align: left; border-bottom: Black 1pt solid">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; vertical-align: top">Common</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Directors and executive officer as a group (5 people)</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right; vertical-align: top">163,038</TD><TD STYLE="text-align: left"><SUP>&nbsp;</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right; vertical-align: top">2.7</TD><TD STYLE="text-align: left; vertical-align: top">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; vertical-align: top">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD>Stockholders in Excess of 5%:</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left"><SUP>&nbsp;</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">CVI Investments, Inc.</TD><TD>&nbsp;</TD>
    <TD>Shareholder</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">370,200</TD><TD STYLE="text-align: left"><SUP>(6)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; vertical-align: top">Preferred</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">Mt. Emmons Mining Company<BR> 333 N. Central Avenue <BR> Phoenix, AZ 85004</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left; vertical-align: top">Convertible Preferred Shareholder</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right; vertical-align: top">729,006</TD><TD STYLE="text-align: left; vertical-align: top"><SUP>(7)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right; vertical-align: top">10.6</TD><TD STYLE="text-align: left; vertical-align: top">%</TD></TR>
</TABLE>



<P STYLE="margin: 0pt 0"></P>

<P STYLE="margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0in; text-align: justify">*
Less than one percent</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3%"><FONT STYLE="font-size: 10pt"><SUP>(1)</SUP></FONT></TD><TD STYLE="text-align: justify; padding-right: 7.8pt; width: 97%">Mr. Veltri&rsquo;s beneficial ownership consists of (i) ownership of 75,166
shares of our common stock, (ii) 5,555 shares underlying stock options that are presently exercisable, and (iii) the ability to
exercise dispositive rights in his capacity as an ESOP Trustee over 22,317 shares currently owned by the ESOP.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3%"><FONT STYLE="font-size: 10pt"><SUP>(2)</SUP></FONT></TD><TD STYLE="text-align: justify; padding-right: 7.8pt; width: 97%">Mr. Smith does not beneficially own any shares based on information disclosed
in the Form 3 filed with the Securities and Exchange Commission on March 26, 2017.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3%"><FONT STYLE="font-size: 10pt"><SUP>(3)</SUP></FONT></TD><TD STYLE="text-align: justify; padding-right: 7.8pt; width: 97%">Mr. Chitwood&rsquo;s beneficial ownership consists of 20,000 shares underlying
stock options that are presently exercisable.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3%"><FONT STYLE="font-size: 10pt"><SUP>(4)</SUP></FONT></TD><TD STYLE="text-align: justify; padding-right: 7.8pt; width: 97%">Mr. Hoffman&rsquo;s beneficial ownership consists of 20,000 shares underlying
stock options that are presently exercisable.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3%"><FONT STYLE="font-size: 10pt"><SUP>(5)</SUP></FONT></TD><TD STYLE="text-align: justify; padding-right: 7.8pt; width: 97%">Mr. Pico&rsquo;s beneficial ownership consists of 20,000 shares underlying
stock options that are presently exercisable.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3%"><FONT STYLE="font-size: 10pt"><SUP>(6)</SUP></FONT></TD><TD STYLE="text-align: justify; padding-right: 7.8pt; width: 97%">Based on information disclosed in the Schedule 13G/A filed with the Securities
and Exchange Commission on February 10, 2017. Height Capital Management, Inc. is the investment manager to CVI Investments, Inc.
and as such may exercise voting and dispositive power over these shares.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3%; text-align: left"><SUP>(7)</SUP></TD><TD STYLE="width: 97%; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
February 11, 2016, Mt. Emmons Mining Company, a subsidiary of Freeport-McMoRan Inc., acquired 50,000 shares of our Series A Convertible
Preferred Stock (&ldquo;Preferred Stock&rdquo;) with an initial liquidation preference of $2,000,000 ($40.00 per share). The Preferred
Stock accrues dividends at a rate of 12.25% per annum and such dividends are not payable in cash but are accrued and compounded
quarterly in arrears and added to the initial liquidation preference. As of December 31, 2016, the adjusted liquidation preference
was approximately $2.2 million or $46.40 per share. At the option of the holder, each share of Preferred Stock may initially be
converted into 13.33 shares of our common stock (the &ldquo;Conversion Rate&rdquo;) for an aggregate of 666,667 shares. In no
event will the aggregate number of shares of Common Stock issued upon conversion be greater than 793,349 shares. The conversion
rate was adjusted for accumulated dividends through December 31, 2016 along with the Company&rsquo;s capital raise on December
20, 2016, and is currently at the rate of 15.01 shares of our common stock. The Preferred Stock will generally not vote with the
Company&rsquo;s Common Stock on an as-converted basis on matters put before the Company&rsquo;s shareholders.</FONT></TD>
</TR></TABLE>

<P STYLE="margin: 0pt 0">&nbsp;</P>



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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><A NAME="a027_v1"></A>OTHER
MATTERS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Our
Board does not know of any other matters that are to be presented for action at the Special Meeting. However, if any other matters
properly come before the Special Meeting or any adjournment(s) thereof, it is intended that the enclosed proxy will be voted in
accordance with the judgment of the persons voting the proxy.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>ADDITIONAL
INFORMATION ABOUT THE COMPANY</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
you would like to receive further information about U.S. Energy Corp., please visit the Company&rsquo;s website at <U>www.usnrg.com</U>.
The &ldquo;Investors&rdquo; section of our website contains management presentations, financial information, stock quotes and
links to our filings with the SEC.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>INCORPORATION
BY REFERENCE</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">We
are incorporating by reference specified documents that we file with the SEC, which means that incorporated documents are considered
part of this Proxy Statement. We are disclosing important information to you by referring you to those documents and information
we subsequently file with the SEC will automatically update and supersede information contained in this Proxy Statement and in
our other filings with the SEC. This document incorporates by reference the Company&rsquo;s Annual Report on Form 10-K and Form
10-K/A for the year ended December 31, 2016, filed on April 28, 2017, the Company&rsquo;s quarterly report on Form 10-Q for the
quarter ended June 30, 2017, filed on August 14, 2017, and the Company&rsquo;s current reports on Form 8-K filed on March 28,
2017, May 8, 2017, September 22, 2017, and October 5, 2017.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>

<P STYLE="margin: 0; text-align: right; text-indent: 0"><U>APPENDIX A</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; text-transform: uppercase"><B>EXCHANGE
AGREEMENT</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">This
Exchange Agreement (this &ldquo;Agreement&rdquo;) is made and entered into on September 28, 2017, by and between U.S. Energy Corp.,
a Wyoming corporation (the &ldquo;Company&rdquo;), Energy One LLC, a Wyoming limited liability company (the &ldquo;Borrower&rdquo;)
and APEG Energy II, L.P. (the &ldquo;Holder&rdquo;), the sole Lender and the Administrative Agent under the Credit Agreement dated
as of July 30, 2010, as amended (the &ldquo;Credit Facility&rdquo;). Capitalized terms used herein but not defined herein shall
have the meanings given to them in the Credit Facility.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">RECITALS</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">WHEREAS,
the Holder currently holds $6,000,000 in principal amount of Loans under the Credit Facility, comprising the entire principal
balance outstanding under the Credit Facility (the &ldquo;Balance&rdquo;);</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">WHEREAS,
the Holder desires to exchange $5,063,380 of the Balance (the &ldquo;Exchanged Balance&rdquo;) for shares of the Company&rsquo;s
Common Stock, par value $0.01 per share (&ldquo;Common Stock&rdquo;) and for cash, on the terms and conditions set forth in this
Agreement (the &ldquo;Exchange&rdquo;);</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">WHEREAS,
the Company desires to issue to the Holder that number of shares of the Company&rsquo;s Common Stock and to pay to the Holder
that amount of cash, determined as set forth in Section 1.1 below, in exchange for the Exchanged Balance;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">NOW,
THEREFORE, in consideration of the premises and the agreements set forth below, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; text-transform: uppercase">ARTICLE
I</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif"><BR>
<BR>
Exchange</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
1.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Exchange of the Exchanged Balance for Common Stock and Cash</U>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the terms and subject to the conditions of this Agreement, on the Closing Date (as defined herein), the Company shall issue, subject
to this Section 1.1 and Section 1.7 hereof, to the Holder, and the Holder agrees to accept from the Company, the number of shares
of Common Stock and cash determined in accordance with the terms of subsections (b) and (d) hereof in exchange for the Exchanged
Balance.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
the Closing Date, the Holder will receive a final number of shares of Common Stock determined as set forth below plus a cash payment
in exchange for the Exchanged Balance. The number of shares of Common Stock issued to the Holder pursuant to the terms of this
Agreement is referred to herein as the &ldquo;Exchange Shares.&rdquo; The Exchange Shares shall equal the Balance, less any cash
payments received by the Holder, divided by the &ldquo;Share Price&rdquo; (as defined below), rounded down to the nearest whole
share.  </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Definitions.
For purposes of this Exchange Agreement:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ldquo;Share
Price&rdquo; means One Hundred One and 3/10<SUP>ths</SUP> (101.3%) of the arithmetic average of the 30 day VWAP as shown in Exhibit
A.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ldquo;VWAP&rdquo;
will be determined as shown in Exhibit A.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ldquo;Trading
Day&rdquo; means a day on which (i) there is no Market Disruption Event (as defined below), and (ii) trading in the Company&rsquo;s
securities generally occurs on the NASDAQ Stock Market.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ldquo;Market
Disruption Event&rdquo; means the occurrence or existence on any Scheduled Trading Day (as defined below) for the Common Stock
of any suspension or limitation imposed on trading of the Common Stock (by reason of movements in price exceeding limits permitted
by the relevant stock exchange or otherwise) in the Common Stock, and such suspension or limitation occurs or exists throughout
the 30 minutes prior to the closing time of the relevant exchange on such day.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(v)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ldquo;Scheduled
Trading Day&rdquo; means a day that is regularly scheduled Trading Day of the NASDAQ Stock Market</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company and the Holder agree that the Exchange Shares shall be capped such that the Holder (together with the Holder&rsquo;s affiliates
or any other person deemed to be a member of a &ldquo;group&rdquo; under Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (a &ldquo;Section 13(d)(3) group&rdquo;) with the Holder with respect to Common Stock of the Company) will beneficially
own no more than 49.9% of the Common Stock outstanding immediately after issuance of the Exchange Shares. The Holder acknowledges
that as a result of this restriction, the Exchange Shares may change depending upon changes in the outstanding shares of Common
Stock. Immediately prior to the Closing Date, the Holder shall certify in writing the number of shares of Common Stock that it
beneficially owns (including through derivative securities) and the shares of Common Stock beneficially owned by the Holder&rsquo;s
affiliates and any other person with whom it may have formed a Section 13(d)(3) group. Any portion of the Exchanged Balance that
is not exchanged for Common Stock due to the above limitation will be paid to the Holder in cash (or other mutually agreeable
consideration) at the Closing (as defined below).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
execution of this Agreement, the Company will promptly make a public announcement regarding the terms hereof.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
1.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Exchange Shares Legend; Registration Rights</U>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Exchange Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer
of the Exchange Shares other than pursuant to an effective registration statement or Rule 144 under the Securities Act (as
defined below), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Exchange
Shares under the Securities Act. Any certificate or certificates representing the Exchange Shares shall bear a legend
substantially as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE &ldquo;SECURITIES
ACT&rdquo;), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certificates
evidencing the Exchange Shares shall not contain any legend (including the legend set forth in Section 1.2(a) hereof): (i) while
a registration statement covering the resale of such securities is effective under the Securities Act, or (ii) following any sale
of such Exchange Shares pursuant to Rule 144, or (iii) if such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff of the Commission). In any such event, upon receipt
from the Holder of certificates bearing restrictive legends representing the Exchange Shares, together with any documentation
reasonably requested by the Company and its counsel, the Company shall promptly cause its counsel to issue a legal opinion to
the Transfer Agent, if required by the Transfer Agent, to effect the removal of the legend hereunder. Certificates for Exchange
Shares free of restrictive legends shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder&rsquo;s
prime broker with the Depository Trust Company System as directed by such Holder.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
later than December 31, 2017, the Company shall file a registration statement on Form S-1 providing for the resale by the Holder
of the Exchange Shares issued and issuable upon exercise of the Warrants. The Company shall use commercially reasonable efforts
to cause such registration to become effective and to keep such registration statement effective at all times until (a) the Exchange
Shares are sold under such registration statement or pursuant to Rule 144 or other exemption under the Securities Act, (b) the
Exchange Shares may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 under the Securities Act, and (c)
the two (2) year anniversary of the date of the issuance of the Exchange Shares, whichever is the earliest to occur. Subject to
the accuracy of the information provided by the Holder to the Company, the Company shall ensure that such registration statement
(including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in
the case of prospectuses, in the light of the circumstances in which they were made) not misleading. After the date hereof and
during any period in which a prospectus or prospectus supplement relating to any of the Exchange Shares subject to registration
under this Section 1.2(c) is required to be delivered by the Holder pursuant to the Securities Act (including in circumstances
where such requirement may be satisfied pursuant to Rule 172 of the Securities Act), (i) the Company will notify the Holder promptly
of the time when any subsequent amendment to such registration statement, other than documents incorporated by reference, has
been filed with the Commission or has become effective or any subsequent supplement to the prospectus regarding such Securities
or the Holder or any subsequent amendment to the prospectus or any supplement or amendment to the prospectus supplement has been
filed with the Commission and of any comment letter from the Commission or any request by the Commission for any amendment or
supplement to such registration statement, any amendment to the prospectus, any supplement to the prospectus that relates to the
Securities subject to such registration statement under this Section or the Holder, or any amendment or supplement to the prospectus
supplement, provided that no notification of the Holder shall be required if such amendment, supplement, or comment, or request
would not, and would not seek, to limit the rights of the Holder or the Exchange Shares, (ii) the Company will prepare and file
with the Commission, promptly upon the Holder&rsquo;s request, any amendments or supplements to such registration statement, prospectus
or prospectus supplement that, in the Company&rsquo;s reasonable opinion, may be necessary in connection with any resale of the
Exchange Shares by the Holder (provided, however, that the failure of the Holder to make such request shall not relieve the Company
of any obligation or liability hereunder), (iii) the Company will not file any amendment or supplement to a registration statement,
prospectus or prospectus supplement, other than documents incorporated by reference, relating to the Exchange Shares subject to
registration under this Section 1.2(c) unless a copy thereof has been submitted or made available to the Holder within a reasonable
period of time before the filing and the Holder has not reasonably objected in writing thereto (provided, however, that (A) the
failure of the Holder to make such objection shall not relieve the Company of any obligation or liability hereunder, and (B) the
Company has no obligation to provide the Holder any advance copy of such filing or to provide the Holder an opportunity to object
to such filing if such filing does not name the Holder or specifically discuss the Exchange Shares subject to registration under
this Section 1.2(c) as contemplated hereby) and the Company will furnish or make available to the Holder at the time of filing
thereof a copy of any document that upon filing is deemed to be incorporated by reference into a registration statement, prospectus
or prospectus supplement, except for those documents available via EDGAR, and (iv) the Company will cause each amendment or supplement
to the prospectus or prospectus supplement, other than documents incorporated by reference, to be filed with the Commission as
required pursuant to the applicable paragraph of Rule 424(b) of the Securities Act. The Holder shall furnish the Company a completed
questionnaire in customary form prior to the filing of such registration statement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
1.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Lock-up</U>. The Holder hereby agrees that it will not, without the prior written consent of the Company, during the
period commencing on the Closing Date (as defined below) and ending twelve (12) months after the Closing Date, (a) lend, offer,
pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock; or (b)
enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership
of Common Stock, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock
or other securities, in cash or otherwise. The foregoing provisions of this Section 1.3 shall not apply to the sale of any shares
to an underwriter pursuant to an underwriting agreement. The Holder further agrees to execute such agreements as may be reasonably
requested by the Company that are necessary to give effect to this Section 1.3. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the shares of Common Stock of the Holder (and transferees and assignees
thereof) until the end of such restricted period.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
1.4 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Prepayment under Credit Facility</U>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
parties agree that the Credit Facility and any documents and instruments delivered pursuant thereto shall remain in effect and
without amendment by reason of this Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Holder hereby waives the requirements of prior notice of prepayment and payment of accrued interest as to the Exchange and the
Exchanged Balance under Section 3.04 of the Credit Agreement, and acknowledges and agrees that no premium or penalty shall be
due upon the Exchange.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
parties further agree that, upon the completion of the Closing, the Exchanged Balance shall no longer be due and payable under
the Credit Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
1.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Share Exchange</U>. In consideration of and for the Exchange hereunder, the Company agrees to issue to the Holder the
Exchange Shares. The issuance of the Exchange Shares to the Holder will be made pursuant to an exemption from registration under
the Securities Act.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
1.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Closing Mechanics</U>. The closing of the transactions contemplated by this Agreement (the &ldquo;Closing&rdquo;) shall
occur on 10:00 a.m., Central Standard Time, on October 31, 2017 or at such other time on the same date or such other date as the
parties may agree in writing (such time and date, the &ldquo;Closing Date&rdquo;). On the Closing Date, upon satisfaction of the
Company&rsquo;s conditions to Closing, the Company will: (i) effect delivery of the Exchange Shares by instructing its transfer
agent to credit the account of Holder&rsquo;s prime broker with DTC through DTC&rsquo;s Deposit/Withdrawal at Custodian (&ldquo;DWAC&rdquo;)
program; and (ii) pay to the Holder the amount of cash determined in accordance with Section 1.1(d) by wire transfer to an account
designated in writing by the Holder at least two business days in advance of the Closing Date.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
1.7 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Conditions to Closing</U>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
obligation of the Holder hereunder to consummate the transactions contemplated hereby at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Holder&rsquo;s
sole benefit and may be waived by the Holder at any time in its sole discretion by providing the Company with prior written notice
thereof:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company shall have submitted an additional share listing application for the Exchange Shares with the NASDAQ on or prior to the
Closing Date and shall cause the Exchange Shares to be approved by the NASDAQ for listing on the Closing Date or as soon as practicable
thereafter;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company shall have received all necessary approvals from shareholders, exchanges, and regulatory bodies; and</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
representations and warranties of the Company in this Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date and the Company shall have complied in all material respects
with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
obligation of the Company hereunder to consummate the transactions contemplated hereby at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company&rsquo;s
sole benefit and may be waived by the Company at any time in its sole discretion by providing the Holder with prior written notice
thereof:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
representations and warranties of the Holder in this Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date and the Holder shall have complied in all material respects
with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; text-transform: uppercase">ARTICLE
II</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif"><BR>
<BR>
Representations and Warranties of the Holder</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Holder hereby makes the following representations and warranties, each of which is true and correct on the date hereof and the
Closing Date and shall survive the Closing Date and the transactions contemplated hereby to the extent set forth herein:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
2.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Existence and Power</U>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Holder is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has
the power, authority and capacity to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate
the transactions contemplated hereby.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
execution of this Agreement by the Holder and the consummation by the Holder of the transactions contemplated hereby do not and
will not constitute or result in a breach, violation, conflict or default under any note, bond, mortgage, deed, indenture, lien,
instrument, contract, agreement, lease or license to which the Holder is a party, whether written or oral, express or implied,
or any statute, law, ordinance, decree, order, injunction, rule, directive, judgment or regulation of any court, administrative
or regulatory body, governmental authority, arbitrator, mediator or similar body on the part of the Holder or on the part of any
other party thereto or cause the acceleration or termination of any obligation or right of the Holder, except for such breaches,
conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the ability of the Holder to perform its obligations hereunder. As used in this Agreement, the term
&ldquo;Material Adverse Effect&rdquo; shall mean a material adverse effect on the business, condition (financial or otherwise),
properties or results of operations of the party, or an event, change or occurrence that would materially adversely affect the
ability of the party to perform its obligations under this Agreement or which would limit the Holder&rsquo;s power to transfer
the Exchanged Balance hereunder.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
2.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Valid and Enforceable Agreement; Authorization</U>. This Agreement has been duly executed and delivered by the Holder
and constitutes a legal, valid and binding obligation of the Holder, enforceable against the Holder in accordance with its terms,
except that such enforcement may be subject to (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting
or relating to enforcement of creditors&rsquo; rights generally, and (b) general principles of equity.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
2.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Title</U>. The Holder has good and valid title to the Exchanged Balance in the aggregate principal amount set forth
in the recitals to this Agreement, free and clear of any mortgage, lien, pledge, charge, security interest, encumbrance, title
retention agreement, option, equity or other adverse claim thereto. The Holder has not, in whole or in part, (i) assigned, transferred,
hypothecated, pledged or otherwise disposed of the Exchanged Balance or its rights in the Exchanged Balance, or (ii) given any
person or entity any transfer order, power of attorney or other authority of any nature whatsoever with respect to the Exchanged
Balance which would limit the Holder&rsquo;s power to transfer the Exchanged Balance hereunder.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
2.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Investment Decision</U>. The Holder is either a &ldquo;qualified institutional buyer&rdquo; within the meaning of Rule
144A under the Securities Act or an institutional &ldquo;accredited investor&rdquo; with the meaning of Rule 501(a)(1)(2) or (3)
of Regulation D under the Securities Act and was not organized for the purpose of acquiring the Exchange Shares. The Holder is
acquiring the Exchange Shares solely for its own account, for investment purposes only and not with a view to the resale or distribution
thereof, in whole or in part. The Holder is knowledgeable, sophisticated and experienced in business and financial matters and
has previously invested in securities similar to the Exchange Shares. The Holder is able to bear the economic risk of its investment
in the Exchange Shares and is presently able to afford the complete loss of such investment.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Holder (or its authorized representative) has had the opportunity to review the Company&rsquo;s filings with the Securities and
Exchange Commission (the &ldquo;Commission&rdquo;), including, without limitation, the Company&rsquo;s Annual Report on Form 10-K
for the year ended December 31, 2016; the Company&rsquo;s Quarterly Reports on Form 10-Q for the quarters ended June 30, 2017,
March 31, 2017 and September 30, 2016; the Company&rsquo;s current reports on Form 8-K; and the Company&rsquo;s 2017 Proxy Statement
(all of such filings with the Commission referred to, collectively, as the &ldquo;SEC Documents&rdquo;). The Holder has had such
opportunity to ask questions of the Company and its representatives and to obtain from representatives of the Company such information
as is necessary to permit it to evaluate the merits and risks of its investment in the Company. The Holder has independently,
without reliance upon any representatives of the Company and based on such information as the Holder deemed appropriate, made
its own analysis and decision to enter into this Agreement. The Holder has had the opportunity to consult with its accounting,
tax, financial and legal advisors to be able to evaluate the risks involved in the Exchange pursuant hereto and to make an informed
investment decision with respect to the Exchange.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Holder acknowledges that the Company is relying on the truth and accuracy of the foregoing representations and warranties in the
offering of the Exchange Shares to the Holder without having first registered the Exchange Shares under the Securities Act</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
2.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Affiliate Status</U>. The Holder is not, and has not been during the preceding three months, an &ldquo;affiliate&rdquo;
of the Company as such term is defined in Rule 144 under the Securities Act.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
2.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Professional Advice</U>. With respect to the tax, accounting and other economic considerations involved in the Exchange,
the Holder is not relying on the Company or any of its affiliates, and the Holder has carefully considered and has, to the extent
the Holder believes such discussion is necessary, discussed with the Holder&rsquo;s professional legal, tax, accounting and financial
advisors the implications of the Exchange for the Holder&rsquo;s particular tax, accounting and financial situation.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
2.7 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>No Solicitation</U>. The Holder was not solicited by anyone on behalf of the Company to enter into this transaction.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; text-transform: uppercase">ARTICLE
III</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif"><BR>
<BR>
Representations, Warranties and Covenants of the Company</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
Company hereby makes the following representations, warranties, and covenants each of which is true and correct on the date hereof
and shall survive the date of the Closing and the transactions contemplated hereby to the extent set forth herein.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
3.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Existence and Power</U>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company is duly incorporated, validly existing and in good standing under the laws of Wyoming, with the requisite power and authority
to own and use its properties and assets and to carry on its business as currently conducted. The Company has the requisite power
and authority to execute and deliver this Agreement, to perform its obligations hereunder and consummate the transactions contemplated
hereby.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
execution of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby (i) does
not require the consent, approval, authorization, order, registration or qualification of, or filing with, any governmental authority
or court, or body or arbitrator having jurisdiction over the Company, other than the Company&rsquo;s shareholders, NASDAQ, the
Commission, relevant state securities authorities and the DTC; and (ii) does not and will not constitute or result in a breach,
violation or default under any note, bond, mortgage, deed, indenture, lien, instrument, contract, agreement, lease or license,
whether written or oral, express or implied, or with the certificate of incorporation or bylaws of the Company, or any statute,
law, ordinance, decree, order, injunction, rule, directive, judgment or regulation of any court, administrative or regulatory
body, governmental authority, arbitrator, mediator or similar body on the part of the Company or on the part of any other party
thereto or cause the acceleration or termination of any obligation or right of the Company or any other party thereto, except
for such breaches, violations or defaults which would not reasonably be expected to, singly or in the aggregate, result in a Material
Adverse Effect (as defined above) on the ability of the Company to perform its obligations hereunder.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
3.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Valid and Enforceable Agreement; Authorization</U>. This Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms,
except that such enforcement may be subject to (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting
or relating to enforcement of creditors&rsquo; rights generally, and (b) general principles of equity.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
3.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Valid Issuance of the Exchange Shares</U>. The Exchange Shares, when issued and delivered in accordance with the terms
and for the consideration set forth in this Agreement, will be validly issued, fully paid and non-assessable and free of restrictions
on transfer other than restrictions on transfer under applicable federal and state securities laws and liens or encumbrances created
by or imposed by the Holder. Assuming the accuracy of the representations of the Holder in Article II of this Agreement, the Exchange
Shares will be issued in compliance in all material respects with all applicable federal and state securities laws. The Company
has a sufficient number of authorized and unissued shares of Common Stock to consummate the Exchange.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; text-transform: uppercase">ARTICLE
IV</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif"><BR>
<BR>
Miscellaneous Provisions</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Survival of Representations and Warranties</U>. The agreements of the Company, as set forth herein, and the respective
representations and warranties of Holder and the Company as set forth herein in Articles II and III, respectively, shall survive
the Closing Date.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Notice</U>. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered,
or mailed first class mail (postage prepaid) with return receipt requested or sent by reputable overnight courier service (charges
prepaid):</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;if
to the Holder, at its address as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">APEG
Energy II, L.P.<BR>
3305 Northland Drive, Suite 101<BR>
Austin, Texas 78731<BR>
Attention: Paul Haarman, Managing Partner</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;if
to the Company, at its address, as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">U.S.
Energy Corp.<BR>
4643 S. South Ulster, Suite 970<BR>
Denver, Colorado 80237<BR>
Attention: David Veltri, Chief Executive Officer</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Each
party hereto by notice to the other party may designate additional or different addresses for subsequent notices or communications.
All notices and communications will be deemed to have been duly given: at the time delivered by hand, if personally delivered;
five business days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by
facsimile; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next
day delivery.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Entire Agreement</U>. This Agreement and the other documents and agreements executed in connection with the Exchange
embody the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all
prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda
and understandings between or among the parties or any of their agents, representatives or affiliates relative to such subject
matter, including, without limitation, any term sheets, emails or draft documents.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Assignment; Binding Agreement</U>. This Agreement and the various rights and obligations arising hereunder shall inure
to the benefit of and be binding upon the parties hereto and their successors and assigns.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Counterparts</U>. This Agreement may be executed in multiple counterparts, and on separate counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any counterpart or
other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and
delivery of this Agreement by such party.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Remedies Cumulative</U>. Except as otherwise provided herein, all rights and remedies of the parties under this Agreement
are cumulative and without prejudice to any other rights or remedies available at law.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Governing Law</U>. This Agreement shall in all respects be construed in accordance with and governed by the substantive
laws of the State of Texas, without reference to its conflicts of law rules. Any right to trial by jury with respect to any action
or proceeding arising in connection with this Agreement is hereby waived by the parties hereto.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>No Third Party Beneficiaries or Other Rights</U>. Nothing herein shall grant to or create in any person not a party
hereto, or any such person&rsquo;s dependents or heirs, any right to any benefits hereunder, and no such party shall be entitled
to sue any party to this Agreement with respect thereto.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Waiver; Consent</U>. This Agreement may not be changed, amended, terminated, augmented, rescinded or discharged (other
than in accordance with its terms), in whole or in part, except by a writing executed by the parties hereto. No waiver of any
of the provisions or conditions of this Agreement or any of the rights of a party hereto shall be effective or binding unless
such waiver shall be in writing and signed by the party claimed to have given or consented thereto. Except to the extent otherwise
agreed in writing, no waiver of any term, condition or other provision of this Agreement, or any breach thereof shall be deemed
to be a waiver of any other term, condition or provision or any breach thereof, or any subsequent breach of the same term, condition
or provision, nor shall any forbearance to seek a remedy for any noncompliance or breach be deemed to be a waiver of a party&rsquo;s
rights and remedies with respect to such noncompliance or breach.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Word Meanings</U>. The words such as &ldquo;herein,&rdquo; &ldquo;hereinafter,&rdquo; &ldquo;hereof&rdquo; and &ldquo;hereunder&rdquo;
refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.
The singular shall include the plural, and vice versa, unless the context otherwise requires. The masculine shall include the
feminine and neuter, and vice versa, unless the context otherwise requires.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>No Broker</U>. Neither party has engaged any third party as broker or finder or incurred or become obligated to pay
any broker&rsquo;s commission or finder&rsquo;s fee in connection with the transactions contemplated by this Agreement other than
such fees and expenses for which that particular party shall be solely responsible.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.12 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Further Assurances</U>. The Holder and the Company each hereby agree to execute and deliver, or cause to be executed
and delivered, such other documents, instruments and agreements, and take such other actions, as either party may reasonably request
in connection with the transactions contemplated by this Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.13&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Costs and Expenses</U>. The Holder and the Company shall each pay their own respective costs and expenses incurred
in connection with the negotiation, preparation, execution and performance of this Agreement, including, but not limited to, attorneys&rsquo;
fees.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.14 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Headings</U>. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Section
4.15&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Severability</U>. If any one or more of the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be affected or impaired thereby.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><BR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first above written.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-size: 10pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif"><FONT STYLE="font-size: 10pt"><B>APEG ENERGY II, L.P.:</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif; width: 50%">&nbsp;</TD>
    <TD STYLE="font-family: Times New Roman,serif; width: 2%"><FONT STYLE="font-size: 10pt">By:</FONT></TD>
    <TD STYLE="font-family: Times New Roman,serif; width: 48%; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif"><FONT STYLE="font-size: 10pt">Name: Patrick Duke</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif"><FONT STYLE="font-size: 10pt">Title: Managing Partner</FONT></TD></TR>
</TABLE>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-size: 10pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif; width: 50%">&nbsp;</TD>
    <TD STYLE="font-family: Times New Roman,serif; width: 2%"><FONT STYLE="font-size: 10pt">By:</FONT></TD>
    <TD STYLE="font-family: Times New Roman,serif; width: 48%; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif"><FONT STYLE="font-size: 10pt">Name: Paul Haarman</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif"><FONT STYLE="font-size: 10pt">Title: Managing Partner</FONT></TD></TR>
</TABLE>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-size: 10pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif"><FONT STYLE="font-size: 10pt"><B>U.S. ENERGY CORP.:</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif; width: 50%">&nbsp;</TD>
    <TD STYLE="font-family: Times New Roman,serif; width: 2%"><FONT STYLE="font-size: 10pt">By:</FONT></TD>
    <TD STYLE="font-family: Times New Roman,serif; width: 48%; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif"><FONT STYLE="font-size: 10pt">Name: David Veltri</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-family: Times New Roman,serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-family: Times New Roman,serif"><FONT STYLE="font-size: 10pt">Title: President and Chief Executive Officer</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT><BR></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>
<P STYLE="margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B><U>EXHIBIT
A</U></B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"><U>U.S.
Energy Corp. 15 Day Volume Weighted Average Price (as of close at 9/20/17)</U>: <B>$0.757</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"></P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><U>APPENDIX
B</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>STANDSTILL
AGREEMENT</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
STANDSTILL AGREEMENT (this &ldquo;Agreement&rdquo;) dated as of September 28, 2017, is entered into by and between U.S. Energy
Corp., a Wyoming corporation (the &ldquo;Company&rdquo;) and APEG Energy II, L.P., a Texas limited partnership (the &ldquo;Holder&rdquo;).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>RECITALS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">WHEREAS,
the Company and the Holder are concurrently entering into an Exchange Agreement (the &ldquo;Exchange Agreement&rdquo;) providing
for the exchange of $5,149,605 of the Company&rsquo;s outstanding indebtedness to the Holder for shares of the Company&rsquo;s
Common Stock, par value $0.01 per share (&ldquo;Common Stock&rdquo;) and for cash, on the terms and conditions set forth in the
Exchange Agreement;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">WHEREAS,
upon the closing of the Exchange Agreement, the Holder will hold approximately 49.9% of the Company&rsquo;s outstanding Common
Stock;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">WHEREAS,
in light of the Exchange Agreement and the resulting ownership of the Company&rsquo;s equity securities by the Holder, the Company
and the Holder desire to enter into this Agreement;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">NOW,
THEREFORE, in consideration of the premises and the mutual covenants and agreements herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">ARTICLE
I</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><BR>&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
1.01. &nbsp;&nbsp;</B><U>The Holder&rsquo;s Covenants</U>. Unless approved in advance in writing by the board of directors
or is consistent with the directives, actions, approvals or knowledge of the management and board of directors of the Company,
the Holder agrees that neither it nor any of its Representatives (defined below) acting on behalf of or in concert with the Holder
(or any of its Representatives) will, for a period commencing on the date hereof and ending one (1) year after the date of the
closing of the Exchange Agreement (the &ldquo;Term&rdquo;), directly or indirectly:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;make
any statement or proposal to any of the members of the board of directors of the Company, the Company&rsquo;s Representatives
or the Company&rsquo;s shareholders regarding, or make any public announcement, proposal or offer (including any &ldquo;solicitation&rdquo;
of &ldquo;proxies&rdquo; as such terms are defined or used in Regulation 14A of the Securities Exchange Act of 1934, as amended)
with respect to, or otherwise solicit, seek or offer to effect (including, for the avoidance of doubt, indirectly by means of
communication with the press or media) (i) any business combination, asset acquisition (other than the potential acquisition of
assets from APEG Energy, L.P. ), merger, tender offer, exchange offer or similar transaction involving the Company or any of its
subsidiaries, (ii) any restructuring, recapitalization, liquidation or similar transaction involving the Company or any of its
subsidiaries, (iii) any acquisition of any of the Company&rsquo;s loans, debt securities, equity securities or assets, or rights
or options to acquire interests in any of the Company&rsquo;s loans, debt securities, equity securities or assets not currently
owned, or (iv) any proposal to seek representation on the board of directors of the Company or otherwise seek to control the management,
board of directors or policies of the Company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>
<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;instigate,
encourage, advise or assist any third party (including forming a &ldquo;group&rdquo; with any such third party) to do, or enter
into any discussions or agreements with any third party with respect to, any of the actions set forth in clause (a) above;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;take
any action which would reasonably be expected to require the Company or any of its affiliates to make a public announcement regarding
any of the actions set forth in clause (a) above;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;acquire
(or propose or agree to acquire), of record or beneficially, by purchase or otherwise, any loans, debt securities, equity securities
or assets of the Company or any of its subsidiaries, or rights or options to acquire interests in any of the Company&rsquo;s loans,
debt securities, equity securities or assets or enter into any swaps or similar arrangements as to the Company&rsquo;s equity
securities; or</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;either
alone or in concert with other shareholders, call a special meeting of shareholders of the Company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of this Agreement, (i) the term &ldquo;Representatives&rdquo; means, as to any person, such person&rsquo;s Affiliates,
and its and their respective directors, officers, employees, managing members, general partners, agents and consultants (including
attorneys, financial advisors and accountants) and (ii) the term &ldquo;Affiliate&rdquo; means, as to any person, any person who,
directly or indirectly, controls, is controlled by, or under common control with that person, and the term &ldquo;control&rdquo;
(including the terms &ldquo;controlled&rdquo;, &ldquo;controlled by&rdquo; and &ldquo;under common control with&rdquo;) means
the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person,
whether through ownership of voting securities or otherwise.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
1.02. </B> &nbsp;&nbsp;<U>Voting</U>. The Holder shall, and shall cause its Affiliates to, during the Term, vote all voting securities
of the Company (including all Common Stock) held by the Holder and its Affiliates or over which the Holder or its Affiliates have
voting control, and shall take all other necessary or desirable actions within its control (including in a capacity as a shareholder,
director, member of a board committee, officer or otherwise) to: (a) vote in the same proportion as shares of Common Stock that
are not held by the Holder or its Affiliates or over which the Holder or its Affiliates do not have voting control with respect
to (i) any board of directors approved motions, objectives, directives, proposals or proxy initiatives and (ii) each nominee for
the Company&rsquo;s board of directors who is nominated and approved by the board of directors&rsquo; nominating committee.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>
<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
1.03. </B> &nbsp;&nbsp;<U>Specific Performance</U>.  The Holder agrees that any material breach by it of any provision of this
Agreement could irreparably injure the Company and that money damages would be an inadequate remedy therefor. Accordingly, the
Holder agrees that the Company shall be entitled to seek one or more injunctions enjoining any such breach and requiring specific
performance of this Agreement, in addition to any other remedy to which the Company is entitled at law or in equity.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">ARTICLE
II</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; text-transform: uppercase"></FONT>
</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.01. &nbsp;&nbsp;</B><U>Notices</U>. Any notice provided for in this Agreement shall be in writing and shall be either personally
delivered, or mailed first class mail (postage prepaid) with return receipt requested or sent by reputable overnight courier service
(charges prepaid):</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
to the Company, to</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.
Energy Corp.</FONT><BR>
<FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">950 Cherry Street, Suite 1515</FONT><BR>
<FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Denver, Colorado 80264</FONT><BR>
<FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Attention: David Veltri, President and Chief Executive
Officer</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
to the Holder, to<BR>
<BR>
APEG Energy II, L.P.<BR>
3305 Northland Drive, Suite 101<BR>
Austin, Texas 78731<BR>
Attention: Paul Haarman</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
party hereto by notice to the other party may designate additional or different addresses for subsequent notices or communications.
All notices and communications will be deemed to have been duly given: at the time delivered by hand, if personally delivered;
five business days after being deposited in the mail, postage prepaid, if mailed; and the next business day after timely delivery
to the courier, if sent by overnight air courier guaranteeing next day delivery.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.02. &nbsp;&nbsp; </B><U>Entire Agreement</U>. This Agreement, the Exchange Agreement and the other documents and agreements
executed in connection therewith embody the entire agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior and contemporaneous oral or written agreements, representations, warranties, contracts,
correspondence, conversations, memoranda and understandings between or among the parties or any of their agents, representatives
or affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>
<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.03. &nbsp;&nbsp; </B><U>Assignment; Binding Agreement</U>. This Agreement and the various rights and obligations arising hereunder
shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.04. &nbsp;&nbsp;</B><U>Counterparts</U>. This Agreement may be executed in multiple counterparts, and on separate counterparts,
each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any counterpart
or other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and
delivery of this Agreement by such party.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.05. &nbsp;&nbsp; </B><U>Remedies Cumulative</U>. Except as otherwise provided herein, all rights and remedies of the parties
under this Agreement are cumulative and without prejudice to any other rights or remedies available at law.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.06. &nbsp;&nbsp;</B><U>Governing Law</U>. This Agreement shall in all respects be construed in accordance with and governed
by the substantive laws of the State of Texas, without reference to its conflicts of law rules. Any right to trial by jury with
respect to any action or proceeding arising in connection with this Agreement is hereby waived by the parties hereto.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.07. &nbsp;&nbsp; </B><U>No Third Party Beneficiaries or Other Rights</U>. Nothing herein shall grant to or create in any person
not a party hereto, or any such person&rsquo;s dependents or heirs, any right to any benefits hereunder, and no such party shall
be entitled to sue any party to this Agreement with respect thereto.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.08. &nbsp;&nbsp;</B><U>Waiver; Consent</U>. This Agreement may not be changed, amended, terminated, augmented, rescinded or
discharged (other than in accordance with its terms), in whole or in part, except by a writing executed by the parties hereto.
No waiver of any of the provisions or conditions of this Agreement or any of the rights of a party hereto shall be effective or
binding unless such waiver shall be in writing and signed by the party claimed to have given or consented thereto. Except to the
extent otherwise agreed in writing, no waiver of any term, condition or other provision of this Agreement, or any breach thereof
shall be deemed to be a waiver of any other term, condition or provision or any breach thereof, or any subsequent breach of the
same term, condition or provision, nor shall any forbearance to seek a remedy for any noncompliance or breach be deemed to be
a waiver of a party&rsquo;s rights and remedies with respect to such noncompliance or breach.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.09. &nbsp;&nbsp;</B><U>Word Meanings</U>. The words such as &ldquo;herein,&rdquo; &ldquo;hereinafter,&rdquo; &ldquo;hereof&rdquo;
and &ldquo;hereunder&rdquo; refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless
the context otherwise requires. The singular shall include the plural, and vice versa, unless the context otherwise requires.
The masculine shall include the feminine and neuter, and vice versa, unless the context otherwise requires.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.10. &nbsp;&nbsp;</B><U>Further Assurances</U>. The Holder and the Company each hereby agree to execute and deliver, or cause
to be executed and delivered, such other documents, instruments and agreements, and take such other actions, as either party may
reasonably request in connection with the transactions contemplated by this Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>
<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Privileged
and Confidential</B></FONT></P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif; text-align: right; text-indent: 0">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.11. &nbsp;&nbsp; </B><U>Costs and Expenses</U>. The Holder and the Company shall each pay their own respective costs and expenses
incurred in connection with the negotiation, preparation, execution and performance of this Agreement, including, but not limited
to, attorneys&rsquo; fees.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.12. &nbsp;&nbsp;</B><U>Headings</U>. The headings in this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Section
2.13. &nbsp;&nbsp; </B><U>Severability</U>. If any one or more of the provisions contained herein, or the application thereof
in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">IN
WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date first set forth above.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; text-align: left; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>U.S. Energy Corp.</B></FONT></TD></TR>
<TR STYLE="vertical-align: top; text-align: left; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 50%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 3%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 47%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; text-align: left; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; text-align: left; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:</FONT></TD>
    <TD STYLE="text-indent: 0.125in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">David A. Veltri </FONT></TD></TR>
<TR STYLE="vertical-align: top; text-align: left; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title:</FONT></TD>
    <TD STYLE="text-indent: 0.125in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">President and Chief
    Executive Officer</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>APEG Energy II, L.P.</B></FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 50%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 3%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 5%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 42%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:</FONT></TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">APEG Energy II GP, LLC, a Texas</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">a Texas limited liability company</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;Title: </FONT></TD>
    <TD STYLE="text-indent: 0.125in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">General Partner</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;By:</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Patrick Duke</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title: Managing
    Partner</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;By:</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Paul Haarman</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title: Managing
    Partner</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><U>APPENDIX
C</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.
Energy Corp.&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">4643
S. Ulster Street, Suite 970</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Denver,
Colorado 80237</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">October
2, 2017</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">APEG
Energy II, L.P.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Attn:
Messrs. Haarman and Duke</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Re:
 U.S. Energy Corp. &ndash; Debt Equity Swap</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dear
Messrs. Haarman and Duke:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reference
is made to that certain Exchange Agreement by and among U.S. Energy Corp. (the &ldquo;Company&rdquo;), Energy One LLC (&ldquo;Energy
One&rdquo;) and APEG Energy II, L.P. (&ldquo;APEG&rdquo;) dated September 28, 2017 and that certain Standstill Agreement by and
between the Company and APEG dated September 28, 2017.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Exchange Agreement and the Standstill Agreement are subject to approval by the Company&rsquo;s Board of Directors and shall not
become effective until the Company&rsquo;s Board provided such approval.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
closing of the Exchange Agreement is subject to NASDAQ approval and approval by the shareholders at a special meeting of the Company
and such closing shall not take place until those approvals are received.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By
executing below APEG acknowledges that the Exchange Agreement and the Standstill Agreement shall not be effective until approved
by the Company&rsquo;s Board of Directors and the closing of the Exchange Agreement shall not take place until the Company receives
NASDAQ and shareholder approval.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">[<I>signature
and acknowledgment follows</I>]<BR CLEAR="ALL"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sincerely,</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 50%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 4%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 47%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>U.S. ENERGY CORP.</B></FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/David
    Veltri</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">David Veltri</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title:</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">President and Chief Executive Officer</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Agreed
and accepted on this 2 day of October, 2017</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">APEG
Energy II, L.P.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 3%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:</FONT></TD>
    <TD STYLE="width: 47%; border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/Patrick
    Duke</FONT></TD>
    <TD STYLE="width: 50%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Patrick Duke</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title:</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Managing Partner</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">APEG
Energy II, L.P.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 3%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By: </FONT></TD>
    <TD STYLE="width: 47%; font: 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/Paul Haarman</FONT></TD>
    <TD STYLE="width: 4%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 46%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Paul Haarman</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Title:</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Managing Partner</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><U>Appendix
D</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">ARTICLES
OF AMENDMENT TO RESTATED ARTICLES OF INCORPORATION OF&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.
ENERGY CORP. AS AMENDED</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

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<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Corporation
    name:</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">U.S.
Energy Corp.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

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<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Article
    number(s) _____________ is amended as follows:</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
    the amendment provides for an exchange, reclassification, or cancellation of issued shares, provisions for implementing the
    amendment if not contained in the amendment itself which may be made upon facts objectively ascertainable outside the articles
    of amendment.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Upon
the filing and effectiveness (the &ldquo;Effective Time&rdquo;) pursuant to the Wyoming Business Corporation Act, as amended,
of this Articles of Amendment to the Restated Articles of Incorporation, as amended, of U.S. Energy Corp. (the &ldquo;Company&rdquo;),
each five (5) shares of the Company&rsquo;s Common Stock, par value $0.01 per share (&ldquo;Common Stock&rdquo;), issued and outstanding
immediately prior to the Effective Time shall be combined into one (1) validly issued, fully paid and non-assessable share of
Common Stock without any further action by the Company or the holder thereof (the &ldquo;Reverse Stock Split&rdquo;). The Company
is authorized to make a cash payment in lieu of any fractional share interest resulting from the Reverse Stock Split; provided
that the Company is also authorized (i) to issue fractional shares to some or all registered holders who would otherwise be eliminated
as a result of the Reverse Stock Split or (ii) to round up fractional shares to the nearest whole share of Common Stock for some
or all of such registered holders, if the Board of Directors of the Company determines that doing so would be in the best interests
of the Company. Certificates that immediately prior to the Effective Time represented shares of Common Stock (&ldquo;Old Certificates&rdquo;),
shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by the Old
Certificate shall have been combined, subject to the treatment of fractional shares as described above. The authorized shares
of Common Stock shall not be reduced or otherwise affected by the Reverse Stock Split or this Articles of Amendment, and neither
the Reverse Stock Split nor this Articles of Amendment will affect the per share par value of our Common Stock, which will remain
at the existing par value of $0.01 per share.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
    amendment was adopted on:</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December
27, 2017</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top; font: 10pt Times New Roman, Times, Serif">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Approval
    of the amendment:</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><U>Shares
were issued</U> and the board of directors have adopted the amendment with shareholder approval, in compliance with W.S. 17-16-1003.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

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<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt; font-family: Times New Roman, Times, Serif"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">&nbsp;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif"><IMG SRC="img002_v1.jpg" ALT="(Graphic)">&nbsp;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">&nbsp;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B><I>U.S.
        Energy Corp.</I></B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B><I>950
        S. Cherry Street</I></B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B><I>Suite
        1515</I></B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B><I>Denver,
        CO 80246</I></B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">&nbsp;</FONT></P></TD>
    <TD STYLE="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt; font-family: Times New Roman, Times, Serif"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">&nbsp;</FONT></P>
                                                                                                                  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></P>
                                                                                                                  <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>VOTE
                                         VIA THE INTERNET &ndash; <FONT STYLE="color: black"><U>www.proxyvote.com</U></FONT></B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">Use
        the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern
        Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions
        to obtain your records and to create an electronic voting instruction form.</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>ELECTRONIC
        DELIVERY OF FUTURE PROXY MATERIALS</B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">If
        you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all
        future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic
        delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree
        to receive or access proxy materials electronically in future years.</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>VOTE
        BY PHONE &ndash; 1-800-690-6903</B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">Use
        any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting
        date. Have your proxy card in hand when you call and then follow the instructions.</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>VOTE
        BY MAIL </B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">Mark,
        sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing,
        c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.</FONT></P>
        </TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>
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    <DIV STYLE="page-break-before: always; margin: 0; text-indent: 0"><P STYLE="margin: 0; text-indent: 0">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; border: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 11pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">TO
    VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: </FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 11pt; text-align: right"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">011189-678324&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KEEP
    THIS PORTION FOR YOUR RECORDS</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 11pt; text-align: right"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">DETACH
    AND RETURN THIS PORTION ONLY</FONT></TD></TR>
<TR>
    <TD STYLE="border-right: Black 1pt solid; border-left: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 11pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>THIS
    PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.</B></FONT></TD></TR>
</TABLE>





<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 37%; border: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"><P STYLE="font: 7pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font: 8pt Times New Roman, Times, Serif"><B>U.S.
                                         ENERGY CORP.</B></FONT></P>
        <P STYLE="font: 7pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">&nbsp;</FONT></P></TD>
    <TD STYLE="width: 7%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-top: 4pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 11pt"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"></TD>
    <TD STYLE="width: 7%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-top: 4pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 11pt"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 24%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-top: 4pt; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 11pt; text-align: justify"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD STYLE="width: 17%; border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 11pt; text-align: justify"><FONT STYLE="font: 8pt Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
</TABLE>






<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 11pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 6pt; padding-left: 12.6pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>The
    Board of Directors recommends you vote FOR the following proposal No. 1:</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>For</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>Against</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>Abstain</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 6pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-bottom: 8pt; padding-left: 12.95pt; text-align: justify; padding-right: 6pt"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">1.
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To approve the issuance of shares of Common Stock in connection with the Exchange Agreement&nbsp;&nbsp;under
    NASDAQ Stock Market Rules 5635(b).</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-bottom: 6pt; padding-left: 12.95pt; text-align: justify; padding-right: 6pt"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>The
    Board of Directors recommends that you vote FOR the following proposal No. 2: </B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-bottom: 8pt; padding-left: 12.95pt; text-align: justify; padding-right: 6pt"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">2.
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To approve an amendment, at the discretion of the Board of Directors, to the Company&rsquo;s articles of incorporation
to implement a reverse stock split of the Company&rsquo;s outstanding Common Stock at a reverse split ratio of 1-for-5, without
reducing the authorized number of shares of our Common Stock.</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 6pt; padding-left: 12.6pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>The
    Board of Directors recommends you vote FOR the following proposal No. 3:</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-bottom: 8pt; padding-left: 35.25pt; text-align: justify; text-indent: -22.3pt; padding-right: 6pt"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
    approve an adjournment of the Special Meeting, if necessary or appropriate, to establish a quorum or to permit further solicitation
    of proxies if there are not sufficient votes at the time of the Special Meeting cast in favor of Exchange Proposal or the
    Reverse Stock Split. </FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B></FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 6pt; padding-left: 12.6pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-bottom: 6pt; padding-left: 12.95pt; text-align: justify; padding-right: 6pt"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">In
    their discretion, the appointed proxies are authorized to vote upon such other business as may properly come before the meeting
    and at any and all adjournments or postponements thereof. </FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 44%; border-right: Black 1pt solid; border-left: Black 1pt solid; padding: 8pt 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 4%; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 1.4pt; padding-top: 8pt"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 24%; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; padding-top: 8pt"><P STYLE="font: 7pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">Please
                                         indicate if you plan to attend this meeting.</FONT></P>
        <P STYLE="font: 7pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></P></TD>
    <TD STYLE="width: 8%; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; padding-top: 8pt; vertical-align: bottom; text-align: center"><P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B>&nbsp;</FONT></P>
        <P STYLE="font: 7pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>Yes</B></FONT></P>
        <P STYLE="font: 7pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"></P></TD>
    <TD STYLE="width: 11%; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; padding-top: 8pt; vertical-align: bottom; text-align: center"><P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt"><B>&#9744;</B>&nbsp;</FONT></P>
        <FONT STYLE="font: 8pt Times New Roman, Times, Serif"><B>No</B></FONT></TD>
    <TD STYLE="width: 8%; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; padding-top: 8pt"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>


<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 11pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="6" STYLE="border: Black 1pt solid; padding-bottom: 8pt; padding-left: 17.3pt; text-align: justify; padding-right: 6pt"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">Please
    sign exactly as your name(s) appear(s) hereon.&nbsp;&nbsp;When signing as attorney, executor, administrator, or other fiduciary,
    please provide your full title as such.&nbsp;&nbsp;Joint owners should each sign personally.&nbsp;&nbsp;All holders must sign.&nbsp;&nbsp;If
    a corporation or partnership, please sign in full corporate or partnership name by authorized officer.</FONT></TD>
    <TD STYLE="border-top: Black 1pt solid; border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 2%; border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 32%; border-bottom: Black 1pt solid; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"></TD>
    <TD STYLE="width: 8%; border-bottom: Black 1pt solid; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 3%; border-bottom: Black 1pt solid; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 21%; border-bottom: Black 1pt solid; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; border-bottom: Black 1pt solid; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 27%; border-bottom: Black 1pt solid; border-right: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; border-left: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-bottom: 4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">Signature
    (PLEASE SIGN WITHIN BOX)</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-bottom: 4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">Date</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-bottom: 4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-bottom: 4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">Signature
    (Joint Owners)</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-bottom: 4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">Date</FONT></TD>
    <TD STYLE="border-right: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"></P>

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    <DIV STYLE="page-break-before: always; margin: 0; text-indent: 0"><P STYLE="margin: 0; text-indent: 0">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>
<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD COLSPAN="3" STYLE="border-top: Black 3pt solid; border-right: Black 3pt solid; border-left: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-family: Times New Roman, Times, Serif"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B>U.S.
                                         ENERGY CORP.</B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">&nbsp;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B>This
        proxy is solicited by the Board of Directors</B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B>for
        the Special Meeting of Shareholders</B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B>to
        be held December 27, 2017 8:30 AM, MST</B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">&nbsp;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">The
        shareholder(s) hereby appoint(s) David A. Veltri and Ryan Smith, or either of them, as proxies, each with the power to
        appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this
        ballot, all of the shares of Common Stock of U.S. ENERGY CORP. that the shareholder(s) is/are entitled to vote at the
        Special Meeting of Shareholders to be held at 8:30 AM, MST on December 27, 2017, at the Company&rsquo;s Offices at 950
        S. Cherry Street, Suite 1515, Denver, Colorado 80246 and any adjournment or postponement thereof.</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">&nbsp;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B>THIS
        PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
        IS INDICATED, IT WILL BE VOTED <U>FOR</U> EACH OF PROPOSALS 1 2, AND 3. </B></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">&nbsp;</FONT></P></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-left: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif; width: 3%"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Times New Roman, Times, Serif; width: 94%"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif">&nbsp;</FONT></TD>
    <TD STYLE="border-right: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif; width: 3%"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-left: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="border-right: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-left: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="border-right: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-left: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="border-right: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-left: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="border-right: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-left: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="border-right: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-left: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="border-right: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; font-family: Times New Roman, Times, Serif">
    <TD STYLE="border-bottom: Black 3pt solid; border-left: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 3pt solid; padding-right: 5.4pt; padding-bottom: 4pt; padding-left: 5.4pt; text-align: center; font-family: Times New Roman, Times, Serif"><P STYLE="margin: 0; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif; font-size: 10pt"><B>Continued
                                         and to be signed on reverse side</B></FONT></P>
                                                                                <P STYLE="margin: 0; text-indent: 0"><FONT STYLE="font-family: Arial, Helvetica, Sans-Serif">&nbsp;</FONT></P></TD>
    <TD STYLE="border-right: Black 3pt solid; border-bottom: Black 3pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
</TABLE>




<P STYLE="margin: 0; font-family: Times New Roman, Times, Serif; text-indent: 0">&nbsp;</P>

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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
