EXCLUSIVITY AGREEMENT
THIS
EXCLUSIVITY AGREEMENT (“Agreement”)
is
made as of this 10th
day of
July, 2006 (the “Effective
Date”)
by and
between U.S. Energy Corp, a Wyoming corporation (“USEG”),
Crested Corp., a Colorado corporation (“CBAG”
and
together with USEG the “Sellers”),
and
SXR
Uranium One Inc., a
Canadian corporation (the “Buyer”).
Recitals
A.
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The
Sellers are in the natural resource business and carry on, directly
and
through subsidiary and affiliated entities, a uranium exploration
and
development business with the goal of creating a United States uranium
mining and milling business (the “Business”).
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B.
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In
accordance with a term sheet dated June 22, 2006 signed by the Parties
(the “Term
Sheet”),
the Sellers wish to sell, and the Buyer directly or through one or
more
wholly-owned subsidiaries thereof wishes to purchase, the uranium
assets
of the Sellers used in the Business listed in Schedule A to the Term
Sheet, as amended on the date hereof (the “Assets”)
for the consideration and on the terms and conditions described therein.
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C.
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The
purchase and sale of the Assets is subject, among other things, to
the
successful completion by the Buyer of a detailed due diligence
investigation of the Assets, to the preparation and execution of
a
mutually satisfactory definitive acquisition agreement (the “Definitive
Agreement”)
containing terms and conditions consistent with the Term Sheet and
the
provisions hereof, to the receipt of all required regulatory and
shareholder approvals and to the approval of the boards of directors
of
each party hereto.
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D.
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In
connection therewith, the Sellers have agreed to grant the Buyer
exclusive
rights as more particularly set forth herein to negotiate the Definitive
Agreement and to conduct its due diligence investigation of the Assets.
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E.
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Concurrently
herewith, the parties have entered into a confidentiality and
non-disclosure agreement (the “Confidentiality
Agreement”)
to replace and supersede the confidentiality agreement dated November
18,
2005 between USEG and Aflease Gold and Uranium Resources Limited.
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Agreement
NOW
THEREFORE
for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Sellers and the Buyer (collectively,
the “Parties”
and
individually, a “Party”)
intending to be legally bound, agree
as
follows:
1. Exclusivity.
(a) |
In
consideration of the receipt of the Fee (as hereinafter defined),
the
Sellers hereby grant to the Buyer for the Term (as hereinafter defined)
the exclusive right, at the Buyer’s sole cost and expense, to review all
information and data in the control or possession of the Sellers
relating
to the Assets and to perform all investigations, inquiries and studies
with respect to the Assets as the Buyer may reasonably require for
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the
purposes of its due diligence, all on the terms and subject to the conditions
set forth herein and in the Confidentiality Agreement.
(b) |
During
the Term, the Sellers (i) will not, and will not permit any other
person
or company to, directly or indirectly through any director, officer,
agent, affiliate, employee or otherwise: (A) solicit, initiate or
encourage the submission of any proposal or offer, or have discussions,
engage in negotiations or enter into any understanding, agreement
or
commitment with, or accept any proposal from, any person other than
the
Buyer relating to the acquisition or purchase of the Assets or the
Business; or (B) furnish or agree to furnish to any other person
any
information regarding the Assets or the Business except as required
by law
for reporting, permitting or conducting business in the ordinary
course or
as required by any existing agreement; (ii) will inform any person
making
inquiry with respect thereto of the existence of this Agreement;
and (iii)
will inform the Buyer of any such inquiry.
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(c)
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Notwithstanding
Section 1(b), the Sellers may continue to pursue the acquisition
of
additional uranium assets that Sellers have been in pursuit of as
of the
date hereof or wish to pursue and in either such case the Buyer will
have
the right to review and approve, or decline to approve, the acquisition
by
the Sellers of any such assets during the Term. If the Buyer approves
such
acquisition and the purchase and sale of the Assets is completed,
the
Buyer will on the closing thereof pay to the Sellers the reasonable
costs
they have incurred in pursuing such acquisition plus 5%, such payment
to
be made in addition to the purchase price payable for the Assets
on such
closing. If the Buyer declines to approve such acquisition, the Sellers
may make the acquisition for their own account or otherwise deal
in such
assets without the Buyer’s further consent or participation, and the Buyer
will have no obligation or liability to reimburse the Sellers for
any of
the costs incurred by them in connection with such pursuit or acquisition.
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2. Fee.
As
consideration for the exclusive rights granted by the Sellers to the Buyer
pursuant to Section 1, within five days of the execution of this Agreement
the
Buyer will pay to the Sellers by wire transfer in immediately available funds
the sum of US $750,000 as a non-refundable fee (the “Fee”);
provided, however:
(a)
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if,
prior to the end of the Term, the Parties enter into a Definitive
Agreement, the Fee will be credited to, and subtracted from, the
purchase
price due from the Buyer to the Sellers pursuant to the terms thereof;
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(b)
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if,
on or before the end of the Term, (i) the Parties do not enter into
a
Definitive Agreement, (ii) the Buyer determines in its sole discretion
that it does not desire to acquire the Assets, or (iii) subject to
Section
2(c), this Agreement is terminated pursuant to Section 7, the Fee
automatically will be deemed earned by the Sellers and will not be
reimbursable to the Buyer; and
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(c)
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if
this Agreement is terminated by the Buyer pursuant to Section 7(a)
by
reason of the material breach hereof by the Sellers or either of
them, or
by reason of the Sellers’ inability to obtain a required third party
consent or approval before the end of the Term, the Fee will be
reimbursable by the Sellers to the Buyer forthwith on receipt by
the
Sellers of the Buyer’s notice of termination.
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The
Parties agree that, absent fraud or willful breach of this Agreement by a Party,
in the event this Agreement is terminated by reason of the material breach
hereof by such Party, the sole and exclusive remedies of the Party or Parties
not in breach will be as set out in Sections 2(b) or (c) hereof, as the case
may
be. Without limiting the foregoing, no Party shall be liable to any other Party
for consequential, incidental, punitive, reliance, exemplary or indirect
damages, lost profits or business interruption damages, whether by statute,
in
tort or contract.
3. Term.
This
Agreement will commence on the Effective Date and, unless terminated earlier
by
a Party under Section 7, will continue until 180 days after the date hereof
unless prior thereto the Buyer requests by written notice to the Sellers a
three
month extension of the exclusivity rights granted hereunder, in which event
this
Agreement will continue until 270 days after the date hereof (the “Term”).
4. Definitive
Documentation.
The
Parties will use their reasonable commercial efforts to settle and sign during
the Term one or more Definitive Agreements consistent with the Term Sheet and
the applicable provisions of this Agreement. Completion of the purchase and
sale
of the Assets will be subject to the receipt on terms acceptable to the Buyer
of
all governmental and regulatory approvals required under applicable laws, all
required stock exchange, shareholder and third party approvals and to the
transfer to the Buyer of all required licenses, permits and other approvals
required in connection with the acquisition, ownership and operation of the
Assets. In connection with the foregoing, the Sellers will use their reasonable
commercial efforts to obtain, prior to the execution of Definitive Agreements,
all third party consents and approvals which are required in connection with
the
completion of the purchase and sale of the Assets, including without limitation
all consents and approvals from third parties having any interest or potential
interest in the Assets.
5. Conduct
of Business.
Until
execution of the Definitive Agreement or termination of this Agreement, the
Sellers (a) will conduct the Business or cause the Business to be conducted,
in
the usual and ordinary course and (b) will not, and will not permit any of
their
respective affiliates to, directly or indirectly, without the Buyer’s prior
consent, (i) dispose of any of the Assets except in the ordinary course of
business, (ii) reorganize the Business, (iii) terminate or amend any existing
material contract or enter into any new material contract relating to the
Business except contracts contemplated by Section 1(c); or (iv) take any
material action that would cause the approval of the shareholders of any Seller
to be required in connection with the transactions contemplated herein.
6. Development
Expenditures.
During
the Term, it is anticipated that the Sellers will continue to develop certain
of
the Assets in accordance with the development and holding budgets indicated
in
Schedule A as amended on the date hereof. Such budgets were provided at the
Buyer’s request to define the potential expenditures to be incurred thereon
during the Term. Both the Buyer and the Sellers agree that (i) Sellers have
certain contractual developmental expenditures that must be met in 2006 and
2007
to hold the Assets and that Sellers will meet those obligations and notify
the
Buyer in advance of such estimated expenditures before any of the same are
incurred; (ii) the Sellers will notify and seek the approval of the Buyer for
any anticipated expenditures relating to the Assets outside of any contractual
or holding cost obligations before any of the same are incurred; and (iii)
the
Sellers will have the ultimate determination as to whether expenditures will
be
made on the Assets.
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To
the
extent such expenditures shall have been approved in advance by the Buyer and
incurred during the Term, then, provided the acquisition and the purchase and
sale of the Assets is completed, the Buyer will on the closing thereof provide
the Seller with a payment equal to the aggregate amount of all such approved
and
incurred expenditures, such payment to be made in addition to the purchase
price
payable for the Assets on such closing. If such closing does not for any reason
occur, the Buyer shall have no liability to provide the Sellers with any
reimbursement on account of such expenditures, even if the Buyer shall have
approved, and the Sellers shall have incurred, the same.
7. Termination.
(a)
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The
Buyer may terminate this Agreement at any time during the Term by
giving
written notice to the Sellers of such termination, whether or not
the
Sellers or either of them are in material breach hereof, and, subject
to
Section 7(c), such termination will become effective upon the Sellers’
receipt of such notice, without further action by either
Party.
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(b)
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The
Sellers may terminate this Agreement at any time during the Term
by giving
written notice to the Buyer of such termination if the Buyer is in
material breach hereof and, subject to Section 7(c), such termination
will
become effective upon the Buyer’s receipt of such notice, without further
action by either Party.
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(c)
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Notwithstanding
any other provision of this Agreement, if the Buyer or the Sellers
give
written notice of termination under Section 7(a) or 7(b) by reason
of a
material breach hereof, such termination will not become effective
unless
the Party giving such notice (the “notifying party”):
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(i)
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sets
out in such notice of termination the basis for its belief that a
material
breach has occurred;
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(ii)
provides
the Party alleged to be in material breach (the “receiving party”) with a period
of 30 business days from the receipt of such notice of termination to give
a
written notice of reply to the notifying party; and
(iii)
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declines,
in a written notice given to the receiving party within 10 business
days
of receiving such notice of reply, to accept such notice of reply;
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in
which
event, the Agreement will be terminated effective upon the receipt by the
receiving party of the notice referred to in Section 7(c)(iii); provided,
however, that, notwithstanding the foregoing, if the receiving party shall
fail
to deliver a written notice of reply within the period of 30 business days
referred to in Section 7(c)(ii), the Agreement will be deemed to have been
terminated in accordance with the notice of termination.
(d)
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Notwithstanding
any other provision of this Agreement, the Confidentiality Agreement
and
the provisions of Sections 2, 9, 11 and 13 of this Agreement, will
survive
any termination of this Agreement.
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8. Due
Diligence
Activities.
During
the Term, the Buyer will have the following rights and obligations with respect
to its due diligence investigations and activities:
(a)
the
Sellers will give Buyer and its authorized representatives such access to the
employees, properties, assets, books and records of the Sellers and their
affiliates relating to the Assets and the Business and all information and
data
relating thereto as the Buyer may reasonably require to carry out and complete
its due diligence review of the Assets;
(b)
upon
reasonable advance written notice to the Sellers, the Buyer and its authorized
representatives will have the right to enter upon any lands and premises
included in the Assets to conduct such inspections as may be necessary and
appropriate for the purposes of its due diligence;
(c)
all
information furnished or made available to the Buyer pursuant to this Agreement
will be deemed to be Confidential Information (as defined in the Confidentiality
Agreement) and will be subject to the terms of the Confidentiality Agreement;
and
(d)
the
Buyer
will conduct all activities hereunder in a reasonable and prudent manner and
in
full compliance with all applicable laws and regulations, and with all
applicable site safety rules of the Sellers which have been communicated to
the
Buyer.
9. No
Representation
or Warranty Regarding Completeness or Accuracy of Data.
(a)
The
Sellers represent and warrant that they have full right, power and authority
to
disclose or make available the information and data to be disclosed or made
available to the Buyer pursuant to this Agreement and the Confidentiality
Agreement without the violation of any contractual, legal or other obligation
to
any entity or person.
(b)
The
Sellers make no representation or warranty, expressed or implied, as to the
accuracy or completeness of any such information, data, reports and other
material.
10. Disclosure.
Each
Party may upon execution of this Agreement issue a news release disclosing
this
Agreement and the subject matter hereof. Any Party intending to issue such
release shall first provide the other Parties with a reasonable opportunity
to
review and comment thereon prior to the issuance thereof. Each Party will
provide the other Parties with a reasonable opportunity to review and comment
on
all subsequent public announcements, news releases or other disclosure by such
Party relating to this Agreement or the subject matter hereof prior to the
issuance thereof except where the disclosing Party, in its reasonable opinion,
believes that such public announcement, news release or other disclosure is
required by law and such advance disclosure to the other Party would not be
practicable.
11. Fees
and Expenses.
Each
Party will be responsible for its own legal, accounting, investment banking
and
other fees and expenses incurred in connection with this Agreement and all
matters related thereto. The Buyer will indemnify and hold harmless the Sellers,
and the Sellers will indemnify and hold harmless the Buyer, from and against
the
claims of any brokers or finders in respect of the purchase and sale of the
Assets.
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12. Notices.
All
notices with regard to this Agreement will be forwarded to a Party at its
address for notice set forth on the signature page of this Agreement. Notices
hereunder will be in writing and will be considered given either (i) when
delivered in person, (ii) upon receipt when delivered by a reputable overnight
delivery service to such contact addresses, or (iii) five days after
deposit in the U.S. or Canadian mail, registered or certified, return receipt
requested, in a sealed envelope or container, postage and postal charges
prepaid.
13. Law.
This
Agreement will be governed by and construed in accordance with the laws of
the
State of Wyoming without reference to the conflicts of laws principles thereof.
Each of the Parties hereby submits to the exclusive jurisdiction of any state
or
federal court sitting in Wyoming in any action or proceeding arising out of
or
relating to this Agreement and agrees that all claims with respect to the action
or proceeding may be heard and determined in any such court. Each Party also
agrees not to bring any action or proceeding arising out of or relating to
this
Agreement in any other court. Each Party agrees to waive any defense of
inconvenient forum to the maintenance of any action or proceeding so brought
and
waives any bond, surety or other security that might be required of any other
party with respect to any such action or proceeding.
14. Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective to the extent of
such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction will
not invalidate or render unenforceable such provision in any other
jurisdiction.
15. Agency.
This
Agreement is not intended to create, and will not be construed to create, a
relationship of partnership between the Parties. This Agreement will not
constitute any Party as the legal representative or agent of any other Party,
nor will any Party have the right or authority to assume, create or incur any
liability or obligation, express or implied, against, in the name of or on
the
behalf of any other Party.
16. General.
(a)
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If
any Party brings any proceedings to enforce any of the terms hereof,
the
prevailing Party will be entitled to recover from the other Party
or
Parties reimbursement for all reasonable expenses, costs and attorneys'
and experts’ fees incurred in connection
therewith.
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(b)
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No
Party will be liable to any other Party for indirect or consequential
damages with respect to this Agreement or in connection with the
breach
hereof.
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(c)
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The
Term Sheet, this Agreement and the Confidentiality Agreement contain
the
entire agreement of the Parties hereto with respect to the subject
matter
hereof and supersede all prior understandings and agreements, whether
written or oral, with respect thereto.
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(d)
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No
Party may assign this Agreement without the prior written consent
of the
other Parties except that the Buyer may assign this Agreement to
one or
more direct or indirect wholly-owned subsidiaries thereof without
the
prior written consent of the Sellers.
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(e)
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Nothing
in this Agreement will be deemed to create rights in or benefits
for any
third parties.
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(f)
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This
Agreement will not be amended or modified in any way except by an
instrument signed by each Party.
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17. Counterparts;
Facsimile.
This
Agreement may be executed in counterparts and by exchange of facsimile copies.
[REMAINDER
OF PAGE INTENTIONALLY BLANK]
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IN
WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
by
its respective duly authorized representative as of the Effective
Date.
U.S.
Energy Corp.
By:
/s/
Xxxx Xxxxxx
Name
Xxxx
Xxxxxx
Title:
President
Address
for notices:
U.S.
Energy Corp.
000
X.
0xx
X.
Xxxxxxxx,
Xxxxxxx
XXX
00000
Attention:
Xxxx X. Xxxxxx
Facsimile:
(000) 000-0000
With
a
copy to:
U.S.
Energy Corp.
000
X.
0xx
X.
Xxxxxxxx,
Xxxxxxx
XXX
00000
Attention:
Xxxxxx X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
Crested
Corp.
By:
/s/
Xxxxx X. Xxxxxx
Name
Xxxxx
X. Xxxxxx
Title:
Co-Chairman
Address
for notices:
Crested
Corp.
000
X.
0xx
X.
Xxxxxxxx,
Xxxxxxx
XXX
00000
Attention:
Xxxxx X. Xxxxxx
Facsimile:
(000) 000-0000
With
a
copy to:
Crested
Corp.
000
X.
0xx
X.
Xxxxxxxx,
Xxxxxxx
XXX
00000
8
Attention:
Xxxxxx X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
Sxr
Uranium One Inc.
By:
/s/
Xxxx X. Xxxxxxxx
Name
Xxxx
X. Xxxxxxxx
Title:
President and CEO
Address
for notices:
Suite
000-00 Xxxxxxxxxx Xxxxxx Xxxx
Xxxxxxx,
Xxxxxxx
Xxxxxx
X0X 0X0
Attention:
Xxxxxxxx
X. Xxxxx
Facsimile:
(000) 000-0000
VANSOL
Library:737031.2
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