Exhibit 10.2

 
Execution Version
 
SECOND AMENDMENT TO
CONTRIBUTION AND SUBSCRIPTION AGREEMENT
 
This SECOND AMENDMENT TO CONTRIBUTION AND SUBSCRIPTION AGREEMENT (this
“Amendment’), dated as of March 31, 2006, is entered into by and among Pinnacle
Gas Resources, Inc., a Delaware corporation (the “Company”), CCBM, Inc., a
Delaware corporation (“CCBM”), U.S. Energy Corp., a Wyoming corporation (“US
Energy”), Crested Corp., a Colorado corporation (“Crested”), and each of the
CSFB Parties (as defined in the Contribution and Subscription Agreement (defined
herein), and collectively with CCBM, US Energy and Crested, the “Investors”).
 
W I T N E S SE T H:
 
WHEREAS, the Company, CCBM, Rocky Mountain Gas, Inc., a Wyoming corporation
(“RMG”), and the CSFB Parties (collectively, the “Parties”) are parties to that
certain Contribution and Subscription Agreement, dated as of June 23, 2003 and
amended by an Amendment to Contribution and Subscription Agreement dated August
9, 2005 (as so amended, the “Contribution and Subscription Agreement”); and
 
WHEREAS, the Parties desire to amend certain terms of the Contribution and
Subscription Agreement.
 
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements hereinafter contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties agree
as follows:
 
ARTICLE 1
 
Definitions
 
All capitalized terms used in the recitals above and the succeeding provisions
of this Amendment which are not defined herein shall have the meaning ascribed
to such terms in the Contribution and Subscription Agreement, as amended by this
Amendment. All sections referred to in this Amendment shall be references to
sections in the Contribution and Subscription Agreement unless otherwise noted.
 
ARTICLE 2
 
Amendments
 
2.1 Section 2.3 is hereby amended by adding the following after subsection (e):
 
(f) Effective as of the closing of the first Private Offering (as defined below)
after the date hereof (such closing date, the “Exercise Date”), the options to
purchase Additional Shares shall be exercised, and hereby will be deemed
exercised, in full by each of (i) CCBM or any of its Permitted Transferees, in
the case of the option described in Section 2.3( a), and (ii) US Energy, Crested
or any
 

--------------------------------------------------------------------------------

 
of their Permitted Transferees, in the case of the option described in Section
2.3(b), on a “cashless” net exercise basis, in which case the Company will issue
to the holder of the option the number of shares of Common Stock computed using
the following formula:
 
X = Y(A-B)
A
 
Where:
 
X = number of shares of Common Stock to be issued to the option holder upon
exercise of the option;
 
Y = total number of shares of Common Stock purchasable under the option;
 
A = the Current Market Price of one share of Common Stock; and
 
B = the Tranche A Price, to the extent the option relates to the Tranche A
Shares, and the Tranche B Price, to the extent the option relates to the Tranche
B Shares; provided, however, that the Tranche A Price and the Tranche B Price
shall each be adjusted to take into account the 25-for-1 stock split with
respect to the Company’s Common Stock in the form of a stock dividend of
twenty-four (24) shares of Common Stock on each outstanding share of Common
Stock, payable by distribution of newly issued shares.
 
For purposes of this Section 2.3, “Current Market Price” means the price at
which shares of Common Stock are offered and sold in the Private Offering.
“Private Offering” means a private placement of the Common Stock of the Company
to “qualified institutional buyers” pursuant to Rule 144A and/or to “accredited
investors” pursuant to Regulation D with net proceeds to the Company of not less
than $100.0 million.
 
(g) Within three days after the Exercise Date, the Company, at its expense,
shall cause to be issued in the name of, and delivered to, the option holder,
or, subject to compliance with the provisions of this Agreement and the
Securityholders Agreement, as the option holder (upon payment by the option
holder of any applicable transfer taxes) may direct, a certificate(s) for the
number of full shares of Common Stock to which the option holder shall be
entitled upon such exercise plus, in lieu of any fractional share to which the
option holder would otherwise be entitled, cash.
 

--------------------------------------------------------------------------------

ARTICLE 3
 
Miscellaneous
 
3.1 Descriptive Headings. The descriptive headings of the several Sections of
this Amendment are inserted for convenience only and do not constitute a part of
this Amendment.
 
3.2 Governing Law. This Amendment shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State
of Texas, without giving effect to the choice of law or conflicts principles
thereof.
 
3.3 Counterparts. This Amendment may be executed by the parties hereto on
separate counterparts (including by facsimile), and such counterparts taken
together shall be deemed to constitute one and the same instrument.
 
3.4 Notices. All communications and notices to the parties hereunder shall be
given as provided in the Contribution and Subscription Agreement.
 
3.5 Severability. Whenever possible, each provision of this Amendment will be
interpreted in such manner as to be effective and valid under applicable Law,
but if any provision of this Amendment is held to be prohibited or unenforceable
in any jurisdiction, such provision will be ineffective only to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
 
3.6 Further Assurances. In connection with this Amendment and the transactions
contemplated hereby, each Party shall execute and deliver any additional
documents and instruments and perform any additional acts that may be necessary
or appropriate to effectuate and perform the provisions of this Amendment and
those transactions.
 
[Signature Pages to Follow]
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date
first set forth above.
 
PINNACLE GAS RESOURCES, INC.
 
By: /s/ Peter G. Schoonmaker 
Name: Peter G. Schoonmaker
Title: Chief Executive Officer and President
 

--------------------------------------------------------------------------------

 
CCBM, INC.
 
By: By: /s/ S.P. Johnson 
Name: S.P. Johnson
Title: President
 

 

 

 

--------------------------------------------------------------------------------

 

U.S. ENERGY CORP.
 
By: /s/ Keith G. Larson 
Name: Keith G. Larson
Title: Chief Executive Officer
 
CRESTED CORP.
 
By: /s/ Keith G. Larson 
Name: Keith G. Larson
Title: Co-Chairman
 

 

 

 

--------------------------------------------------------------------------------

 

MILLENNIUM PARTNERS II, L.P.
 

 
By:
DLJ Merchant Banking III, Inc.,

as Managing General Partner
 
By: /s/ Michael S. Isikow 
Name: Michael S. Isikow
Title: Principal
 
DLJ MERCHANT BANKING III, INC., 
as Advisory General Partner on behalf of DLJ
Offshore Partners III, C.V.
 
By: /s/ Michael S. Isikow 
Name: Michael S. Isikow
Title: Principal
 
DLJ MERCHANT BANKING III, INC.,
as Advisory General Partner on behalf of DLJ
Offshore Partners III-1, C.V. and as attorney-in-
fact for DLJ Merchant Banking III, L.P., as
Associate General Partner of DLJ Offshore Partners
III-1, C.V.
 
By: /s/ Michael S. Isikow 
Name: Michael S. Isikow
Title: Principal
 
DLJ MERCHANT BANKING III, INC.,
as Advisory General Partner on behalf of DLJ
Offshore Partners III-2, C.V. and as attorney-in-
fact for DLJ Merchant Banking III, L.P., as
Associate General Partner of DLJ Offshore Partners
III-2, C.V.
 
By: /s/ Michael S. Isikow 
Name: Michael S. Isikow
Title: Principal
 
 

 

--------------------------------------------------------------------------------

 

DLJ MERCHANT BANKING PARTNERS III, L.P.
 

 
By:
DLJ Merchant Banking III, Inc.,

as Managing General Partner
 
By: /s/ Michael S. Isikow 
Name: Michael S. Isikow
Title: Principal
 
DLJ MB PARTNERS III GMBH & CO. KG
 

 
By:
DLJ Merchant Banking III, L.P.,

as Managing Limited Partner
By: DLJ Merchant Banking III, Inc.,
as General Partner
 
By: /s/ Michael S. Isikow 
Name: Michael S. Isikow
Title: Principal
 
By: DLJ MB GmbH, as General Partner
 
By: /s/ Michael S. Isikow 
Name: Michael S. Isikow
Title: Director
 
MBP III PLAN INVESTORS, L.P.
 

 
By:
DLJ LBO Plans Management Corporation II, as General Partner

 
By: /s/ Michael S. Isikow 
Name: Michael S. Isikow
Title: Vice President
 

--------------------------------------------------------------------------------