Amended and Restated Articles of Amendment to the
                          Articles of Incorporation of
                            Rocky Mountain Gas, Inc.


     The  articles  of  incorporation  of  Rocky  Mountain  Gas,  Inc.  (the
"Corporation") are amended by the creation of Series A Preferred Stock, pursuant
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to  W.S.  17-16-602(d)  of  the  Wyoming  Business  Corporation Act (the "Act"):
                                                                          ---

     (i)  The  name  of  the  Corporation  is  Rocky  Mountain  Gas,  Inc.

     (ii)  The text of the amendment, to create the Series A Preferred Stock out
of the general unlimited class of preferred stock, follows. No change is made to
the  provisions of article FOURTH of the original articles of incorporation with
respect  to  the  common  stock.

                        TERMS OF SERIES A PREFERRED STOCK

     Section 1. Designation, Amount and Par Value. The series of preferred stock
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shall  be  designated  as  its  10%  Series  A  Convertible Preferred Stock (the
"Preferred  Stock")  and  the  number of shares so designated shall be 1,333,333
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(which  shall  not  be  subject  to  increase  without the consent of all of the
holders  of  the  Preferred  Stock  (each,  a  "Holder"  and  collectively,  the
                                                ------
"Holders")).  Each share of Preferred Stock shall have no par value and a stated
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value  equal  to  $3.00  (the  "Stated  Value"). Capitalized terms not otherwise
                                -------------
defined  herein  shall  have  the  meaning given such terms in Section 8 hereof.

     Section  2.  Dividends.
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     (a)  Holders  shall  be  entitled to receive and the Corporation shall pay,
     cumulative  dividends  at the rate per share (as a percentage of the Stated
     Value per share) of 10% per annum (subject to increase pursuant to Sections
     6(a)  and  7(a)), payable annually on March 1, beginning with March 1, 2005
     and on any Conversion Date (except that, if such date is not a Trading Day,
     the  payment  date  shall  be  the  next  succeeding Trading Day)("Dividend
                                                                        --------
     Payment Date"). The form of dividend payments to each Holder shall be made,
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     (i)  if  funds  are  legally available for the payment of dividends and the
     Equity  Conditions  are  not  met,  in cash only, (ii) if funds are legally
     available  for  the payment of dividends and the Equity conditions are met,
     subject  to  the  notice  conditions contained herein, at the option of the
     Corporation,  (A)  in  cash (in lieu thereof and at the option of a Holder,
     the  Holder  may  elect to receive shares of Corporation Common Stock which
     shall  be  valued  at  $3.00 per share (subject to adjustment for any stock
     splits,  reverse  splits  and  similar  capital  events  after the Original
     Issuance Date)) or (B) in Parent Common Stock, which shall be valued at 90%
     of  the  average  of  the 5 VWAPs immediately prior to the Dividend Payment
     Date  (but in no event less than $1.50 per share, as adjusted for any stock
     splits  or similar capital events subsequent to the Original Issue Date) or
     (iii)  if  funds are not legally available for the payment of dividends and
     the  Equity  conditions  are  met,  in  Parent Common Stock, which shall be
     valued  at  90%  of  the  average  of  the 5 VWAPs immediately prior to the
     Dividend  Payment  Date  (but  in  no  event  less than $1.50 per share, as
     adjusted  for  any stock splits or similar capital events subsequent to the
     Original  Issue  Date), and (iv) if funds are not legally available for the
     payment of dividends and the Equity conditions are not met, at the election
     of  the  Holder,  (A)  in  unregistered Parent Common Stock, which shall be
     valued  at  90%  of  the  average  of  the 5 VWAPs immediately prior to the
     Dividend  Payment  Date  (but  in  no  event  less than $1.50 per share, as
     adjusted  for  any stock splits or similar capital events subsequent to the
     Original Issue Date), (B) in shares of Corporation Common Stock which shall
     be  valued  at $3.00 per share (subject to adjustment for any stock splits,
     reverse  splits  and  similar  capital  events  after the Original Issuance
     Date),  (C)  by  the  accrual of such dividend payment to the next Dividend
     Payment  Date  or  (D)  by  the  accretion  of such dividend payment to the
     outstanding  Stated  Value.  The  Holders  shall  have  the same rights and
     remedies  with respect to the delivery of any such shares as if such shares
     were  being  issued  pursuant  to  Section  5.  30  days prior to the first
     Interest  Payment  Date,  the  Corporation  shall have notified the Holders
     whether  it may lawfully pay cash dividends. The Corporation shall promptly
     notify the Holders at any time the Corporation shall become able or unable,
     as  the  case  may  be,  to lawfully pay cash dividends. If at any time the
     Corporation has the right to pay dividends in cash and Parent Common Stock,
     the  Corporation  must  provide  the  Holder with at least 20 Trading Days'
     prior  notice  of  its  election  to  pay a regularly scheduled dividend in
     Parent  Common  Stock. Dividends on the Preferred Stock shall be calculated
     on  the  basis  of  a  360-day  year,  shall accrue daily commencing on the
     Original  Issue  Date, and shall be deemed to accrue from such date whether
     or  not earned or declared and whether or not there are profits, surplus or
     other  funds  of  the  Corporation  legally  available  for  the payment of
     dividends. Any dividends, whether paid in cash or shares, that are not paid
     within  three Trading Days following a Dividend Payment Date shall continue
     to  accrue  and shall entail a late fee, which must be paid in cash, at the
     rate  of 18% per annum or the lesser rate permitted by applicable law (such
     fees  to accrue daily, from the Dividend Payment Date through and including
     the  date  of  payment).

     (b)  So  long  as any Preferred Stock shall remain outstanding, neither the
     Corporation  nor any subsidiary thereof shall redeem, purchase or otherwise
     acquire  directly  or  indirectly  any  Junior  Securities.  So long as any
     Preferred  Stock  shall remain outstanding, neither the Corporation nor any
     subsidiary thereof shall directly or indirectly pay or declare any dividend
     or  make  any distribution (other than a dividend or distribution described
     in  Section 5 or dividends due and paid in the ordinary course on preferred
     stock  of  the  Corporation  at  such  times  when  the  Corporation  is in
     compliance  with  its  payment  and  other obligations hereunder) upon, nor
     shall any distribution be made in respect of, any Junior Securities so long
     as  any  dividends  due on the Preferred Stock remain unpaid, nor shall any
     monies be set aside for or applied to the purchase or redemption (through a
     sinking  fund  or  otherwise) of any Junior Securities or shares pari passu
     with  the  Preferred  Stock.

     Section  3.  Voting  Rights.  Except  as  otherwise  provided herein and as
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otherwise  required  by  law,  the  Preferred Stock shall have no voting rights.
However,  so  long  as  any  shares  of  Preferred  Stock  are  outstanding, the
Corporation  shall  not,  without  the  affirmative  vote  of  the  Holders of a
seventy-five  percent  majority  of  the  shares  of  the  Preferred  Stock then
outstanding,  (a)  alter  or  change adversely the powers, preferences or rights
given  to the Preferred Stock or alter or amend this Certificate of Designation,
(b)  authorize  or create any class of stock ranking as to dividends, redemption
or distribution of assets upon a Liquidation (as defined in Section 4) senior to
or  otherwise  pari passu with the Preferred Stock, (c) amend its certificate of
incorporation or other charter documents so as to affect adversely any rights of
the Holders, (d) increase the authorized number of shares of Preferred Stock, or
(e)  enter  into  any  agreement  with  respect  to  the  foregoing.

     Section  4. Liquidation. Upon any liquidation, dissolution or winding-up of
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the Corporation, whether voluntary or involuntary (a "Liquidation"), the Holders
                                                      -----------
shall  be entitled to receive out of the assets of the Corporation, whether such
assets are capital or surplus, for each share of Preferred Stock an amount equal
to  the  $4.05  per  share plus any accrued and unpaid dividends thereon and any
other  fees  or  liquidated  damages  owing  thereon  before any distribution or
payment shall be made to the holders of any Junior Securities, and if the assets
of  the  Corporation shall be insufficient to pay in full such amounts, then the
entire  assets  to  be distributed to the Holders shall be distributed among the
Holders  ratably in accordance with the respective amounts that would be payable
on  such  shares if all amounts payable thereon were paid in full. A Fundamental
Transaction  or  Change  of  Control  Transaction  shall  not  be  treated  as a
Liquidation.  The Corporation shall mail written notice of any such Liquidation,
not  less  than 45 days prior to the payment date stated therein, to each record
Holder.

     Section  5.  Conversion.
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     (a)  (i)  Conversions  at  Option  of Holder. Each share of Preferred Stock
     shall  be  convertible  into  that  number of shares of Parent Common Stock
     (subject  to  the  limitations set forth in Sections 5(a)(ii) and (iii)) or
     Corporation  Common  Stock  determined by dividing the Stated Value of such
     share  of Preferred Stock by the applicable Set Price, at the option of the
     Holder, at any time and from time to time from and after the Original Issue
     Date.  Holders  shall  effect conversions by providing the Corporation with
     the  form  of  conversion  notice attached hereto as Annex A (a "Conversion
                                                          -------     ----------
     Notice").  Each  Conversion  Notice  shall  specify the number of shares of
     ------
     Preferred  Stock  to  be  converted  (which  shall  not be less than 25,000
     shares,  unless  the Holder then holds less than 25,000 shares), the number
     of  shares  of  Preferred Stock owned prior to the conversion at issue, the
     number  of  shares of Preferred Stock owned subsequent to the conversion at
     issue  and  the date on which such conversion is to be effected, which date
     may  not be prior to the date the Holder delivers such Conversion Notice to
     the Corporation by facsimile (the "Conversion Date"). If no Conversion Date
                                        ---------------
     is  specified in a Conversion Notice, the Conversion Date shall be the date
     that  such  Conversion  Notice  to  the  Corporation  is  deemed  delivered
     hereunder.  The calculations and entries set forth in the Conversion Notice
     shall  control  in  the  absence  of  manifest  or  mathematical  error.

          (ii) Beneficial Ownership Limitation. The Corporation shall not effect
     any  conversion  of  the  Preferred Stock into Parent Common Stock, and the
     Holder  shall  not  have  the right to convert any portion of the Preferred
     Stock  into  Parent  Common Stock to the extent that after giving effect to
     such conversion, the Holder (together with the Holder's affiliates), as set
     forth on the applicable Conversion Notice, would beneficially own in excess
     of  4.99%  of  the  number of shares of the Parent Common Stock outstanding
     immediately  after  giving  effect  to such conversion. For purposes of the
     foregoing  sentence,  the  number  of  shares  of  Parent  Common  Stock
     beneficially  owned  by  the  Holder  and  its affiliates shall include the
     number  of  shares  of  Parent Common Stock issuable upon conversion of the
     Preferred Stock with respect to which the determination of such sentence is
     being  made,  but shall exclude the number of shares of Parent Common Stock
     which  would be issuable upon (A) conversion of the remaining, nonconverted
     Stated  Value of Preferred Stock beneficially owned by the Holder or any of
     its  affiliates  and  (B)  exercise  or  conversion  of  the unexercised or
     nonconverted  portion  of any other securities of the Parent (including the
     Warrants)  subject  to  a limitation on conversion or exercise analogous to
     the  limitation contained herein beneficially owned by the Holder or any of
     its affiliates. Except as set forth in the preceding sentence, for purposes
     of  this  Section  5(a)(ii),  beneficial  ownership  shall be calculated in
     accordance  with  Section 13(d) of the Exchange Act. To the extent that the
     limitation contained in this Section 5(a)(ii) applies, the determination of
     whether the Preferred Stock is convertible (in relation to other securities
     owned  by  the  Holder together with any affiliates) and of which shares of
     Preferred  Stock  is  convertible  shall  be in the sole discretion of such
     Holder,  and the submission of a Conversion Notice into Parent Common Stock
     shall  be deemed to be such Holder's determination of whether the shares of
     Preferred  Stock may be converted (in relation to other securities owned by
     such  Holder)  and  which  shares of the Preferred Stock is convertible, in
     each  case  subject  to  such  aggregate  percentage limitations. To ensure
     compliance with this restriction, the Holder will be deemed to represent to
     the  Corporation  each  time  it  delivers  a  Conversion  Notice that such
     Conversion  Notice  has  not  violated  the  restrictions set forth in this
     paragraph and the Corporation shall have no obligation to verify or confirm
     the  accuracy of such determination. For purposes of this Section 5(a)(ii),
     in determining the number of outstanding shares of Parent Common Stock, the
     Holder  may rely on the number of outstanding shares of Parent Common Stock
     as  reflected  in  the  most recent of the following: (A) the Parent's most
     recent Form 10-Q or Form 10-K, as the case may be, (B) a more recent public
     announcement  by  the  Parent  or (C) any other notice by the Parent or the
     Parent's transfer agent setting forth the number of shares of Parent Common
     Stock  outstanding. In any case, the number of outstanding shares of Parent
     Common  Stock  shall be determined after giving effect to the conversion or
     exercise  of  securities  into Parent Common Stock, including the Preferred
     Stock,  by  the  Holder  or  its affiliates since the date as of which such
     number  of  outstanding  shares  of  Parent  Common  Stock  was  reported.

          (iii)  Limitation  on  Number  of  Shares  Issuable.  Notwithstanding
     anything  herein  to  the  contrary, the Corporation shall not issue to any
     Holder  any shares of Parent Common Stock, including pursuant to any rights
     herein,  including,  without  limitation, any conversion rights or right to
     issue  shares  of  Common Stock in payment of dividends, to the extent such
     shares, when added to the number of shares of Parent Common Stock issued or
     issuable  (A)  upon conversion of any shares of Preferred Stock pursuant to
     Section  5(a)(i)  and  (B)  upon  exercise of those certain warrants issued
     pursuant  to  that  certain  Securities  Purchase  Agreement  would  exceed
     2,479,327  [19.999%  of  the  Parent's  outstanding  Parent  Common  Stock
     immediately prior to the Closing Date], or such greater or lesser number of
     shares  of  Parent  Common  Stock  permitted  pursuant  to  the  corporate
     governance  rules of the Nasdaq Stock Market Inc. or other Principal Market
     that is at the time the principal trading exchange or market for the Parent
     Common  Stock,  based upon share volume, as confirmed in writing by counsel
     to  the  Parent  (the  "Maximum Aggregate Share Amount"), unless the Parent
                             ------------------------------
     first  obtains shareholder approval permitting such issuances in accordance
     with  Nasdaq  Stock  Market  Inc.  rules  or  other  Principal Market rules
     ("Shareholder Approval"). Each Holder shall be entitled to a portion of the
       --------------------
     Maximum  Aggregate  Share Amount equal to the quotient obtained by dividing
     (x)  such  the  number  of shares of Preferred Stock initially purchased by
     such Holder by (y) the aggregate number of shares purchased by all Holders.
     Such  portions  shall  be  adjusted  upward ratably in the event all of the
     shares  of  Preferred  Stock of any Holder are no longer outstanding. If at
     any  time  the  number  of  shares  of  Parent  Common  Stock  which could,
     notwithstanding  the  limitation  set forth herein, be issuable and sold to
     all Holders during the following 12 months (assuming all dividends are paid
     in  shares  of  Parent  Common  Stock  during such period of determination)
     equals  or  exceeds  the Maximum Aggregate Share Amount, then the Preferred
     Stock  shall  thereafter only be convertible into Corporation Common Stock.

     (b)  (i)  Not  later than five Trading Days after each Conversion Date (the
     "Share  Delivery  Date"), the Corporation shall deliver to the Holder (A) a
      ---------------------
     certificate  or certificates which, after the Effective Date, shall be free
     of  restrictive legends and trading restrictions (other than those required
     by Section 4.1 of the Purchase Agreement) representing the number of shares
     of  Corporation Common Stock or Parent Common Stock being acquired upon the
     conversion of shares of Preferred Stock, and (B) a bank check in the amount
     of  accrued  and  unpaid  dividends  (if the Corporation is required to pay
     accrued  dividends  in  cash).  After  the  Effective Date, the Corporation
     shall,  upon request of the Holder, deliver any certificate or certificates
     required  to  be  delivered  by  the  Corporation  under this Section which
     represent  Parent  Common Stock electronically through the Depository Trust
     Corporation  or another established clearing corporation performing similar
     functions.  If  in  the  case  of any Conversion Notice such certificate or
     certificates  are  not delivered to or as directed by the applicable Holder
     by  the  fifth  Trading  Day after the Conversion Date, the Holder shall be
     entitled  to  elect  by written notice to the Corporation at any time on or
     before  its  receipt  of  such  certificate  or certificates thereafter, to
     rescind  such  conversion, in which event the Corporation shall immediately
     return the certificates representing the shares of Preferred Stock tendered
     for  conversion.

          (ii) The Corporation's obligations to issue and deliver the Conversion
     Shares  (whether  of  Corporation Common Stock or Parent Common Stock) upon
     conversion  and  redemption of Preferred Stock in accordance with the terms
     hereof  are  absolute  and  unconditional,  irrespective  of  any action or
     inaction  by  the  Holder  to  enforce the same, any waiver or consent with
     respect  to  any provision hereof, the recovery of any judgment against any
     Person  or  any  action  to  enforce the same, or any setoff, counterclaim,
     recoupment,  limitation  or termination, or any breach or alleged breach by
     the  Holder or any other Person of any obligation to the Corporation or any
     violation  or  alleged  violation of law by the Holder or any other person,
     and irrespective of any other circumstance which might otherwise limit such
     obligation of the Corporation to the Holder in connection with the issuance
     of  such  Conversion  Shares.  If  the  Corporation fails to deliver to the
     Holder  such certificate or certificates pursuant to Section 5(b)(i) by the
     Share  Delivery  Date  applicable to such conversion, the Corporation shall
     pay  to  such  Holder, in cash, as liquidated damages and not as a penalty,
     for each $5,000 of Stated Value of Preferred Stock being converted, $50 per
     Trading  Day  (increasing  to $100 per Trading Day after 3 Trading Days and
     increasing  to $200 per Trading Day 6 Trading Days after such damages begin
     to  accrue)  for  each Trading Day after the Share Delivery Date until such
     certificates  are delivered. Nothing herein shall limit a Holder's right to
     pursue actual damages for the Corporation's failure to deliver certificates
     representing  shares of Corporation Common Stock or Parent Common Stock, as
     applicable,  upon  conversion  within  the period specified herein and such
     Holder  shall  have  the  right  to  pursue  all  remedies  available to it
     hereunder,  at  law or in equity including, without limitation, a decree of
     specific  performance  and/or  injunctive  relief.

          (iii)  If  the  Corporation  fails  to  deliver  to  the  Holder  such
     certificate or certificates pursuant to Section 5(b)(i) by a Share Delivery
     Date,  and  if  after  such Share Delivery Date the Holder purchases (in an
     open  market  transaction  or  otherwise) Parent Common Stock to deliver in
     satisfaction  of  a  sale by such Holder of the Conversion Shares which the
     Holder  was  entitled to receive upon the conversion relating to such Share
     Delivery  Date  (a "Buy-In"), then the Corporation shall pay in cash to the
                         ------
     Holder the amount by which (x) the Holder's total purchase price (including
     brokerage  commissions,  if  any)  for the Parent Common Stock so purchased
     exceeds  (y)  the  product  of (1) the aggregate number of shares of Parent
     Common  Stock  that such Holder was entitled to receive from the conversion
     at issue multiplied by (2) the price at which the sell order giving rise to
     such purchase obligation was executed. For example, if the Holder purchases
     Parent  Common  Stock  having  a total purchase price of $11,000 to cover a
     Buy-In with respect to an attempted conversion of shares of Preferred Stock
     with respect to which the aggregate sale price giving rise to such purchase
     obligation  is  $10,000,  under  clause  (A)  of  the immediately preceding
     sentence  the  Corporation  shall be required to pay the Holder $1,000. The
     Holder  shall provide the Corporation written notice indicating the amounts
     payable  to  the  Holder in respect of the Buy-In, together with applicable
     confirmations  and  other evidence reasonably requested by the Corporation.
     Nothing  herein  shall  limit a Holder's right to pursue any other remedies
     available  to  it  hereunder,  at  law  or  in  equity  including,  without
     limitation,  a decree of specific performance and/or injunctive relief with
     respect  to  the  Corporation's  failure  to  timely  deliver  certificates
     representing shares of Parent Common Stock or Corporation Common Stock upon
     conversion  of  the  shares  of Preferred Stock as required pursuant to the
     terms  hereof.

     (c)  (i) The conversion price for each share of Preferred Stock into Parent
     Common  Stock  shall be 90% of the average of the 5 VWAPs immediately prior
     to  the  Conversion  Date (but in no event less than $1.50, as adjusted for
     any stock splits or similar capital events subsequent to the Original Issue
     Date),  or  in shares of the Corporation Common Stock which shall be valued
     at  $3.00  per  share (the "Set Price"), subject to adjustment as set forth
                                 ---------
     below.

          (ii)  if  the  Corporation,  at  any time while the Preferred Stock is
     outstanding:  (A)  shall  pay  a  stock  dividend  or  otherwise  make  a
     distribution  or distributions on shares of its Corporation Common Stock or
     any  other  equity  or  equity  equivalent  securities payable in shares of
     Corporation  Common  Stock, (B) subdivide outstanding shares of Corporation
     Common  Stock into a larger number of shares, (C) combine (including by way
     of reverse stock split) outstanding shares of Corporation Common Stock into
     a  smaller  number of shares, or (D) issue by reclassification of shares of
     the  Corporation  Common  Stock  any  shares  of  capital  stock  of  the
     Corporation,  then the Set Price shall be multiplied by a fraction of which
     the  numerator  shall  be  the number of shares of Corporation Common Stock
     Outstanding  before  such  event  and of which the denominator shall be the
     number  of shares of Corporation Common Stock Outstanding after such event.
     Any  adjustment  made  pursuant  to  this  Section  shall  become effective
     immediately  after  the  record  date for the determination of stockholders
     entitled  to  receive  such  dividend  or  distribution  and  shall  become
     effective  immediately  after  the  effective  date  in  the  case  of  a
     subdivision,  combination  or  reclassification.

          (iii)  if  the  Corporation,  at any time while the Preferred Stock is
     outstanding,  shall  issue  rights,  options  or warrants to all holders of
     Corporation  Common  Stock (and not to Holders) entitling them to subscribe
     for  or  purchase  shares  of Corporation Common Stock at a price per share
     less  than  the  Set Price at the record date mentioned below, then the Set
     Price  shall be multiplied by a fraction, of which the denominator shall be
     the  number  of  shares  of the Corporation Common Stock Outstanding on the
     date  of  issuance of such rights or warrants plus the number of additional
     shares  of  Corporation  Common Stock offered for subscription or purchase,
     and of which the numerator shall be the number of shares of the Corporation
     Common Stock Outstanding on the date of issuance of such rights or warrants
     plus  the  number of shares which the aggregate offering price of the total
     number of shares so offered (assuming receipt by the Corporation in full of
     all  consideration  payable  upon  exercise  of  such  rights,  options  or
     warrants)  would  purchase  at the Set Price. Such adjustment shall be made
     whenever  such  rights  or  warrants are issued, and shall become effective
     immediately  after  the  record  date for the determination of stockholders
     entitled  to  receive  such  rights,  options  or  warrants.

          (iv)  if  the  Corporation or any subsidiary thereof at any time while
     the  Preferred Stock is outstanding, shall offer, sell, grant any option or
     warrant  to  purchase  or  offer,  sell  or  grant any right to reprice its
     securities,  or  otherwise dispose of or issue any Corporation Common Stock
     or  any  equity or equity equivalent securities (including any equity, debt
     or  other  instrument that is at any time over the life thereof convertible
     into  or  exchangeable for Corporation Common Stock) (collectively, "Common
                                                                          ------
     Stock  Equivalents")  entitling any Person to acquire shares of Corporation
     ------------------
     Common  Stock,  at  an effective price per share less than the Set Price (a
     "Dilutive  Issuance"),  as  adjusted  hereunder  (if  the  holder  of  the
      ------------------
     Corporation  Common Stock or Common Stock Equivalent so issued shall at any
     time, whether by operation of purchase price adjustments, reset provisions,
     floating  conversion,  exercise  or exchange prices or otherwise, or due to
     warrants,  options  or rights per share which are issued in connection with
     such issuance, be entitled to receive shares of Corporation Common Stock at
     a  price per share which is less than the Set Price, such issuance shall be
     deemed  to  have  occurred  for less than the Set Price), then (A) from the
     Original Issue Date until the 30th day following the Effective Date (if the
     Registration  Statement  is  unavailable  for use by the Holder during such
     period, such period shall be extended for such number of unavailable days),
     the  Set Price shall be reduced to equal the effective conversion, exchange
     or  purchase  price  for  such  Corporation  Common  Stock  or Common Stock
     Equivalents  (including  any  reset  provisions  thereof), at issue and (B)
     after  30th  day  following  the  Effective Date (as extended in clause (A)
     above),  the  Set  Price shall be reduced by multiplying the Set Price by a
     fraction,  the  numerator  of  which is the number of shares of Corporation
     Common  Stock  Outstanding  immediately prior to the Dilutive Issuance plus
     the  number  of shares of Corporation Common Stock which the offering price
     for  such  Dilutive  Issuance  would  purchase  at  the  Set Price, and the
     denominator  of  which  shall  be  the  sum  of  the  number  of  shares of
     Corporation  Common  Stock  Outstanding  immediately  prior to the Dilutive
     Issuance plus the number of shares of Corporation Common Stock so issued or
     issuable in connection with the Dilutive Issuance. Such adjustment shall be
     made whenever such Corporation Common Stock or Common Stock Equivalents are
     issued.  The  Corporation shall notify the Holder in writing, no later than
     the  Business Day following the issuance of any Corporation Common Stock or
     Common  Stock  Equivalent  subject  to this section, indicating therein the
     applicable  issuance  price,  or of applicable reset price, exchange price,
     conversion  price  and  other  pricing  terms.

          (v)  if  the  Corporation,  at  any  time while the Preferred Stock is
     outstanding,  shall  distribute  to all holders of Corporation Common Stock
     (and  not  to Holders) evidences of its indebtedness or assets or rights or
     warrants  to  subscribe  for  or  purchase  any  security  other  than  the
     Corporation Common Stock (which shall be subject to Section 5(c)(iii), then
     in  each  such  case the Set Price shall be adjusted by multiplying the Set
     Price  in  effect  immediately  prior  to  the  record  date  fixed  for
     determination  of  stockholders  entitled to receive such distribution by a
     fraction  of  which the denominator shall be the Set Price determined as of
     the  record  date mentioned above, and of which the numerator shall be such
     Set  Price on such record date less the then per share fair market value at
     such  record date of the portion of such assets or evidence of indebtedness
     so  distributed  applicable  to  one  outstanding  share of the Corporation
     Common  Stock  as  determined  by  the Board of Directors in good faith. In
     either  case  the adjustments shall be described in a statement provided to
     the  Holders  of  the  portion  of  assets  or evidences of indebtedness so
     distributed  or  such  subscription  rights  applicable  to  one  share  of
     Corporation  Common  Stock. Such adjustment shall be made whenever any such
     distribution  is  made  and  shall  become  effective immediately after the
     record  date  mentioned  above.

          (vi)  All  calculations  under  this Section 5(c) shall be made to the
     nearest  cent  or  the  nearest 1/100th of a share, as the case may be. The
     number  of shares of Corporation Common Stock outstanding at any given time
     shall  not  include  shares  owned  or  held  by  or for the account of the
     Corporation,  and the disposition of any such shares shall be considered an
     issue  or  sale  of  Corporation Common Stock. For purposes of this Section
     5(c),  the  number  of  shares  of  Corporation  Common  Stock deemed to be
     outstanding (the "Corporation Common Stock Outstanding") as of a given date
                       ------------------------------------
     shall  be  the  sum  of  the  number  of shares of Corporation Common Stock
     (excluding  treasury  shares,  if  any)  issued  and  outstanding.

          (vii)  Notwithstanding  anything to the contrary herein, no adjustment
     shall  be  made hereunder in connection with the following (a) the granting
     or  issuance of shares of Corporation Common Stock or options to employees,
     officers and directors of the Corporation pursuant to any stock option plan
     or  employee  incentive  plan  or  agreement  duly adopted or approved by a
     majority  of  the  non-employee  members  of  the Board of Directors of the
     Corporation  or  a  majority  of the members of a committee of non-employee
     directors  established  for such purpose, (b) the conversion or exercise of
     any  Preferred  Stock  or  any  other security issued by the Corporation in
     connection  with  the  offer  and  sale  of  this  Corporation's securities
     pursuant  to  this  Agreement,  (c)  the  exercise  of or conversion of any
     convertible  securities,  options or warrants issued and outstanding on the
     date  hereof, provided that such securities have not been amended since the
     date  hereof,  or  (d)  acquisitions  or strategic investments, the primary
     purpose  of  which  is  not  to  raise  capital.

          (viii) Whenever the Set Price is adjusted pursuant to this Section the
     Corporation  shall promptly mail to each Holder, a notice setting forth the
     Set  Price after such adjustment and setting forth a brief statement of the
     facts  requiring  such  adjustment.

     (d) Mandatory Conversion. Any shares of Preferred Stock which have not been
     converted  or redeemed on the second year anniversary of the Original Issue
     Date  shall  be  automatically  converted into shares of Corporation Common
     Stock  at  the  Set  Price  then  in  effect.

     Section  6.  [Intentionally  Omitted].

     Section  7.  Redemption  Upon  Triggering  Events.
                  ------------------------------------

     (a)  Upon  the  occurrence  of  a  Triggering  Event, each Holder shall (in
     addition to all other rights it may have hereunder or under applicable law)
     have  the  right, exercisable at the sole option of such Holder, to require
     the  Corporation  to  redeem  all  of the Preferred Stock then held by such
     Holder  for a redemption price, in cash, equal to the Triggering Redemption
     Amount.  The Triggering Redemption Amount, in cash shall be due and payable
     within  5  Trading  Days  of  the  date on which the notice for the payment
     therefore  is  provided  by  a  Holder  (the "Triggering Redemption Payment
                                                   -----------------------------
     Date").  If  the  Corporation fails to pay the Triggering Redemption Amount
     ----
     hereunder  in  full pursuant to this Section on the date such amount is due
     in  accordance with this Section, the Corporation will pay interest thereon
     at  a  rate of 18% per annum (or such lesser amount permitted by applicable
     law), accruing daily from such date until the Triggering Redemption Amount,
     plus  all  such  interest  thereon,  is  paid in full. For purposes of this
     Section,  a  share of Preferred Stock is outstanding until such date as the
     Holder  shall  have  received  Conversion  Shares  upon  a  conversion  (or
     attempted  conversion)  thereof  that  meets the requirements hereof or has
     been  paid  the  Triggering  Redemption  Amount plus all accrued but unpaid
     dividends  and  all  accrued  but  unpaid  liquidated  damages  in  cash.

     (b)  "Triggering  Event"  means  any  one  or  more of the following events
           -----------------
     (whatever  the  reason  and whether it shall be voluntary or involuntary or
     effected  by  operation of law or pursuant to any judgment, decree or order
     of  any  court,  or  any order, rule or regulation of any administrative or
     governmental  body):

          (i) the failure of the Registration Statement to be declared effective
     by  the  Commission  on  or prior to the 210th day after the Original Issue
     Date;

          (ii)  if,  during  the  Effectiveness Period, the effectiveness of the
     Registration  Statement lapses for any reason for more than an aggregate of
     60  calendar  days (which need not be consecutive days) during any 12 month
     period,  or  the  Holder  shall  not  be  permitted  to  resell Registrable
     Securities under the Conversion Shares Registration Statement for more than
     an  aggregate  of  60  calendar  days  (which need not be consecutive days)
     during  any  12  month  period;

          (iii)  the Corporation shall fail to deliver certificates representing
     Conversion Shares issuable upon a conversion hereunder that comply with the
     provisions  hereof  prior  to  the  10th  Trading Day after such shares are
     required  to  be  delivered  hereunder,  or  the  Corporation shall provide
     written  notice  to any Holder, including by way of public announcement, at
     any  time,  of  its intention not to comply with requests for conversion of
     any  shares  of  Preferred  Stock  in  accordance  with  the  terms hereof;

          (iv)  one  of  the  Events  (as  defined  in  the  Registration Rights
     Agreement)  described  in subsections (i), (ii) or (iii) of Section 2(c) of
     the  Registration  Rights  Agreement  shall  not  have  been  cured  to the
     satisfaction  of  the  Holders  prior to the expiration of 30 days from the
     Event  Date  (as  defined  in  the  Registration Rights Agreement) relating
     thereto  (other  than  an Event resulting from a failure of an Registration
     Statement  to  be  declared  effective by the Commission on or prior to the
     210th  day after the Original Issue Date, which shall be covered by Section
     7(b)(i));

          (v)  the  Corporation  shall  fail  for  any reason to pay in full the
     amount  of  cash  due  pursuant  to  a  Buy-In  within 10 days after notice
     therefor  is  delivered  hereunder or shall fail to pay all amounts owed on
     account  of  an  Event  within  five  days  of  the  date  due;

          (vi)  the Corporation shall fail to have available a sufficient number
     of  authorized  and unreserved shares of Corporation Common Stock or Parent
     Common  Stock  to  issue  to  such  Holder  upon  a  conversion  hereunder;

          (vii)  the  Corporation  shall  fail  to  observe or perform any other
     covenant,  agreement  or  warranty  contained  in,  or otherwise commit any
     breach  of the Transaction Documents, and such failure or breach shall not,
     if  subject  to  the  possibility  of  a cure by the Corporation, have been
     remedied  within 30 calendar days after the date on which written notice of
     such  failure  or  breach  shall  have  been  given;

          (ix)  The  occurrence  of  a  Change  of  Control  Transaction  or the
     Corporation  shall  redeem  more  than  a  de  minimis  number  of  Junior
     Securities;

          (x)  there  shall  have  occurred  a  Bankruptcy  Event;  or

          (xi) the Common Stock shall fail to be listed or quoted for trading on
     a  Principal  Market  for  more  than  5  consecutive  Trading  Days.

     Section  8. Definitions. For the purposes hereof, the following terms shall
                 -----------
have  the  following  meanings:

"Bankruptcy  Event"  means  any  of  the  following events: (a) the Corporation,
 -----------------
     Parent  or  any  Significant  Subsidiary  (as  such term is defined in Rule
     1.02(s)  of  Regulation  S-X)  thereof commences a case or other proceeding
     under  any  bankruptcy,  reorganization,  arrangement,  adjustment of debt,
     relief of debtors, dissolution, insolvency or liquidation or similar law of
     any  jurisdiction relating to the Corporation or any Significant Subsidiary
     thereof;  (b)  there  is  commenced  against the Corporation, Parent or any
     Significant  Subsidiary  thereof  any  such  case or proceeding that is not
     dismissed within 60 days after commencement; (c) the Corporation, Parent or
     any  Significant Subsidiary thereof is adjudicated insolvent or bankrupt or
     any order of relief or other order approving any such case or proceeding is
     entered;  (d) the Corporation, Parent or any Significant Subsidiary thereof
     suffers  any  appointment  of  any  custodian  or  the  like  for it or any
     substantial part of its property that is not discharged or stayed within 60
     days;  (e)  the  Corporation,  Parent or any Significant Subsidiary thereof
     makes  a  general  assignment  for  the  benefit  of  creditors;  (f)  the
     Corporation,  Parent  or any Significant Subsidiary thereof calls a meeting
     of  its  creditors  with  a  view to arranging a composition, adjustment or
     restructuring  of  its  debts;  or  (g)  the  Corporation,  Parent  or  any
     Significant  Subsidiary  thereof,  by  any act or failure to act, expressly
     indicates  its  consent  to,  approval  of  or  acquiescence  in any of the
     foregoing  or  takes  any  corporate  or  other  action  for the purpose of
     effecting  any  of  the  foregoing.

"Change  of  Control  Transaction" means the occurrence after the date hereof of
 --------------------------------
     any  of  (a) an acquisition after the date hereof by an individual or legal
     entity  or  "group" (as described in Rule 13d-5(b)(1) promulgated under the
     Exchange  Act)  of  effective  control (whether through legal or beneficial
     ownership  of  capital  stock  of the Corporation or Parent, by contract or
     otherwise)  of in excess of 33% of the voting securities of the Corporation
     (other  than  by  Parent)  or  Parent,  or (b) a replacement at one time or
     within  a  one  year  period  of  more  than one-half of the members of the
     Corporation's  or  Parent's  board  of directors which is not approved by a
     majority  of those individuals who are members of the board of directors on
     the  date hereof (or by those individuals who are serving as members of the
     board  of  directors on any date whose nomination to the board of directors
     was approved by a majority of the members of the board of directors who are
     members  on  the  date  hereof), or (c) the execution by the Corporation or
     Parent  of an agreement to which the Corporation or Parent is a party or by
     which  it  is bound, providing for any of the events set forth above in (a)
     or  (b).

"Closing"  means  closing  of  the  purchase  and  sale  of the Preferred Stock.
 -------

"Commission"  means  the  Securities  and  Exchange  Commission.
 ----------

"Conversion  Amount"  means  the  sum  of  the  Stated  Value  at  issue.
 ------------------

"Conversion  Date"  shall  have  the  meaning  set  forth  in  Section  5(b)(i).
 ----------------

"Conversion  Shares" means, collectively, the shares of Corporation Common Stock
 ------------------
     or  Parent  Common  Stock  into  which  the  shares  of Preferred Stock are
     convertible (and issuable in lieu of cash dividends) in accordance with the
     terms  hereof.

"Corporation  Common  Stock"  means the Corporation's Common Stock, and stock of
 --------------------------
     any other class into which such shares may hereafter have been reclassified
     or  changed.

"Corporation  Common  Stock  Outstanding"  shall  have  the meaning set forth in
 ---------------------------------------
     Section  5(c)(vi).

"Dividend  Payment  Date"  shall  have  the  meaning  set forth in Section 2(a).
 -----------------------

"Effective  Date"  means  the  date  that the Registration Statement is declared
 ---------------
     effective  by  the  Commission.

"Equity  Conditions"  Unless  waived by a Holder as to a particular event (which
 ------------------
     waiver  shall  apply  only  to  such  Holder),  as  of such event date, the
     following  conditions  have  been  met: (i) the Corporation shall have duly
     honored  all  conversions  and  redemptions scheduled to occur or occurring
     prior  to  such  date,  (ii)  there  is an effective Registration Statement
     pursuant  to  which  the  Holders  are  permitted to utilize the prospectus
     thereunder  to  resell  all  of  the Parent Conversion Shares issued to the
     Holders  and  all  of  the  Parent Conversion Shares as are issuable to the
     Holders upon conversion in full of the Preferred Stock (and the Corporation
     believes,  in  good  faith,  that  such  effectiveness  will  continue
     uninterrupted for the foreseeable future), (iii) the Parent Common Stock is
     listed  for  trading on the Principal Market (and the Corporation believes,
     in  good  faith,  that  trading of the Parent Common Stock on the Principal
     Market  will  continue  uninterrupted for the foreseeable future), (iv) all
     liquidated  damages  and  other  amounts  owing in respect of the Preferred
     Stock  shall  have been paid or will, concurrently with the issuance of the
     Conversion  Shares,  be  paid  in cash; (v) there is a sufficient number of
     authorized  but  unissued  and otherwise unreserved shares of Parent Common
     Stock  and  Corporation Common Stock for the issuance of all the Conversion
     Shares  as  are  issuable  to  the  Holder  upon  conversion in full of the
     Preferred  Stock;  (vi) no Triggering Event has occurred and is continuing;
     (vii)  all  of  the  Parent  Conversion  Shares issuable to the Holder upon
     conversion  in full of the Preferred Stock will not violate the limitations
     set forth in Sections 5(a)(ii) and (iii); (viii) the average of the 5 VWAPs
     immediately  prior  to  the  date  in  question  is  greater than $1.67, as
     adjusted  for  any stock splits or similar capital events subsequent to the
     Original  Issue  Date,  and  (ix)  no  public  announcement of a pending or
     proposed  Fundamental  Transaction  or  Change  of  Control Transaction has
     occurred  that  has  not  been  consummated.

"Exchange  Act"  means  the  Securities  Exchange  Act  of  1934,  as  amended.
 -------------

"Fundamental  Transaction"  means the occurrence after the date hereof of any of
 ------------------------
     (a)  the  Corporation  or Parent effects any merger or consolidation of the
     Corporation  with  or  into  another  Person, (b) the Corporation or Parent
     effects  any  sale  of  all  or substantially all of its assets in one or a
     series  of  related  transactions,  (c)  any tender offer or exchange offer
     (whether  by  the  Corporation,  Parent  or  another  Person)  is completed
     pursuant  to  which  holders of Common Stock or Parent Common Stock, as the
     case  may  be,  are  permitted to tender or exchange their shares for other
     securities,  cash or property, or (d) the Corporation or Parent effects any
     reclassification  of  the  Common Stock or Parent Common Stock, as the case
     may be, or any compulsory share exchange pursuant to which the Common Stock
     or  Parent  Common Stock, as the case may be, is effectively converted into
     or  exchanged  for  other  securities,  cash  or  property.

"Holder"  shall  have  the  meaning  given  such  term  in  Section  1  hereof.
 ------

"Junior  Securities"  means  the  Common  Stock  and  all other equity or equity
 ------------------
     equivalent  securities  of the Corporation other than those securities that
     are (a) outstanding on the Original Issue Date and (b) which are explicitly
     senior  in  rights  or  liquidation  preference  to  the  Preferred  Stock.

"Original Issue Date" shall mean the date of the first issuance of any shares of
 -------------------
     the Preferred Stock regardless of the number of transfers of any particular
     shares  of  Preferred  Stock  and  regardless of the number of certificates
     which  may  be  issued  to  evidence  such  Preferred  Stock.

"Parent"  means  U.S.  Energy  Corp.,  a  Wyoming  corporation.
 ------

"Parent  Common  Stock"  means  the common stock of the Parent, and stock of any
     other  class into which such shares may hereafter have been reclassified or
     changed.

"Parent  Conversion  Shares"  means the shares of Parent Common Stock into which
 --------------------------
     the shares of Preferred Stock are convertible (and issuable in lieu of cash
     dividends)  in  accordance  with  the  terms  hereof.

"Person"  means a corporation, an association, a partnership, an organization, a
 ------
     business, an individual, a government or political subdivision thereof or a
     governmental  agency.

"Principal  Market"  shall  initially mean the Nasdaq Small-Cap Market and shall
 -----------------
     also  include  the  New York Stock Exchange, the NASDAQ National Market, or
     the American Stock Exchange, whichever is at the time the principal trading
     exchange  or  market  for the Parent Common Stock, based upon share volume.

"Purchase  Agreement"  means  the  Securities  Purchase  Agreement,  dated as of
 -------------------
     February  __,  2004,  to which the Corporation, the Parent and the original
     Holders are parties, as amended, modified or supplemented from time to time
     in  accordance  with  its  terms.

"Registration  Rights  Agreement" means the Registration Rights Agreement, dated
 -------------------------------
     as  of  February __, 2004, to which the Parent and the original Holders are
     parties,  as  amended,  modified  or  supplemented  from  time  to  time in
     accordance  with  its  terms.

"Registration  Statement"  means  a  registration  statement  that  meets  the
 -----------------------
     requirements  of the Registration Rights Agreement and registers the resale
     of  all  Parent  Conversion  Shares by each Holder, who shall be named as a
     "selling  stockholder"  thereunder,  all  as  provided  in the Registration
     Rights  Agreement.

"Securities  Act"  means  the  Securities  Act  of  1933,  as  amended.
 ---------------

"Set Price"  shall  have  the  meaning  set  forth  in  Section  5(c)(i).
 ---------

"Trading Day" shall mean any day during which the Principal Market shall be open
 -----------
     for  business.

"Transaction  Documents"  shall  mean  the Purchase Agreement and all agreements
 ----------------------
     entered  into  in  connection  therewith, including the Registration Rights
     Agreement  and  the  Warrants.

"Triggering  Event"  shall  have  the  meaning  set  forth  in  Section  7(b).
 -----------------

"Triggering  Redemption  Amount" for each share of Preferred Stock means the sum
 ------------------------------
     of  (i)  the greater of (A) 130% of the Stated Value and (B) the product of
     (a)  the  VWAP  on  the  Trading  Day immediately preceding the date of the
     Triggering  Event and (b) the Stated Value divided by the then Set Price as
     it  relates  to  Parent  Conversion  Shares,  (ii)  all  accrued but unpaid
     dividends thereon and (iii) all liquidated damages and other amounts due in
     respect  of  the  Preferred  Stock.

"VWAP"  means,  for  any  date,  the  per  share  price  of  Parent Common Stock
 ----
     determined  by  the first of the following clauses that applies: (a) if the
     Parent  Common  Stock  is  then listed or quoted on a Principal Market, the
     daily  volume  weighted  average  price of the Parent Common Stock for such
     date  (or  the nearest preceding date) on the Principal Market on which the
     Parent  Common  Stock  is  then  listed  or quoted as reported by Bloomberg
     Financial  L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:02
     p.m.  Eastern  Time);  (b) if the Parent Common Stock is not then listed or
     quoted  on a Principal Market and if prices for the Parent Common Stock are
     then quoted on the OTC Bulletin Board, the volume weighted average price of
     the  Parent  Common  Stock for such date (or the nearest preceding date) on
     the  OTC  Bulletin Board; (c) if the Parent Common Stock is not then listed
     or  quoted  on  the  OTC Bulletin Board and if prices for the Parent Common
     Stock  are  then  reported  in  the "Pink Sheets" published by the National
     Quotation  Bureau  Incorporated  (or  a  similar  organization  or  agency
     succeeding to its functions of reporting prices), the most recent bid price
     per  share  of  the  Parent  Common  Stock so reported; or (d) in all other
     cases,  the  fair  market  value  of  a  share  of  Parent  Common Stock as
     determined  by  an  independent  appraiser  selected  in  good faith by the
     Holders  and  reasonably  acceptable  to  the  Corporation.

     Section  9. Fundamental Transactions and Change of Control Transactions. If
                 -----------------------------------------------------------
a  Fundamental Transaction occurs, then upon any subsequent conversion of shares
of  Preferred  Stock,  the  Holder  shall  have  the  right to receive, for each
Conversion  Share that would have been issuable upon such conversion absent such
Fundamental  Transaction,  the  same  kind  and  amount  of  securities, cash or
property  as  it would have been entitled to receive upon the occurrence of such
Fundamental  Transaction  if  it had been, immediately prior to such Fundamental
Transaction,  the  holder  of  one  share  of  either  Parent  Common  Stock  or
Corporation  Common  Stock,  as the case may be (the "Alternate Consideration").
                                                      -----------------------
For purposes of any such conversion, the determination of the Set Price shall be
appropriately  adjusted  to  apply  to such Alternate Consideration based on the
amount  of  Alternate  Consideration  issuable in respect of one share of Parent
Common  Stock  or  Corporation Common Stock in such Fundamental Transaction, and
the  Corporation shall apportion the Set Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of Parent Common Stock or Corporation
Common  Stock  are given any choice as to the securities, cash or property to be
received  in  a Fundamental Transaction, then the Holder shall be given the same
choice  as  to  the  Alternate  Consideration it receives upon any conversion of
shares  of Preferred Stock following such Fundamental Transaction. To the extent
necessary  to  effectuate  the  foregoing  provisions,  any  successor  to  the
Corporation  or  surviving entity in such Fundamental Transaction shall issue to
the  Holder  new  preferred  stock  consistent with the foregoing provisions and
evidencing  the  Holder's  right  to convert such preferred stock into Alternate
Consideration.  The  terms  of  any  agreement  pursuant  to which a Fundamental
Transaction  is  effected  shall  include  terms requiring any such successor or
surviving  entity  to  comply with the provisions of this Section 9 and insuring
that  the  Preferred  Stock (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

     Section  10.  Miscellaneous.
                   -------------

     (a)  If  (i)  the  Corporation  shall  declare  a  dividend  (or  any other
     distribution)  on  the Corporation Common Stock, (ii) the Corporation shall
     declare  a  special  nonrecurring  cash  dividend on or a redemption of the
     Corporation  Common  Stock,  (iii)  the  Corporation  shall  authorize  the
     granting  to  all holders of Corporation Common Stock rights or warrants to
     subscribe  for  or  purchase any shares of capital stock of any class or of
     any  rights, (iv) the approval of any stockholders of the Corporation shall
     be  required  in  connection  with any Fundamental Transaction or Change of
     Control  Transaction,  or (v) the Corporation shall authorize the voluntary
     or involuntary dissolution, liquidation or winding up of the affairs of the
     Corporation;  then  the  Corporation  shall file a press release or Current
     Report  on  Form  8-K to disclose such occurrence and notify the Holders at
     their  last  addresses  as  they  shall  appear upon the stock books of the
     Corporation,  at  least  20 calendar days prior to the applicable record or
     effective  date  hereinafter  specified,  a  notice stating (x) the date on
     which  a  record  is  to  be  taken  for  the  purpose  of  such  dividend,
     distribution,  redemption,  rights or warrants, or if a record is not to be
     taken,  the  date  as  of  which the holders of Corporation Common Stock of
     record  to  be entitled to such dividend, distributions, redemption, rights
     or  warrants  are  to  be  determined  or  (y)  the  date on which any such
     Fundamental  Transaction  or  Change  of Control Transaction is expected to
     become  effective  or  close,  and the date as of which it is expected that
     holders of Corporation Common Stock of record shall be entitled to exchange
     their  Corporation  Common  Stock  for  securities,  cash or other property
     deliverable  upon  any  such  Fundamental  Transaction or Change of Control
     Transaction.  Holders  are  entitled  to  convert  the Conversion Amount of
     Preferred Stock during the 20-day period commencing the date of such notice
     to  the  effective  date  of  the  event  triggering  such  notice.

     (b)  The  Corporation  covenants that it will at all times reserve and keep
     available  out  of its authorized and unissued shares of Corporation Common
     Stock  solely  for  the  purpose  of  issuance upon conversion of Preferred
     Stock,  each  as  herein provided, free from preemptive rights or any other
     actual  contingent  purchase  rights of persons other than the Holders, not
     less  than  such  number  of shares of Corporation Common Stock as shall be
     issuable  upon the conversion of all outstanding shares of Preferred Stock.
     The  Corporation covenants that all shares of Corporation Common Stock that
     shall  be  so  issuable  shall, upon issue, be duly and validly authorized,
     issued  and  fully  paid  and  nonassessable.

     (c)  Upon  a  conversion hereunder the Corporation shall not be required to
     issue stock certificates representing fractions of shares of Corporation or
     Parent Common Stock, but may if otherwise permitted, make a cash payment in
     respect  of any final fraction of a share based on the fair market value at
     such  time.

     (d)  The issuance of certificates for Parent or Corporation Common Stock on
     conversion  of  Preferred Stock shall be made without charge to the Holders
     thereof  for  any documentary stamp or similar taxes that may be payable in
     respect  of  the  issue  or delivery of such certificate, provided that the
     Corporation  shall  not  be  required to pay any tax that may be payable in
     respect  of  any transfer involved in the issuance and delivery of any such
     certificate upon conversion in a name other than that of the Holder of such
     shares  of  Preferred  Stock  so  converted.

     (e)  To effect conversions or redemptions, as the case may be, of shares of
     Preferred  Stock,  a  Holder  shall  not  be  required  to  surrender  the
     certificate(s)  representing  such  shares  of  Preferred  Stock  to  the
     Corporation unless all of the shares of Preferred Stock represented thereby
     are  so  converted,  in which case the Holder shall deliver the certificate
     representing  such  share  of  Preferred  Stock  promptly  following  the
     Conversion  Date  at issue. Shares of Preferred Stock converted into Parent
     or Corporation Common Stock or redeemed in accordance with the terms hereof
     shall  be  canceled  and  may  not  be  reissued.

     (f)  Any  and  all  notices  or  other  communications  or deliveries to be
     provided  by  the  Holders  of  the  Preferred  Stock hereunder, including,
     without  limitation,  any  Conversion  Notice,  shall  be  in  writing  and
     delivered  personally,  by  facsimile  or  sent  by a nationally recognized
     overnight  courier  service,  addressed  to  the  attention  of  the  Chief
     Financial  Officer  of the Corporation addressed to Robert Scot Lorimer Fax
     Number:  (307)  857-3050  or  to  such other address or facsimile number as
     shall  be specified in writing by the Corporation for such purpose. Any and
     all  notices  or  other  communications or deliveries to be provided by the
     Corporation  hereunder  shall  be  in  writing and delivered personally, by
     facsimile  or  sent  by  a nationally recognized overnight courier service,
     addressed  to  each  Holder at the facsimile telephone number or address of
     such  Holder appearing on the books of the Corporation, which address shall
     initially be the address of such Holder set forth on the signature pages of
     the  Purchase  Agreement,  or  such  other  address as the Corporation or a
     Holder  may  designate  by  ten  days  advance  written notice to the other
     parties  hereto.  Any notice or other communication or deliveries hereunder
     shall  be  deemed  given  and  effective on the earliest of (i) the date of
     transmission, if such notice or communication is delivered via facsimile at
     the facsimile telephone number specified in this Section prior to 6:30 p.m.
     (New  York  City  time)  (with confirmation of transmission), (ii) the date
     after  the  date  of  transmission,  if  such  notice  or  communication is
     delivered via facsimile at the facsimile telephone number specified in this
     Section  later  than 6:30 p.m. (New York City time) on any date and earlier
     than  11:59  p.m.  (New  York City time) on such date (with confirmation of
     transmission),  (iii)  five  days  after  having been sent by registered or
     certified  mail,  return  receipt  requested, postage prepaid, (iv) one day
     after  deposit  with  a  nationally  recognized  overnight courier service,
     specifying  next day delivery, with written verification of service, or (v)
     upon  actual  receipt  by  the  party to whom such notice is required to be
     given.

     (g)  For  purposes  hereof, a share of Preferred Stock is outstanding until
     such  date  as  the  Holder  shall  have  received the Conversion Shares or
     redemption  amount  (as  the  case  may  be)  issuable  or payable to it in
     accordance  with  this  Articles  of  Amendment.


This Amendment was adopted on February 25, 2004 and is effective on February 25,
2004.


This Amendment was duly adopted by the Board of Directors of Rocky Mountain Gas,
Inc.

     Dated: February 25,  2004.
            -----------


------------------------------------               -----------------------------
Name:     Keith  G.  Larsen
Title:    Chief  Executive  Officer


<PAGE>


                                    ANNEX A

                              NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert shares of Preferred
Stock)

The  undersigned  hereby  elects to convert the number of shares of 10% Series A
Convertible Preferred Stock indicated below, into shares of common stock of (the
"Common  Stock"),  of
 -------------

/_/  U.S  Energy  Corporation,  a  Wyoming  corporation

/_/  Rocky  Mountain  Gas,  Inc.,  a  Wyoming  Corporation

according  to the conditions hereof, as of the date written below. If shares are
to  be  issued  in  the name of a person other than undersigned, the undersigned
will  pay  all  transfer  taxes  payable  with respect thereto and is delivering
herewith  such  certificates and opinions as reasonably requested by the issuing
corporation  in  accordance  therewith. No fee will be charged to the Holder for
any  conversion,  except  for  such  transfer  taxes,  if  any.

Conversion  calculations:

     Date  to  Effect  Conversion

     -----------------------------------------
     Number  of  shares  of  Preferred  Stock  owned  prior  to  Conversion

     -----------------------------------------
     Number  of  shares  of  Preferred  Stock  to  be  Converted

     -----------------------------------------
     Stated  Value  of  shares  of  Preferred  Stock  to  be  Converted

      -----------------------------------------
     Number  of  Conversion  Shares  to  be  Issued

     -----------------------------------------
     Applicable  Set  Price

     -----------------------------------------
     Number  of  shares  of  Preferred  Stock  subsequent  to  Conversion

     -----------------------------------------
[HOLDER]


By:_______________________
      Name:
      Title: