Document:

STOCK OPTION AGREEMENT
                             ----------------------

         AGREEMENT,  dated as of May 25, 2004 by and between Lunettes, Etal Inc,
Las Vegas Inc, a Nevada  Company with its principal  place of business at 1026 W
El Notre Pkwy,  Suite 191,  Escondido,  CA 92026 (the  "Company") and , Waldwick
Investments Limited, (the "Optionee").

                              W I T N E S S E T H:

         WHEREAS, the parties have agreed, under a subscription  agreement dated
May 25, 2004 to grant this option (the  "Option") to the Optionee to purchase up
to 500,000 shares of the Company's  common stock, par value $.001 per share (the
"Common  Stock")  at an  exercise  price  and  upon  the  terms  and  conditions
hereinafter set forth.

         NOW,  THEREFORE,  in consideration  of the mutual  covenants  contained
herein, the parties hereto agree as follows:

    1.   Grant of Option.  Subject to all the terms and conditions  hereof,  the
Company  hereby  grants to Optionee  the right to purchase all or any part of an
aggregate of 500,000 shares of Common Stock of the Company (the "Option Shares")
at an exercise price (the  "Exercise  Price") per share equal to the greater of:
(a) a 40% discount  from the average  closing bid price of the Common Stock on a
public exchange during the ten (10) trading days  immediately  prior to exercise
of the Option, or (b) $0.50 per share.

    2.   Exercisability of Option. The Option Shares subject to the Option shall
become  purchasable  by the Optionee,  in whole or in part, at any time prior to
the expiration of the Option,  which expiration shall occur on December 31, 2005
(the  "Expiration  Date").  On the Expiration  Date,  this Option and all rights
hereunder  shall  expire and any Option  Shares not  purchased  on or before the
Expiration Date may not thereafter be purchased hereunder. In the event Optionee
fails to exercise the Option on or prior to the Expiration Date, then the Option
as to all Option  Shares not exercised  shall expire and Optionee  shall have no
rights with respect to such remainder of the Option or the Option Shares.

    3.   Method of Exercise of Option;  Payment of Exercise  Price.  This Option
shall be exercisable at any time and from time to time,  prior to the Expiration
Date, by surrender to the Company of the notice (the "Notice")  attached  hereto
as Exhibit "A". The Notice shall state the Optionee's  election to exercise this
Option  and the  number  of  Option  Shares  in  respect  of  which  it is being
exercised,  and shall be  accompanied  by a check in the amount of the  Exercise
Price.  Within a reasonable time following payment of the full Exercise Price by
Optionee,   the  Company  shall  deliver  to  the  Optionee  a  certificate   or
certificates  representing  those shares.  A certificate or certificates for the
shares as to which this Option shall have been so exercised  shall be registered
in the name of the Optionee and shall be delivered to Optionee at the address of
Optionee  specified in the Notice or at such other address as Optionee shall set
forth in its Notice.

    4.   Non-Assignability  of Option.  This Option may be exercised only by the
Optionee and shall not be sold, transferred,  assigned, pledged, hypothecated or
otherwise  disposed of in any way  (whether by  operation  of law or  otherwise)
without the Company's  prior written consent except that Optionee may, solely in
connection  with a  transfer  of all or  substantially  all of its  assets to an
entity or entities  controlled  by  Optionee  ("Affiliate"),  sell,  transfer or
assign all its  interest  in this  Agreement  to such  Affiliate  but only after
giving  the  Company at least ten (10) days  notice in  writing of the  proposed
sale, transfer or assignment.  Any buyer, transferee, or assignee of this Option
shall be bound by and subject to each and every  provision of this Agreement and
shall not sell, transfer,  assign,  pledge,  hypothecate or otherwise dispose of

<PAGE>

the Option in any way (whether by operation of law or otherwise).

    5.   Limitation  of  Optionee's  Rights.  Except as  otherwise  provided  in
Section  6,  Optionee  shall  not  have any of the  rights  or  privileges  of a
shareholder  of the  Company  in  respect of any  Option  Shares  issuable  upon
exercise of this Option unless and until those shares have been paid for in full
and upon  such  payment  in full  Optionee  shall  be  deemed  to be the  record
Optionee.

    6.   Anti-Dilution Provisions. If the Company shall pay a dividend in shares
of its Common Stock,  subdivide (split) its outstanding  shares of Common Stock,
combine  (reverse  split)  its  outstanding  shares  of Common  Stock,  issue by
reclassification of its shares of Common Stock any shares or other securities of
the Company,  or distribute to holders of its Common Stock any securities of the
Company or of  another  entity,  the  number of shares of Common  Stock or other
securities  the  Optionee  is  entitled  to  purchase  pursuant  to this  Option
immediately  prior  thereto  shall be  adjusted  so that the  Optionee  shall be
entitled to receive upon  exercise the number of shares of Common Stock or other
securities  which it would  have owned or would  have been  entitled  to receive
after the  happening of any of the events  described  above had this Option been
exercised  immediately  prior to the  happening of such event,  and the Exercise
Price shall be correspondingly adjusted;  provided,  however, that no adjustment
in the number of shares and/or the Exercise Price shall be required  unless such
adjustment would require an increase or decrease of at least one percent (1%) in
such number and/or price; and provided  further,  however,  that any adjustments
which by reason of this  Section 6 are not  required to be made shall be carried
forward and taken into account in any subsequent adjustment.  An adjustment made
pursuant to this Section 6 shall become effective  immediately  after the record
date in the case of the stock  dividend or other  distribution  and shall become
effective  mmediately  after the  effective  date in the case of a  subdivision,
combination or  reclassification.  The Optionee shall be entitled to participate
in any  subscription  or other rights  offering made to holders of the Company's
Common  Stock to the extent it would have been  entitled  had this  Option  been
exercised  in the  full  number  of  shares  as to  which  this  Option  remains
unexercised  immediately  prior to the record date for such rights offering.  If
the Company is  consolidated or merged with or into another Company or if all or
substantially  all of its assets are  conveyed to another  Company,  this Option
shall  thereafter  be  exercisable  for the  purchase  of the kind and number of
shares of stock or other  securities or property,  if any,  receivable upon such
consolidation,  merger or  conveyance  by an Optionee of the number of shares of
Common Stock of the Company  which could have been  purchased on the exercise of
this Option immediately prior to such consolidation,  merger or conveyance; and,
in any  such  case,  appropriate  adjustment  (as  determined  by the  Board  of
Directors)  shall be made in the application of the provisions  herein set forth
with respect to the rights and  interests  thereafter of the Optionee to the end
that the  provisions  set forth  herein  (including  provisions  with respect to
changes in and other  adjustments  of the  number of shares of Common  Stock the
Optionee is entitled to purchase) shall  thereafter be applicable,  as nearly as
possible, in relation to any shares of Common Stock or other securities or other
property  thereafter  deliverable  upon the  exercise of this  Option.  Upon any
adjustment  of the  number of shares of  Common  Stock or other  securities  the
Optionee is entitled to purchase,  and of any change in Exercise Price,  then in
each such  case the  Company  shall  give  written  notice  thereof  to the then
registered holder of this Option at the address of such Optionee as shown on the
books of the  Company,  which  notice  shall  state such change and set forth in
reasonable  detail  the  method of  calculation  and the facts  upon  which such
calculation  is based.  Each such notice shall be  accompanied by a statement of
the firm of  independent  certified  public  accountants  retained  to audit the
financial  statements of the Company to the effect that such firm concurs in the
Company's calculation of the change.

                                     Page 3
<PAGE>

    7.   Piggyback  Registration Rights. If the Company at any time from the ate
of the issuance of this Option through the Expiration Date, proposes to register
any of its  securities  under the ecurities Act for sale to the public,  whether
for its own account or for the account of other security holders or both (except
with respect to  registration  statements  on Forms S-4,  S-8 and any  successor
forms thereto), each such time it will give written notice to such effect to the
Optionee at least 30 days prior to such filing.  Upon the written request of the
Optionee  received  by the  Company  within 20 days after the giving of any such
notice by the Company to  register  any of shares of Common  Stock,  the Company
will cause the shares of Common Stock as to which  registration  shall have been
so requested to be included in the securities to be covered by the  registration
statement  proposed to be filed by the  Company,  all to the extent  required to
permit the sale or other  disposition  by the  Optionee of such shares of Common
Stock so  registered.  Notwithstanding  the  foregoing,  in the  event  that any
registration  pursuant  to this  Section  7 shall  be,  in whole or in part,  an
underwritten  public  offering of Common  Stock,  the number of shares of Common
Stock to be included in such an underwriting  may be reduced (pro rata among the
requesting  Optionees) and the other selling stockholders (based upon the number
of shares of Common  Stock  requested  to be  registered  by them) if and to the
extent that the  managing  underwriter  shall be of the good faith  opinion that
such  inclusion  would  adversely  affect the  success of such an  underwriting,
provided, that such number of shares of Common Stock shall not be reduced if any
shares of Common Stock are to be included in such  underwriting  for the account
of any person other than the Company or requesting Optionees of shares of Common
Stock.  In  the  event  of  such a  reduction,  the  Company  agrees  to  file a
registration  statement for the resale of the shares  underlying this Option not
included in such underwritten  offering within ninety (90) days of the date that
the underwritten  offering is declared  effective by the Securities and Exchange
Commission.  Notwithstanding the foregoing provisions,  the Company may withdraw
any  registration  statement  referred  to in this  Section  7  without  thereby
incurring any liability to the Optionees of shares of Common Stock.

    8.   Purchase for Investment. The Optionee represents and agrees that if the
Optionee exercises this Option, in whole or in part, then those Option Shares so
acquired will be acquired for the purpose of  investment  and not with a view to
their resale or distribution and upon each exercise of this Option, the Optionee
will furnish to the Company a written statement to that  effect,satisfactory  in
form and  substance to the Company and its  counsel.  Optionee  understands  and
acknowledges  that the shares to be  acquired  pursuant  to this  Option will be
"restricted  securities"  as such term is defined  under the  Securities  Act of
1933, as amended (the "Act") and accordingly will bear a legend  indicating such
restrictions.

    9.   Representations  and Warranties of Optionee.  As a condition to receipt
of the Option and for other good and valuable consideration, receipt of which is
hereby  acknowledge,  the  Optionee  represents  and  warrants to the Company as
follows:

                    (I)  Optionee  acknowledges that the Company is a evelopment
stage  company  with  no  significant  operating  history  and  that  there  are
significant risks associated with the Company's business. Accordingly, the value
of the Option and the Option Shares will be based upon the Company's development
of its business which is subject to significant risks; and

                    (II) Optionee  understands  that the  Option  and the Option
Shares  (issuable  upon exercise of the Option) are being offered and sold under
an  exemption  from  registration  provided  by  Section  4 of the  Act  and the
regulations promulgated thereunder,  as well as applicable State law exemptions,
and warrants and  represents  that the Option and the Option Shares are being or
will be (in the case of the Option Shares)  acquired by the  undersigned  solely
for the  undersigned's  own account,  for investment  purposes only, and are not
being  purchased  with the  intent or view to resell  the  Option or the  Option
Shares  or  for  the  resale,  distribution,  subdivision  or  fractionalization
thereof.  Consequently,  the  undersigned  must  bear the  economic  risk of the
investment for an indefinite period of time because the Option and the Option

                                     Page 4
<PAGE>

Shares cannot be resold or otherwise transferred unless subsequently  registered
under  the Act  and  qualified  under  applicable  State  law or an  opinion  of
qualified  counsel  that  indicates  an  exemption  from   registration   and/or
qualification is available.

    10.  Notices. Any notice to be given under the terms of this Option shall be
in writing and addressed to the Company at the Company's then-present address or
to Optionee at the address provided  herein,  or at such other address as either
party may  hereafter  designate  in writing  to the  other.  Any notice or other
communication given hereunder shall have been deemed duly given when enclosed in
a properly sealed envelope addressed as aforesaid,  registered or certified, and
deposited  postage prepaid in a post office or branch post office or, in person,
when so delivered, or by overnight courier providing evidence of receipt.

    11.  Representations of Company. The Company represents:  (i) the execution,
delivery and performance of this Agreement has been duly authorized by the Board
of  Directors  of  the  Company;  (ii)  the  consummation  of  the  transactions
contemplated  by this  Agreement will not violate any provision of the Company's
Certificate of Incorporation or Bylaws;  and (iii) no consent of any third party
including, without limitation,  federal or state regulatory agencies is required
for execution and performance of this Agreement by the Company.

    12.  Governing  Law.  This  Agreement  shall be deemed to be made  under and
shall be  construed  in  accordance  with the laws of the  State of New York and
applicable Federal law without regard to conflict of law principles.

    13.  Successors and Assigns.  This Agreement shall be binding upon and inure
to the benefit of the parties  hereto and their legal  successors  and permitted
assigns.

    14.  Entire Understanding;  Masculine / Feminine. This Agreement constitutes
the entire  understanding  of the  parties  and shall not be  amended  except by
written agreement between the parties.  As used herein, the masculine form shall
include the feminine and vice-versa, as the context shall require.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the day and year first above written.

                                                 Lunettes Etal Inc
                                                 By:

                                                    __________________________

                                                 Waldwick Investments Limited.

                                                 By:

                                                    __________________________CREDIT AGREEMENT
                              DATED JULY 30, 2004
                                    BETWEEN
                               U. S. ENERGY CORP.
                                      AND
                               GEDDES AND COMPANY

<PAGE>

                                CREDIT AGREEMENT

     This  CREDIT AGREEMENT entered into at Riverton, Wyoming on the 30th day of
July, 2004, is by and among U.S. Energy Corp., a Wyoming corporation duly formed
and  existing under the laws of the State of Wyoming (the "Borrower") and Geddes
and  Company, an Arizona corporation, duly formed and existing under the laws of
the  State  of  Arizona  (the  "Lender").

                                R E C I T A L S
                                ---------------

     A.   The  Borrower  has  requested  that the Lender provide a Loan of up to
          $3,000,000  to  the  Borrower.

     B.   The  Lender  has  agreed  to  make  such Loan subject to the terms and
          conditions  of  this  Agreement.

     C.   In  consideration  of  the  mutual  covenants  and  agreements  herein
          contained  and  of  the loans and commitments hereinafter referred to,
          the  parties  hereto  agree  as  follows:

                                    ARTICLE I
                                  DEFINITIONS

Section  1.01  Certain  Defined  Terms. As used in this Agreement, the following
               -----------------------
terms  have  the  meanings  specified  below:

     -    "Agreement"  means this Credit Agreement, as the same may from time to
           ---------
          time  be  amended,  modified,  supplemented  or  restated.

     -    "Collateral" means the Properties of the Borrower described in Section
           ----------
          4.01  of  this  Agreement.

     -    "Commitment"  means  the  commitment  of  the  Lender to make the Loan
           ----------
          hereunder  for  an  amount  up  to Three Million Dollars ($3,000,000).

     -    "Commitment  Fee"  has  the  meaning  assigned  such  term  in Section
           ---------------
          2.03(a).

     -    "Default"  means  any event or condition which constitutes an Event of
           -------
          Default or that upon notice, lapse of time or both would, unless cured
          or  waived,  become  an  Event  of  Default.

     -    "Effective  Date"  means  the  date  first  appearing  above.
           ---------------

     -    "Event  of  Default"  has the meaning assigned to such term in Section
           ------------------
          10.01.

     -    "Initial  Funding" has the meaning assigned such term in Section 2.02.
           ----------------

                                        1
<PAGE>

     -    "Loan Documents" means this Credit Agreement, the Note, the Pledge and
           --------------
          Security  Agreement  and  the  Warrant  Agreement.

     -    "Loan"  means  the loan made by the Lender to the Borrower pursuant to
           ----
          this  Agreement.

     -    "Maturity  Date"  means the date that is two years after the Effective
           --------------
          Date.

     -    "Note" means the Secured Convertible Note of the Borrower described in
           ----
          Section  2.04  and  being  substantially  in  the form of Exhibit "A",
          together  with all amendments, modifications, replacements, extensions
          and  rearrangements  thereof.

     -    "Pledge  and  Security  Agreement"  means  an  agreement  between  the
           --------------------------------
          Borrower,  Rocky Mountain Gas, Inc., a Wyoming corporation ("RMG") and
          Lender  in  the  form  of  Exhibit  "B",  as  the same may be amended,
          modified  or  supplemented  from  time  to  time.

     -    "Warrant  Agreement"  means that certain Warrant Agreement from RMG to
           ------------------
          the Lender in the form attached hereto as Exhibit "C", as the same may
          be  amended,  modified  or  supplemented  from  time  to  time.

                                   ARTICLE II
                                   COMMITMENT

Section  2.01     Loans.     Subject  to  the  terms  and  conditions  of  this
                  -----
Agreement,  the  Lender  agrees  to  make  Loans to the Borrower in an aggregate
principal  amount  up to Three Million Dollars ($3,000,000), (the "Commitment").
Any  amount  of the Commitment which has not been borrowed by the Borrower prior
to  August 1, 2006 (the "Commitment Termination Date") shall not be available to
the  Borrower  for  Loans  from  and  after  such  Commitment  Termination Date.

Section  2.02     Borrowings.  Subject  to  the  satisfaction  of all conditions
                  ----------
precedent  by  the  date  of  such  funding:

     A.   Initial  Funding.  On the Effective Date, the Lender shall make a Loan
          ----------------
          to  the Borrower in an amount equal to Borrower's initial Disbursement
          Request  (the  "Initial  Funding").
                          ----------------

     B.   Subsequent  Funding.  Borrower, if in compliance with the terms of the
          -------------------
          Loan,  shall  have  the  right to receive the remaining balance of the
          Three  Million  Dollar  ($3,000,000)  Loan.  Borrower  shall  submit a
          Disbursement  Request  to  Lender  as provided for in Exhibit "1" with
          respect  to each further borrowing. Principal sums repaid or converted
          under  Article  7  during  the  loan  term  may  not  be  reborrowed.

     C.   Minimum  Amounts.  All  borrowings  made  pursuant  to  the  notices
          ----------------
          described  in  B  above  shall  be  in  amounts  of at least $100,000.

                                        2
<PAGE>

Section  2.03     Commitment Fee.    The Borrower shall pay to Lender at closing
                  --------------
a  fee of $90,000, which is equal to 3.0% for all amounts committed to be loaned
to  the  Borrower  hereunder.

Section  2.04     Note.     The Loan made  by  the  Lender  shall  be  evidenced
by  a  Secured  Convertible  Note  of  the Borrower in substantially the form of
Exhibit  A  as  of  the  date  of  this  Agreement._ARTICLE  III

                                  ARTICLE III
                       PAYMENTS OF PRINCIPAL AND INTEREST

Section  3.01     Repayment  of  Loan.     Interest  on the borrowed outstanding
                  -------------------
principal  shall  be  payable  on  the first business day following each quarter
ending  September,  December,  March  and  June,  commencing October 1, 2004 and
continuing  until  the  entire  principal  amount  of  the Note is paid in full.

Section  3.02     Interest.
                  --------

     A.   Interest  Rates.  The  Borrower  will  pay  the Lender interest on the
          ---------------
          unpaid  principal  amount  actually  borrowed  and drawn down from the
          $3,000,000  Loan  at  Ten  Percent  (10%)  per  annum

     B.   Interest  Rate  Computations. All interest hereunder shall be computed
          ----------------------------
          on  the  basis of a year of 365 days (or 366 days in a leap year), and
          in  each  case  shall be payable for the actual number of days elapsed
          (including  the  first  day  but  excluding  the  last  day).

Section  3.03     Prepayments.     The Borrower may prepay all or any portion of
                  -----------
the  Loan  made  without  premium  or  penalty.

                                   ARTICLE IV
                                   COLLATERAL

Section  4.01     Collateral  Pool.  Collateral  for the Loan as provided for by
                  ----------------
the  Pledge  and  Security  Agreement  will  consist  of  the  following:

     A.   The  Ticaboo  Note  and  the  related  mortgage;  and

     B.   A  1981  Citation  II  550  jet,  S/N  #550-0264,  FAA  # N777WY,; and

     C.   RMG's  working  mineral  interests  in  Castle  Rock  CBM  leases; and

     D.   Four million issued and outstanding shares of Rocky Mountain Gas, Inc.
          ("RMG")  Common  Stock.

                                        3
<PAGE>

                                    ARTICLE V
                              MANDATORY PREPAYMENT

Section 5.01     Mandatory Prepayment.     Borrower agrees to immediately prepay
the  balance  of  the  Loan  as  specified  in  the  Note.

                                   ARTICLE VI
              WARRANTS IN RMG, REGISTRATION AND CASHLESS EXERCISE

Section 6.01     Warrants in RMG.     Borrower agrees to have issued in Lender's
name  or  its designee, warrants to purchase RMG Common Stock in accordance with
the  Warrant  Agreement.

Section 6.02     Registration.     Lender shall have full registration rights on
                 ------------
the  shares  exercised  once  RMG  goes  public.

Section  6.03     Cashless  Exercise.     There  shall  be  no cashless exercise
                  ------------------
except  per  Section  7.01  of  this  Agreement.

                                  ARTICLE VII
                    OPTIONAL CONVERSION AND CONVERSION PRICE

Section  7.01     Optional  Conversion.     Lender  shall have the option at any
                  --------------------
time  prior  to payment of all amounts due under the Note, to convert all or any
portion  of  the  unpaid  principal  amount  of  the  Note  into  fully paid and
non-assessable  shares  of  common  stock  of  RMG  Common  Stock.

Section  7.02     Conversion Price.     The number of shares of RMG Common Stock
                  ----------------
that  Lender  shall be entitled to receive upon conversion shall be equal to the
number  attained  by  dividing  the  unpaid  principal  amount of the Note being
converted by the Conversion Price.  The "Conversion Price" shall be equal to the
Exercise  Price  (as  defined  in  the  Warrant  Agreement)  as  of  the date of
conversion.  Lender  shall  receive  full registration rights on any such shares
received  upon  conversion  to  the  same  extent  as  provided  in  the Warrant
Agreement.  If the Lender elects to convert any part of the Note into RMG Common
Stock,  the  Lender  shall refund back to USEG the three points paid to Geddes &
Company  at  closing on a prorata basis (i.e., if one million dollars out of the
three million dollar loan is converted, only one-third of the three points is to
refunded  back  to  USEG).

                                  ARTICLE VIII
                              CONDITIONS PRECEDENT

Article  8.01     Initial  Funding.     The  obligations  of  the Lender to make
                  ----------------
Loans  under  the  Initial  Funding shall not become effective until the date on
which  each  of  the  following  conditions  are  satisfied.

     A.   The  Lender  shall  have  received  all fees and other amounts due and
          payable

                                        4
<PAGE>

          on  or  prior  to  the  Effective  Date.

     B.   The  Lender  shall have received the duly executed Note payable to the
          order  of  the  Lender  in  a principal amount equal to its Commitment
          dated  as  of  the  date  hereof.

     C.   The  Lender  shall  have  received from Borrower and RMG duly executed
          counterparts  of  the  Pledge  and  Security  and  Warrant  Agreements
          described on Exhibits B and C, and delivery of any Collateral required
          by  the  terms  thereof.

     D.   The  terms  of  the  Loan Documents have been approved by the Board of
          Directors  of  the  Borrower  and  RMG.

     E.   Lender  shall  have received an opinion of counsel, in form reasonably
          acceptable  to  Lender,  confirming  the  authorization, execution and
          delivery of the Loan Documents by Borrower and RMG, the enforceability
          of  the  Loan  Documents, and the validity, priority and perfection of
          the  security  interests  granted  to  Lender  in  the  Collateral.

                                   ARTICLE IX
                         REPRESENTATIONS AND WARRANTIES

              The Borrower and Lender represent and warrant that:

Section  9.01     Organization;  Powers.
                  ---------------------

     A.   Each  of  the Borrower and RMG is duly organized, validly existing and
          in  good  standing  under the laws of Wyoming, has all requisite power
          and  authority,  and  has  all  material  governmental  licenses,
          authorizations,  consents  and  approvals necessary, to own its assets
          and  to  carry  on  its  business  as  now  conducted.

     B.   The  Lender  is  duly organized, validly existing and in good standing
          under  the laws of Arizona, has all requisite power and authority, and
          has  all  material governmental licenses, authorizations, consents and
          approvals necessary, to own its assets and to carry on its business as
          now  conducted  and  warrants to the Borrower it has the $3,000,000 to
          loan  to  Borrower.

                                    ARTICLE X
                          EVENTS OF DEFAULT; REMEDIES

Section  10.01     Event  of  Default.     One  or  more of the following events
                   ------------------
shall  constitute  an  "Event  of  Default":

                                        5
<PAGE>

     A.   The  Borrower  shall  fail  to  pay any interest due on the borrowings
          under  the  Loan  when  and  as the same shall become due and payable,
          whether  at  the  due  date  thereof or at a date fixed for prepayment
          thereof  or otherwise.

     B.   The  Borrower  shall  fail to pay the principal amount due on the Loan
          when  the  same  shall  become  due  and  payable.

     C.   The  Borrower  or  RMG  shall  default in the performance of any other
          agreement  or  covenant contained herein or in any other Loan Document
          (other  than  as  provided  in  subparagraph  A  or B above), and such
          default  shall  continue  uncured  for  twenty  (20) days after notice
          thereof  to  Borrower  given  by  Secured  Party.

Section  10.02     Remedies.     In the case of an Event of Default by Borrower,
                   --------
Lender shall have the right to declare the Note and the Loan then outstanding to
be due and payable according to the terms of the Note, and shall have all rights
as  described  in  the  Note  or  any  other  Loan  Document.

                                   ARTICLE XI
                                  MISCELLANEOUS

Section  11.01     Notices.
                   -------

     A.   All  notices  and other communications provided for herein shall be in
          writing  and  shall be delivered by hand or overnight courier service,
          mailed  by  certified  or  registered  mail  or  sent  by telecopy, as
          follows:

          1.   If  to  the  Borrower  or  RMG:
                    U.  S.  Energy  Corp.  /  Rocky  Mountain  Gas,  Inc.
                    877  North  8th  West
                    Riverton,  Wyoming  82501
                    Attn:  Scott  Lorimer
                    (Telecopy  No.  (307)  857-3050);

          2.  If  to  the  Lender:

                    Geddes  and  Company
                    2930  East  Camelback  Road,  Suite  110
                    Phoenix,  Arizona  85016
                    (Telecopy  No.  (602)  468-1793).

     B.   Notices and other communications to the other parties hereunder may be
          delivered  or  furnished  by  electronic  communications  pursuant  to
          procedures  agreed  by  the  parties.

                                        6
<PAGE>

Section  11.02     Successors  and Assigns.     The provisions of this Agreement
                   -----------------------
shall  be  binding upon and inure to the benefit of the parties hereto and their
respective  successors  and assigns permitted hereby, except that any assignment
must  be approved in writing by the other party.  Such written consent shall not
be  unreasonably  withheld  by  either  party.

Section  11.03     Counterparts;  Integration;  Effectiveness.
                   ------------

     A.   This  Agreement  may  be  executed  in  counterparts (and by different
          parties  hereto  on  different  counterparts),  each  of  which  shall
          constitute  an  original,  but  all of which when taken together shall
          constitute  a  single  contract.

     B.   This  Agreement  and  the  other  Loan Documents constitute the entire
          contract  among  the parties relating to the subject matter hereof and
          thereof  and  supersede  any  and  all  previous  agreements  and
          understandings, oral or written, relating to the subject matter hereof
          and thereof. This Agreement and the other Loan Documents represent the
          final  agreement  among  the parties hereto and thereto and may not be
          contradicted  by evidence of prior, contemporaneous or subsequent oral
          agreements  of  the  parties.

Section 11.04     Severability.     Any provision of this Agreement or any other
                  ------------
Loan  Document  held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality  or  unenforceability  without  affecting  the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision.

Section  11.05     Governing  Law;  Jurisdiction.
                   --------------

     A.   This  Agreement  and  the  Loan  Documents  (other  than  the  Warrant
          Agreement)  shall be governed by, and construed in accordance with the
          laws  of  the  State  of  Arizona.

     B.   Any  legal  action  or  proceeding  with respect to the Loan Documents
          (other  than  the Warrant Agreement) shall be brought in the Courts of
          the  State  of Arizona, and each party consents to the jurisdiction of
          such  Courts.

Section  11.06     Headings.  Article  and Section  headings and  the  Table  of
                   --------
Contents used herein are for convenience of reference only, are not part of this
Agreement  and  shall  not  affect  the  construction  of,  or  be  taken  into
consideration  in  interpreting,  this  Agreement.

Section  11.07     Condition  to  Borrower  Obligations.  The  obligations  of
                   ------------------------------------
Borrower  and  RMG  hereunder  shall  be  ineffective  until, and are subject to
obtaining  the  approval  of  the Boards of Directors of Borrower and RMG of the
transactions  contemplated  hereby; this Agreement shall automatically terminate
and  be  of  no force and effect unless such approvals are obtained on or before
August  6,  2004.

                                        7
<PAGE>

     The parties hereto have caused this Agreement to be duly executed as of the
day  and  year  first  above  written.

BORROWER:                               U.S. ENERGY CORP.

                                        By:    /s/ Keith G. Larsen
                                           -------------------------------------
                                           Name:  Keith G. Larsen
                                           Title: President

LENDER:                                 GEDDES AND COMPANY

                                        By:    /s/ F. Michael Geddes
                                           -------------------------------------
                                           Name:  F. Michael Geddes
                                           Title: President

                                        8
<PAGE>

                                  EXHIBIT "1"

                              DISBURSEMENT REQUEST

     DATE:  ___________________________

     TO:       Geddes  and  Company
               2930  Camelback  Road,  Suite  110
               Phoenix,  Arizona  85016
               (602)  468-  1793  (facsimile)

     FROM:     U.  S.  Energy  Corp.
               877  North  8th  West
               Riverton,  Wyoming  82501
               (307)  857-3050  (facsimile)

     Pursuant  to  the  July  30,  2004  Credit  Agreement and the July 30, 2004
Secured  Convertible  Note, Borrower hereby requests the following disbursement:

Current  Amount  Borrowed:            $_______________________

Amount  Requested:                    $_______________________

Total  Borrowed  After  Request       $_______________________

Date  Required:                       ________________________

                                      U.S. Energy Corp.

                                      By:  ____________________________
                                              KEITH G. LARSEN
                                              President

                                        9
<PAGE>

                             EXHIBITS AND SCHEDULES
                             ----------------------

     Exhibit  A     Secured  Convertible  Note
     Exhibit  B     Form  of  Pledge  and  Security  Agreement
     Exhibit  C     Form  of  Warrant  Agreement

                                       10
<PAGE>

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