Document:

EXHIBIT "A"
                            SECURED CONVERTIBLE NOTE

<PAGE>

NEITHER  THIS  NOTE  NOR  THE  SHARES OF ROCKY MOUNTAIN GAS, INC. ("RMG") COMMON
STOCK  ISSUABLE  UPON  CONVERSION  OF  THIS  NOTE HAVE BEEN REGISTERED UNDER THE
SECURITIES  ACT  OF  1933,  AS  AMENDED (THE "ACT"), AND IF RMG BECOMES A PUBLIC
COMPANY,  THE  SHARES  MAY  NEITHER  BE OFFERED, SOLD NOR OTHERWISE TRANSFERRED,
PLEDGED  OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE
HOLDER  HAS  RECEIVED  AN  OPINION  OF  COUNSEL  OR  OTHER  EVIDENCE  REASONABLY
SATISFACTORY  TO  THE  MAKER  THAT  SUCH  REGISTRATION  IS  NOT  REQUIRED.

$3,000,000                                                         July 30, 2004

                            SECURED CONVERTIBLE NOTE

     FOR  VALUE RECEIVED, U.S. Energy Corp. (the "Maker") a Wyoming corporation,
having  its principal place of business at 877 North 8th West, Riverton, Wyoming
82501,  hereby  promises  to pay to the order of Geddes and Company ("Payee") an
Arizona  corporation, having its address at 2930 East Camelback Road, Suite 110,
Phoenix,  Arizona 85016, the sum of Three Million Dollars ($3,000,000),  or such
lesser  amount  which  represents  the  actual  principal  amount  borrowed  in
accordance  with that certain Credit Agreement ( the "Credit Agreement") between
Maker  as Borrower and Payee as Lender of even date with this Note. This Secured
Convertible  Note  (this "Note") is issued pursuant to the Credit Agreement. All
capitalized  terms  used  herein but not otherwise defined herein shall have the
meanings  ascribed  to  them  in  the  Credit  Agreement.

     1.   Maturity.  The  amount  outstanding  under  this  Note will be due and
          --------
          payable  at  the  address  of  Payee  or such other place as Payee may
          designate  on the earlier of: (a) August 1, 2006, or (b) the date upon
          which  Maker's  subsidiary, Rocky Mountain Gas, Inc., becomes a public
          company  (the  "Maturity  Date").  No advances shall be made by Lender
          after  the  Maturity  Date.

     2.   Payment  of  Interest.  Interest on the borrowed outstanding principal
          ---------------------
          balance  under  this  Note  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  this  Note  is  paid  in  full.

     3.   Interest  Rate.  The  outstanding principal balance of this Note shall
          --------------
          bear  interest  at  a  rate  per  annum  equal  to  Ten Percent (10%).

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     4.   Optional  Prepayment.
          --------------------

          A.   Subject  to  paragraph  B  below, from and after the date hereof,
               Maker  shall have the privilege at any time and from time to time
               of  prepaying  this  Note  in  whole  or  in  part  (each,  a
               "Prepayment"),  provided  that Maker shall send a notice (each, a
               "Prepayment Notice") to Payee at least five (5) days prior to the
               date  of  each such prepayment (each, a "Prepayment Date"). There
               shall be no premium or penalty in connection with any Prepayment.
               Each  Prepayment shall be applied first against accrued interest,
               if  any,  and then against principal outstanding. Each Prepayment
               Notice  shall set forth the Prepayment Date and the amount of the
               Prepayment,  specifying  the amount thereof being applied against
               accrued  interest  and  the  amount thereof being applied against
               principal.  The  amount of principal repaid by any Prepayment may
               not  be  re-borrowed.

          B.   In the event that Maker sends a Prepayment Notice to Payee, Payee
               may  elect  prior  to  the Prepayment Date to convert into common
               stock  of  Rocky Mountain Gas, Inc. ("RMG Common Stock") pursuant
               to Section 5 hereof, all or part of the amount of principal to be
               repaid  by  the  proposed  Prepayment  instead  of receiving such
               prepayment.

     5.   Optional Conversion. At any time prior to repayment of all amounts due
          -------------------
          under the Note, all or any portion of the principal amount of the Note
          shall  be  convertible  at the option of the Payee into fully paid and
          non-assessable shares of RMG Common Stock. The number of shares of RMG
          Common  Stock  that Payee shall be entitled to receive upon conversion
          shall be equal to the number attained by dividing the 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.

          A.   In order to exercise the conversion privilege, shall give written
               notice of conversion to Maker stating Payee's election to convert
               this  Note  or  the  portion  thereof  in  a  minimum of $100,000
               increments  specified  in said notice. As promptly as practicable
               after  receipt of the notice, Maker shall issue and shall deliver
               to  Payee  a  certificate  or certificates for the number of full
               shares  of  RMG Common Stock issuable upon the conversion of this
               Note  or  portion  thereof  registered  in  the  name of Payee in
               accordance  with  the  provisions  of  this  Section  5.

          B.   Each conversion shall be deemed to have been effected on the date
               the  conversion  notice  shall  have  been  received by Maker, as
               aforesaid,  and Payee shall be deemed to have become on said date
               the  holder of record of the shares of Common Stock issuable upon
               such  conversion.  No  fractional shares of Common Stock shall be
               issued  upon

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               conversion  of  this  Note. Any amounts so converted shall not be
               reborrowed.

     6.   Security.  As  security  for  the repayment of all liabilities arising
          --------
          under  this Note, the Maker hereby grants to Payee a security interest
          in and a lien on all of the Collateral (as that term is defined in the
          Pledge  and  Security Agreement). Payee shall have all rights provided
          to  a  secured party under the Pledge and Security Agreement and under
          the  Uniform  Commercial Code of the State of Arizona. The Maker shall
          execute and deliver such documentation as Payee may reasonably request
          to  evidence  and  perfect  Payee's  security interest granted in this
          Section  6.

     7.   Use  of Proceeds. Funds advanced under this Note shall be used for the
          ----------------
          Maker's  and  RMG's  acquisition  and  development  of  natural  gas
          properties  and general corporate purposes consistent with the Maker's
          business  and  that  of  RMG.

     8.   Covenants.  Maker  covenants  and  agrees  that,  so  long  as  any
          ---------
          indebtedness is outstanding hereunder, it will comply with each of the
          following  covenants  (except in any case where Payee has specifically
          consented  otherwise  in  writing):

          A.   Financial  Reporting. Maker shall furnish to Payee a copy of each
               --------------------
               financial  report  submitted  on Form 10-K or 10-Q filed with the
               Securities  and Exchange Commission within seven (7) days of such
               filing.

          B.   Notice  of  Event of Default. Maker shall furnish to Payee notice
               ----------------------------
               of  the  occurrence  of  any Event of Default (as defined herein)
               within  five  (5)  days  after  it  becomes known to an executive
               officer  of  Maker.  -

          C.   Financial  Statements.  Maker  shall  furnish  to Payee quarterly
               ---------------------
               financial  statements, including balance sheets and statements of
               income,  for  each  of  Maker  and RMG, which statements shall be
               annually  audited, as soon as practicable after they are prepared
               for  internal  use.

     9.   Event  of  Default.  For  purposes of this Note, the Maker shall be in
          ------------------
          default  hereunder  (and  an  "Event  of  Default" shall have occurred
          hereunder)  if:

          A.   Maker  shall  fail  to  pay  when  due  any payment of principal,
               interest, fees, costs, expenses or any other sum payable to Payee
               hereunder  or  otherwise;

          B.   Maker  shall default in the performance of any other agreement or
               covenant contained herein (other than as provided in subparagraph
               A above), and such default shall continue uncured for twenty (20)
               days

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               after  notice  thereof to Maker given by Payee, or if an Event of
               Default  shall  occur  under  any  other  Loan  Document;

          C.   Maker:  becomes insolvent, bankrupt or generally fails to pay its
               debts  as  such  debts  become  due;  is adjudicated insolvent or
               bankrupt;  admits  in  writing its inability to pay its debts; or
               shall  suffer  a  custodian,  receiver  or  trustee  for  it  or
               substantially  all  of  its  property  to  be  appointed  and  if
               appointed  without  its  consent, not be discharged within thirty
               (30)  days;  makes an assignment for the benefit of creditors; or
               suffers  proceedings  under  any  law  related  to  bankruptcy,
               insolvency,  liquidation  or  the reorganization, readjustment or
               the  release  of  debtors  to  be  instituted  against  it and if
               contested  by it not dismissed or stayed within ten (10) days; if
               proceedings  under  any  law  related  to bankruptcy, insolvency,
               liquidation,  or  the reorganization, readjustment or the release
               of  debtors is instituted or commenced by Maker; if any order for
               relief  is  entered relating to any of the foregoing proceedings;
               if  Maker  shall  call  a meeting of its creditors with a view to
               arranging  a  composition or adjustment of its debts; or if Maker
               shall  by  any  act  or  failure  to act indicate its consent to,
               approval  of  or  acquiescence  in  any  of  the  foregoing;

     10.  Consequences  of  Default.  Upon the occurrence of an Event of Default
          -------------------------
     and  at  any  time  thereafter, the entire unpaid principal balance of this
     Note, together with interest accrued thereon and with all other sums due or
     owed  by  Maker  hereunder,  shall  become  immediately due and payable. In
     addition,  the principal balance and all past-due interest shall thereafter
     bear  interest  at  the  rate  of  18%  per  annum  until  paid.

     11.  Remedies  not  Exclusive.  The  remedies  of  Payee provided herein or
          ------------------------
     otherwise  available  to  Payee at law or in equity shall be cumulative and
     concurrent,  and  may  be  pursued singly, successively and together at the
     sole  discretion  of  Payee,  and  may  be  exercised  as often as occasion
     therefore shall occur; and the failure to exercise any such right or remedy
     shall  in  no  event  be  construed  as  a  waiver  or release of the same.

     12.  Notice.  All  notices  required  to  be  given  to  any of the parties
          ------
     hereunder shall be in writing and shall he deemed to have been sufficiently
     given  for  all purposes when presented personally to such party or sent by
     certified  or  registered  mail, return receipt requested, to such party at
     its  address  set  forth  below:

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<PAGE>

If  to  the  Maker:     U.S. Energy Corp.
-------------------
                        877  North  8th  West
                        Riverton,  Wyoming  82501
                        Attn:  Scott  Lorimer
                        Fax:  307-857-3050

If  to  the  Payee:     Geddes  and  Company.
-------------------
                        2930  East  Camelback  Road,  Suite  110
                        Phoenix,  Arizona  85016
                        Attn:  F.  Michael  Geddes
                        Fax:  602-468-1793

     Such  notice  shall  be  deemed  to  be  given  when  received if delivered
personally  or  five  (5) business days after the date mailed. Any notice mailed
shall  be sent by certified or registered mail. Any notice of any change in such
address  shall  also be given in the manner set forth above. Whenever the giving
of notice is required, the giving of such notice may be waived in writing by the
party  entitled  to  receive  such  notice.

     13.  Severability.  In the event that any provision of this Note is held to
          ------------
     be  invalid, illegal or unenforceable in any respect or to any extent, such
     provision  shall  nevertheless  remain  valid, legal and enforceable in all
     such  other  respects  and  to  such extent as may be permissible. Any such
     invalidity,  illegality  or  unenforceability  shall  not  affect any other
     provisions  of  this  Note,  but  this  Note  shall be construed as if such
     invalid,  illegal  or  unenforceable  provision  had  never  been contained
     herein.

     14.  Successors  and  Assigns. This Note inures to the benefit of the Payee
          ------------------------
     and  binds  the  Maker,  and its respective successors and assigns, and the
     words  "Payee"  and  "Maker"  whenever occurring herein shall be deemed and
     construed  to  include  such  respective  successors  and  assigns.

     15.  Entire  Agreement.  This  Note  embodies  the entire understanding and
          -----------------
     agreement  between  the  parties  hereto  and  thereto  with respect to the
     subject  matter  hereof  and  thereof  and supersedes all prior agreements,
     understandings  and  inducements,  whether  express  or  implied,  oral and
     written.

     16.  Modification  of  Agreement. This Note may not be modified, altered or
          ---------------------------
     amended, except by an agreement in writing signed by both the Maker and the
     Payee.

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     17.  Governing  Law.  This  instrument  shall be construed according to and
          --------------
     governed  by  the  laws  of  the  State  of  Arizona.

     18.  Consent  to  Jurisdiction  and  Service  of Process. Maker irrevocably
          ---------------------------------------------------
     appoints  each  and every officer of Maker as its attorney upon whom may be
     served  any notice, process or pleading in any action or proceeding against
     it  arising  out  of  or  in  connection  with  this Note; and Maker hereby
     consents  that  any  action  or  proceeding  against  it  be  commenced and
     maintained  in  any court within the State of Arizona by service of process
     on  any  such,  officer;  and  Maker agrees that the courts of the State of
     Arizona  shall  have jurisdiction with respect to the subject matter hereof
     and  the  person  of  Maker and the collateral securing Maker's obligations
     hereunder. Notwithstanding the foregoing, Payee, in its absolute discretion
     may  also  initiate  proceedings in the courts of any other jurisdiction in
     which  Maker  may  be  found  or in which any of its properties or any such
     collateral  may  be  located.

     19.  Mandatory  Prepayments.  Maker shall apply, as Prepayments to the Loan
          ----------------------
     until  paid  in  full, (a) all amounts received by Maker from settlement or
     enforcement  of  any  judgment entered upon its claims against Nukem, Inc.,
     and  (b)  all  payments  or  proceeds received by Maker with respect to the
     disposition  or  sale of any of the Collateral (whether or not such sale or
     disposition  is  permitted  by  the  terms  of  the  Pledge  and  Security
     Agreement). Lender shall be required to make no further advances under this
     Note  following  a sale or disposition of any of the Collateral (whether or
     not  such  sale  or disposition is permitted by the terms of the Pledge and
     Security  Agreement).

     IN  WITNESS WHEREOF, Maker has duly executed this Note as of the date first
written  above.

                                        MAKER

                                        U.S. ENERGY CORP.

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

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<PAGE>EXHIBIT  "B"

                          PLEDGE AND SECURITY AGREEMENT

<PAGE>

                          PLEDGE AND SECURITY AGREEMENT

This  PLEDGE  AND SECURITY AGREEMENT, dated as of July 30, 2004, is between U.S.
Energy  Corp.  (the  "Borrower"),  and  Rocky  Mountain Gas, Inc., ("RMG"), both
Wyoming  corporations,  and  Geddes  and  Company,  (the  "Lender")  an  Arizona
corporation,  and  is  executed  pursuant  to the Credit Agreement dated of even
date herewith (as amended, supplemented or otherwise modified from time to time,
the  "Credit  Agreement"),  among  Borrower  and  Lender.

                                    RECITALS

     WHEREAS, the Borrower and RMG have requested that the Lender provide a loan
of  up  to  $3,000,000  to  the  Borrower  (the  "Loan");  and

     WHEREAS,  the  Lender  has agreed to make such Loan subject to the terms of
the  Credit  Agreement;  and

     WHEREAS,  the  Borrower  and RMG, will receive direct and indirect benefits
from  the  Loan  under  the  Credit  Agreement;  and

     WHEREAS,  it  is  a condition precedent to the obligations of the Lender to
make  the  Loan under the Credit Agreement that the Borrower and RMG execute and
deliver  this  Agreement;

     NOW,  THEREFORE,  in consideration of the promises herein and to induce the
Lenders  to enter into the Credit Agreement and to make the Loan thereunder, and
for  other good and valuable consideration, the receipt and sufficiency of which
are  hereby  acknowledged,  the  parties  hereto  agree  as  follows:

                                    ARTICLE I
                          DEFINITIONS; TERMS GENERALLY

     Section  1.01  Definitions.   As  used  herein:

     (a)  terms  defined  above  have  the  meanings  given  such  terms  above;

     (b)  unless otherwise defined herein, terms defined in the Credit Agreement
          and  used  herein  have  the  meanings  given  to  them  in the Credit
          Agreement;

     (c)  unless  otherwise  defined  herein,  terms  defined  in  the  Uniform
          Commercial  Code  (as  defined  herein)  and used herein have the same
          meanings  herein  as  specified  therein; provided, however, that if a
          term  is  defined  in  Article  9  of  the  Uniform  Commercial  Code
          differently  than  in  another Article of the Uniform Commercial Code,
          then  such  term  has  the  meaning  specified  in  Article  9;  and

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<PAGE>

     (d)  the  following  terms  have  the  following  meanings:

          "Agreement"  means this Pledge and Security Agreement, as the same may
           ---------
          be  amended,  supplemented  or  otherwise  modified from time to time.

          "Collateral"  has  the  meaning  given  such  term  in  Section  2.01.
           ----------

          "Obligations"  means  the  collective  reference  to  the  payment and
           -----------
          performance  when
          due  of all indebtedness, liabilities, obligations and undertakings of
          the  Borrower  (including,  without  limitation,  all Indebtedness) of
          every  kind  or  description  arising  out  of  or  outstanding under,
          advanced  or  issued pursuant to, or evidenced by, the Loan Documents.

          "Pledged  Property"  means:
           -----------------

          1.   That certain promissory note dated August 14, 2003, issued by The
               Cactus  Group, LLC to Plateau Resources Limited (and subsequently
               assigned  to  the  Borrower) (the "Ticaboo Note") and the related
               mortgage  securing such note, copies of which are attached hereto
               as  Exhibit  B-1;  and

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

          3.   RMG's  working  mineral  interests in all Castle Rock CBM leases,
               consisting  of  all  Acquired  Assets (as such term is defined in
               that  certain  Agreement  for Purchase and Sale of Assets between
               RMG  and  Quantum Energy, LLC, dated January 3, 2000, as modified
               by that certain Purchase and Sale Agreement between RMG and CCBM,
               Inc.  dated  June  29,  2001), which leases are more specifically
               described  on  Exhibit  B-2  attached  hereto  (the  "Mineral
               Interests");  and

          4.   Four  million  shares  of Rocky Mountain Gas, Inc. ("RMG") Common
               Stock  (the  "RMG  Stock")  .

          "Secured  Party"  means  the  Lender.
           --------------

          "Loan  Documents"  means  the  collective  reference  to  the  Credit
           ---------------
          Agreement,  the  Secured Convertible Note, the Warrant Agreement, this
          Agreement  and  any  other  document  made,  delivered or given in
          connection  with  any  of  the  foregoing.

          "Uniform  Commercial  Code"  means the Uniform Commercial Code as from
           -------------------------
          time  to  time  in  effect  in  the  State  of  Arizona.

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<PAGE>

     Section  1.02  Terms Generally; Rules of Construction.   The definitions of
terms  herein  shall apply equally to the singular and plural forms of the terms
defined.  Whenever  the  context  may  require,  any  pronoun  shall include the
corresponding  masculine,  feminine  and  neuter  forms.

                                   ARTICLE II
                           GRANT OF SECURITY INTEREST

     Section  2.01  Grant  of  Security Interest. As collateral security for the
prompt  and  complete  payment  and  performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Borrower and RMG
hereby  pledge  to  the  Secured Party, and hereby grant to the Secured Party, a
first priority (second priority as to the Citation aircraft) continuing security
interest  in,  lien  on and right of setoff against, all of the Pledged Property
and  all  proceeds  thereof  (the  "Collateral").

     Section  2.02  Authorization to File Financing Statements. The Borrower and
RMG  hereby irrevocably authorize the Secured Party at any time and from time to
time  to  file  in  any  filing  office in any relevant jurisdiction any initial
financing  statements  and  amendments thereto indicating the Collateral in such
form as may be required by the Secured Party. The Borrower agrees to furnish any
information reasonably requested by the Secured Party for such purposes promptly
upon  the  Secured  Party's  request.  The  Borrower  and  RMG also ratify their
authorization  for  the Secured Party to have filed in any relevant jurisdiction
any  like  initial  financing statements or amendments thereto if filed prior to
the  date  hereof. In addition, to perfect security interests by Secured Party's
possession,  Borrower  or RMG will deliver to Secured Party the original Ticaboo
Note,  with  a  separate  endorsement  signed  in  blank,  and  a  certificate
representing  the  RMG  Stock,  together  with  stock  powers  endorsed in blank
sufficient  to  effect  a  transfer  of  such stock. Upon payment in full of the
Obligations, Secured Party shall return possession of all Collateral to Borrower
and release all filed and recorded financing statements or other evidence of the
security  interests  arising  hereunder.

                                  ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

     The  Borrower  and RMG hereby represent and warrant to Secured Party, as of
the date hereof and at all times during the terms of this Agreement, as follows:

     Section 3.01 Organization. The Borrower and RMG are duly organized, validly
existing  and  in  good  standing  under the laws of Wyoming, have all requisite
power  and  authority,  and  have  all  material  governmental  licenses,
authorizations, consents and approvals necessary, to own their respective assets
and  to  carry  on  their  business  as  now  conducted.

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<PAGE>

     Section  3.02  Authority; Enforceability. The execution and delivery by the
Borrower  and  RMG  of  this  Agreement  and  the  other  Loan Documents and the
performance  of their obligations hereunder and thereunder are within the powers
of the Borrower and RMG and have been duly authorized by all necessary corporate
Board  approval,  and do not contravene any law, regulation, or order applicable
to  the  Borrower  or  RMG or any of its properties or assets or any contractual
restriction  which may, individually or in the aggregate have a material adverse
effect  on  the business, prospects or condition (financial or otherwise) of the
Pledgor.

     Section 3.03 Perfected First Priority Liens. The security interests granted
pursuant  to  this  Agreement  (a)  upon  the  filing  of  a financing statement
describing the Collateral with the Secretary of State of Wyoming and delivery of
possession  of  the  Ticaboo  Note  and  the  RMG  Stock, shall constitute valid
perfected  security interests of the Collateral in favor of the Secured Party as
collateral  security  for  the  Obligations,  enforceable in accordance with the
terms hereof against all creditors of the Borrower and any Persons purporting to
purchase  any  Collateral  from  the Borrower and (b) except for the Citation II
aircraft there are no prior or other Liens on the Collateral in existence on the
date  hereof.

     Section  3.04 Solvency. The Borrower is not insolvent as of the date hereof
and  will  not  be  rendered  insolvent  as  a  result  of  this  Agreement.

                                   ARTICLE IV
                              AFFIRMATIVE COVENANTS

     The  Borrower  and  RMG  hereby unconditionally covenant and agree with the
Secured  Party,  until  the  entire  Obligation  shall have been paid in full as
follows:

     Section  4.01  Maintenance  of  Perfected  Security  Interest;  Further
     Documentation.

          (a)  The  Borrower  and  RMG  shall maintain the security interest and
               lien  created  by this Agreement as a perfected security interest
               and  lien having at least the priority described in Section 3.03;
               and

          (b)  The  Borrower shall promptly give notice to the Secured Party of,
               and  shall  defend  against, any suit, action, proceeding or lien
               that  involves  the Collateral or that could adversely affect the
               security  interest  and  lien  granted  by  it hereunder, and the
               Borrower  shall  defend the security interest and lien created by
               this  Agreement

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<PAGE>

               against  the  claims  and  demands of all Persons whomsoever; and

          (c)  The  Borrower and RMG will furnish to the Secured Party from time
               to  time  statements  and  schedules  further  identifying  and
               describing  the  Collateral  and such other reports in connection
               with  the Collateral as the Secured Party may reasonably request.

          (d)  The  Borrower  and  RMG  shall timely perform and comply with all
               provisions  of  the  Loan  Documents.

                                    ARTICLE V
                               NEGATIVE COVENANTS

     Section  5.01  Restrictions  on  Sales and other Dispositions. The Borrower
shall  not  sell,  assign, convey, pledge, encumber, transfer, redeem, exchange,
substitute,  replace  or  otherwise dispose of or abandon all or any part of the
Collateral  without  the  prior  written  consent of the Secured Party, provided
however, the Borrower shall have the right to exercise good business judgment in
the  management  of  the  Mineral  Interests  including  lease  cancellation  or
expiration  so  long  as  75%  of  the  value  is  not  diminished.

     Section 5.02 Impairment of Security Interest. The Borrower will not take or
fail  to  take any action which would in any manner impair the enforceability or
priority  of the Secured Party's security interest in any Collateral, impair the
Collateral  or  the  rights,  remedies,  powers  and privileges conferred on the
Secured  Party  pursuant  to this Agreement or by operation of law or otherwise.

                                   ARTICLE VI
                                EVENT OF DEFAULT

     Section  6.01  Event  of  Default.  One  or more of the following events or
circumstances  shall  constitute  an  "Event  of  Default"  hereunder:

          A.   An  "Event  of  Default"  under the Credit Agreement or any other
               Loan  Document  shall  occur  and  be  continuing;  or

          B.   The  Borrower shall fail to pay any amount hereunder or under any
               other  Loan  Document to which it is a party when and as the same
               shall  become  due  and  payable.

                                  ARTICLE VII
                              RIGHTS AND REMEDIES

     Section  7.01  Rights  and  Remedies.  Upon  the  occurrence and during the
continuance  of an Event of Default, the Secured Party may exercise, in addition
to  all  other rights and remedies granted to it in the Secured Documents and in
any  other

                                        5
<PAGE>

instrument or agreement securing, evidencing or relating to the Obligations, all
rights  and remedies of a secured party under the Uniform Commercial Code or any
other  applicable  law  or otherwise available at law or equity. All proceeds of
sale  of  any Collateral shall be applied to the Obligations, and Borrower shall
be  entitled  to  any  surplus  proceeds  or  Collateral  remaining  after  the
Obligations  are  paid  in  full.

                                  ARTICLE VIII
                                  MISCELLANEOUS

     Section  8.01  Notices.  All  notices and other communications provided for
herein shall be given in the manner and subject to the terms of Section 13.01 of
the  Credit  Agreement  (including  provisions  regarding a change of address or
telecopy  number  of  a  party). The address and telecopy number for notices and
communications  with  respect  to  the  parties  is  as  follows:

U.S.  Energy  Corp.                         Rocky  Mountain  Gas,  Inc.
Attn:  Scott  Lorimer                       Attn:  Scott  Lorimer
877  North  8th  West                       877  North  8th  West
Riverton,  Wyoming  82501                   Riverton,  Wyoming  82501
(307)  856-9271                             (307)  856-9271
(307)  857-3050  (facsimile)                (307)  857-3050  (facsimile)

Geddes  and  Company
Attn:  F.  Michael  Geddes
2930  Camelback  Road,  Suite  110
Phoenix,  Arizona  85016
(602)  957-1354
(602)  468-1792  (facsimile)

     Section  8.02  Amendments. No amendment, supplement or modification of this
Agreement,  and  no  waiver of any provision of this Agreement or consent to any
departure by the Borrower there from, shall in any event be effective unless the
same  has  been  agreed  to  in  writing  by  the  parties.

     Section  8.03  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  8.04  Governing  Law;  Consent  to  Jurisdiction.

          (a)  This  Agreement shall be governed by, and construed in accordance
               with,  the  laws  of  the  State  of  Arizona.

                                        6
<PAGE>

          (b)  Any  legal action or proceeding with respect to this Agreement or
               any  other  loan  document  shall be brought in the Courts of the
               State  of  Arizona.

     Section  8.05  Entire  Agreement. This written Agreement and the other Loan
Documents  represent  the  entire  agreement among the parties as to the subject
matter  hereof.

     IN  WITNESS WHEREOF, intending to be legally bound, the Borrower has caused
this  Agreement  to  be  duly  executed  as  of  the  date  first above written.

                                        U.S.  ENERGY  CORP.

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

                                        ROCKY  MOUNTAIN  GAS,  INC.

                                        By:   /s/ Mark J. Larsen
                                           -------------------------------------
                                             Mark  J.  Larsen
                                             President

Accepted:

GEDDES  AND  COMPANY

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

                                        7
<PAGE>

                                EXHIBIT "B - 1"

                                     TO THE

                          PLEDGE AND SECURITY AGREEMENT

                        Ticaboo Note and Related Mortgage

                                        8
<PAGE>

                                EXHIBIT "B - 2"

                                     TO THE

                          PLEDGE AND SECURITY AGREEMENT

                            RMG Working Interest in

                      Castle Rock Coal Bed Methane Leases

                                        9
<PAGE>

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