Document:

Exhibit 10.35

    EXHIBIT
      10.35

     

    

      AMENDMENT
        TO

      CONTRIBUTION
        AND SUBSCRIPTION AGREEMENT

       

      This
        AMENDMENT TO CONTRIBUTION AND SUBSCRIPTION
        AGREEMENT
        (this
“Amendment”),
        dated
        as of August 9, 2005, is entered into by and among Pinnacle Gas Resources,
        Inc.,
        a Delaware corporation (the “Company”),
        CCBM,
        Inc., a Delaware corporation (“CCBM”),
        U.S.
        Energy Corp., a Wyoming corporation (“US
        Energy”),
        Crested Corp., a Colorado corporation (“Crested”),
        and
        each of the CSFB Parties (as defined in the Contribution and Subscription
        Agreement (defined herein), and collectively with CCBM, US Energy and Crested,
        the “Investors”).

       

      W
        I T
        N E S S E T H:

       

      WHEREAS,
        the Company, CCBM, Rocky Mountain Gas, Inc., a Wyoming corporation
        (“RMG”),
        and
        the CSFB Parties (collectively, the “Parties”)
        are
        parties to that certain Contribution and Subscription Agreement, dated as
        of
        June 23, 2003 (the “Contribution
        and Subscription Agreement”);
        and

       

      WHEREAS,
        by an assignment dated May 31, 2005, RMG transferred all its shares of common
        stock of the Company and all right, title, interest and obligations in and
        to
        the Contribution and Subscription Agreement to US Energy and Crested, which
        transfers are permitted under the terms of the Contribution and Subscription
        Agreement; and

       

      WHEREAS,
        the Parties desire to amend certain terms of the Contribution and Subscription
        Agreement.

       

      NOW,
        THEREFORE, in consideration of the premises, mutual covenants and agreements
        hereinafter contained and for other good and valuable consideration, the
        receipt
        and sufficiency of which are hereby acknowledged, the Parties agree as
        follows:

       

      ARTICLE
        1

       

      Definitions

       

      All
        capitalized terms used in the recitals above and the succeeding provisions
        of
        this Amendment which are not defined herein shall have the meaning ascribed
        to
        such terms in the Contribution and Subscription Agreement, as amended by
        this
        Amendment. All sections referred to in this Amendment shall be references
        to
        sections in the Contribution and Subscription Agreement unless otherwise
        noted.

       

      ARTICLE
        2

       

      Amendments

       

      2.1  Section
        2.3(a) is hereby amended by deleting the first sentence thereof in its entirety
        and replacing it with the following sentence:

       

      “For
        so
        long as CCBM or any of its Permitted Transferees shall own of record Common
        Stock, CCBM or, in the event CCBM has transferred all of the Common

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Stock
        it
        holds to a Permitted Transferee, such Permitted Transferee shall have a
        continuing option upon 10 Business Days’ notice to the Company, to purchase in
        one or more transactions after the date of this Agreement (i) a Pro Rata
        Portion
        of up to 25,000 additional shares of Common Stock (“Tranche
        A Shares”)
        at a
        purchase price per share equal to $100 as increased by 10% per annum compounded
        quarterly beginning on the Closing Date and accruing daily through the date
        of
        the purchase of such shares (the “Tranche
        A Price”)
        and
        (ii) a Pro Rata Portion of up to 25,000 additional shares of Common Stock
        (“Tranche
        B Shares”
and
        together with the Tranche A Shares, “Additional
        Shares”)
        at a
        purchase price equal to $100 per share as increased by 20% per annum compounded
        quarterly beginning on the Closing Date and accruing daily through the date
        of
        the purchase of such shares (the “Tranche
        B Price”).”

       

      2.2  Section
        2.3(b) is hereby amended by deleting the first sentence thereof and replacing
        it
        with the following sentence:

       

      “For
        so
        long as US Energy, Crested or any of their Permitted Transferees shall own
        of
        record Common Stock, US Energy or Crested or, in the event US Energy or Crested
        has transferred all of the Common Stock it holds to a Permitted Transferee,
        such
        Permitted Transferee shall have a continuing option upon 10 Business Days’
notice to the Company, to purchase in one or more transactions after the
        date of
        this Agreement (i) a Pro Rata Portion of up to 25,000 Tranche A Shares at
        a
        purchase price per share equal to the Tranche A Price and (ii) a Pro Rata
        Portion of up to 25,000 Tranche B Shares at a purchase price per share equal
        to
        the Tranche B Price.”

       

      ARTICLE
        3

       

      Acknowledgement

       

      For
        the
        avoidance of doubt, each of the parties hereto acknowledge that the assignment
        by RMG to US Energy and Crested of all of its Capital Stock in the Company
        and
        all of its rights, title and interest under the Contribution and Subscription
        Agreement and the Securityholders Agreement constitute transfers to Permitted
        Transferees (as such term is defined in the Securityholders Agreement) permitted
        by the terms of the Contribution Agreement and Securityholders Agreement,
        and
        that such assignments were effected in accordance with the terms
        thereof.

       

      ARTICLE
        4

       

      Miscellaneous

       

      4.1  Descriptive
        Headings.
        The
        descriptive headings of the several Sections of this Amendment are inserted
        for
        convenience only and do not constitute a part of this Amendment.

       

      4.2  Governing
        Law.
        This
        Amendment shall be construed and enforced in accordance with, and the rights
        of
        the parties shall be governed by, the law of the State of Texas, without
        giving
        effect to the choice of law or conflicts principles thereof.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      4.3  Counterparts.
        This
        Amendment may be executed by the parties hereto on separate counterparts
        (including by facsimile), and such counterparts taken together shall be deemed
        to constitute one and the same instrument. 

       

      4.4  Notices.
        All
        communications and notices to the parties hereunder shall be given as provided
        in the Contribution and Subscription Agreement.

       

      4.5  Severability.
        Whenever
        possible, each provision of this Amendment will be interpreted in such manner
        as
        to be effective and valid under applicable Law, but if any provision of this
        Amendment is held to be prohibited or unenforceable in any jurisdiction,
        such
        provision will be ineffective only to the extent of such prohibition or
        unenforceability without invalidating the remaining provisions hereof, and
        any
        such prohibition or unenforceability in any jurisdiction shall not invalidate
        or
        render unenforceable such provision in any other jurisdiction.

       

      4.6  Further
        Assurances.
        In
        connection with this Amendment and the transactions contemplated hereby,
        each
        Party shall execute and deliver any additional documents and instruments
        and
        perform any additional acts that may be necessary or appropriate to effectuate
        and perform the provisions of this Amendment and those
        transactions.

       

      [Signature
        Pages to Follow]

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        the
        undersigned have executed this Amendment as of the date first set forth
        above.

       

      
        	 	
                PINNACLE
                  GAS RESOURCES, INC.

              
	 	 
	 	
                By:  /s/
                  Pete Schoonmaker

              
	 	
                Name: Pete
                  Schoonmaker

              
	 	
                Title: CEO

              
	 	 
	 	 
	 	
                CCBM,
                  INC.

              
	 	 
	 	
                By:  /s/
                  S.P. Johnson IV

              
	 	
                Name: S.P.
                  Johnson IV

              
	 	
                Title: President

              
	 	 
	 	 
	 	
                U.S.
                  ENERGY CORP.

              
	 	 
	 	
                By:  /s/
                  Keith Larsen

              
	 	
                Name: Keith
                  Larsen

              
	 	
                Title: President

              
	 	 
	 	 
	 	
                CRESTED
                  CORP.

              
	 	 
	 	
                By:  /s/
                  Hal Herron

              
	 	
                Name: Hal
                  Herron

              
	 	
                Title: President

              
	 	 
	 	 
	 	
                MILLENNIUM
                  PARTNERS II,
                  L.P.

              
	 	 
	 	
                By:
                  

              	
                DLJ
                  Merchant Banking III, Inc.,

                a
                  Managing General Partner

              
	 	 
	 	
                By:  /s/
                  Ken Lonson

              
	 	
                Name: Ken
                  Lonson

              
	 	
                Title: Vice
                  President

              

      

      

       

      
        
          

            [Signature
              page to Amendment to Contribution and Subscription
              Agreement]

          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    

      
        	 	
                DLJ
                  MERCHANT BANKING III, INC.,

                as
                  Advisory General Partner on behalf of DLJ Offshore Partners III,
                  C.V.

              
	 	 
	 	
                By:  /s/
                  Ken Lonson

              
	 	
                Name: Ken
                  Lonson

              
	 	
                Title: President

              
	 	 
	 	 
	 	
                DLJ
                  MERCHANT BANKING III, INC.,

                as
                  Advisory General Partner on behalf of DLJ Offshore Partners III-1,
                  C.V.
                  and as attorney-in-fact for DLJ Merchant Banking III, L.P., as
                  Associate
                  General Partner of DLJ Offshore Partners III-1, C.V.

              
	 	 
	 	
                By:  /s/
                  Ken Lonson

              
	 	
                Name: Ken
                  Lonson

              
	 	
                Title: President

              
	 	 
	 	 
	 	
                DLJ
                  MERCHANT BANKING III, INC.,

                as
                  Advisory General Partner on behalf of DLJ Offshore Partners III-2,
                  C.V.
                  and as attorney-in-fact for DLJ Merchant Banking III, L.P., as
                  Associate
                  General Partner of DLJ Offshore Partners III-2, C.V.

              
	 	 
	 	
                By:  /s/
                  Ken Lonson

              
	 	
                Name: Ken
                  Lonson

              
	 	
                Title: Vice
                  President

              
	 	 
	 	 
	 	
                DLJ
                  MERCHANT BANKING PARTNERS III, L.P.

              
	 	
                 

                By: DLJ
                  Merchant Banking III, Inc., 

                 

                as
                  Managing General Partner

              
	 	 
	 	
                By:  /s/
                  Ken Lonson

              
	 	
                Name: Ken
                  Lonson

              
	 	
                Title: Vice
                  President

              
	 	 
	 	 

      

    

     

     

    
      
        

          [Signature
            page to Amendment to Contribution and Subscription
            Agreement]

        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      
        	 	
                DLJ
                  MB PARTNERS III GMBH & CO. KG

              
	 	
                 

                By: DLJ
                  Merchant Banking III, L.P.,

                as
                  Managing Limited Partner

              
	 	
                By: DLJ
                  Merchant Banking III, LLC,

                as
                  General Partner

              
	 	
                By: DLJ
                  Merchant Banking III, Inc., as Managing Member

              
	 	 
	 	
                By:  /s/
                  Ken Lonson

              
	 	
                Name: Ken
                  Lonson

              
	 	
                Title: Vice
                  President

              
	 	 
	 	 
	 	
                MBP
                  III PLAN INVESTORS, L.P.

              
	 	
                By: DLJ
                  Merchant Banking III, Inc.,

                as
                  General Partner

              
	 	 
	 	
                By:  /s/
                  Ken Lonson

              
	 	
                Name: Ken
                  Lonson

              
	 	
                Title: Vice
                  President

              

      

      

       

      
        
          

            [Signature
              page to Amendment to Contribution and Subscription
              Agreement]Director Compensation

 Exhibit 10.46 
 Schedule of Compensation for Non-Employee Directors 
  

					
	 Annual Retainer
	  	$	10,000	 
	 Committee Chairman Annual Retainer:
	  			
	 Audit Committee
	  	$	12,500	 
	 Compensation Committee
	  	$	6,000	 
	 Committee Member Annual Retainer
	  			
	 Audit Committee
	  	$	7,500	 
	 Compensation Committee
	  	$	4,000	 
	 Regular Board Meeting Fee
	  	$	2,500	(1)
	 Special Board Meeting Fee
	  	$	1,000	(2)
	 Committee Meeting Fee
	  	$	1,000	(3)
	 New Member Restricted Stock/Stock Option Award Grant (#)
	  	 	  	(4)
	 Committee Chairman Restricted Stock Award
	  			
	 Audit Committee (#)
	  	 	  	(4)
	 Compensation Committee (#)
	  	 	  	(4)
	 Nominating Committee (#)
	  	 	  	(4)
	 Committee Member Restricted Stock Award
	  			
	 Audit Committee (#)
	  	 	  	(4)
	 Compensation Committee (#)
	  	 	  	(4)
	 Annual Director Stock Option Grant
	  	 	  	(4)
	 Annual Director Restricted Stock Grant
	  	 	  	(4)

	(1)	The fee is $1,000 if participation is by telephone. 

	(2)	The fee is $500 if participation is by telephone. 

	(3)	The fee is $500 if participation is by telephone. 

	(4)	Any award is at the discretion of the Compensation Committee or Board of Directors. 

  

 Schedule of Compensation for 
 Chairman of the Board of Directors 
  

					
	 Consulting Arrangement
	  	$	12,000/month	 
	 Annual Stock Option Grant
	  	 	(1	)
	 Annual Restricted Stock Grant
	  	 	(1	)

	(1)	Any award is at the discretion of the Compensation Committee or Board of Directors. 

  

 2

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