Document:

Exhibit 10.1 Settlement Agreement with Phelps Dodge Corp.

    
      
        

      

    

     

     

    

      SETTLEMENT
        AGREEMENT

       

      

       

      This
        Settlement Agreement (“Settlement Agreement”) is entered into and effective as
        of the 25th
        day of
        September 2006, by and between U.S. Energy Corp. and Crested Corp. (“USE/CC”),
        on the one hand, and Phelps Dodge Corporation, Mt. Emmons Mining Company,
        and
        Cyprus AMAX Minerals Company, (collectively “Phelps Dodge”), on the other. In
        this Settlement Agreement, USE/CC and Phelps Dodge may sometimes be referred
        to
        as “the Parties.”

      RECITALS

       

      WHEREAS,
        the Parties have been engaged in a lawsuit captioned Phelps
        Dodge Corp, et al. v. U.S. Energy Corp., et al.,
        Civil
        Action No. 02-cv-00796-LTB-PAC (D. Colo.) (“Lawsuit”) concerning,
        inter alia, the rights and duties of the Parties relating to the transfer(s)
        of
        mining properties near Crested Butte, Colorado, including duties pursuant
        to
        various agreements finalized in 1987 (collectively, the “Agreements”) entered
        into between USE/CC and Phelps Dodge’s predecessor(s); and 

       

      WHEREAS,
        on February 10, 2005, judgment on the merits in favor of Phelps Dodge was
        entered, from which USE/CC filed a timely appeal, now pending in the Tenth
        Circuit Court of Appeals as Case No. 06-1259 (the “Appeal”); and

       

      WHEREAS,
        on July 26, 2006, judgment awarding Phelps Dodge attorneys’ fees and costs
        was entered (“Attorneys’ Fees Judgment”), from which USE/CC filed a timely
        appeal and which was consolidated with the Appeal; and 

       

      WHEREAS,
        on September 6, 2006, Phelps Dodge filed a cross-appeal of the Attorneys’
Fees Judgment (the “Cross-Appeal”); and

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      WHEREAS,
        USE/CC and Phelps Dodge desire to settle all outstanding matters relating
        to the
        Lawsuit, the Appeal, and the Cross-Appeal, and to waive their respective
        appeal
        rights;

       

      THEREFORE,
        the Parties, in consideration of the covenants and payments herein, have
        agreed
        to the terms set out below.

       

      1.  Incorporation
        of Recitals:
        The
        foregoing recitals are material to this Settlement Agreement and are
        incorporated herein by this reference.

       

      2.  Payment
        by USE/CC to Phelps Dodge:
        It is
        agreed between the Parties that, concurrent with the delivery by Phelps Dodge
        to
        USE/CC of an executed copy of this Settlement Agreement, USE/CC shall pay
        Phelps\Dodge in immediately available funds Seven Million Dollars (US$7,000,000)
        (“Settlement Payment”). 

       

      3.  Dismissal
        of the Appeal and Cross-Appeal:
        Within
        five business days of the receipt of the Settlement Payment in accordance
        with
        Paragraph 2 above, the Parties shall file the Motion to Dismiss the Appeal
        and
        Cross Appeal with Prejudice attached hereto as Exhibit A. 

       

      4.  Attorneys’
        Fees and Other Costs:
        The
        Settlement Payment is deemed to be in full satisfaction of any and all
        attorneys’ fees, legal costs, operating costs, and any other costs or expenses
        incurred by any party, including but not limited to fees and costs relating
        to
        the Attorneys’ Fees Judgment, the Appeal, and Cross-Appeal and this Settlement
        Agreement. 

       

      5.  Execution;
        Authority:
        The
        Parties’ signatories to this Settlement Agreement expressly represent and
        warrant that they have the authority to settle outstanding matters relating
        to
        Agreements, the Lawsuit, and the Appeal and Cross-Appeal, and the Parties’
signatories to this Settlement Agreement expressly represent and warrant
        that
        they have the authority to execute the Settlement Agreement on behalf of
        the
        signing parties they represent. 

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      6.  Warranty
        of Non-Assignment:
        The
        Parties represent and warrant that none of them have assigned or transferred,
        or
        purported to assign or transfer, to any person or entity any claims, debts,
        liabilities, demands, rights, obligations, damages, losses, causes of action,
        costs, expenses, and attorneys’ fees subject to this Settlement Agreement.

       

      7.  Binding
        Effect:
        This
        Settlement Agreement shall inure to the benefit of and be binding upon the
        shareholders, successors, assigns, and legal representatives of the
        Parties.

       

      8.  Multiple
        Counterparts:
        This
        Settlement Agreement may be executed in multiple counterparts, each of which
        shall be deemed to be and have the same force and effect of an original,
        and all
        of which, taken together, shall constitute and be construed as a single
        agreement. A facsimile signature shall be treated as an original. The Parties
        shall promptly exchange original signatures after execution. 

       

      9.  Opportunity
        to Read and Consult:
        Each of
        the Parties to this Settlement Agreement represents that it has read it,
        has
        consulted with counsel regarding its terms, fully understands the rights
        and
        obligations described herein, and is entering into the Settlement Agreement
        freely and without duress.

       

      10.  Complete
        and Final Agreement:
        It is
        agreed that this Settlement Agreement embodies the complete and final agreement
        and release between the Parties as to the Lawsuit, the Appeal, and the
        Cross-Appeal. All previous covenants, promises, agreements, conditions or
        other
        understandings, either oral or written, with respect to the Lawsuit, the
        Appeal,
        and the Cross-Appeal are deemed superseded by this Settlement Agreement.
        This
        Settlement Agreement may be amended only by an instrument in writing executed
        jointly by the signing parties.

       

      11.  Construction:
        The
        language used in this Settlement Agreement will be deemed to be the language
        chosen by the Parties to express their mutual intent, and the Settlement
        

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      Agreement
        shall not be construed against any party because of such party’s involvement in
        the preparation or drafting of this Settlement Agreement.

       

      12.  Severability:
        If any
        provision of this Settlement Agreement or any document executed in connection
        with this Settlement Agreement is held to be illegal, invalid or unenforceable
        under present or future laws effective during the term hereof, such provision
        shall be fully severable and shall in no way affect the validity or
        enforceability of this Settlement Agreement or any other provision herein.
        Should any section, paragraph, subparagraph, or other portion of this Settlement
        Agreement or any Exhibit incorporated herein be found invalid or be required
        to
        be modified as a matter of law in a fully authorized court or by a duly
        authorized government agency, then only that portion of this Settlement
        Agreement shall be invalid or modified. The remainder of this Settlement
        Agreement, which is still valid and unaffected, shall remain in force. If
        the
        absence of the part that is held to be invalid, illegal, or unenforceable,
        or
        modification of the part required to be modified, substantially deprives
        a party
        of the economic benefit of this Settlement Agreement, the signing parties
        shall
        negotiate in good faith reasonable and valid provisions to restore the economic
        benefit to the party deprived or to balance the signing parties’ obligations
        consistent with the intent reflected in this Settlement Agreement. 

       

      13.  No
        Admission:
        The
        Parties agree that the settlement embodied in this Settlement Agreement,
        and all
        actions taken pursuant hereto, is made to compromise and settle the outstanding
        matters relating to the Lawsuit, the Appeal, and the Cross-Appeal without
        further litigation. It is not and shall not be interpreted as an admission
        of
        any liability or wrongdoing by any party. No statement appearing in this
        Settlement Agreement or in any Exhibit to this Settlement Agreement or any
        other
        document to carry out the terms of this Settlement Agreement is, or should
        be
        interpreted as, an admission or statement against interest. This 

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      Settlement
        Agreement, its terms and all negotiations relating thereto shall not be used
        by
        any party in any other proceedings or otherwise for any purpose except to
        the
        extent necessary to enforce this Settlement Agreement.

       

      14.  Title
        and Headings; Enforceability:
        The
        titles and headings to the paragraphs in this Settlement Agreement are inserted
        for convenience and reference only, and are not intended to be a part of
        or to
        affect the meaning of or interpretation of this Settlement Agreement. The
        provisions of this Settlement Agreement shall, where possible, be interpreted
        in
        a manner to sustain their legality and enforceability.

       

      15.  Effect
        on Prior Agreements:
        This
        Settlement Agreement does not terminate, modify or amend the
        Agreements.

       

      16.  Choice
        of Law:
        This
        Agreement and all disputes arising hereunder shall be interpreted under and
        governed by the laws of the State of Colorado.

      

      [Remainder
        of page intentionally left blank]

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      PHELPS
        DODGE CORPORATION

      

      

      

      By:
        /s/
        S.
        David Colton 

      Title:
        Sr. Vice President and General Counsel

      Printed
        Name: S. David Colton

      

      MT.
        EMMONS MINING COMPANY 

      

      

      

      By:
        /s/
        S.
        David Colton 

      Title:
        Sr. Vice President and General Counsel

      

      CYPRUS
        AMAX MINERALS COMPANY

      

      

      

      By:
        /s/
        S.
        David Colton 

      Title:
        Sr. Vice President and General Counsel

      

      U.S.
        ENERGY CORP. 

      

      

      

      By:
        /s/
        Mark J. Larsen 

      Title:
        President

      

      CRESTED
        CORP. 

      

      

      

      By:
        /s/
        Keith G. Larsen 

      Title:
        CEO

      

      

      

      

      

      Settlement
        Agreement Execution PageExhibit 10.2 Purchase and Sale Contract with CLJ Merchant Banking III, Inc.

    
      

    

     

     

    

    STOCK
      PURCHASE AGREEMENT

     

    This
      STOCK
      PURCHASE AGREEMENT, dated September 21, 2006 (this “Agreement”),
      is by
      and among U.S. Energy Corporation, a Wyoming corporation (“USE”)
      and
      Crested Corp. a Colorado corporation (together with USE, “Sellers”),
      and
      DLJ MB Partners III GmbH & Co. KG, a limited company organized under the
      laws of Germany, DLJ Offshore Partners III, C.V., a partnership organized under
      the laws of the Netherland Antilles, DLJ Offshore Partners III-1, C.V., a
      partnership organized under the laws of the Netherland Antilles, DLJ Offshore
      Partners III-2, C.V., a partnership organized under the laws of the Netherland
      Antilles, Millennium Partners II, L.P., a Delaware limited partnership, DLJ
      Merchant Banking Partners III, L.P., a Delaware limited partnership, and MBP
      III
      Plan Investors, L.P., a Delaware limited partnership (collectively,
“Purchasers”).

     

    W
      I T
      N E S S E T H:

     

    WHEREAS,
      Sellers desire to sell to Purchasers shares of the common stock, par value
      $.01
      per share (“Common
      Stock”),
      of
      Pinnacle Gas Resources, Inc., a Delaware corporation (the “Company”),
      and
      Purchasers desire to purchase shares of Common Stock from Sellers, upon and
      subject to the terms of this Agreement;

     

    NOW,
      THEREFORE, in consideration of the mutual covenants and agreements set forth
      herein, and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the parties hereto agree as
      follows:

     

    ARTICLE
      I  

    PURCHASE
      AND SALE

     

    Section
      1.1  Purchase
      and Sale of Shares.
      Upon the
      terms and subject to the conditions set forth in this Agreement, and in reliance
      upon the representations and warranties herein made by each party to the other,
      Sellers agree jointly to sell, and Purchasers agree jointly to purchase from
      Sellers, at the Closing (as hereinafter defined), an aggregate of 2,459,102
      shares of Common Stock (the “Shares”);
      and
      each Purchaser severally agrees to purchaser that number of Shares of set forth
      opposite such Purchaser’s name on Schedule
      I.

     

    Section
      1.2  Purchase
      Price.
      As
      consideration for the purchase and sale of the Shares, Purchasers jointly will
      pay, or cause to be paid, to Sellers on the Closing Date, by wire transfer
      of
      immediately available funds to the account identified on Schedule
      II,
      the sum
      of $13,800,000, which amount shall be allocated between Sellers as set forth
      on
Schedule
      II.

     

    Section
      1.3  Closing.
      The
      closing of the purchase and sale of the Shares (the “Closing”)
      shall
      be at such date and time as shall be mutually agreed to by the parties hereto
      (such date, the Closing
      Date”).
      The
      Closing shall take place at the offices of Akin Gump Strauss Hauer & Feld,
      LLP, 1111 Louisiana Street, 44th
      Floor,
      Houston, Texas or such other place as shall be mutually agreed to by the parties
      hereto. Sellers will deliver to Purchasers at the Closing a certificate or
      certificates representing all of the Shares with duly executed stock powers
      attached thereto.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    ARTICLE
      II  

    REPRESENTATIONS
      AND WARRANTIES

     

    Section
      2.1  Representations
      and Warranties of Sellers.
      Sellers
      hereby represent and warrant to each Purchaser as follows:

     

    (a)  Each
      Seller is a corporation duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation.

     

    (b)  Each
      Seller has all requisite power and authority to execute and deliver into this
      Agreement and to consummate the transactions contemplated hereby. The execution
      and delivery of this Agreement by each Seller and the consummation by each
      Seller of the transactions contemplated hereby have been duly authorized by
      all
      necessary action on the part of Seller.

     

    (c)  This
      Agreement has been duly executed and delivered by each Seller and (assuming
      that
      this Agreement is a legal, valid, and binding obligation of each other parties
      hereto) constitutes a valid and binding obligation of each Seller, enforceable
      against each Seller in accordance with its terms, except as enforceability
      may
      be subject to the effects of bankruptcy, insolvency, reorganization, moratorium
      or other laws relating to or affecting the rights of creditors or general
      principles of equity.

     

    (d)  The
      execution and delivery of this Agreement by each Seller and the consummation
      by
      each Seller of the transactions contemplated hereby will not (A) violate any
      provision of any existing law, statute, rule, regulation or ordinance applicable
      to either Seller or (B) conflict with, result in any breach of or constitute
      a
      default under (1) the Certificate of Incorporation or By-laws of either Seller,
      (2) any order, writ, judgment, award or decree of any court, governmental
      authority, bureau or agency to which either Seller is a party or by which either
      Seller may be bound or (3) any contract or other agreement or undertaking to
      which either Seller is a party or by which either Seller may be
      bound.

     

    (e)  No
      consent, approval, order or authorization of, or registration, declaration
      or
      filing with, any court, administrative agency or commission or other
      governmental authority or instrumentality, is required by or with respect to
      either Seller in connection with the execution and delivery of this Agreement
      or
      the consummation by either Seller of the transactions contemplated hereby except
      for (i) such as have been obtained prior to the date hereof and (ii) consent
      of
      Friedman Billings Ramsey & Co., Inc. to the transfer of the Shares pursuant
      to that certain lock-up agreement dated March 31, 2006.

     

    (f)  Each
      Seller has, and upon transfer by Sellers of the Shares hereunder, Purchasers
      will have, good and marketable title to the Shares, free and clear of any
      claims, liens, encumbrances, security interests, restrictions and adverse claims
      of any kind or nature whatsoever. There are no outstanding subscriptions,
      options, warrants, rights, contracts, understandings or agreements to purchase
      or otherwise acquire the Shares.

     

     

    
      
         

      

      
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    Section
      2.2  Representations
      and Warranties of Purchasers.
      Purchasers hereby represent and warrant to Sellers as follows:

     

    (a)  Each
      Purchasers is duly organized, validly existing and in good standing under the
      laws of the jurisdiction of its incorporation or organization. 

     

    (b)  Each
      Purchaser has all requisite power and authority to enter into this Agreement
      and
      to consummate the transactions contemplated hereby. The execution and delivery
      of this Agreement by each Purchaser and the consummation by each Purchaser
      of
      the transactions contemplated hereby have been duly authorized by all necessary
      action on the part of each Purchaser.

     

    (c)  This
      Agreement has been duly executed and delivered by each Purchaser and (assuming
      that this Agreement is a legal, valid, and binding obligation of each other
      parties hereto) constitutes a valid and binding obligation of each Purchaser,
      enforceable against each Purchaser in accordance with its terms, except as
      enforceability may be subject to the effects of bankruptcy, insolvency,
      reorganization, moratorium or other laws relating to or affecting the rights
      of
      creditors or general principles of equity.

     

    (d)  The
      execution and delivery of this Agreement by each Purchaser and the consummation
      by each Purchaser of the transactions contemplated hereby will not (A) violate
      any provision of any existing law, statute, rule, regulation or ordinance
      applicable to any
      Purchaser or
      (B)
      conflict with, result in any breach of or constitute a default under (1) the
      Certificate of Incorporation or By-laws of any Purchaser, (2) any order, writ,
      judgment, award or decree of any court, governmental authority, bureau or agency
      to which any Purchaser is a party or by which any Purchaser may be bound or
      (3)
      any contract or other agreement or undertaking to which any Purchaser is a
      party
      or by which any Purchaser may be bound.

     

    (e)  No
      consent, approval, order or authorization of, or registration, declaration
      or
      filing with, any court, administrative agency or commission or other
      governmental authority or instrumentality, is required by or with respect to
      any
      Purchaser in connection with the execution and delivery of this Agreement or
      the
      consummation by any Purchaser of the transactions contemplated hereby except
      for
      (i) such as have been obtained prior to the date hereof and (ii) consent of
      Friedman Billings Ramsey & Co., Inc. to the transfer of the Shares pursuant
      to that certain lock-up agreement dated March 31, 2006.

     

    ARTICLE
      III  

    CLOSING
      CONDITIONS.

     

    Section
      3.1  Conditions
      to Each Party’s Obligations.
      The
      obligation of Purchasers to purchase the Shares at the Closing, and the
      obligation of Sellers to sell the Shares at the Closing, are subject to the
      satisfaction or mutual waiver at or prior to the Closing of the following
      conditions:

     

    (a)  No
      preliminary or permanent injunction or other order shall have been issued by
      any
      court of competent jurisdiction or by any governmental or regulatory body,
      nor
      shall any statute, rule, regulation or executive order have been promulgated
      or

     

    

    
      
        
           

           

        

        
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    enacted
      by any governmental authority which prevents the consummation of the
      transactions contemplated by this Agreement.

     

    (b)  No
      action
      or proceeding before any court or any governmental or regulatory authority
      shall
      have been commenced by any governmental or regulatory body and shall be pending
      against any of the parties hereto or any of their respective affiliates,
      associates, officers or directors seeking to prevent or delay the transactions
      contemplated by this Agreement.

     

    (c)  (i)
      Friedman, Billings, Ramsey & Co., Inc. shall have provided a waiver of the
      applicable lock-up provisions under that certain letter agreement, dated March
      31, 2006, to the purchase and sale of the Shares hereunder (and Purchasers
      shall
      have received a true and correct copy of such waiver) or (ii) the lock-up period
      under such letter agreement shall have expired.

     

    (d)  The
      representations and warranties of each of the parties hereto contained in this
      Agreement shall have been true and complete when made and shall be true and
      complete at and as of the Closing Date with the same force and effect as though
      such representations and warranties were made at and as of the Closing
      Date.

     

    (e)  Each
      of
      the parties hereto shall have performed and complied with all agreements,
      obligations and conditions required by this Agreement to be performed or
      complied with by such party at or prior to the Closing.

     

    ARTICLE
      IV  

    MISCELLANEOUS

     

    Section
      4.1  Confidentiality;
      Non Disclosure.
      Each of
      the parties hereto shall, and shall cause their respective officers, directors,
      employees, affiliates and other agents and representatives (collectively,
“Representatives”),
      to
      hold confidential all information with respect to this Agreement, including
      the
      identity of the parties hereto and the terms and provisions of the transactions
      contemplated hereunder. None of the parties hereto will, and each of the parties
      will direct their Representatives not to, directly or indirectly, make any
      public comment, statement or communication with respect to, or otherwise
      disclose or permit the disclosure of the existence of, this Agreement, any
      of
      the terms, conditions or other aspects of this Agreement or the transactions
      contemplated hereunder. The foregoing notwithstanding, any party hereto may
      disclosure any such information to the extent, and only to the extent, (a)
      required to be so disclosed pursuant to the terms of that certain
      Securityholders Agreement, dated June 23, 2003, as amended, and (b) upon the
      advice of counsel, such information is required to be disclosed by a party
      hereto or any of its Representatives as a result of any applicable law
      (including public reporting requirements under federal and state securities
      laws);
      provided,
      however,
      that
      only such information that is required to be disclosed may be disclosed and,
      in
      the event any information is required to be disclosed pursuant to this clause
      (b), the party proposing such disclosure shall provide the other parties hereto
      an opportunity, reasonably in advance of any such disclosure, to review and
      comment on the form and content of such proposed disclosure. 

     

     

    
      
         

      

      
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    Section
      4.2  Exclusivity.
      In
      consideration of the covenants and agreements of Purchasers set forth herein,
      Sellers further agree that prior to December 31, 2006, Sellers will not ̧ and
      will not permit any of their respective Representatives to, enter into any
      agreement, discussion, or negotiation with (and shall terminate any existing
      discussions or negotiations with), or provide information to, or solicit,
      encourage, entertain or consider any inquiries or proposals from, any other
      person with respect to any purchase and sale of Common Stock held by Sellers
      and/or any of their respective affiliates. During such period Sellers will
      promptly notify Purchasers of any inquiries (including the identity of the
      party
      making such inquiry) regarding any such proposed purchase and sale of Common
      Stock.

     

    Section
      4.3  No
      Brokers.
      Sellers
      and Purchasers hereby represent to each other that neither it nor any of its
      respective affiliates have employed any broker or finder or incurred any
      liability for any brokerage or finder’s fees or commissions or expenses related
      thereto in connection with the negotiation, execution or consummation of this
      Agreement or any of the transactions contemplated hereby and respectively agree
      to indemnify and hold the other harmless from and against any and all claims,
      liabilities or obligations with respect to any such fees, commissions or
      expenses asserted by any person on the basis of any act or statement alleged
      to
      have been made by such party or any of its affiliates.

     

    Section
      4.4  Entire
      Agreement.
      This
      Agreement constitutes the entire agreement and understanding of the parties
      in
      respect of the subject matter hereof and supersedes all prior understandings,
      agreements or representations by or between the parties, written or oral, to
      the
      extent they relate in any way to the subject matter hereof.

     

    Section
      4.5  Binding
      Effect; Third Party Beneficiaries.
      All of
      the terms, agreements, covenants, representations, warranties and conditions
      of
      this Agreement are binding upon and inure to the benefit of and are enforceable
      by, the parties and their respective successors and permitted assigns. There
      are
      no third party beneficiaries having rights under or with respect to this
      Agreement.

     

    Section
      4.6  Further
      Assurances.
      If any
      further action is necessary or reasonably desirable to carry out this
      Agreement’s purposes, each party will take such further action (including
      executing and delivering any further instruments and documents and providing
      any
      reasonably requested information) as the other party reasonably may
      request.

     

    Section
      4.7  Survival
      of Representations, Warranties and Covenants.
      Each
      representation, warranty, covenant and obligation in this Agreement will survive
      the execution and delivery of this Agreement and the consummation of the
      transactions contemplated by this Agreement, and will not be affected by any
      investigation by or on behalf of the other party to this Agreement.

     

    Section
      4.8  Indemnification.
      Sellers
      will indemnify and hold harmless each Purchaser and Purchasers will indemnify
      and hold harmless Sellers, from and against any and all losses, claims, damages,
      liabilities and expenses (including, without limitation, legal fees and
      expenses) suffered or incurred by any such indemnified party to the extent
      arising from any breach of any representation or warranty of the indemnifying
      party contained in this Agreement or any breach 

     

    

    
      
        
           

           

        

        
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    by
      the
      indemnifying party, or failure by the indemnifying party to fulfill, any
      covenant or agreement contained herein. 

     

    Section
      4.9  Notices.
      All
      notices, requests and other communications provided for or permitted to be
      given
      under this Agreement must be in writing and given by personal delivery, by
      certified or registered United States mail (postage prepaid, return receipt
      requested), by a nationally recognized overnight delivery service for next
      day
      delivery, or by facsimile transmission, as follows (or to such other address
      as
      any party may give in a notice given in accordance with the provisions
      hereof):

     

    If
      to
      Sellers, to:

     

    U.S.
      Energy Corporation 

    877
      North
      8th West

    Riverton,
      WY 82501

    Attention:
      Mark J. Larsen, President 

    Facsimile:
      (307) 857-3050  

    

    and
      to:

    

    Crested
      Corp.

    877
      North
      8th West

    Riverton,
      WY 82501 

    Attention:
      Keith G. Larsen, Co-Chariman  

    Facsimile:
      (307) 857-3050 

    

    with
      a
      copy (which will not constitute notice) to:

     

    U.S.
      Energy Corporation

    877
      North
      8th West

    Riverton,
      WY 82501

    Attention:
      Steven R. Youngbauer, 

    Associate
      General Counsel

    Facsimile:
      (307) 857-3050 

    

    If
      to
      Purchasers, to: 

     

    c/o
      Credit Suisse

    Eleven
      Madison Avenue, 16th
      Floor

    New
      York,
      New York 10010

    Attention:
      Daniel Gewirtz

    Facsimile:
      (212) 325-2663

     

    

     

    

    
      
        
           

           

        

        
          6

          
            

          

        

        
           

        

      

    

    

    with
      a
      copy to (which does not constitute notice) to:

     

    

     

    Avista
      Capital Partners, LP

    1000
      Louisiana Street, Suite 1975

    Houston,
      Texas 77002

    Attention:
      Robert L. Cabes

    Facsimile:
      (713) 328-1097

     

    with
      a
      copy (which will not constitute notice) to:

     

    Akin
      Gump
      Strauss Hauer & Feld LLP

    1111
      Louisiana, 44th
      Floor

    Houston,
      Texas 77002

    Attention:
      J. Michael Chambers

    Facsimile:
      (713) 236-0822

     

    Section
      4.10  Specific
      Performance; Remedies.
      Each
      party acknowledges and agrees that the other party would be damaged irreparably
      if any provision of this Agreement were not performed in accordance with its
      specific terms or were otherwise breached. Accordingly, the parties will be
      entitled to an injunction or injunctions to prevent breaches of the provisions
      of this Agreement and to enforce specifically this Agreement and its provisions
      in addition to any other remedy to which they may be entitled, at law or in
      equity. Except as expressly provided herein, the rights, obligations and
      remedies created by this Agreement are cumulative and in addition to any other
      rights, obligations or remedies otherwise available at law or in equity. Except
      as expressly provided herein, nothing herein will be considered an election
      of
      remedies.

     

    Section
      4.11  Headings.
      The
      article and section headings contained in this Agreement are inserted for
      convenience only and will not affect in any way the meaning or interpretation
      of
      this Agreement.

     

    Section
      4.12  Governing
      Law.
      This
      Agreement will be governed by and construed in accordance with the laws of
      the
      State of Delaware, without giving effect to any choice of law
      principles.

     

    Section
      4.13  Amendment.
      This
      Agreement may not be amended or modified except by a writing signed by all
      of
      the parties hereto.

     

    Section
      4.14  Extensions;
      Waivers.
      Any
      party may, for itself only, (a) extend the time for the performance of any
      of
      the obligations of any other party under this Agreement, (b) waive any
      inaccuracies in the representations and warranties of any other party contained
      herein or in any document delivered pursuant hereto and (c) waive compliance
      with any of the agreements or conditions for the benefit of such party contained
      herein. Any such extension or waiver will be valid only if set forth in a
      writing signed by the party to be bound thereby. No waiver by any party of
      any
      default, misrepresentation or breach of warranty or covenant hereunder, whether
      intentional or not, may be deemed to extent to any prior or subsequent default,
      misrepresentation or breach of warranty or covenant hereunder or affect in
      any
      way any rights arising because of any prior or subsequent such occurrence.
      Neither the failure nor any delay on the party of any 

     

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

     

    Section
      4.15  party
      to
      exercise any right or remedy under this Agreement will operate as a waiver
      thereof, nor will any single or partial exercise of any right or remedy preclude
      any other or further exercise of the same or of any other right or
      remedy.

     

    Section
      4.16  Expenses.
      Sellers
      shall be responsible for, and shall promptly pay, costs and expenses incurred
      by
      Purchasers in connection with the preparation, execution and performance of
      this
      Agreement and the transactions contemplated hereby including, without
      limitation, the reasonable fees and expenses of Akin Gump Strauss Hauer &
Feld, LLP, counsel to Purchasers.

     

    Section
      4.17  Counterparts;
      Effectiveness.
      This
      Agreement may be executed in two or more counterparts, each of which will be
      deemed an original but all of which together will constitute one and the same
      instrument. This Agreement will become effective when one or more counterparts
      have been signed by each of the parties and delivered to the other party, which
      delivery may be made by exchange of copies of the signature page by facsimile
      transmission. 

     

    [Signature
      Page to Follow]

     

    

    
      
        
          
             

          

           

        

        
          8

          
            

          

        

        
           

          
          

        

      

    

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      as
      of the date first above written.

     

    

     

    
      	
              DLJ
                MERCHANT BANKING PARTNERS III, L.P.

            
	
               

              By: DLJ
                Merchant Banking III, Inc., 

                    
                as Managing General Partner

            
	 
	
              By:  
                /s/ Kenneth J. Lohsen 

            
	
              Name:
                Kenneth J. Lohsen

            
	
              Title:
                Vice President

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

            
	 
	
              By:  
                /s/ Kenneth J. Lohsen 

            
	
              Name:
                Kenneth J. Lohsen

            
	
              Title:
                Vice 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/ Kenneth J. Lohsen 

            
	
              Name:
                Kenneth J. Lohsen

            
	
              Title:
                Vice 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/ Kenneth J. Lohsen 

            
	
              Name:
                Kenneth J. Lohsen

            
	
              Title:
                Vice President

            
	 
	 

    

    

    
      
        
          Stock
            Purchase Agreement—Signature Page

           

        

        
           

          
            

          

        

        
           

        

      

    

    

    

    
      	
              MILLENNIUM
                PARTNERS II, L.P. 

            
	
               

              By: DLJ
                Merchant Banking III, Inc., 

                    
                as Managing General Partner

            
	 
	
              By:  
                /s/ Kenneth J. Lohsen 

            
	
              Name:
                Kenneth J. Lohsen

            
	
              Title:
                Vice President

            
	 
	 
	
              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/ Kenneth J. Lohsen 

            
	
              Name:
                Kenneth J. Lohsen

            
	
              Title:
                Vice President

            
	 
	 
	
              MBP
                III PLAN INVESTORS, L.P.

            
	
               

              By: DLJ
                Merchant Banking III, Inc., 

                    
                as Managing General Partner

            
	 
	
              By:  
                /s/ Kenneth J. Lohsen 

            
	
              Name:
                Kenneth J. Lohsen

            
	
              Title:
                Vice President

            
	 
	
               

              U.S.
                ENERGY CORPORATION

            
	 
	
              By:  
                /s/ Keith G. Larsen 

            
	
              Name:
                Keith G. Larsen

            
	
              Title:
                Chief Executive Officer

            
	 
	
               

              CRESTED
                CORP.

            
	 
	
              By:  
                /s/ Harold F. Herron 

            
	
              Name:
                Harold F. Herron

            
	
              Title:
                President

            
	 

    

    

     

    

     

    

     

    

    
      
        
          
            Stock
              Purchase Agreement—Signature Page

          

           

        

        
           

          
            

          

        

        
           

          
          

        

      

    

    

    SCHEDULE
      I

     

    SHARE
      ALLOCATIONS

     

    

     

    
      	
              Purchaser:

            	
              Number
                of Shares:

            
	 	 
	
              DLJ
                Merchant Banking Partners III, L.P.

            	
              1,870,117

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

            	
               

              100,615

            
	 	 
	
              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.

            	
               

               

               

              33,374

            
	 	 
	
              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.

            	
               

               

               

              23,772

            
	 	 
	
              Millennium
                Partners II, L.P.

            	
              15,772

            
	 	 
	
              DLJ
                MB Partners III GmbH & Co., KG

            	
              10,721

            
	 	 
	
              MBP
                III Plan Investors, L.P.

            	
              404,731

            
	 	 
	
              Total:

            	
              2,459,102

            

    

    

     

    

     

    

    
      
        
          
            Schedule
              I

          

           

        

        
           

          
            

          

        

        
           

          
          

        

      

    

    

    SCHEDULE
      II

     

    WIRING
      INSTRUCTIONS AND PURCHASE PRICE ALLOCATION

     

    

     

    

     

    

     

    
      	
              For
                the account of US Energy:

            	
              Purchase
                Price Allocation:

            
	
              First
                Interstate Bank of Commerce 

              Casper
                Office

              104
                South Wolcott

              P.O.
                Box 40

              Casper,
                WY 82602

              (307)
                235-4207

               

              ABA
                Number 092901683

              Account
                of : U.S. Energy Corp.

              Money
                Market Account Number: 836888750

               

              Federal
                Identification Number 83-0205516

            	
               

              $8,970,003.93

            
	 	 
	
              For
                the account of Crested Corp.

            	
              Purchase
                Price Allocation:

            
	 	 
	
              First
                Interstate Bank of Commerce 

              Casper
                Office

              104
                South Wolcott

              P.O.
                Box 40

              Casper,
                WY 82602

              (307)
                235-4207

               

              ABA
                Number 092901683

              Account
                of : Crested Corp.

              Money
                Market Account Number: 836888784

               

              Federal
                Identification Number 84-0608126

            	
               

              $4,829,996.07

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