RECITALS:

WHEREAS, Participant is [an employee] [a director] of the Company and the Company desires to grant to Participant stock appreciation rights under and pursuant to the Pinnacle Gas Resources, Inc. Second Amended and Restated Stock Incentive Plan (the “Plan”); and

WHEREAS, Participant and the Company now desire to set forth their mutual understanding and agreement with respect to the matters set forth herein;

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.             Grant of SAR.  To carry out the purposes of the Plan and in consideration of the mutual agreements and other matters set forth herein and in the Plan, the Company hereby grants to Participant                  (    ) Stock Appreciation Rights (“SARs”) effective as of the Grant Date on the terms and conditions set forth herein and in the Plan.  The Plan and this Agreement shall be administered by the Committee.  A SAR confers on the Participant a right to receive, upon exercise, hereof, the excess of (A) the Fair Market Value of a share of Common Stock on the date of exercise over (B) $1.00.  Such excess shall be paid cash or Common Stock or in a combination thereof to the Participant (at the sole discretion of the Committee).

2.             Term.  Unless sooner terminated as provided under the terms of the Plan, the SARs shall expire if not exercised within seven (7) years from the Grant Date.