Exhibit
10.23


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


PRB ENERGY, INC.

2007 EQUITY INCENTIVE PLAN
















PRB ENERGY, INC.

2007 EQUITY INCENTIVE PLAN


ARTICLE I

INTRODUCTION


1.1           Establishment.  PRB Energy, Inc., a Nevada corporation,
hereby establishes the 2007 Equity Incentive Plan for certain key employees of
the Company and certain directors and consultants to the Company.  The Plan permits the grant of non-qualified
stock options, restricted stock awards, stock bonuses and other stock grants to
certain key employees of the Company, and to certain directors and consultants
to the Company.


1.2           Purposes.  The purposes of the Plan are to provide those
who are selected for participation in the Plan with added incentives to
continue in the long-term service of the Company and to create in such
persons a more direct interest in the future success of the operations of the
Company by relating incentive compensation to increases in shareholder value,
so that the income of those participating in the Plan is more closely aligned
with the income of the Company’s shareholders. 
The Plan is also designed to provide a financial incentive that will
help the Company attract, retain and motivate the most qualified employees,
directors and consultants.


ARTICLE II

DEFINITIONS


2.1           “Affiliated Corporation” means any
corporation or other entity that is affiliated with the Plan Sponsor through
stock ownership or otherwise and is designated as an “Affiliated Corporation”
by the Board.


2.2           “Award” means an Option, a
Restricted Stock Award or grants of Stock issued under the Plan.


2.3           “Board” means the Board of Directors
of the Plan Sponsor.


2.4           “Change of Control” shall be deemed
to have occurred:


(1)           At such time as a third person,
including a “group” as defined in Section 13(d)(3) of the Exchange Act, becomes
the beneficial owner of securities of the Plan Sponsor having 25% or more of the
total number of votes that may be cast for the election of directors of the
Plan Sponsor; or


(2)           On the date on which the shareholders
of the Plan Sponsor approve (i) any agreement for a merger or consolidation of
the Plan Sponsor with another corporation, provided that there shall be no
Change of Control if the persons and entities who were the shareholders of the
Plan Sponsor immediately before such merger or consolidation continue to own,
directly or indirectly, more than two-thirds of the outstanding voting
securities of the



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corporation resulting
from such merger or consolidation in substantially the same proportion as their
ownership of the voting securities of the Plan Sponsor outstanding immediately
before such merger or consolidation or (ii) any sale, exchange or other
disposition of all or substantially all of the Plan Sponsor’s assets; or


(3)           on the effective date of any sale,
exchange or other disposition of greater than 50% in fair market value of the
Plan Sponsor’s assets, other than in the ordinary course of business, whether
in a single transaction or a series of related transactions.


In
determining whether clause (1) of the preceding sentence has been satisfied,
the third person owning Shares must be someone other than a person or an Affiliated
Corporation of a person that, as of the Effective Date, was both (A) the
beneficial owner of securities of the Plan Sponsor having 10% or more of the
total number of votes that may be cast for the election of directors of the
Plan Sponsor and (B) a director or executive officer of the Company.  The Committee’s reasonable determination as
to whether such an event has occurred shall be final and conclusive.


2.5           “Code” means the Internal Revenue
Code of 1986, as it may be amended from time to time.


2.6           “Committee” means a committee
established under Article VII of the Plan which is empowered to take actions
with respect to the administration of the Plan.


2.7           “Company” means the Plan Sponsor and
the Affiliated Corporations.


2.8            “Disabled” or “Disability”
shall have the meaning given to such terms in Code § 22(e)(3).


2.9           “Effective Date” means the effective
date of the Plan which is May 31, 2007.


2.10         “Eligible Consultants” means those
consultants to the Company and non-employee directors of the Company who are
determined by the Committee to be individuals whose services are important to
the Company.


2.11         “Eligible Employees” means those key
employees (including, without limitation, officers and directors who are also
employees) of the Company, upon whose judgment, initiative and efforts the
Company is, or will become, largely dependent for the successful conduct of its
business.  For purposes of the Plan, an
employee is an individual whose wages are subject to the withholding of federal
income tax under Code § 3401.


2.12         “Exchange Act” means the Securities
Exchange Act of 1934, as amended.


2.13         “Fair Market Value” means the
closing price of the Stock on the American Stock Exchange, the principal stock
exchange or other market on which the stock is traded on the date in which Fair
Market Value is determined.  If the Stock
is not reported on any securities exchange, the Fair Market Value of Stock on a
particular date shall be as determined by the Committee in good



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faith
by applying any reasonable valuation method permitted under Code § 409A to
determine fair market value in accordance with Code § 409A.


2.14         “Incentive Option” means an Option
designated as an incentive stock option and granted in accordance with Code
§ 422.


2.15         “Non-Qualified Option” means any Option
other than an Incentive Option.


2.16         “Option” means a right to purchase
Stock at a stated or formula price for a specified period of time.  Options granted under the Plan shall be
Non-Qualified Options.


2.17         “Option Agreement” shall have the
meaning given to it in Section 4.2.


2.18         “Option Holder” means a Participant
who has been granted one or more Options under the Plan.


2.19         “Option Price” means the price at
which each share of Stock subject to an Option may be purchased, determined in
accordance with Subsection 4.2(b).


2.20         “Participant” means an Eligible
Employee or Eligible Consultant designated by the Committee during the term of
the Plan to receive one or more Awards under the Plan.


2.21         “Performance Award” means a
pre-established, performance-based grant under the Plan pursuant to Article
III.


2.22         “Performance Award Agreement”
means the agreement specified in Article III.


2.23         “Plan” means the PRB Energy, Inc.
2007 Equity Incentive Plan.


2.24         “Plan Sponsor” means PRB Energy,
Inc. and any successor thereto.


2.25         “Restricted Stock” means Stock
granted to a Participant that is subject to certain restrictions.


2.26         “Section” or “Subsection” means a
reference to a section or subsection of the Plan, unless another reference
specifically applies.


2.27         “Share” means a share of Stock.


2.28         “Stock” means the common stock of
the Plan Sponsor.


2.29         “Stock Bonus” means either an
outright grant of Stock or a grant of Stock subject to and conditioned upon
certain employment or performance related goals.



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ARTICLE III

PARTICIPATION AND PERFORMANCE-BASED AWARDS


3.1           Participation.  Participants in the Plan shall be those
Eligible Employees who, in the judgment of the Committee, are performing, or
during the term of their incentive arrangement will perform, vital services in
the management, operation and development of the Company, and significantly
contribute, or are expected to significantly contribute, to the achievement of
long-term corporate economic objectives. 
Eligible Consultants shall be selected from those non-employee
consultants to the Company and directors of the Company who are performing
services important to the operation and growth of the Company.  Participants may be granted from time to time
one or more Awards.


3.2           Performance-Based Awards.  The Company intends that Performance Awards
to certain employees will satisfy the performance-based compensation
requirements of Code § 162(m) so that the Company may deduct any compensation
paid under the Plan for federal income tax purposes without limitation under
Code § 162(m).  If any provision of this
Plan or any Performance Award Agreement would otherwise frustrate or conflict
with such intent, that provision, to the extent possible, shall be interpreted
and deemed amended so as to avoid such conflict.


3.3           Grants of
Performance-Based Awards. 
The Committee may grant Performance Awards that grant a specific number
of Options or shares of Restricted Stock that vest in whole or in part upon
satisfaction of specified performance goals. 
The Committee may also grant Performance Awards that require the
Committee to grant a specific number of shares of Stock, Options or shares of
Restricted Stock upon satisfaction of specified performance goals.  The Committee shall, in its sole discretion,
determine the type of Performance Awards to be made, the time at which
Performance Awards are to be made and the time at which the Performance Awards
vest or Shares are granted under Performance Awards, actual performance against
targets for purposes of Performance Award vesting or granting of Awards,
specific weighing of the components of Performance Award vesting or grants, and
establish such other terms under the Plan as the Committee may deem necessary
or desirable and consistent with the terms of the Plan.  The Committee shall have the full and
exclusive right to grant and determine terms and conditions of all Performance
Awards granted under the Plan.  The
performance goal or goals for a Performance Award shall be established in
writing at the time the Performance Award is granted.  The Committee shall have no power to increase
a Performance Award that has been granted, but shall have the power to decrease
a Performance Award.


3.4           Award Agreements.  Performance Award Agreements that are
intended to comply with Code § 162(m) shall specify the target number of Shares
or units for the Participant.  The
maximum vesting for a Performance Award shall be 100% of the Award.  No Performance Award shall entitle the
Participant to receive more than 1,700,000 Shares or units in any calendar
year.  Performance Awards to all
Participants for any calendar year shall not exceed 1,700,000 Shares.



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3.5           Preestablished Performance
Goals.  The performance
criteria for any Performance Award that is intended to satisfy the requirements
for “performance-based compensation” under Section 162(m) of the Code shall be
a measure based on one or more Qualifying Performance Criteria selected by the
Committee and specified at the time the Performance Award is granted.  For purposes of this Plan, the term “Qualifying
Performance Criteria” shall mean any one or more of the following performance
criteria, either individually or in any combination, applied to the Company, an
Affiliated Corporation or a business unit of the Company or Affiliated
Corporation, either individually or in any combination, and measured either
annually or cumulatively over a period of years, on an absolute basis or
relative to a pre-established target, to previous years’ results or to a
designated comparison group, in each case as specified by the Committee in the
Performance Award: (a) cash flow, (b) earnings per share, (c) earnings before
interest, taxes, depreciation and amortization, (d) return on equity, (e) total
shareholder return, (f) share price performance, (g) return on capital, (h)
return on assets or net assets, (i) total revenue, revenue or net revenue, (j)
income or net income, (k) operating income or net operating income, (l)
operating profit or net operating profit, (m) operating margin or profit margin
and (n) return on invested capital.  The
Committee may appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to exclude any of the following events that
occurs during a performance period:  (i)
asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the
effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs and (v) any extraordinary non-recurring items described
in the Company’s Exchange Act filings.


3.6           Committee Certification.  Notwithstanding satisfaction of any
Qualifying Performance Criteria, the number of Shares or Stock Options under a
Performance Award to be granted or vested on account of satisfaction of such
Qualifying Performance Criteria may be reduced by the Committee on the basis of
such further considerations as the Committee in its sole discretion shall
determine.  Except as otherwise provided
in this Plan or any Performance Award Agreement, the Participant shall not be
entitled to vest in or be granted any portion of a Performance Award until the
Committee certifies in writing that the Participant has met his or her specific
performance goals and determines the portion of the Performance Award which is
to be vested or granted.


ARTICLE IV

OPTIONS


4.1           Grant
of Options.  A Participant
may be granted one or more Options. 
Options shall be granted as of the date specified in the Option
Agreement.  In no event shall the
exercise of one Option affect the right to exercise any other Option or affect
the number of Shares for which any other Option may be exercised.  The grant of each Option shall be separately
approved by the Committee, and the receipt of one Option shall not result in
automatic receipt of any other Option. 
Upon determination by the Committee to grant an Option to a Participant,
the Committee shall enter into a Option Agreement with the Participant.


4.2           Stock Option Agreements.  Each Option granted under the Plan shall be
evidenced by a written stock option certificate or agreement (an “Option
Agreement”).  An Option Agreement


 



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shall
be issued by the Plan Sponsor in the name of the Participant to whom the Option
is granted (the “Option Holder”) and in such form as may be approved by the
Committee.  The Option Agreement shall
incorporate and conform to the conditions in the Plan as well as any other
terms and conditions that are not inconsistent as the Committee may consider
appropriate.  In the event of any
inconsistency between the provisions of the Plan and any Option Agreement, the
provisions of the Plan shall govern.


(a)                                  Number of Shares.  Each Option Agreement shall state that it
covers a specified number of shares of Stock, as determined by the Committee.


(b)                                 Price.  The price at which each share of Stock
covered by an Option may be purchased shall be determined in each case by the
Committee but shall not be less than 100% of the Fair Market Value of the Stock
on the date the Option is granted.


(c)                                  Duration of Options.  Each Option Agreement shall state the period
of time, determined by the Committee, within which the Option may be exercised
by the Option Holder (the “Option Period”). 
The Option Period must end not more than ten years from the date the
Option is granted.


(d)                                 Restrictions on Exercise.  The Option Agreement shall also set forth any
restrictions on Option exercise during the Option Period, if any, as may be
determined by the Committee.  Each Option
shall become exercisable (vest) over such period of time, if any, or upon such
events, as determined by the Committee.


(e)                                  Termination of Services, Death or Disability.  The Committee may specify the period, if any,
after which an Option may be exercised following termination of the Option
Holder’s services in the Option Agreement.  
If the Option Agreement does not specify the period of time following
termination of service during which Options may be exercised or vest, the time
periods or vesting provisions in this Subsection shall apply.


(i)                                     Termination for Cause.  If the services of the Option Holder are
terminated within the Option Period for “cause,” as determined by the Company,
the Option shall thereafter be void for all purposes.  “Cause” shall have the meaning assigned to it
by the Option Holder’s employment agreement, if the Company has entered into an
employment agreement with the Option Holder; otherwise termination for “cause”
shall mean termination of employment as a result of a violation of any Company
policy, procedure or guideline, or engaging in any of the following forms of
misconduct:  conviction of any felony or
of any misdemeanor involving dishonesty or moral turpitude; theft or misuse of
the Company’s property or time; use of alcohol or controlled substances on the
Company’s premises or appearing on such premises while intoxicated or under the
influence of drugs not prescribed by a physician, or after having abused
prescribed medications; illegal use of any controlled substance; illegal
gambling on the Company’s premises; discriminatory or



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                                                harassing
behavior, whether or not illegal under federal, state or local law; willful
misconduct; or falsifying any document or making any false or misleading
statement  relating to employment by the
Company; or injures the economic or ethical welfare of the Company by
misconduct or inattention to duties and responsibilities; or fails to meet the
Company’s performance expectations, as determined by the Company in its sole
discretion.


(ii)                                  Disability.  If the Option Holder becomes Disabled,
the Option may be exercised by the Option Holder within one year following the
Option Holder’s termination of services on account of Disability (provided that
such exercise must occur within the Option Period), but not thereafter.  In this event, the Option may be exercised
with respect to all of the Shares covered by the Option.


(iii)                               Death. 
 If the Option Holder dies
during the Option Period while still performing services for the Company or
within the one year period referred to in (ii) above or the three-month period
referred to in (iv) below, the Option may be exercised by those entitled to do
so under the Option Holder’s will or by the laws of descent and distribution
within one year following the Option Holder’s death (provided that such
exercise must occur within the Option Period), but not thereafter.  In this event, the Option may be exercised
with respect to all of the Shares covered by the Option.


(iv)                              Termination for Reasons Other than Cause,
Disability or Death.  If
the Option Holder is no longer employed by the Company or performing services
for the Company for any reason other than Cause, Disability or the Option Holder’s
death, the Option may be exercised by the Option Holder within three months
following the date of termination (provided that the exercise must occur within
the Option Period), but not thereafter. 
The Option may be exercised only with respect to the Shares as to which
the Option had become exercisable on or before the date of termination of
services.


4.3           Transferability.  Each Option shall not be transferable by the
Option Holder except by will or pursuant to the laws of descent and
distribution.  Each Option is exercisable
during the Option Holder’s lifetime only by him or her, or in the event of
Disability or incapacity, by his or her guardian, conservator or legal
representative.  The Committee may
provide at the time of grant or thereafter that the Option Holder may transfer
an Option to a member of the Option Holder’s immediate family, a trust of which
members of the Option Holder’s immediate family are the only beneficiaries, or
a partnership of which members of the Option Holder’s immediate family or
trusts for the sole benefit of the Option Holder’s immediate family are the
only partners, or in other circumstances at the Committee’s sole
discretion.  Immediate family means the
Option Holder’s spouse, issue (by birth or adoption), parents, grandparents and
siblings (including half brothers and sisters and adopted siblings).



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4.4           Manner of Exercise.   The method for exercising each Option
granted hereunder shall be by delivery to the Plan Sponsor of (1) written
notice specifying the number of Shares with respect to which such Option is
exercised and (2) payment in full of the exercise price and any liability
the Company may have for withholding of federal, state or local income or other
taxes incurred by reason of the exercise of the Option.  The purchase of such Shares shall take place
at the principal offices of the Plan Sponsor within thirty days following
delivery of such notice, at which time the Option Price of the Shares shall be
paid in full.  If the Option Price is
paid by means of a broker’s loan transaction, in whole or in part, the closing
of the purchase of the Stock under the Option shall take place (and the Option
shall be treated as exercised) on the date on which, and only if, the sale of
Stock upon which the broker’s loan was based has been closed and settled,
unless the Option Holder makes an irrevocable written election, at the time of
exercise of the Option, to have the exercise treated as fully effective for all
purposes upon receipt of the Option Price by the Plan Sponsor regardless of
whether or not the sale of the Stock by the broker is closed and settled.  A properly executed certificate or
certificates representing the Shares shall be delivered to the Option Holder
upon payment.  If Options on less than
all Shares evidenced by an Option Agreement are exercised, the Plan Sponsor
shall deliver a new Option Agreement evidencing the Option on the remaining
Shares upon delivery of the Option Agreement for the Option being exercised.


4.5           Payment of the Exercise Price.  The exercise price shall be paid by any of
the following methods or any combination of the following methods at the
election of the Option Holder, or by any other method approved by the Committee
upon the request of the Option Holder:


(a)           in
cash.


(b)                                 by
certified check, cashier’s check or other check acceptable to the Plan Sponsor,
payable to the order of the Plan Sponsor.


(c)                                  by
delivery to the Plan Sponsor of certificates representing the number of Shares
then owned by the Option Holder, the Fair Market Value of which equals the
purchase price of the Stock purchased pursuant to the Option, properly endorsed
for transfer to the Plan Sponsor.  No
Option may be exercised by delivery to the Plan Sponsor of certificates
representing Stock, unless such Stock has been held by the Option Holder for
more than six months.  The Fair Market
Value of any shares of Stock delivered in payment of the purchase price upon
exercise of the Option under the Plan shall be the Fair Market Value as of the
exercise date.  The exercise date shall
be the day of delivery of the certificates for the Stock used as payment of the
Option Price.


(d)                                 by
delivery to the Plan Sponsor of a properly executed notice of exercise together
with irrevocable instructions to a broker to deliver to the Plan Sponsor promptly
the amount of the proceeds of the sale of all or a portion of the Stock or of a
loan from the broker to the Option Holder required to pay the Option Price.


4.6           Withholding Requirement.  The Plan Sponsor’s obligations to deliver
shares of Stock upon the exercise of any Option shall be subject to the
Participant’s satisfaction of all applicable federal, state and local income
and other tax withholding requirements.  Upon exercise of an Option,



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the
Option Holder shall make appropriate arrangements with the Company to provide
for the amount of additional withholding required by Code §§ 3102 and 3402
and applicable state income tax laws, including payment of such taxes through
delivery of shares of Stock or by withholding Stock to be issued under the Option.


4.7           Withholding With Stock.  The Committee may, in its sole discretion,
grant the Participant an election to pay all such amounts of tax withholding,
or any part thereof, by electing to transfer to the Plan Sponsor, or to have
the Plan Sponsor withhold from Shares otherwise issuable to the Participant,
shares of Stock having a value equal to the amount required to be withheld or
such lesser amount as may be elected by the Participant.  All elections shall be subject to the
approval or disapproval of the Committee. 
The value of shares of Stock to be withheld shall be based on the Fair
Market Value of the Stock on the date that the amount of tax to be withheld is
to be determined (the “Tax Date”).  Any
such elections by Participants to have shares of Stock withheld for this
purpose will be subject to the following restrictions:


(a)           All
elections must be made prior to the Tax Date.


(b)           All
elections shall be irrevocable.


(c)           If
the Participant is an officer or director of the Plan Sponsor within the meaning
of Section 16 of the Exchange Act (“Section 16”), the Participant must satisfy
the requirements of Section 16 and any applicable Rules thereunder with respect
to the use of Stock to satisfy such tax withholding obligation.


4.8           Shareholder Privileges.  No Option Holder shall have any rights as a
shareholder with respect to any shares of Stock covered by an Option until the
Option Holder becomes the holder of record of such Stock, and no adjustments
shall be made for dividends or other distributions or other rights as to which
there is a record date preceding the date such Option Holder becomes the holder
of record of such Stock, except as provided in the Plan.


ARTICLE V

RESTRICTED STOCK


5.1           Grant
of Restricted Stock Awards. 
The Committee may grant a Participant one or more Restricted Stock
Awards consisting of Shares of Stock. 
The number of Shares granted as a Restricted Stock Award shall be
determined by the Committee.


5.2           Restrictions.  A Participant’s right to retain a Restricted
Stock Award granted to the Participant under this Article shall be subject to
such restrictions, including but not limited to the Participant’s continuous
employment by or performance of services for the Company for a restriction
period specified by the Committee or the attainment of specified performance
goals and objectives, as may be established by the Committee with respect to
such Award.  The Committee may, in its
sole discretion, require different periods of service or different performance
goals and objectives with respect to different Participants, to different
Restricted Stock Awards or to separate, designated portions of the Shares
constituting a Restricted Stock Award. 
In the event of the death or Disability



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of
a Participant, or the retirement of a Participant in accordance with the
Company’s established retirement policy, all required periods of service and
other restrictions applicable to Restricted Stock Awards then held by the
Participant shall lapse, and the Award shall become fully nonforfeitable.  Except as otherwise determined by the
Committee, if a Participant’s employment or consulting services terminate for
any other reason, any Restricted Stock Awards as to which the period for which
services are required or other restrictions have not been satisfied (or waived
or accelerated) shall be forfeited, and all shares of Stock related thereto
shall be immediately returned to the Company.


5.3           Privileges of a Stockholder; Transferability.  Unless otherwise provided in the Restricted
Stock Award, a Participant shall have all voting, dividend, liquidation and
other rights with respect to Stock in accordance with its terms received by the
Participant as a Restricted Stock Award under this Article upon the Participant’s
becoming the holder of record of such Stock, except the Participant’s right to
sell, encumber or otherwise transfer such Stock.


5.4           Enforcement of Restrictions.  The Committee shall cause a legend to be
placed on the Stock certificates issued pursuant to each Restricted Stock Award
referring to the restrictions of this Article and, in addition, may in its sole
discretion require one or more of the following methods of enforcing the
restrictions of this Article:


(a)                                  Requiring
the Participant to keep the Stock certificates, duly endorsed, in the custody
of the Company while the restrictions remain in effect; or


(b)                                 Requiring
that the Stock certificates, duly endorsed, be held in the custody of a third
party while the restrictions remain in effect.


ARTICLE VI

STOCK BONUSES


The Committee may award Stock Bonuses to such
Participants, subject to such conditions and restrictions, as it determines in
its sole discretion.  Stock Bonuses may
be either outright grants of Stock, or may be grants of Stock subject to and
conditioned upon certain employment or performance related goals.


From time to time during the duration of this Plan,
the Board may, in its sole discretion, adopt one or more incentive compensation
arrangements for Participants pursuant to which the Participants may acquire
shares of Stock, whether by purchase, outright grant or otherwise.  Any such arrangements shall be subject to the
general provisions of this Plan and all shares of Stock issued pursuant to such
arrangements shall be issued under this Plan.


 



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ARTICLE VII

PLAN ADMINISTRATION


7.1           Committee.  The Plan shall be administered by a
Committee appointed by and serving at the pleasure of the Board of Directors,
consisting of not less than two Directors (the “Committee”) and consisting
solely of outside Directors (within the meaning of Code § 162(m)(4)(C)(i)). The
Board of Directors may from time to time remove members from or add members to
the Committee, and vacancies on the Committee, howsoever caused, shall be
filled by the Board of Directors.  The
Committee shall be so constituted at all times as to permit the Plan to comply
with Rule 16b-3 or any successor rule promulgated under the Exchange Act and to
permit Awards to comply with the performance based compensation exception of
Code § 162(m).  Members of the Committee
and any subcommittee or special committee shall be appointed from time to time
by the Board, shall serve at the pleasure of the Board and may resign at any
time upon written notice to the Board.


7.2           Committee Meetings and Actions.  The Committee shall hold
meetings at such times and places as it may determine.  A majority of the members of the Committee
shall constitute a quorum, and the acts of the majority of the members present
at a meeting or a consent in writing signed by all members of the Committee
shall be the acts of the Committee and shall be final, binding and conclusive
upon all persons, including the Company, its shareholders and all persons
having any interest in Awards that may be or have been granted pursuant to the
Plan.


7.3           Powers of Committee.   In accordance with the
provisions of the Plan, the Committee shall, in its sole discretion, select the
Participants from among the Eligible Employees and Eligible Consultants,
determine the Awards to be made pursuant to the Plan, and the time at which
such Awards are to be made, fix the Option Price, period and manner in which an
Option becomes exercisable, the vesting period and other restrictions on
Restricted Stock, and establish such other terms of Awards under the Plan as
the Committee may deem necessary or desirable and consistent with the terms of
the Plan.  The Committee shall determine
the form or forms of the agreements with Participants that shall evidence the
particular provisions, terms, conditions, rights and duties of the Plan Sponsor
and the Participants with respect to Awards granted pursuant to the Plan, which
provisions need not be identical except as may be provided herein.  The Committee shall have the full and
exclusive right to grant and determine terms and conditions of all Options
granted under the Plan.  In granting
Options, the Committee shall take into consideration the contribution the
Option Holder has made or may make to the success of the Company or its
subsidiaries and such other factors as the Committee shall determine.  The Committee may from time to time adopt
such rules and regulations for carrying out the purposes of the Plan as it may
deem proper and in the best interests of the Company.  The Committee may correct any defect, supply
any omission or reconcile any inconsistency in the Plan or in any agreement
entered into hereunder in the manner and to the extent it shall deem expedient
and it shall be the sole and final judge of such expediency.  No member of the Committee shall be liable
for any action or determination made in good faith.  The determinations, interpretations and other
actions of the Committee pursuant to the provisions of the Plan shall be
binding and conclusive for all purposes and on all persons.


7.4           Interpretation of Plan.  The determination of the
Committee as to any disputed question arising under the Plan, including
questions of construction and interpretation, shall be final,



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binding
and conclusive upon all persons, including the Company, its shareholders and
all persons having any interest in Awards that may be or have been granted
pursuant to the Plan.


7.5           Indemnification.  Each person who is or shall have
been a member of the Committee or of the Board of Directors shall be
indemnified and held harmless by the Plan Sponsor against and from any loss,
cost, liability or expense that may be imposed upon or reasonably incurred in
connection with or resulting from any claim, action, suit or proceeding to
which such person may be a party or in which such person may be involved by reason
of any action taken or failure to act under the Plan and against and from any
and all amounts paid in settlement thereof, with the Company’s approval, or
paid in satisfaction of a judgment in any such action, suit or proceeding
against him, provided such person shall give the Company an opportunity, at its
own expense, to handle and defend the same before undertaking to handle and
defend it on such person’s own behalf. 
The foregoing right of indemnification shall not be exclusive of, and is
in addition to, any other rights of indemnification to which any person may be
entitled under the Plan Sponsor’s Articles of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.


ARTICLE VIII

STOCK SUBJECT TO THE PLAN


8.1           Number of Shares.  The number of Shares that are authorized for
issuance under the Plan in accordance with the provisions of the Plan and
subject to such restrictions or other provisions as the Committee may from time
to time deem necessary shall not exceed 20% of the issued and outstanding
Shares as of the date of the grant or award, subject to the adjustment
provisions in this Article.  The Shares
may be either authorized and unissued Shares or previously issued Shares
acquired by the Plan Sponsor.  This
authorization may be increased from time to time by approval of the Board and
by the shareholders of the Plan Sponsor if, in the opinion of counsel for the
Plan Sponsor, shareholder approval is required. 
Shares of Stock that may be issued upon exercise of Options under the
Plan shall be applied to reduce the maximum number of Shares remaining
available for use under the Plan.  The
Plan Sponsor shall at all times during the term of the Plan and while any
Options are outstanding retain as authorized and unissued Stock at least the
number of Shares from time to time required under the provisions of the Plan,
or otherwise assure itself of its ability to perform its obligations hereunder.


8.2           Unused Stock.  Any shares of Stock that are subject to an
Award that expires or for any reason is terminated unexercised and any shares
of Stock withheld for the payment of taxes or received by the Plan Sponsor as
payment of the exercise price of an Option or otherwise as contemplated by the
Plan shall automatically become available for use under the Plan.


8.3           Adjustments for Stock Splits and Stock Dividends.  If the Plan Sponsor shall at any time
increase or decrease the number of its outstanding Shares or change in any way
the rights and privileges of such Shares by means of the payment of a stock
dividend or any other distribution upon such shares payable in Stock, or
through a stock split, subdivision, consolidation, combination,
reclassification or recapitalization involving the Stock, then in relation to
the Stock that is affected by one or more of the above events, the numbers,
rights and privileges of the following shall be



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increased,
decreased or changed in like manner as if they had been issued and outstanding,
fully paid and nonassessable at the time of such occurrence:  (i) the Shares as to which Awards may be
granted under the Plan and (ii) the Shares then included in each outstanding
Award granted hereunder.


8.4           General Adjustment Rules.  No adjustment or substitution provided for in
this Article shall require the Plan Sponsor to sell a fractional share of Stock
under any Option, or otherwise issue a fractional share of Stock, and the total
substitution or adjustment with respect to each Option and other Award shall be
limited by deleting any fractional share. 
In the case of any such substitution or adjustment, the aggregate Option
Price for the total number of shares of Stock then subject to an Option shall
remain unchanged but the Option Price per share under each such Option shall be
equitably adjusted by the Committee to reflect the greater or lesser number of
shares of Stock or other securities into which the Stock subject to the Option
may have been changed, and appropriate adjustments shall be made to other
Awards to reflect any such substitution or adjustment.


8.5           Determination by the Committee.  Adjustments under this Article shall be made
by the Committee, whose determinations shall be final and binding upon all
parties.


ARTICLE IX

GENERAL RESTRICTIONS


9.1           Compliance with Securities
Laws.  Each Award grant
shall be subject to the requirement that, if at any time counsel to the Plan
Sponsor shall determine that the listing, registration or qualification of the
Shares subject to such Award grant upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, is necessary as a condition of, or in connection with, the
issuance or purchase of Shares thereunder, such Award grant may not be accepted
or exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Committee. 
Nothing herein shall be deemed to require the Plan Sponsor to apply for
or to obtain such listing, registration or qualification.


9.2           Changes in Accounting Rules.  Except as provided otherwise at the time an
Award is granted, notwithstanding any other provision of the Plan to the
contrary, if, during the term of the Plan, any changes in the financial or tax
accounting rules applicable to Options or other Awards shall occur which, in
the sole judgment of the Committee, may have a material adverse effect on the
reported earnings, assets or liabilities of the Plan Sponsor, the Committee shall
have the right and power to modify as necessary, any then outstanding and
unexercised Options or other Awards as to which the applicable services or
other restrictions have not been satisfied.


ARTICLE X

REQUIREMENTS OF LAW


10.1         Requirements
of Law.  The issuance of
Stock and the payment of cash pursuant to the Plan shall be subject to all
applicable laws, rules and regulations.



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10.2         Federal Securities Law Requirements.  If a Participant is an officer or director of
the Plan Sponsor within the meaning of Section 16 of the Exchange Act, Awards
granted hereunder shall be subject to all conditions required under Rule 16b-3,
or any successor rule promulgated under the Exchange Act, to qualify the Award
for any exception from the provisions of Section 16(b) of the Exchange Act
available under that Rule.  Such
conditions shall be set forth in the agreement with the Participant which
describes the Award or other document evidencing or accompanying the Award.


10.3         Governing Law.  The Plan and all agreements hereunder shall
be construed in accordance with and governed by the laws of the State of
Colorado.


ARTICLE XI

DURATION OF THE PLAN


Unless sooner terminated by the Board of Directors,
the Plan shall terminate at the close of business on May 30, 2017, and no
Award shall be granted after such termination. 
Awards outstanding at the time of the Plan termination may continue to
be exercised, or become free of restrictions, in accordance with their terms.


ARTICLE XII

PLAN AMENDMENT, MODIFICATION AND TERMINATION


The Board may at any time terminate, and from time to
time may amend or modify the Plan, provided, however, that no amendment or
modification may become effective without approval of the amendment or
modification by the shareholders if shareholder approval is required to enable
the Plan to satisfy any applicable statutory or regulatory requirements, or if
the Plan Sponsor, on the advice of counsel, determines that shareholder
approval is otherwise necessary or desirable.


No amendment, modification or termination of the Plan
shall in any manner adversely affect any Award previously granted under the
Plan, without the consent of the Participant holding such Award.


ARTICLE
XIII

CHANGE OF CONTROL


Notwithstanding any
exercise dates or vesting provisions stated in any agreement pertaining to any
Award, upon the occurrence of a Change of Control all exercise dates of any
outstanding Award shall accelerate and all outstanding Awards shall vest.


ARTICLE
XIV

MISCELLANEOUS


14.1         Gender and Number.  Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.



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14.2         No Right to Continued Employment.  Nothing contained in the Plan or in any Award
granted under the Plan shall confer upon any Participant any right with respect
to the continuation of his employment by, or consulting relationship with, the
Company, or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement or other contract to the contrary,
at any time to terminate such services or to increase or decrease the
compensation of the Participant from the rate in existence at the time of the
grant of an Award.  Nothing in this Plan
shall limit or impair the Company’s right to terminate the employment of any
employee, to terminate the consulting services of any consultant or to
terminate the services of any director. 
Whether an authorized leave of absence, or absence in military or
government service, shall constitute a termination of service shall be
determined by the Committee at the time in its sole discretion.


14.3         Nontransferability.  Except as provided otherwise in the Plan or
determined by the Committee, no right or interest of any Participant in an
Award granted pursuant to the Plan shall be assignable or transferable during
the lifetime of the Participant, either voluntarily or involuntarily, or
subjected to any lien, directly or indirectly, by operation of law, or otherwise,
including execution, levy, garnishment, attachment, pledge or bankruptcy.  In the event of a Participant’s death, a
Participant’s rights and interests in Awards shall, to the extent provided in
the Plan, be transferable by will or the laws of descent and distribution, and
payment of any amounts due under the Plan shall be made to, and exercise of any
Awards may be made by, the Participant’s legal representatives, heirs or
legatees.  If, in the opinion of the
Committee, a person entitled to payments or to exercise rights with respect to
the Plan is disabled from caring for his affairs because of mental condition,
physical condition or age, payment due such person may be made to, and such
rights shall be exercised by, such person’s guardian, conservator or other
legal personal representative upon furnishing the Committee with evidence
satisfactory to the Committee of such status.


14.4         No Plan Funding.  Obligations to Participants under the Plan
will not be funded, trusteed, insured or secured in any manner.  The Participants under the Plan shall have no
security interest in any assets of the Company, and shall be only general
creditors of the Company.


14.5         Other Employee Benefits.  The amount of any compensation deemed to be
received by a Participant as a result of the exercise of an Option or receipt
of any other Award or the sale of Shares received upon such exercise or Award
shall not constitute “earnings” or “compensation” with respect to which any
other employee benefits of such employee are determined, including without
limitation benefits under any pension, profit sharing, 401(k), life insurance
or salary continuation plan.



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IN WITNESS WHEREOF, the Plan Sponsor has caused this Plan to be duly
executed, effective as of the Effective Date.


	
  

  	
  PRB ENERGY, INC.

  
	
   

  	
  Plan Sponsor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert W. Wright

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  May 31, 2007

  



 



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