Document:

EXHIBIT  4.11

REGISTRATION RIGHTS
AGREEMENT

REGISTRATION
RIGHTS AGREEMENT (this “Agreement”),
dated as of December 28, 2006, by and between PRB Energy, Inc., a Nevada
corporation, with headquarters located at 1875 Lawrence Street, Suite 450,
Denver, Colorado 80202 (“Parent”),
and the undersigned buyers (each, a “Buyer”,
and collectively, the “Buyers”).

WHEREAS:

A.            In connection with the Securities Purchase Agreement by
and among Parent, PRB Oil & Gas, Inc., a Colorado corporation (the “Company”), and Buyers of even date herewith
(the “Securities Purchase Agreement”),
(i) the Company has agreed, upon the terms and subject to the conditions set
forth in the Securities Purchase Agreement, to issue and sell to each Buyer
senior secured debentures of the Company and (ii) Parent has agreed, upon the
terms and subject to the conditions set forth in the Securities Purchase
Agreement, to issue and sell to each Buyer shares (“Closing Shares”) of Parent’s common stock, par value $0.001
per share (the “Common Stock”).

B.            To induce the Buyers to execute and deliver the
Securities Purchase Agreement, Parent has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder, or any similar successor statute
(collectively, the “1933 Act”),
and applicable state securities laws.

NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Parent and each of the Buyers hereby agree as follows:

1.     Definitions.

Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings set
forth in the Securities Purchase Agreement. 
As used in this Agreement, the following terms shall have the following
meanings:

a.     “Business Day” means any day other than Saturday, Sunday or
any other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.

b.     “Closing Date” shall have the meaning set forth in the
Securities Purchase Agreement.

c.     “Effective Date” means the date that the Registration
Statement has been declared effective by the SEC.

d.     “Effectiveness Deadline” means the date which is 150 days
after the Closing Date.

 

e.     “Filing Deadline” means the date which is 90 days after the
Closing Date.

f.      “Investor” means a Buyer or any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
9 and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9.

g.     “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.

h.     “register,” “registered,”
and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements (as
defined below) in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration or ordering of effectiveness of such Registration Statement(s) by
the SEC.

i.      “Registrable Securities” means the Closing Shares.

j.      “Registration Statement” means a registration statement or
registration statements of Parent filed under the 1933 Act covering the
Registrable Securities.

k.     “Required Holders” means the holders of at least a majority
of the Registrable Securities.

l.      “Required Registration Amount” means 100% of the Closing
Shares.

m.    “Rule 415” means Rule 415 under the 1933 Act or any successor
rule providing for offering securities on a continuous or delayed basis.

n.     “SEC” means the United States Securities and Exchange
Commission.

2.     Registration.

a.     Mandatory Registration.  Parent shall prepare, and, as soon as
practicable, but in no event later than the Filing Deadline, file with the SEC
the Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities.  In the event
that Form S-3 is unavailable for such a registration, Parent shall use such
other form as is available for such a registration on another appropriate form
reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(d).  The Registration Statement
prepared pursuant hereto shall register for resale at least the number of
shares of Common Stock equal to the Required Registration Amount as of date the
Registration Statement is initially filed with the SEC.  The Registration Statement shall contain
(except if otherwise directed by the Required Holders) the “Selling
Shareholders” and “Plan of Distribution” sections in substantially
the form attached hereto as Exhibit B. 
Parent shall use its best efforts to have the Registration Statement
declared effective by the SEC as soon as practicable, but in no event later
than the Effectiveness

 

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Deadline.  Each Investor agrees to furnish to Parent a completed
questionnaire in the form of Exhibit C within three trading days after
receiving Parent’s written request therefor.

b.     Allocation
of Registrable Securities.  The
number of Registrable Securities included in any Registration Statement shall
be allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement
covering such initial number of Registrable Securities or increase thereof is
declared effective by the SEC.  In the
event that an Investor sells or otherwise transfers any of such Investor’s
Registrable Securities other than pursuant to the Plan of Distribution
contained in the Registration Statement, each transferee shall be allocated a
pro rata portion of the then remaining number of Registrable Securities
included in such Registration Statement for such transferor.  Any shares of Common Stock included in a
Registration Statement and which remain allocated to any Person which ceases to
hold any Registrable Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement.  In no event
shall Parent include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required
Holders.

c.     Legal
Counsel.  The Required Holders shall
have the right to select one legal counsel to review and oversee any registration
pursuant to this Section 2 (“Legal
Counsel”), which shall be McDermott Will & Emery LLP or such
other counsel as thereafter designated by the Required Holders.  Parent and Legal Counsel shall reasonably
cooperate with each other in performing Parent’s obligations under this
Agreement.

d.     Ineligibility
for Form S-3.  In the event that Form
S-3 is not available for the registration of the resale of Registrable
Securities hereunder, Parent shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the Required
Holders and (ii) undertake to register the Registrable Securities on Form S-3
as soon as such form is available, provided
that Parent shall maintain the effectiveness of the Registration Statement then
in effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC.

e.     Effect of Failure to
File and Obtain and Maintain Effectiveness of Registration Statement.  If (i) a Registration Statement covering all
of the Registrable Securities required to be covered thereby and required to be
filed by Parent pursuant to this Agreement is not declared effective by the SEC
on or before the respective Effectiveness Deadline (an “Effectiveness Failure”) or (ii) on any day after the
Effective Date sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(s)) pursuant to such
Registration Statement (including, without limitation, because of a failure to
keep such Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement or to
register a sufficient number of shares of Common Stock) (a “Maintenance Failure”) then, as partial relief for the
damages to any holder by reason of any such delay in or reduction of its
ability to sell the underlying shares of Common Stock (which remedy shall not
be exclusive of any other remedies available at law or in equity), Parent shall
pay to each holder of Registrable Securities relating to such Registration
Statement an amount in cash equal to 1.0% of the aggregate Purchase Price (as
such term is defined in the Securities

 

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Purchase Agreement)
allocable to such Investor’s Registrable Securities included in such
Registration Statement on each of the following dates: (i) the day of an
Effectiveness Failure and on every thirtieth day (pro rated for periods totaling
less than thirty days) after an Effectiveness Failure until such Effectiveness
Failure is cured; and (ii) the initial day of a Maintenance Failure and on
every thirtieth day (pro rated for periods totaling less than thirty days)
after a Maintenance Failure until such Maintenance Failure is cured.  The payments to which a holder shall be
entitled pursuant to this Section 2(e) are referred to herein as “Registration Delay Payments.”  Registration Delay Payments shall be paid on
the day of the Effectiveness Failure and the initial day of a Maintenance
Failure, as applicable, and thereafter on the earlier of (A) the thirtieth day
after the event or failure giving rise to the Registration Delay Payments has
occurred and (B) the third Business Day after the event or failure giving rise
to the Registration Delay Payments is cured. 
In the event Parent fails to make Registration Delay Payments in a
timely manner, such Registration Delay Payments shall bear interest at the rate
of 2.0% per month (prorated for partial months) until paid in full. The
cumulative Registration Delay Payments shall not exceed 5% of the aggregate
Purchase Price (as such term is defined in the Securities Purchase Agreement).

3.     Related Obligations.

At such time as Parent is obligated to file a
Registration Statement with the SEC pursuant to Section 2(a) or 2(d), Parent
shall use commercially reasonable efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, Parent shall have the following obligations:

a.     Parent shall promptly
prepare and file with the SEC a Registration Statement with respect to the
Registrable Securities and use commercially reasonable efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective as soon as practicable after such filing (but in no event later than
the Effectiveness Deadline).  Parent
shall keep each Registration Statement effective pursuant to Rule 415 at all
times until the earlier of (i) the date as of which the Investors may sell all
of the Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
under the 1933 Act or (ii) the date on which the Investors shall have sold all
of the Registrable Securities covered by such Registration Statement (the “Registration Period”). 
Parent shall ensure that each Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein
(in the case of prospectuses, in the light of the circumstances in which they
were made) not misleading.  The term “commercially
reasonable efforts” shall mean, among other things, that Parent shall submit to
the SEC, within two Business Days after the later of the date (i) that Parent
learns that no review of a particular Registration Statement will be made by
the staff of the SEC or that the staff has no further comments on a particular
Registration Statement, as the case may be, and (ii) of the approval of Legal
Counsel pursuant to Section 3(c) (which approval is immediately sought), a
request for acceleration of effectiveness of such Registration Statement to a
time and date not later than 48 hours after the submission of such request.

 

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b.             Parent shall prepare and file with
the SEC such amendments (including post-effective amendments) and supplements
to a Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of Parent covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement.  In the case of amendments and
supplements to a Registration Statement which are required to be filed pursuant
to this Agreement (including pursuant to this Section 3(b)) by reason of Parent
filing a report on Form 10-Q, Form 10-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the “1934 Act”), Parent shall have incorporated such report by
reference into such Registration Statement, if applicable, or shall file such
amendments or supplements with the SEC on the same day on which the 1934 Act
report is filed which created the requirement for Parent to amend or supplement
such Registration Statement.

c.     Parent
shall (A) permit Legal Counsel to review and comment upon (i) a Registration
Statement at least five Business Days prior to its filing with the SEC and (ii)
all amendments and supplements to all Registration Statements (except for
Annual Reports on Form 10-K, and Reports on Form 10-Q and any similar or
successor reports) within a reasonable number of days prior to their filing
with the SEC, and (B) not file any Registration Statement or amendment or
supplement thereto in a form to which Legal Counsel reasonably objects.  Parent shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which
consent shall not be unreasonably withheld or delayed.  Parent shall furnish to Legal Counsel,
without charge, (i) copies of any correspondence from the SEC or the staff of
the SEC to Parent or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by reference,
if requested by an Investor, and all exhibits and (iii) upon the effectiveness
of any Registration Statement, one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto.  Parent and Legal Counsel shall reasonably
cooperate with each other in performing Parent’s obligations pursuant to this
Section 3.

d.     Parent shall furnish to
each Investor whose Registrable Securities are included in any Registration
Statement, without charge, (i) promptly after the same is prepared and filed
with the SEC, at least one copy of such Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, 10 copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such
other number of copies as such Investor may reasonably request) and (iii) such
other documents, including copies of any preliminary or final prospectus, as
such Investor may reasonably request from time to time in order to facilitate
the disposition of the Registrable Securities owned by such Investor.

 

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e.     Parent
shall use commercially reasonable efforts to (i) register and qualify, unless
an exemption from registration and qualification applies, the resale by
Investors of the Registrable Securities covered by a Registration Statement
under such other securities or “blue sky” laws of all applicable jurisdictions
in the United States, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided,
however, that Parent shall not be required in connection therewith
or as a condition thereto to (x) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3(e),
(y) subject itself to general taxation in any such jurisdiction, or (z) file a
general consent to service of process in any such jurisdiction.  Parent shall promptly notify Legal Counsel
and each Investor who holds Registrable Securities of the receipt by Parent of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the
securities or “blue sky” laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any proceeding for
such purpose.

f.      Parent
shall notify Legal Counsel and each Investor in writing of the happening of any
event, as promptly as practicable after becoming aware of such event, as a
result of which the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (provided that
in no event shall such notice contain any material, nonpublic information),
and, subject to Section 3(r), promptly prepare a supplement or amendment to
such Registration Statement to correct such untrue statement or omission, and
deliver 10 copies of such supplement or amendment to Legal Counsel and each
Investor (or such other number of copies as Legal Counsel or such Investor may
reasonably request).  Parent  shall also promptly notify Legal Counsel and
each Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by
facsimile or e-mail on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and (iii)
of Parent’s reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.

g.     Parent shall use commercially
reasonable efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order or suspension and the resolution thereof or
its receipt of actual notice of the initiation or threat of any proceeding for
such purpose.

 

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h.     If
the Investors engage in an underwritten public offering of the Registrable
Securities, at the reasonable request of any Investor, Parent shall furnish to
such Investor, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as an Investor may reasonably
request (i) a letter, dated such date, from Parent’s independent certified
public accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the Investors, and (ii) an opinion, dated as of such
date, of counsel representing Parent for purposes of such Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to the Investors.

i.      Parent
shall make available for inspection by (i) any Investor, (ii) Legal Counsel and
(iii) one firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”),
all pertinent financial and other records, and pertinent corporate documents
and properties of Parent (collectively, the “Records”),
as shall be reasonably deemed necessary by each Inspector, and cause Parent’s
officers, directors and employees, counsel and Parent’s independent certified
public accountants to supply all information which may be necessary and any
Inspector may reasonably request; provided, however,
that each Inspector shall agree to hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record or other
information which Parent determines in good faith to be confidential, and of
which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge.  Each
Investor agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or through
other means, give prompt notice to Parent and allow Parent, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.  Nothing herein (or in any other confidentiality
agreement between Parent and any Investor) shall be deemed to limit the
Investors’ ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.

j.      Parent shall hold in
confidence and not make any disclosure of information concerning an Investor
provided to Parent unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this Agreement or any other agreement. 
Parent agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Investor and allow such Investor, at the Investor’s expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information.

 

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k.     Parent
shall use commercially reasonable efforts to cause all of the Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by Parent are
then listed.  Parent shall pay all fees and
expenses in connection with satisfying its obligation under this Section 3(k).

l.      Parent
shall cooperate with the Investors who hold Registrable Securities being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may be, as the Investors may reasonably request and registered in such names as
the Investors may request.

m.    If
requested by an Investor, Parent shall within 5 days of receipt of notice from
such Investor (i) incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to
be sold in such offering; (ii) make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to
be incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if reasonably
requested by an Investor holding any Registrable Securities.

n.     Parent
shall use commercially reasonable efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved by such
other federal or state governmental agencies or authorities as may be necessary
to consummate the disposition of such Registrable Securities.

o.     Parent
shall make generally available to its security holders as soon as practical,
but not later than 90 days after the close of the period covered thereby, an
earnings statement (in form complying with, and in the manner provided by, the provisions
of Rule 158 under the 1933 Act) covering a twelve-month period beginning not
later than the first day of Parent’s fiscal quarter next following the
Effective Date of the Registration Statement.

p.     On
the date hereof, Parent shall furnish to the Investors lock-up agreements
executed by each Person listed on Exhibit D hereto pursuant to which
each such Person shall agree not to sell, transfer or dispose any shares of
Common Stock owned by such Person during the 30-day period following the
Effective Date.

q.     Parent
shall otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.

r.      Within 2 Business Days
after a Registration Statement which covers Registrable Securities is ordered
effective by the SEC, Parent shall: (i) file a definitive prospectus with the
SEC under Rule 424(b) of the 1933 Act; and (ii) deliver, and shall cause

 

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legal counsel for Parent to deliver, to the transfer agent for such
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.

s.     Notwithstanding
anything to the contrary contained herein, at any time after the Registration
Statement has been declared effective by the SEC, Parent may delay the
disclosure of material, non-public information concerning Parent the disclosure
of which at the time is not, in the good faith opinion of the Board of
Directors of Parent and its counsel, in the best interest of Parent and, in the
opinion of counsel to Parent, otherwise required (a “Grace Period”); provided, that
Parent shall promptly (i) notify the Investors in writing of the existence of
material, non-public information giving rise to a Grace Period (provided that in each notice Parent will not disclose the
content of such material, non-public information to the Investors) and the date
on which the Grace Period will begin, and (ii) notify the Investors in writing
of the date on which the Grace Period ends; and, provided
further, that no Grace Period shall exceed 20 consecutive days and
during any 365-day period such Grace Periods shall not exceed an aggregate of
30 days and the first day of any Grace Period must be at least two trading days
after the last day of any prior Grace Period (each, an “Allowable
Grace Period”).  For purposes
of determining the length of a Grace Period above, the Grace Period shall begin
on and include the date the Investors receive the notice referred to in clause
(i) and shall end on and include the later of the date the Investors receive
the notice referred to in clause (ii) and the date referred to in such notice.  The provisions of Section 3(g) hereof shall
not be applicable during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, Parent
shall again be bound by the first sentence of Section 3(f) with respect to the
information giving rise thereto unless such material, non-public information is
no longer applicable.  Notwithstanding
anything to the contrary contained herein, Parent shall cause its transfer
agent to deliver unlegended shares of Common Stock to a transferee of an
Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale, and, if required under
applicable securities laws, deliver a copy of the prospectus included as part
of the applicable Registration Statement, prior to the Investor’s receipt of
the notice of a Grace Period and for which the Investor has not yet settled.

4.     Obligations of the Investors.

a.     At least 5 Business Days
prior to the first anticipated filing date of a Registration Statement, Parent
shall notify each Investor in writing of the information Parent requires from
each such Investor if such Investor elects to have any of such Investor’s
Registrable Securities included in such Registration Statement.  It shall be a condition precedent to the
obligations of Parent to complete the registration pursuant to this Agreement
with respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to Parent such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it, as shall be reasonably required to effect
and maintain the effectiveness of the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as Parent may reasonably request.

 

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b.     Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees
to cooperate with Parent as reasonably requested by Parent in connection with
the preparation and filing of any Registration Statement hereunder, unless such
Investor has notified Parent in writing of such Investor’s election to exclude
all of such Investor’s Registrable Securities from such Registration Statement.

c.     Each
Investor agrees that, upon receipt of any notice from Parent of the happening
of any event of the kind described in Section 3(g) or the first sentence of
Section 3(f), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to any Registration Statement(s) covering such Registrable
Securities until such Investor’s receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(g) or the first sentence of
Section 3(f) or receipt of notice that no supplement or amendment is
required.  Notwithstanding anything to
the contrary contained herein, Parent shall, to the extent it may do so under
applicable federal and state securities law, cause its transfer agent to
deliver unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Investor has
entered into a contract for sale prior to the Investor’s receipt of a notice
from Parent of the happening of any event of the kind described in Section 3(g)
or the first sentence of Section 3(f) and for which the Investor has not yet
settled.

d.     Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement.

5.     Expenses of Registration.

All reasonable expenses, other than underwriting
discounts, commissions or concessions and brokers’ or agents’ commissions or
concessions or selling commissions or concessions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
Parent shall be paid by Parent.  Parent
shall also reimburse the Investors for the reasonable fees and disbursements of
one Legal Counsel in connection with registration, filing or qualification of
the Registrable Securities pursuant to Sections 2 and 3 of this Agreement.

6.     Indemnification.

In the event any Registrable Securities are included
in a Registration Statement under this Agreement:

a.     To the fullest extent
permitted by law, Parent will, and hereby does, indemnify, hold harmless and
defend each Investor, the directors, officers, members, partners, employees,
agents, and representatives of, and each Person, if any, who controls any Investor
within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’
fees, amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating, preparing or defending
any action, claim, suit, inquiry, proceeding,

 

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investigation
or appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an Indemnified Person is or may be a party thereto (“Indemnified Damages”), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
“blue sky” laws of any jurisdiction in which Registrable Securities are offered
(“Blue Sky Filing”), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
Parent files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged
violation by Parent of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities pursuant
to a Registration Statement or (iv) any violation by Parent of this Agreement
(the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”).  Subject
to Section 6(c), Parent shall reimburse the Indemnified Persons, promptly as
such expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. 
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply
to a Claim by an Indemnified Person arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to Parent by such Indemnified Person for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by Parent pursuant to Section 3(d); (ii)
with respect to any preliminary prospectus, shall not inure to the benefit of
any such Person from whom the Person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
Person controlling such Person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus,
as then amended or supplemented, if such prospectus was timely made available
by Parent pursuant to Section 3(d), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a violation and such Indemnified Person, notwithstanding such advice,
used it or failed to deliver the correct prospectus as required by the 1933 Act
and such correct prospectus was timely made available pursuant to Section 3(d);
(iii) shall not be available to the extent such Claim is based on a failure of
the Investor to deliver or to cause to be delivered the prospectus made
available by Parent, including a corrected prospectus, if such prospectus or
corrected prospectus was timely made available by Parent pursuant to Section
3(d); and (iv) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of Parent, which
consent shall not be unreasonably withheld or delayed.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.

 

 11
 

b.     In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), Parent, each of its directors, each of its
officers who signs the Registration Statement and each Person, if any, who
controls Parent within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934
Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or
are based upon any Violation, in each case to the extent, and only to the
extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to Parent by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(c), such
Investor will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party, promptly as such expenses are incurred and are due and
payable, in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in
this Section 6(b) and the agreement with respect to contribution contained in
Section 7 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor,
which consent shall not be unreasonably withheld or delayed; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9. 
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.

c.     Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6 of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however,
that an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel with the fees and expenses of not more than one counsel for
such Indemnified Person or Indemnified Party to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding.  In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates.  The Indemnified Party or Indemnified Person
shall

 

 12
 

cooperate reasonably with
the indemnifying party in connection with any negotiation or defense of any
such action or Claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified
Party or Indemnified Person which relates to such action or Claim.  The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the status
of the defense or any settlement negotiations with respect thereto.  No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its prior
written consent, provided, however,
that the indemnifying party shall not unreasonably withhold, delay or condition
its consent.  No indemnifying party
shall, without the prior written consent of the Indemnified Party or
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim or
litigation.  Following indemnification as
provided for hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made.  The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action.

d.     The
indemnification required by this Section 6 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.

e.     The
indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.

7.     Contribution.

To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no Person
involved in the sale of Registrable Securities which Person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale shall be entitled to contribution from any
Person involved in such sale of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.

8.     Reports Under the 1934 Act.

With a view to
making available to the Investors the benefits of Rule 144 promulgated under
the 1933 Act or any other similar rule or regulation of the SEC that may at

 

 13
 

any time permit the
Investors to sell securities of Parent to the public without registration (“Rule 144”), Parent agrees to:

a.     make
and keep public information available, as those terms are understood and
defined in Rule 144;

b.     file
with the SEC in a timely manner all reports and other documents required of
Parent under the 1933 Act and the 1934 Act so long as Parent remains subject to
such requirements (it being understood that nothing herein shall limit Parent’s
obligations under Section 4(c) of the Securities Purchase Agreement) and the
filing of such reports and other documents is required for the applicable
provisions of Rule 144; and

c.     furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by Parent, if true, that it has complied
with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii)
a copy of the most recent annual or quarterly report of Parent and such other
reports and documents so filed by Parent, and (iii) such other information as
may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.

9.     Assignment of Registration Rights.

The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of such
Investor’s Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to Parent within a reasonable time after such assignment; (ii)
Parent is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the Registrable Securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws; (iv) at or before the time Parent receives
the written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with Parent to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance with
the applicable requirements of the Securities Purchase Agreement.

10.   Amendment of Registration Rights.

Provisions of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of Parent and the Required
Holders.  Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and Parent.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the Registrable
Securities.  No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification
of any provision of any of this Agreement unless the same consideration also is
offered to all of the parties to this Agreement.

 

 14
 

11.           Miscellaneous.

a.     A
Person is deemed to be a holder of Registrable Securities whenever such Person
owns or is deemed to own of record such Registrable Securities.  If Parent receives conflicting instructions,
notices or elections from two or more Persons with respect to the same Registrable
Securities, Parent shall act upon the basis of instructions, notice or election
received from the such record owner of such Registrable Securities.

b.     Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed
to have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. 
The addresses and facsimile numbers for such communications shall be:

If to Parent:

	
   

  	
  PRB Energy, Inc.

  	
   

  
	
   

  	
  1875 Lawrence
  Street, Suite 450

  	
   

  
	
   

  	
  Denver, Colorado
  80202

  	
   

  
	
   

  	
  Telephone:

  	
  303 308-1330 ext. 101

  	
   

  
	
   

  	
  Facsimile:

  	
  303 308-1590

  	
   

  
	
   

  	
  Attention:

  	
  Mr. Robert W. Wright, CEO

  	
   

  

 

With
a copy (for informational purposes only) to:

	
   

  	
  Douglas R. Wright, Esq.

  
	
   

  	
  Faegre & Benson LLP

  
	
   

  	
  3200 Wells Fargo Center

  
	
   

  	
  1700 Lincoln Street

  
	
   

  	
  Denver, CO 80203

  
	
   

  	
  Telephone:

  	
  303 607-3500

  
	
   

  	
  Facsimile:

  	
  303 607-3600

  

 

If to Legal Counsel:

	
   

  	
  McDermott Will & Emery
  LLP

  	
   

  
	
   

  	
  340 Madison
  Avenue

  	
   

  
	
   

  	
  New York, New
  York  10173

  	
   

  
	
   

  	
  Telephone:

  	
  212 547-5400

  	
   

  
	
   

  	
  Facsimile:

  	
  212 547-5444

  	
   

  
	
   

  	
  Attention:

  	
  Stephen E. Older, Esq.

  	
   

  
	
   

  	
   

  	
  Joel L.
  Rubinstein, Esq.

  	
   

  

 

If to a Buyer, to its address and facsimile number set forth on the Schedule
of Buyers attached hereto, with copies to such Buyer’s representatives as
set forth on the Schedule of Buyers, or to such other address and/or
facsimile number and/or to the attention of such other Person as the

 

 15
 

recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change.  Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

c.     Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.

d.     All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the
State of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for
such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by
law.  If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

e.     This
Agreement, the other Transaction Documents (as defined in the Securities
Purchase Agreement) and the instruments referenced herein and therein
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof.  There
are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. 
This Agreement, the other Transaction Documents and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

 

 16
 

f.      Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of
and be binding upon the permitted successors and assigns of each of the parties
hereto.

g.     The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

h.     This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
agreement.  This Agreement, once executed
by a party, may be delivered to each other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.

i.      Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.

j.      The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will
be applied against any party.

k.     This
Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as expressly
provided in Section 6 hereof.

l.      All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in the Agreement,
by the Required Holders.

m.    The
obligations of each Buyer hereunder are several and not joint with the
obligations of any other Buyer, and no provision of this Agreement is intended
to confer any obligations on any Buyer vis-à-vis any other Buyer.  Nothing contained herein, and no action taken
by any Buyer pursuant hereto, shall be deemed to constitute the Buyers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Buyers are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated herein.

* * * * * *

 17

 

IN WITNESS WHEREOF,
each Buyer and Parent has caused its respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.

	
  

  	
   

  	
  PARENT:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PRB ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ William F. Hayworth

  	
   

  
	
   

  	
   

  	
   

  	
  Name: William F. Hayworth

  
	
   

  	
   

  	
   

  	
  Title: President

  
						

 

 

IN
WITNESS WHEREOF, each Buyer and Parent has caused its
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

	
  

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DKR SOUNDSHORE OASIS HOLDING FUND

  LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ Barbara  Burger

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Barbara Burger

  
	
   

  	
   

  	
   

  	
  Title: Director

  

 

 

IN WITNESS WHEREOF,
each Buyer and Parent has caused its respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.

	
  

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WEST COAST OPPORTUNITY FUND,

  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Atticus Lowe

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Atticus Lowe

  
	
   

  	
   

  	
   

  	
  Title: Chief Investment Officer

  

 

 

SCHEDULE
OF BUYERS

	
  Buyer

  	
   

  	
  Buyer Address

  and Facsimile Number

  	
   

  	
  Buyer’s Representative’s Address 

  and Facsimile Number

  
	
  DKR Soundshore Oasis Holding

  Fund Ltd.

  	
   

  	
  1281 East Main Street

  Stamford, CT 06902

  Telephone: (203) 324-8378

  Facsimile: (203) 324-8488

  Attention: Rajni A. Narasi

  	
   

  	
  McDermott Will & Emery LLP

  340 Madison Avenue

  New York, New York 10173

  Telephone: (212) 547-5400

  Facsimile: (212) 547-5444

  
	
  

  	
   

  	
   

  	
   

  	
  Attention:

  	
  Stephen E. Older, Esq.

  
	
  

  	
   

  	
   

  	
   

  	
   

  	
  Joel L. Rubinstein, Esq.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  West Coast Opportunity Fund, LLC

  	
   

  	
  2151 Alessandro Drive, Suite 1

  Ventura, CA 93001

  Telephone: (805) 653-5333

  Facsimile: (805) 648-6488

  Attention: Atticus Lowe

  	
   

  	
  Catherine DeBono Holmes

  Jeffer, Mangels, Butler & Marmaro LLP

  1900 Avenue of the Stars, 7th Floor Los

  Angeles, California 90067

  Telephone: (310) 201-3553

  Facsimile: (310) 712-8553

  

 

 

EXHIBIT
A

FORM
OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

            ,
200   

[Transfer Agent]

[Address]

Attention:  [                       ]

Re:                               PRB
Energy, Inc.

Ladies and Gentlemen:

[We are][I am] counsel to
PRB Energy, Inc., a Nevada corporation (the “Company”),
and have represented the Company in connection with that certain Securities
Purchase Agreement (the “Securities Purchase
Agreement”) entered into by and among the Company and the buyers
named therein (collectively, the “Holders”)
pursuant to which the Company issued to the Holders [*] shares (the “Shares”) of Common Stock, $0.001 par value
(“Common Stock”), of the
Company.  Pursuant to the Securities
Purchase Agreement, the Company also has entered into a Registration Rights
Agreement with the Holders (the “Registration
Rights Agreement”) pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the Registration
Rights Agreement), including the Shares, under the Securities Act of 1933, as
amended (the “1933 Act”).  In connection with the Company’s obligations
under the Registration Rights Agreement, on             
   , 200 , the Company filed a Registration Statement on
Form S-3 (File No. 333-             )
(the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each
of the Holders as a selling shareholder thereunder.

In connection with the foregoing, [we][I] advise you
that a member of the SEC’s staff has advised [us][me] by telephone that the SEC
has entered an order declaring the Registration Statement effective under the
1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no knowledge, after
telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

This letter shall serve as our notice to you that the
shares of Common Stock registered pursuant to the Registration Statement are
currently freely transferable by the Holders pursuant to the Registration
Statement.

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [ISSUER’S COUNSEL]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  cc:

  	
  [LIST NAMES OF HOLDERS]

  
					

 

 1

EXHIBIT B

SELLING SHAREHOLDERS

The
shares of Common Stock being offered by the selling shareholders were
originally issued by the Company to investors in a private placement
transaction.  For additional information
regarding the issuance of those shares of Common Stock, see “Private Placement
of Shares of Common Stock” above.  We are
registering the shares of Common Stock in order to permit the selling
shareholders to offer the shares for resale from time to time.  Except for the ownership of the shares of Common
Stock issued pursuant to the Securities Purchase Agreement, the selling
shareholders have not had any material relationship with us within the past
three years.

The
table below lists the selling shareholders and other information regarding the
beneficial ownership of the shares of Common Stock by each of the selling
shareholders.  The second column lists
the shares of Common Stock being offered by this prospectus by the selling
shareholders as of the date hereof.

The
third column lists the shares of Common Stock being offered by this prospectus
by the selling shareholders.

In
accordance with the terms of a registration rights agreement with the selling
shareholders, this prospectus generally covers the resale of up to 100% of the
shares of Common Stock issued by the Company to the Securities Purchase
Agreement.

The
fourth column assumes the sale of all of the shares offered by the selling
shareholders pursuant to this prospectus.

The
selling shareholders may sell all, some or none of their shares in this
offering.  See “Plan of Distribution.”

	
  Name of
  Selling Shareholder

  	
   

  	
  Number of Shares of

  Common Stock Owned

  Prior to Offering

  	
   

  	
  Maximum Number of

  Shares of Common Stock to

  be Sold Pursuant to this

  Prospectus

  	
   

  	
  Number of Shares of

  Common Stock Owned

  After Offering

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DKR
  Soundshore Oasis Holding Fund Ltd. (1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  West
  Coast Opportunity Fund, LLC (2)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  

 

(1)           

(2)           

 1
 

PLAN
OF DISTRIBUTION

We are
registering the shares of Common Stock issued to investors pursuant to the
Securities Purchase Agreement to permit the resale of these shares of Common
Stock by the selling shareholders from time to time after the date of this
prospectus.  We will not receive any of
the proceeds from the sale by the selling shareholders of the shares of Common
Stock.  We will bear all fees and
expenses incident to our obligation to register the shares of Common Stock.

The
selling shareholders may sell all or a portion of the shares of Common Stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents.  If the shares of Common Stock are sold
through underwriters or broker-dealers, the selling shareholders will be
responsible for underwriting discounts and commissions and brokers’ or agents’
commissions or selling commissions.  The
shares of Common Stock may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or at negotiated prices.  These sales may be effected in transactions,
which may involve crosses or block transactions,

·                  on
any national securities exchange or quotation service on which the securities
may be listed or quoted at the time of sale;

·                  in
the over-the-counter market;

·                  in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

·                  through
the writing of options, whether such options are listed on an options exchange
or otherwise;

·                  ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

·                  block
trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;

·                  purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;

·                  an
exchange distribution in accordance with the rules of the applicable exchange;

·                  privately
negotiated transactions;

·                  short
sales;

·                  sales pursuant
to Rule 144;

 

 2

 

·                  broker-dealers
may agree with the selling shareholders to sell a specified number of such
shares at a stipulated price per share;

·                  a
combination of any such methods of sale; and

·                  any
other method permitted pursuant to applicable law.

If
the selling shareholders effect such transactions by selling shares of Common
Stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling shareholders or commissions from
purchasers of the shares of Common Stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved).  In connection with sales of the shares of
Common Stock or otherwise, the selling shareholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of
the shares of Common Stock in the course of hedging in positions they
assume.  The selling shareholders may
also sell shares of Common Stock short and deliver shares of Common Stock
covered by this prospectus to close out short positions and to return borrowed
shares in connection with such short sales. 
The selling shareholders may also loan or pledge shares of Common Stock
to broker-dealers that in turn may sell such shares.

The
selling shareholders may pledge or grant a security interest in some or all of
the shares of Common Stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell such shares of Common Stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of selling shareholders to include the pledgee, transferee
or other successors in interest as selling shareholders under this
prospectus.  The selling shareholders
also may transfer and donate the shares of Common Stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this prospectus.

The
selling shareholders and any broker-dealer participating in the distribution of
the shares of Common Stock may be deemed to be “underwriters” within the
meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act.  At the time a particular offering of the
shares of Common Stock is made, a prospectus supplement, if required, will be
distributed which will set forth the aggregate amount of shares of Common Stock
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.

Under
the securities laws of some states, the shares of Common Stock may be sold in
such states only through registered or licensed brokers or dealers.  In addition, in some states the shares of
Common Stock may not be sold unless such shares have been registered or
qualified

 2
 

 

for sale in such
state or an exemption from registration or qualification is available and is
complied with.

There
can be no assurance that any selling shareholder will sell any or all of the
shares of Common Stock registered pursuant to the shelf registration statement,
of which this prospectus forms a part.

The
selling shareholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of Common Stock by the selling
shareholders and any other participating person.  Regulation M may also restrict the ability of
any person engaged in the distribution of the shares of Common Stock to engage
in market-making activities with respect to the shares of Common Stock.  All of the foregoing may affect the
marketability of the shares of Common Stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
Common Stock.

We
will pay all expenses of the registration of the shares of Common Stock
pursuant to the registration rights agreement, estimated to be $[     ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided,
however, that a selling shareholder will pay all underwriting
discounts, commissions and concessions and brokers’ or agents’ commissions and
concessions or selling commissions and concessions, if any.  We will indemnify the selling shareholders
against liabilities, including some liabilities under the Securities Act, in
accordance with the registration rights agreement, or the selling shareholders
will be entitled to contribution.  We may
be indemnified by the selling shareholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling shareholder specifically for use in
this prospectus, in accordance with the related registration rights agreement,
or we may be entitled to contribution.

Once
sold under the shelf registration statement, of which this prospectus forms a
part, the shares of Common Stock will be freely tradable in the hands of persons
other than our affiliates.

 3

EXHIBIT C

INVESTOR
QUESTIONNAIRE

The
information contained in this questionnaire will be relied upon by PRB Energy,
Inc. (the “Company”) and its advisors. 
Accordingly, by signing this questionnaire, you represent as follows:

(i)            The
information contained herein is complete and accurate and may be relied upon by
the Company and its advisors; and

(ii)           You
will notify the Company immediately of any material change in any information
provided herein.

Although
the Company will use commercially reasonable efforts to keep the information
provided in the answers to this questionnaire strictly confidential, the
Company may present this questionnaire and the information provided in it to
such parties as the Company reasonably deems advisable if called upon to establish
the availability under any federal or state securities laws of an exemption
from registration or if the contents thereof are relevant to any issue in any
action, suit, or proceeding to which the Company is a party or by which it is
or may be bound.

This
questionnaire does not constitute an offer by the Company, but rather is a
request for information.

Thank
you for taking the time to complete this questionnaire.

 

Investor
Information

INSTRUCTIONS:     Please
print or type all answers.   If the answer to any question is “none”
or “not applicable,” please so state.

	
  Part A – General

  
	
   

  	
  For Entities:

  	
   

  
	
   

  	
  1. Name: 

  	
   

  
	
   

  	
  2. Taxpayer Identification No.: 

  	
   

  
	
   

  	
  3. Jurisdiction and Year of Organization: 

  	
   

  
	
   

  	
  4. Nature of Business: 

  	
   

  
	
   

  	
  5. Business Address: 

  	
   

  
	
   

  	
  6. Business Telephone Number: 

  	
   

  
									

 

Part B – Type of
Investor

1.             Are you:

(i)                                     A
bank as defined in Section 3(a)(2) of the Securities Act of 1933 (the “Securities
Act”) or a savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity?

Yes       No      

(ii)                                  A
broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934? Yes       No      

(iii)                               An
insurance company as defined in Section 2(a)(13) of the Securities Act?

Yes      No      

(iv)                              An
investment company registered under the Investment Company Act of 1940 (the “Company
Act”) or a business development company as defined in Section 2(a)(48) of the
Company Act? Yes      No      

(v)                                 A
small business investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958? Yes      No      

(vi)                              A
plan established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess of
$5,000,000? Yes      No      

(vii)                           An
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 (“ERISA”) whose the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or that has total assets in excess of $5,000,000? Yes      No      

 2
 

 

(viii)                        A
private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940? Yes      No      

(ix)                                An
organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended, a corporation, Massachusetts or similar business trust, or
partnership with total assets in excess of $5,000,000, which was not formed for
the specific purpose of acquiring the securities of a particular issuer?  Yes      No      

(x)                                   An
entity in which all of the equity owners are “accredited investors,” as such
term is defined under the Securities Act of 1933?  Yes      No      

(xi)                                A
self-directed plan with investment decisions made solely by persons who are
accredited investors? Yes      No      Please
attach a separate sheet setting forth the basis for the representation that
they are “accredited investors.”

(xii)                             A
natural person whose individual net worth, or joint net worth with your spouse,
exceeds $1,000,000? (In calculating your net worth, you may include all assets,
such as your home, home furnishings and automobiles, less your liabilities.)
Yes      No      

(xiii)                          A
natural person who had an individual income in excess of $200,000 in each of
the two most recent years or joint income with your spouse in excess of
$300,000 in each of those years, and has a reasonable expectation of reaching
the same income level in the current year? Yes      No      

(xiv)                         A
trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities of a particular issuer, whose investments
are directed by a sophisticated person with sufficient knowledge and experience
in financial and business matters to evaluate the merits and risks of the trust’s
investments? Yes      No      

Part C – Financial
and Other Data

1. If you are an entity,
please indicate the range of your total amount of assets.

           $0 - $5,000,000

         
 Over $5,000,000

2. Do you have adequate
liquid assets (defined as cash, cash equivalents and freely marketable
securities) to meet your current needs and personal contingencies?  Yes         No         

3. Please indicate your other investment experience
(e.g., stocks, real estate, etc.)

 

 

4. Do you or the persons
who make investment decisions on your behalf have sufficient knowledge and
experience in financial and business matters to evaluate the merits and risks
of your investments?

Yes         No         

 3
 

 

5. Do you typically use a purchaser representative in
connection with your investments (i.e., someone who has such knowledge and
experience in financial and business matters that he or she is capable of
evaluating the merits and risks of your investments and whom you acknowledge in
writing during the course of your investment to be your purchaser
representative)?  Yes         No         

If so, please provide the name, address and telephone
number of your purchaser representative.

 

 

IN
WITNESS WHEREOF, the undersigned has executed this questionnaire as of                 ,
200  , and declared that it is truthful and correct.

	
   

  	
  

  	
   

  
	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
					

 

 4

 

EXHIBIT
D

PERSONS
EXECUTING LOCK-UP AGREEMENTS PURSUANT TO

SECTION 3(p) OF THE AGREEMENT

Robert
Wright

William
Hayworth

Daniel
Reichel

Susan
WrightEXHIBIT
10.20

PURCHASE AND SALE AGREEMENT

BY AND
BETWEEN

LANCE OIL
& GAS COMPANY, INC.

AND

WESTERN GAS
RESOURCES, INC.

“SELLERS”

AND

PRB OIL
& GAS, INC.

“BUYER”

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE 1.

  	
  DEFINITIONS

  	
   

  	
  1

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  	
  1

  
	
  ARTICLE 2.

  	
  TRANSFER OF THE PROPERTIES

  	
   

  	
  9

  
	
   

  	
  2.1

  	
  Sale and Purchase

  	
   

  	
  9

  
	
  ARTICLE 3.

  	
  PURCHASE PRICE

  	
   

  	
  9

  
	
   

  	
  3.1

  	
  Purchase Price

  	
   

  	
  9

  
	
   

  	
  3.2

  	
  Earnest Money

  	
   

  	
  9

  
	
  ARTICLE 4.

  	
  DUE DILIGENCE REVIEW

  	
   

  	
  10

  
	
   

  	
  4.1

  	
  Review of Records

  	
   

  	
  10

  
	
   

  	
  4.2

  	
  Alleged Title Defects

  	
   

  	
  10

  
	
   

  	
  4.3

  	
  Environmental Inspection

  	
   

  	
  11

  
	
   

  	
  4.4

  	
  Alleged Environmental Conditions

  	
   

  	
  11

  
	
   

  	
  4.5

  	
  Aggregate Threshold Amount

  	
   

  	
  12

  
	
   

  	
  4.6

  	
  Waiver and Release

  	
   

  	
  13

  
	
  ARTICLE 5.

  	
  ACCOUNTING

  	
   

  	
  13

  
	
   

  	
  5.1

  	
  Revenues, Expenses and Capital Expenditures

  	
   

  	
  13

  
	
   

  	
  5.2

  	
  Taxes

  	
   

  	
  14

  
	
   

  	
  5.3

  	
  Obligations and Credits

  	
   

  	
  14

  
	
   

  	
  5.4

  	
  Final Accounting Statement

  	
   

  	
  14

  
	
   

  	
  5.5

  	
  Post-Final Settlement Date

  	
   

  	
  15

  
	
  ARTICLE 6.

  	
  CASUALTY AND CONDEMNATION

  	
   

  	
  15

  
	
   

  	
  6.1

  	
  Casualty and Condemnation

  	
   

  	
  15

  
	
  ARTICLE 7.

  	
  INDEMNITIES

  	
   

  	
  15

  
	
   

  	
  7.1

  	
  Opportunity for Review

  	
   

  	
  15

  
	
   

  	
  7.2

  	
  Assumptions of Obligations, Including Environmental

  	
   

  	
  15

  
	
   

  	
  7.3

  	
  Seller’s Non-Environmental Indemnity Obligation

  	
   

  	
  16

  
	
   

  	
  7.4

  	
  Buyer’s Non-Environmental Indemnity Obligation

  	
   

  	
  16

  
	
   

  	
  7.5

  	
  NORM and Hazardous Substances

  	
   

  	
  16

  
	
   

  	
  7.6

  	
  Notice and Cooperation

  	
   

  	
  16

  
	
   

  	
  7.7

  	
  Defense of Claims

  	
   

  	
  17

  
	
   

  	
  7.8

  	
  Waiver of Certain Damages

  	
   

  	
  18

  
	
   

  	
  7.9

  	
  Limitations on Indemnities

  	
   

  	
  18

  
	
   

  	
  7.10

  	
  Payment Disputes

  	
   

  	
  18

  
	
  ARTICLE 8.

  	
  SPECIAL WARRANTY OF TITLE AND DISCLAIMERS

  	
   

  	
  18

  
	
   

  	
  8.1

  	
  Special Warranty of Title

  	
   

  	
  18

  
	
   

  	
  8.2

  	
  Disclaimer - Representations and Warranties

  	
   

  	
  18

  
	
   

  	
  8.3

  	
  Disclaimer - Statements and Information

  	
   

  	
  19

  
	
  ARTICLE 9.

  	
  SELLER’S REPRESENTATIONS AND WARRANTIES

  	
   

  	
  19

  
	
   

  	
  9.1

  	
  Organization and Good Standing

  	
   

  	
  19

  
	
   

  	
  9.2

  	
  Authority; Authorization of Agreement

  	
   

  	
  19

  
	
   

  	
  9.3

  	
  No Violations

  	
   

  	
  19

  
	
   

  	
  9.4

  	
  Absence of Certain Changes

  	
   

  	
  20

  
	
   

  	
  9.5

  	
  Operating Costs

  	
   

  	
  20

  
	
   

  	
  9.6

  	
  Pending Proceedings

  	
   

  	
  20

  

 

 i
 

 

 

	
  

  	
  9.7

  	
  Bankruptcy

  	
   

  	
  20

  
	
   

  	
  9.8

  	
  Liability for Brokers’ Fees

  	
   

  	
  20

  
	
   

  	
  9.9

  	
  No Liens

  	
   

  	
  21

  
	
   

  	
  9.10

  	
  Judgments

  	
   

  	
  21

  
	
   

  	
  9.11

  	
  Records

  	
   

  	
  21

  
	
   

  	
  9.12

  	
  Compliance with Law

  	
   

  	
  21

  
	
   

  	
  9.13

  	
  Applicable Contracts

  	
   

  	
  21

  
	
   

  	
  9.14

  	
  Permits

  	
   

  	
  21

  
	
   

  	
  9.15

  	
  Taxes

  	
   

  	
  21

  
	
   

  	
  9.16

  	
  Lease Accounts

  	
   

  	
  21

  
	
   

  	
  9.17

  	
  Preferential Purchase Rights and Consents

  	
   

  	
  21

  
	
  ARTICLE 10.

  	
  BUYER’S REPRESENTATIONS AND WARRANTIES

  	
   

  	
  22

  
	
   

  	
  10.1

  	
  Organization and Good Standing

  	
   

  	
  22

  
	
   

  	
  10.2

  	
  Corporate Authority; Authorization of Agreement

  	
   

  	
  22

  
	
   

  	
  10.3

  	
  No Violations

  	
   

  	
  22

  
	
   

  	
  10.4

  	
  SEC Disclosure

  	
   

  	
  22

  
	
   

  	
  10.5

  	
  Independent Evaluation

  	
   

  	
  23

  
	
   

  	
  10.6

  	
  Governmental Approvals

  	
   

  	
  23

  
	
  ARTICLE 11.

  	
  ADDITIONAL AGREEMENTS

  	
   

  	
  23

  
	
   

  	
  11.1

  	
  Covenants of Sellers

  	
   

  	
  23

  
	
   

  	
  11.2

  	
  Notice of Loss

  	
   

  	
  23

  
	
   

  	
  11.3

  	
  Subsequent Operations

  	
   

  	
  23

  
	
   

  	
  11.4

  	
  Buyer’s Assumption of Obligations

  	
   

  	
  23

  
	
   

  	
  11.5

  	
  Records

  	
   

  	
  24

  
	
  ARTICLE 12.

  	
  CONDITIONS PRECEDENT TO CLOSING

  	
   

  	
  24

  
	
   

  	
  12.1

  	
  Conditions Precedent to Seller’s Obligation to Close

  	
   

  	
  24

  
	
   

  	
  12.2

  	
  Conditions Precedent to Buyer’s Obligation to Close

  	
   

  	
  24

  
	
   

  	
  12.3

  	
  Conditions Precedent to Obligation of Each Party

  	
   

  	
  24

  
	
  ARTICLE 13.

  	
  TERMINATION

  	
   

  	
  25

  
	
   

  	
  13.1

  	
  Grounds for Termination

  	
   

  	
  25

  
	
   

  	
  13.2

  	
  Effect of Termination

  	
   

  	
  25

  
	
   

  	
  13.3

  	
  Dispute over Right to Terminate

  	
   

  	
  26

  
	
   

  	
  13.4

  	
  Return of Documents

  	
   

  	
  26

  
	
   

  	
  13.5

  	
  Confidentiality

  	
   

  	
  26

  
	
  ARTICLE 14.

  	
  THE CLOSING

  	
   

  	
  26

  
	
   

  	
  14.1

  	
  Closing

  	
   

  	
  26

  
	
   

  	
  14.2

  	
  Obligations of Seller at Closing

  	
   

  	
  26

  
	
   

  	
  14.3

  	
  Obligations of Buyer at Closing

  	
   

  	
  27

  
	
  ARTICLE 15.

  	
  MISCELLANEOUS

  	
   

  	
  27

  
	
   

  	
  15.1

  	
  Notices

  	
   

  	
  27

  
	
   

  	
  15.2

  	
  Conveyance Costs

  	
   

  	
  28

  
	
   

  	
  15.3

  	
  Brokers’ Fees

  	
   

  	
  28

  
	
   

  	
  15.4

  	
  Access to Information

  	
   

  	
  28

  
	
   

  	
  15.5

  	
  Further Assurances

  	
   

  	
  28

  
	
   

  	
  15.6

  	
  Survival of Representations and Warranties

  	
   

  	
  28

  
	
   

  	
  15.7

  	
  Amendments and Severability

  	
   

  	
  29

  

 

 ii
 

 

 

	
  

  	
  15.8

  	
  Successors and Assigns

  	
   

  	
  29

  
	
   

  	
  15.9

  	
  Headings

  	
   

  	
  29

  
	
   

  	
  15.10

  	
  Governing Law

  	
   

  	
  29

  
	
   

  	
  15.11

  	
  No Partnership Created

  	
   

  	
  29

  
	
   

  	
  15.12

  	
  Public Announcements

  	
   

  	
  29

  
	
   

  	
  15.13

  	
  No Third Party Beneficiaries

  	
   

  	
  29

  
	
   

  	
  15.14

  	
  Not to be Construed Against Drafter

  	
   

  	
  29

  
	
   

  	
  15.15

  	
  Entire Agreement

  	
   

  	
  30

  
	
   

  	
  15.16

  	
  Conspicuousness of Provisions

  	
   

  	
  30

  
	
   

  	
  15.17

  	
  Arbitration

  	
   

  	
  30

  
	
   

  	
  15.18

  	
  Execution in Counterparts

  	
   

  	
  32

  

 

 iii
 

 

EXHIBITS AND SCHEDULES

 

Exhibits

	
  Exhibit A-1

  	
  Leases

  
	
  Exhibit A-1-a

  	
  Allocated Value for Leases

  
	
  Exhibit A-2

  	
  Wells

  
	
  Exhibit A-3

  	
  Allocation of Purchase Price

  
	
  Exhibit B

  	
  Amherst Facility

  
	
  Exhibit C

  	
  Form of Assignment and Conveyance

  
	
  Exhibit D

  	
  Bill of Sale

  
	
  Exhibit E

  	
  Form of Letters in Lieu

  
	
  Exhibit F

  	
  Lance Easements and WGR Easements

  
	
  Exhibit G

  	
  Lance Personal Property and WGR Personal Property

  
	
   

  	
   

  
	
  Schedules

  	
   

  
	
   

  	
   

  
	
  Schedule 9.13

  	
  Lance Applicable Contracts and WGR Applicable
  Contracts

  
	
  Schedule 9.14

  	
  Lance Permits and WGR Permits

  
	
  Schedule 9.17

  	
  Preferential Rights

  

 

 iv

 

PURCHASE AND SALE AGREEMENT

THIS
PURCHASE AND SALE AGREEMENT (this “Agreement”) is dated December 7, 2006, by
and between LANCE OIL & GAS COMPANY, INC. (“Lance”), a Delaware corporation
and WESTERN GAS RESOURCES, INC. (“WGR”),
a Delaware corporation (Lance and WGR, together
“Sellers”), and PRB Oil & Gas,
Inc, a Colorado corporation (“Buyer”).

WHEREAS,
Sellers desire to sell, assign and convey to Buyer and Buyer desires to purchase and accept ownership of certain oil and
gas properties, gas gathering assets and related interests located in Phillips
and Sedgwick Counties, Colorado and Chase, Deuel, Dundy, Perkins and Keith Counties, Nebraska; and

WHEREAS,
the parties have reached agreement regarding such sale and purchase.

NOW,
THEREFORE, for valuable consideration and the mutual covenants and agreements herein contained, Sellers and Buyer
agree as follows:

ARTICLE 1. DEFINITIONS

1.1           Definitions. In this
Agreement, capitalized terms have the meanings provided in this Article, unless expressly provided otherwise
in other Articles.

“Accounting
Referee” has the meaning set forth in Article 5.4.

“Affiliate”
means and includes any entity that, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
the entity specified. Control means
ownership of greater than fifty-one percent (51%) of the voting stock, units,
or partnership interests of such
entity.

“Aggregate
Threshold Amount” has the meaning set forth in Article 4.5.

“Alleged
Environmental Condition” means an Environmental Condition asserted by Buyer in accordance with Article 4.4.

“Alleged
Title Defect” means a Title Defect (as hereinafter defined) which is asserted
by Buyer in accordance with Article
4.2.

“Allocated
Value” means the portion of the Purchase Price allocated to the various Properties as set forth on Exhibit A-1-a,
for Leases, and on Exhibit A-2, for Wells.

“Assignment”
means a document in the form of Exhibit C.

“Business Day” means a
Day (as hereinafter defined) excluding Saturdays, Sundays and U.S. legal holidays.

“Buyer’s Knowledge” means
the actual knowledge of any officer, director, or manager level employee of Buyer.

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“Casualty
Loss” means any loss, damage or reduction in value to the Properties resulting
from mechanical failure or defects, catastrophic occurrences, acts of God and
any other property losses which are
not the result of normal wear and tear or of natural reservoir changes.

“Claim” or “Claims” means
any and all claims, demands, suits, causes of action, losses, damages, liabilities,
fines, penalties and costs (including attorneys’ fees and costs of litigation) which are brought by or owed to a Third Party.

“Claim
Notice” has the meaning set forth in Article 7.6.

“Claimant”
has the meaning set forth in Article 15.16 regarding Arbitration.

“Close”
or “Closing” means the consummation of the transfer of title to the Properties
(as hereinafter defined) to Buyer, including execution and delivery of all
documents provided herein.

“Closing
Date” means the later of (i) December 31, 2006, or (ii) such other date as
may result from the procedures set
forth in this Agreement, or such other date as may be mutually agreed upon by the parties.

“Closing
Statement” means the statement to be prepared and delivered under Article 14.1.

“Day”
means a calendar day consisting of twenty-four (24) hours from midnight to midnight.

“Defensible
Title” means, as to the Properties, such title that, subject to and except for
the Permitted Encumbrances (as
hereinafter defined), that:

(a)                                  With
respect to each Lease shown on Exhibit A-1 or each Well shown on Exhibit
A-2, obligates Lance to bear a Working Interest for such Lease or Well not
greater than the Working Interest shown thereon for such Lease or for such
Well, without increase throughout the term of the Lease or the productive life
of such Well, as applicable, except for (i)
increases resulting from contribution
requirements with respect to defaulting co-owners under applicable operating
agreements, and (ii) increases to the extent
that they are accompanied by a proportionate increase in Lance’s Net Revenue Interest;

(b)                                 With
respect to each Well, entitles Lance to receive the “Net Revenue Interests”
set forth in Exhibit A-2 of all oil, gas and associated liquid and gaseous hydrocarbons produced, saved and marketed
from the Wells without decrease throughout the term of the productive
life of such Well, as applicable, except for (i) decreases in connection with
those operations in which Lance or Buyer may
from and after the date of this Agreement be a non-consenting co-owner, (ii) decreases resulting from the
establishment or amendment from and after the date of this Agreement of pools
or units, and (iii) decreases required
to allow other working interest owners to make up past underproduction or pipelines to make up past under deliveries; provided that disclosure thereof has
been made by Sellers to Buyer in writing

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(c)                                  Is free and clear of liens, encumbrances and
encroachments;

(d)                                 Is deducible from applicable federal, tribal,
state and county records; and

(e)                                  Permits Sellers and their assigns and designees
rights of ingress and egress over the Properties for purposes of oil and
gas exploration, development, gathering,
and production.

“Dispute”
has the meaning set forth in Article 15.16.

“Earnest
Money” has the meaning set forth in Article 3.2.

“Effective
Time” means 12:01 a.m. Mountain Standard Time on December 1, 2006.

“Environmental
Claims” means all Claims for pollution or environmental damages of any kind, including without limitation, those
relating to: (a) remediation and/or clean-up required by Environmental Laws; (b) injury or death of any
person or damage or loss of any property or reserve; (c) the assessment, remediation, removal, transportation or
disposal of asbestos, NORM or other potentially hazardous substances associated
with or attributable to the Properties; and/or (d) Claims relating to breach and/or violation of Environmental Laws,
common law causes of action asserting
damage to the environmental quality of a property such as negligence, gross negligence, strict liability, nuisance or
trespass, or fault imposed by statute, rule or regulation.

“Environmental
Condition” means any condition that, as of the Effective Time (as hereafter defined), is not in compliance with the
then existing Environmental Laws (as hereafter defined), including, without limitation, non-compliance of permitting
requirements and other filings and
notice requirements.

“Environmental Laws”
means all laws, statutes, ordinances, permits, orders, judgments, rules or
regulations which are promulgated, issued or enacted by a governmental entity
or tribal authority having appropriate
jurisdiction that, (a) relate to the prevention of pollution or environmental damage, (b) the remediation of
pollution or environmental damage, or (c) the protection of the environment generally; including without limitation,
the Clean Air Act, as amended, the
Clean Water Act, as amended, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, the Federal Water Pollution Control Act,
as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic Substance and Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous and the Solid Waste
Amendments Act of 1984, as amended, and the Oil Pollution Act of 1990, as amended, and other environmental or notice
obligations based upon common law.

“Final
Accounting Statement” has the meaning set forth in Article 5.4. “Final
Settlement Date” has the meaning set forth in Article 5.4.

“Lance
Applicable Contracts” shall mean all joint operating agreements; oil, gas,
liquids, casinghead gas and condensate purchase, sales, processing,
gathering, treatment, compression, and transportation agreements; farm-out or
farm-in agreements; dry hole, bottom hole, acreage contribution, purchase and acquisition agreements; area of mutual
interest agreements; servicing

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contracts; and all other
executory contracts and agreements relating, in each case listed above, to the Lance Assets, as set forth on Schedule
9.13.

“Lance
Assets” means all of Lance’s right, title and interest in, to and under, the following:

(a)                                  oil, gas and mineral leases and other mineral
leases and the leasehold estates
created thereby described in Exhibit A-1 hereto (collectively, the “Leases”), including all of Lance’s working
interests, operating rights, mineral interests, overriding royalty interests,
reversionary interests, net profits
interests, net revenue interests, and any other similar or dissimilar interests, all rights in any pooled or unitized
acreage by virtue of the Leases being
a part thereof, all production from the pool or unit allocated to any such Leases, and all interests in any wells
within the pool or unit associated with
the Leases;

(b)                                 all wells described in Exhibit A-2 hereto
(the “Wells”);

(c)                                  The Lance Personal Property;

(d)                                 The Lance Applicable Contracts;

(e)                                  The Lance Easements;

(f)                                    The Lance Permits; and

(g)                                 The Lance Records.

“Lance
Easements” means the easements, surface use agreements, and right-of-way agreements, permits, licenses, servitudes or other
interests held by Lance in the course of owning and operating the Lance Assets, as described on Exhibit F
hereto.

“Lance
Permits” means to the extent assignable to Buyers, all permits, licenses, certificates, orders, approvals, authorizations,
grants, consents, concessions, warrants, franchises and similar rights
and privileges granted by a Governmental Authority that are used, or held for use exclusively for or in connection with the
ownership, development and operation of the Lance Assets, as listed in Schedule 9.14 hereto.

“Lance Personal Property”
means the equipment and other personal and mixed property (including liquid
hydrocarbon inventory in tanks), improvements situated in or upon, or used or
useful, or held for future use in connection with the exploration, development
and production of oil, gas and other
minerals, sulfur, associated gas from any of the Leases, or the treatment, storage or transportation of such substances
therefrom, including Wells, casing, tubing, derricks, tanks, batteries, boilers, separators, rods,
dehydrators, compressors, pumps, flow lines, water lines, water reservoirs, gas
lines, buildings, field offices, fixtures, machinery, gas production, gathering
or processing equipment, systems or pipelines, gas marketing systems or
pipelines, power lines, telephone and telegraph lines, and all other
fixtures and improvements, located on the
Leases or lands pooled therewith or located thereon as set forth on Exhibit
G hereto;

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“Lance
Records” means all contract, land, right of way, title, engineering,
environmental, operating and
maintenance, accounting, tax, files, documents, instruments, notes, papers,
reports, abstracts, surveys, maps, books, records, correspondence, and studies
to the extent relating to and used or
held solely in connection with, the ownership, operation or maintenance of the
Lance Assets.

“Laws”
means laws, statutes, ordinances, permits, decrees, orders, judgments, rules or
regulations (including without
limitation Environmental Laws) which are promulgated, issued or enacted by a governmental entity or tribal
authority having appropriate jurisdiction.

“Letters-in-Lieu”
means a document in the form of Exhibit E.

“Material,” for purposes
of Article 9, means any matter reasonably anticipated to cost or have an adverse effect on the value, operation or
use of any of the Properties in excess of two hundred and fifty thousand United
States dollars ($250,000).

“Net
Revenue Interest” with respect to any Well shall mean a party’s Working
Interest share of revenues therefrom
less such party’s proportionate share of all royalties, overriding royalties, production payments, applicable carried
interests, net profits interests, reversionary interests, and other burdens.

“Non-Environmental
Claims” means all Claims, except Environmental Claims. “NORM” means naturally occurring radioactive
materials.

“Open
Defects” means all Open Environmental Conditions and all Open Title Defects.

“Open
Environmental Conditions” means all uncured Qualifying Alleged Environmental Conditions that were submitted to Sellers on a
timely basis and that remain in dispute.

“Open
Title Defects” means all uncured Qualifying Alleged Title Defects that were submitted to Seller on a timely basis and that
remain in dispute.

“Permitted
Encumbrances” means:

(a)                                  Royalties,
overriding royalties, production payments, reversionary interests, convertible interests, net profits interests, division orders and
similar burdens encumbering the
Properties to the extent the net cumulative
effect of such burdens do not operate to reduce the Net Revenue Interests of the Wells to less than the Net
Revenue Interests set forth in Exhibit
A-2;

(b)                                 Preferential purchase rights and consents to
assignment and similar contractual provisions encumbering the Properties
with respect to which, prior to Closing, (i) waivers or consents are obtained
from the appropriate parties, or (ii) the
appropriate time period for asserting such rights have expired without an exercise of such rights;

(c)                                  All
rights to consent by, required notices to, filings with, or other actions by governmental entities or tribal authorities in
connection with the transfer of

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record
legal title in and to the Properties to Buyer, if the same are customarily obtained subsequent to the
transfer of title;

(d)                                 Rights
reserved to or vested in any governmental entity or tribal authority having
appropriate jurisdiction to control or regulate the Properties in any manner whatsoever, and all Laws of any such
governmental entity or tribal authority;

(e)                                  Easements, rights-of-way, servitudes, surface
leases, sub-surface leases, grazing rights, logging rights, canals,
ditches, reservoirs, pipelines, utility lines,
telephone lines, power lines, railways, streets, roads, alleys, highways
and structures on, over and through the Properties, to the extent such rights, interests or structures do not
materially interfere with the operation
of the Properties;

(f)                                    The terms and conditions of all production sales
contracts; division orders; contracts
for agreements; equipment leases; surface leases; unitization and pooling
designations, declarations, orders and agreements; processing agreements; plant
agreements; pipeline, gathering, and transportation agreements; injection, repressuring, and recycling agreements; produced water or other disposal agreements; seismic or
geophysical permits or agreements;
calls on production in agreements pertaining to the Properties; and any and all other agreements filed of record in
the county where the affected
Property is located or which are ordinary and customary in the oil and gas exploration, development, or extraction
business, or in the business of
processing of gas and gas condensate production for the extraction of products therefrom attributable to or
encumbering the Properties, including
but not limited to the Lance Applicable Contracts and the WGR Applicable Contracts;

(g)                                 Liens for taxes or assessments not yet due or not
yet delinquent or, if delinquent, that are being contested by Sellers in
good faith in the normal course of
business;

(h)                                 Liens of operators or non-operators relating to
obligations not yet due or not yet delinquent or, if delinquent, that
are being contested by Sellers in good
faith in the normal course of business;

(i)                                     Title Defect(s) and Alleged Title Defects which are
not Qualifying Alleged Title Defects or, when combined with all other
Qualifying Alleged Title Defects,
Qualifying Alleged Environmental Conditions and Casualty Losses, do not meet the Aggregate Threshold Amount and/or which Buyer has waived hereunder; and

(j)                                     Environmental
Condition(s) and Alleged Environmental Condition(s) which are not Qualifying Alleged Environmental Conditions or, when combined with all other Qualifying Alleged Title
Defects, Qualifying Alleged Environmental Conditions and Casualty
Losses, do not meet the Aggregate Threshold
Amount and/or which Buyer has waived hereunder.

“Properties”
means the Lance Assets and the WGR Assets.

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“Purchase
Price” has the meaning set forth in Article 3.1.

“Qualifying
Alleged Environmental Condition” has the meaning set forth in Article 4.4. “Qualifying
Alleged Title Defect” has the meaning set forth in Article 4.2.

“Records”
means the Lance Records and the WGR Records.

“Required
Consents” means all consents and approvals, if any, whether required
contractually or by applicable federal, state, local or tribal Law, or
otherwise necessary for the execution,
delivery and performance of this Agreement by Sellers (except for consents and approvals of governmental entities or tribal
authorities customarily obtained subsequent to the transfer of title).

“Respondent”
has the meaning set forth in Article 15.16 regarding Arbitration.

“Sellers’
Knowledge” means the actual knowledge of any officer, director, or manager level employee of such Seller.

“Title Defect” means any lien, encumbrance, encroachment or defect
associated with the Sellers’ title to their respective Properties (excluding
Permitted Encumbrances) that would cause such Seller not to have Defensible
Title.  Notwithstanding the foregoing,
the following shall not be considered Title Defects:

(1)                                  defects based solely on (i) lack of information in the
Sellers’ files, or (ii) references to a document(s) if such document(s) is not
in Sellers’ files;

(2)                                  defects in the chain of title prior to January 1, 1950,
consisting of the mere failure to recite marital status in a document or
omissions of successors of heirship or estate proceedings, unless Buyer
provides affirmative evidence that such failure or omission has resulted in
another party’s actual and superior claim of title to the relevant Property;

(3)                                  defects arising out of lack of survey, unless a survey is
required by applicable laws or regulations;

(4)                                  defects arising out of lack of corporate or other entity
authorization unless Buyer provides affirmative evidence that the action was
not authorized and results in another party’s actual and superior claim of
title to the relevant Property.

(5)                                  defects based on a gap in Sellers’ chain of title in the
BLM or MMS records as to federal leases, in the state’s records as to state
leases, or in the county or parish records as to fee Leases, unless such gap is
affirmatively shown to exist in such records by an abstract of title, title
opinion or landman’s title chain which documents shall be included in a Title
Defect Notice; and

(6)                                  defects disclosed to or known by Buyer and/or its
Affiliates prior to the execution of this Agreement.

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“Third
Party” means any person or entity, governmental or otherwise, other than the Sellers and Buyer, and their respective
Affiliates.

“WGR
Applicable Contracts” shall mean all contracts that relate exclusively to the ownership,
operation or maintenance of the WGR Assets, including all gas and liquids
purchase and sales agreements, gas and liquids storage agreements, gas and
liquids transportation agreements, waste
disposal and recycling agreements, rental contracts, gathering, treating and processing agreements, interconnect agreements, compression
service and other service agreements,
all as described on Schedule 9.13.

“WGR
Assets” means all of WGR’s right, title and interest in, to and under, the
following:

(a)                                  The gas gathering pipeline and facilities known
as the Amherst Facility as shown on the plat attached as Exhibit B
hereto (the “Amherst Facility”);

(b)                                 The WGR Easements;

(c)                                  The WGR Permits;

(d)                                 The WGR Applicable Contracts;

(e)                                  The WGR Personal Property;

(f)                                    The WGR Records;

(g)                                 All technical information, shop rights, designs,
plans, manuals, specifications and other
proprietary and nonproprietary technology and data used exclusively in connection
with the construction, ownership and operation of the Amherst Facility.

“WGR
Easements” means the easements, surface use agreements, and right-of-way
agreements, permits, licenses, servitudes or other interests held by WGR in the
course of constructing and owning the
WGR Assets, as described on Exhibit F hereto.

“WGR
Permits” means, to the extent assignable to Buyers, all permits, licenses, certificates, orders, approvals, authorizations,
grants, consents, concessions, warrants, franchises and similar rights
and privileges granted by a Governmental Authority that are used, or held for use exclusively for or in connection with, the
ownership, use, operation, maintenance, construction, or installation of the WGR Assets, as listed in Schedule
9.14 hereto.

“WGR Personal Property”
means all tangible personal property of every kind and nature which is necessary for, or which is used or held
for use exclusively for or in connection with, the ownership, operation
or maintenance of the Amherst Facility, including field equipment, tanks, pumps, pipe, valves, meters, fire equipment,
fixtures, instruments, spare parts and supplies, telecommunications equipment, supplies and materials, as described on Exhibit
G hereto, and all hydrocarbon
inventory of the Amherst Facility, including linefill.

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“WGR Records” means all
contract, land, right of way, title, engineering, environmental, operating and maintenance, accounting, tax, files,
documents, instruments, notes, papers, reports, abstracts, surveys, maps,
books, records, correspondence, and studies to the extent relating to and used or held solely in connection with, the
ownership, operation or maintenance of the WGR Assets.

“Working
Interest” with respect to any Well or Lease means the interest in and to such Well or Lease that is burdened with the obligation
to bear and pay costs and expenses of maintenance,
development operations and plugging and abandoning on or in connection with such Well or Lease, but without regard to the
effect of any royalties, overriding royalties, production payments, net profits interests and other similar burdens
upon, measured by, or payable out of
production therefrom.

ARTICLE 2. TRANSFER OF THE PROPERTIES

2.1           Sale and Purchase.  On the Closing Date, effective as of the
Effective Time and upon the terms and
conditions herein set forth, (a) Lance agrees to sell and assign the Lance Assets to Buyer and Buyer agrees to purchase and
accept the Lance Assets, and (b) WGR agrees to sell and assign the WGR
Assets to Buyer and Buyer agrees to purchase and accept the WGR Assets. Each of the foregoing transactions shall be
dependent upon the consummation of the other
transaction and each shall be considered to have occurred simultaneously with
the other.

ARTICLE 3. PURCHASE PRICE

3.1           Purchase Price.  The total purchase price, subject to
adjustments as set forth herein, paid to Sellers by Buyer shall be
Eleven Million Seven Hundred Thousand United States Dollars (US$11,700,000) (“Purchase Price”), payable in full at Closing by
wire transfer in immediately available funds. The Purchase Price shall
be reduced to the extent that after the
procedures in this Agreement have been followed, the Allocated Value of Open
Defects and Casualty Losses exceed the
Aggregate Threshold Amount. The Purchase Price shall be increased to the extent that Lance’s ownership
interest in any of the Lance Assets is greater than the interest set forth on Exhibit A-2.  An allocation of the Purchase Price has been made by
Buyer as between the Lance Assets and the WGR Assets and that allocation is set
forth on Exhibit A-3.  The allocation of the Purchase Price among
the Properties has been made solely by Buyer based on its independent
evaluation and appraisal of the Lance Assets and WGR Assets and is deemed to be
effective as of the Effective Time.  The
allocation is subject to adjustment in accordance with any adjustments to the
total Purchase Price as provided elsewhere herein.

3.2           Earnest Money. Upon the
execution of this Agreement, Buyer shall pay to Sellers an earnest money deposit in an amount equal to ten
(10%) percent of the Purchase Price (“Earnest
Money”). In the event of Closing, Buyer shall receive a credit toward the
Purchase Price equal to the amount of the Earnest Money. If Closing does not
occur, the provisions of Article
13.2 shall apply.

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ARTICLE 4. DUE DILIGENCE REVIEW

4.1           Review of Records.
Sellers shall make available to Buyer for its review, during normal business
hours original Lance Records and WGR Records in their respective possession relating to the Properties. Buyer shall have the
right to reasonably request copies of any and all such Lance Records or WGR Records at Buyer’s
expense.

4.2           Alleged Title Defects.

(a)                                  As soon as reasonably practicable after Buyer’s
review of the title Records, but in no
event later than December 22, 2006, Buyer
shall deliver a written notice to Sellers identifying any Properties which are
subject to Alleged Title Defect(s) with a value in excess of Five Thousand Dollars ($5,000.00) per
Alleged Title Defect (a “Qualifying
Alleged Title Defect”). Buyer shall endeavor to keep Sellers advised on a current basis of any Alleged Title
Defects as any are identified during
Buyer’s due diligence review. Buyer’s notice of Qualifying Alleged Title
Defect(s) shall include a complete description (including any supporting documentation in Buyer’s possession) of each Alleged
Title Defect being claimed and the value which Buyer attributes to each said Alleged Title Defect which shall not
exceed the Allocated Value for the
affected Property.

(b)                                 With respect to Qualifying Alleged Title
Defect(s) that are not disputed in good faith by Sellers and that when combined
with all Qualifying Alleged Environmental
Conditions and Casualty Losses exceed the Aggregate Threshold Amount, Sellers shall use commercially
reasonable efforts to cure such
Qualifying Alleged Title Defects at Sellers’ sole cost and expense. No
later than five (5) Days prior to the scheduled Closing Date, Buyer and Sellers
shall meet in an attempt to mutually agree
on a proposed resolution with respect to
any Qualifying Alleged Title Defect(s) which by such time have not been cured, agreed to or resolved between the
parties. Sellers shall have the option, in their sole discretion, of
indemnifying Buyer with respect to any Alleged Title Defect(s) in which case,
such Alleged Title Defect(s) shall be deemed cured, agreed to or resolved
between the parties.

(c)                                If as of the scheduled Closing Date there are Open
Title Defect(s) in excess of the
Aggregate Threshold Amount, the parties shall refer such Open Title Defects, to binding resolution before
an attorney licensed in the state
where the affected portion of the Properties is located who is familiar with
the types of leases or properties involved in or affected by the Open Title Defect and who has at least fifteen (15)
years of oil and gas title experience
and satisfies the independence and neutrality standards set forth in Article 15.16(b). The title attorney shall
resolve the Open Title Defects
submitted by the parties in accordance with the procedure set forth in
Article 15.16(c). If the parties are not able to agree on a title attorney,

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JAG
(as defined in Article 15.16(b)) shall appoint the title attorney. The decision of the title attorney regarding any Open
Title Defect shall be final as
between the parties.

4.3           Environmental Inspection.
Upon execution of this Agreement, Sellers shall grant Buyer access to
the Properties, for the purpose of inspecting the environmental condition of
the same. Buyer shall have the right, where
authorized by Sellers (which authorization shall not be unreasonably
withheld) to conduct tests related to the environmental condition of the
Properties so long as the tests do not unreasonably interfere with the
operation of the Properties. Buyer’s access to the Properties shall be at Buyer’s sole
risk, cost and expense, and Buyer shall release Sellers and other working interest owners of the Properties from
and shall fully protect, indemnify and
defend Sellers and the other working interest owners of the Properties and their respective officers, agents,
employees and Affiliates and hold them harmless
from and against any and all Claims relating to, arising out of, or connected, directly or indirectly, with Buyer’s acts or
omissions in the exercise of its rights hereunder, including without limitation, Claims relating to
(a) injury or death of any person or persons
whomsoever, (b) damage to or loss of any property or resource, (c) pollution, environmental damage or violation of Environmental
Laws, (d) common law causes of action
such as negligence, gross negligence, strict liability, nuisance or trespass,
or (e) fault imposed by statute, rule,
regulation or otherwise. The indemnity obligation and release provided herein shall apply regardless of cause or
of any negligent acts or omissions of representatives of Sellers or
other working interest owners of the Properties and/or their respective
officers, agents, employees and Affiliates that occurred during Buyer’s
exercise of its rights hereunder. Buyer additionally agrees to comply with the
rules, procedures and instructions
issued by Sellers while on the Properties.

4.4           Alleged Environmental Conditions.

(a)                                  As
soon as reasonably practical after Buyer’s review of the environmental condition of the Properties, but in no event
later than December 22, 2006,  Buyer shall deliver a written notice to
Sellers of identifying any Properties which are subject to Alleged
Environmental Conditions with an
estimated remediation cost in excess of Ten Thousand Dollars ($10,000.00)
per Alleged Environmental Condition (“Qualifying Alleged Environmental
Condition”). Buyer shall endeavor to keep
Sellers advised on a current basis of any Alleged Environmental Condition as any are identified during Buyer’s due
diligence review. Buyer’s notice of Qualifying Alleged Environmental
Condition(s) shall include a
complete description of each individual environmental condition which Buyer
takes exception to (including any supporting documentation in Buyer’s
possession) and the costs which Buyer in good faith attributes to remediating the same which shall not exceed the
Allocated Value for the affected
Property.

(b)                               With
respect to all Qualifying Alleged Environmental Conditions that are not disputed in good faith by Sellers and that when
combined with all Alleged Title
Defects and Casualty Losses exceed the Aggregate

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Threshold Amount, Sellers shall use commercially
reasonable efforts to cure such
Qualifying Alleged Environmental Condition prior to the scheduled Closing Date, at Sellers’ sole cost and expense. Immediately
prior to the scheduled Closing Date, Buyer and Sellers shall meet in an attempt to mutually agree on an
acceptable resolution addressing any such Qualifying Alleged
Environmental Condition(s) which by such time
have not been cured, agreed to or resolved by the parties.

(c)                                  If as of the scheduled Closing Date there are Open
Environmental Conditions in excess
of the Aggregate Threshold Amount the parties shall refer such Open
Environmental Condition to binding resolution before an attorney or environmental engineering firm licensed in the state where
the affected portion of the Properties
is located, who is familiar with Environmental
Laws, who has at least fifteen (15) years of Environmental Laws experience and satisfies the independence and
neutrality standards set forth in
Article 15.16(b). The environmental engineer or attorney shall resolve all Open Environmental Conditions submitted
by the parties in accordance with the procedure set forth in Article
15.16(c). If the parties are not able to agree on an environmental attorney or
engineer, JAG shall appoint the environmental attorney or engineer. The
decision of the environmental attorney or engineer
regarding any Open Environmental Condition
shall be final as between the parties.

4.5           Aggregate Threshold Amount and
Value.

(a)                                  Notwithstanding anything herein
to the contrary, Sellers shall have no obligation
under this Agreement: to cure Qualifying Alleged Title Defects or Qualifying Alleged Environmental
Condition; to compensate Buyer; or to reduce the Purchase Price, unless
and until the aggregate value of all Open
Defects added to the amount of all Casualty Losses equals two hundred
fifty thousand United States dollars ($250,000) (the “Aggregate Threshold Amount”).

(b)                               If the total value of all Open Defects and Casualty
Losses exceeds the Aggregate
Threshold Amount, Closing shall not be delayed, postponed or canceled. The Closing shall be without prejudice to
the rights of Buyer and Sellers to resolve all remaining Open Defects in
accordance with this Article 4 and Article
15.16. To the extent the total value of all Open Defects and Casualty Losses are greater than the Aggregate Threshold Amount, the Allocated Value of the affected
Properties shall be deducted from the Purchase Price payable at Closing
and the affected Properties shall be removed from the applicable Conveyance and Assignment, pending Sellers’ ongoing curative efforts or the decision from the title
attorney, environmental attorney or engineer, as applicable. Once the Open
Defect has been cured by Sellers or
the decision has been rendered, Buyer shall, within five (5) days of such cure or decision, pay Sellers the
Allocated Value of the Property if the
Open Defect has been cured or

 12
 

 

the amount due as determined
by the decision of the arbitrator/expert, and Sellers shall execute and deliver to Buyer a Conveyance and
Assignment containing such affected
Property.

(c)                                  The value attributable to an Alleged Title Defect
shall be an amount determined to be
reasonably required to cure or remove the Alleged Title Defect but shall not exceed:

(i)                                     With respect to an Alleged Title Defect affecting
Leases, the value per acre as set
forth on Exhibit A-1-a, multiplied by the number of acres of the
affected Lease, multiplied by the decimal interest
therein affected by the Open Defect; and

(ii)                                With
respect to an Alleged Title Defect affecting Wells, the value as set forth on Exhibit A-2, proportionately
reduced to the percentage of Sellers’ interest affected by the Alleged
Title Defect.

(d)                               The
value attributable to an Alleged Environmental Condition shall be the reasonably anticipated cost to cure or remedy the
Environmental Condition but shall
not exceed the Allocated Value of the affected Property.

4.6           Waiver and Release. Except for claims Buyer asserts under the special warranty of title contained in Article 8.1, all title objections or
issues that could have been raised as Qualifying Alleged Title Defects and all
Environmental Conditions or issues that could
have been raised as Qualifying Alleged Environmental Conditions that are not
raised by Buyer in a written notice delivered on a timely basis pursuant
to this Article 4 shall be waived by Buyer for all purposes, and Buyer shall
have no right to seek an adjustment to the
Purchase Price, make a claim against Sellers or seek indemnification from
Sellers associated with such omitted
or untimely Title Defects, Alleged Title Defects, Environmental Conditions or Alleged Environmental
Conditions.

ARTICLE 5. ACCOUNTING

5.1
          Revenues, Expenses and
Capital Expenditures. All revenues attributable to the operation of the
Properties prior to the Effective Time shall be owned by and for the account of
Sellers. Sellers shall be entitled to all
operating revenues and shall be responsible for all operating expenses and related accounts payable
arising in the ordinary course of business attributable to the Properties, in each case to the extent they relate to
the time prior to the Effective Time.
Buyer shall be entitled to all operating revenues and shall be responsible for
the payment of all operating
expenses and related accounts payable arising in the ordinary course of business attributable to the Properties, in each
case to the extent they relate to time after the Effective Time. The
actual amounts or values associated with the above shall be accounted for to
the extent known in the Closing Statement with the final reconciliation
contained in the Final Accounting Statement.
At Closing Buyer shall assume liability for suspense funds, if any, associated
with the acquired Properties as of the Effective Time. These suspense funds, if
any, shall be reflected as a Purchase Price
reduction in the Closing Statement.

 13
 

 

5.2           Taxes. All taxes and
assessments, including without limitation, excise taxes, ad valorem taxes and
any other federal, state, local or tribal taxes or assessments attributable to
the ownership or operation of the Properties
prior to the Effective Time shall remain Sellers’ responsibility, and all deductions, credits and
refunds pertaining to the aforementioned taxes and assessments, no matter when received, shall belong
to Sellers. All taxes and assessments, including without limitation,
excise taxes, ad valorem taxes and any other federal, state, local or tribal taxes and assessments attributable to the
ownership or operation of the Properties after the Effective Time (excluding franchise and income
taxes of the Sellers from the Effective Time through the Closing) shall be Buyer’s responsibility, and all deductions,
credits and refunds pertaining to the
aforementioned taxes and assessments, no matter when received, shall belong to Buyer. The actual amounts or values associated
with the above, if any, shall be accounted for to the extent known in the Closing Statement and
finally reconciled in the Final Accounting Statement. Ad valorem taxes, real property and personal property taxes
which have not been assessed and paid for calendar year 2006 shall be
estimated based on the prior year assessment, prorated
through the Effective Time and reflected in Closing Statement as a reduction in
the Purchase Price. Such reduction shall be deemed final and conclusive
between the parties for all purposes. Buyer shall be solely responsible for all
transfer, sales, use or similar taxes resulting from or associated with the transaction contemplated under this
Agreement.

5.3
          Obligations and
Credits. All prepaid insurance premiums, utility charges, taxes, rentals
and any other prepaids applicable to periods of time after the Effective Time,
if any, and attributable to the Properties
shall be reimbursed to Sellers by Buyer; and accrued payables applicable to periods of time prior to the
Effective Time, if any, and attributable to the Properties shall be the responsibility of Sellers. The actual
amounts or values associated with the above shall be accounted for in the Closing Statement or Final Accounting
Statement.

5.4
          Final Accounting
Statement. As soon as reasonably practicable, but in no event later than
ninety (90) Days after Closing, Sellers shall deliver to Buyer a post-closing
statement setting forth a detailed final calculation of all post-closing
adjustments applicable to the periods before
and after the Effective Time (“Final Accounting Statement”). As soon as
reasonably practicable, but in no
event later than thirty (30) Days after Buyer receives the Final Accounting
Statement, Buyer shall deliver to Sellers a written report containing any
changes Buyer proposes to be made to
such statement. If Buyer fails to deliver such report to Sellers, the Final Accounting Statement delivered by Sellers shall
be deemed to be true and correct and binding on and non-appealable by the
parties. As soon as reasonably practicable, but in no event later than fifteen (15) Days after Sellers receive
Buyer’s proposed changes to the Final Accounting Settlement, the parties shall meet and undertake to agree on the final
post-closing adjustments. If the
parties fail to agree on the final post-closing adjustments within such fifteen
(15) Day period, the disputed items shall be resolved by submitting the
same to a firm of independent nationally recognized
accountants mutually acceptable to the parties (the “Accounting Referee”). The Accounting Referee shall resolve the dispute(s)
regarding the Final Accounting Statement within thirty (30) Days after having the relevant materials submitted for
review. The decision of the Accounting Referee shall be binding and
non-appealable by the parties. The fees and expenses associated with the
Accounting Referee shall be borne half by Buyer and half by Sellers. The date upon which all amounts associated with the
Final Accounting Statement are agreed to by the parties or determined by decision of the Accounting Referee, is referred
to as the “Final Settlement Date.” Any amounts owed by either party
to the other as a result of the Final

 14
 

 

Accounting Statement shall be paid
within five (5) Business Days after the Final Settlement Date.

5.5           Post-Final Settlement Date.
Any revenues received or costs and expenses paid by Buyer after the Final
Settlement Date which are attributable to the ownership or operation of the Properties prior to the Effective Time shall be
billed or reimbursed to Sellers, as appropriate. Any revenues received or costs and expenses paid by Sellers after the
Final Settlement Date which are
attributable to the ownership or operation of the Properties after the
Effective Time shall be reimbursed
or billed to Buyer.

ARTICLE 6. CASUALTY AND CONDEMNATION

6.1
          Casualty and
Condemnation. If any part of the Properties shall (a) be destroyed prior to
Closing by a Casualty Loss, or (b) be taken in condemnation or if proceedings
for such purposes shall be pending; Sellers
shall promptly notify Buyer in writing of the nature and extent of the Casualty Loss or taking. If the value of the
Casualty Loss or taking exceeds
twenty-five thousand United States dollars ($25,000), then either Buyer or Sellers may terminate this Agreement prior to
the Closing. If either party terminates this Agreement in accordance with this Article, neither party shall have any
further obligations, as expressly provided in this Agreement, and
Sellers shall return to Buyer the Earnest Money.  If neither
party terminates this Agreement, this Agreement shall remain in full force and
effect, and Sellers and Buyer shall
agree on a reduction in the Purchase Price to the extent of the Casualty
Losses.  Sellers shall retain any and all sums paid to Sellers, unpaid
awards, insurance proceeds and other payments associated
with or attributable to such Casualty Loss or taking.

ARTICLE 7. INDEMNITIES

7.1
          Opportunity for Review. Each party represents that it has had an adequate
opportunity to review the following indemnity and release provisions,
including the opportunity to submit the same
to legal counsel for review and comment. Based upon the foregoing representation, the parties agree to the
provisions set forth below.

7.2
          Assumption of Obligations, Including Environmental. Effective at the Effective Time, subject to Section 7.1 and except as otherwise
expressly set out in this Agreement,
Buyer assumes all rights, liabilities, duties, obligations, risk of loss,
Claims, Losses and any related responsibility for the ownership,
operation or use of the Properties and the
business related thereto and any condition (including Environmental Claims) of
or on the Properties attributable to
any period of time, whether before, on or after the Effective Time. From and after the Closing Date,
Sellers shall have no obligation whatsoever, under this Agreement or otherwise to protect, indemnify,
defend or hold harmless Buyer, its officers,
agents, employees and Affiliates (“Buyer Indemnitees”) from and against any Environmental
Claims relating to, arising out of, or connected, directly or indirectly, with the ownership or operation of the Properties, no
matter when asserted, and Buyer expressly
releases Sellers, their officers, agents, employees and Affiliates (“Seller Indemnitees”)
from the same. The indemnity obligation and release provided herein shall apply regardless of cause or of any negligent acts
or omissions of any Seller Indemnitee.

 15

 

7.3           Sellers’
Indemnity Obligation. After Closing Sellers shall, individually and severally, release Buyer from and shall fully
protect, indemnify and defend Buyer Indemnitees
and hold them harmless from and against any and all Claims relating to, arising out of, or connected, directly or
indirectly, with:

(a)                                the breach of any of the
representations, warranties, covenants or agreements of such Seller contained in this Agreement to the extent that such survive Closing in accordance with
Article 15.5; and

(b)                               amounts payable or other
obligations, liabilities or Claims arising pursuant or related to any Lance Contracts or WGR Contracts, as applicable, but only to the extent such amounts or
obligations relate to periods prior
to the Effective Time.

7.4
          Buyer’s Indemnity Obligation. After Closing, Buyer shall release Sellers from and shall fully protect, indemnify and defend
Seller Indemnitees, and hold them harmless
from and against any and all Claims relating to, arising out of, or connected, directly or indirectly, with:

(a)                                  the breach of any of the
representations, warranties, covenants, or agreements of Buyer contained in this Agreement; and

(b)                                 to the extent that Sellers are not required to indemnify Buyers Indemnitees in accordance with Section 7.3,
all liabilities or obligations of any kind or nature, resulting from or
arising out of the ownership, use or
operation of the Properties by Buyer, whether arising out of or relating to periods before, on or after the Effective
Time. The indemnity obligation and release provided herein shall apply regardless of cause or of any negligent
acts or omissions of any Seller
Indemnitee.

7.5           NORM and Hazardous Substances. The parties acknowledge that the Properties may contain asbestos, NORM or other potentially hazardous
substances, and that special procedures may be required for the assessment,
remediation, removal, transportation
or disposal of said asbestos, NORM or other potentially hazardous substances. Buyer agrees to assume any and all
liability associated with or attributable to the assessment,
remediation, removal, transportation and disposal of the asbestos, NORM or
other potentially hazardous substances associated with or attributable to the
Properties and will conduct said activities
in accordance with all applicable Laws.

7.6
          Notice and Cooperation. If a Claim is asserted against a party for
which the party would be liable under
the provisions of this Article, it is a condition precedent to the indemnifying party’s obligations hereunder that the
indemnified party gives the indemnifying party written notice of such Claim
setting forth full particulars of the Claim, as known by the indemnified
party, including a copy of the Claim (if it was a written Claim) (a “Claim
Notice”). The indemnified party shall make a reasonable
effort to notify the indemnifying party of any Claim within one (1) month of receipt of a Claim but shall in all
events effect such notice within

 16
 

 

such time as will allow the
indemnifying party to defend against such Claim and no later than three (3) calendar months after receipt of the
Claim by the indemnified party.

If
the indemnifying party receives a Claim Notice which the indemnifying party
believes in good faith that it is not obligated to assume and indemnify
the indemnified party sending the Claim Notice, the indemnifying party shall
deliver written notice to indemnified party rejecting the Claim Notice within fifteen (15) Days after receipt. The parties
shall promptly meet to discuss the
responsibility for the Claim described in the Claim Notice. If the parties fail
to agree on which party is
responsible for the Claim, the parties shall refer the matter to arbitration
under Article 15. If the matter has not been arbitrated and the party who
received the original demand or Claim
is required to provide its own defense and satisfy any settlement or judgment,
then such actions shall be without prejudice to or waiver of that party’s
right to seek reimbursement for all costs,
expenses (including attorneys fees and court costs) and damages incurred in
connection with the Claim.

7.7           Defense of Claims.

(a)                                  Counsel.  Upon receipt of a Claim Notice, unless
disputed, the indemnifying party
shall, at the sole cost and expense of the indemnifying party, assume the defense thereof with counsel
selected by the indemnifying party and
reasonably satisfactory to the indemnified party. The indemnified party shall cooperate in all
reasonable respects in such defense.
If any Claim involves Claims with respect to which Buyer indemnifies Seller and also Claims for which Seller
indemnifies Buyer, each party shall have the right to assume the defense of and
hire counsel for that portion of the Claim for which it may have
liability. The indemnified party shall have
the right to employ separate counsel in any Claim and to participate in the defense thereof, provided the fees and expenses of counsel employed by an indemnified
party shall be at the sole expense of
the indemnified party, unless otherwise agreed between the parties.

(b)                                 Settlement.
If the indemnifying party does not promptly notify the indemnified party that it has undertaken the defense thereof, the
indemnified party has the right to defend, at the expense of the indemnifying party, the Claim with counsel of its
own choosing, subject to the right of the indemnifying party to assume
the defense of any Claim at any time prior to
settlement or final determination thereof. If the indemnified party has
exercised the right to defend hereunder, the indemnified party shall
nevertheless be obligated to send a written notice to the indemnifying party of
any proposed settlement of any Claim. The indemnifying
party must either accept the settlement within thirty (30) Days of receipt of such notice, unless the
settlement offer is limited to a shorter
period of time in which case the indemnifying party shall have such
shorter period of time in which to accept the proposed settlement, or
immediately undertake the defense of the Claim and indemnify the indemnified party against all costs, expenses, and
liabilities associated

 17
 

 

therewith.
If the indemnifying party fails or refuses to accept a proposed settlement, and does not assume defense of the
Claim, the indemnified party may, at
its sole election, defend or settle the Claim, and the indemnifying party shall, upon demand by the
indemnified party, reimburse the indemnified party for all costs, liabilities
and expenses incurred by the
indemnified party in the defense or settlement of the Claim.

7.8
          Waiver of
Certain Damages. Each of the parties hereby waives, and agrees not to seek consequential, punitive or special
damages of any kind from the other with respect to any Claim or dispute, arising out of or relating to this
Agreement or breach hereof. This
provision does not diminish or affect in any way the parties’ rights and obligations under any indemnities from Third Party
Claims provided for in this Agreement.

7.9
          Limitations on Indemnities.
In no event shall an indemnifying party have any obligation of indemnification to the other party if the Claim for
which indemnity is sought was caused
by gross negligence or willful misconduct on the part of the indemnified party
and/or its officers, directors, employees, agents or Affiliates, nor shall any
indemnity provisions in this Agreement apply or be deemed to apply to
matters affecting lands other than those
which are included in the Properties.

7.10         Payment Disputes.
Notwithstanding the provisions of Article 7.2 and 7.3 above, if a Claim is brought after Closing by a third
party against Buyer or Sellers alleging improper payment of royalty,
severance, production, privilege, ad valorem or gross receipts taxes and any related penalties and interest assessed in
connection therewith relating to the Properties for periods prior to or
after the Effective Time, Buyer, as the custodian of the Records, shall defend such Claim or, at Sellers election, to the extent
that the Claim is asserted in writing within one (1) year after Closing and relates to periods prior to the Effective
Date, Sellers may assume defense of the claim and Buyer shall fully cooperate
with Sellers in providing access to and copies of any required Records.
In the event that Buyer has defended such Claim, Sellers shall reimburse Buyer
for the portion of the amount actually paid to the Third Party in satisfaction
of the Claim.

ARTICLE 8. SPECIAL WARRANTY OF TITLE AND DISCLAIMERS

8.1
          Special Warranty of Title.
Sellers shall warrant and defend Defensible Title to the Properties against
every person whomsoever lawfully claiming the Properties or any part thereof by, through or under Sellers, but
not otherwise.

8.2
          Disclaimer - Representations and Warranties. Buyer acknowledges and agrees that Buyer is purchasing the Properties on
an “AS-IS, WHERE-IS” basis, and with all
faults in their present condition and state of repair, without recourse. Except
as expressly set forth in Article 9
of this Agreement, Sellers shall be deemed to have expressly disclaimed
any and all representations and warranties concerning the Properties, express, statutory, implied or otherwise, including without
limitation, any warranty of title other than the special warranty given in Article 8.1, the quality of
hydrocarbon reserves, the

 18
 

 

quantity of hydrocarbon reserves, the amount of
revenues, the amount of operating costs, condition
(physical or environmental), compliance with applicable Laws, absence of
defects (latent or patent), safety, state of repair, merchantability or
fitness for a particular purpose. At
Closing, Buyer expressly release Sellers from the same; provided, however,
that Buyer shall have the right to enforce any representations and warranties
given to Seller by a third party to the extent such are assignable to Buyer.

8.3
          Disclaimer - Statements and Information.  Except as
expressly set forth in this Agreement, Sellers disclaim any and all
liability and responsibility for and associated with the quality, accuracy,
completeness or materiality of the Records, data, information and materials furnished (orally or in writing) at
any time to Buyer, its officers, agents, employees and Affiliates in connection with the transaction
contemplated herein, including without
limitation, the quality of hydrocarbon reserves, the quantity of hydrocarbon reserves, the amount of revenues, the amount of
operating costs, the financial data, the contract data, the
environmental condition of the Properties, the physical condition of the Properties and the continued financial viability of
the Properties, and Buyer expressly releases
Sellers from the same.

ARTICLE 9. SELLER’S REPRESENTATIONS AND WARRANTIES

Each
Seller represents and warrants, individually and only as to itself, to Buyer
that on the date hereof and as of the Closing Date the statements
contained in this Article 9 are true and correct.

9.1
          Organization and Good Standing. Each Seller is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of
Delaware, is duly qualified to do business in each State in which the
Properties are located and has all requisite power and authority to own its interest in the Properties.

9.2
          Authority;
Authorization of Agreement. Each Seller has all requisite power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated herein and to perform all of
the terms and conditions to be performed by it as provided for in this Agreement.
The execution and delivery of this Agreement, the performance of all of the
terms and conditions to be performed by it
and the consummation of the transactions contemplated herein have been
duly authorized and approved by all necessary corporate action on the part of each Seller. This Agreement has been duly executed
and delivered by each Seller and constitutes the valid and binding obligation of such Seller, enforceable against it
in accordance with its terms.

9.3
          No Violations. The execution and delivery of this Agreement by Sellers does not, and
the fulfillment and compliance with the terms and conditions hereof and the
consummation of the transactions
contemplated herein, will not:

(a)                                  Conflict with or require the consent of any person
or entity under any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of Sellers;

 19
 

 

(b)                                 Violate
any provision of, or require any filing, consent or approval under any Law applicable to or binding upon Sellers
(assuming receipt of all consents and
approvals of governmental entities customarily obtained subsequent to the transfers of title);

(c)                                  Conflict with, result in a breach of, constitute
a default under or constitute an event
that with notice or lapse of time, or both, would constitute a default under, accelerate or permit the
acceleration of the performance required
by, or require any consent, authorization or approval under, (i) any mortgage, indenture, loan, credit agreement or
other agreement, evidencing
indebtedness for borrowed money to which either Seller is a party or by which either Seller is bound, or (ii)
any order, judgment or decree of any
governmental entity; or

(d)                                 Result
in the creation or imposition of any lien or encumbrance upon the Properties.

9.4           Absence of Certain Changes.
Between the date of execution of this Agreement and the Closing Date, there has not been without Buyer’s prior written
consent, any of the following
entered into by Sellers:

(a)                                  A sale, lease or other disposition of the
Properties;

(b)                                 A mortgage, pledge or grant of a lien or security
interest in any of the Properties;
or

(c)                                  A contract or commitment to do either of the
foregoing; and

(d)                                 Take any actions which could have a Material
adverse effect on the Properties.

9.5           Operating Costs.  All costs incurred in connection with the
operation of the Properties, other
than any costs or charges that are being contested by Sellers in good faith,
have been fully paid and discharged by
Sellers, except normal expenses incurred in operating the Properties within the previous sixty (60) Days or
as to which Sellers have not yet been billed.

9.6           Pending Proceedings.  There is no action, suit or proceeding
pending against either Seller which
could have a material adverse effect on the value or operation of the Properties or that could prevent the consummation
of the transactions contemplated by this Agreement, and to Sellers’ Knowledge, there is no such action, suit or
proceeding threatened against either
Seller.

9.7
          Bankruptcy.  There are no bankruptcy,
reorganization or receivership proceedings pending, being contemplated by, or, to Sellers’ Knowledge, threatened
against either Seller.

9.8           Liability for Brokers’ Fees.  Sellers have not incurred any liability,
contingent or otherwise, for brokers’ or
finders’ fees relating to the transactions contemplated by this Agreement for which Buyer shall have any
responsibility whatsoever.

 20
 

 

9.9
          No Liens.  Except for Permitted Encumbrances, the
Properties will be conveyed to Buyer at the
Closing free and clear of all liens and encumbrances.

9.10         Judgments.  There are no unsatisfied judgments or
injunctions issued by a court of competent
jurisdiction or other governmental agency outstanding against either Seller
that would be reasonably expected to materially interfere with the ownership
and operation of the Properties or
impair their ability to consummate the transaction contemplated hereby.

9.11         Records.  The Records are files, or copies thereof,
that Sellers have used in the normal
course of their business to own or operate the Properties. Sellers make no
representations or warranties
regarding the accuracy of any of the Records and any all implied warranties are
expressly disclaimed.

9.12         Compliance with Law. With
respect to the Properties, to Sellers’ Knowledge, neither Seller has received written notice (i) of a
violation of any statute, law, ordinance, regulation, permit, rule or
order of any foreign, federal, state, tribal or local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable to their business or operations which remains uncured, and
which would have a material adverse
effect on any of the Properties, (ii)
from any government authority with jurisdiction over the Properties that
the Properties are not in substantial compliance with applicable laws, or (iii) a violation of any Environmental Law(s).

9.13         Applicable Contracts. Schedule
9.13 is a list of the Lance Applicable Contracts and WGR Applicable
Contracts.  To Sellers’ Knowledge, all
such agreements are in full force and effect
and Sellers are not in default thereunder, and Sellers have not received a
written notice of default with
respect to such agreements that remains uncured.

9.14         Permits.  Schedule 9.14 is a list of all Lance
Permits and WGR Permits. To Sellers’ Knowledge (i) all permits are in
force and effect, (ii) all fees relating thereto have been paid, and (iii) all
filings and notices required to be made with any governmental authority have been made.

9.15         Taxes. During Sellers’ period of
ownership to the Closing Date, all taxes relating to the Properties have been
paid when due, unless contested in good
faith by appropriate proceedings. All income taxes of Sellers and obligations relating
thereto that could result in a lien or other claim against any of the
Properties have been properly paid, unless
contested in good faith by appropriate proceedings.

9.16         Lease Accounts. All federal,
state and royalty accounts with respect to the Properties are current,
and all payments required thereunder have been made except amounts, if any, held in suspense accounts in the ordinary
course of business as referenced in Article 5.1 above and disclosed to Buyer in writing prior to Closing.

9.17         Preferential Purchase Rights.  Schedule 9.17 is a list of the
Properties, if any, subject to
preferential purchase rights.

 21
 

 

ARTICLE 10. BUYER’S REPRESENTATIONS AND WARRANTIES

Buyer
represents and warrants to Sellers that to the best of Buyer’s knowledge on the
date hereof and as of the Closing Date the statements in this Article 10 are
true and correct.

10.1         Organization and Good Standing.
Buyer is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of Colorado, is or will be duly qualified to do
business in all States in which the Properties are located and has all requisite corporate power and
authority to own and lease the Properties.

10.2         Corporate Authority; Authorization
of Agreement. Buyer has all requisite corporate power and authority to execute and deliver this Agreement, to
consummate the transactions
contemplated herein and to perform all the terms and conditions to be performed
by it as provided for in this Agreement. The execution and delivery of
this Agreement by Buyer, the performance by
Buyer of all the terms and conditions to be performed by it and the consummation
of the transactions contemplated herein have been duly authorized and approved by all necessary corporate action. This Agreement
has been duly executed and delivered by Buyer and constitutes the valid and binding obligation of Buyer,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency
or other Laws relating to or affecting the enforcement of creditors’ rights and
general principles of equity (regardless of whether such enforceability
is considered in a proceeding at law or in
equity).

10.3         No Violations. The execution and
delivery of this Agreement by Buyer does not, and the fulfillment and compliance
with the terms and conditions hereof and the consummation of the transactions contemplated herein, will
not:

(a)                                  Conflict with or require the consent of any person
or entity under any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of Buyer;

(b)                                 Violate
any provision of, or require any filing, consent or approval under any Law applicable to or binding upon Buyer; or

(c)                                  Conflict with, result in a breach of, constitute
a default under or constitute an event
that with notice or lapse of time, or both, would constitute a default under, accelerate or permit the
acceleration of the performance required
by, or require any consent, authorization or approval under, (i) any mortgage, indenture, loan, credit agreement or
other agreement evidencing
indebtedness for borrowed money to which Buyer is a party or by which Buyer is bound, or (ii) any order,
judgment or decree of any governmental
entity.

10.4         SEC Disclosure. Buyer is
acquiring the Properties for its own account for use in its trade or business,
and not with a view toward or for sale in connection with any distribution thereof, nor with any present intention of making
a distribution thereof within the meaning of the Securities Act of 1933, as amended.

 22
 

 

10.5         Independent Evaluation. Buyer represents that it is sophisticated in the evaluation, purchase, operation
and ownership of oil and gas properties. In making its decision to enter into
this Agreement and to consummate the transaction contemplated herein,
Buyer represents that it has relied solely on its own independent investigation
and evaluation of the Properties and that at
Closing Buyer will have satisfied itself as to the title, physical condition and the environmental
condition of the Properties.

10.6         Governmental Approvals. No
approval, consent, waiver, authorization or other order of, and no declaration, filing, registration,
qualification or recording with, any person, including any governmental
authority, is required to be obtained or made by or on behalf of the Buyer in connection with the execution, delivery or
performance of this Agreement or the consummation
of the Closing hereunder in accordance with the terms and conditions of this Agreement.

ARTICLE 11. ADDITIONAL AGREEMENTS

11.1         Covenants of Sellers. From the
date hereof until Closing, without first obtaining the consent of Buyer, Sellers will not:

(a)                                  waive any right of material value relating to the
Properties;

(b)                                 convey, encumber, mortgage, pledge or dispose of
any of the Properties;

(c)                                  enter
into, modify or terminate any Lance Applicable Contracts or WGR Applicable Contracts; or

(d)                                 contract or commit itself to do any of the
foregoing.

11.2         Notice of Loss. From the date
hereof until Closing, Sellers shall promptly notify Buyer of any loss or damage to the Properties, or any part thereof, known
to Sellers and in the aggregate
exceeding Ten Thousand and No/100 United States Dollars (US $10,000).

11.3         Subsequent Operations. Lance
makes no representations or warranties to Buyer as to the transferability or assignability of the position of operator
under the joint operating agreements
pertaining to the Properties. Buyer acknowledges that the rights and
obligations associated with operatorship of the Properties are governed
by the applicable agreement(s) and that operatorship of the Properties will be
decided in accordance with the terms of said agreement(s).

11.4         Buyer’s Assumption of Obligations.
Except as otherwise provided in this Agreement,
Buyer agrees to assume and shall timely perform and discharge all duties and obligations
of the owner of the Properties relating to the period of time after the
Effective Time, including without limitation,
duties and obligations under all the contracts associated with the Properties.
Sellers shall incur no liability for Buyer’s failure to properly perform or
discharge such duties and
obligations. Buyer agrees to accept full responsibility for Lance’s
proportionate share of the costs and expenses associated with or
attributable to the plugging and abandonment of all wells, equipment and
facilities conveyed to Buyer under this Agreement and the remediation, restoration and clean up of the
Properties. In conducting the duties and obligations

 23
 

 

hereunder, Buyer shall comply with
the applicable Laws of any governmental entity having appropriate jurisdiction.

11.5         Records. Within thirty (30) Days
after Closing (except as provided below), Sellers shall furnish to Buyer
all Records; provided, however, Sellers shall be entitled to
retain copies of any or all such Records
and to retain as long as needed (a) the originals of any Records required
in connection with litigation or other proceedings pending or threatened
against Sellers or the Properties as of the
Closing Date, and/or (b) the originals of any Records required in connection with the Final Accounting Statement. At
Sellers’ expense, photocopies of any and all Records retained by Sellers shall
be furnished to Buyer within thirty (30) Days after Closing, and the originals of such Records shall be furnished to
Buyer within thirty (30) Days after Sellers’ need for said Records ceases.
Buyer agrees to maintain the Records received from Sellers in accordance herewith for a period of seven (7) years
after the Closing and to afford Sellers reasonable access to the Records as requested by Sellers.

ARTICLE 12. CONDITIONS PRECEDENT TO CLOSING

12.1         Conditions Precedent to Seller’s
Obligation to Close. Sellers shall be obligated to consummate the sale as contemplated by this Agreement on the Closing
Date, provided the following
conditions precedent have been satisfied or have been waived by Sellers:

(a)                                  All
representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects
at and as of Closing as though such
representations and warranties were made at and as of such time; and

(b)                                 Buyer shall have complied in all material
respects with all obligations and conditions contained in this Agreement
to be performed or complied with on or
prior to the Closing.

12.2         Conditions Precedent to Buyer’s Obligation
to Close. Buyer shall be obligated to consummate
the purchase as contemplated by this Agreement on the Closing Date, provided
the following conditions precedent
have been satisfied or have been waived by Buyer:

(a)                                  All
representations and warranties of Sellers contained in this Agreement shall be true and correct in all material respects
at and as of Closing as though such
representations and warranties were made at and as of such time; and

(b)                                 Sellers shall have complied in all material
respects with all obligations and conditions contained in this Agreement
to be performed or complied with on or
prior to the Closing.

12.3         Conditions Precedent to Obligation
of Each Party. The parties shall be obligated to consummate the sale and purchase as contemplated in this Agreement on
the Closing Date, provided the
following conditions precedent have been satisfied or have been waived by the
party or parties benefited or affected thereby:

 24
 

 

(a)                                  No
suit, action or other proceedings shall be pending before any court or
governmental entity in which it is sought by a person or entity other than the parties hereto or any of their Affiliates,
officers, directors, or employees to
restrain, enjoin or otherwise prohibit the consummation of the
transactions contemplated by this Agreement, or to obtain substantial damages in connection with the transaction
contemplated herein, nor shall there be any investigation by a
governmental entity pending which might result
in any such suit, action or other proceedings seeking to restrain, enjoin or
otherwise prohibit the consummation of the transaction contemplated by this Agreement;

(b)                                 All Required Consents shall have been obtained and
delivered to Buyer by the Closing;
and

(c)                                  All
preferential rights of purchase, if any, that may be applicable to such Properties shall have been waived, or the time to
elect under such preferential rights
shall have elapsed, prior to Closing.

ARTICLE 13. TERMINATION

13.1         Grounds for Termination.
This Agreement may be terminated at any time prior to Closing:

(a)                                  By the mutual written agreement of Sellers and
Buyer;

(b)                                 By either Seller or Buyer if the consummation of
the transactions contemplated herein would violate any non-appealable
final order, decree or judgment of any
governmental entity having appropriate jurisdiction enjoining or awarding substantial damages in
connection with the consummation of
the transactions contemplated herein;

(c)                                  By either Seller or Buyer pursuant to Article 6.1
if the total value of all Casualty
Losses and Open Defects exceeds two hundred fifty thousand United States
dollars ($250,000); or

(d)                                 Notwithstanding
anything contained in this Agreement to the contrary, by Buyer or either Seller if Closing shall not have
occurred by December 31, 2006.

13.2         Effect of Termination.
If this Agreement is terminated in accordance with Article 13.1, such termination shall be without liability
of any party to this Agreement or any officer, director, Affiliate, or employee of such party, except the Earnest Money
shall be returned to Buyer as provided in Article 3.2 above and the
obligations provided in Articles 13.3, 13.4, 13.5 and 15.3 shall survive termination. If this Agreement is terminated as
a result of Buyer’s failure or refusal
to perform an obligation hereunder (including without limitation Closing on the
Closing Date) or breach of Article
12.1, Sellers shall be entitled to retain the Earnest Money as a liquidated damage to reimburse Sellers for their
out-of-pocket fees and expenses incurred in connection with the transactions contemplated by this Agreement. If
Closing does not occur as a

 25
 

 

result of either Seller’s breach
or as a result of termination by Buyer in accordance with the provisions of this Agreement, the Earnest Money
shall be refunded to Buyer.

13.3         Dispute over Right to Terminate.
If there is a dispute between the parties over either party’s right to
terminate this Agreement under Article 13.1, Closing shall not occur as scheduled.
The party which disputes the other party’s right to terminate may initiate
arbitration proceedings in accordance with
Article 15.16 within thirty (30) Days of the date on which Closing was scheduled to occur and, if arbitration
is so initiated, the dispute will be resolved through such arbitration
proceeding. If the party which disputes the termination right does not initiate
an arbitration proceeding to resolve the dispute within the time period
specified hereinabove, such party shall be
deemed to have waived its right to object to such termination.

13.4         Return of Documents. If this
Agreement is terminated prior to Closing, each party shall return to the party which owns or is otherwise entitled
thereto all books, records, maps,
files, papers and other property in such party’s possession relating to the
transaction contemplated by this
Agreement.

13.5         Confidentiality. In the event of
termination of this Agreement, the parties agree to keep all the terms
of this transaction confidential for a period of two (2) years after termination
of this Agreement.

ARTICLE 14. THE CLOSING

14.1         Closing. Three (3) Days prior to
the Closing Date, Sellers shall provide Buyer with a Closing Statement setting
forth the Purchase Price, as adjusted in accordance with this Agreement
for all known adjustments as of that date. Sellers shall additionally provide
Buyer with wiring instructions designating
the account or accounts to which the Purchase Price is to be delivered in accordance with Article 14.3(b).
Closing shall be held in Sellers’ office or any other location that is mutually agreeable to Sellers
and Buyer.

14.2         Obligations of Seller at Closing.
At the Closing, Sellers shall deliver to Buyer, unless waived by Buyer, the following:

(a)                                  An Assignment and Conveyance of the Lance Leases,
Wells and Lance Easements,
substantially in the form attached hereto as Exhibit C. The Assignment shall be executed and acknowledged in
three (3) multiple originals or such
greater number as agreed between the parties or as required by any applicable Law;

(b)                               An Assignment and Conveyance of the WGR
Easements, substantially in the form attached hereto as Exhibit C. The
Assignment shall be executed and acknowledged in three (3) multiple
originals or such greater number as agreed
between the parties or as required by any applicable Law;

(c)                                  A
Bill of Sale for the remaining Lance Assets, to the extent not conveyed by 14.2(a) above, substantially in the form
attached hereto as Exhibit D.

 26
 

 

(d)                               A
Bill of Sale for the remaining WGR Assets, to the extent not conveyed by 14.2(b) above, substantially in the form
attached hereto as Exhibit D.

(e)                                Evidence of waiver or lapse of any unexercised
preferential purchase rights that
may be applicable to the sale of the Properties;

(f)                                    Any necessary Letters-in-Lieu of division orders
or transfer orders as may be
prepared by Buyer and presented to Sellers;

(g)                                 A Section 1445 Non-foreign Affidavit; and

(h)                                 Such other instruments as necessary to carry out
Sellers’ obligations under this
Agreement.

14.3         Obligations of Buyer at Closing.
At the Closing, Buyer shall deliver to Seller, unless waived by Seller, the following:

(a)                                The Assignment and Conveyance documents, executed
and properly acknowledged, referred
to in Article 14.2(a) and (b);

(b)                                 The Bill of Sale documents, executed and properly
acknowledged, referred to in Article
14.2(c) and (d);

(c)                                  The adjusted Purchase Price, less Earnest Money, by
wire transfer in accordance with
Article 3 hereof;

(d)                                 Letters-in-Lieu
of division orders or transfer orders executed by an authorized officer of Buyer substantially in the form of Exhibit E;
and

(e)                                  Such other instruments as necessary to carry out
Buyer’s obligations under this
Agreement.

ARTICLE 15. MISCELLANEOUS

15.1         Notices. All notices and other
communications required, permitted or desired to be given hereunder must be in writing and sent by U.S. mail, properly
addressed as shown below, and with all postage and other charges fully
prepaid or by hand delivery or by facsimile transmission. Date of service by
mail is three Business Days following the date of mailing and hand delivery is
the date on which such notice is delivered to the addressee and by facsimile is
the date sent (as evidenced by fax machine
confirmation of receipt), or if such date is not on a Business Day, then on the next date which is a
Business Day. Each party may change its address by notifying the other party in writing.

 27
 

 

 

	
   

  	
  If to Sellers:

  	
  Western Gas Resources, Inc.

  
	
   

  	
   

  	
  1099 18th Street, Suite 1200

  
	
   

  	
   

  	
  Denver, CO 80202

  
	
   

  	
   

  	
  Attn: Mark Petry

  
	
   

  	
   

  	
  E-mail: Mark.Petry@anadarko.com

  
	
   

  	
   

  	
  Telephone: 303-252-6066

  
	
   

  	
   

  	
  Facsimile: 720-264-0426

  
	
   

  	
   

  	
   

  
	
   

  	
  If to Buyer:

  	
  PRB Oil & Gas, Inc.

  
	
   

  	
   

  	
  1875 Lawrence
  Street, Suite 450

  
	
   

  	
   

  	
  Denver, Colorado
  80202

  
	
   

  	
   

  	
  Attention: Mr.
  Paul Ritzdorf\

  
	
   

  	
   

  	
  E-mail:
  pritzdorf@prbenergy.com

  
	
   

  	
   

  	
  Telephone:
  303-308-1330

  
	
   

  	
   

  	
  Facsimile: 303-308-1590

  

 

15.2         Conveyance Costs. Buyer shall be
solely responsible for filing and recording any documents related to the transfer of the Properties from Sellers to Buyer
and for all costs and fees associated therewith, including filing any
necessary transfer of ownership documents with appropriate federal, state, local and tribal authorities as required by
applicable Law. Within thirty (30)
Days after Closing, Buyer shall furnish Sellers with all recording data and
evidence of all required filings.

15.3         Brokers’ Fees. Neither party has
retained any brokers, agents or finders to act on behalf of either party in this matter, other than that Sellers have
retained Meagher Oil & Gas Properties,
Inc. to assist Sellers. Each party agrees to
release, protect, indemnify, defend and hold the other harmless from and against any and all Claims with
respect to any commissions, finders’
fees or other remuneration due to any broker, agent or finder claiming by, through or under such party.

15.4         Access to Information. From the
date hereof, Sellers will (i) give Buyer and its authorized
representatives adequate and reasonable access, during normal business hours,
to the offices, properties, books and records of Sellers relating to the
Properties (including for the purposes of conducting a Financial Audit);
(ii) furnish to Buyer and its authorized representatives such financial
and operating data and other information relating to the Properties as may be
reasonably requested; and (iii) cooperate with Sellers in connection therewith.

15.5         Further Assurances. From and
after Closing, at the request of Buyer but without further consideration, Sellers shall execute and deliver or use
reasonable efforts to cause to be executed
and delivered such other instruments of conveyance and take such other actions
as Buyer reasonably may request to
more effectively put Buyer in possession of the Properties.

15.6         Survival of Representations and
Warranties. The representations and warranties contained in Articles 9.1, 9.2, 9.3, 9.8 and Article 10, and the special
warranty of title in Article 8.1 of this Agreement shall survive Closing. No
warranties or representations shall be superseded by or merged into the
Assignment. The parties have made no representations or warranties, except
those expressly set forth in this Agreement.

 28
 

 

All other representations,
warranties, indemnities, covenants and agreements of Sellers shall terminate at Closing.

15.7         Amendments and Severability. No
amendments or other changes to this Agreement shall be effective or
binding on any of the parties unless the same shall be in writing and signed by Sellers and Buyer. The invalidity of
any one or more provisions of this Agreement
shall not affect the validity of this Agreement as a whole, and in case of any
such invalidity, this Agreement shall
be construed as if the invalid provision had not been included herein.

15.8         Successors and Assigns. This
Agreement shall not be assigned, either in whole or in part, without the express written consent of the non-assigning party.
The terms, covenants and conditions
contained in this Agreement shall be binding upon and shall inure to the
benefit of Sellers and Buyer and
their respective successors and assigns.

15.9         Headings. The titles and
headings set forth in this Agreement have been included solely for ease of reference and shall not be considered in the
interpretation or construction of this
Agreement.

15.10       Governing Law. This Agreement
shall be governed by and construed under the Laws of the State of Colorado, excluding any choice of law rules which
may direct the application of the
Laws of another jurisdiction.

15.11       No Partnership Created. It is not
the purpose or intention of this Agreement to create (and it shall not be construed as creating) a joint venture,
partnership or any type of association,
and the parties are not authorized to act as agent or principal for each other
with respect to any matter related
hereto.

15.12       Public Announcements. Buyer shall
not issue a public statement or press release with
respect to the transaction contemplated herein (including the price and other
terms) without the prior written
consent of Sellers, except as required by Law or listing agreement with a national
security exchange and then only after prior consultation with the Sellers.
Buyer shall have the right to disclose the transaction as required by law;
provided that Buyer agrees that in any such
disclosures, Sellers shall not be identified without their prior written
consent.

15.13       No Third Party Beneficiaries.
Nothing contained in this Agreement shall entitle anyone other than Sellers or Buyer or their authorized successors and
assigns to any claim, cause of
action, remedy or right of any kind whatsoever.

15.14       Not to be Construed Against Drafter.
The parties acknowledge that they have had an adequate opportunity to review each and
every provision contained in this Agreement
and to submit the same to legal counsel for review and comment, including expressly
but without limitation all waivers and indemnities in this Agreement. Based on
said review and consultation, the parties agree with each and every term
contained in this Agreement. Based on the foregoing, the parties agree that the
rule of construction that a contract be construed against the drafter, if any,
shall not be applied in the interpretation and
construction of this Agreement.

 29
 

 

15.15       Entire Agreement. This Agreement
supersedes all prior and contemporaneous negotiations, understandings,
letters of intent and agreements (whether oral or written) between the parties relating to the Properties and
constitutes the entire understanding and agreement between the parties with respect to the sale and
purchase of the Properties.

15.16       Conspicuousness of Provisions. The
parties acknowledge that the provisions contained in this Agreement that are
set out in “bold” satisfy the requirement of
the express negligence rule and any
other requirement at law or in equity that provisions contained in a contract be conspicuously marked or highlighted.

15.17       Arbitration. Notwithstanding
anything in this Agreement to the contrary, all disputes, other than
those relating to the Final Accounting Statement which shall be resolved in accordance with Article 5.4 hereof, between the
parties shall be solely and finally settled as follows:

(a)                                  Any
controversy, dispute or claim arising out of, in connection with, or in relation to, the interpretation, performance,
and enforceability of this Agreement
(a “Dispute”), will be solely and finally settled by binding arbitration (“Arbitration”), without right of appeal. Subject to the immediately preceding sentence, any of the parties
may demand arbitration by written notice to the other of the Dispute(s)
and the remedy(s) sought (“Demand for
Arbitration”), setting forth a summary of the Dispute and the party’s
position, along with a list of three (3) arbitrator candidates, including a brief
description of each arbitrator’s background and experience (provided such experience satisfies the criteria set forth in Articles 4.2(c) and 4.4(c),
if applicable. The party receiving the Demand for Arbitration shall
provide the other party with a response, including any affirmative defenses or
counterclaims, and a list of three (3)
arbitrator candidates, including a brief description of each arbitrator’s background and experience, within five
(5) Business Days from the date of
receipt of the Demand for Arbitration. In the event of any counterclaims being filed by a party, the other
party shall have five (5) Business
Days to provide the other party with a response. Any Demand for
Arbitration and any counterclaims arising as a result thereof shall be
initiated in accordance with any time limits provided under this Agreement for such a Dispute to be brought, and if
no time limit is provided, within the
time period allowed by any applicable statute of limitations.

(b)                                 The Arbitration will be conducted before a single
arbitrator at a neutral location in
Denver, Colorado. The arbitrator shall also acknowledge and agree to follow the arbitration procedures set
forth herein and to make good faith
efforts to meet the time lines provided hereunder. If the parties are unable to agree upon an arbitrator
within ten (10) Business Days from the date of a party’s receipt of a
Demand for Arbitration, then the Judicial
Arbiter Group, Denver, Colorado (“JAG”) shall select the arbitrator for the parties. No party may have any ex parte

 30
 

 

communications with the arbitrator regarding any matter
related to the Arbitration.

(c)                                  The
arbitration hearing shall be scheduled within five (5) Business Days after the arbitrator is selected and shall be
scheduled to take place no later than
sixty (60) days from the date of the Demand for Arbitration. The arbitration shall be conducted in accordance with
the following:

(i)                                     The parties may be represented by counsel.

(ii)                                  Each party shall provide the other with copies of
all non-privileged documents and
information that is relevant to the Dispute,
on which it bases or supports its position(s) or which it intends to introduce
at the arbitration hearing, and shall provide the other party with such documents or information within twenty (20) Business Days of the date of the Demand for
Arbitration. Each party shall disclose to the other the names and
addresses of all persons with knowledge
relevant to the Dispute, including expert
witnesses, who a party intends to call as a witness at the arbitration hearing.

(iii)                             No later than five (5) Business Days before
the arbitration hearing, each of the parties shall provide the other and the arbitrator with a concise written statement of the
facts and evidence a party intends to
present at the arbitration hearing together with a discussion of the
applicable law and the basis for the
requested remedy or aware or the denial of the relief sought. Unless
good cause is shown, no rebuttal statements or other pre-hearing written submissions will be allowed.

(iv)                            The arbitrator shall determine the order of proof
which will be similar to that used
for federal judicial proceedings.

(v)                                 The arbitrator shall arrange for a stenographic or
other record to be made of the arbitration hearing and both parties
shall bear the cost thereof.

(vi)                            The arbitration hearing may proceed in the absence
of a party who fails to attend.
However, the arbitrator shall not render a decision solely on the basis of a party’s failure to attend the hearing.

(vii)                         The parties may jointly stipulate to a waiver of
the hearing and agree to submit the
Dispute to the arbitrator based solely on the written submissions and other evidence as the parties may agree.

(viii)                      The rules of evidence do not have to be strictly
adhered to; provided, however, that the arbitrator shall apply
applicable laws or

 31
 

 

rules
pertaining to any applicable privileges and/or work product. The arbitrator shall attempt to allow each of the parties the opportunity to present material and relevant
evidence at the hearing and the
arbitrator may be guided in this respect by the Federal Rules of Evidence.

(ix)                              The arbitrator will issue its decision (the “Decision”)
within fifteen (15) Business
Days after the close of the arbitration hearing.
The arbitrator may grant any remedy or relief that the arbitrator deems
to be just and equitable, including, but not limited
to specific performance. The Decision shall be in writing signed by the arbitrator and shall address each
Dispute or issue presented for
Arbitration by the parties, including the basis or reason(s) for the Decision. Within five (5)
Business Days of the issuance of the
Decision, a party may serve a request on the other party and the arbitrator requesting a correction of
any computation, typographical or
other similar error in the Decision.  A party opposing such a request shall file its
opposition within three (3) Business
Days of being served with the request for the correction. Thereafter, the arbitrator shall have three (3) Business Days to take appropriate action on the request and,
serve its corrected, modified or
revised Decision, if any, upon the parties in writing (the “Revised
Decision”). The Revised Decision shall be
considered final, for purposes of any judicial proceeding to enforce or vacate the Revised Decision. All
proceedings to enforce, confirm, modify or vacate the Revised Decision
will be controlled by and pursuant to the
Federal Arbitration Act, 9 U.S.C. § 1 et. seq. and
any applicable law of the State of Colorado
before any state or federal court having jurisdiction thereof.

(x)                                 The
arbitrator may award sanctions, as appropriate, for a party’s willful failure to comply with any of its
obligations hereunder, including the assessment of costs, the exclusion of evidence
or any other relief as deemed
equitable and just by the arbitrator.

(d)                               The parties shall bear equally the fees and
expenses of the Arbitration, unless the arbitrator decides otherwise,
and each party shall bear the costs of its own
counsel, witnesses (if any) and employees, unless the arbitrator decides otherwise. 
The parties intend that this agreement to arbitrate be valid, enforceable and irrevocable.

15.18       Execution in Counterparts. This
Agreement may be executed in counterparts, which shall when taken together constitute one (1) valid and binding
agreement. Facsimile signatures shall be effective and binding on all
parties. Counterpart originals of all signatures provided by facsimile shall be
provided to all parties within thirty (30) Days after execution of this Agreement.

[SIGNATURE
PAGES FOLLOW]

 32
 

 

The parties have executed this
Agreement as of the date first set forth above.

	
   

  	
  SELLERS:

  	
  LANCE OIL & GAS COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  Mark R. Petry

  	
   

  
	
   

  	
   

  	
  Name: Mark R.
  Petry

  
	
   

  	
   

  	
  Title:
  Attorney-In-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WESTERN GAS
  RESOURCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  Mark R. Petry

  	
   

  
	
   

  	
   

  	
  Name: Mark R.
  Petry

  
	
   

  	
   

  	
  Title:
  Attorney-In-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BUYER:

  	
  PRB OIL & GAS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ Robert W. Wright

  	
   

  
	
   

  	
   

  	
  Name:

  	
    Robert W. Wright

  	
   

  
	
   

  	
   

  	
  Title:

  	
    Chief Executive Officer

  	
   

  
									

 

 33

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