Document:

Exhibit 10.1

    
      

      

    

     

     

    Exhibit
      10.1

    

    

    

    

    

    Purchase
      and Sale Agreement

    

    

    between

    

    PRB
      Energy, inc

    

    

    “Seller”

    

    and

    

    Arête Industries,
      Inc..
      

    

    “Buyer”

    

    Effective:
      September 1, 2006

    

    

    

    
      
        
          PURCHASE
            AND SALE AGREEMENT BY AND BETWEEN ARETE INDUSTRIES, INC. and PRB ENERGY,
            INC.

          EFFECTIVE
            SEPTEMBER 1, 2006

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    PURCHASE
      AND SALE AGREEMENT

    

    

    This
      Purchase and Sale Agreement (the “Agreement”)
      entered into this 1st day of September, 2006, is the agreement between PRB
      Energy, Inc., 1875 Lawrence Street, Suite 450, Denver, Colorado 80202 (the
      "Seller")
      and
      Arête Industries, Inc., 7260 Osceola Street, Westminster, Colorado 80030 (the
      “Buyer”)
      concerning the sale and purchase of certain coal bed methane gas gathering
      pipeline and compressor station-related assets described below. For purposes
      of
      this Agreement, the effective date of the purchase and sale shall be 12:01
      a.m.
      Mountain Time on September 1, 2006 (the “Effective
      Date”).
      Seller and Buyer shall close the transaction contemplated by this Agreement
      on
      or before September 13, 2006, (the “Closing
      Date”.)

    

    RECITALS:

    

    A. Buyer
      and
      Seller desire to enter into an agreement whereby the Seller seeks to sell and
      the Buyer seeks to buy the coal bed methane gas gathering pipeline and
      compressor station-related assets currently associated with the TOP Gathering
      System in Campbell County, Wyoming (hereinafter referred to as the "TOP");
      and

    

    B. Buyer
      and
      Seller desire to enter into this Agreement to complete said
      transaction.

    

    Now
      therefore, in consideration of the mutual agreements and covenants contained
      herein, Buyer and Seller agree as follows:

    

    
      	
              1.

            	
              Purchase
                and Sale of Assets.
                Subject to the terms, conditions and exclusions of this Agreement,
                Seller
                agrees to sell and Buyer agrees to purchase Seller’s right, title and
                interest in and to "TOP" located in Campbell County, Wyoming as depicted
                on Exhibit A 

            

    

    

    
      	12.  	
              a.Real
                Property.
                All easements, rights of way, permits, licenses, prescriptive rights
                structures or other interests in real property associated with or
                relating
                to the Assets as listed on Exhibit
                A-1;

            

    

    

    
      	13.  	
              b.Equipment.
                All pipelines, equipment, valves, vessels, fittings, meters or other
                measurement facilities, operational and control equipment, pig launchers,
                pig catchers, tanks and all other personal property, as depicted
                on
                Exhibit A (one
                dehydration unit & one ecology pot currently on site are excluded from
                the purchase and sale) ;
                

            

    

    

    
      	14.  	
              c.Contracts
                et al. All contracts and agreements relating to the use of the assets,
                as
                depicted on Exhibit A-1;
                

            

    

    

    
      	 	
              d.

            	
              Other
                Interests in the Assets.
                All other rights, titles and interests in and to the Assets as described
                above are part of the Assets, it being the purpose and intent of
                this
                Agreement that Seller sell and Buyer purchase all of Seller’s right, title
                and interest in and to the
                Assets.

            

    

    
      
        2

         

        PURCHASE
          AND SALE AGREEMENT BY AND BETWEEN ARETE INDUSTRIES, INC. and PRB ENERGY,
          INC.

        EFFECTIVE
          SEPTEMBER 1, 2006

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
              2.

            	
              Purchase
                Price.
                In consideration of the conveyance of the Assets, upon execution
                of this
                Agreement, Buyer shall pay to Seller the sum of Three Hundred and
                Thirty
                Thousand Dollars and no cents ($330,000.00) (the “Purchase
                Price”)

            

    

    

    
      	
              3.

            	
              Seller's
                Representations and Warranties.
                Seller represents and warrants, to the best of its knowledge, the
                following to Buyer as of the Closing
                Date:

            

    

    

    
      	 	
              a.

            	
              Preferential
                Rights to Purchase.
                No third party holds any preferential right to purchase, right of
                first
                offer, right of last refusal or other preferential right to purchase
                the
                Assets.

            

    

    

    
      	 	
              b.

            	
              Signatory
                for Seller.
                The signatory for Seller has the full power and authority to bind
                the
                Seller to the terms hereof, and to complete the sale contemplated
                hereby.

            

    

    

    
      	 	
              c.

            	
              Agreement
                Represents.
                This Agreement represents the valid and subsisting agreement of Seller,
                fully binding upon Seller and subject only to general principles
                of equity
                and bankruptcy laws.

            

    

    

    
      	 	
              d.

            	
              No
                Abandonment.
                Seller has taken no actions that demonstrate an intent to abandon
                the
                Assets, or released of record any rights of way pertaining to the
                Assets.

            

    

    

    
      	 	
              e.

            	
              Fees.
                Seller has incurred no liability, contingent or otherwise, for broker's
                or
                finder's fees in respect to this transaction for which Buyer shall
                have
                any responsibility whatsoever.

            

    

    

    
      	
              4.

            	
              Buyer's
                Representations and Warranties.
                Buyer represents and warrants, to the best of Buyer’s knowledge, the
                following to Seller as of the Closing
                Date:

            

    

    

    
      	 	
              a.

            	
              Consents
                and Approvals.
                No
                consent, approval, authorization, license, order or permit, or
                declaration, filing or registration with, or notification to any
                governmental authority or any other person, is required to be obtained
                by
                the Buyer in connection with the execution and delivery of this Agreement
                by the Buyer or the performance of the Buyer's obligations
                hereunder;

            

    

    

    
      	 	
              b.

            	
              Fees.
                Buyer has not incurred any liability, contingent or otherwise, for
                brokers' or finders' fees relating to the transactions contemplated
                by
                this Agreement for which Seller shall have any responsibility
                whatsoever;

            

    

    

    
      	1.  	
              c.Restoration.
                Buyer has the sole responsibility to determine the necessary measures
                and
                to perform all necessary restoration of the
                Assets.

            

    

    

    
      	
              5.

            	
              WARRANTY.
                BUYER ACKNOWLEDGES AND AGREES THAT THE ASSETS LISTED IN EXHIBITS
                A, A-1
                AND B ARE BEING TRANSFERRED, ASSIGNED AND CONVEYED FROM SELLER TO
                BUYER
                "AS IS, WHERE IS AND WITH ALL FAULTS" IN THEIR PRESENT CONDITION
                AND STATE
                OF REPAIR. SELLER HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS AND
                WARRANTIES

            

    

    
      
        3

         

        PURCHASE
          AND SALE AGREEMENT BY AND BETWEEN ARETE INDUSTRIES, INC. and PRB ENERGY,
          INC.

        EFFECTIVE
          SEPTEMBER 1, 2006

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    CONCERNING
      THE ASSETS, EXPRESS OR IMPLIED, WHETHER ARISING IN CONTRACT, TORT OR ANY OTHER
      THEORY OF LAW, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF TITLE,
      MERCHANTABILITY OR FITNESS FOR A GENERAL OR PARTICULAR PURPOSE. FURTHER, BUYER
      SPECIFICALLY AGREES THAT SELLER IS MAKING NO REPRESENTATION OR WARRANTY, EITHER
      EXPRESS OR IMPLIED, AS TO THE ADEQUACY OR COMPLETENESS OF THE UNDERLYING REAL
      PROPERTY INTERESTS ASSOCIATED WITH OR USED IN CONNECTION WITH THE ASSETS,
      INCLUDING BUT NOT LIMITED TO EASEMENTS AND RIGHTS OF WAY.

    

    6. Indemnification.

    

    
      	 	
              a.

            	
              By
                Seller.
                Seller agrees to indemnify, defend and hold Buyer harmless on account
                of
                all debts, liabilities or causes of action attributable to Buyer’s
                ownership of the property and to transactions applicable to the Contracts
                which accrued prior to the date of Closing except as otherwise set
                forth
                below; and

            

    

    

    
      	 	
              b.

            	
              By
                Buyer.
                Buyer agrees to indemnify, defend and hold Seller harmless on account
                of
                all debts, liabilities or causes of action attributable to Seller’s
                ownership of the property and to transactions applicable to the Contracts
                which accrued after to the date of
                Closing.

            

    

    

    
      	 	
              c.

            	
              All
                indemnities of or by the parties under this Agreement shall survive
                the
                Closing Date hereof.

            

    

    

    
      	
              7.

            	
              Conveyance
                Documents.
                At Closing, Seller shall execute and deliver an Assignment, Conveyance,
                and Bill of Sale in the form of which is attached as Exhibit
                B.

            

    

    

    
      	
              8.

            	
              Conditions
                to Closing - Seller.
                The Seller’s obligations at Closing are subject, at Seller’s option, to
                the satisfaction at or prior to the Closing Date of the following
                conditions precedent:

            

    

    

    
      	 	
              a.

            	
              All
                representations and warranties of Buyer contained in Paragraph 4
                of this
                Agreement shall be true and correct in all material respects, and
                Buyer
                shall have performed and satisfied all covenants and agreements required
                by this Agreement to be performed and satisfied by Buyer at or prior
                to
                the Closing Date in all material
                respects;

            

    

    

    
      	2.  	
              b.Buyer
                shall have executed and delivered to Seller all of the documents
                that are
                contemplated to be executed and delivered pursuant to this Agreement
                prior
                to or at the Closing Date.

            

    

    

    
      	
              9.

            	
              Conditions
                to Closing - Buyer.
                The Buyer’s obligations at Closing are subject, at Buyer’s option, to the
                satisfaction at or prior to the Closing Date of the following conditions
                precedent:

            

    

    

    
      	 	
              a.

            	
              All
                representations and warranties of Seller contained in Paragraph 3
                of this
                Agreement shall be true and correct in all material respects, and
                Seller
                shall have performed and

            

    

    
      
        4

        

        PURCHASE
          AND SALE AGREEMENT BY AND BETWEEN ARETE INDUSTRIES, INC. and PRB ENERGY,
          INC.

        EFFECTIVE
          SEPTEMBER 1, 2006

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    satisfied
      all covenants and agreements required by this Agreement to be performed and
      satisfied by Seller at or prior to the Closing Date in all material
      respects;

    

    
      	 	
              b.

            	
              Seller
                shall have executed and delivered to Buyer all of the documents that
                are
                contemplated to be executed and delivered pursuant to this Agreement
                prior
                to or at the Closing Date.

            

    

    

    10. Termination.
      This
      Agreement may be terminated in accordance with the following
      provisions:

    

    
      	 	
              a.

            	
              By
                Seller if the conditions set forth in Paragraph 8 are not satisfied,
                through no fault of the Seller, or waived by Seller in writing, as
                of the
                Closing Date; or

            

    

    

    
      	 	
              b.

            	
              By
                Buyer if the conditions set forth in Paragraph 9 are not satisfied,
                through no fault of the Buyer, or waived by Buyer in writing, as
                of the
                Closing Date.

            

    

    

    
      	
              11.

            	
              Confidentiality.
                Unless required by applicable law, rules or regulations, neither
                party
                hereto shall make a public announcement or communication to any third
                party concerning this Agreement or the transactions contemplated
                hereby
                without the express written consent of the other party. Notwithstanding
                any of the foregoing, Buyer and Seller shall be permitted to communicate
                as deemed necessary in its sole discretion regarding change of ownership
                of Property.

            

    

    

    
      	
              12.

            	
              Entire
                Agreement.
                This Agreement, together with Exhibits “A”, “A-1” and “B” attached hereto
                and data delivered hereunder, shall constitute the complete agreement
                between the parties hereto and shall supersede all prior agreements,
                whether written or oral, and any representations or conversations
                with
                respect to the purchase and sale of the Assets.

            

    

    

    
      	
              13.

            	
              Binding
                Effect.
                This Agreement shall be binding upon and shall inure to the benefit
                of the
                parties hereto, and their successors and assigns. This Agreement
                may be
                assigned to a party’s parent, subsidiary, member or affiliate without the
                consent of the other party provided notice of such assignment is
                provided
                to the other party. No other assignment by either party shall be
                made
                without the express written consent of the other party, which shall
                not be
                unreasonably withheld.

            

    

    

    
      	
              14.

            	
              Counterparts.
                This Agreement may be executed in any number of counterparts each
                of which
                shall be considered an original and each of which shall be an enforceable
                agreement.

            

    

    

    
      	
              15.

            	
              Law
                Applicable.
                This Agreement shall be governed by and construed in accordance with
                the
                laws of the State of Wyoming applicable to contracts made and performed
                entirely therein. 

            

    

    

    
      	
              16.

            	
              Joint
                Draft.
                This Agreement was drafted and prepared by Seller and Buyer with
                each
                party having access to their own legal counsel. Seller and Buyer
                each
                waive any position or claim that it may now have or may have in the
                future
                based on the argument that the Agreement was drafted by only one
                of the
                parties and not jointly prepared by Seller and
                Buyer.

            

    

    
      
        5

         

        PURCHASE
          AND SALE AGREEMENT BY AND BETWEEN ARETE INDUSTRIES, INC. and PRB ENERGY,
          INC.

        EFFECTIVE
          SEPTEMBER 1, 2006

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              17.

            	
              Severability:
                Each and every provision of this Agreement is intended to be severable.
                If
                any term or provision is held to be invalid or illegal for any reason
                whatsoever, all other conditions and provisions of this Agreement
                shall
                nevertheless remain in full force and effect so long as the economic
                or
                legal substance contemplated by this transaction is not affected
                in a
                materially adverse manner with respect to either
                party.

            

    

    

    
      	
              18.

            	
              Mediation:
                No civil action with respect to any dispute, claim or controversy
                arising
                out of or relating to this Agreement may be commenced until the matter
                has
                been submitted to a mediator for mediation. Either Party may commence
                mediation by providing to the other party a written request for mediation,
                setting forth the subject of the dispute, claim or controversy and
                the
                relief requested. It is hereby agreed that the Parties, upon occasion
                that
                such a notice is delivered, shall endeavor for a period of thirty
                (30)
                days to reach an accord on the disputed matter prior to going to
                formal
                mediation. Should the Parties fail to reach such an accord, the Parties
                agree to cooperate and act in good faith in the selection of a mutually
                agreed to mediator and in scheduling the mediation proceedings. The
                Parties further covenant that they will participate in the mediation
                in
                good faith, and that they will share equally in its costs. All offers,
                promises, conduct and statements, whether oral or written, made in
                the
                course of the mediation by any of the Parties, their agents, attorneys,
                employees, or experts, and by the mediator and the mediator’s employees,
                are confidential, privileged and inadmissible for any purposes, including
                impeachment, in any litigation or other proceeding involving the
                parties,
                provided that evidence that is otherwise admissible or discoverable
                shall
                not be rendered inadmissible non-discoverable as a result of its
                use in
                the mediation. Either Party may seek equitable relief prior to the
                mediation to preserve the status quo pending completion of the mediation
                process. Except for an action to obtain equitable relief, neither
                party
                may commence a civil action with respect to the matters submitted
                to
                mediation until after the completion of the initial mediation session,
                or
                45 days after the date of filing of the written request for mediation,
                whichever occurs first. Mediation may continue after the commencement
                of a
                civil action, if the Parties so desire. The provisions of this clause
                may
                be enforced by any Court of competent jurisdiction in the State of
                Wyoming, and the Party seeking enforcement shall be entitled to an
                award
                of all costs, fees and expenses, including attorneys’ fees, to be paid by
                the Party against whom the enforcement is
                ordered.

            

    

    

    
      	
              19.

            	
              Attorney's
                Fees.
                The prevailing party in any dispute hereunder shall be entitled to
                recover
                its reasonable attorneys' fees and costs. In addition, should either
                party
                decline to complete the closing and associated transaction, the declining
                party shall pay all attorney's fees and costs of the party seeking
                to
                close the transaction.

            

    

    

    
      	
              20.

            	
              Waivers.
                No party’s rights hereunder will be deemed waived except by a writing
                signed by such party.

            

    

    

    
      	
              21.

            	
              Incorporation
                of Exhibits.
                All exhibits and schedules referred to herein are attached hereto
                and are
                made a part hereof by this reference. This Agreement shall be the
                controlling document to the extent there is any conflict between
                the
                language of this Agreement and any of the
                exhibits.

            

    

    

    
      	
              22.

            	
              Survival.
                Except as otherwise provided herein, the representations and warranties
                contained in

            

    

    
      
        6

         

        PURCHASE
          AND SALE AGREEMENT BY AND BETWEEN ARETE INDUSTRIES, INC. and PRB ENERGY,
          INC.

        EFFECTIVE
          SEPTEMBER 1, 2006

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    this
      Agreement shall not survive the closing.

    

    
      	
              23.

            	
              Further
                Assurances and Agreements.
                Seller and Buyer each agree that it will take such further or other
                action(s) and to execute or deliver such other documents necessary
                to
                carry out the purposes and intent of this Agreement or any document
                delivered pursuant to this
                Agreement.

            

    

    

    

    IN
      WITNESS WHEREOF, the Parties to this Agreement have executed this Agreement
      as
      of the Effective Date first above written.

    

    

    ARETE
      INDUSTRIES, INC.

    

    

    By:
      /s/
      Charles Gamber

    Name: Charles
      Gamber

    Title: CEO/President

    

    

    

    

    PRB
      ENERGY, INC.

    

    

    By
      :
/s/
      Bill Hayworth

    Name: Bill
      Hayworth

    Title: President

     

    

    

    
      
        
          7

           

          PURCHASE
            AND SALE AGREEMENT BY AND BETWEEN ARETE INDUSTRIES, INC. and PRB ENERGY,
            INC.

          EFFECTIVE
            SEPTEMBER 1, 2006

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    

    EXHIBIT
      A

    

    ATTACHED
      TO AND MADE A PART OF THAT CERTAIN

    PURCHASE
      AND SALE AGREEMENT BY AND BETWEEN

    ARETE
      INDUSTRIES, INC. and PRB ENERGY, INC.

    

    

    

    DESCRIPTION
      OF ASSETS

    

    Pipelines

    
      	 	
              ·

            	
              4.5
                Miles 8” coated steel pipe, hydro-tested, welds x-rayed and cathodically
                protected

            

    

    
      	 	
              ·

            	
              Pig
                launcher/receiver

            

    

    

    Interconnect
      

    
      	 	
              ·

            	
              Building

            

    

    
      	 	
              ·

            	
              Slug
                catcher

            

    

    
      	 	
              ·

            	
              Level
                Controller/Scrubber pot

            

    

    
      	 	
              ·

            	
              400
                BBL Tank

            

    

    
      	 	
              ·

            	
              Pig
                launcher/receiver

            

    

    

    Buff
      Station

    

    
      	 	
              ·

            	
              Inlet
                Separator

            

    

    
      	 	
              ·

            	
              Separator
                flash tanks (2)

            

    

    
      	 	
              ·

            	
              400
                BBL Tank

            

    

    
      	 	
              ·

            	
              Various
                Piping and various valves - heat traced and
                insulated

            

    

    
      	 	
              ·

            	
              Emergency
                shut down system - fire eyes (4), gas detectors
                (4)

            

    

    
      	 	
              ·

            	
              Meter
                houses (3) - Barton Chart meter, Total Flow
                Meters

            

    

    
      	 	
              ·

            	
              Oxygen
                analyzer

            

    

    
      	 	
              ·

            	
              Suction
                control valves (4)

            

    

    
      	 	
              ·

            	
              Regulators

            

    

    
      	 	
              ·

            	
              Buildings
                (4)

            

    

    

     

    
      
        

        

        

        PURCHASE
          AND SALE AGREEMENT BY AND BETWEEN ARETE INDUSTRIES, INC. and PRB ENERGY,
          INC.

        EFFECTIVE
          SEPTEMBER 1, 2006

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A-1

     

    ATTACHED
      TO AND MADE A PART OF THAT CERTAIN

    PURCHASE
      AND SALE AGREEMENT BY AND BETWEEN

    ARETE
      INDUSTRIES, INC. and PRB ENERGY, INC.

    

    Real
      Property and Leasehold Interests

    
      	 	
              ·

            	
              Compressor
                Site Agreement by and between the WYO Davis Family Limited Partnership
                and
                PRB Gas Transportation, Inc. successor to TOP Gathering LLC, dated
                June 3,
                2002

            

    

    
      	 	
              ·

            	
              Pipeline
                Right-of-Way Grant by and between Ohmans, Inc. a Wyoming Corporation
                and
                PRB Gas Transportation, Inc. successor to TOP Gathering LLC, dated
                September26, 2001

            

    

    
      	 	
              ·

            	
              Receipt
                Point Site Lease by and between Ohmans, Inc., a Wyoming Corporation
                and
                PRB Gas Transportation, Inc. successor to TOP gathering, LLC dated
                December 31, 2001

            

    

    
      	 	
              ·

            	
              Gas
                Compressor Equipment Master Rental Agreement by and between Universal
                Compression and PRB Gas Transportation, Inc. successor to TOP Gathering
                LLC, dated December 17, 2001

            

    

    

    Governmental
      Authorizations

    
      	 	
              ·

            	
              State
                of Wyoming, Department of Environmental Quality Air Quality Permit
                CT-2598, Buff Compressor Station, dated November 23, 2001 as modified
                by
                Permit No. MD-837, dated December 17,
                2002

            

    

    

    Contracts
      and Agreements

    
      	 	
              ·

            	
              Gathering
                Services Agreement by and between Bear Paw Energy, LLC and PRB Gas
                Transportation, Inc. successor to TOP Gathering LLC, dated September
                20,
                2001

            

    

    
      	 	
              ·

            	
              Gathering
                Services Agreement by and between PRB Gas Transportation, Inc. successor
                to TOP gathering LLC and United Energy Trading, dated July 18,
                2002

            

    

    
      	 	
              ·

            	
              Gathering
                Services Agreement by and between PRB Gas Transportation, Inc. successor
                to TOP Gathering LLC and Natural Gas Fuel Company, Inc. dated October
                15,
                2001

            

    

    
      	 	
              ·

            	
              Gathering
                Services Agreement by and between PRB Gas Transportation, Inc. successor
                to TOP Gathering LLC and Natural Gas Fuel Company, Inc. - Emerald
                dated
                July 18, 2002 (Expired)

            

    

    
      	 	
              ·

            	
              Operating
                Agreement of TOP Gathering LLC dated October 15, 2001
                (Expired)

            

    

    
      	 	
              ·

            	
              Contribution
                Agreement dated October 15, 2001, by and among Pete Haman, Knorstar
                Energy, LLC, data management Consultants, Inc. and Crescent Holding,
                LLC
                (Expired)

            

    

    
      	 	
              ·

            	
              Letter
                Agreement dated June 12, 2002 by and between TOP Gathering LLC and
                Global
                Vision Solutions LLC for an internet based monitoring system
                (Expired)

            

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      B

    ATTACHED
      TO AND MADE A PART OF THAT CERTAIN

    PURCHASE
      AND SALE AGREEMENT BY AND BETWEEN

    ARETE
      INDUSTRIES, INC. and PRB ENERGY, INC.

    

    

    

    ASSIGNMENT,
      CONVEYANCE, and BILL OF SALE

    

    
      
        	 STATE OF WYOMING 	  )	 
	 	  )	 
	 COUNTY OF CAMPBELL 	  )	 

      

    

    
 

    THIS
      ASSIGNMENT, CONVEYANCE, AND BILL OF SALE (the "Assignment") dated as of
      September 13, 2006 is entered into between ARETE INDUSTRIES, INC. ("Assignee")
      and PRB ENERGY, INC. ("Assignor").

    

    WITNESSETH:

    

    FOR
      TEN
      DOLLARS ($10.00) AND OTHER GOOD AND VALUABLE CONSIDERATION, the receipt and
      sufficiency of which are hereby acknowledged, Assignor hereby GRANTS, CONVEYS,
      QUITCLAIMS and ASSIGNS to Assignee all of Assignor's right, title and interest
      in and to the following properties (real, personal, or mixed) and rights
      (contractual or otherwise) unless expressly reserved or excluded herein:
      together with all rights incident thereto as set forth in Exhibits A and A-1.
      All properties, real, personal, or mixed and rights (contractual or otherwise)
      included hereinabove are sometimes referred to hereinafter as the "Property"
      or
      "Properties".

    

    TO
      HAVE
      AND TO HOLD the Properties subject to the following terms and
      conditions:

    

    1. The
      terms, covenants, and conditions hereof bind and inure to the benefit of the
      parties hereto and their respective successors and assigns. All future
      conveyances of any portion of the Properties and/or their associated facilities
      and equipment shall recognize and perpetuate the rights and obligations set
      out
      herein.

    

    2. ASSIGNEE
      ACKNOWLEDGES AND AGREES THAT THE ASSETS LISTED IN EXHIBITS A and A-1 ARE BEING
      TRANSFERRED, ASSIGNED AND CONVEYED FROM ASSIGNOR TO ASSIGNEE "AS IS, WHERE
      IS
      AND WITH ALL FAULTS" IN THEIR PRESENT CONDITION AND STATE OF REPAIR. ASSIGNOR
      HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES CONCERNING THE
      ASSETS, EXPRESS OR IMPLIED, WHETHER ARISING IN CONTRACT, TORT OR ANY OTHER
      THEORY OF LAW, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF TITLE,
      MERCHANTABILITY OR FITNESS FOR A GENERAL OR PARTICULAR PURPOSE. FURTHER ASSIGNEE
      SPECIFICALLY AGREES THAT ASSIGNOR IS MAKING NO REPRESENTATION OR WARRANTY,
      EITHER EXPRESS OR IMPLIED, AS TO THE ADEQUACY OR COMPLETENESS OF THE UNDERLYING
      REAL PROPERTY INTERESTS ASSOCIATED WITH OR USED IN CONNECTION WITH THE ASSETS,
      INCLUDING BUT NOT LIMITED TO EASEMENTS AND RIGHTS OF WAY.

    

    

    3. This
      Assignment and its performance shall be construed in accordance with, and
      governed by, the laws of the State of Wyoming without regard to the choice
      of
      law rules of any jurisdiction, and Assignor and Assignee submits to the
      exclusive jurisdiction of State Courts located in Gillette, Campbell County,
      Wyoming.

    

    

    EXECUTED
      this 13th day of September, 2006.

    

    

    ASSIGNOR:

    PRB
      Energy, Inc.

    

    

    

    

    /s/
      Bill Hayworth

    Bill
      Hayworth

    President

     

    

    

    

    ASSIGNEE:

    Arête
      Industries, Inc.

    

    

    

    

    /s/
      Charles Gamber

    Charles
      Gamber

    CEO/President

    
      
         

        PURCHASE
          AND SALE AGREEMENT BY AND BETWEEN ARETE INDUSTRIES, INC. and PRB ENERGY,
          INC.

        EFFECTIVE
          SEPTEMBER 1, 2006

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      

      
        
          	 STATE OF COLORADO 	  )	 
	 	  )	 
	 COUNTY OF DENVER 	  )	 

        

      

     

    The
      foregoing instrument was acknowledged before me this 13 day of September, 2006,
      by Bill Hayworth on behalf of PRB Energy, Inc.

    

    Witness
      my hand and official seal.

    

    

    

    /s/
      Mary L. McKinezy

    Notary
      Public

    

    My
      Commission Expires: 11/21/2009

    

    

    

    

    

    
      

      
        

        
          
            	 STATE OF COLORADO 	  )	 
	 	  )	 
	 COUNTY OF DENVER 	  )	 

          

        

    

    The
      foregoing instrument was acknowledged before me this 13th day of September,
      2006, by Charles Gamber on behalf of Arête Industries, Inc.

    

    Witness
      my hand and official seal.

    

    

    

    /s/
      Mary L. McKinezy

    Notary
      Public

    

    My
      Commission Expires: 11/29/2009Exhibit 4

Exhibit 4.1 

AVALON ENERGY CORPORATION

2006 STOCK INCENTIVE

AND

OPTION PLAN

1. THE PLAN.

The purpose of the Avalon Energy Corporation’s (the Company) 2006 Stock Incentive and Option Plan (the Plan) is to provide the Company with the means of attracting and retaining the services of highly motivated and qualified directors and key personnel.

The Plan is intended to advance the interests of the Company and its stockholders by affording to key employees, consultants and non-employee directors, upon whose skill, judgment, initiative, and efforts the Company is largely dependent for the successful conduct of its business, an opportunity for investment in the Company and incentives inherent in stock ownership in the Company. The term Company shall include all subsidiaries of the Company.

2. LEGAL COMPLIANCE.

It is the intent of the Plan that it conform in all respects with the requirements of Rule 16b-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934 (Rule 16b-3) or, in connection with Incentive Stock/Options (ISOs), as such term is defined in Section 422 (a) of the Internal Revenue Code of 1986 (the Code) as mentioned from time to time.  If any aspect of the Plan does not conform to Section 422 (a) of the Code, as amended from time to time, such aspect shall be deemed to be modified, deleted, or otherwise changed as necessary to insure continued compliance with such provisions.

3. ADMINISTRATION OF THE PLAN.

3.1 PLAN COMMITTEE:  The Plan shall be administered by a committee (the Committee).  The members of the Committee shall be appointed from time to time by the Board of Directors of the Company (the Board) and shall consist of not less than two (2) nor more than five (5) persons.

3.2 COMMITTEE PROCEDURES:  The Committee from time to time may adopt such rules and regulations for carrying out the purposes of the Plan as it may deem proper and in the best interests of the company.  The committee shall keep minutes of its meetings and records of its actions.  A Majority of the members of the committee shall constitute a quorum for the transaction of any business by the Committee.  The Committee may act at any time by an affirmative vote of a majority of those members
voting.  Such vote may be taken at a meeting which may be conducted in person, telephonically, or by written consent of all Committee members without a meeting.

3.3 FINALITY OF COMMITTEE ACTION:  The Committee’s actions shall be final and conclusive and binding on all persons, including, without limitations, the Company, its stockholders, the Committee and each of the members of the Committee, respective successor(s) and interest(s).

3.4 NON LIABILITY OF COMMITTEE MEMBERS:  No Committee member shall be liable for any action or determination made by him in good faith with respect to the Plan or any Options granted or shares issued thereunder.

4. NON-EXCLUSIVITY OF THE PLAN.

Nothing contained in the Plan is intended to amend, modify, or rescind any previously approved compensation plan(s), program(s) or option(s) entered into by the Company.  This Plan shall be construed to be in addition to and independent of any and all such other arrangements.  Neither the adoption of the Plan by the Board nor the submission of the Plan to the Stockholders of the Company for approval shall be construed as creating limitations on the power or authority of the Board to adopt, with or without stockholder approval, such additional or other compensation arrangements as the Board may from time to time deem desirable.

5. GOVERNING LAW.

The Plan and all rights and obligations under it shall be construed and enforced in accordance with the laws of the State of Nevada.

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