Document:

EXHIBIT
4.9

PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT, dated as of December 28, 2006 (this “Agreement”), is entered into by and among PRB Oil & Gas, Inc., a Colorado corporation as issuer (the “Company”), and PRB Energy, Inc., a Nevada corporation (“PRB  Energy”), and PRB Gathering, Inc., a Colorado corporation (“PRB  Gathering” and together with PRB Energy, the “Guarantors” and each a “Guarantor” and the Guarantors together with the Company, the “Debtors” and each a “Debtor”) and such Holders of those certain Senior Secured Debentures due August 31, 2008 (or other date as set forth therein) (each a “Secured Party” and together, the “Secured Parties”) in the original aggregate principal amount of $15,000,000, as the same may be amended from time to time, (the “Debentures”), issued by the Company to the Secured Parties in connection with that certain Securities Purchase Agreement entered into by and among the Company and the Secured Parties, and guaranteed by the Guarantors, on the date hereof (the “Securities Purchase Agreement”).
W I T N E S S E T H:

WHEREAS, pursuant to the
Debentures, the Secured Parties have extended and have agreed to extend certain
credit extensions described above to the Company as evidenced by the
Debentures;

NOW, THEREFORE, in consideration
of the agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:

1.             Certain Definitions. As used in this Agreement,
the following terms shall have the meanings set forth in this Section 1.  Terms used but not otherwise defined in this
Agreement that are defined in Article 9 of the UCC (such as “general
intangibles” and “proceeds”) shall have the respective meanings given such
terms in Article 9 of the UCC, and capitalized terms not otherwise defined
herein shall have the meaning given them in the Securities Purchase Agreement
described above.

(a)           “Collateral”
means the collateral in which the Secured Parties are granted a security
interest by this Agreement, or otherwise so obligated to grant a security
interest under the Securities Purchase Agreement, Debenture, or Guaranty and
which shall include the following, whether presently owned or existing or
hereafter acquired or coming into existence, and all additions and accessions
thereto and all substitutions and replacements thereof, and all proceeds,
products and accounts thereof, including, without limitation, all proceeds from
the sale or transfer of the Collateral and of insurance covering the same and
of any tort claims in connection therewith:

(i)            all
Accounts, Deposit Accounts (to be provided pursuant to the Post-Closing
Security Letter Agreement entered into on the Closing date by and among the
Secured Parties and the Debtors), Instruments, Documents, Chattel Paper
(whether Tangible Chattel Paper or Electronic Chattel Paper), Goods (including
Inventory, Equipment,

 

Fixtures and Motor Vehicles), Payment Intangibles, Software and other General Intangibles and all Letter-of-Credit Rights;

(ii)           the
shares of common stock and preferred stock of, or partnership, membership and
other ownership interests in any subsidiary organized under the laws of the
United States or any political subdivision thereof, now or hereafter owned by
any Debtor (other than treasury stock of PRB Energy), and all certificates
evidencing the same (collectively, the “Pledged Equity”)
which are attached hereto on Schedule A, together with, in each case:

(1)           all
shares, securities, monies or property representing a dividend on any of the
Pledged Equity, or representing a distribution or return of capital upon or in
respect of the Pledged Equity, or resulting from a split up, revision,
reclassification or other like change of the Pledged Equity or otherwise
received in exchange therefor, and any subscription warrants, rights or options
issued to the holders of, or otherwise in respect of, the Pledged Equity, and

(2)           without
affecting the obligations of the Debtors under any provision prohibiting such
action hereunder or under any other Transaction Document, in the event of any
consolidation or merger or similar transaction in which a subsidiary of such
Debtor is not the surviving corporation, all ownership interests of any class
or character of the successor corporation (unless such successor corporation is
that Debtor itself), formed by or resulting from such consolidation or merger
(the Pledged Equity, together with all other certificates, shares, securities,
properties or moneys as may from time to time be pledged hereunder pursuant to
this clause (2) and clause (1) above being herein collectively called the “Equity Collateral”);

(iii)          all Investment Property, Financial Assets and
Securities Accounts not covered by the foregoing clauses, (i), (i) and (iii);

(iv)          all
Intellectual Property;

(v)           all
commercial tort claims described on Schedule B hereto;

(vi)          All
other tangible and intangible property of each Debtor, including all books,
correspondence, credit files, records, invoices, tapes, cards, computer runs
and other papers and documents in the possession or under the control of the
Debtor or any computer bureau or service company from time to time acting for
such Debtor;

(vii)         all Proceeds and products in whatever form of
all or any part of the other Collateral, including all rents, profits, income
and benefits and all proceeds of insurance and all condemnation awards and all
other compensation for any event of loss with respect to all or any part of the
other Collateral (together with all rights to recover and proceed with respect
to the same), and all accessions to, substitutions for and replacements of all
or any part of the other Collateral;

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(viii)        the Collateral shall not include the Excluded
Collateral.

(b)           “Excluded
Collateral” means the assets of the Debtors expressly set forth in Annex
A  (provided that, upon the termination
and release of the Liens existing as of the date hereof of Rocky Mountain Gas
in the RMG Assets (as such term is defined in the Debentures),  the RMG Assets shall cease to be part of the
Excluded Collateral).

(c)           “Obligations”
means all obligations of the Debtors owed to the Secured Parties whether now or
hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with
others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from the Secured Parties
as a preference, fraudulent transfer or otherwise as such obligations may be
amended, supplemented, converted, extended or modified from time to time.

(d)           “Required
Holders” has the meaning set forth the Debenture and shall include the
Agent acting on behalf of the Required Holders pursuant to their written
instructions.

(e)           “UCC”
means the Uniform Commercial Code and or any other applicable law of any
jurisdiction (including, without limitation, the state of Nevada, Colorado,
Wyoming and New York) as to any Collateral located therein.

2.             Grant of Security Interest.

As an inducement
for the Secured Parties to extend the credit as evidenced by the Debentures and
to secure the complete and timely payment, performance and discharge in full,
as the case may be, of all of the Obligations, each Debtor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the Secured
Parties a continuing security interest in and to, a lien upon and a right of
set-off against all of their respective right, title and interest of whatsoever
kind and nature in and to, the Collateral (the “Security
Interest”).

3.             Representations, Warranties, Covenants and Agreements
of the Debtors.  Each Debtor
represents and warrants to, and covenants and agrees with, the Secured Parties
as follows:

(a)           Each
Debtor has the requisite corporate power and authority to enter into this
Agreement and otherwise to carry out its obligations hereunder.  The execution, delivery and performance by
each Debtor of this Agreement and the filings contemplated therein have been
duly authorized by all necessary action on the part of each Debtor and no
further action is required by each Debtor.

(b)           Each
Debtor has no place of business or offices where its books of account and
records are kept (other than temporarily at the offices of its attorneys or
accountants)

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or places where Collateral is stored or located, except as set forth on Schedule C attached hereto.

(c)           Each
Debtor is the sole owner of its Collateral, free and clear of any conflicting
ownership interest or liens, security interests, encumbrances, rights or claims
(except for Permitted Liens), and is fully authorized to grant the Security
Interest in and to pledge the Collateral. 
There is not on file in any governmental or regulatory authority, agency
or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those
filed in favor of the Secured Parties) covering or affecting any of the
Collateral.  So long as this Agreement
shall be in effect, no Debtor shall execute and shall knowingly permit to be on
file in any such office or agency any such financing statement or other document
or instrument (except (i) for Permitted Liens and (ii) to the extent filed or
recorded in favor of the Secured Parties pursuant to the terms of this
Agreement).

(d)           To
each Debtor’s knowledge, no part of its ownership rights to its Collateral has
been judged invalid or unenforceable.  No
written claim has been received that any Collateral or any Debtor’s use of any
Collateral violates the rights of any third party.  There has been no adverse decision to any
Debtor’s claim of ownership rights in or exclusive rights to use of its
Collateral in any jurisdiction or to any Debtor’s right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of such Debtor, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.

(e)           Each
Debtor shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule C and may not relocate such books of
account and records or tangible Collateral unless it delivers to the Secured
Parties at least 30 days prior to such relocation (i) written notice of such
relocation and the new location thereof (which must be within the United
States) and (ii) evidence that appropriate financing statements under the UCC
and other necessary documents have been filed and recorded and other steps have
been taken to perfect the Security Interest to create in favor of each of the
Secured Parties a valid, perfected and continuing perfected first priority lien
in the Collateral (other than with respect to the oil and gas real property
that forms a part of the Collateral, in which will be created a valid,
perfected and continuing perfected lien in such property; provided however, each Debtor shall
promptly inform the Secured Parties upon learning of any  prior lien on such oil and gas interests that
would be materially adverse to the interests of the Secured Parties thereon).

(f)            This
Agreement together with such mortgages, deeds of trust, trust deeds, assignment
of production and other agreements to be provided pursuant to the Post-Closing
Security Letter Agreement entered into on the Closing date by and among the
Secured Parties and the Debtors, creates, or will create, in favor of the
Secured Parties a valid security interest in the Collateral securing the
payment and performance of the Obligations and, upon making the filings
described in the immediately following

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sentence, will create a perfected first priority security interest in such Collateral (other than with respect to the oil and gas real property that forms a part of the Collateral, in which will be created a perfected security interest in such property; provided however, each Debtor has no knowledge of any prior liens on such oil and gas interests such that alone or in the aggregate would that would be materially adverse to the interests of the  Secured Parties thereon).

(g)           Each
Debtor hereby authorizes each of the Secured Parties to file one or more
financing statements under the UCC, with respect to the Security Interest with
the proper filing and recording agencies in any jurisdiction deemed proper by
them.

(h)           The
execution, delivery and performance of this Agreement by each Debtor does not
conflict with, or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing such Debtor’s debt or otherwise) or other understanding
to which such Debtor is a party or by which any property or asset of such
Debtor is bound or affected.  No consent
(including, without limitation, from stockholders or creditors of such Debtor)
is required for such Debtor to enter into and perform its obligations
hereunder.

(i)            After
making the filings contemplated by Section 3(f), each Debtor shall at all times
maintain the liens and Security Interest provided for hereunder as valid and
perfected first priority liens and security interests in the Collateral as
described in Sections 3(e) and (f) of this Agreement in favor of the Secured
Parties until this Agreement and the Security Interest hereunder shall be
terminated pursuant to Section 11 hereof. 
Each Debtor hereby agrees to defend the same against any and all
persons.  Each Debtor shall safeguard and
protect all Collateral for the account of the Secured Parties.  Each Debtor irrevocably authorizes the
Secured Parties at any time and from time to time to file in any filing office
in any jurisdiction any initial financing statement or amendment thereto that
indicates the collateral as “all assets” or “all personal property” of such
Debtor or words of similar effect and will pay the cost of filing the same in
all public offices wherever filing is, or is deemed by the Secured Parties to
be, necessary or desirable to effect the rights and obligations provided for
herein.  Without limiting the generality
of the foregoing, the Debtors shall pay all fees, taxes and other amounts
necessary to maintain the Collateral and the Security Interest hereunder, and
the Debtors shall obtain and furnish to the Secured Parties from time to time,
upon demand, such releases and/or subordinations of claims and liens which may
be required to maintain the priority of the Security Interest hereunder.

(j)            No
Debtor will directly or indirectly, consummate an Asset Sale, as such is
defined in the Debenture.

(k)           Each
Debtor shall keep and preserve its Equipment, Inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any

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such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.

(l)            Each
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Parties promptly, in sufficient detail, of any substantial change in
the Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Parties’
security interest therein.

(m)          Each
Debtor shall promptly execute and deliver to the Secured Parties such further
deeds, mortgages, fixture filings, assignments, security agreements, financing
statements or other instruments, documents, certificates and assurances and
take such further action as any Secured Party may from time to time request and
may in its sole discretion deem necessary to perfect, protect or enforce its
security interest in the Collateral or any additional collateral, including,
without limitation, the execution and delivery of separate mortgages and
fixture filings, which shall be satisfactory to the Secured Parties in their
sole discretion for real or personal property interest.

(n)           Each
Debtor shall permit the Secured Parties and their representatives and agents to
inspect the Collateral at any time, with reasonable advance notice, and to make
copies of records pertaining to the Collateral as may be requested by the
Secured Parties from time to time.

(o)           Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of its Collateral other than as normal and
customary in the ordinary course of such Debtor’s business.

(p)           Each
Debtor shall promptly notify the Secured Parties in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against its Collateral and of any other information received by such
Debtor which would have a material adverse effect on the value of the
Collateral, the Security Interest or the rights and remedies of the Secured
Parties hereunder.

(q)           All
information heretofore, herein or hereafter supplied to the Secured Parties by
or on behalf of any Debtor with respect to the Collateral is accurate and
complete in all material respects as of the date furnished.

(r)            Each
Debtor shall, and cause it subsidiaries, if any, to, at all times preserve and
keep in full force and effect their respective valid existence and good
standing and any rights and franchises material to their businesses.

(s)           Each
Debtor will not change its name, corporate structure, or identity, or add any
new fictitious name unless it provides at least 30 days prior written notice to
the Secured Parties of such change and, at the time of such written
notification, such Debtor provides any financing statements or fixture filings
necessary to perfect and continue

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perfected the perfected first priority Security Interest granted and evidenced by this Agreement.

(t)            No
Debtor may consign any of its Inventory or sell any of its Inventory on bill
and hold, sale or return, sale on approval, or other conditional terms of sale
without the consent of the Secured Parties which shall not be unreasonably
withheld.

(u)           No
Debtor may relocate its chief executive office to a new location without
providing thirty (30) days prior written notification thereof to the Secured
Parties and so long as, at the time of such written notification, such Debtor
provides any financing statements or fixture filings necessary to perfect and
continue perfected the perfected first priority Security Interest granted and
evidenced by this Agreement.

4.             Defaults. The following events
shall be “Events of Default”:

(a)           The
occurrence of an Event of Default (as defined in any of the Debentures) under
the Debenture;

(b)           Any
representation or warranty of any Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;

(c)           The
failure by any Debtor to observe or perform any of its obligations hereunder
for (i) ten (10) days after delivery to all Debtors of notice of such failure
by or on behalf of a Secured Party if such failure is not able to be cured, or
(ii) thirty (30) days after delivery to all Debtors of notice of such failure
by or on behalf of a Secured Party if such failure is able to be cured and the
Debtor is diligently prosecuting such cure; or

(d)           If
any provision of this Agreement shall at any time for any reason be declared to
be null and void, or the validity or enforceability hereof shall be contested
by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
governmental authority having jurisdiction over any Debtor, seeking to
establish the invalidity or unenforceability thereof, or any Debtor shall deny
that any Debtor has any liability or obligation purported to be created under
this Agreement.

5.             Duty
To Hold In Trust.  Upon the
occurrence of any Event of Default and at any time thereafter, each Debtor
shall, upon receipt of any revenue, income or other sums subject to the
Security Interest, whether payable pursuant to the Debentures or otherwise, or
of any check, draft, note, trade acceptance or other instrument evidencing an
obligation to pay any such sum, hold the same in trust for the Secured Parties
and shall forthwith endorse and transfer any such sums or instruments, or both,
to the Secured Parties (pro rata in accordance with the principal amount of
Debentures held by each) for application to the satisfaction of the
Obligations.

6.             Rights
and Remedies Upon Default.  Upon the
occurrence of any Event of Default and at any time thereafter, the Required
Holders on behalf of all Secured Parties shall have the right to exercise all
of the remedies conferred hereunder and under the Debentures, and all the

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rights and remedies of a
secured party under the UCC.  Without
limitation, the Required Holders, on behalf of all Secured Parties, shall have
the following rights and powers:

(a)           The
Required Holders, acting through the Agent, shall have the right to take
possession of the Collateral and, for that purpose, enter, with the aid and
assistance of any person, any premises where the Collateral, or any part
thereof, is or may be placed and remove the same, and each Debtor shall
assemble the Collateral and make it available to the Required Holders at places
which the Required Holders shall reasonably select, whether at such Debtor’s
premises or elsewhere, and make available to the Required Holders, without
rent, all of such Debtor’s respective premises and facilities for the purpose
of the Required Holders taking possession of, removing or putting the
Collateral in saleable or disposable form.

(b)           The
Required Holders, acting through the Agent, shall have the right to operate the
business of the Debtors using the Collateral and shall have the right to
assign, sell, lease or otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as the Required Holders may deem
commercially reasonable, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon or notice to the
Debtors or right of redemption of any Debtor, which are hereby expressly
waived.  Upon each such sale, lease,
assignment or other transfer of Collateral, the Required Holders may, unless
prohibited by applicable law which cannot be waived, purchase all or any part
of the Collateral being sold, free from and discharged of all trusts, claims,
right of redemption and equities of any Debtor, which are hereby waived and
released.

7.             Applications
of Proceeds. The proceeds of any such sale, lease or other disposition of
the Collateral hereunder shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Secured Parties in enforcing their rights hereunder
and in connection with collecting, storing and disposing of the Collateral, and
then to satisfaction of the Obligations to each Secured Party, and to the
payment of any other amounts required by applicable law, after which the
Secured Parties shall pay to the Debtors any surplus proceeds.  If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 18%
per annum or the lesser amount permitted by applicable law (the “Default Rate”), and the reasonable fees of any attorneys
employed by the Required Holders to collect such deficiency.  To the extent permitted by applicable law,
each Debtor waives all claims, damages and demands against the Secured Parties
arising out of the repossession, removal, retention or sale of the Collateral,
unless due to the gross negligence or willful misconduct of the Secured
Parties.

8.             Costs
and Expenses. The Debtors agree to pay all reasonable out-of-pocket fees,
costs and expenses incurred in connection with any filing required hereunder,
including without

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limitation, any financing
statements pursuant to the UCC, continuation statements, partial releases
and/or termination statements related thereto or any expenses of any searches
reasonably required by any Secured Party. 
The Debtors shall also pay all other claims and charges which in the
reasonable opinion of the Required Holders might prejudice, imperil or
otherwise affect the Collateral or the Security Interest therein.  The Debtors will also, upon demand, pay to
the Required Holders the amount of any and all reasonable expenses, including
the reasonable fees and expenses of their counsel and of any experts and
agents, which the Required Holders may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (iii)
the exercise or enforcement of any of the rights of the Secured Parties under
the Debentures.  Until so paid, any fees
payable hereunder shall be added to the principal amount of the Debentures and
shall bear interest at the Default Rate.

9.             Responsibility
for Collateral.  Each Debtor assumes
all liabilities and responsibility in connection with all Collateral (except
for such Collateral that is perfected by possession or control and only to the
extent such is in the possession of a Secured Party or its agent), and the
Obligations shall in no way be affected or diminished by reason of the loss,
destruction, damage or theft of any of the Collateral or its unavailability for
any reason.

10.           Security
Interest Absolute. All rights of each Secured Party and all Obligations of
the Debtors hereunder shall be absolute and unconditional, irrespective of: (a)
any lack of validity or enforceability of this Agreement, the Debentures or any
agreement entered into in connection with the foregoing, or any portion hereof
or thereof; (b) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the
Debentures or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guaranty, or any other security, for all or any of the
Obligations; (d) any action by the Required Holders to obtain, adjust, settle
and cancel in its sole discretion any insurance claims or matters made or
arising in connection with the Collateral; or (e) any other circumstance which
might otherwise constitute any legal or equitable defense available to any
Debtor, or a discharge of all or any part of the Security Interest granted
hereby.  Until the Obligations shall have
been paid and performed in full, the rights of each Secured Party shall
continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy.  The Debtor expressly waives presentment,
protest, notice of protest, demand, notice of nonpayment and demand for
performance. In the event that at any time any transfer of any Collateral or any
payment received by any Secured Party hereunder shall be deemed by final order
of a court of competent jurisdiction to have been a voidable preference or
fraudulent conveyance under the bankruptcy or insolvency laws of the United
States, or shall be deemed to be otherwise due to any party other than any
Secured Party, then, in any such event, the Debtors’ obligations hereunder
shall survive cancellation of this Agreement, and shall not be discharged or
satisfied by any prior payment thereof and/or cancellation of this Agreement,
but shall remain a valid and binding obligation enforceable in accordance with
the terms and provisions hereof.  Each
Debtor waives all right to require a Secured Party to proceed against any other
person or Debtor or to apply any Collateral which such Secured Party may hold
at any time, or to marshal assets, or to

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pursue any other remedy.
Each Debtor waives any defense arising by reason of the application of the
statute of limitations to any obligation secured hereby.

11.           Term
of Agreement. This Agreement and the Security Interest shall terminate on
the date on which all payments under the Debentures have been made in full or
have been satisfied and all other Obligations have been paid or
discharged.  Upon such termination, each
Secured Party, at the request and at the expense of the Debtors, will join in
executing any termination statement or similar statement with respect to any
financing statement or other security instrument executed and filed pursuant to
this Agreement.

12.           Power
of Attorney; Further Assurances.

(a)           Each
Debtor authorizes the Required Holders, and the Agent acting pursuant to the
written instructions of the Required Holders, and does hereby make, constitute
and appoint the Agent, acting on behalf of and pursuant to the written
instructions of the Required Holders, and each of the Agent’s officers, agents,
successors or assigns with full power of substitution, as such Debtor’s true
and lawful attorney-in-fact, with power, in the name of the Required Holders,
the Agent or such Debtor, after the occurrence and during the continuance of an
Event of Default, (i) to endorse any note, checks, drafts, money orders or
other instruments of payment (including payments payable under or in respect of
any policy of insurance) in respect of the Collateral that may come into
possession of the Secured Party; (ii) to sign and endorse any financing
statement pursuant to the UCC or any invoice, freight or express bill, bill of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) to demand, collect, receipt for, compromise,
settle and sue for monies due in respect of the Collateral; and (v) generally,
to do, at the option of the Required Holders, and at the expense of the
Debtors, at any time, or from time to time, all acts and things which the Required
Holders or the Agent acting on their behalf, deem necessary to protect,
preserve and realize upon the Collateral and the Security Interest granted
therein in order to effect the intent of this Agreement and the Debentures all
as fully and effectually as the Debtors might or could do; and each Debtor
hereby ratifies all that said attorney shall lawfully do or cause to be done by
virtue hereof.  This power of attorney is
coupled with an interest and shall be irrevocable for the term of this
Agreement and thereafter as long as any of the Obligations shall be
outstanding.

(b)           On
a continuing basis, each Debtor will make, execute, acknowledge, deliver, file
and record, as the case may be, with the proper filing and recording agencies
in any jurisdiction, including, without limitation, the jurisdictions indicated
on Schedule C attached hereto, all such instruments, and take all such
action as may reasonably be deemed necessary or advisable, or as reasonably
requested by the Agent, to perfect the Security Interest granted hereunder and
otherwise to carry out the intent and purposes of this Agreement, or for
assuring and confirming to the Required Holders the grant or perfection of a
perfected first priority security interest in all the Collateral under the UCC (other
than with respect to the oil and gas real property that forms a part of the
Collateral,

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in which will be created
a perfected security interest in such property; provided however, each Debtor has no
knowledge of any prior liens on such oil and gas interests such that alone or
in the aggregate would that would be materially adverse to the interests of
the  Secured Parties thereon).

(c)           Each
Debtor hereby irrevocably appoints the Required Holders and the Agent acting on
their behalf, as the Debtor’s attorney-in-fact, with full authority in the
place and instead of the Debtor and in the name of the Debtor, from time to
time in the Required Holders’ or the Agent’s discretion, to take any action and
to execute any instrument which the Required Holders or the Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including
the filing, in its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without
the signature of such Debtor where permitted by law.

13.           Notices.
All notices, requests, demands and other communications hereunder shall be
subject to the notice provision of the applicable Securities Purchase Agreement
with notices to PRB Gathering given in the same manner as notices to PRB Energy
in the Securities Purchase Agreement.

14.           Other
Security. To the extent that the Obligations are now or hereafter secured
by property other than the Collateral or by the guarantee, endorsement or
property of any other person, firm, corporation or other entity, then the
Required Holders shall have the right, in their 
sole discretion, to pursue, relinquish, subordinate, modify or take any
other action with respect thereto, without in any way modifying or affecting
any Secured Party’s rights and remedies hereunder.

15.           Best
Efforts for Licensed Collateral. Notwithstanding any other provision
contained herein or any of the other Transaction Documents, upon the occurrence
of an Event of Default, each Debtor hereby agrees that with respect to any part
of the Collateral which may require the consent of any third party or third
parties in order for such Debtor to transfer and/or convey its interest in and
to such Collateral to the Required Holders, as may be required in accordance
herewith, such Debtor agrees to and shall use its best efforts to obtain such
consents or approvals in as expedient manner as possible.

 11
 

 

16.           Agency.

(a)           Appointment.  The Required Holders by
their acceptance of the benefits of this Agreement, hereby designate DKR
SOUNDSHORE OASIS HOLDING FUND LTD. as their representative (the “Agent”) to act as specified herein.  The Required Holders shall by written consent
from time to time as they shall deem appropriate, authorize the Agent to take
such action on their behalf under the provisions of this Agreement and any
other Transaction Document (as such term is defined in the Debentures) and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto.  The Agent may perform any of its duties
hereunder by or through its agents or employees.

(b)           Nature of Duties.  The Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement.  Neither the Agent nor any of its partners,
members, shareholders, officers, directors, employees or agents shall be liable
for any action taken or omitted by it as such under this Agreement or hereunder
or in connection herewith or therewith, be responsible for the consequence of
any oversight or error of judgment or answerable for any loss, unless caused
solely by its or their gross negligence or willful misconduct as determined by
a final judgment (not subject to further appeal) of a court of competent
jurisdiction.  The duties of the Agent
shall be mechanical and administrative in nature; the Agent shall not have by
reason of this Agreement or any other Transaction Document a fiduciary relationship
in respect of any Debtor or any Secured Party; and nothing in this Agreement or
any other Transaction Document, expressed or implied, is intended to or shall
be so construed as to impose upon the Agent any obligations in respect of this
Agreement or any other Transaction Document except as expressly set forth
herein and therein.

(c)           Lack of Reliance on the
Agent.  Independently and without reliance upon the
Agent, each Secured Party, to the extent it deems appropriate, has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of the Company and its subsidiaries in connection with
such Secured Party’s investment in the Debtors, the creation and continuance of
the Obligations, the transactions contemplated by the Transaction Documents,
and the taking or not taking of any action in connection therewith, and (ii)
its own appraisal of the creditworthiness of the Company and its subsidiaries,
and of the value of the Collateral from time to time, and the Agent shall have
no duty or responsibility, either initially or on a continuing basis, to
provide any Secured Party with any credit, market or other information with
respect thereto, whether coming into its possession before any Obligations are
incurred or at any time or times thereafter. 
The Agent shall not be responsible to the Debtors or any Secured Party
for any recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection
herewith, or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Transaction Document, or for the financial condition of
the Debtors or the value of any of the Collateral, or be required to make any
inquiry concerning either the performance or

 12
 

 

observance of any of the terms, provisions or conditions of
this Agreement or any other Transaction Document, or the financial condition of
the Debtors, or the value of any of the Collateral, or the existence or
possible existence of any default or Event of Default under this Agreement, the
Debentures or any of the other Transaction Documents.

(d)           Certain Rights of the Agent.  Subject to this Agreement, the Agent shall
have the right to take any action with respect to the Collateral, on behalf of
all of the Secured Parties.  To the
extent practical, the Required Holders shall provide the Agent with
instructions with respect to any material act or action (including failure to
act) in connection with this Agreement or any other Transaction Document, and
the Agent shall be entitled to act or refrain from acting in accordance with
the instructions of the Required Holders; if such instructions are not provided
despite the Agent’s request therefor, the Agent shall be entitled to refrain
from such act or taking such action, and if such action is taken, shall be
entitled to appropriate indemnification from the Secured Parties in respect of
actions to be taken by the Agent; and the Agent shall not incur liability to
any person or entity by reason of so refraining.  Without limiting the foregoing, (a) no
Secured Party shall have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder in accordance
with the terms of this Agreement or any other Transaction Document, and the
Debtors shall have no right to question or challenge the authority of, or the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent
shall not be required to take any action which the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary
to this Agreement, the Transaction Documents or applicable law.

(e)           Reliance  The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper person or entity, and, with respect to all legal matters pertaining
to this Agreement and the other Transaction Documents and its duties
thereunder, upon advice of counsel selected by it and upon all other matters
pertaining to this Agreement and the other Transaction Documents and its duties
thereunder, upon advice of other experts selected by it.  Anything to the contrary notwithstanding, the
Agent shall have no obligation whatsoever to any Secured Party to assure that
the Collateral exists or is owned by the Debtors or is cared for, protected or
insured or that the liens granted pursuant to this Agreement have been properly
or sufficiently or lawfully created, perfected, or enforced or are entitled to
any particular priority.

(f)            Indemnification.  To the extent that the Agent is not
reimbursed and indemnified by the Debtors, the Secured Parties will jointly and
severally reimburse and indemnify the Agent, in proportion to their respective
principal amounts of Debentures, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in performing its duties
hereunder or under this Agreement or any other Transaction Document, or in any
way relating to or arising out of this Agreement or any other Transaction
Document

 13
 

 

except for those determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction to have
resulted solely from the Agent’s own gross negligence or willful
misconduct.  Prior to taking any action
hereunder as Agent, the Agent may require each Secured Party to deposit with it
sufficient sums as it determines in good faith is necessary to protect the
Agent for costs and expenses associated with taking such action.

(g)           Resignation by the Agent.

(i)            (a) The Agent (A) may resign
at any time or (B) upon it no longer being a Holder, it must resign, by giving
30 days’ prior written notice to the Debtors and the Secured Parties or (b) if
requested in writing by the Required Holders, must immediately resign upon the
appointment of a successor Agent pursuant to clause (ii) below, from the
performance of all its functions and duties under this Agreement as Agent.  Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (ii) and (iii) below.

(ii)           Upon any such notice of
resignation or as otherwise provided, the Required Holders, shall appoint a
successor Agent hereunder.

(iii)          If a successor Agent shall
not have been so appointed within such 30-day period, the Agent shall then
appoint a successor Agent who shall serve as Agent until such time, if any, as
the Required Holders appoint a successor Agent as provided above.  If a successor Agent has not been appointed
within such 30-day period, the Agent may petition any court of competent
jurisdiction or may interplead the Debtors and the Secured Parties in a
proceeding for the appointment of a successor Agent, and all fees, including,
but not limited to, extraordinary fees associated with the filing of
interpleader and expenses associated therewith, shall be payable by the Debtors
on demand.

(h)           Rights with respect to
Collateral.  Each Secured Party agrees with all other
Secured Parties and the Agent (i) that it shall not, and shall not attempt to,
exercise any rights with respect to its security interest in the Collateral,
whether pursuant to any other agreement or otherwise (other than pursuant to
this Agreement), or take or institute any action against the Agent or any of
the other Secured Parties in respect of the Collateral or its rights hereunder
(other than any such action arising from the breach of this Agreement) and (ii)
that such Secured Party has no other rights with respect to the Collateral
other than as set forth in this Agreement and the other Transaction
Documents.  Upon the acceptance of any
appointment as the Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent shall be
discharged from its duties and obligations under this Agreement.  After
any retiring Agent’s resignation or removal hereunder as Agent, the provisions
of this Agreement shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent.

 14
 

 

17.           Miscellaneous.

(a)           No
course of dealing between any Debtor and any Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of any Secured Party, any
right, power or privilege hereunder or under the Debentures shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.

(b)           All
of the rights and remedies of each Secured Party with respect to the
Collateral, whether established hereby or by the Debentures or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.

(c)           This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto.  Except as specifically set forth in this
Agreement, no provision of this Agreement may be modified or amended except by
a written agreement specifically referring to this Agreement and signed by the
parties hereto.

(d)           In
the event any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, unless such provision is
narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable.  If, notwithstanding the
foregoing, any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction, such provision, as to such jurisdiction,
shall be ineffective to the extent of such invalidity, prohibition or
unenforceability without invalidating the remaining portion of such provision
or the other provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this Agreement in
any other jurisdiction.

(e)           No
waiver of any breach or default or any right under this Agreement shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
or right, whether of the same or similar nature or otherwise.

(f)            This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns.

(g)           Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

(h)           All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in

 15
 

 

accordance with the
internal laws of the State of New York. 
Each party agrees that all proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
the Debentures (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in New York, New
York.  Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in New York, New York 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
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court or that such proceeding is improper.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for 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.  Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating
to this Agreement or the transactions contemplated hereby. If either party
shall commence a proceeding to enforce any provisions of this Agreement, then
the prevailing party in such proceeding shall be reimbursed by the other party
for its reasonable attorneys fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such proceeding.

(i)            This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.

[signature page follows]

 16

 

IN WITNESS WHEREOF, the parties hereto have caused this Pledge and
Security Agreement to be duly executed on the day and year first above written.

	
  COMPANY:

  	
   

  
	
   

  	
   

  
	
  PRB OIL
  & GAS, INC., A COLORADO

  	
   

  
	
  CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William F. Hayworth

  	
   

  	
   

  
	
   

  	
  Name: William F. Hayworth

  	
   

  
	
   

  	
  Title: President

  	
   

  
	
   

  	
   

  
	
  Address for
  Notice and Delivery:

  	
  With a copy to:

  
	
  PRB Oil &
  Gas, Inc.

  	
  Douglas R. Wright, Esq.

  
	
  1875 Lawrence
  Street, Suite 450

  	
  Faegre & Benson LLP

  
	
  Denver, Colorado
  80202

  	
  3200 Wells Fargo Center

  
	
  Telephone:

  	
  303 308-1330 ext. 101

  	
  1700 Lincoln Street

  
	
  Facsimile:

  	
  303 308-1590

  	
  Denver, CO 80203

  
	
  Attention:

  	
  Mr. Robert W. Wright, CEO

  	
  Telephone:

  	
  303 607-3500

  
	
   

  	
  Facsimile:

  	
  303 607-3600

  
	
   

  	
   

  
	
   

  	
   

  
	
  GUARANTORS:

  	
   

  
	
   

  	
   

  
	
  PRB
  ENERGY, INC., A NEVADA CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William F. Hayworth

  	
   

  	
   

  
	
   

  	
  Name: William F. Hayworth

  	
   

  
	
   

  	
  Title: President

  	
   

  
	
   

  	
   

  
	
  PRB
  GATHERING, INC., A COLORADO

  	
   

  
	
  CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William F. Hayworth

  	
   

  	
   

  
	
   

  	
  Name: William F. Hayworth

  	
   

  
	
   

  	
  Title: President

  	
   

  
	
   

  	
  With a copy to:

  
	
  Address for
  Notice and Delivery:

  	
  Douglas R. Wright, Esq.

  
	
  c/o PRB Oil
  & Gas, Inc.

  	
  Faegre & Benson LLP

  
	
  1875 Lawrence
  Street, Suite 450

  	
  3200 Wells Fargo Center

  
	
  Denver, Colorado
  80202

  	
  1700 Lincoln Street

  
	
  Telephone: 303
  308-1330 ext. 101

  	
  Denver, CO 80203

  
	
  Facsimile: 303
  308-1590

  	
  Telephone: 303 607-3500

  
	
  Attention: Mr.
  Robert W. Wright, CEO

  	
  Facsimile: 303 607-3600

  
								

 

 

IN WITNESS WHEREOF, the parties
hereto have caused this Pledge and Security Agreement to be duly executed on
the day and year first above written.

	
  SECURED PARTIES:

  	
   

  
	
   

  	
   

  
	
  DKR SOUNDSHORE OASIS HOLDING FUND LTD.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Barbara Burger

  	
   

  	
   

  
	
   

  	
  Name: Barbara Burger

  	
   

  
	
   

  	
  Title: Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address for Notice and Delivery:

  	
   

  	
  With a copy to:

  	
   

  
	
  1281 East Main Street

  	
  McDermott Will & Emery LLP

  
	
  Stamford, CT 06902

  	
  340 Madison Avenue

  
	
  Telephone: (203) 324-8378

  	
  New York, New York 10173

  
	
  Facsimile: (203) 324-8488

  	
  Telephone: (212) 547-5400

  
	
  Attention: Rajni A. Narasi, Assoc. General Counsel

  	
  Facsimile: (212) 547-5444

  
	
   

  	
  Attention:

  	
  Stephen E. Older, Esq.

  
	
   

  	
   

  	
  Meir A. Lewittes, Esq.

  
	
   

  	
   

  
	
   

  	
   

  
	
  WEST COAST OPPORTUNITY FUND, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Atticus Lowe

  	
   

  	
   

  
	
   

  	
  Name: Atticus Lowe

  	
   

  
	
   

  	
  Title: Chief Investment Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address for Notice and Delivery:

  	
  With a copy to:

  
	
  2151 Alessandro Drive, Suite 1

  	
  Catherine DeBono Holmes

  
	
  Ventura, CA 93001

  	
  Jeffer, Mangels, Butler & Marmaro

  
	
  Telephone: (805) 653-5333

  	
  LLP

  
	
  Facsimile: (805) 648-6488

  	
  1900 Avenue of the Stars, 7th Floor

  
	
  Attention: Atticus Lowe

  	
  Los Angeles, California 90067

  
	
   

  	
  Telephone: (310) 201-3553

  
	
   

  	
  Facsimile: (310) 712-8553

  
								

 

 

SCHEDULE A

PLEDGED EQUITY

Obligor:

	
  Name of Subsidiary

  	
   

  	
  Number of Shares

  	
   

  	
  Certificate

  Number

  	
   

  	
  Percentage

  Ownership

  	
   

  
	
  PRB Oil & Gas, Inc.

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  100%

  	
   

  

 

Obligor:

	
  Name of Subsidiary

  	
   

  	
  Number of Shares

  	
   

  	
  Certificate

  Number

  	
   

  	
  Percentage

  Ownership

  	
   

  
	
  PRB Gathering, Inc.

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100%

  	
   

  

 

 

SCHEDULE B
Commercial Tort Claims

On March 20, 2006, PRB terminated a Farmout and Development Agreement dated
August 1, 2005 (“Farmout Agreement”) with Enterra Energy Trust’s wholly-owned
subsidiary Rocky Mountain Gas, Inc. (“RMG”). 
We are also the designated field operator under a Joint Operating
Agreement (“JOA”) with RMG for certain coal-bed methane properties in Wyoming
and Montana that are covered by the JOA. 
In February 2006, RMG executed 19 authorizations for expenditure to
drill and complete the Moyer coal pilot wells. After termination of the Farmout
Agreement, PRB, as operator under the JOA, issued a cash call to RMG for RMG’s
share of the estimated well costs for nine wells. In addition, after
termination of the Farmout Agreement, RMG requested its full working interest
in all wells drilled after the termination date. As of March 31, 2006, the
outstanding amount due from RMG was $713,000, which we classified as an account
receivable.

PRB did not receive payment from RMG for the well costs as required under
the JOA and issued a notice of default to RMG. 
The default was not cured within the period prescribed by the JOA and,
under the JOA, RMG’s interest was relinquished to PRB until the proceeds from
the nine Moyer wells equal 300% of the capital expenditures by PRB on RMG’s
behalf.  As a result, we reclassified the
$713,000 account receivable from RMG as additional costs of oil and gas
properties on our June 30, 2006 balance sheet.

On June 22, 2006, RMG filed an arbitration demand against PRB, asserting
that the area of mutual interest provision in the terminated Farmout Agreement
continues until August 2007 and, therefore, includes the Pennaco acquisition
and that we should pay 100% of the costs of drilling the nine Moyer wells for a
50% working interest.  On August 22,
2006, PRB denied RMG’s arbitration claims, and asserted counterclaims against
RMG.  The arbitration is scheduled for
February 2007.  At this time, we cannot
predict the outcome of the arbitration.

We also agreed upon termination of the Farmout Agreement to continue to
provide management services until June 30, 2006.  As of June 30, 2006, we had a receivable due
from RMG of $386,000 for management services rendered and certain other amounts
due from RMG. RMG disputed the amounts due to us. In July 2006, PRB and RMG
entered into an interim agreement under which, among other things, RMG paid us
$175,000 of the amount due at June 30, 2006. 
The remainder of the amount due is to be settled after a review is
jointly completed by RMG and PRB of the transactions covered by the
agreement.  It is anticipated that this
review will be completed by December 31, 2006. 
Any remaining disputed expenses will be presented for resolution at the
February 2007 arbitration.  No reserve
against this remaining balance has been recorded at September 30, 2006, as we
believe the balance to be fully collectible.

 

SCHEDULE C
Principal Place of Business of Debtors:
1875 Lawrence Street, Suite 450
Denver, CO  80202
812 E. 4th Street
Gillette, WY  82716
Locations Where Collateral is Located or Stored:
Denver, CO
Phillips County, CO
Sedgwick County, CO

Perkins County, NE

Chase County, NE

Dundy County, NE

Keith County, NE

Deuel, NE

Campbell County, WY

[More specific
information as to the Location of the Collateral is available on Annex A to the
Post-Closing Security Letter Agreement entered into on the Closing date by and
among the Secured Parties and the Debtors.]

 

ANNEX AEXHIBIT  4.10

SECURED
GUARANTY

THIS SECURED GUARANTY (this “Guaranty”) is made as of December 28, 2006 by PRB ENERGY, INC. and PRB
GATHERING, INC. (each a “Guarantor” and together the “Guarantors”).

WHEREAS, PRB OIL
& GAS, INC. (the “Company”) has
on even date herewith issued senior secured debentures (the “Debentures”) to the Holders, as defined therein, pursuant to
the terms of that certain Securities Purchase Agreement dated as of even date
herewith (as amended, modified, supplemented or extended from time to time, the
“Securities Purchase Agreement” and,
together with all related agreements and documents issued or delivered
thereunder or pursuant thereto, the “Transaction Documents”);

WHEREAS, it is a condition to
the willingness of the Holders to purchase the Debentures from the Company as
contemplated under the Securities Purchase Agreement that the Guarantors enter
into this Guaranty for the benefit of the Holders;

WHEREAS, the Guarantors will each
receive either a direct or indirect benefit from the credit provided to the
Company under the Transaction Documents; and

NOW
THEREFORE, the parties hereto, intending to be legally bound, and in
consideration of the foregoing and the mutual covenants contained herein,
hereby agree as follows:

Section 1.               Guaranty.

(a)           Each of the Guarantors, jointly and
severally, as primary obligor and not merely as surety, hereby absolutely,
unconditionally and irrevocably guarantees: (i) the performance of all obligations
of the Company under the Transaction Documents, including without limitation
the due and punctual payment in full (and not merely the collectibility) of all
obligations under the Debentures, including all principal thereof and all
interest payable thereon, at the interest rate provided therein, in each case regardless
of the extent allowed as a claim in any proceeding in respect of the
bankruptcy, reorganization or insolvency of the Company, any Guarantor or any
of their respective Affiliates (a “Reorganization”), in each case when
due and payable, according to the terms of the Debentures and the other Transaction
Documents, whether at stated maturity, by reason of acceleration or otherwise;
(ii) the due and punctual payment in full (and not merely the collectibility)
of all other sums and charges which may at any time be due and payable by the Company
in accordance with, or under the terms of, the Debentures or the other Transaction
Documents, whether at stated maturity, by reason of acceleration or otherwise;
(iii) the due and punctual payment in full (and not merely the collectibility),
performance and/or observance of all other indebtedness, liabilities,
obligations, terms, covenants and conditions contained in the Transaction
Documents, whether now or hereafter existing, on the part of the Company to be
paid, performed or observed; and (iv) the due and punctual payment and
performance in full (and not merely the collectibility) of any and all other
future advances and other obligations, indebtedness, obligations and
liabilities of the Company to each of the Holders of every kind and

 

 

description, whether now
existing or hereafter arising, whether direct, indirect or contingent, whether
secured or unsecured, and howsoever evidenced, incurred or arising, including
without limitation any future loans and advances made to the Company by any Holder
prior to, during or following any Reorganization (all of the foregoing being
hereinafter collectively called the “Guaranteed Obligations”).

(b)           Notwithstanding any provision
contained in this Guaranty or any other Guaranty Document (as defined in
Section 2) to the contrary (except as set forth in clause (c) below), it
is the intention and guaranty of the Guarantors and the Company that the
obligations of each of the Guarantors under this Guaranty shall be valid and
enforceable against each such Guarantor to the maximum extent permitted by
applicable law.  Accordingly, if any
provision of this Guaranty creating any obligation of a Guarantor in favor of
the Holders shall be declared to be invalid or unenforceable in any respect or
to any extent, it is the stated intention and agreement of the Guarantors and
the Holders that any balance of the obligation created by such provision and
all other obligations of the Guarantors to the Holders created by other
provisions of this Guaranty shall remain valid and enforceable.  Likewise, if any sums which any  Holder may be otherwise entitled to collect
from a Guarantor under this Guaranty shall be declared to be in excess of those
permitted under any law (including any federal or state fraudulent conveyance
or like statute or rule of law) applicable to such Guarantor’s obligations
under this Guaranty, it is the stated intention and agreement of such Guarantor
and such Holder that all sums not in excess of those permitted under such applicable
law shall remain fully collectible by such Holder from such Guarantor and such
excess sums shall nevertheless survive as a subordinate obligation of such
Guarantor, junior in right to the claims of general unsecured creditors, but
prior to the claims of equityholders in the Guarantor.  This provision shall control every other
provision of the Guaranty Documents.

Section 2.               Security.  This Guaranty (as the same may be amended,
modified, supplemented, replaced or extended from time to time) and all obligations,
indebtedness or liabilities of the Guarantors arising hereunder, as well as the
obligations under the other Transaction Documents, shall be secured by the
Pledge and Security Agreement of even date herewith (as the same may be
amended, restated, renewed, replaced, supplemented or otherwise modified from
time to time, the “Pledge Agreement”; the Pledge Agreement, together
with this Guaranty and any and all other agreements now or hereafter securing
this Guaranty, being collectively referred to herein as the “Guaranty
Documents”).

Section 3.               Subsequent Changes.  Each Guarantor expressly agrees that each Holder
may, in its sole and absolute discretion, without notice to or further assent
of the Guarantors and without in any way releasing, affecting or impairing the
Guaranteed Obligations and liabilities of the Guarantors hereunder: (a) waive
compliance with, or any default under, or grant any other indulgences with
respect to, the Guaranteed Obligations; (b) modify, amend or change any
provisions of the Guaranteed Obligations; (c) grant extensions or renewals of
or with respect to the Guaranteed Obligations, and/or effect any release,
compromise or settlement in connection therewith; (d) agree to the
substitution, exchange, release or other disposition of any Guarantor or of all
or any part of the collateral securing the Guaranteed Obligations; (e) make
advances for the purpose of performing any term or covenant contained in the
Guaranty Documents or any other Transaction Documents evidencing the Guaranteed
Obligations, with respect to which the

 

 

Company shall be in
default; (f) subject to the provisions of the Debentures, assign or otherwise
transfer the Guaranteed Obligations, including, without limitation, the
assignment and transfer of any Holder’s rights and remedies under this
Guaranty, or any interest therein; (g) deal in all respects with the Company
and the Guarantors, the Guaranteed Obligations or any collateral securing the
Guaranteed Obligations as if this Guaranty were not in effect; (h) extend
credit to the Company or the Guarantors whether or not (1) notice of election
to terminate any of the Transaction Documents or any other agreement among the Holders
and the Company or the Guarantors has been given by the Holders, or by the Company
or the Guarantors, or (2) any Event of Default, or any event which with notice
or lapse of time, or both, would constitute an Event of Default, has occurred
under the Debentures or any other agreement among the Holders and the Company
or the Guarantors; (i) replace any existing obligations and the documentation
therefore with an amended and restated obligation and the documentation
therefor; and (j) settle or compromise any or all of the Guaranteed Obligations
with the Company or the Guarantors, and/or any other person or persons liable
therein, and/or subordinate the payment of same or any part hereof to the
payment of any other debts or claims which may at any time be due or owing to
the Holders and/or other person.

Section 4.               Direct and Absolute Obligation.  The liability of each Guarantor under this
Guaranty shall be primary, direct and immediate and not conditional or
contingent upon pursuit by the Holders of any remedies it may have against the Company
or the Guarantors or any other party with respect to the Guaranteed
Obligations, whether pursuant to the terms of the Debentures or otherwise.  The obligations of each Guarantor under this
Guaranty shall be absolute and unconditional, irrespective of the genuineness,
validity, regularity, enforceability or priority of the Debentures or the
Transaction Documents, the Guaranteed Obligations or any other circumstances
which might otherwise constitute a legal or equitable discharge of a surety or
guarantor and without regard to any counterclaim, setoff, declaration or
defense of any kind which any party obligated under the Debentures or any other
document evidencing or securing any of the Guaranteed Obligations may have or
assert.  No exercise or nonexercise by any
Holder of any right given to it hereunder or under the Debentures, and no
change, impairment or suspension of any right or remedy of any Holder, shall in
any way affect any of either Guarantor’s obligations hereunder or give any
Guarantor any recourse against any Holder. 
Without limiting the generality of the foregoing, no Holder shall be
required to make any demand on the Company, its Affiliates and/or any other
party, or otherwise pursue or exhaust its remedies against the Company or any
other party, before, simultaneously with or after, enforcing its rights and
remedies hereunder against the Guarantors. 
Any one or more successive and/or concurrent actions may be brought
hereon against any Guarantor, either in the same action, if any, brought
against the Company and/or any other party, or in separate actions, as often as
a Holder, in its sole discretion, may deem advisable.

Section 5.               Waivers.

(a)           Each Guarantor hereby expressly
waives: (i) diligence, presentment and demand for payment and protest of
nonpayment; (ii) notice of acceptance of this Guaranty and of presentment,
demand, dishonor and protest; (iii) notice of any default hereunder or under
the Debentures or any other Guaranteed Obligations and of all indulgences; (iv)
all other notices and demands otherwise required by law which the Guarantors
may lawfully waive; (v) the right to

 

 

assert in any action or
proceeding hereupon any setoff, counterclaim or other claim which it may have
against the Holders; and (vi) the benefit of all other principles or provisions
of law, statutory or otherwise, which are or might be in conflict with the
terms hereof.  As further consideration
for the purchase of the Debentures by the Holders from the Company and as a
material inducement to the Holders to purchase the Debentures and accept this
Guaranty, each Guarantor hereby irrevocably waives, disclaims and relinquishes
all claims, whether based in equity or law, whether by contract, statute or
otherwise, that such Guarantor might now or hereafter have against the Company or
any other person that is primarily or contingently liable on the Guaranteed
Obligations guarantied hereby or that arise from the existence or performance
of such Guarantor’s obligations under this Guaranty, including, but not limited
to, any right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim or remedy of the Company or any
of its Subsidiaries against the Holders or any collateral security that any Holder
now has or hereafter acquires.

(b)           Each Guarantor is presently informed
of the financial condition of the Company and of all of the circumstances which
a diligent inquiry would reveal and which bear upon the risk of nonpayment of
the Guaranteed Obligations.  Each
Guarantor hereby covenants and agrees that such Guarantor will continue to keep
itself informed of the Company’s financial condition, the status of other
guarantors, sureties, or other parties liable with respect to the Guaranteed
Obligations, if any, and of all of the circumstances which bear upon the risk
of nonpayment.  Absent a written request
for such information by the Guarantors to the Holders, each Guarantor hereby
waives its right if any, to require any Holder to disclose to the Guarantor any
information which such Holder may now or hereafter acquire concerning such
condition or circumstances, including, without limitation, the release of or
revocation by any other guarantor or other party liable with respect to the
Guaranteed Obligations.

Section 6.               Unenforceability of
Obligations against the Company.  If
for any reason the Company has no legal existence or is under no legal
obligation to discharge any of the Guaranteed Obligations, or if any of the
Guaranteed Obligations have become irrecoverable from the Company by reason of its
insolvency, bankruptcy or reorganization or by other operation of law or for
any other reason, this Guaranty shall nevertheless be binding on each Guarantor
to the same extent as if such Guarantor at all times had been the principal
obligor on all such Guaranteed Obligations. 
In the event that acceleration of the time for payment of any of the
Guaranteed Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Company or for any other reason, all such amounts
otherwise subject to acceleration under the terms of the Debentures, the other Transaction
Documents or any other agreement evidencing, securing or otherwise executed in
connection with any Guaranteed Obligation shall be immediately due and payable
by the Guarantors.

Section 7.               Instrument for the Payment of
Money.  Each Guarantor hereby
acknowledges that this Guaranty constitutes an instrument for the payment of
money, and consents and agrees that each Holder, at its sole option, in the
event of a dispute by the Guarantor in the payment of monies due hereunder,
shall have the right to bring motion-action under New York CPLR
Section 3213.

 

 

Section 8.               Representations and
Warranties.  Each Guarantor, as to
itself, hereby represents and warrants to the Holders that:

(a)           Such Guarantor (i) is a corporation
duly organized and validly existing and in good standing under the laws of the
state of its incorporation and is duly qualified to transact business in
each  jurisdiction where because of the
nature of its business or property such qualification is required, (ii) has
full power and authority to own its properties and assets and to carry on its
business as now being conducted and as presently contemplated, and (iii) has
full power and authority to execute and deliver, and perform its obligations
under, the Guaranty Documents to which it is a party or signatory.

(b)           The execution and delivery of, and
performance by such Guarantor of its obligations under, the Guaranty Documents
are within its corporate power, have been duly authorized by all requisite
action and do not and will not violate any provision of law, any order,
judgment or decree of any court or other agency of government, the corporate
charter or by-laws of such Guarantor or any indenture, agreement or other
instrument to which such Guarantor is a party, or by which such Guarantor is
bound, or be in conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the property or assets of such Guarantor pursuant to, any such indenture,
agreement or instrument, except where such violation, conflict or default would
not have a material adverse effect on the properties, assets or condition
(financial or otherwise) of such Guarantor or any rights of the Holders under
any of the Guaranty Documents to which it is a party (hereinafter, a “Material
Adverse Effect”).  Each of the
Guaranty Documents to which such Guarantor is a party, including without
limitation the Pledge Agreement, constitutes the valid and binding obligation
of such Guarantor, enforceable against it in accordance with its terms,
subject, however, to bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the rights and remedies of creditors generally or the
application of principles of equity, whether in any action in law or proceeding
in equity, and subject to the availability of the remedy of specific
performance or of any other equitable remedy or relief to enforce any right
under any such agreement.

(c)           Except for filings to be made in
connection with the Pledge Agreement (including, but not limited to, UCC-1
Financing Statements) and any other collateral document that requires the
recordation or filing with any governmental authority, the Guarantors are not
required to obtain any consent, approval or authorization from, or to file any
declaration or statement with, any governmental instrumentality or other
agency, or any other person, in connection with or as a condition to the
execution, delivery or performance of any of the Guaranty Documents to which it
is a party.

(d)           There is no action, suit or
proceeding at law or in equity or by or before any governmental instrumentality
or other agency, including any arbitration board or tribunal, now pending or,
to the knowledge of such Guarantor, threatened (nor is any basis therefor known
to such Guarantor), (i) which questions the validity of any of the Guaranty
Documents, or any action taken or to be taken pursuant hereto or thereto, or
(ii)

 

 

against or affecting such Guarantor which, if adversely determined,
either in any case or in the aggregate, would have a Material Adverse Effect.

(e)           No Guarantor is a party to any
agreement or instrument or subject to any corporate, partnership or other restriction
which by its terms could have a Material Adverse Effect as a result such
Guarantor entering into this Guaranty or performing hereunder.

(f)            No Guarantor is in violation of any
provision of its corporate charter or by-laws or any material indenture,
agreement or instrument to which it is a party or by which it is bound or, to
the best of such Guarantor’s knowledge and belief, of any provision of law or
any order, judgment or decree of any court or other Governmental Authority
except to the extent such violation would not cause a Material Adverse Effect.

Section 9.               Affirmative Covenant.  Each Guarantor hereby covenants and agrees
that, until payment in full of the Guaranteed Obligations and termination of
all commitments with respect thereto, such Guarantor shall comply with all of
the covenants and other provisions of the Debentures which apply to it (if any).

Section 10.             Events of Default.  In each case of the happening of an “Event of
Default”, as such term (or any similar term) is defined in the Debentures
(hereinafter referred to as an “Event of Default”),
then and upon any such Event of Default and at any time thereafter during the
continuance of such Event of Default, at the election of the Holders (or
automatically in the case of certain Events of Default as specified in the Debentures),
the Guaranteed Obligations and any and all other obligations of the Company and
the Guarantors and any of them to the Holders shall for the purposes of this
Guaranty immediately become due and payable, both as to principal and interest,
without presentment, demand, or protest, all of which are hereby expressly
waived, anything contained herein or other evidence of such Guaranteed
Obligations to the contrary notwithstanding.

Section 11.             Notices.  All notices, requests, demands and other
communications provided for hereunder shall be in writing (including telecopied
communication) and mailed or telecopied or delivered to the applicable party at
the addresses indicated pursuant to the Pledge Agreement or, as to each party,
at such other address as shall be designated by such parties in a written
notice to the other party complying as to delivery with the terms of this
Section.  All such notices, requests,
demands and other communication shall be deemed given upon receipt by the party
to whom such notice is directed.

Section 12.             Place and Denomination of
Payment.  All Guaranteed Obligations
paid by each Guarantor hereunder shall be paid in U.S. Dollars in immediately
available funds to the Holders at their offices at the address provided for
above unless some other address is hereafter designated by the Holders.

Section 13.             Subordination, Assignment and Transfer.  Until the payment and performance in full of
all Guaranteed Obligations, no Guarantor shall accept or retain any
distribution or other payment from the Company unless the same is not
restricted under the terms

 

 

of the Debentures.  Each Guarantor hereby appoints irrevocably the
Agent, as defined in the Pledge Agreement and as may be replaced from time to
time, as the Guarantor’s attorney-in-fact in its name to demand and
enforce payment of the Guarantor’s obligations and indebtedness hereunder, to
prove all claims, receive all dividends and take all other action on said
obligations and indebtedness in any liquidation or any proceedings whatsoever
affecting the Company or their property under any bankruptcy or other laws now
or hereafter in effect for the relief of debtors.

Section 14.             Termination of Guaranty.  This Guaranty is a continuing Guaranty and
shall remain in full force and effect until the indefeasible payment in full in
cash (or other property acceptable to the Holders, in their sole discretion) of
the Guaranteed Obligations.

Section 15.             Company’s Insolvency.  The obligations of each Guarantor to make payment
in accordance with the terms of this Guaranty shall not be impaired, modified,
changed, released or limited in any manner whatsoever by any impairment,
modification, change, release or limitation of the liability of the Company,
any of its Subsidiaries or any of its respective estates, in bankruptcy or
reorganization resulting from the operation of any present or future provision
of the United States Bankruptcy Code or other statute or from the decision of
any court.  Each Guarantor agrees that in
the event any amounts referred to herein are paid in whole or in part by the Company,
any of its Subsidiaries or any Guarantor, such Guarantor’s liability hereunder
shall continue and remain in full force and effect in the event that all or any
part of any such payment is recovered from the Holders as a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.  Each Guarantor further
agrees that this Guaranty includes the costs incurred by the Holders in
defending any claim or suit seeking such recovery.

Section 16.             Nonwaiver of Rights.  All rights and remedies afforded to the Holders
by reason of this Guaranty and the Debentures or by law are separate and
cumulative and the exercise of one shall not in any way limit or prejudice the
exercise of any other such rights or remedies. 
No delay or omission by the Holders in exercising any such right or
remedy shall operate as a waiver thereof. 
No waiver of any rights and remedies hereunder, and no modification or
amendment hereof, shall be deemed made by the Holders unless in writing and
duly executed.  Any such written waiver
shall apply only to the particular instance specified therein and shall not
impair the further exercise of such right or remedy or of any other right or
remedy of the Holders, and no single or partial exercise of any right or remedy
hereunder shall preclude further exercise of any other right or remedy.

Section 17.             CONSENT TO JURISDICTION.  EACH
GUARANTOR, TO THE EXTENT THAT THE GUARANTOR MAY LAWFULLY DO SO, HEREBY CONSENTS
TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE
JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS,
FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THE
GUARANTOR’S OBLIGATIONS UNDER OR WITH RESPECT TO THIS GUARANTY AND THE GUARANTY
DOCUMENTS, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS SUCH GUARANTOR MAY HAVE

 

 

AS TO VENUE INCLUDING, WITHOUT
LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS.  IN ADDITION, TO THE EXTENT THAT IT MAY
LAWFULLY DO SO, EACH GUARANTOR CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL
SERVICE OR U.S.  CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE GUARANTOR IN CARE OF THE COMPANY
AT THE ADDRESS PROVIDED IN THE DEBENTURES. 
TO THE EXTENT ANY GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH GUARANTOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
GUARANTY TO THE MAXIMUM EXTENT PERMITTED BY LAW.

Section 18.             WAIVER OF TRIAL BY JURY.  EACH GUARANTOR HEREBY VOLUNTARILY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT IN OR WITH RESPECT TO
THIS GUARANTY, THE GUARANTY DOCUMENTS OR ANY OTHER AGREEMENTS EXECUTED IN
CONNECTION HEREWITH.

Section
19.             Agency.  Pursuant to Section 16 of the Pledge
Agreement and subject to the rights and obligations provided the Agent therein,
the Agent may act for the Holders hereunder.

Section 20.             Governing Law.  This Guaranty shall be construed in accordance
with and governed by the laws of the State of New York applicable to contracts
made and performed in said state.  It is
intended that this Guaranty shall take effect as a sealed instrument.

Section 21.             Successors.  This Guaranty shall inure to the benefit of,
and be enforceable by, the Holders and their successors and assigns, and shall
be binding upon, and enforceable against, the Guarantors and their successors
and assigns.

Section 22.             Severability.  In case this Guaranty or any one or more of
the provisions contained herein shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this Guaranty
shall be construed as if such invalid, illegal or unenforceable provision had
never been included.

Section 23.             Section Headings.  The section headings in this Guaranty are
inserted for convenience of reference only and shall not in any way affect the
meaning or construction of any provision of this Guaranty.

Section 24.             Counterparts.  This Guaranty may be executed by the parities
hereto in several counterparts hereof and by different parties hereto on
separate counterparts hereof, each of which shall be an original and all of
which shall together constitute one and the same agreement.  Delivery of an executed signature page of
this Guaranty by facsimile transmission or

 

 

electronic mail shall be
effective as an in-hand delivery of an original executed counterpart
thereof.

Section 25.             Inconsistencies.  Any inconsistencies between the provisions of
this Guaranty and the Debentures shall be governed by a reference to the
provisions of the Debentures.

[Signature
Page Follows]

 

 

IN WITNESS
WHEREOF, each Guarantor has caused this Guaranty to be duly executed under seal
as of the day and year first above written.

GUARANTOR:

PRB ENERGY, INC.,

a Nevada corporation

	
  By:

  	
  /s/ William F. Hayworth

  	
   

  
	
   

  	
  Name: William F. Hayworth

  
	
   

  	
  Title: President

  

 

	
  Address for Notice
  and Delivery:

  	
  With a copy to:

  
	
  PRB Oil &
  Gas, Inc.

  	
  Douglas R. Wright, Esq.

  
	
  1875 Lawrence
  Street, Suite 450

  	
  Faegre & Benson LLP

  
	
  Denver, Colorado
  80202

  	
  3200 Wells Fargo Center

  
	
  Telephone:

  	
  303 308-1330
  ext. 101

  	
  1700 Lincoln Street

  
	
  Facsimile:

  	
  303 308-1590

  	
  Denver, CO 80203

  
	
  Attention:

  	
  Mr. Robert W. Wright, CEO

  	
  Telephone:

  	
  303 607-3500

  
	
   

  	
  Facsimile:

  	
  303 607-3600

  

 

 

GUARANTOR:

PRB GATHERING, INC.,

a Colorado corporation

	
  By:

  	
  /s/ William F. Hayworth

  	
   

  
	
   

  	
  Name: William F. Hayworth

  
	
   

  	
  Title: President

  

 

	
  Address for Notice
  and Delivery:

  	
  With a copy to:

  
	
  PRB Oil &
  Gas, Inc.

  	
  Douglas R. Wright, Esq.

  
	
  1875 Lawrence
  Street, Suite 450

  	
  Faegre & Benson LLP

  
	
  Denver, Colorado
  80202

  	
  3200 Wells Fargo Center

  
	
  Telephone:

  	
  303 308-1330
  ext. 101

  	
  1700 Lincoln Street

  
	
  Facsimile:

  	
  303 308-1590

  	
  Denver, CO 80203

  
	
  Attention:

  	
  Mr. Robert W. Wright, CEO

  	
  Telephone:

  	
  303 607-3500

  
	
   

  	
  Facsimile:

  	
  303 607-3600

  

 

 

IN WITNESS
WHEREOF, the undersigned has duly executed the agreement as of the day and year
first above written.

	
  SECURED PARTIES:

  	
   

  
	
   

  	
   

  
	
  DKR
  SOUNDSHORE OASIS HOLDING FUND LTD.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Barbara Burger

  	
   

  	
   

  
	
   

  	
  Name: Barbara
  Burger

  	
   

  
	
   

  	
  Title: Director

  	
   

  
				

 

 

	
  Address for Notice
  and Delivery:

  	
  With a copy to:

  
	
  1281 East Main
  Street

  	
  McDermott Will & Emery LLP

  
	
  Stamford, CT
  06902

  	
  340 Madison Avenue

  
	
  Telephone:

  	
  (203) 324-8378

  	
  New York, New York 10173

  
	
  Facsimile:

  	
  (203) 324-8488

  	
  Telephone:

  	
  (212) 547-5400

  
	
  Attention:

  	
  Rajni A. Narasi,
  Assoc. General Counsel

  	
  Facsimile:

  	
  (212) 547-5444

  
	
   

  	
  Attention:

  	
  Stephen E. Older, Esq.

  
	
   

  	
   

  	
  Meir A. Lewittes, Esq.

  

 

 

	
  WEST COAST OPPORTUNITY FUND, LLC

  
	
   

  
	
   

  
	
  By:

  	
   /s/ Atticus Lowe

  	
   

  
	
   

  	
  Name: Atticus
  Lowe

  
	
   

  	
  Title: Chief
  Investment Officer

  

 

 

	
  Address for Notice
  and Delivery:

  	
  With a copy to:

  
	
  2151 Alessandro
  Drive, Suite 1

  	
  Catherine DeBono Holmes

  
	
  Ventura, CA
  93001

  	
  Jeffer, Mangels, Butler & Marmaro LLP

  
	
  Telephone:

  	
  (805) 653-5333

  	
  1900 Avenue of the Stars, 7th Floor

  
	
  Facsimile:

  	
  (805) 648-6488

  	
  Los Angeles, California 90067

  
	
  Attention:

  	
  Atticus Lowe

  	
  Telephone:

  	
  (310) 201-3553

  
	
   

  	
  Facsimile:

  	
  (310) 712-8553

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