DEBTOR-IN-POSSESSION LOAN AND SECURITY AGREEMENT

Exhibit 10.1

DEBTOR-IN-POSSESSION LOAN AND SECURITY AGREEMENT

Between

PRB ACQUISITION, LLC

As Lender

and

PRB OIL AND GAS, INC., and

PRB ENERGY, INC.

Debtors and Debtors-in-Possession

As Borrowers

Dated as of May 19, 2008

DEBTOR-IN-POSSESSION LOAN AND SECURITY AGREEMENT

Dated as of May 19, 2008

THIS DEBTOR-IN-POSSESSION LOAN AND SECURITY AGREEMENT (the “Agreement”) is entered into by and between PRB ENERGY, INC. (“Energy”) and PRB OIL AND GAS, INC. (“Oil  & Gas”), each a Colorado corporation and a debtor and debtor-in-possession in bankruptcy (individually and/or collectively, “Borrower”), and PRB ACQUISITION, LLC, a Colorado limited liability company (“Lender”).

RECITALS

WHEREAS, on or about March 5, 2008 (the “Petition Date”), Borrower and certain affiliates (collectively, the “Debtors”) filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (as hereinafter defined), thereby commencing Chapter 11 Case No. 08-12661, which is jointly administered under Case No. 08-12658 (the “Bankruptcy Case”) with the United States Bankruptcy Court for the District of Colorado (the “Bankruptcy Court”);

WHEREAS, Borrower and its jointly administered affiliates continue to operate as debtors-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code;

WHEREAS, Borrower has requested that Lender enter into certain financing arrangements with Borrower pursuant to Section 364(c)(1), (c)(2), (c)(3) and (d) of the Bankruptcy Code for such purposes as are hereinafter described in this Agreement;

WHEREAS, Borrower has obtained debtor-in-possession financing from PRB Funding, LLC pursuant to that certain Interim Order Authorizing Post-Petition Financing and Limited Use of Cash Collateral [Docket No. 133 in the Bankruptcy Case], but Borrower has been unable to obtain additional debtor-in-possession financing on an unsecured basis or on terms as favorable or more favorable than the terms provided herein, and an immediate need exists for Borrower to obtain funds to continue in the operation of their business;

WHEREAS, to provide security for, and to assure the repayment of the Obligations (as hereinafter defined), Borrower has agreed to grant to Lender and any of its successors and assigns, inter alia, security interests in and liens against all of Borrower’s property and interests, whether real or personal, tangible or intangible, but excluding the Excluded Assets (as defined herein), on the terms and conditions set forth herein and in accordance with Sections 364(c)(1), (c)(2), and (c)(3), and (d) of the Bankruptcy Code;

WHEREAS, on or about May       , 2008, Borrower has filed with the Bankruptcy Court a motion to authorize Borrower to enter into this Agreement and to approve the DIP Facility and all corresponding terms and provisions;

WHEREAS, Lender is willing to provide such financial arrangements to Borrower, subject to the terms and conditions of this Agreement and subject to the terms

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and conditions set forth in the DIP Order (as defined herein) approving the proposed financing; and

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows.

DEFINITIONS

As used in this Agreement:

“Account” or “Accounts” means all now owned or hereafter acquired right, title and interest in all accounts, as such term is defined in the UCC, and any and all supporting obligations with respect to any of the foregoing.

“Account Debtor” means a Person to whom Borrower sells inventory, goods or services in the ordinary course of business, including without limitation, each Person who is obligated on a Receivable.

“Additional Documents” has the meaning set forth in Section 3.2(c).

“Agreement” means this Debtor-in-Possession Loan and Security Agreement, including all Schedules, exhibits and other attachments hereto, as the same may be amended, supplemented, extended or restated from time to time.

“Agreement Date” means the date as of which this Agreement is dated.

“Applicable Law” means all applicable provisions of constitutions, statutes, rules, regulations and orders of governmental bodies and orders and decrees of courts and arbitrators.

“Automatic Stay” means the automatic stay imposed under Section 362 of the Bankruptcy Code.

“Bankruptcy Code” means the United States Bankruptcy Code, as in effect from time to time.

“Borrowing” means a borrowing of Loan Advances.

“Budget” means a cash flow budget through June 30, 2008 on a receipts and disbursements basis satisfactory in form and substance to Lender, which is attached hereto as Exhibit “A.”

“Business Day” means any day other than a Saturday, Sunday or other day on which banks in the State of Colorado are authorized or required to close.

“Chattel Paper” means all “chattel paper” as defined in Article 9 of the UCC including, without limitation, “electronic chattel paper” or “tangible chattel paper,” as each term is defined in Article 9 of the UCC.

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“Closing Date” means the date of the initial funding under this Agreement.

“Collateral” means all of Borrower’s assets, including, without limitation, all of the following property and interests in property of Borrower, wherever located and whether now or hereafter existing or now owned or hereafter acquired or arising, and whether constituting pre-petition property or post-petition property: (i) all Receivables; (ii) all Inventory; (iii) all Equipment; (iv) all Contract Rights; (v) all General Intangibles; (vi) all Investment Property; (vii) each Deposit Account maintained with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a certificate of deposit that is an instrument under the UCC (a list of Borrower’s Deposit Accounts is set forth in Schedule 1 hereto); (viii) all Goods and other property, whether or not delivered, (a) the sale or lease of which gives or purports to give rise to any Receivable, including, but not limited to, all merchandise returned or rejected by or repossessed from customers, or (b) securing any Receivable, including, without limitation, all rights as an unpaid vendor or lienor (including, without limitation, stoppage in transit, replevin and reclamation) with respect to such Goods and other property; (ix) all mortgages, deeds to secure debt and deeds of trust on real or personal property, guaranties, leases, security agreements, and other agreements and property which secure or relate to any Receivable or other Collateral, or are acquired for the purpose of securing and enforcing any item thereof; (x) all documents of title, policies and certificates of insurance, securities, Chattel Paper (including electronic chattel paper and tangible chattel paper) and other Documents and Instruments; (xi) all other Goods and personal property, whether tangible or intangible, wherever located, including money, supporting obligations, letters of credit, and each Letter-of-Credit right; (xii) all files, correspondence, computer programs, tapes, discs and related data processing software which contain information identifying or pertaining to any of the Receivables, or any Account Debtor, or showing the amounts thereof or payments thereon or otherwise necessary or helpful in the realization thereon or the collection thereof; (xiii) any “commercial tort claims” as that term is defined in the UCC, as set forth on Schedule 1 attached hereto; (xiv) all Intellectual Property; (xv) to the extent not included in any of the foregoing, the DJ Basin Collateral; and (xvi) any and all products and proceeds of the foregoing (including, but not limited to, any claim to any item referred to in this definition, and any claim against any third party for loss of, damage to or destruction of any or all of, the Collateral or for proceeds payable under, or unearned premiums with respect to, policies of insurance) in whatever form, including, but not limited to, cash, negotiable instruments and other instruments for the payment of money, Chattel Paper, security agreements and other documents, other than the Excluded Assets.

“Commitment Fee” means the fee referred to in Section 2.1.

“Contract Rights” means any rights under contracts not yet earned by performance and not evidenced by an instrument or Chattel Paper.

“Debentures” means the two pre-petition debentures, each in the principal amount of $7,500,000.00, one of which was issued to DKR Soundshore Oasis Holding Fund and the other of which was issued to West Coast Opportunity Fund.

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“Default” shall mean an event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default.

“Deposit Account” has the meaning given to it in the UCC.

“Deposit Account Control Agreement” means the Deposit Account Control Agreement among Borrower, Lender and the bank named therein, pursuant to which Lender shall have been granted a first priority lien and security interest in the deposit account more particularly described therein.

“Development Loan” means, in respect of the properties that are the subject of the DJ Basin Collateral,  a discretionary loan or loans that Lender may make to Borrower under the terms of this Agreement, provided, however that the proceeds of such loan or loans shall be made only (i) for capital expenditures on pipeline, gathering system and related infrastructure and expenditures associated therewith, (ii) in connection with permitting of wells and obtaining any approvals, consents or the like required by applicable laws or regulations, (iii) in furtherance of assessing, analyzing or evaluating the prospects of the properties comprised by the DJ Basin Collateral, and/or (iv)  any other expenditure deemed appropriate by Lender, and shall in all cases only be made by Lender in Lender’s sole and absolute discretion with no ability of Borrower to require or demand any advance.

“Development Loan Advance” means any advance of the Development Loan.

“DIP Facility” means the credit facility established under this Agreement.

“DIP Facility Account” shall mean that certain bank account, indentified in Schedule 1, into which all proceeds of the Loan Advances and the Development Loan Advances shall be deposited and for which Lender shall have control pursuant to a Deposit Account Control Agreement and for which no other party shall have a Lien.

“DIP Order” shall mean the order entered by the Bankruptcy Court in the Bankruptcy Case after a final hearing under Bankruptcy Rule 4001(c)(2), pursuant to Section 364(c) and (d) of the Bankruptcy Code, as to which no stay pending appeal has been entered, and no motion to reconsider filed, and which has not been vacated, modified or reversed, (i) authorizing the Borrower to incur post-petition secured indebtedness and to grant Liens under the DIP Facility in accordance with this Agreement and any other Loan Documents, (ii) providing for the super-priority of the Obligations, including without limitation, a specific grant of a security interest to Lender in all Collateral, as well as the right to the proceeds from all Collateral in accordance with this Agreement and any other Loan Documents, (iii) providing “adequate protection” pursuant to Section 364(d) of the Bankruptcy Code to such creditors whose Liens have been primed, (iv) authorizing the payment by the Borrower of all fees and expenses contemplated by this Agreement and any other Loan Documents, including, but not limited to, those certain fees set forth in Article II herein, each as set forth in such order, and in all respects to be satisfactory to Lender, and (v) authorizing the Due Diligence Fee (as defined herein).

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“DJ Basin Collateral” means those certain oil and gas leases and related agreements identified in the Borrower’s Schedules filed with the Bankruptcy Court for property in the Denver Julesberg Basin on the Colorado/Nebraska Border acquired from Western Gas Resources, Inc. and Lance Oil & Gas on or about December 28, 2006, as more particularly described in Schedule 1 hereto, but expressly excluding those oil and gas leases separately described on Schedule 1 that Borrower will allow to lapse.

“Documents” means all “documents” as defined in Article 9 of the UCC.

 “Dollar” and “$” means freely transferable United States dollars.

“Equipment” means (a) all “equipment” as defined in Article 9 of the UCC and (ii) all accessions or additions thereto, all parts thereof, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefor, wherever located, now or hereafter existing, including any fixtures.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, including (unless the context otherwise requires) any rules or regulations promulgated thereunder.

“ERISA Event” means (a) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto has been waived by the PBGC; (b) the provision by the administrator of any ERISA Plan of a notice of intent to terminate such ERISA Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (c) the cessation of operations at a facility in the circumstances described in Section 4068(f) of ERISA; (d) the withdrawal by any Borrower or any ERISA Affiliate from a Multiple Employer Plan (as defined in ERISA) during a plan year for which it was a substantial employer, as defined in 4001(a)(2) of ERISA; (e) the failure by any Borrower or any ERISA Affiliate to make a material payment to an ERISA Plan required under Section 302(f)(1) of ERISA; (f) the adoption of an amendment to an ERISA Plan requiring the provision of initial or additional security to such ERISA Plan, pursuant to Section 307 of ERISA; or (g) the institution by the PBGC of proceedings to terminate an ERISA Plan, pursuant to Section 4042 of ERISA, or the occurrence of any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, an ERISA Plan.

“ERISA Plan” means any employee benefit or other plan established or maintained, or to which contributions have been made, by any Borrower or any Subsidiary and covered by Title IV of ERISA or to which Section 412 of the IRC applies.

“Estate” means the bankruptcy estate created in the Bankruptcy Case pursuant to 11 U.S.C. § 541(a).

“Event of Default” means an event described in Section 9.1 of the Agreement provided that any requirement for notice or lapse of time or any other condition has been satisfied.

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“Excluded Assets” shall mean any of Borrower’s oil and gas leases, gathering lines, and gathering equipment located in the State of Wyoming as of April 22, 2008, the asset pool for which is set forth in Schedule 1 hereto, which assets are excluded from the Collateral.  Excluded Assets shall not include the DJ Basin Collateral and any oil and gas leases, gathering lines, and gathering equipment related thereto and its Certificate of Deposit maintained with Colorado State Bank and pledged as security to Bank of Oklahoma and further encumbered by a junior security interest in favor of the Debenture Holders.

“Financing Statements” means any and all Uniform Commercial Code financing statements, in form and substance satisfactory to Lender, naming Lender as secured party, and Borrower as debtor, whether executed and delivered by Borrower or Lender or otherwise authorized by Borrower.

“General Intangibles” has the same meaning given to it in the UCC.

“Goods” means all “goods” as defined in Article 9 of the UCC.

“Governmental Approvals” means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all governmental bodies, whether federal, state, local or foreign national or provincial and all agencies thereof.

“Guaranty Obligation” means as to any Person, any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “Primary Obligations”) of any other person (the “Primary Obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent (a) to purchase any such Primary Obligation or any Property constituting direct or indirect security therefore, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the Primary Obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such Primary Obligation of the ability of the Primary Obligor to make payment of such Primary Obligation, or (d) otherwise to assure or hold harmless the owner of any such Primary Obligation against loss in respect thereof; provided, that, notwithstanding the foregoing, the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the Primary Obligation in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith.

“Indebtedness” means at any time and with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all indebtedness of such Person for the deferred purchase price of property or services (other than property, including Inventory, and services purchased, and trade payables, other expense accruals and deferred compensation items arising, in the ordinary course of business, including negotiated trade terms and Chapter 11 expense accruals), (c) all obligations of

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such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business), (d) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all capital lease obligations of such Person, (f) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities, (g) all Guaranty Obligations of such Person in respect of indebtedness of others referred to in clauses (a) through (f) above, and (h) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness.

“Instruments” means all “instruments” as defined in Article 9 of the UCC.

“Intellectual Property” means all now owned or hereafter acquired right, title and interest in trade names, trademarks, trade secrets, service marks, data bases, software and software systems, including the source and object codes, information systems, discs, tapes, customer lists, telephone numbers, credit memoranda, goodwill, patents, patent applications, patents pending, copyrights, royalties, literary rights, licenses, and franchises, together with (a) all income, royalties, damages, claims and payments now or hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past and future infringements thereof, (b) rights to sue for past, present and future infringements thereof, and (c) all rights corresponding to any of the foregoing throughout the world.

“Interest Rate” means a fixed rate of eighteen percent (18%) per annum; or, after the occurrence of an Event of Default, a fixed rate of twenty-one percent (21%) per annum.

“Interested Party” means any employee, agent, owner, partner, member, or shareholder of Borrower.

“Internal Revenue Code” or “IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

“Inventory” means all inventory as such term is defined in the UCC and shall include, without limitation, all documents evidencing and General Intangibles.

“Investment Property” has the meaning given to it in the UCC.

“Letter-of-Credit right” has the meaning given to it in the UCC.

“Lien” means: (a) any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease, conditional sale or other title retention agreement, or other security interest, security title or encumbrance of any kind in respect of any property of such Person, or upon the income or profits therefrom, (b) any arrangement, express or implied, under

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which any property is transferred, sequestered or otherwise identified for the purpose of subjecting the same to the payment of debt or performance of any other obligation in priority to the payment of general, unsecured creditors, and (c) the filing of, or any agreement to give, any financing statement under the Uniform Commercial Code or its equivalent in any jurisdiction, excluding informational financing statements relating to leased property.

“Loan Documents” means collectively this Agreement, the DIP Order and each other instrument, agreement or document executed by Borrower related thereto, and any and all amendments, restatements, modifications and/or supplements to all such documents.

“Loans” means any one or more advances under the DIP Facility.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, properties, financial condition, contingent liabilities or material agreements of Borrower taken as a whole, including, but not limited to, the oil and gas industry as a whole, (b) the value of the Collateral, (c) the Security Interest or the priority of the Security Interest, (d) the respective ability of Borrower to perform any material obligations under this Agreement or any other Loan Document to which it is a party, and/or (e) the legality, validity, binding effect, enforceability or admissibility into evidence of any Loan Document or the ability of Lender to enforce any rights or remedies under or in connection with any Loan Document.

“Maximum Amount” shall mean $400,000.00 or such lesser or greater amount as shall be agreed upon from time to time in writing by Lender and Borrower.

“Maximum Development Loan Amount” shall mean $1,000,000.00 or such lesser or greater amount as shall be agreed upon from time to time in writing by Lender and Borrower.

“Maximum Total Amount” shall mean the sum of the Maximum Amount and the Maximum Development Loan Amount.

“Maximum Lawful Rate of Interest” means a rate of interest equal to the highest rate of interest that may be charged under applicable laws or regulations in effect from time to time.

“Notice of Borrowing” means a telephonic or electronic notice followed by a confirming same-day written notice requesting a Borrowing, which is given by telex or facsimile transmission in accordance with the applicable provisions of this Agreement and which specifies (a) the amount of the requested Borrowing, and (b) the date of the requested Borrowing.

“Obligations” means, in each case whether now in existence or hereafter arising, (a) the principal of, and interest and premium, if any, on, the Loans, and (b) all other indebtedness, liabilities, obligations, covenants and duties of Borrower to Lender of every kind, nature and description arising under this Agreement, or any of the other Loan Documents, or in connection with the DIP Facility, whether direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, and

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whether or not evidenced by any note, and whether or not for the payment of money, including without limitation, fees, costs, charges, indemnities and expenses required to be paid or reimbursed pursuant to this Agreement or any of the Loan Documents.

“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

“Permitted Liens” means: (a) allowed Liens securing taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA) or the allowed claims of materialmen, mechanics, carriers, warehousemen or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business but, in the case of warehousemen or landlords, only if such liens are junior to the Security Interest in any of the Collateral, (b) allowed Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers’ compensation, unemployment insurance or similar legislation or under payment or performance bonds, (c) other allowed Liens on real property owned by Borrower in the nature of zoning restrictions, easements, and rights or restrictions of record on the use of real property, which do not materially detract from the value of such property or impair the use thereof in the business of Borrower, (d) purchase money Liens, (e) the Liens arising under the Debentures, each in the principal amount of $7,500,000.00, which Liens were granted to DKR Soundshore Oasis Holding Fund and West Coast Opportunity Fund, and (f) the Lien of PRB Funding, LLC in the principal amount of up to $575,000.00.

“Person” means any individual, limited liability company, corporation, partnership, association, trust or unincorporated organization, trustee, a government or any agency or political subdivision thereof, or any other legal entity.

“Plan of Reorganization” shall mean a plan of reorganization proposed by Borrower or any other Person in the Bankruptcy Case.

“Post-Petition” means any event, matter or item that arose on or after the Petition Date.

“Pre-Petition” means any event, matter or item that arose prior to the Petition Date.

“Receivable” means and includes (a) any and all rights to the payment of money or other forms of consideration of any kind (whether classified under the UCC as Accounts, Contract Rights, Chattel Paper, General Intangibles, or otherwise) including, but not limited to, Accounts, Letters-of-credit rights, Chattel Paper, tax refunds, insurance proceeds, Contract Rights, notes, drafts, Instruments, Documents, acceptances, and all other debts, obligations and liabilities in whatever form from any Person, (b) all guarantees, security and Liens for payment thereof, (c) all Goods, whether now owned or hereafter acquired, and whether sold, delivered, undelivered, in transit or returned, which may be represented by, or the sale or lease of which may have given rise to, any such right to payment or other debt, obligation or liability, and (d) all proceeds of any of the foregoing.

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“Revenues” shall mean all money, funds, cash, proceeds, or payments of any kind received by Borrower from all sources, including without limitation, all proceeds of Collateral, including insurance proceeds, and all proceeds from the sale of Inventory or other Collateral, whether received in cash, by check, by other instrument, or otherwise.

“Security” shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

“Security Interest” means the Liens of Lender on and in the Collateral created or effected hereby or by any of the other Loan Documents, the DIP Order, or pursuant to the terms hereof or thereof.

“Term” means the period of time commencing on the Agreement Date and ending June 30, 2008.

“Termination Date” means the earliest to occur of: (a) September 30, 2008, (b) an Event of Default, or (c) confirmation of a Plan of Reorganization.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of Colorado.

General .  Unless otherwise defined, all terms used in this Agreement that are defined in the UCC shall have the meaning give them in the UCC.  All terms of an accounting nature not specifically defined in this Agreement shall have the meaning ascribed them by GAAP.  References to any legislation or statute or code, or to any provision thereof, shall include any modification or reenactment of, or any legislative, statutory or code provision substituted for, such legislation, statute or code or provision thereof.  References to any Person include its successor or permitted substitutes and assigns.

ARTICLE I - LOANS, RENEWAL AND TERMINATION

1.1            DIP Facility .

(a)            Lender agrees, during the Term and for so long as no Default or Event of Default exists and subject to the terms of this Agreement, to make Loan Advances to Borrower in an aggregate amount not to exceed the Maximum Amount.  The proceeds of Loan Advances shall be used only for those items on the Budget, which Lender has approved, which includes the expenses of Oil & Gas and certain expenses of Energy, and which shall be limited to (a) general and administrative expenses related to the business of Oil & Gas, (b) fees incurred by the Borrower’s professionals as allocated by the Budget, and (c) certain, limited, expenses relating to corporate overhead and governance.

(b)            During the Term, the Lender may make one or more advances of the Development Loan in its sole and absolute discretion.  Borrower acknowledges and agrees that it shall have no ability to require or demand any advance from Lender.

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1.2            Borrowing Procedures (Excluding Development Loans) .

(a)            Subject to the provisions of Section 8.1 of this Agreement, as applicable, and provided that there does not then exist a Default or an Event of Default, Borrower may, from time to time, request that Lender make Loan Advances to Borrower in accordance with the terms of this Agreement.  Lender shall fund requests for Loan Advances as follows: (i) by the close of business on the first Business Day after such request is received if the request is received prior to 1:00 p.m. prevailing Mountain Time; and (ii) by the close of the second Business Day after such request is received if the request is received after that time.

(b)            The initial request for a Loan Advance shall be made by transmission to Lender of a fully executed Borrowing Certificate on or before the Closing Date substantially in the form of Exhibit “B” (the “Borrowing Certificate”), which certificate shall specify (i) the amount to be borrowed (which shall be equal to or less than the Maximum Amount in effect as of the Closing Date), and (ii) the use of the proceeds (including an itemized list of all checks, ACH or wire transactions, or other items to be funded with such proceeds); provided, that, Lender shall at any time have the right to review and comment, in the exercise of its reasonable discretion to the extent necessary to insure Borrower’s compliance with the Budget, on the amount of such request.  Borrower shall make no more than two (2) requests for Loan Advances per calendar week.

(c)            Subsequent requests for Loan Advances shall be made by transmission to Lender of a fully executed Borrowing Certificate as provided in Section 1.2(b), executed by an authorized officer of Borrower.  Borrower agrees that the delivery of any such Borrowing Certificate shall constitute a certification by Borrower that (i) the requested Loan and the intended use thereof are consistent with the terms of this Agreement and is necessary for Borrower to satisfy its obligations as set forth on the then current Budget, (ii) the proceeds of all prior Loans have been applied in conformity with the requirements of this Agreement, (iii) all of the representations contained in Article 5 of this Agreement are true and correct, (iv) Borrower has observed and performed in all material respects all applicable covenants and agreements contained herein and in the other Loan Documents and the DIP Order, and satisfied each condition to such Loan contained herein or in the other Loan Documents or in the DIP Order (as applicable), to be observed, performed or satisfied by Borrower, (v) the making of the requested Loan is in compliance with all provisions of this Agreement and the other Loan Documents, (vi) such authorized officer has no knowledge of any Default or Event of Default, and (vii) the conditions set forth in Article 8 of this Agreement are satisfied.

(d)            Borrower shall reimburse Lender and hold Lender harmless from any loss or expense that Lender may sustain or incur as a consequence of the failure of Borrower to borrow additional Loans after Borrower has requested (or is deemed to have requested) such additional Loans, including any such loss or expense arising from the liquidation or re-employment of funds obtained by Lender to maintain the Loans or from fees payable to terminate the deposits from which such funds were obtained.

(e)            It is expressly understood and agreed that the Maximum Amount is a maximum ceiling on Loan Advances to Borrower; provided, however, that it is agreed that should the Obligations ever exceed the ceiling so determined or any other limitation

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set forth in this Agreement, such amounts shall nevertheless constitute Obligations secured by the Security Interest of Lender and, as such, shall be entitled to all benefits thereof and security therefor.

(f)             All Loan Advances shall be deposited only into the DIP Facility Account, which is a bank account that is subject to the Deposit Account Control Agreement and shall not be transferred into a bank account for which any other creditor has custody, control or a Lien.

1.3            Interest .  Interest shall accrue on the outstanding principal balance of the Loans at the Interest Rate.  All interest accrued on the outstanding principal balance of the Loans shall be calculated on the basis of a year of three hundred sixty (360) days and the actual number of days elapsed in each month.  Accrued interest shall be added to the outstanding principal balance of the Loans on the first Business Day of each calendar month following the month in which such interest accrues.

1.4            Allocation of Payments and Limit of Interest .  Any amounts received by Lender from Borrower shall be applied pro tanto to the Obligations as follows:  first to pay any interest, fees costs, charges, indemnities, and expenses then due to Lender under the Loan Documents, until paid in full, and second, to repay the principal amount of all outstanding Obligations until paid in full.  Upon the occurrence and during the continuance of an Event of Default, all Revenues received by Lender from Borrower shall be applied pro tanto to the Obligations in such manner as Lender shall determine in its sole discretion.  Lender does not intend to charge interest at a rate in excess of the highest rate permitted by Applicable Law.  Interest on any outstanding principal balance shall be spread over the entire period that such principal balance is outstanding.  Any excess interest charges paid by Borrower to Lender shall be applied to reduce the outstanding principal balance of the Obligations.

1.5            Termination .

(a)            This Agreement shall expire on the Termination Date.

(b)            Upon the termination of this Agreement for any reason as herein provided, Borrower shall pay, discharge and satisfy, no later than the effective date of such termination, the Loan Advances, all accrued and unpaid interest and fees, and all other non-contingent Obligations then outstanding.

(c)            All undertakings, agreements, covenants, warranties and representations of Borrower contained in this Agreement and the other Loan Documents shall survive any such termination, and Lender shall retain each and every Security Interest, and all other rights and remedies of Lender under this Agreement and the other Loan Documents, notwithstanding such termination, until Borrower has paid the amounts described in Section 1.5(b).

(d)            Notwithstanding the payment in full of the Loans, all accrued and unpaid interest and fees, and all other non-contingent Obligations outstanding, Lender shall not be required to terminate its Security Interests unless, with respect to any loss or damage Lender may incur as a result of dishonored checks or other items of payment

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received by Lender from Borrower or any Account Debtor and applied to the Obligations, Lender shall have retained such monetary reserves and its Security Interest for such period of time as Lender, in its reasonable discretion, may deem necessary to protect Lender from any such loss or damage.

1.6            Priority of All Advances and Loans   All advances and loans, including, but not limited to, all fees, interest, and expenses, and any other portion of the Obligations, whether such Obligations are within or in excess of the Maximum Total Amount, made hereunder by Lender to Borrower shall constitute and be deemed an allowed cost and expense of administration in the Bankruptcy Case and shall be entitled to priority under Section 364(c)(1), Section 364(c)(2), Section 364(c)(3), and Section 364(d) of the Bankruptcy Code ahead of all other costs and expenses of administration of the kind specified in Sections 105, 326, 330, 331, 503(b), 506(c), 507(a), 507(b) or 726 of the Bankruptcy Code, except as may be otherwise provided in the DIP Order or pursuant to the Corrected Interim Order Authorizing Post-Petition Financing and Use of Cash Collateral dated April 11, 2008 (Docket No. 154) (the “Interim PRB Funding Order”); provided, however, that the Lender’s Liens, other than its Lien upon the DIP Facility Account, shall be subordinate in priority to the Permitted Liens.

ARTICLE II - FEES

2.1            Commitment Fee .  In order to induce Lender to enter into this Agreement and to make the Loans, Borrower agrees to pay to Lender a Commitment Fee in an amount equal to three percent (3%) of (a) the Maximum Amount, which Commitment Fee shall be due and payable, fully earned and non-refundable upon entry of the DIP Order and payable on the Termination Date; and (b) any amount advanced to Borrower in excess of the Maximum Amount, which shall then be due and payable, fully earned and non-refundable upon the funding of such additional Loan Advances.

2.2            Costs and Expenses .  Borrower agrees to reimburse Lender for all reasonable out-of-pocket expenses incurred by Lender in connection with the DIP Facility established by this Agreement, any and/or all of the Loan Documents, the Loans, including, but not limited to, filing fees, tax, lien and judgment search fees, fees of outside auditors, bank fees, reasonable outside accountants’ fees and expenses, appraisers, reasonable outside attorneys’ fees and expenses, and any other reasonable fees or expenses.  All of the foregoing expenses shall be due and payable no later than the Termination Date.

2.3            Due Diligence Fee .  In order to induce Lender to enter into this Agreement and provide Borrower with the DIP Facility, Borrower agrees to pay to Lender a Due Diligence Fee in an amount equal to $100,000.00, which Due Diligence Fee shall be due and fully earned upon entry of the DIP Order and payable on the Termination Date.  The Due Diligence Fee shall accrue as part of the DIP Facility on top of and in addition to the Maximum Total Amount.

2.4            Priority of Fees .  All fees, whether such fees are within or in excess of the Maximum Total Amount, incurred hereunder shall constitute and be deemed an allowed cost and expense of administration in the Bankruptcy Case and shall be entitled to

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priority under Section 364(c)(1), Section 364(c)(2), Section 364(c)(3), and Section 364(d) of the Bankruptcy Code ahead of all other costs and expenses of administration of the kind specified in Sections 105, 326, 330, 331, 503(b), 506(c), 507(a), 507(b) or 726 of the Bankruptcy Code, except as may be otherwise provided in the DIP Order or the Interim PRB Funding Order; provided, however, that the Lender’s Liens, other than its Lien upon the DIP Facility Account, shall be subordinate in priority to the Permitted Liens.

ARTICLE III - GRANT OF SECURITY INTEREST

3.1            Grant of Security Interest .  To secure the payment, performance and observance of the Obligations, the Borrower grants and hereby assigns, mortgages, hypothecates and pledges, to Lender all of the Collateral, and grants to Lender a continuing security interest in, and a Lien upon, and a right of set off against, all of the Collateral.  The Borrower acknowledges that the Security Interest and Lien granted to the Lender pursuant to this Article III is and continues to be an allowed, valid and perfected, first priority Security Interest and Lien upon the Collateral subject only to the Permitted Liens (other than the DIP Facility Account which shall not be subject to the Permitted Liens).

3.2            Continued Priority of Security Interest .

(a)            The Security Interest granted by Borrower shall at all times be valid, perfected and enforceable against Borrower and all third parties in accordance with the terms of this Agreement, as security for the Obligations, and the Collateral shall not be at any time subject to any Liens that are prior to, or on parity with or junior to the Security Interest, other than Permitted Liens or as may be provided in the DIP Order.

(b)            Borrower shall, at its sole cost and expense, take all action that may be necessary or desirable, or that Lender may reasonably request, so as at all times to maintain the validity, perfection, enforceability and rank of the Security Interest in the Collateral in conformity with the requirements of Section 3.2(a), or to enable Lender to exercise or enforce its rights hereunder.

(c)            Borrower covenants and agrees with Lender that from and after the Agreement Date and until the Termination Date, at any time upon the request of Lender, Borrower shall execute (or cause to be executed) and deliver to Lender, any and all financing statements, original financing statements in lieu of continuation statements, fixture filings, security agreements, pledges, assignments, endorsements of certificates of title, and all other documents (the “Additional Documents”) upon which Borrower’s signature may be required that Lender may request in its