ARETE INDUSTRIES INC (Form: 8-K, Received: 02/23/2016 08:27:15)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: December 30, 2015

(Date of earliest event reported)

Arête Industries, Inc.

(Exact name of registrant as specified in its charter)


COLORADO	33-16820-D	84-1508638
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

7260 Osceola Street

Westminster, CO 80030

(Address of principal executive offices) (Zip Code)

(303) 427-8688

(Registrant's telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

□ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

□ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

□ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).

□ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e- 14(c)).

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On January 19, 2016, but effective December 31, 2015, (the " Effective Date ") Arête Industries, Inc. (the " Company ") entered into a Settlement Agreement with Tucker Family Investments, LLLP, a Colorado limited liability limited partnership (" Tucker "); DNR Oil & Gas, Inc., a Colorado corporation (" DNR "); Tindall Operating Company, a Colorado corporation (" Tindall "), and Tucker Energy, LLC, a Colorado limited liability company (" Energy "). Mr. Charles B. Davis is the owner of DNR and affiliated with Tindall and Energy. He is also an officer, director and shareholder of the Company. The parties had entered into an Amended and Restated Purchase and Sale Agreement on July 29, 2011, (effective April 1, 2011), as further amended on August 12, 2011, and September 16, 2011, (the " Purchase and Sale Agreement ") under which the Company completed the oil and gas property purchase under the Purchase and Sale Agreement on September 30, 2011.

Previously, in a separate transaction, the Company issued an unsecured promissory note dated January 1, 2014, in the principal amount of $792,151 to DNR that had accrued interest thereon of $20,078 through the Effective Date.

In consideration of the amounts indicated below and payment by the Company of $303,329 in cash the parties (i) terminated Exhibits C and C-2 to the Purchase and Sale Agreement for all purposes; (ii) extinguished all liabilities of the Company under Exhibit C of the Purchase and Sale Agreement including an alleged amount of $250,000; (iii) agreed that the above promissory note and accrued interest thereon was paid in full; and (iv) released each other against any and all claims which have been raised or could have been raised among them. Specifically, Exhibits C and C-2 to the Purchase and Sale Agreement related to potential payments that would need to be made by the Company in the event oil prices increased to certain levels and related to certain payments to be made by the Company in the event it sold certain properties purchased under the Purchase and Sale Agreement. Exhibits C and C-2 were terminated and extinguished (including any amounts owed thereunder such as the alleged amount of $250,000 under Exhibit C to the Purchase and Sale Agreement) in exchange for 25 fully paid nonassessable restricted shares of 7% Series A2 Convertible Preferred Stock of the Company. Consideration to pay the above promissory note in full consisted of the Company issuing to DNR 65 fully paid, nonassessable restricted shares of its 7% Series A2 Convertible Preferred Stock, and paying DNR $303,329 in cash. A description of the terms of the 7% Series A2 Convertible Preferred Stock, including its terms of conversion into shares of the Company's common stock is set forth in Item 5.03 below.

The Settlement Agreement is attached hereto as Exhibit 10.1. The foregoing description of the Settlement Agreement does not propose to be complete and is qualified in its entirety to reference to the Settlement Agreement.

ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.

On December 30, 2015, the Company completed the asset acquisition as provided under a purchase and sale agreement executed on November 25, 2015, but effective December 1, 2015 (the " Wellstar Purchase and Sale Agreement ") with Wellstar Corporation (the " Seller "), an unaffiliated corporation. The assets acquired are producing oil and gas leases located in Sumner County, Kansas and Kimball County, Nebraska (collectively, the " Properties " and individually, the " Padgett Properties " and the " Nebraska Properties "). The Company acquired 51% of Seller's interest (ranging from 47% to 100% of the working interests) in the Padgett Properties and acquired 100% of the Seller's interest (100% of the working interests) in the Nebraska Properties for aggregate consideration of $1,100,000 and the issuance of 1,000,000 shares of the Company's restricted common stock valued at $0.10 per share at the date of closing, or $100,000.

The foregoing description of the Wellstar Purchase and Sale Agreement does not propose to be complete and is qualified in its entirety by reference to the Wellstar Purchase and Sale Agreement, a copy of which is filed hereto as Exhibit 10.2.

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.

On December 30, 2015, the Company issued 1,000,000 shares of its restricted common stock to an unaffiliated corporation in connection with the Wellstar Purchase and Sale Agreement described in Item 2.01 above.

In addition, on December 11, 2016, the Company began privately offering up to 600 shares of its newly created 7% Series A2 Convertible Preferred Stock at a purchase price per share equal to $10,000 for aggregate consideration of up to $6,000,000. The terms of the private placement required the Company to sell a minimum of 170 shares of the 7% Series A2 Convertible Preferred Stock, and on December 30, 2015, the Company broke escrow and sold the minimum 170 shares for aggregate cash proceeds of $1,700,000. Also, effective December 31, 2015, the Company sold 90 shares of its 7% Series A2 Convertible Preferred Stock under the Settlement Agreement described in Item 1.01 above.

The one million shares of restricted common stock in connection with the Wellstar Purchase and Sale Agreement and the shares of 7% Series A2 Convertible Preferred Stock issued as described above were sold in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506(b) promulgated thereunder. These securities qualified for exemption under Rule 506 promulgated under Section 4(2) of the Securities Act because the issuance of securities by the Company did not involve a "public offering" based upon the following factors: (i) a limited number of securities were issued to a limited number of offerees with whom the Company had preexisting business relationships; (ii) there was no public solicitation in connection with any offers or sales of the securities; (iii) each offeree was an "accredited investor" as such term is defined by Rule 501 under the Securities Act; and (iv) the investment intent of the offerees.

A description of the terms of the 7% Series A2 Convertible Preferred Stock, including its terms of conversion into shares of common stock of the Company is set forth in Item 5.03 below.

ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION

In connection with the matters described in Items 1.01 and 3.02 above, the Company created a new series of preferred stock entitled "7% Series A2 Convertible Preferred Stock" which became effective by filing an amendment to its articles of incorporation with the Colorado Secretary of State.

Description of 7% Series A1 Convertible Preferred Stock

The following describes the general terms and provisions of the 7% Series A2 Convertible Preferred Stock of the Company (the " Series A2 Preferred Stock .") The Series A2 Preferred Stock has the rights and preferences summarized below. However, attached as Exhibit 3.1 to this report is the amendment to the Company's articles of incorporation which sets forth the terms of the Series A2 Preferred Shares in greater detail. Readers are encouraged to read Exhibit 3.1 in its entirety. Although the Company believes this summary covers the material terms and provisions of the Series A2 Preferred Stock as contained in the Amendment, it may not contain all information that may be important to investors.

Authorized Shares, Stated Value and Liquidation Preference . Six hundred shares are designated as the 7% Series A2 Convertible Preferred Stock, which has a stated value and liquidation preference of $10,000 per share.

Ranking . The Series A2 Preferred Stock will rank senior to future classes of preferred stock established after the issue date of the Series A2 Preferred Stock, unless the Company's Board of Directors expressly provides otherwise when establishing a future class or series. The Series A2 Preferred Stock ranks senior to the Company's common stock but it is junior to the Company's outstanding debt and accounts payable.

Dividends . Holders of Series A2 Preferred Stock are entitled to receive dividends at an annual rate of 7.0% of the $10,000 per share liquidation preference, payable quarterly in arrears on each of March31, June 30, September 30 and December 31. Dividends are payable in cash or in shares of the Company's common stock (at its then fair market value), at the election of the Company.

Voting Rights . Holders of the Series A2 Preferred Stock will vote together with the holders of the Company's common stock as a single class on all matters upon which the holders of common stock are entitled to vote. Each share of Series A Preferred Stock will be entitled to such number of votes as the number of shares of common stock into which such share of Preferred Stock is convertible; however, solely for the purpose of determining such number of votes, the conversion price per share will be deemed to be $2.00, subject to customary anti-dilution adjustments. In addition, the holders of the Series A2 Preferred Stock will vote as a separate class with respect to certain matters, including amendments to the Company's articles of incorporation that alter the voting powers, preferences and special rights of the Series A2 Preferred Stock.

Liquidation . In the event the Company voluntarily or involuntarily liquidates, dissolves or winds up, the holders of the Series A2 Preferred Stock will be entitled, before any distribution or payment out of the Company's assets may be made to or set aside for the holders of any of its junior capital stock and subject to the rights of its creditors, to receive a liquidation distribution in an amount equal to $10,000 per share, plus any unpaid dividends.

Redemption by the Company . The Series A2 Preferred Stock is redeemable in whole or in part at the Company's option at any time at a price of $10,000 per share, plus any unpaid dividends.

Optional Redemption by Holder. Unless prohibited by Colorado law governing distributions to shareholders, the Company, upon 90 days' prior written request from any holders of outstanding shares of Series A2 Preferred Stock, in its sole discretion, may redeem at a redemption price equal to the sum of (i) $10,000 per share and (ii) the accrued and unpaid dividends thereon, to the redemption date, up to one-third of each holder's outstanding shares of Series A2 Preferred Stock on: (i) the first anniversary of the Original Issue Date (the " First Redemption Date "), (ii) the second anniversary of the Original Issue Date (the " Second Redemption Date ") and (iii) the third anniversary of the Original Issue Date (the " Third Redemption Date ", along with the First Redemption Date and the Second Redemption Date, collectively, each a " Redemption Date "). If on any Redemption Date, Colorado law governing distributions to shareholders prevents the Company from redeeming all shares of Series A2 Preferred Stock to be redeemed, the Company may ratably redeem the maximum number of shares that it may redeem consistent with such law, and may also redeem the remaining shares as soon as it may lawfully do so under such law.

Preemptive Rights . Holders of the Series A2 Preferred Stock do not have preemptive rights to purchase any securities of the Company that may be issued in the future.

Mandatory Conversion . Each share of outstanding Series A2 Preferred Stock will automatically be converted into shares of the Company's common stock upon the earlier of (i) any closing of underwritten offering by the Company of shares of common stock to the public pursuant to an effective registration statement under the Securities Act of 1933, in which the aggregate cash proceeds to be received by the Company and selling stockholders (if any) from such offering (without deducting underwriting discounts, expenses and commissions) are at least $7,000,000, and the price per share paid by the public for such shares is at least $2.00 (such price to be adjusted for any stock dividends, combinations or splits) or (ii) the date agreed to by written consent of the holders of a majority of the then outstanding Series A2 Preferred Stock.

Optional Conversion by Investors . At any time, each holder of Series A2 Preferred Stock has the right, at such holder's option, to convert all or any portion of such holder's Series A2 Preferred Stock into shares of the Company's common stock prior to the mandatory conversion of the Series A2 Preferred Stock. Each share of Series A2 Preferred Stock is convertible into shares of common stock at a conversion price of $2.00 per share, subject to customary anti-dilution adjustments, including in connection with stock dividends and distributions, stock splits, subdivisions and combinations.

ITEM 7.01 REGULATION FD DISCLOSURE.

The Company issued a press release announcing the acquisition described in Item 2.01 and such release is attached hereto as Exhibit 99.1. The press release is furnished pursuant to this Item 7.01 and shall not be deemed furnished and not filed with the Securities and Exchange Commission for any purpose.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial statements of businesses acquired .

The financial statements required under this Item due to completion of the asset acquisition described in Item 2.01 above shall be filed by amendment to this Current Report on Form 8-K no later than 71 calendar days after December 30, 2015.

(b) Pro forma financial information .

The pro forma financial information required under this Item due to the completion of the asset acquisition described above in Item 2.01 shall be filed by amendment to this Current Report on Form 8-K no later than 71 calendar days after December 30, 2015.

(d) Exhibits

The following exhibits are filed with this Current Report on Form 8-K:

	Exhibit No.	Description
	3.1	Articles of Amendment to the Articles of Incorporation of Arête Industries, Inc. – Preferences, Limitations and Relative Rights of 7% Series A2 Convertible Preferred Stock.
	10.1	Settlement Agreement between Arête Industries, Inc. and Tucker Family Investments, LLLP, a Colorado limited liability limited partnership; DNR Oil & Gas, Inc., a Colorado corporation; Tindall Operating Company, a Colorado corporation, and Tucker Energy, LLC, a Colorado limited liability company.
	10.2	Lease Purchase Agreement between Arête Industries, Inc. and Wellstar Corporation dated November 25, 2015.
	99.1	Press Release of Arête Industries, Inc. dated February 23, 2016.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ARÊTE INDUSTRIES, INC.

Dated: February 23, 2016
	By:	/s/ Nicholas L. Scheidt
	Name:	Nicholas L. Scheidt
	Title:	Chief Executive Officer

EXHIBIT INDEX

	Exhibit No.		Description
	3.1		Articles of Amendment to the Articles of Incorporation of Arête Industries, Inc. – Preferences, Limitations and Relative Rights of 7% Series A2 Convertible Preferred Stock.
	10.1		Settlement Agreement between Arête Industries, Inc. and Tucker Family Investments, LLLP, a Colorado limited liability limited partnership; DNR Oil & Gas, Inc., a Colorado corporation; Tindall Operating Company, a Colorado corporation, and Tucker Energy, LLC, a Colorado limited liability company.
	10.2		Lease Purchase Agreement between Arête Industries, Inc. and Wellstar Corporation dated November 25, 2015.
	99.1		Press Release of Arête Industries, Inc. dated February 23, 2016.

ARTICLES OF AMENDMENT

to the

ARTICLES OF INCORPORATION

ARÊTE INDUSTRIES, INC.

PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF

7% SERIES A2 CONVERTIBLE PREFERRED STOCK

(Pursuant to Section 7-106-102 of the

Colorado Business Corporation Act)

Arête Industries, Inc., a Colorado corporation (the “ Corporation ”), pursuant to the authority conferred upon its Board of Directors (the “ Board ”) by the Articles of Incorporation of the Corporation, as amended (the “ Articles of Incorporation ”), and pursuant to Section 7-106-102 of the Colorado Business Corporation Act, said Board, on December 30, 2015, adopted the following resolution:

RESOLVED, that pursuant to the authority expressly granted to and vested in the Board in accordance with the provisions of the Articles of Incorporation, the Board hereby creates the 7% Series A2 Convertible Preferred Stock and hereby states the designation and number of shares, and fixes the relative rights, powers and preferences, and qualifications, limitations and restrictions thereof as follows:

Section 1. Designation and Number of Shares. The shares of such series shall be designated as “7% Series A2 Convertible Preferred Stock” (the “ Series A2 Preferred Stock ”) and the number of shares constituting the Series A2 Preferred Stock shall be six hundred (600). Such number of shares may be increased or decreased by further resolution duly adopted by the Board and by the filing of an amendment to the Articles of Incorporation pursuant to the provisions of the Colorado Business Corporation Act stating that such reduction or increase has been so authorized; provided, that no decrease shall reduce the number of shares of Series A2 Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A2 Preferred Stock.

Section 2.

Definitions. As used herein with respect to Series A2 Preferred Stock:

(a) “ Amendment ” means these Articles of Amendment relating to the Series A2 Preferred Stock, as it may be amended from time to time.

(b) “ Business Day ” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is not a day on which banking institutions in New York City, New York generally are authorized or obligated by law, regulation or executive order to close.

(d) “ Fair Market Value ” as applied to the Common Stock shall mean: (i) if traded on a securities exchange, the value shall be deemed to be the average closing prices of the Common Stock on such exchange over the 20 trading day period ending three days prior to the record date; (ii) if traded over-the-counter, the value shall be deemed to be the average closing bid or sale prices (whichever is applicable) over the 20 trading day period ending three days prior to the record date; and (iii) if there is no public market, the value shall be the fair market value thereof, as determined in good faith by the Board.

(e) “ Junior Stock ” means the Common Stock and any other class or series of stock of the Corporation (other than Series A2 Preferred Stock) that ranks junior to Series A2 Preferred Stock as to the payment of dividends.

(f) “ Liquidation Preference ” means the sum of the Original Issue Price per share and (ii) the accrued and unpaid dividends thereon, whether or not declared.

(g) “ Original Issue Amount ” means the aggregate number of shares of Series A2 Preferred Stock issued on the Original Issue Date.

(h) “ Original Issue Date ” means December 30, 2015.

(i) “ Original Issue Price ” means $10,000.

(j) “ Registration Statement ” means a registration statement filed with the Securities and Exchange Commission in connection with the issuance of or resales of shares of Common Stock issued (i) as payment of a dividend, including dividends paid in connection with a conversion and (ii) upon conversion of the Series A2 Preferred Stock into Common Stock.

(k) “ Trading Day ” means a day on which the Common Stock: (i) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business; and (ii) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

Section 3. Dividends.

(a) Rate . Holders of Series A2 Preferred Stock shall receive, on each share of Series A2 Preferred Stock, to the extent funds are legally available for the payment of dividends under Colorado law and the Board declares a dividend, dividends with respect to each Dividend Period (as defined below) at a per annum rate of 7% on the Original Issue Price. Such dividends shall be payable in cash, by delivery of shares of Common Stock or through any combination of cash and shares of Common Stock, as determined by the Corporation. Such dividends shall begin to accrue from the later of the Original Issue Date or the date the Corporation shall thereafter issue additional authorized shares of Series A Preferred Stock (which may be one or more dates) and shall be payable in arrears quarterly (as provided below in this Section 3(a)), on each of March 31, June 30, September 30 and December 31 (each, a “ Dividend Payment Date ”), commencing on March 31, 2016; provided, that if any such Dividend Payment Date would otherwise occur on a day that is not a Business Day, such Dividend Payment Date shall instead be (and any dividend payable on Series A2 Preferred Stock on such Dividend Payment Date shall instead be payable on) the immediately succeeding Business Day. Dividends payable on the Series A2 Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on the Series A2 Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.

Dividends that are payable on Series A2 Preferred Stock on any Dividend Payment Date will be payable to holders of record of Series A2 Preferred Stock as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day before such Dividend Payment Date (as originally scheduled) or such other record date fixed by the Board that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “ Dividend Record Date ”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

Each dividend period (a “ Dividend Period ”) shall commence on and include a Dividend Payment Date (other than the initial Dividend Period, which shall commence on and include the later of the Original Issue Date of the Series A2 Preferred Stock or such later date as Series A Preferred Stock may be issued, as the case may be) and shall end on and include the calendar day next preceding the next Dividend Payment Date. Dividends payable in respect of a Dividend Period shall be payable in arrears on the first Dividend Payment Date after such Dividend Period. Holders of Series A2 Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on the Series A2 Preferred Stock as specified in this Section 3 (subject to the other provisions of this Amendment).

(b) Priority of Dividends . So long as any share of Series A2 Preferred Stock remains outstanding, no dividend shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than a dividend payable solely in Junior Stock), and no Common Stock or Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock for or into other Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock during a Dividend Period, unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Series A2 Preferred Stock have been paid in full (or a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Series A2 Preferred Stock on the applicable record date).

Subject to the foregoing, such dividends (payable in cash, securities or other property) as may be determined by the Board may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and the Series A2 Preferred Stock shall not be entitled to participate in any such dividends.

(c) Method of Payment of Dividends . (i) Subject to the limitations described below, any dividend (or any portion of any dividend) on the Series A2 Preferred Stock, whether or not for a current Dividend Period or any prior Dividend Period will be paid by the Corporation, as determined in the Corporation’s sole discretion:

(A)

in cash;

(B)

by delivery of shares of Common Stock; or

(ii) Common Stock issued in payment or partial payment of a declared dividend shall be valued for such purpose at the Fair Market Value of the Common Stock.

(d) No Fractional Shares . No fractional shares of Common Stock shall be delivered to Holders in payment or partial payment of a dividend. Any fraction of a share of Common Stock shall be rounded up to the next whole share of Common Stock.

(e) To the extent that the Corporation determines that a Registration Statement is required in connection with the issuance of, or for resales of, Common Stock issued as payment of a dividend, including dividends paid in connection with a conversion, the Corporation shall, to the extent such a Registration Statement is not currently filed and effective, use its reasonable best efforts to file and maintain the effectiveness of such a Registration Statement until the earlier of such time as all shares of Common Stock have been resold thereunder and such time as all such shares are freely tradable without registration. To the extent applicable, the Corporation shall also use its reasonable best efforts to have the shares of Common Stock qualified or registered under applicable state securities laws, if required.

Section 4. Right to Convert.

(a) Holder’s Conversion Right . Each share of Series A2 Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Liquidation Preference by the Applicable Conversion Price (as defined below) in effect at the time of conversion. The “ Applicable Conversion Price ” shall initially be equal to $2.00. Such initial Applicable Conversion Price, and the rate at which shares of Series A2 Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

(b) Corporation’s Conversion Right . On or after six (6) months from the Original Issue Date, if the closing price of the Common Stock on its trading market is $3.00 or greater for:

(i) at least 20 consecutive trading days (the “ First Conversion Period ”), then up to 25% of the aggregate Original Issue Amount outstanding of the Series A2 Preferred Stock plus any accrued and unpaid dividends thereon, will be subject to conversion at the option of the Corporation;

(ii) at least 20 consecutive trading days at any time following the First Conversion Period (the “ Second Conversion Period ”), then an additional 25% (up to 50% in total) of the aggregate Original Issue Amount outstanding of the Series A2 Preferred Stock plus any accrued and unpaid dividends thereon, will be subject to conversion at the option of the Corporation;

(iii) at least 20 consecutive trading days at any time following the Second Conversion Period (the “ Third Conversion Period ”), then an additional 25% (up to 75% in total) of the aggregate Original Issue Amount outstanding of the Series A2 Preferred Stock plus any accrued and unpaid dividends thereon, will be subject to conversion at the option of the Corporation; and

(iv) at least 20 consecutive trading days at any time following the Third Conversion Period (the “ Fourth Conversion Period ”), then all of the outstanding Series A2 Preferred Stock plus any accrued and unpaid dividends thereon, will be subject to conversion at the option of the Corporation.

Any amount of the Series A2 Preferred Stock subject to conversion, as set forth herein, (the “ Conversion Amount ”) may be converted by the Corporation at any time and from time to time, upon not less than 10 nor more than 30 days’ written notice to the Holder. Any conversion elected by the Corporation under this subsection 4(b) shall be effected in a pro-rata manner to all holders of the Series A2 Preferred Stock and such conversion shall be determined by dividing the Liquidation Preference by the Applicable Conversion Price in effect at the time of conversion.

(c) Adjustments to Applicable Conversion Price . The Applicable Conversion Price shall be subject to adjustment from time to time as follows:

(i) Adjustments for Stock Splits, Stock Dividends, Etc . If the Corporation shall, at any time or from time to time while any Series A2 Preferred Stock is outstanding, (a) pay a dividend or make a distribution on its Common Stock in shares of the Common Stock other than dividends on the Series A2 Preferred Stock, (b) subdivide the outstanding shares of Common Stock into a greater number of shares of Common Stock, (c) combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (d) takes action resulting in a similar effect upon the Common Stock, then, and in every such case, the Applicable Conversion Price in effect immediately prior to such action shall be adjusted to equal the Applicable Conversion Price in effect immediately prior to such action multiplied by a fraction, the numerator of which is the number of issued and outstanding shares of Common Stock immediately following such action and the denominator of which is the number of issued and outstanding shares of Common Stock immediately prior to such action. An adjustment made pursuant to this Section 4(c) shall become effective on the record date in the case of a dividend or distribution and on the effective date in the case of a subdivision or combination.

(ii) Deferral of Small Adjustments . Any adjustment in the Applicable Conversion Price otherwise required by this Section 4(c) may be postponed until the date of the next adjustment otherwise required to be made up to, but not beyond, one year from the date on which it would otherwise be required to be made, if such adjustment (together with any other adjustments postponed pursuant to this subsection (ii) and not theretofore made) would not require an increase or decrease of more than five percent (5.0%) in such Applicable Conversion Price and would not, if made, entitle the holders of all then outstanding shares of Series A2 Preferred Stock upon conversion to receive additional shares of Common Stock equal in the aggregate of five percent (5.0%) or more of the then issued and outstanding shares of Common Stock. All calculations under this Subsection (ii) shall be made to the nearest cent or to the nearest 1/10th of a share, as the case may be.

(iii) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of a Applicable Conversion Price pursuant to this Section 4(c), the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of the Series A2 Preferred Stock to which adjustments or readjustments of Applicable Conversion Price applies a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A2 Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth: (i) such adjustments and readjustments; (ii) the Applicable Conversion Price at the time in effect; and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Series A2 Preferred Stock.

(d) Conversion Mechanics and Procedures .

(i) Upon the conversion of the Series A2 Preferred Stock, the holders of the Series A2 Preferred Stock shall: (i) in the event of a voluntary conversion and if required by The Depository Trust Company or any other similar facility, complete and manually sign the conversion notice provided by the conversion agent designated by the Corporation, or provide a facsimile of the conversion notice and deliver the irrevocable notice to the conversion agent; (ii) if required, furnish appropriate endorsements and transfer documents; (iii) if required, pay all transfer or similar taxes, stamps or funds therefore, or provide evidence of payment thereof; and, (iv) comply with procedures required by The Depository Trust Company or any other similar facility for converting the Series A2 Preferred Stock into shares of Common Stock, if any.

(ii) The Corporation shall not issue any fraction of a share of Common Stock upon any conversion. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of the Series A2 Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of a fraction of a share of Common Stock. If, after the aforementioned aggregation, the issuance would result in the issuance of a fraction of a share of Common Stock, the Corporation shall round such fraction of a share of Common Stock up to the nearest whole share.

(iii) The Corporation shall, so long as shares of the Series A2 Preferred Stock are outstanding, reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Series A2 Preferred Stock and issuing dividends on the Series A2 Preferred Stock, such number of shares of Common Stock (or such other shares or securities as may be required) as shall from time to time be sufficient for such purposes. If at any time the Corporation does not have available the number of authorized and unissued shares of Common Stock (or any such other shares or other securities) necessary to satisfy full conversion of all Series A2 Preferred Stock outstanding as well as all dividends accrued but not declared thereon, the Corporation shall take such action as may be necessary to increase the authorized and unissued shares of Common Stock (or other shares or other securities) to such number of shares as shall be sufficient for such purposes.

(iv) Any notice required by the provisions of this Section 4 shall be in writing and shall be deemed effectively given (A) upon personal delivery to the party to be notified, (B) when sent by telex, e-mail or facsimile, if sent during normal business hours of the recipient; if not, then on the next business day, (C) five days after having been sent by registered or certified mail, return receipt requested, postage pre-paid, or (D) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Corporation.

Section 5. Mandatory Conversion.

(a) Trigger Events . Upon either (a) the closing of the sale of shares of Common Stock to the public at a price of at least $2.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least seven million dollars ($7,000,000) of gross proceeds to the Corporation or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least a majority of the then outstanding shares of Series A2 Preferred Stock (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “ Mandatory Conversion Time ”), (i) all outstanding shares of Series A2 Preferred Stock shall automatically be converted into shares of Common Stock as determined by dividing the Liquidation Preference by the Applicable Conversion Price in effect at the time of conversion and (ii) such shares may not be reissued by the Corporation.

(b) Procedural Requirements . All holders of record of shares of Series A2 Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Series A Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Series A2 Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series A Preferred Stock converted pursuant to Subsection 5(a), including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5(b). As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Series A2 Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and the payment of any declared but unpaid dividends on the shares of Series A2 Preferred Stock converted. Such converted Series A2 Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for shareholder action) as may be necessary to reduce the authorized number of shares of Series A2 Preferred Stock accordingly.

Section 6. Voting Rights. On any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written consent of shareholders in lieu of meeting), each holder of outstanding shares of Series A2 Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series A2 Preferred Stock held by such holder are convertible as of the record date for determining shareholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Articles of Incorporation, holders of Series A2 Preferred Stock shall vote together with the holders of Common Stock as a single class.

Section 7. Liquidation, Dissolution and Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, holders of each outstanding share of the Series A2 Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the capital stock, whether such assets are capital, surplus or earnings, an amount equal to the Original Issue Price per share of the Series A2 Preferred Stock, as adjusted for any stock dividends, combinations or splits with respect to such shares, plus all accrued and unpaid dividends thereon (the “ Liquidation Preference Amount ”). Whenever the distribution provided for in this Section 7 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by not less than a majority of the directors then serving on the Board. A reorganization of the Corporation, or a consolidation or merger of the Corporation with or into another corporation or entity or a sale of or other disposition of all or substantially all of the assets of the Corporation, shall not be treated as a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 7.

Section 8. Redemption by Corporation .

(a) Optional Redemption . Unless prohibited by Colorado law governing distributions to shareholders, the Corporation, at its option, may redeem, in whole at any time or in part from time to time, the shares of Series A2 Preferred Stock at the time outstanding, upon notice given as provided in Section 8(b) below, at a redemption price equal to the sum of (i) $10,000 per share and (ii) the accrued and unpaid dividends thereon, whether or not declared, to the redemption date. The redemption price for any shares of Series A2 Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above.

(b) Notice of Redemption . Notice of every redemption of shares of Series A2 Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series A2 Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series A2 Preferred Stock. Notwithstanding the foregoing, if the Series A2 Preferred Stock are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Series A2 Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Series A2 Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(c) Partial Redemption . In case of any redemption of part of the shares of Series A2 Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Corporation may determine to be fair and equitable. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Series A2 Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(d) Effectiveness of Redemption . If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company having a capital and surplus of at least $50 million and selected by the Board, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

(e) No Sinking Fund . The Series A2 Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions.

Section 9. Redemption by Holder .

(a) Optional Redemption . Unless prohibited by Colorado law governing distributions to shareholders, the Corporation, upon ninety (90) days’ prior written request from any holders of outstanding shares of Series A2 Preferred Stock, in its sole discretion, may redeem at a redemption price equal to the sum of (i) $10,000 per share and (ii) the accrued and unpaid dividends thereon, to the redemption date, up to one-third of each holder’s outstanding shares of Series A2 Preferred Stock on: (i) the first anniversary of the Original Issue Date (the “ First Redemption Date ”), (ii) the second anniversary of the Original Issue Date (the “ Second Redemption Date ”) and (iii) the third anniversary of the Original Issue Date (the “ Third Redemption Date ”, along with the First Redemption Date and the Second Redemption Date, collectively, each a “ Redemption Date ”). The redemption price for any shares of Series A2 Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any unpaid dividends payable on a Redemption Date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the Redemption Date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 4 above. If on any Redemption Date, Colorado law governing distributions to shareholders prevents the Corporation from redeeming all shares of Series A2 Preferred Stock to be redeemed, the Corporation shall ratably redeem the maximum number of shares that it may redeem consistent with such law, and shall redeem the remaining shares as soon as it may lawfully do so under such law.

(b) Notice of Redemption . Notice of every redemption request by the holders of outstanding shares of Series A2 Preferred Stock shall be given to the Corporation at least ninety (90) days prior to each Redemption Date. Each redemption request shall be irrevocable.

Section 10. No Preemptive Rights. No share of Series A2 Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

Section 11. Vote to Change the Terms of the Series A2 Preferred Stock. Following the issuance of any shares of Series A2 Preferred Stock, the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of not less than a majority of the then outstanding Series A2 Preferred Stock, shall be required for any change to this Amendment, which would amend, alter, change or repeal any of the powers, designations, preferences and rights of the Series A2 Preferred Stock.

Section 12. Authority of the Board . The Board shall have the power to resolve any ambiguity or correct any error in this Amendment, and its action in so doing shall be final and conclusive.

IN WITNESS WHEREOF , Arête Industries, Inc. has caused this Amendment to be executed by its duly authorized officer, on this 16 ^th day of February, 2016.

	ARÊTE INDUSTRIES, INC.
	By:	/s/ Nicholas L. Scheidt
		Name: Nicholas L. Scheidt Title: Chairman and CEO

SETTLEMENT AGREEMENT

This Settlement Agreement (the "Agreement") dated January 19, 2016, but effective December 31, 2015 (the "Effective Date") is by and among Tucker Family Investments, LLLP, a Colorado limited liability limited partnership ("Tucker"); DNR Oil & Gas, Inc., a Colorado corporation ("DNR"); Tindall Operating Company, a Colorado corporation ("Tindall"), and Tucker Energy, LLC, a Colorado limited liability company ("Energy") whose collective address is 12741 East Caley Court, Unit 142, Englewood, Colorado 80111, and Arête Industries, Inc., 7260 Osceola Street, Westminster, Colorado 80030, (the "Company"). Energy and DNR may be referred to collectively as "Sellers." Sellers, the Company, Tindall, and Tucker may be referred to individually as a "Party" or collectively as the "Parties."

RECITALS

A. The Parties entered into an Amended and Restated Purchase and Sale Agreement on July 29, 2011 (but effective April 1, 2011), as further amended on August 12, 2011 and September 16, 2011 (the "Purchase and Sale Agreement").

B. The Company completed the oil and gas property purchase under the Purchase and Sale Agreement on September 30, 2011.

C. The Parties have discussed Exhibit C (attached hereto as Exhibit I) to the Purchase and Sale Agreement, and there is uncertainty whether payments are due by the Company under said Exhibit C.

D. The Parties have discussed Exhibit C-2 (attached hereto as Exhibit II) to the Purchase and Sale Agreement and its adverse effect on the perception of the Company by investors and others in the investment community.

E. The Company has issued an unsecured Promissory Note dated January 1, 2014 (attached hereto as Exhibit III) in the principal amount of $792,151.00 to DNR that has accrued interest thereon of $20,078 through the Effective Date.

F. In exchange for a combination of issuance by the Company of its 7% Series A2 Convertible Preferred Stock and payment by the Company of $303,329 in cash as set forth below, the Parties desire to (i) terminate Exhibits C and C-2 to the Purchase and Sale Agreement for all purposes; (ii) extinguish all liabilities of the Company under Exhibit C including an alleged amount of $250,000; and (iii) have the above Promissory Note and accrued interest thereon paid in full.

G. The Parties further desire to release each other against any and all claims which have been raised or could have been raised among them as set forth below.

H. The Parties recognize that Charles Davis is both a principal in DNR and a shareholder, officer and director of the Company.

I. To accomplish the foregoing, the Parties wish to enter into this Agreement.

AGREEMENT

In consideration of the mutual promises contained herein, $10.00 paid by the Company to each of the Sellers, Tucker and Tindall and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Extinguishment of Exhibits C and C-2. Exhibits C and C-2 to the Purchase and Sale Agreement are hereby extinguished, terminated and voided in their entirety and shall be of no further force or effect (including any amounts owed thereunder such as the alleged amount of $250,000 under Exhibit C) in exchange for 25 fully paid nonassessable restricted shares of 7% Series A2 Convertible Preferred Stock of the Company, said stock to be issued in such amounts as directed by the Sellers and pursuant to the Company's Confidential Offering Memorandum dated December 11, 2015, and supplemented on January 8, 2016 (the "Memorandum"). The purchaser of said stock hereunder delivers to the Company herewith a fully executed subscription agreement in accordance with the Memorandum.

2. Payment of Promissory Note. Upon presentation of that certain Promissory Note dated January 1, 2014, attached hereto as Exhibit A, in the principal amount of $793,151 by DNR to the Company, marked "Paid in Full", the Company shall simultaneously issue 65 fully paid, nonassessable restricted shares of its 7% Series A2 Convertible Preferred Stock, and it shall pay to DNR the sum of $303,229. DNR shall deliver a subscription agreement pursuant to the Memorandum at said time, as well.

3. Release by Sellers, Tindall and Tucker. Sellers, Tucker, and Tindall release any and all past, present or future claims, demands, obligations, actions, cause of action, rights, damages, costs, loss of time, loss of service, lost profits, attorneys' fees, costs of litigation, and expenses and compensation of any nature whatsoever, including, without limitation, any and all known or unknown claims for lost profits or other business injury, which have been raised or could have been raised against the Company by Sellers, Tindall, and Tucker through the date hereof, except DNR does not release claims arising under nonpayment of the $303,229 amount or nonissuance of stock in Paragraph 2 hereof.

4. The Company's Release of Sellers, Tindall and Tucker. The Company releases Sellers, Tindall, and Tucker against any and all past, present or future claims, demands, obligations, actions, causes of action, rights, damages, costs, loss of time, loss of service, lost profits, attorneys' fees, costs of litigation, and expenses and compensation of any nature whatsoever, including, without limitation, any and all known or unknown claims for lost profits or other business injury, which have been raised or could have been raised against the Sellers, Tindall and Tucker through the date of this Agreement, except for claims against DNR arising out of non-delivery of the Promissory Note as set forth in Paragraph 2 hereof.

5. Expenses. All fees, costs and expenses incurred by the Company or Sellers in negotiating this Agreement shall be paid by the Party incurring the same.

6. Notices. All notices and communications required or permitted under this Agreement shall be sent in writing to each of the Sellers and to the Company and addressed as set forth below. Any communication or delivery hereunder shall be deemed to have been made and the receiving Party charged with notice when received whether by (i) telecopy or facsimile transmission, (ii) mail or (iii) overnight courier. All notices shall be addressed as follows:

To Sellers, Tindall and Tucker:

Tucker and Energy

R. Lee Tucker, Limited Partner

Tucker Family Investments, LLLP

12741 E. Caley, Unit 142

Englewood, CO 80111

Attn: R. Lee Tucker

Fax: 303-850-0175

DNR Oil & Gas Inc.

12741 E. Caley, Unit 142

Englewood, CO 80111

Attn: Charles B. Davis, President

Fax: 303-825-2968

Tindall Operating Company

12741 E. Caley, Unit 142

Englewood, CO 80111

Attn: R. Lee Tucker, President

Fax: 303-850-0175

To Company:

Arête Industries, Inc.

7260 Osceola Street

Westminster, CO 80030

Attn.: Nicholas L. Scheidt

Fax: 303-429-9664

Any Party may, by written notice so delivered to the other Parties, change the address or individual to which delivery shall thereafter be made under this subsection.

7. Amendments. This Agreement may not be amended nor any rights hereunder waived except by an instrument in writing signed by the Party to be charged with such amendment or waiver and delivered by such Party to the Party claiming the benefit of such amendment.

8. Counterparts / Signatures. The Parties may execute this Agreement in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. The Parties agree that facsimile and electronic signatures are binding.

9. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of Colorado.

10. Entire Agreement. This Agreement, the Promissory Note attached hereto as Exhibit A and the Purchase and Sale Agreement constitute the entire understanding among the Parties, their respective members, affiliates, shareholders, officers, directors and employees with respect to the subject matter hereof, superseding all written or oral negotiations and discussions, and prior agreements and understandings relating to such subject matter. Each Exhibit attached to this Agreement is incorporated into this Agreement. Each signatory hereto represents that he is duly authorized to execute this Agreement by the entity under which is name appears.

11. Binding Effect. This Agreement shall be binding upon, and shall inure to the benefit of, the Parties hereto, and their respective successors and assigns.

12. No Third-Party Beneficiaries. This Agreement is intended to benefit only the Parties hereto and their respective permitted successors and assigns. There are no third party beneficiaries to this Agreement.

The parties have executed this Agreement as of January 19, 2016, effective as of the Effective Time.

TUCKER FAMILY INVESTMENTS, LLLP

By: /s/ R. Lee Tucker

Name: R. Lee Tucker

Title: Limited Partner

TINDALL OPERATING COMPANY

By: /s/ R. Lee Tucker

Name: R. Lee Tucker

Title: President

SELLERS:

TUCKER ENERGY, LLC

By: /s/ R. Lee Tucker

Name: R. Lee Tucker

Title: Limited Partner

DNR OIL & GAS, INC.

By: /s/ Charles B. Davis

Name: Charles B. Davis

Title: President

THE COMPANY:

ARÊTE INDUSTRIES, INC.

By: /s/ Nicholas L. Scheidt

Name: Nicholas L. Scheidt

Title: Chief Executive Officer

EXHIBIT I

EXHIBIT C TO THE PURCHASE AND SALE AGREEMENT

OIL PRlCE INCREASE

1. Upon the 61st continuous day of Nymex oil prices over $90.00/bbl Arete will owe DNR/Tucker or its assigns $250,000 (Two hundred fifty thousand dollars) payable on the same date one year from the 6lst day.

2. Upon the 61st continuous day of Nymex oil prices over $100.00/bbl Arete will owe DNR/Tucker or its assigns $500,000 (Five hundred thousand dollars) payable on the same date one year from the 61st day. Any amounts previously paid by Arete to DNR/Tucker for increased prices will reduce the amount due from this paragraph.

3. Upon the 61st continuous day of Nymex oil prices over $110.00/bbl Arete will owe DNR/Tucker or its assigns $1,000,000 (One Million dollars) payable on the same date one year from the 6lst day. Any amounts previously paid by Arete to DNR/Tucker for increased prices will reduce the amount due from this paragraph.

4. Upon the 61st continuous day of Nymex oil prices over $125.00/bbl Arete will owe DNR/Tucker or its assigns $1,500,000 (One Million Five hundred thousand dollars) payable on the same date one year from the 6lst day. Any amounts previously paid by Arete to DNR/Tucker for increased prices will reduce the amount due from this paragraph.

5. Upon the 61st continuous day of Nymex oil prices over $150.00/bbl Arete will owe DNR/Tucker or its assigns, $3,500,000 (Three Million five hundred thousand dollars) payable on the same date one year from the 6J st day. Any amounts previously paid by Arete to DNR/Tucker for increased prices will reduce the amount due from this paragraph.

NATURAL GAS PRICE INCREASE

1. Upon the 61st continuous day of Nymex natural gas prices over $5.00/mmbtu, Arete will owe DNR/Tucker or its assigns $50,000 (Fifty thousand dollars) payable on the same date one year from the 61st day.

2. Upon the 61st continuous day of Nymex natural gas prices over $6.00/mmbtu, Arete will owe DNR/Tucker or its assigns $100,000 (Two hundred thousand dollars) payable on the same date one year from the 61st day. Any amounts previously paid by Arete to DNR/Tucker for increased prices will reduce the amount due from this paragraph.

3. Upon the 61st continuous day of Nymex natural gas prices over $7.50/mmbtu, Arete will owe DNR/Tucker or its assigns $250,000 (Two hundred fifty thousand dollars) payable on the same date one year from the 6lst day. Any amounts previously paid by Arete to DNR/Tucker for increased prices will reduce the amount due from this paragraph.

4. Upon the 61st continuous day of Nymex natural gas prices over $10.00/mmbtu, Arete will owe DNR/Tucker or its assigns $500,000 (Five hundred thousand dollars) payable on the same date one year from the 6lst day. Any amounts previously paid by Arete to DNR/Tucker for increased prices will reduce the amount due from this paragraph.

5. Upon the 61st continuous day of Nymex natural gas prices over $12.00/mmbtu, Arete will owe DNR/Tucker or its assigns $750,000 (Seven hundred fifty thousand dollars) payable on the same date one year from the 6 I st day. Any amounts previously paid by Arete to DNR/Tucker for increased prices will reduce the amount due from this paragraph.

RESERVE INCREASES

If Arete increases its proven producing net oil reserves by 20,000 (Twenty thousand) barrels of oil by drilling/recompletion of any DNR/Tucker identified "possible" reserves in Colorado or Kansas as attached, then Arete will owe DNR/Tucker or its assigns an additional $250,000 dollars for every 20,000 (Twenty thousand) barrel increment. This amount to be multiplied by the number of the oil price scenario which is $90.00= 1, $100.00 = 2,

$110.00=3, $125.00=4, and $150.00=5.

If Arete increases its proven producing net natural gas reserves by 150,000 (One hundred fifty thousand) mcf by drilling/recompletion of any DNR/Tucker identified "possible" reserves then Arete will owe DNR/Tucker or its assigns an additional $150,000 dollars for every $150,000 mcf increment. This amount to be multiplied by the number of the natural gas price scenario which is $5.00= !,$6.00 = 2, $7.50=3, $10.00=4, and $12.00=5.

TOTALS

Upon the payment of a total of $5,000,000 (Five million dollars) to DNR/Tucker or its assigns due to Price and/or Reserve Increases as described above within ten (10) years from the date of closing, no more payments to DNR/Tucker are required for price increases or reserve increases from operations in Colorado or Kansas.

Wyoming "Horizontal" plays

Almost all of the Wyoming properties included in this sale have possible large amounts of oil and gas in various "formations" which may be exploited utilizing recompletions and/or horizontal drilling techniques. Therefore DNR/Tucker wish to share in any future drilling/recompletion in formations not currently producing. If any properties will be sold/used for drilling/recompletion in formations not currently producing then purchaser will receive 1.25 times the "Allocated Amount" for any properties sold/used for drilling or recompletion. If purchase price of any "property(ies) exceeds the "l.25 times allocated amount" then DNR/Tucker or its assigns will share any remaining Purchase Price amount 70% (Seventy percent) to DNR/Tucker or its assigns and 30% to Arete

(Example: Allocated Amount of Property = $60,000 and property is sold for $310,000) Arete will receive 1.25 x $60K or $75K, remaining 235K is split 70% to DNR/Tucker and 30% to Arete.

Allocated Amount is defined as that part of the Purchase Price that is shown for each property(ies) on the Exhibit attached to the Purchase and Sale Agreement dated between Arete Industries, Inc. and DNR/Tucker et al.

Any earned or reserved interests such as Overriding Royalty Interests, Royalty Interests, Carried Working Interests, etc. shall be split 50% to DNR/Tucker and 50% Arete.

Any Reserve Increases resulting from Arete drilling and/or recompleting wells will have the same incentives applied as in the Reserve Increases Paragraph for DNR/Tucker properties in Colorado/Kansas.

TOTALS

Upon the payment of a total of $25,000,000 (Twenty-five million dollars) to DNR/Tucker or its assigns due from any source as described above within ten (10) years from the date of closing, no more payments to DNR/Tucker are required from any operations of wells or properties purchased under this agreement.

EXHIBIT II

EXHIBIT C-2 TO THE PURCHASE AND SALE AGREEMENT

EXHIBIT C-2

AGREEMENT REGARDING APPLICATION OF PROCEEDS

THIS AGREEMENT REGARDING APPLICATION OF PROCEEDS ("Agreement 11) is entered into effective as of April 1, 2011, by and between DNR Oil & Gas, Inc. ("Seller"), Tucker Energy, LLC ("Tucker"), whose collective address is 12741 E. Caley, Unit 142, Englewood, Colorado 80111, and Arête Industries, Inc., 7260 Osceola Street, Westminster, CO 80030, ("Buyer"). Seller, Tucker, and Buyer may be referred to individually as a "Party" or collectively as the "Parties."

RECITALS

A. Seller owns, and intends to sell, certain oil and gas interests in the lands described in Exhibit A ("Separate Interests").

B. Buyer desires to obtain, and Seller is willing to grant on the terms set forth herein, the right for Buyer to receive a specified share of proceeds derived from Seller's sale of the Separate Interests.

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

AGREEMENT

1. Assignment of Right to Receive Proceeds From S ale . Subject to Buyer's satisfaction of Buyer's obligations under this Agreement and that certain Amended and Restated Purchase and Sale Agreement dated effective April 1, 2011 executed contemporaneously herewith ("PSA"), Seller grants, conveys, and assigns to Buyer the right to receive payment of the following share of the proceeds arising from the sale by Seller of ail, or any part, of the Separate Interests:

Buyer shall receive proceeds equal to 125% of the value allocated ta the Separate Interests in Exhibit B ta the PSA. Any remaining proceeds derived from the sale by Seller of the Separate Interests shall be distributed in the following ratio:

Seller 70%

Buyer 30%

Buyer's share of the proceeds arising from the sale by Seller of all, or any part, of the Separate Interests, calculated by using the formula set forth above, is hereinafter referred to as "Buyer Proceeds." In addition to the Buyer Proceeds from any sale of the Separate Interests by Seller, any earned or reserved interests such as overriding royalty interests, royalty interests, carried working interests, etc. created by the sale of the Separate Interests shall be split 50% to Seller and 50% to Buyer.

2. No Other Rights Granted or A ssigned . Buyer acknowledges and agrees that Buyer has no present interest in the Separate Interests other than the right to have the Buyer Proceeds and credited to Buyer on the terms set forth herein upon any sale of the Separate Interests by Seller. Buyer has no right to participate in the sale of the Separate Interests in any manner, nor any right to review, approve, or disapprove the terms of any such sale, which terms must be acceptable to Seller in Seller's sole discretion. Buyer acknowledges and agrees that Buyer is not a third party beneficiary with regard to the Separate Interests in any manner other than Buyer's right to receive the Buyer Proceeds on the terms set forth herein, and that Buyer's right to receive the Buyer Proceeds is contingent, as a condition precedent, upon Buyer's execution of, and Buyer's continuing performance of Buyer's obligations under the PSA. In the event that the PSA is terminated for any reason other than uncured breach of the PSA by Seller or Tucker, ail rights of Buyer of any kind with respect to the Separate Interests, including but not limited to any right of Buyer in or to the Buyer Proceeds, shall automatically terminate and Buyer shall be deemed to have forfeited, as liquidated damages to Seller and Tucker, any and ail payments made to Seller and Tucker under the PSA and/or this Agreement. The Parties agree that the damages to Seller and Tucker resulting from termination of the PSA are difficult to measure and the Parties agree that the amount of the liquidated damages provided herein bears a reasonable relationship to and is a reasonable estimation of such damages.

3. Payment Upon S ale . Subject to Buyer remaining in good standing under the PSA, upon the sale of all or any part of the Separate Interests by Seller, Seller shall remit the Buyer Proceeds to Buyer in the following manner:

Seller shall apply all Buyer Proceeds to any amounts, whether principal or interest, then outstanding from Buyer to Seller and/or Tucker under the terms of the PSA. It is the intention of the Parties that the Buyer Proceeds be applied to ail outstanding amounts from Buyer under the PSA, whether or not those amounts are immediately due and payable under the terms of the PSA.

If the Buyer · Proceeds exceed the full amount of principal and interest outstanding under the terms of the PSA, Seller shall apply the Buyer Proceeds to satisfy all outstanding amounts under the PSA in full and promptly remit any excess amounts to Buyer in immediately verifiable funds.

If Buyer has paid in full ail of Buyer's obligations under the PSA, including interest, Seller shall remit the Buyer Proceeds directly to Buyer in immediately verifiable funds.

4. Payment Upon Partial S ale . Upon any partial sale of the Separate Interests, Seller shall determine the amount of Buyer Proceeds by applying the formula in Section 1 of this Agreement to the amount of Separate Interests sold, and shall promptly deliver the amount of those Buyer Proceeds in accordance with Section 3 of this Agreement.

5. Satisfaction in F ull . Buyer acknowledges and agrees that, upon satisfaction by Seller of the requirements of sections 3 or 4 with regard to all sales by Seller of the Separate Interests, the obligations of Seller and Tucker to Buyer with regard to the Separate Interests shall be fully discharged and Buyer shall have no further claim of any kind in or to the Separate Interests, whether contractual, equitable, or otherwise.

6. Taxes . Buyer agrees that it shall be solely responsible for any tax liability resulting from the Buyer Proceeds remitted to Buyer hereunder and will not look to Seller or Tucker for payment of any portion of any tax liability payable as a result of this Agreement.

7. Authority . The Parties, respectively, represent and warrant that (i) they have the sole right and exclusive authority to execute this Agreement with regard to the matters addressed herein; (ii) they have the full and present authority to execute this Agreement without the need for any further resolutions or approvals; and (iii) they have not sold, assigned, transferred, conveyed or otherwise disposed of any rights or Separate Interests referred to herein.

8. Entire A greement . This Agreement contains the entire agreement between the Parties with regard to the matters set forth herein, and supersedes any and all prior understandings related thereto, whether verbal or written.

9. Assistance of C ounsel . In entering into this Agreement, each Party represents that it has relied upon the legal advice of the attorneys of its own choice and that the terms of this Agreement have been completely read and explained to it by its attorneys and that these terms are fully understood and voluntarily accepted by it.

10. Governing Law and Attorney F ees . This Agreement shall be construed and interpreted in accordance with the laws of the State of Colorado. In the event of a dispute arising under this Agreement, the prevailing party in any judicial action shall be entitled to recover costs and reasonable attorney fees.

11. Additional D ocuments . All Parties agree to cooperate fully and execute any and all supplementary documents and to take all additional actions which may be necessary or appropriate to give full force and effect to the basic terms and intent of this Agreement.

12. Enforceability . If , after the date hereof, any provision of this Agreement is held to be illegal, invalid or unenforceable under the present or future laws effective during the term of this Agreement, such provision shall be fully severable. In lieu thereof, there shall be added a

provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and legal, valid and enforceable.

13. Modification . This Agreement shall not be modified or amended except by an instrument in writing signed by ail Parties.

14. Effective Time . This Agreement shall become effective immediately following execution by al! Parties.

15. Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which taken together shall constitute a single instrument. Electronically transmitted signatures, whether by facsimile or otherwise, shall be treated by the Parties as originals.

DNR OIL & GAS, INC.

By: /s/ Charles B. Davis

Name: Charles B. Davis

Title: President

TUCKER ENERGY, LLC

By: /s/ R. Lee Tucker

Name: R. Lee Tucker

Title: Limited Partner

ARÊTE INDUSTRIES, INC.

By: /s/ Donald Prosser

Name: Donald Prosser

Title: Chief Executive Officer

EXHIBIT III

PROMISSORY NOTE DATED JANUARY 1, 2014

UNSECURED PRQMTSSORY NOTE

$792,151	Westminster, Colorado
	January 1 , 2014

For value received, the undersigned, Arete Industries, lnc. ("Debtor"), of 7260 Osceola Street, Westminster, CO 80030, hereby promise. lo pay to the order DNR Oil & Gas, Inc. (DNR), 12741 East Caley, Suite 142, Centennial, Colorado 801 J 1 on or before the 1 st day of January 2019 ("Maturity Date"), the principal sum of Seven Hundred Two Thousand One Hundred Fifty One ($792,151) Dollars, with interest accrued as follows: For the years 2014 and 2015 a rate of 2.5%, 2016 a rate of 4%, 2017 a rate of 6%, and 2018 a rate of 8%.

Principal and Interest : This Promissory Note ("Note") shall be paid as follows: l payment of principal and interest in 2016 or $250,000, 1 payment of principal and interest in 2017 of $250,000, 1 payment of principal and interest in 2018 of $250,000, and the balance of principal and interest due on January 1 , 2019.

Payments of both principal and interest are to be made in lawful money of the United States of America in immediately available funds.

Prepayment : Debtor shall have the privilege of prepaying without penalty al! or any part of this Note, al any time, that includes the full interest payment.

Default and Acceleration : Upon the occurrence of a Default a defined in the Security Agreement, at the option of the Holder hereof, (i) the entire outstanding principal balance and all accrued but unpaid interest shall become immediately due and payable upon written notice to Borrower, (ii) the Holder may fully enforce its rights in the Collateral, if given, to secure the payment of this Note, and (iii) the Holder may pursue all other rights and remedies available under this Note, any instrument securing payment of this Note, or by law.

Default Rate of Interest : Upon the occurrence of a Default, Borrower promises to pay interest on the outstanding principal balance of this Note at a simple rate of interest equal to eighteen percent (18%) per annum, ("Default Rate").

Early Discharge : Upon full payment of the outstanding principal balance and ail accrued bul unpaid interest, this Note shall be fully discharged. cancelled and surrendered to Borrower.

Remedies Cumulative : The rights or remedies of the Holder as provided in this Note and any instrument securing payment of this Note shall be cumulative and concurrent and may be pursued at the sole discretion of the Holder singly, successively, or together against Borrower. The failure to exercise any such right or remedy shall in no event be construed as a waiver or release of such rights or remed1es or the right to exercise them at any later time.

Forbearance : Any forbearance of the Holder in exercising any right or remedy hereunder or under the Security Agreement, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by the Holder of payment of any sum payable hereunder after the due date of such payment shall not be a waiver of the Holder's right to require prompt payment when due of all other sums payable hereunder.

Application of Payment : All payments made on this Note shall be applied first to payment of accrued but unpaid interest and the remainder of all such payments shall be applied to the reduction of the outstanding principal balance on this Note.

Usury : In the event the interest provisions hereof, any exactions provided for herein or in the Security Agreement or my other instrument securing this Note, shall result, in an effective rate of interest which, exceeds the limit of the usury or any other applicable law, all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied upon the outstanding principal balance of this Note immediately upon receipt of such moneys by the Holder and any such amount in excess of such outstanding principal balance shall he immediately returned to Borrower.

Jurisdiction : This Note is to be governed according to the laws of the State of Colorado, without giving effect to conflict of law principles.

Binding Effect : This Note shall be binding upon Borrower, and it successors and assigns and shall inure to the benefic of the Holder and its successors and assigns.

Notice : All notices required or permitted in connection with this Note shall be given at the place and in the manner provided in the Security Agreement for the giving of notices.

Attorneys' Fees : Borrower further promises to pay all reasonable attorneys fees incurred by the Holder in connection with any Default hereunder and in any proceeding brought to enforce any of the provisions of this Note.

IN WITTNESS WHEREOF , Borrower has duly executed this Promissory Note effective as of the day and year first above written.

BORROWER:

ARETE INDUSTRIES, INC.

By: /s/ Nicholas Scheidt

Name: Nicholas Scheidt

Title: CEO

LEASE PURCHASE AGREEMENT

This LEASE PURCHASE AGREEMENT (this “ Agreement ”), executed this 24th day of November, 2015, but whose effective date for all purposes is the 1st day of December, 2015, is by and between Wellstar Corporation, herein known as the “ Seller ”, with an address of 11990 Grant Street #550 Northglenn, CO 80233 and Arete Industries, Inc. “ Buyer ”, with an address of 7260 Osceola St., Westminster, CO 80030. Seller and Buyer are sometimes each referred to herein as a “Party” and collectively as the “Parties.”

R E C I T A L S

Seller owns and wishes to convey to Buyer certain interests in the producing oil and gas leases located in Sumner County Kansas and Kimball County Nebraska, (“collectively “the Properties”, and individually, “the Padgett Properties” and the Nebraska Properties”). The Padgett Properties and the Nebraska Properties are more particularly described on Exhibit “A” attached hereto, and by this reference, incorporated herein. Seller desires to sell, and buyer desires to buy fifty-one percent (51%) of Seller’s interest in the Padgett Properties, and one hundred per cent (100%) of Seller’s interest in the Nebraska Properties. The sale shall include 51% with respect to the Padgett Properties, and 100% with respect to the Nebraska properties, of Seller’s interest in and to all Oil and Gas leases related to the Properties, together with the corresponding percentage ownership of all of Sellers’s interest in and to the well bores, personal property, contract rights, marketing agreements, and rights of access and egress related to and associated with each respective Property. Collectively, the interests to be conveyed in the respective percentage for each property shall be known as “Subject Interests”.

Buyer desires to purchase the Subject Interests from Seller for the consideration set forth below, with it also being further specified which party shall pay expenses or collect any revenue from the assets on Exhibit “B”.

A G R E E M E N T

ARTICLE 1

1.01 Interpretation . As used in this Agreement, unless the context otherwise requires, the term “includes” and its syntactical variants means “includes but is not limited to.” The headings and captions contained in this Agreement have been inserted for convenience only and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions hereof. Preparation of this Agreement has been a joint effort of the Parties and the resulting document shall not be construed more severely against one of the Parties than against the other. All references herein to “Sections” and “Articles” in this Agreement shall refer to the corresponding section and article of this Agreement unless specific reference is made to such sections of another document or instrument. The words “hereof,” “herein” and “hereunder” and words of similar import when used in any agreement or instrument shall refer to such agreement or instrument as a whole and not to any particular provision of such agreement or instrument.

ARTICLE 2

Purchase and Sale of Leases

2.01 Sale and Assignment . Subject to the terms and conditions of this Agreement, effective as of the Closing Date, in exchange for the Purchase Price (as defined below), Seller shall grant, bargain, sell, convey, transfer, assign and deliver to Buyer fifty one percent of its right, title and interest in and to the Padgett Properties as described on Exhibit “A”. The assignment shall be made using the form attached hereto as Exhibit “A-1” which assignment shall contain warranties of title by, through and under Seller, but not otherwise, and shall be effective December 1, 2015. Seller shall grant, bargain, sell, convey, transfer, assign and deliver to Buyer one hundred percent of its right, title and interest in and to the Nebraska as described on Exhibit “A”. The assignment shall be made using the form attached hereto as Exhibit “A-2” which assignment shall contain no warranties of title, and shall be effective December 1, 2015 on an “as is” and “where is” basis and “with all faults and defects”

2.02 Purchase and Assumption . Subject to the terms and conditions of this Agreement, effective as of the Closing Date, and in exchange for the Purchase Price, Buyer shall purchase, on an “as is” and “where is” basis and “with all faults and defects,” the Subject Interests. The assignment of the Subject Interests shall be made with special warranties of title with respect to the Padgett Properties, and, as to the Nebraska Properties, without warranty of title, either express or implied, with it being stipulated that as a condition of closing, Seller shall provide Buyer with evidence that cures the following title requirments:

(i) There is currently a Short Term Mortgage Redemption, Security Agreement, Assignment, Financing Statement and Fixture Filing (“Mortgage”) dated July 23, 2002 from Seller, as Debtor, to Bank of Oklahoma, National Association (“BOK”), in which the Seller assigns to BOK all right, title and interest in and to all of the Subject Interests, to secure and enforce the obligation described therein, said Mortgage being amended on March 2, 2009. These instruments indicate that the Seller has granted the right to receive all of the severed and extracted hydrocarbons produced from or attributed to all of the Subject Interests, together with all of the proceeds thereof. As such, the Buyer is requiring as a condition to Closing, that Seller obtain a release of the Properties covering the Properties from BOK, in which BOK specifically releases the Seller and the Subject Interests from any obligation to BOK and further stipulates that BOK is in agreement with the terms of this agreement.

(ii) Sellers agrees to do everything in its power to provide Buyer with as much title information as possible which it might have at its disposal, as well as assisting in the procurement of title information from operators of the Subject Interests.

2.03 Purchase Price . Buyer agrees to pay Seller as consideration for the Subject Interests as follows:

(a) The sum of One Million One Hundred Thousand Dollars ($1,100,000.00) for the Subject Interests. The cash consideration shall be wired to the account of Wellstar Corporation at Bank of Oklahoma at closing.

(b) As additional consideration, Buyer shall issue to Seller One Million shares of Arete Inducstries, Inc. common stock. Said shares shall be unresticted, except as may by require under SEC laws and regualtions (SEC Section 144). The shares shall be issued to Wellstar Corporation at Closing.

2.04 Expenses . Seller shall be responsible for any and all Expenses for the Subject Interests which derive from work performed prior to the Effective Date of this agreement, being December 1, 2015. Both Buyer and Seller agree that should the Buyer or Seller be invoiced for any expenses after the Closing Date, the parties shall determine the date of when the work was performed that the expenses derived from, and if such date was prior to the Effective Date, then Seller shall be held liable for the expense and if such date was after the Effective Date, then Buyer shall be held liable to pay such expenses.

2.05 Revenue . Seller shall be responsible for reporting any and all Revenue that derives from the wellbores in Exhibit “B” which is tendered to them after the Closing and which is allocated to production attributable to the Subject Interest for periods after the Effective Date of this agreement. It is agreed that any revenue collected by the Buyer or Seller before or after the Effective Date , attributable for production prior to the Effective date , shall be the property of Seller and shall be retained by Seller and any revenue derived from the from production attributable to the Subject Interest after the Effective Date shall delivered to or retained by the Buyer.

2.06 Purchase Closing . The closing of the transactions contemplated under this Article 2 shall occur on the Closing Date .

2.07 Title Defect . Should the Buyer find evidence of title defects with greater than ten percent (10%) of the Subject Interests associated with the Padgett Properties, which cannot be cured by the Closing Date, then the Buyer shall have the sole right to exercise its option to not initiate the Closing. It is further agreed, that upon identifying any title defects as to the Padgett Properties between the date this agreement is executed and the Closing Date, Buyer agrees to immediately provide both notice and evidence of said defect to Seller so that both parties can work together to cure the requirements that would remove the cloud of title generated by the defect.

2.08 Agreement Regarding Operations . Buyer and Seller agree that, prior to Closing, they will enter into a Letter Agreement providing for (a) amending all operating agreements related to the Property Subject Interests to reduce administrative overhead rates to $200.00 per well per month; (b)approval of DNR (or an entity owned and controlled by Charlie Davis and/or Randy Arnold) as contract operator on terms reasonably fond in the respecive fields; (c) in the event Buyer sells the Subject Interests in an arms length trasaction Seller shall have the right to join in such transaction on the same terms as Buyer, or to elect to request Buyer resign as operator prior to the close of the contemplated transaction and Buyer shall vote for Seller as successor operator under any operating agreement.

ARTICLE 3

The Closing

3.01 Closing . The Closing shall be consummated on the Closing Date as follows:

(i) Buyer will deliver the cash portion of the Purchase Price to Seller in U.S. dollars by wire transfer in accordance with instructions to be provided by Seller;

(ii) Buyer will tender to Seller a Arete Industries, Inc. share certificate indicating Wellstar is the owner of One million shares of Arete Industries, inc. common stock.

(iii) The Closing Date is specified as end of business on Wednesday, December 29, 2015, which shall take place in the Seller’s offices described below.

(iv) Upon verification that the wire transfer of funds Check has been delivered, and the tender of appropriate common stock certificates recognizing that Seller is credited with ownership of common shares as set out above, Seller will deliver to Buyer fully executed and notarized assignments of all of the Subject Interests.

3.02 Post Closing Recordings . Buyer shall be responsible for recording all assignments.

ARTICLE 4

Representations and Warranties of the Parties

4.01 DISCLAIMER . SUBJECT TO ALL THE OTHER TERMS AND CONDITIONS OF THIS AGREEMENT, BUYER ACKNOWLEDGES AND AGREES THAT (a) SELLER DOES NOT WARRANT OR GUARANTEE TITLE TO ANY LEASES OR WELLBORES OR ANY OTHER INTEREST CONTAINED HEREIN EXCEPT THAT SELLER WILL WARRANT TITLE TO THE PADGETT PROPERTIES BY, THROUGH AND UNDER, BUT NOT OTHERWISE; (b) IT IS ACQUIRING THE SUBJECT INTERESTS OTER THAN THE PADGETT PROPERTIES “AS IS” “WHERE IS” AND “WITH ALL FAULTS AND DEFECTS;” (c) EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIM ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE NATURE, QUALITY OR CONDITION OF THE LEASES.

4.02 Representations and Warranties of Buyer . Except as otherwise set forth in this Agreement, Buyer represents and warrants to Seller that the following representations and warranties are true on and as of the Closing Date in all material respects:

(a) Good Standing. Buyer (i) is a Corporation duly organized, validly existing and in good standing under the laws of Colorado_; (ii) has all requisite organizational power and authority to own and lease the properties and assets it currently owns and leases and to carry on its business as such business is currently conducted; and (iii) is duly qualified to do business as a foreign entity and is in good standing in the State of Colorado as well as the State of Kansas and Nebraska. Buyer has all requisite organizational power and authority to execute and deliver this Agreement and all documents that are executed and delivered pursuant to this Agreement, to consummate the transactions contemplated hereby and to perform all the terms and conditions hereof to be performed by it. The execution and delivery of this Agreement by Buyer and all documents that are executed and delivered pursuant to this Agreement, and the performance and the consummation of the transactions contemplated hereby have been (i) duly authorized and approved by it, or (ii) are within the authority of the person executing this Agreement on its behalf. This Agreement and all documents executed pursuant to this Agreement are the valid and binding obligations of Buyer, and enforceable against Buyer in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws relating to or affecting generally the enforcement of creditors’ rights and general principles of equity.

(b) Power and Authority. This Agreement and the execution and delivery hereof by the Parties does not, and the fulfillment and compliance with the terms and conditions hereof and the consummation of the transactions contemplated hereby will not, violate any provision of or constitute a default (without regard to any requirement of notice or the lapse of time or both) or require any filing or consent under Buyer’s certificate of formation, or other governing instruments, any law or regulation to which Buyer is subject, or any provision of any material indenture, mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment or decree to which Buyer or any of its Affiliates is a party or by which Buyer or any of its Affiliates or any of their respective assets or properties are bound.

ARTICLE 5

Notice; Miscellaneous

5.01 Notices . All notices and other communications given hereunder shall be in writing and shall be deemed given if delivered personally or mailed by registered or certified mail, return receipt requested, to the Parties at the following addresses:

(a) If to Seller:

Attn: Timothy J.Collins

Wellstar Corporation

11990 Grant Street, Suite 550

Northglenn, CO 80233

Phone: 303-280-4516

(b) If to Buyer:

Arete Industries, Inc.

Attn: Nicholas Scheidt

7260 Osceola St.

Westminster, CO 80030

Phone: 303-

5.02 Miscellaneous .

(a) Exclusive Agreement . This Agreement (including the Exhibits attached hereto) supersedes all prior written or oral agreements between the Parties with respect to the transactions contemplated herein and is intended as a complete and exclusive statement of the terms of the agreement between the Parties with respect to the transactions contemplated herein.

(b) Choice of Law and Venue; Limitation on Damages . This Agreement shall be governed by the laws of the State of Colorado.

(c) Exhibits . The Exhibits attached to this Agreement are made part hereof for all purposes. The Parties shall revise or supplement the Exhibits attached to this Agreement at any time within one year after Closing to reflect a change in any state of facts or the occurrence, non-occurrence or existence of any events that would make the information contained in any such Exhibit misleading or incorrect if it was not revised or supplemented.

(d) Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party. Upon any binding determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable and legally enforceable manner, to the end that the transactions contemplated hereby may be completed to the extent possible.

(e) Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute but one and the same agreement. It is agreed by the parties hereto that facsimile or e-mail signature pages signed by the Parties shall be binding to the same extent as original signature pages.

(f) Further Assurances . Each Party agrees to promptly execute and deliver or cause to be executed and delivered to the other on the Closing Date, and at such other times thereafter as shall be reasonably requested, any additional instrument or take any further action as may be reasonably necessary or appropriate that the other may reasonably request for the purpose of carrying out the transactions contemplated by and the purposes and intents of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Lease Purchase Agreement as of the Execution Date.

SELLER:

WELLSTAR CORPORATION

By: /s/ Timothy J. Collins

Printed: Timothy J. Collins

Position: Executive Vice President

BUYER:

Arete Industries, Inc.

By: /s/ Nicholas Scheidt

Printed: Nicholas Scheidt as President

List of Exhibits

Exhibit “A” Leases

Exhibit “B” Included Wellbores

ARÊTE INDUSTRIES, INC. ANNOUNCES CLOSING OF PURCHASE AND SALE AGREEMENT AND RESTRUCTURING OF CERTAIN LIABILITIES

Westminster, CO – February 23, 2016 – Arête Industries, Inc. (OTC PINK: ARET) announced today that it successfully closed on the purchase and sale agreement of certain oil and gas properties with an unaffiliated company on December 30, 2015. The assets acquired by the Company are producing oil and gas leases located in Sumner County, Kansas and Kimball County, Nebraska (collectively, the "Properties" and individually, the "Padgett Properties" and the "Nebraska Properties"). The Company acquired 51% of seller's interest (ranging from 47% to 100% of the working interests) in the Padgett Properties and acquired 100% of the seller's interest (100% of the working interests) in the Nebraska Properties for aggregate consideration of $1,100,000 and the issuance of 1,000,000 shares of the Company's restricted common stock valued at $0.10 per share at the date of closing, or $100,000.

The Padget Properties and Nebraska Properties acquired include approximately 870 and 1,680 gross acres, respectively. The Padget Properties currently have 26 gross producing wells and are flowing at a rate of approximately 50 barrels of oil per day. The Properties have undeveloped acreage that the Company plans to seek to develop in the future if oil prices rebound.

Also, on December 31, 2015, the Company restructured certain debts and contingencies with certain related parties. The Company issued $900,000 of its Series A2 7% Convertible Preferred Stock and paid $303,329 in cash as consideration for the following;

·	Payoff of outstanding debt with a principal balance of $792,000

·	Accrued interest through December 31, 2015, of $20,078

·	Cancellation of $250,000 of contingent liabilities

·	Cancellation of a certain profit sharing agreement with respect to high oil and gas prices and a profit sharing agreement in the event the Company sells certain of its properties above certain cost recovery thresholders. The Company now has no such agreements outstanding.

Nicholas Scheidt, CEO, stated "This acquisition and the restructuring of its liabilities and contingencies is consistent with the Company's goals and objectives. The Company also has strengthened its balance sheet by reducing certain obligations, which will free up working capital and provide additional liquidity for the Company. We are very pleased with these positive developments."

Statement as to Forward Looking Statements

Certain statements contained herein, which are not historical, are forward-looking statements that are subject to risks and uncertainties not known or disclosed herein that could cause actual results to differ materially from those expressed herein. These statements may include projections and other "forward-looking statements" within the meaning of the federal securities laws. Any such projections or statements reflect Arête's current views about future events and financial performance. No assurances can be given that such events or performance will occur as projected and actual results may differ materially from those projected. Important factors that could cause the actual results to differ materially from those projected include, without limitation, the Company's dependence on its management, the Company's significant lack of capital, changes in prices for crude oil and natural gas, the ability of management to execute plans to meet the Company's goals and other risks inherent in the Company's business that are detailed in the Company's Securities and Exchange Commission ("SEC") filings. Readers are encouraged to review these risks in the Company's SEC filings.

For Further Information Contact:

Nicholas Scheidt

CEO

303-427-8688

info@areteindustries.com