Unassociated Document


     

    THIS
      DEBENTURE AND THE SHARES PURCHASABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
      AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NEITHER THIS
      DEBENTURE NOR SUCH SHARES MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
      REGISTRATION IN EFFECT UNDER SUCH ACT UNLESS THE COMPANY RECEIVES AN OPINION
      OF
      COUNSEL OR OTHER EVIDENCE REASONABLY ACCEPTABLE TO IT DEMONSTRATING THAT SUCH
      SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
      REQUIREMENTS OF SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.


    


    THE
      PRINCIPAL AMOUNT REPRESENTED BY THIS DEBENTURE AND, ACCORDINGLY, THE SECURITIES
      ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE
      FACE HEREOF PURSUANT TO SECTION 1 OF THIS DEBENTURE.

    


    


    0%
      SUBORDINATED MANDATORY CONVERTIBLE DEBENTURE

    


    


    US$1,500,000                                                    February
      13, 2006

    


    FOR
      VALUE
      RECEIVED, BARNABUS ENERGY, INC., a Nevada corporation (the “Company”
or
      the
“Corporation”),
      hereby unconditionally promises to pay to the order of Bank Sal. Oppenheim
      jr.
& Cie. (Schweiz) AG, on behalf of fully managed accounts, or assigns (the
“Registered
      Holder”),
      at
      such address or at such other place as may be designated in writing by the
      Registered Holder, the aggregate principal sum of ONE MILLION FIVE HUNDRED
      THOUSAND DOLLARS ($1,500,000), without interest (this “Debenture”).
      Subject to the other provisions of this Debenture, the principal of this
      Debenture shall mature and become due and payable in full on July 31, 2008
      (the
“Maturity
      Date”).
      All
      payments of principal by the Company under this Debenture shall be made in
      United States dollars to an account specified by the Registered Holder to the
      Company in writing prior to the Maturity Date. This Debenture is being issued
      pursuant to the Investment Agreement of even date herewith between the Company,
      the initial Registered Holder and the other purchasers named on the signature
      page thereto(the “Investment
      Agreement”).
      Capitalized terms used and not otherwise defined herein shall have the meanings
      given such terms in the Investment Agreement

     

    THE
      PRINCIPAL AMOUNT REPRESENTED BY THIS DEBENTURE AND, ACCORDINGLY, THE SECURITIES
      ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE
      FACE HEREOF PURSUANT TO SECTION 1 OF THIS DEBENTURE.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.  CONVERSION.

     

    (a)  By
      the
      Registered Holder.
      This
      Debenture may be converted by the Registered Holder on or before the Maturity
      Date, in whole or in part, into that number of shares of Common Stock equal
      to
      the principal amount of this Debenture (or the portion being converted) divided
      by the Conversion Price then in effect (the “Conversion
      Shares”)
      by
      surrendering this Debenture, with the purchase form appended hereto as
Exhibit
      I
      duly
      executed by the Registered Holder at the principal executive offices of the
      Company, or at such other office or agency as the Company may
      designate.

     

    Each
      conversion of this Debenture pursuant to this paragraph (a) shall be deemed
      to
      have been effected immediately prior to the close of business on the day on
      which this Debenture shall have been surrendered to the Company as provided
      above. At such time, the person or persons in whose name or names any
      certificates for Conversion Shares shall be issuable upon such conversion as
      provided below shall be deemed to have become the holder or holders of record
      of
      the Conversion Shares represented by such certificates.

     

    As
      soon
      as practicable after the conversion of this Debenture in full or in part, the
      Company, at its expense, will cause to be issued in the name of, and delivered
      to, the Registered Holder, or as such Registered Holder (upon payment by such
      Registered Holder of any applicable transfer taxes) may direct:

     

    (i)  a
      certificate or certificates for the number of Conversion Shares to which the
      Registered Holder shall be entitled upon such conversion; and

     

    (ii)  in
      case
      such conversion is in part only, a new Debenture or Debentures (dated the date
      hereof) of like tenor, in principal amount equal to the principal amount hereof
      less the amount that has been converted into Conversion Shares.

     

    (b)  By
      the
      Company.
      This
      Debenture may be converted by the Company, in whole but not in part, by giving
      notice thereof to the Registered Holder on any Trading Day if (i) the VWAP
      for the twenty (20) consecutive Trading Days ended on the Trading Day before
      the
      Trading Day on which notice of conversion is given is at least $4.00 per share
      (which per share amount shall be adjusted pro rata in the case of any split,
      dividend, combination or other event affecting the number of outstanding shares
      of Common Stock), and (ii) a registration statement covering the resale of
      the
      Conversion Shares was effective during such 20-Trading Day period and remains
      effective on the date of such notice. Upon the Company's giving notice in
      accordance with the preceding sentence, this Debenture shall without further
      action be converted into that number of Conversion Shares equal to the
      outstanding principal amount hereof divided by the Conversion Price then in
      effect. Each conversion of this Debenture pursuant to this paragraph (b) shall
      be deemed to have occurred immediately prior to the close of business on the
      day
      on which notice of conversion is given as provided above. At such time, the
      person or persons in whose name or names any certificates for Conversion Shares
      shall be issuable upon such conversion shall be deemed to have become the holder
      or holders of record of the Conversion Shares represented by such
      certificates.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    As
      soon
      as practicable after the conversion of this Debenture the Company, at its
      expense, will cause to be issued in the name of, and delivered to, the
      Registered Holder, or as such Registered Holder (upon payment by such Registered
      Holder of any applicable transfer taxes) may direct a certificate or
      certificates for the number of Conversion Shares to which the Registered Holder
      shall be entitled upon such conversion.

     

    (c)  Conversion
      Price.
      As used
      herein, the Conversion Price shall initially be $1.46 and from time to time
      shall be such amount as adjusted as provided herein.

     

    2.  ADJUSTMENTS.

     

    (a)  Adjustment
      for Stock Splits and Combinations.
      If the
      Company shall at any time or from time to time after the date on which this
      Debenture was first issued (the “Original
      Issue Date”)
      effect
      a subdivision of the outstanding Common Stock, the Conversion Price shall be
      proportionately decreased. If the Company shall at any time or from time to
      time
      after the Original Issue Date combine the outstanding shares of Common Stock,
      the Conversion Price shall be proportionately increased. Any adjustment under
      this paragraph shall become effective at the close of business on the date
      the
      subdivision or combination becomes effective.

     

    (b)  Adjustments
      for Other Dividends and Distributions.
      In the
      event the Company at any time or from time to time after the Original Issue
      Date
      shall make or issue, or fix a record date for the determination of holders
      of
      Common Stock entitled to receive, a dividend or other distribution payable
      in
      securities of the Company or in cash or other property, then and in each such
      event the Registered Holder shall receive upon conversion hereof, in addition
      to
      the Conversion Shares issuable hereunder, the kind and amount of securities
      of
      the Company and/or cash and other property which the Registered Holder would
      have been entitled to receive had this Debenture been converted on the date
      of
      such event.

     

    (c)  Adjustment
      for Mergers or Reorganizations, etc.
      If
      there shall occur any reclassification, reorganization, recapitalization,
      consolidation, sale of all or substantially all assets or merger involving
      the
      Company in which the Common Stock is converted into or exchanged for securities,
      cash or other property (other than a transaction covered by subsection 2(b)
      above), then, following any such reclassification, reorganization,
      recapitalization, consolidation, sale of all or substantially all assets or
      merger, and without payment of any additional consideration thereof, the
      Registered Holder shall receive upon conversion hereof the kind and amount
      of
      securities, cash or other property which the Registered Holder would have been
      entitled to receive if, immediately prior to such reclassification,
      reorganization, recapitalization, consolidation or merger, sale of all or
      substantially all assets, this Debenture had been converted.

     

    The
      foregoing provisions of this Section 2(c) shall similarly apply to
      successive reorganizations, consolidations, mergers, sales and transfers and
      to
      the stock or securities of any other corporation that are at the time receivable
      upon the conversion of this Debenture. If the per share consideration payable
      to
      the holder hereof for Conversion Shares in connection with any such transaction
      is in a form other than cash or marketable securities, then the value of such
      consideration shall be determined in good faith by the Company’s Board of
      Directors. In all events, appropriate adjustment (as determined in good faith
      by
      the Company’s Board of Directors) shall be made in the application of the
      provisions of this Debenture with respect to the rights and interests of the
      Holder after the transaction, to the end that the provisions of this Debenture
      shall be applicable after that event, as near as reasonably may be, in relation
      to any shares or other property deliverable after that event upon conversion
      of
      this Debenture.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    (d)  Subsequent
      Issuances.
      Except
      for Excluded Issuances, if and whenever the Corporation shall issue or sell
      any
      shares of Common Stock for a consideration per share less than the Conversion
      Price in effect immediately prior to the time of such issue or sale, then and
      in
      each such case (a “Trigger
      Issuance”)
      the
      then-existing Conversion Price shall be reduced, as of the close of business
      on
      the effective date of the Trigger Issuance, to the lowest per share price at
      which such Additional Shares of Common Stock were issued or sold.

     

    In
      case
      at any time the Corporation shall in any manner grant (directly and not by
      assumption in a merger or otherwise) any Warrants or other rights to subscribe
      for or to purchase, or any options for the purchase of, Common Stock or any
      stock or security convertible into or exchangeable for Common Stock (such
      Warrants, rights or options being called “Options” and such convertible or
      exchangeable stock or securities being called “Convertible Securities”), whether
      or not such Options or the right to convert or exchange any such Convertible
      Securities are immediately exercisable, and the price per share for which Common
      Stock is issuable upon the exercise of such Options or upon the conversion
      or
      exchange of such Convertible Securities (determined by dividing (A) the sum
      of
      (x) the total amount, if any, received or receivable by the Company as
      consideration for the granting of such Options or Convertible Securities, plus
      (y) the aggregate amount of additional consideration payable to the Company
      upon
      the conversion of all such Options or the aggregate amount of additional
      consideration, if any, payable upon the conversion or exchange of such
      Convertible Securities, by (B) the total maximum number of shares of Common
      Stock issuable upon the exercise of such Options or upon the conversion or
      exchange of all such Convertible Securities) shall be less than the Conversion
      Price in effect immediately prior to the time of the granting of such Options
      or
      Convertible Securities, then the Conversion Price shall be adjusted to equal
      the
      price at which Common Stock is issuable upon such conversion or conversion
      or
      exercise. No adjustment of the Conversion Price shall be made upon the actual
      issue of such Common Stock upon exercise of such Options or upon the actual
      conversion or exchange of such Convertible Securities.

     

    In
      case
      any shares of Common Stock, Options or Convertible Securities shall be issued
      or
      sold for cash, the consideration received therefor shall be deemed to be the
      amount received by the Company therefor, without deduction therefrom of any
      expenses incurred or any underwriting commissions or concessions paid or allowed
      by the Corporation in connection therewith. In case any shares of Common Stock,
      Options or Convertible Securities shall be issued or sold for a consideration
      other than cash or for a consideration including cash and such other
      consideration, the amount of the consideration other than cash received by
      the
      Corporation shall be deemed to be the fair value of such consideration as
      determined in good faith by the Board, without deduction of any expenses
      incurred or any underwriting commissions or concessions paid or allowed by
      the
      Company in connection therewith. In case any Options shall be issued in
      connection with the issue and sale of other securities of the Company, together
      comprising one integral transaction in which no specific consideration is
      allocated to such Options by the parties thereto, such Options shall be deemed
      to have been issued for such consideration as determined in good faith by the
      Board. This determination of the fair value of consideration (or the allocation
      thereof) need not be the amount recorded in the books and records of the Company
      if the Board determines that the determination of different amounts for
      different contexts is in the best interest of the Company and its stockholders
      and creditors as a whole. 

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    As
      used
      herein, “Excluded
      Issuances”
shall
      mean any issuance of Common Stock (A) to directors, officers, employees or
      consultants of the Company, (B) upon the conversion or conversion of Options
      or
      Convertible Securities issued prior to the date hereof, unless such securities
      have been amended or modified in any manner after the date hereof,
      (C) pursuant to the Investment Agreement and other agreements in effect on
      the date hereof and securities issued upon the conversion or conversion of
      those
      securities, (D) by reason of a dividend, stock split or other distribution
      on
      shares of Common Stock; (E) to David Saltman or Cheryl Bostater pursuant to
      the
      terms of their employment agreements; and (F) in connection with the acquisition
      of a business or technology, the formation of a joint venture or a strategic
      investment.

     

    (e) Milestone
      Adjustments.
      The
      Conversion Price shall be adjusted as, when and to the extent provided in
      this
      paragraph (e); provided,
      however,
      no
      further adjustments to the Conversion Price shall be made pursuant to this
      paragraph (e) with respect to any fiscal quarter ended after November 30, 2006
      if: (x) there was no Milestone Failure with respect to the fiscal quarter ended
      November 30, 2006; and (y) the VWAP for any twenty (20) consecutive Trading
      Days
      after the Milestone Announcement Date with respect to the fiscal quarter ended
      November 30, 2006 is at least $4.00 per share (which per share amount shall
      be
      adjusted pro rata in the case of any split, dividend, combination or other
      event
      affecting the number of outstanding shares of Common Stock). Upon each Milestone
      Failure Date, the Conversion Price in effect on such Milestone Failure Date
      shall, at the election of the Registered Holder, be decreased to the VWAP for
      the five (5) Trading Days immediately following such Milestone Failure Date
      multiplied by the Designated Discount Rate applicable to such Milestone Failure
      as set forth in the Milestone table below. With
      respect to each fiscal quarter ended after a Milestone Failure Date, if the
      cumulative Net Sales through such fiscal quarter ended exceed the cumulative
      Milestones through such fiscal quarter, then all
      prior
      adjustments to this paragraph (e) shall be reversed. For purposes of this
      Debenture, the following terms shall have the following meanings:

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    (i)  “Milestone”
      means, with respect to a given fiscal quarter, the dollar amount of Net Sales
      for such fiscal quarter, as set forth in the table immediately
      below:

    


    
      	 
	
              Milestones

            
	
              Fiscal

            	
              Milestone

            	
              Designated

            
	
              Quarter
                Ended

            	
              Threshold

            	
              Discount
                Rate

            
	 	 	 
	
              February
                28, 2006

            	
              $100,000

            	
              75%

            
	
              May
                31, 2006

            	
              $1,400,000

            	
              75%

            
	
              August
                31, 2006

            	
              $4,500,000

            	
              80%

            
	
              November
                30, 2006

            	
              $8,000,000

            	
              80%

            
	
              February
                28, 2007

            	
              $9,000,000

            	
              85%

            
	
              May
                31, 2007

            	
              $12,000,000

            	
              85%

            
	
              August
                31, 2007

            	
              $15,000,000

            	
              90%

            
	
              November
                30, 2007

            	
              $18,000,000

            	
              90%

            


    

    


     

    (ii)  “Milestone
      Announcement Date” shall mean, with respect to each fiscal quarter ended during
      2006 and 2007, the date on which the Company files the Periodic Report
      applicable to such quarter; it being understood if the Company amends any such
      Periodic Report after its initial filing, then all calculations, determinations
      and adjustments, if any, under this Debenture with respect to the fiscal quarter
      for which such Periodic Report was filed shall, upon the filing of such
      amendment, be re-calculated, re-determined and re-adjusted, if applicable,
      as
      though the information contained in such amendment were contained in the
      original filing.

     

    (iii)  “Milestone
      Failure” shall be deemed to occur, with respect to a fiscal quarter specified in
      the table contained in the definition of the term “Milestone”, if the Net Sales
      for such fiscal quarter do not exceed the Milestone for such fiscal quarter,
      as
      reported in the applicable Periodic Report.

     

    (iv)  “Milestone
      Failure Date” shall mean a Milestone Announcement Date on which a Milestone
      Failure is deemed to occur.

     

    (v)  “Net
      Sales” means the revenues generated in the ordinary course of business by the
      Company, determined in accordance with GAAP, as reported in the Company’s
      applicable Periodic Report.

     

    (vi)  “Periodic
      Report” shall mean the quarterly report on Form 10-Q, 10-QSB or such other form
      the Company is then eiligible to use, or, in the case of the fourth fiscal
      quarter of a given fiscal year, the annual report on Form 10-K, 10-KSB or such
      other form the Company is then eligible to use, in each case, filed by the
      Company with the SEC pursuant to Section 13 or 15(d) of the Exchange
      Act.

     

    (vii)  “Trading
      Day” shall mean a day, other than a Saturday or Sunday, on which The New York
      Stock Exchange, Inc. is open for trading.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    (viii)  “VWAP”
      means, with respect to a period of specified Trading Days,
      the
      volume weighted average price per share of the Common Stock measured over each
      of the days during such period, which shall be equal to the average of the
      quotient(s) for each Trading Day during such period of (x) the aggregate dollar
      amount of Common Stock traded (i.e., the sale prices multiplied by the number
      of
      shares traded) for such Trading Day, divided by (y) the total number of shares
      of Common Stock traded during such Trading Day.

     

    (f) Certificate
      as to Adjustments.
      Upon
      the occurrence of each adjustment or readjustment pursuant to this
      Section 2, the Company at its expense shall promptly compute such
      adjustment or readjustment in accordance with the terms hereof and furnish
      to
      the Registered Holder a certificate setting forth such adjustment or
      readjustment (including the kind and amount of securities, cash or other
      property for which this Debenture shall be exercisable, the Conversion Price
      and
      the method of calculation of each) and showing in detail the facts upon which
      such adjustment or readjustment is based. 

     

    (g) Adjustment
      to Conversion Shares.
      Whenever the Conversion Price is adjusted pursuant to this Section 2, there
      shall be a corresponding adjustment made to the number of Conversion Shares
      upon
      conversion hereof.

     

    3.  FRACTIONAL
      SHARES.
      The
      Company shall not be required upon the conversion of this Debenture to issue
      any
      fractional shares, and shall round any fractional shares to the next highest
      whole number of shares. If a fractional share interest arises upon any
      conversion or conversion of the Debenture, the Company shall eliminate such
      fractional share interest by paying the Registered Holder an amount computed
      by
      multiplying the fractional interest by the Fair Market Value of a full share
      of
      common Stock.

     

    The
“Fair
      Market Value” per share of Common Stock shall be determined as

     

    (i)  if
      the
      Common Stock is listed on a national securities exchange, the NASDAQ Small
      Cap
      Market, the NASDAQ National Market, the OTCBB or another nationally recognized
      trading system as of the Conversion Date, the Fair Market Value per share of
      Common Stock shall be deemed to be the average of the high and low reported
      sale
      prices per share of Common Stock thereon on the trading day immediately
      preceding the Conversion Date (provided that if no such price is reported on
      such day, the Fair Market Value per share of Common Stock shall be determined
      pursuant to clause (ii)).

     

    (ii)  In
      all
      other cases, the Fair Market Value per share of Common Stock shall be deemed
      to
      be the amount most recently determined by the Board of Directors to represent
      the fair market value per share of the Common Stock. Notwithstanding the
      foregoing, if the Board of Directors has not made such a determination within
      the three-month period prior to the Conversion Date, then (A) the Board of
      Directors shall make a determination of the Fair Market Value per share of
      the
      Common Stock within 20 days of a request by the Registered Holder that it do
      so,
      and (B) the conversion of this Debenture pursuant to this subsection 1(b)
      shall be delayed until such determination is made.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    4.  REPRESENTATIONS
      AND WARRANTIES BY THE REGISTERED HOLDER.
      The
      Registered Holder represents and warrants to the Company that upon each
      conversion hereof, the Registered Holder affirms to the Company that the
      representations and Debenturies contained in Sections 4.01 and 4.04 through
      4.08
      of the Investment Agreement are true and correct as if made by the Registered
      Holder on the date of conversion.

     

    5.  REQUIREMENTS
      FOR TRANSFER.

     

    (a)  This
      Debenture and the Conversion Shares shall not be sold or transferred unless
      either (i) they first shall have been registered under the Act and under
      applicable state securities or blue sky laws, or (ii) the Company first shall
      have been furnished with an opinion of legal counsel, reasonably satisfactory
      to
      the Company, to the effect that such sale or transfer is exempt from the
      registration requirements of the Act.

     

    (b)  Each
      certificate representing Conversion Shares shall bear a legend substantially
      in
      the following form:

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
      HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY
      NOT
      BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION IN EFFECT UNDER
      SUCH
      ACT UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL OR OTHER EVIDENCE
      REASONABLY ACCEPTABLE TO IT DEMONSTRATING THAT SUCH SALE OR TRANSFER IS EXEMPT
      FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT OR UNLESS
      SOLD PURSUANT TO RULE 144 OF SUCH ACT.

     

    The
      foregoing legend shall be removed from the certificates representing any
      Conversion Shares, at the request of the holder thereof, at such time as
      (i) they become eligible for resale pursuant to an effective registration
      statement or Rule 144(k) under the Act or (ii) the Company shall have
      received either an opinion of counsel or a “no-action” letter from the SEC to
      the effect that any transfer of the Conversion Shares represented by such
      certificates will not violate the Act and applicable state securities
      laws.

     

    6.  EVENT
      OF DEFAULT.
      The
      occurrence of any of following events shall constitute an “Event of
      Default”
      hereunder:

     

    (a)  the
      failure of the Corporation to make any payment of principal on this Debenture
      when due, whether at maturity, upon acceleration or otherwise; or

     

    (b)  the
      Corporation makes an assignment for the benefit of creditors or admits in
      writing its inability to pay its debts generally as they become due; or an
      order, judgment or decree is entered adjudicating the Corporation as bankrupt
      or
      insolvent; or any order for relief with respect to the Corporation is entered
      under the Federal Bankruptcy Code or any other bankruptcy or insolvency law;
      or
      the Corporation petitions or applies to any tribunal for the appointment of
      a
      custodian, trustee, receiver or liquidator of the Corporation or of any
      substantial part of the assets of the Corporation, or commences any proceeding
      relating to it under any bankruptcy, reorganization, arrangement, insolvency,
      readjustment of debt, dissolution or liquidation law of any jurisdiction; or
      any
      such petition or application is filed, or any such proceeding is commenced,
      against the Corporation and either (i) the Corporation by any act indicates
      its
      approval thereof, consents thereto or acquiescence therein or (ii) such petition
      application or proceeding is not dismissed within sixty (60) days.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    Upon
      the
      occurrence of any such Event of Default all unpaid principal under this
      Debenture shall become immediately due and payable.
      

     

    7.  NO
      IMPAIRMENT.
      The
      Company will not, by amendment of its charter through reorganization, transfer
      of assets, consolidation, merger, dissolution, issuance or sale of securities
      or
      any other voluntary action, avoid or seek to avoid the observance or performance
      of any of the terms of this Debenture, but will at all times in good faith
      assist in the carrying out of all such terms and in the taking of all such
      action as may be necessary or appropriate in order to protect the rights of
      the
      holder of this Debenture against impairment.

     

    8.  NOTICES
      OF RECORD DATE, ETC.
      In the
      event:

     

    (a)  that
      the
      Company shall take a record of the holders of its Common Stock (or other stock
      or securities at the time deliverable upon the conversion of this Debenture)
      for
      the purpose of entitling or enabling them to receive any dividend or other
      distribution, or to receive any right to subscribe for or purchase any shares
      of
      stock of any class or any other securities, or to receive any other right;
      or

     

    (b)  of
      any
      capital reorganization of the Company, any reclassification of the Common Stock
      of the Company, any consolidation or merger of the Company with or into another
      corporation (other than a consolidation or merger in which the Company is the
      surviving entity and its Common Stock is not converted into or exchanged for
      any
      other securities or property), or any transfer of all or substantially all
      of
      the assets of the Company; or

     

    (c)  of
      the
      voluntary or involuntary dissolution, liquidation or winding-up of the Company,
      then, and in each such case, the Company will mail or cause to be mailed to
      the
      Registered Holder a notice specifying, as the case may be, (i) the record date
      for such dividend, distribution or right, and the amount and character of such
      dividend, distribution or right, or (ii) the effective date on which such
      reorganization, reclassification, consolidation, merger, transfer, dissolution,
      liquidation or winding-up is to take place, and the time, if any is to be fixed,
      as of which the holders of record of Common Stock (or such other stock or
      securities at the time deliverable upon the conversion of this Debenture) shall
      be entitled to exchange their shares of Common Stock (or such other stock or
      securities) for securities or other property deliverable upon such
      reorganization, reclassification, consolidation, merger, transfer, dissolution,
      liquidation or winding-up. Such notice shall be mailed at least ten days prior
      to the record date or effective date for the event specified in such
      notice.

     

    9.  STOCK
      FULLY PAID, RESERVATION OF STOCK.
      All of
      the Conversion Shares issuable upon the conversion of the rights represented
      by
      this Debenture will, upon issuance and receipt of the purchase price therefor,
      be validly issued, fully paid and nonassessable, and free from all taxes, liens
      and charges except for restrictions on transfer provided for herein or under
      applicable federal and state securities laws. The Company will at all times
      reserve and keep available, solely for issuance and delivery upon the conversion
      of this Debenture, such number of shares of Common Stock and other securities,
      cash and/or property, as from time to time shall be issuable upon the conversion
      of this Debenture.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    10.  REPLACEMENT
      OF DEBENTURES.
      Upon
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of this Debenture and (in the case of loss, theft
      or
      destruction) upon delivery of an indemnity agreement (without any obligation
      for
      a surety or other security therefor) in an amount reasonably satisfactory to
      the
      Company, or (in the case of mutilation) upon surrender and cancellation of
      this
      Debenture, the Company will issue, in lieu thereof, a new Debenture of like
      tenor.

     

    11.  TRANSFERS,
      ETC.

     

    (a)  The
      Company will maintain a register containing the name and address of the
      Registered Holder of this Debenture. The Registered Holder may change its or
      his
      address as shown on the Debenture register by written notice to the Company
      requesting such change.

     

    (b)  This
      Debenture and all rights hereunder are transferable, in whole or in part, upon
      surrender of this Debenture with a properly executed assignment in a form
      reasonably acceptable to the Company at the principal executive offices of
      the
      Company.

     

    (c)  Until
      any
      transfer of this Debenture is made in the Debenture register, the Company may
      treat the Registered Holder as the absolute owner hereof for all purposes;
      provided,
      however,
      that if
      and when this Debenture is properly assigned in blank, the Company may (but
      shall not be obligated to) treat the bearer hereof as the absolute owner hereof
      for all purposes, notwithstanding any notice to the contrary.

     

    12.  MAILING
      OF NOTICES, ETC.
      All
      notices and other communications from the Company to the Registered Holder
      shall
      be mailed by first-class certified or registered mail, postage prepaid, to
      the
      address last furnished to the Company in writing by the Registered Holder.
      All
      notices and other communications from the Registered Holder or in connection
      herewith to the Company shall be mailed by first-class certified or registered
      mail, postage prepaid, to the Company at its principal executive office. If
      the
      Company should at any time change the location of its principal executive office
      to a place other than as set forth below, it shall give prompt written notice
      to
      the Registered Holder and thereafter all references in this Debenture to the
      location of its principal executive office at the particular time shall be
      as so
      specified in such notice.

     

    13.  NO
      RIGHTS AS STOCKHOLDER.
      Until
      the conversion of this Debenture, the Registered Holder shall not have or
      conversion any rights by virtue hereof as a stockholder of the
      Company.

     

    14.  CHANGE
      OR WAIVER.
      Any
      term of this Debenture may be amended or waived upon the written consent of
      the
      Company and the Registered Holder.

     

    15.  SECTION HEADINGS.
      The
      Section headings in this Debenture are for the convenience of the parties and
      in
      no way alter, modify, amend, limit or restrict the contractual obligations
      of
      the parties.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    16.  GOVERNING
      LAW.
      This
      Debenture will be governed by and construed in accordance with the internal
      laws
      of the State of Nevada without giving effect to the conflict or choice of law
      provision thereof that would give rise the application of the domestic
      substantive law of any other jurisdiction.

     

    EXECUTED
      as of the Date of Issuance indicated above.

     

     

    BARNABUS
      ENERGY, INC.

     

    By:        
      _____________________________

    Name: David
      Saltman

    Title: President

     

    


     

    
 

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
      I

    


    PURCHASE
      FORM

     

    
      	To: Barnabus Energy, Inc. (the
              “Company”)	
               Dated:
                ____________

            


    

     

    The
      undersigned, pursuant to the provisions set forth in the attached Debenture,
      hereby irrevocably elects to purchase shares of the Common Stock covered by
      such
      Debenture.

     

    The
      undersigned herewith elects to convert $__________ in principal amount of such
      Debenture at the Conversion Price provided for in such Debenture, which is
      $_________.

     

    Please
      issue a certificate representing said shares of Common Stock in the name of
      the
      undersigned or in such other name as is specified below:

     

    The
      undersigned affirms the representation and warranties contained in Sections
      4.01
      and 4.04 through 4.08 of that certain Investment Agreement dated the same date
      as the attached Debenture, among the Company, the initial holder of the attached
      Debenture and the other purchasers listed on the signature page
      thereof.

     

    
      Name
        of
        Entity: _______________________________________   

       

      


      Signature
        of 

      Authorized
        Person: ____________________________________

       

      Address:
        ____________________________________________

       

      ___________________________________________________

       

       

      Date:
        _______________________________________________