Exhibit
4.1


 


THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


 


PRB OIL &
GAS, INC.


 


and


 


BLACK RAVEN
ENERGY, INC.


 


AMENDED AND
RESTATED SENIOR SECURED DEBENTURE


 


	
  Issuance
  Date: February 2, 2009

  	
  Principal: U.S. $18,450,000

  



 


FOR VALUE RECEIVED, PRB Oil & Gas, Inc.,
a Colorado corporation (the “Company”), a
wholly owned subsidiary of Black Raven Energy, Inc., a Nevada corporation
formerly known as PRB Energy, Inc. (“Parent”), and
the Parent (the Company and the Parent being sometimes referred to herein
collectively as the “Obligors”) hereby promise, jointly and severally, to pay
to the order of West Coast Opportunity Fund, LLC or registered assigns (“Holder”) the amount set out above as the Principal (as
reduced pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal”) when due, upon the Maturity Date (as defined below),
acceleration, redemption or otherwise (in each case in accordance with the
terms hereof) and to pay interest (“Interest”) on
any outstanding Principal at a rate equal to ten percent (10.00%) per annum
(the “Interest Rate”), from the date set out
above as the Issuance Date (the “Issuance Date”)
until the same becomes due and payable, whether upon an Interest Date (as
defined below) or, the Maturity Date, acceleration, redemption or otherwise (in
each case in accordance with the terms hereof). 
This Amended and Restated Senior Secured Debenture (including all Senior
Secured Debentures issued in exchange, transfer or replacement hereof, this “Debenture”) is issued by the Obligors pursuant to the terms
and provisions of the Plan of Reorganization (as defined below) and amends,
restates and supersedes the two Prior Senior Secured Debentures (as defined
below).  Certain capitalized terms used
herein are defined in Section 21.


 


(1)                                  PAYMENTS OF PRINCIPAL.  On December 31, 2009 (the “Initial Scheduled Principal Payment Date”),
the Obligors shall pay to the Holder $3,750,000 of the outstanding Principal
balance of this Debenture, as well as all accrued but unpaid Interest hereunder
as of such date. On the Maturity Date, the Obligors shall pay to the Holder the
remainder of the outstanding Principal balance of this Debenture, as well as
all accrued but 


 


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unpaid
Interest hereunder as of such date. For purposes of this Debenture, the term “Maturity Date” shall mean December 31,
2010, or (a) such earlier date as may be accelerated by the Required
Holders upon the occurrence and/or existence of an Event of Default in
accordance with the terms hereof, or (b) such later date as may be
extended at the option of the Required Holders (i) in the event that, and
for so long as, an Event of Default (as defined in Section 3(a)) shall
have occurred and be continuing or any event shall have occurred and be
continuing which with the passage of time and the failure to cure would result
in an Event of Default or (ii) through the date that is ten (10) days
after the consummation of a Change of Control in the event that a Change of
Control is publicly announced or a Change of Control Notice (as defined in Section 4(b))
is delivered prior to the Maturity Date.


 


(2)                                  INTEREST; INTEREST RATE.  Interest on this Debenture shall commence
accruing on the Issuance Date and shall be computed on the basis of a 365-day
year and actual days elapsed and shall be payable in arrears for each Payment
Quarter on the last day of each such Payment Quarter during the period
beginning on the Issuance Date and ending on, and including, the Maturity Date
(each, an “Interest Date”).  Interest shall be payable on each Interest
Date, to the record holder of this Debenture on the applicable Interest Date,
in cash (“Cash Interest”).  Interest accrues at the Interest Rate on all
outstanding unpaid Principal owed under this Debenture and all accrued Interest
is payable on each Interest Date.  Upon
the occurrence and during the continuance of an Event of Default, the Interest
Rate shall be increased to eighteen percent (18.00%) (the “Default Rate”).  In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the date of such cure; provided that the
Interest as calculated and unpaid at such increased rate during the continuance
of such Event of Default shall continue to apply to the extent relating to the
days after the occurrence of such Event of Default through and including the
date of cure of such Event of Default.


 


(3)                                  RIGHTS UPON EVENT OF DEFAULT.


 


(a)                                  Events of Default.  Each of the following events shall constitute
an “Event of Default”:


 


(i)                                     the Obligors’ failure to pay to the Holder any amount of
Principal, Interest, Late Charges or other amounts when and as due under this
Debenture (including, without limitation, the Obligors’ failure to pay any
redemption payments or amounts hereunder) or any other Transaction Document, if
such failure continues (A) for a period of at least five (5) Business
Days in the case of a failure to pay any amount of Principal or (B) for a
period of at least three (3) Business Days from notice by Holder in the
case of a failure to pay any other amount;


 


(ii)                                  any default occurs and is continuing under any redemption of
or acceleration prior to maturity of any Indebtedness of the Company, Parent or
any of their respective Subsidiaries in excess of $100,000; provided, that in
the event that any such acceleration of indebtedness is rescinded by the
holders thereof prior to acceleration of this Debenture, no Event of Default
shall exist as a result of such rescinded acceleration;


 


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(iii)                               the Company, Parent or any of their Subsidiaries, pursuant
to or within the meaning of Title 11, U.S. Code, or any similar Federal,
foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a
voluntary case, (B) consents to the entry of an order for relief against
it in an involuntary case, (C) consents to the appointment of a receiver,
trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general
assignment for the benefit of its creditors or (E) admits in writing that
it is generally unable to pay its debts as they become due;


 


(iv)                              creditors of the Company, Parent or any of their
Subsidiaries file an action for relief under any Bankruptcy Law against such
entity in an involuntary case and such action is not dismissed within thirty
(30) days of such filing or a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that (A) is for relief against the
Company, Parent or any of their Subsidiaries in an involuntary case, (B) appoints
a Custodian of the Company, Parent or any of their Subsidiaries or (C) orders
the liquidation of the Company, Parent or any of their Subsidiaries;


 


(v)                                 a final judgment or judgments for the payment of money
aggregating in excess of $250,000 are rendered against the Company, Parent or
any of their Subsidiaries and which judgments are not, within sixty (60) days
after the entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within sixty (60) days after the expiration of such stay; provided,
however, that any judgment which is covered by insurance or an indemnity
from a credit worthy party shall not be included in calculating the $250,000
amount set forth above so long as the Obligors provide the Holder a written
statement from such insurer or indemnity provider (which written statement
shall be reasonably satisfactory to the Holder) to the effect that such
judgment is covered by insurance or an indemnity and the applicable Obligor
will receive the proceeds of such insurance or indemnity within sixty (60) days
of the issuance of such judgment;


 


(vi)                              the Company or Parent, as applicable, materially breaches
any representation or warranty, or breaches any covenant or other term or
condition of any Transaction Document, except, in the case of a breach of a
covenant or other term or condition of any Transaction Document which is
curable, only if such breach continues for a period of at least ten (10) consecutive
Business Days;


 


(vii)                           any breach or failure in any respect to comply with Section 8
of this Debenture which shall continue for a period of thirty (30) days after
notice of such breach or failure;


 


(viii)                        any Event of Default (as defined in any Security Document)
occurs and is continuing under any Security Document, the repudiation by the
Company, Parent or any of their Subsidiaries of any of its obligations under
any Security Document or the unenforceability of any Security Document against
the Company, Parent or any of their Subsidiaries for any reason; or


 


(ix)                                the occurrence or existence of any violation or breach on
the part of either Obligor of the Plan of Reorganization or the failure of
either Obligor to comply 


 


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in a
timely manner with any order of the bankruptcy court exercising bankruptcy
jurisdiction over the Plan of Reorganization.


 


(b)                                 Redemption Right.  Promptly after the occurrence of an Event of
Default with respect to this Debenture, the Obligors shall deliver written
notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the
Holder.  At any time after the earlier of
the Holder’s receipt of an Event of Default Notice and the Holder becoming
aware of an Event of Default, the Required Holders may require the Obligors to
redeem all or any portion of the Debentures (as “Event of Default Redemption”) by delivering written notice
thereof (the “Event of Default Redemption
Notice”) to the Obligors, which Event of Default Redemption Notice
shall indicate the portion of the Debentures the Required Holders are electing
to redeem; provided that upon the occurrence of any default described in Section 3(a)(vi) and
3(a)(vii), the Debentures shall automatically, and without any action on behalf
of the Holders, be redeemed by the Obligors. 
Each portion of the Debentures subject to redemption by the Obligors
pursuant to this Section 3(b) shall be redeemed by the Obligors at a
price equal to 110% of the outstanding Principal amount and accrued and unpaid
Interest and accrued and unpaid Late Charges and Interest with respect to such
portion of the Debentures subject to redemption (the “Event of Default Redemption Price”).  Redemptions required by this Section 3(b) shall
be made in accordance with the provisions of Section 7.


 


(4)                                  RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.


 


(a)                                  Assumption.  Neither Obligor shall enter into or be party
to a Fundamental Transaction unless (i) such Fundamental Transaction has
been approved in advance in writing by the Required Holders, and (ii) the
Successor Entity assumes in writing all of the obligations of the applicable
Obligor(s) under this Debenture and the other Transaction Documents in
accordance with the provisions of this Section 4(a) pursuant to
written agreements in form and substance reasonably satisfactory to the Required
Holders and approved by the Required Holders prior to such Fundamental
Transaction.  Upon the occurrence of any
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Debenture referring to the “Company”, the “Parent”,
and/or the “Obligors”, as applicable, shall refer instead to the Successor
Entity), and may exercise every right and power of the applicable Obligor and
shall assume all of the obligations of the applicable Obligor(s) under
this Debenture with the same effect as if such Successor Entity had been named
as the “Company”, “Parent”, or “Obligor” herein.  The provisions of this Section shall
apply similarly and equally to successive Fundamental Transactions and shall be
applied without regard to any limitations on the redemption of this Debenture.


 


(b)                                 Redemption Right.  No sooner than fifteen (15) days nor later
than ten (10) days prior to the consummation of a Change of Control, but
not prior to the public announcement of such Change of Control, the Obligors
shall deliver written notice thereof via facsimile and overnight courier to the
Holder (a “Change of Control Notice”).  At any time during the period beginning after
the Holder’s receipt of a Change of Control Notice and ending on the date of
the consummation of such Change of Control (or, in the event a Change of
Control Notice is not delivered at least ten (10) days prior to a Change
of Control, at any time on or after 


 


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the
date which is ten (10) days prior to a Change of Control and ending ten (10) days
after the consummation of such Change of Control), the Required Holders may
require the Obligors to redeem all or any portion of the Debentures by
delivering written notice thereof (“Change of
Control Redemption Notice”) to the Obligors, which Change of Control
Redemption Notice shall indicate the portion of the Debentures each Holder is
electing to redeem.  The portion of this
Debenture subject to redemption pursuant to this Section 4 shall be
redeemed by the Obligors at a price equal to 110% of the sum of the amount
being redeemed together with accrued and unpaid Interest with respect to such
amount and accrued and unpaid Late Charges with respect to such amount and
Interest (the “Change of Control Redemption
Price”).  Redemptions required
by this Section 4 shall be made in accordance with the provisions of Section 7
and shall have priority to payments to stockholders in connection with a Change
of Control.


 


(5)                                  COMPANY REDEMPTION.  The Obligors may elect to pay to the Holder
of this Debenture the Company Redemption Amount, subject to and in accordance
with the terms of this Section 5, by redeeming the Principal, in whole but
not in part, in accordance with this Section 5 (a “Company Redemption”); provided that
all of the outstanding Principal must be redeemed by the Obligors, subject to
the provisions of this Section 5. 
On or prior to the date which is the sixth (6th) Business Day prior to
the Company Redemption (each, a “Company
Redemption Notice Due Date”), the Obligors shall deliver written
notice (each, a “Company Redemption Notice”),
to the Holder which Company Redemption Notice shall state the amount which the
Obligors elect to redeem pursuant to a Company Redemption (the “Company Redemption Amount”), which shall be
equal to 110% of the outstanding Principal, together with accrued and unpaid
Interest with respect to such Company Redemption Amount and accrued and unpaid
Late Charges with respect to such Company Redemption Amount and Interest.  Each Company Redemption Notice shall be
irrevocable.  The Obligors shall redeem
the applicable Company Redemption Amount of this Debenture pursuant to this Section 5.  If the Obligors elect a Company Redemption,
then the Company Redemption Amount which is to be paid to the Holder on the
applicable Company Redemption Date shall be redeemed by the Obligors on such
Company Redemption Date, and the Obligors shall pay to the Holder on such
Company Redemption Date, by wire transfer of immediately available funds, an
amount in cash equal to the Company Redemption Amount.


 


(6)                                  NON-CIRCUMVENTION.  The Company and Parent hereby covenant and
agree that neither the Company nor Parent will, by amendment of its Articles of
Incorporation, Bylaws or through any reorganization, transfer of assets,
consolidation, merger, scheme of arrangement, dissolution, issue 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, and will at all times in
good faith carry out all of the provisions of this Debenture and take all
action as may be required to protect the rights of the Holder of this
Debenture.


 


(7)                                  HOLDER’S REDEMPTIONS.


 


(a)                                  Mechanics.  The Obligors shall deliver the applicable
Event of Default Redemption Price to the Holder within five Business Days after
the Obligors’ receipt of the Required Holders’ Event of Default Redemption
Notice.  If the Required Holders have
submitted a Change of Control Redemption Notice in accordance with Section 4(b),
the Obligors 


 


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shall
deliver the applicable Change of Control Redemption Price to the Holder
concurrently with the consummation of such Change of Control if such notice is
received prior to the consummation of such Change of Control and within five (5) Business
Days after the Company’s receipt of such notice otherwise.  In the event of a redemption of less than all
of the Principal of this Debenture, the Obligors shall promptly cause to be
issued and delivered to the Holder a new Debenture (in accordance with Section 11(d))
representing the outstanding Principal which has not been redeemed.


 


(b)                                 Redemption by Holders.  Any Event of Default Redemption Notice or
Change of Control Redemption Notice for redemption or repayment as a result of
an event or occurrence substantially similar to the events or occurrences
described in Section 3(b), Section 4(b) or Section 8 is to
be delivered to the Obligors by the Required Holders.  If the Obligors receive any Event of Default
Redemption Notice or Change of Control Redemption Notice and the Obligors are
unable to redeem all Principal, interest and other amounts designated in such
Redemption Notice, then the Obligors shall redeem a pro rata amount from each
holder of the Debentures (including the Holder) based on the Principal amount
of the Debentures submitted for redemption pursuant to such Event of Default
Redemption Notice or Change of Control Redemption Notice received by the
Obligors from the Required Holders.


 


(8)                                  COVENANTS.


 


(a)                                  Rank.  All payments due under this Debenture shall
be senior in right of payment to all other Indebtedness of the Company and its
Subsidiaries except for Permitted Indebtedness that is secured by Permitted
Liens.


 


(b)                                 Incurrence of Indebtedness.  So long as this Debenture is outstanding,
Parent and the Company shall not, and neither Parent nor the Company shall
permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
assume or suffer to exist any Indebtedness, other than (i) the
Indebtedness evidenced by this Debenture, and (ii) Permitted Indebtedness
that is either unsecured or secured by Permitted Liens.


 


(c)                                  Existence of Liens.  So long as this Debenture is outstanding,
Parent and the Company shall not, and neither Parent nor the Company shall
permit any of its Subsidiaries to, directly or indirectly, allow or suffer to
exist any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract
rights) owned by Parent, the Company or any of either of its Subsidiaries
(collectively, “Liens”) other than
Permitted Liens.


 


(d)                                 Restricted Payments.  Parent shall not, the Company shall not, and
neither Parent nor the Company shall permit any of its Subsidiaries to,
directly or indirectly,


 


(i)                                     declare or pay any dividend or make any other payment or
distribution on account of the Parent’s Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Parent) or to the direct or indirect holders of the Parent’s
Equity Interests in their capacity as such;


 


(ii)                                  purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the 


 


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Parent)
any Equity Interests of the Parent or any direct or indirect parent of the
Parent in excess of $200,000 per calendar year; or


 


(iii)                               make any payment on or with respect to, accelerate the
maturity of, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness of the Company or the Parent, except a payment of
interest, principal or other amounts due at the stated maturity thereof.


 


(e)                                  Asset Sales.  Parent shall not, the Company shall not, and
neither Parent nor the Company shall permit any of its Subsidiaries to,
directly or indirectly, consummate any Asset Sale.


 


(f)                                    Use of Proceeds.  The Obligors shall use the proceeds of this
Debenture:  (i) for the fees and
expenses associated with the sale of the Debenture and Common Stock; (ii) to
pay certain costs, expenses, and obligations of the Obligors as provided for
the in the Plan of Reorganization, and (iii) for general corporate
purposes.


 


(g)                                 Ratification of Obligations and Liens.  Each of the
Obligors hereby ratifies and confirms all of its respective obligations under,
or in connection with, the Transaction Documents and all of the documents,
instruments, and agreements executed, or otherwise existing, in connection
therewith (other than the Registration Rights Agreement and the Securities
Purchase Agreement), as amended, modified, and restated hereby. Without
limiting the generality of the foregoing, each of the Obligors hereby expressly
acknowledges and agrees that all Liens granted by either of the Obligors under
any of the Security Documents heretofore executed in connection with the Prior
Senior Secured Debentures shall continue to secure the indebtedness,
obligations, and liabilities of each of the Obligors under this Debenture with
the same force and effect as if this Debenture was specifically described in
each of such Security Documents as indebtedness specifically secured thereby.


 


(h)                                 Further Assurances.
Each of the Obligors hereby agrees to hereafter take such additional actions,
and execute and deliver such additional documentation (in form and substance
reasonably acceptable to the Holder) as the Holder may, from time to time
hereafter, reasonably request in order to further implement, confirm, preserve,
protect, continue, perfect, or otherwise effectuate the terms and provisions of
this Debenture and/or any of the other Transaction Documents.


 


(9)                                  VOTE TO ISSUE, OR CHANGE THE TERMS OF, DEBENTURES.  The affirmative
vote at a meeting duly called for such purpose or the written consent without a
meeting of the Required Holders shall be required for any change or amendment
to this Debenture.


 


(10)                            TRANSFER.                             This Debenture may be offered, sold, assigned or transferred
by the Holder without the consent of the Obligors, or either of them, subject
only to the following provisions:


 


(a)                                  Transfer or
Resale.  Each Holder understands that:
this Debenture has not been and is not being registered under the 1933 Act or
any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (i) subsequently registered thereunder, (ii) 


 


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such
Holder shall have delivered to the Company and Parent an opinion of counsel, in
a generally acceptable form, to the effect that this Debenture may be sold,
assigned or transferred pursuant to an exemption from such registration, or (iii) such
Holder provides the Company and Parent with reasonable assurance that this
Debenture can be sold, assigned or transferred pursuant to Rule 1544 or Rule 144A
promulgated under the 1933 Act (or, in each case, a successor rule thereto);
provided, however, that this Debenture may
be pledged in connection with a bona fide margin account or other loan or
financing arrangement secured by this Debenture and such pledge of this
Debenture shall not be deemed to be a transfer, sale or assignment of this
Debenture hereunder, and no Holder effecting a pledge of this Debenture shall
be required to provide the Company or Parent with any notice thereof or
otherwise make any deliver to the Company or Parent pursuant to this Debenture
or any other Transaction Document.


 


(b)                                 Legends.  Each Holder understands that the certificates
or other instruments representing this Debenture, except as set forth below,
shall bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):


 


THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS.  THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144a UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


 


The legend set
forth above shall be removed and the Company and/or Parent, as applicable,
shall issue a new Debenture without such legend to the holder of this Debenture
upon which it is stamped, if (i) this Debenture is registered for resale
under the 1933, (ii) in connection with a sale, assignment or other
transfer, such holder provides the Company or Parent, as applicable, with an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of this Debenture may be made without registration
under the applicable requirements of the 1933 Act, or (iii) this Debenture
is sold, assigned or transferred pursuant to Rule 144, or such holder
provides the Company or Parent, as applicable, with reasonable assurance that
this Debenture can be sold, assigned, or transferred pursuant to Rule 144(k).


 


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(11)                            REISSUANCE OF THIS DEBENTURE.


 


(a)                                  Transfer.  If this Debenture is to be transferred, the
Holder shall surrender this Debenture to the Obligors, whereupon the Obligors
will forthwith issue and deliver upon the order of the Holder a new Debenture
(in accordance with Section 11(d)), registered as the Holder may request,
representing the outstanding Principal being transferred, by the Holder and, if
less then the entire outstanding Principal is being transferred, a new
Debenture (in accordance with Section 11(d)) to the Holder representing
the outstanding Principal not being transferred.


 


(b)                                 Lost, Stolen or Mutilated Debenture.  Upon receipt by the
Obligors of evidence reasonably satisfactory to the Obligors of the loss,
theft, destruction or mutilation of this Debenture, and, in the case of
mutilation, upon surrender and cancellation of this Debenture, the Obligors
shall execute and deliver to the Holder a new Debenture (in accordance with Section 11(d))
representing the outstanding Principal.


 


(c)                                  Debenture Exchangeable for Different Denominations.  This Debenture is
exchangeable, upon the surrender hereof by the Holder at the principal office
of the Parent, for a new Debenture or Debentures (in accordance with Section 11(d) and
in Principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Debenture, and each such new Debenture will
represent such portion of such outstanding Principal as is designated by the
Holder at the time of such surrender.


 


(d)                                 Issuance of New Debentures.  Whenever the Obligors are required to issue a
new Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall
be of like tenor with this Debenture, (ii) shall represent, as indicated
on the face of such new Debenture, the Principal remaining outstanding (or in
the case of a new Debenture being issued pursuant to Section 11(a) or
Section 11(c), the Principal designated by the Holder which, when added to
the Principal represented by the other new Debentures issued in connection with
such issuance, does not exceed the Principal remaining outstanding under this
Debenture immediately prior to such issuance of new Debentures), (iii) shall
have an issuance date, as indicated on the face of such new Debenture, which is
the same as the Issuance Date of this Debenture, (iv) shall have the same
rights, security, benefits, and conditions as this Debenture, and (v) shall
represent accrued Interest and Late Charges on the Principal and Interest of
this Debenture, from the Issuance Date.


 


(12)                            REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF.  The remedies provided in this Debenture shall
be cumulative and in addition to all other remedies available under this
Debenture and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief),
and nothing herein shall limit the Holder’s right to pursue actual and
consequential damages for any failure by the Obligors to comply with the terms
of this Debenture.  Amounts set forth or
provided for herein with respect to payments and the like (and the computation
thereof) shall be the amounts to be received by the Holder and shall not,
except as expressly provided herein, be subject to any other obligation of the
Obligors (or the performance thereof). 
The Obligors each acknowledge and agree that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate.  Each Obligor therefore agrees that, in the
event of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available 


 


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remedies,
to an injunction restraining any breach, without the necessity of showing
economic loss and without any bond or other security being required.


 


(13)                            PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this
Debenture is placed in the hands of an attorney for collection or enforcement
or is collected or enforced through any legal proceeding or the Holder
otherwise takes action to collect amounts due under this Debenture or to
enforce the provisions of this Debenture or (b) there occurs any
bankruptcy, reorganization, receivership of either Obligor or other proceedings
affecting creditors’ rights and involving a claim under this Debenture, then
the Obligors shall, jointly and severally, pay the costs incurred by the Holder
for such collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding, including, but
not limited to, attorneys’ fees and disbursements.


 


(14)                            CONSTRUCTION; HEADINGS.  This Debenture shall be deemed to be jointly
drafted by the Obligors and the Holder and shall not be construed against any
Person as the drafter hereof.  The
headings of this Debenture are for convenience of reference and shall not form
part of, or affect the interpretation of, this Debenture.


 


(15)                            FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay
on the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.


 


(16)                            DISPUTE RESOLUTION.  In the case of a dispute as to the
determination of the Redemption Price, the Obligors shall submit the disputed
determinations or arithmetic calculations via facsimile within one (1) Business
Day of receipt, or deemed receipt, of the Redemption Notice or other event
giving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Obligors are unable to
agree upon such determination or calculation within one (1) Business Day
of such disputed determination or arithmetic calculation being submitted to the
Holder, then the Obligors shall, within one Business Day submit via facsimile
the disputed arithmetic calculation of the Redemption Price to the Parent’s
independent, outside accountant.  The
Obligors, at the Obligors’ expense, shall cause the accountant to perform the
determinations or calculations and notify the Obligors and the Holder of the
results no later than five (5) Business Days from the time it receives the
disputed determinations or calculations. 
Such accountant’s determination or calculation, as the case may be,
shall be binding upon all parties absent demonstrable error.


 


(17)                            NOTICES; PAYMENTS.


 


(a)                                  Notices.  Any notices, consents, waivers or other
communications require or permitted to be given under the terms of this
Debenture and/or any of the other Transaction Documents shall, except to the
extent specifically provided otherwise in an applicable Transaction Document,
be in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
business day after deposit with an overnight courier service, in each 


 


10

















 


case
properly addressed to the party to receive the same.  The addresses and facsimile numbers for such
communications shall be:


 


	
   

  	
  If to the Company:

  	
   

  
	
   

  	
  PRB Oil &
  Gas, Inc.

  	
   

  
	
   

  	
  1875 Lawrence Street,
  Suite 450

  	
   

  
	
   

  	
  Denver, Colorado 80202

  	
   

  
	
   

  	
  Telephone:

  	
  303
  308-1330

  
	
   

  	
  Facsimile:

  	
  303
  308-1590

  
	
   

  	
  Attention:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  With
  a copy (for informational purposes only) to:

  
	
   

  	
   

  
	
   

  	
  Douglas
  R. Wright, Esq.

  
	
   

  	
  Faegre &
  Benson LLP

  
	
   

  	
  3200
  Wells Fargo Center

  
	
   

  	
  1700
  Lincoln Street

  
	
   

  	
  Denver,
  CO 80203

  
	
   

  	
  Telephone:

  	
  303
  607-3500

  
	
   

  	
  Facsimile:

  	
  303
  607-3600

  
	
   

  	
   

  	
   

  
	
   

  	
  If
  to Parent:

  
	
   

  	
   

  	
  Black
  Raven Energy, Inc.

  
	
   

  	
  1875
  Lawrence Street, Suite 450

  
	
   

  	
  Denver,
  Colorado 80202

  
	
   

  	
  Telephone:

  	
  303
  308-1330

  
	
   

  	
  Facsimile:

  	
  303
  308-1590

  
	
   

  	
  Attention:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  With
  a copy (for informational purposes only) to:

  
	
   

  	
  Douglas
  R. Wright, Esq.

  
	
   

  	
  Faegre &
  Benson LLP

  
	
   

  	
  3200
  Wells Fargo Center

  
	
   

  	
  1700
  Lincoln Street

  
	
   

  	
  Denver,
  CO 80203

  
	
   

  	
  Telephone:

  	
  303
  607-3500

  
	
   

  	
  Facsimile:

  	
  303
  607-3600

  
	
   

  	
   

  	
   

  
	
   

  	
  If
  to the initial Holder of this Debenture:

  
	
   

  	
  West
  Coast Opportunity Fund, LLC

  
	
   

  	
  2151
  Alessandro Drive, Suite 215

  
	
   

  	
  Ventura,
  CA 93001

  
	
   

  	
  Attention:

  	
  Atticus
  Lowe

  
	
   

  	
  Telephone:

  	
  805
  653-5333

  
	
   

  	
  Facsimile:

  	
  805
  648-6488

  
					



 


11

















 


	
   

  	
  With
  a copy (for informational purposes only) to:

  
	
   

  	
  Thompson &
  Knight LLP

  
	
   

  	
  Three
  Allen Center

  
	
   

  	
  333
  Clay Street, Suite 3300

  
	
   

  	
  Houston,
  TX 77002-4499

  
	
   

  	
  Telephone:

  	
  713
  653-8660

  
	
   

  	
  Facsimile:

  	
  713
  654-1871

  
	
   

  	
  Attention:

  	
  Rhett
  G. Campbell, Esq.

  



 


or
to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five days prior to the effectiveness of such change.  Written confirmation of receipt (A) given
by the recipient of such notice, consent, waiver or other communication, (B) mechanically
or electronically generated by the sender’s facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by an overnight courier service shall be
rebuttable evidence of personal service receipt by facsimile or receipt from an
overnight courier service in accordance with clause (i), (ii) or (iii) above,
respectively.


 


The
Obligors shall each provide the Holder with prompt written notice of all
actions taken pursuant to this Debenture, including in reasonable detail a
description of such action and the reason therefor.


 


(b)                                 Payments.  Whenever any payment of cash is to be made by
the Obligors, or either of them, to any Person pursuant to this Debenture, such
payment shall be made in lawful money of the United States of America by a
check drawn on an account of the applicable Obligor(s) and sent via
overnight courier service to such Person at such address as previously provided
to the Obligors in writing (which address, in the case of the initial Holder of
this Debenture, shall initially be as set forth in Subsection (a) above
for notice purposes); provided that the Holder may elect to receive a
payment of cash via wire transfer of immediately available funds by providing
the Obligors with prior written notice setting out such request and the Holder’s
wire transfer instructions.  Whenever any
amount expressed to be due by the terms of this Debenture is due on any day
which is not a Business Day, the same shall instead be due on the next
succeeding day which is a Business Day and, in the case of any Interest Date
which is not the date on which this Debenture is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of
determining the amount of Interest due on such date.  Any amount of Principal or other amounts due
under this Debenture or under any of the other the Transaction Documents, other
than Interest, which is not paid when due shall result in a late charge being
incurred and payable, jointly and severally, by the Obligors in an amount equal
to interest on such amount at the rate of eighteen percent (18.00%) per annum
from the date such amount was due until the same is paid in full (“Late Charge”).


 


(18)                            CANCELLATION.  After all Principal, accrued Interest and
other amounts at any time owed on this Debenture have been paid in full in
cash, this Debenture shall automatically be deemed canceled, shall be
surrendered to the Parent for cancellation and shall not be reissued.


 


12
















 


(19)                            WAIVER OF NOTICE.  To the extent permitted by law, the Obligors
hereby waive demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
of this Debenture.


 


(20)                            GOVERNING LAW.  This Debenture shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Debenture and all disputes
arising hereunder shall be governed by, the laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.


 


(21)                            CERTAIN DEFINITIONS.  For purposes of this Debenture, the following
terms shall have the following meanings:


 


(a)                                  “Asset Sale” means (i) the sale, lease, conveyance or other
disposition of any assets or rights other than in the ordinary course of business,
and (ii) the sale of Equity Interests in any of the Subsidiaries of either
Obligor; provided that the following shall not constitute an “Asset Sale”:  (A) sales and recourse lease-backs of
compressors that have been approved in advance in writing by Lender; (B) farm-outs,
partnerships and other participation agreements or arrangements typical in the
oil and gas industry that have been approved in advance in writing by Lender
and distributions by the Obligors or any of their respective Subsidiaries of an
interest in or right to an oil and gas project, to participants, co-owners,
partners, operators, interest holders or others, that are required pursuant to
the documentation governing such oil and gas project if such agreements or
arrangements are not required to be disclosed in a Form 8-K under the
Securities Exchange Act of 1934; (C) the sale of equipment that has become
worn out or obsolete; and (D) the sale of assets if the proceeds therefrom
shall be used to immediately replace such assets and be secured pursuant to the
Security Documents and the value of such assets shall not exceed $100,000 for
any one sale or in the aggregate $300,000 in any calendar year.


 


(b)                                 “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in the City of New York, New York are authorized or
required by law to remain closed.


 


(c)                                  “Capital Lease Obligation” means, at the time any
determination is to be made, the amount of the liability in respect of a
capital lease that would at that time be required to be capitalized on a
balance sheet prepared in accordance with GAAP.


 


(d)                                 “Capital Stock” means:  (1) in
the case of a corporation, corporate stock; (2) in the case of an
association or business entity, any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock; (3) in
the case of a partnership or limited liability company, partnership interests
(whether general or limited) or membership interests; and (4) any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing
Person, but excluding from all of the foregoing any debt securities convertible
into Capital Stock, whether or not such debt securities include any right of
participation with Capital Stock.


 


13





















 


(e)                                  “Change of Control” means any Fundamental
Transaction other than (i) any reorganization, recapitalization or
reclassification of the shares of Capital Stock in which holders of the voting
power as to either of the Obligors immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities, or (ii) pursuant
to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of either of the Obligors.


 


(f)                                    “Common Stock” shall mean the common stock of the Parent, par value $.001
per share.


 


(g)                                 “Effective Date” has the meaning ascribed to such term in the Plan of
Reorganization..


 


(h)                                 “Equity Interests” means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).


 


(i)                                     “Exit Financing” means that one certain Principal advance, in the amount of
up to $1,500,000, made by Holder to the Obligors as provided in the Plan of
Reorganization and advanced on the Effective Date.


 


(j)                                     “Fundamental Transaction” means that either of the
Obligors shall, directly or indirectly, in one or more related transactions, (i) consolidate
or merge with or into (whether or not the applicable Obligor is the surviving
corporation) another Person, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of
either of the Obligors to another Person, or (iii) allow another Person to
make a purchase, tender or exchange offer that is accepted by the holders of
more than the 50% of the outstanding shares of Capital Stock (not including any
shares of Capital Stock held by the Person or Persons making or party to, or
associated or affiliated with the Persons making or party to, such purchase,
tender or exchange offer), or (iv) consummate a stock purchase agreement
or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement).with another Person
whereby such other Person acquires more than the 50% of the outstanding shares
of Capital Stock (not including any shares of Capital Stock held by the other
Person or other Persons making or party to, or associated or affiliated with
the other Persons making or party to, such stock purchase agreement or other business
combination), or (v) reorganize, recapitalize or reclassify its Capital
Stock.


 


(k)                                  “GAAP” means United States generally accepted accounting
principles, consistently applied.


 


(l)                                     “Hedging Obligations” means, with respect to any
specified Person, the obligations of such Person under:


 


14





















 


(i)                                     interest rate swap agreements
(whether from fixed to floating or from floating to fixed), interest rate cap
agreements and interest rate collar agreements;


 


(ii)                                  other agreements or arrangements
designed to manage interest rates or interest rate risk; and


 


(iii)                               other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange rates
or commodity prices.


 


(m)                               “Indebtedness” means, any indebtedness (excluding accrued expenses and
trade payables), whether or not contingent:


 


(i)                                     in respect of borrowed money;


 


(ii)                                  evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof);


 


(iii)                               in respect of banker’s
acceptances;


 


(iv)                              representing Capital Lease
Obligations;


 


(v)                                 representing the balance
deferred and unpaid of the purchase price of any property or services due more
than six months after such property is acquired or such services are completed;
or


 


(vi)                              representing any Hedging
Obligations,


 


if and to the extent any of the preceding items (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance
sheet of the Company prepared in accordance with GAAP.  In addition, the term “Indebtedness” includes
all Indebtedness of others secured by a Lien on any asset of the Company or its
Subsidiaries (whether or not such Indebtedness is assumed by the Company or
such Subsidiary) and, to the extent not otherwise included, the guarantee by
the Company or any of its Subsidiaries of any Indebtedness of any other Person.


 


(n)                                 “Material Adverse Effect” means any material adverse
effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or Prospects of the Obligors and their
Subsidiaries, taken as a whole, or on the transactions contemplated by this
Debenture and by the other Transaction Documents, or on the authority or
ability of either Obligor to perform its respective obligations under this
Debenture and/or under any of the other Transaction Documents.


 


(o)                                 “Mortgages” means, collectively, (i) any and all mortgages, deeds
of trust, assignments of production, security agreements, and/or financing
statements heretofore executed and delivered by the Obligors, or either of
same, securing the Prior Senior Secured Debentures, including without
limitation, any of same that are described or referred to in Exhibit “A”
attached hereto, (ii) any and all other or additional mortgages, deeds of
trust, assignments of


 


15





















 


production, security agreements, and/or
financing statements that may contemporaneously herewith or hereafter be
executed and delivered by the Obligors, or either of same, or any other Person,
securing this Debenture, and (iii) any and all amendments, modifications,
extensions, restatements, supplements, and other modifications of or to any or
all of the foregoing.


 


(p)                                 “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person, or, if there is more than one such Person or
Parent Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental Transaction.


 


(q)                                 “Payment Quarter” means each of:  the
period beginning on and including the Issuance Date and ending on and including
March 31, 2009; the period beginning on and including April 1, 2009
and ending on and including June 30, 2009; the period beginning on and
including July 1, 2009 and ending on and including September 30,
2009; the period beginning on and including October 1, 2009 and ending on
and including December 31, 2009; the period beginning on and including January 1,
2010 and ending on and including March 31, 2010; the period beginning on
and including April 1, 2010 and ending on and including June 30,
2010; the period beginning on and including July 1, 2010 and ending on and
including September 30, 2010; and the period beginning on and including October 1,
2010 and ending on and including December 31, 2010.


 


(r)                                    “Permitted Indebtedness” means (a) purchase money
debt, Capital Lease Obligations or other Indebtedness incurred in connection
with the acquisition of an interest in property, equipment, entities, or other
assets or otherwise in the ordinary course of business and the refinancing,
renewal or extension (but not any increase in the amount)  thereof, provided that such purchase money
debt, Capital Lease Obligations or other Indebtedness is recourse only to the
interests in property, equipment, entities or other assets so acquired and (b) Indebtedness
of the Parent, the Company or any Subsidiary outstanding as of the Effective
Date (after giving effect to the terms and provisions of the Plan of
Reorganization) and the refinancing, renewal or extension thereof provided that
(i) there are no additional obligors with respect thereto, (ii) there
is no shortening of the maturity thereof, (iii) principal amount thereof
is not increased, and (iv) the security interest is not changed or
amended; (c) recourse leases of compressors that have been approved in
advance in writing by Lender, (d) additional Indebtedness not to exceed
$500,000 at any time which shall not be secured or shall be expressly
subordinated to this Debenture pursuant to subordination documentation in form
and substance acceptable to the Holder; and (e) Indebtedness of the
Parent, the Company or any Subsidiary required or expressly permitted by the
terms and provisions of the Plan of Reorganization and the refinancing, renewal
or extension (but not any increase in the amount) thereof.


 


(s)                                  “Permitted Liens” means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any
Lien created by operation of law, such as materialmen’s liens, mechanics’ liens
and other similar liens, arising in the ordinary course of business with
respect to a liability that is not yet due or delinquent or that are being
contested in good faith by appropriate proceedings, (iv) Liens securing
the Obligors’ obligations under this Debenture and/or the Prior


 


16





















 


Senior Secured Debentures, (v) Liens
securing Permitted Indebtedness, (vi) royalties, overriding royalties,
reversionary interests, production payments and similar burdens granted by
Parent or any Subsidiary with respect to the interests owned by such Person,
consistent with past practice and industry standards, if the net cumulative
effect of such burdens does not operate to deprive such Person of any material
right in respect of its assets or properties (except for rights customarily
granted with respect to such interests), if such royalties, overriding
royalties, reversionary interests, production payments and similar burdens are
not required to be disclosed in a Form 8-K under the Securities Exchange
Act of 1934; (vii) easements, rights of way, servitudes, permits, surface
leases and other rights in respect to surface operations, pipelines, grazing,
logging, canals, ditches, reservoirs or the like, conditions, covenants and
other restrictions, and easements of streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other easements and rights of way
on, over or in respect of Parent or any Subsidiary’s assets or properties,
consistent with past practice and industry standards and that are not required
to be disclosed in a Form 8-K under the Securities Exchange Act of 1934; (viii) all
contracts, agreements and instruments, and all defects and irregularities and
other matters affecting Parent or any Subsidiary’s assets and properties which
were in existence at the time such assets and properties were originally
acquired by such Person and all routine operational agreements entered into in the
ordinary course of business, which contracts, agreements, instruments, defects,
irregularities and other matters and routine operational agreements are not
such as to, individually or in the aggregate, interfere materially with the
operation, value or use of Parent or any Subsidiary’s assets and properties,
considered in the aggregate, consistent with past practice and industry
standards and that are not required to be disclosed in a Form 8-K under
the Securities Exchange Act of 1934; (ix) Liens in connection with
workmen’s compensation, unemployment insurance or other social security, old
age pension or public liability obligations; (x) legal or equitable
encumbrances up to an aggregate amount of $250,000 deemed to exist by reason of
the existence of any litigation or other legal proceeding or arising out of a
judgment or award with respect to which an appeal is being prosecuted in good
faith; or (xi) rights reserved to or vested in any municipality, governmental,
statutory or other public authority to control or regulate Parent or any
Subsidiary’s assets and properties in any manner, and all applicable laws, rules and
orders from any governmental authority, to the extent any such rights could not
be reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.


 


(t)                                    “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.


 


(u)                                 “Plan of Reorganization” means the Plan of
Reorganization filed and confirmed in the chapter 11 cases of In re PRB Energy, Inc., Case No. 08-12658, and In re PRB Oil & Gas, Inc., Case No. 08-12661, both
pending in the United States Bankruptcy Court for the District of Colorado.


 


(v)                                 “Prior Senior Secured Debentures” means two Senior Secured
Debentures, each dated December 28, 2006 and each in the original
principal amount of $7,500,000, one of which was originally payable to the
order of Lender and the other of which was originally payable to the order of
DKR Soundshore Oasis Holding Fund Ltd.


 


17





















 


(w)                               “Property” means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible,
including, without limitation, capital stock.


 


(x)                                   “Registration Rights Agreement” means that certain
Registration Rights Agreement, dated as of December 28, 2006, by and among
the Parent and the original holders of the Prior Senior Secured Debentures.


 


(y)                                 “Required Holders” means the holders of Debentures representing at least a
majority of the aggregate Principal amount of the Debentures then outstanding.


 


(z)                                   “SEC” means the United States Securities and Exchange
Commission.


 


(aa)                            “Securities Purchase Agreement” means that certain Securities
Purchase Agreement, dated as of December 28, 2006, by and among the
Obligors and the original holders of the Prior Senior Secured Debentures.


 


(bb)                          “Security Agreements” means, collectively, (i) any
and all pledges, security agreements, and/or financing statements heretofore
executed and delivered by the Obligors, or either of same, covering personal
property and securing the Prior Senior Secured Debentures, including without
limitation, any of same that are described or referred to in Exhibit “A”
attached hereto, (ii) any and all other or pledges, security agreements,
collateral assignments, financing statements, and/or other collateral documents
covering personal property that may contemporaneously herewith or hereafter be
executed and delivered by the Obligors, or either of same, or any other Person,
securing this Debenture, and (iii) any and all amendments, modifications,
extensions, restatements, supplements, and other modifications of or to any or
all of the foregoing.


 


(cc)                            “Security Documents” means, collectively, the
Security Agreements, the Mortgages, if any, and all other instruments,
documents and agreements delivered by either of the Obligors or any of their
respective Subsidiaries in order to grant to any holder of this Debenture, or
any of the Prior Senior Secured Debentures, a Lien on any real, personal or
mixed property of either of the Obligors or one of their respective
Subsidiaries as security for the obligations under this Debenture and/or any of
the Prior Senior Secured Debentures.


 


(dd)                          “Subsidiaries” means any entity in which either of the Obligors, directly
or indirectly, owns or controls capital stock, equity interest(s), or other
indicia of ownership.


 


(ee)                            “Successor Entity” means the Person, which may be an Obligor, formed by,
resulting from or surviving any Fundamental Transaction or the Person with
which such Fundamental Transaction shall have been made.


 


(ff)                                “Transaction Documents” means this Debenture, the
Security Documents, and any and all other or additional documents, instruments,
and agreements relating


 


18





















 


to, or executed, or otherwise existing, in
connection herewith or therewith, other than the Registration Rights Agreement
and the Securities Purchase Agreement.


 


(22)                            DISCLOSURE.  Upon receipt or delivery by either Obligor of
any notice in accordance with the terms of this Debenture, unless the Obligors
have in good faith determined that the matters relating to such notice do not
constitute material, nonpublic information relating to the Obligors or their
respective Subsidiaries, the Obligors shall within one (1) Business Day
after any such receipt or delivery publicly disclose such material, nonpublic
information on a Current Report on Form 8-K or otherwise.  In the event that the Obligors believe that a
notice contains material, nonpublic information relating to the Obligors or
their respective Subsidiaries, the Obligors so shall indicate to such Holder
contemporaneously with delivery of such notice, and in the absence of any such
indication, the Holder shall be allowed to presume that all matters relating to
such notice do not constitute material, nonpublic information relating to
either of the Obligors or any of their respective Subsidiaries.


 


(23)                            RENEWAL
AND EXTENSION OF EXISTING INDEBTEDNESS; ADDITONAL INDEBTEDNESS.  The indebtedness evidenced by this Debenture
constitutes (i) in part, a renewal, extension, amendment, and restatement
(but not a novation or extinguishment) of the indebtedness of the Obligors to
the holders of the Prior Senior Secured Debentures (all of which indebtedness
is currently owned by the Holder of this Debenture), and, (ii) in part,
the advance by the Holder to the Obligors of additional funds, in the amount of
up to $1,500,000, as the Exit Financing under the Plan of Reorganization.


 


[Signature Page Follows]


 


19

















 


IN WITNESS WHEREOF, the Obligors have caused this Debenture to be duly
executed as of the Issuance Date set out above.


 


	
   

  	
  PRB OIL & GAS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William F. Hayworth

  
	
   

  	
  Name: William F. Hayworth

  
	
   

  	
  Title: President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BLACK RAVEN ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William F. Hayworth

  
	
   

  	
  Name: William F. Hayworth

  
	
   

  	
  Title: President and Chief Executive Officer

  



 


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