Exhibit 10.2
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY
STATE.
NEITHER THIS CONVERTIBLE PROMISSORY NOTE
NOR ANY INTEREST
HEREIN MAY BE
OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED IN THE
ABSENCE OF SUCH
REGISTRATION AND QUALIFICATION UNLESS THE
PROSPECTIVE TRANSFEREE
PROVIDES
MAKER WITH AN OPINION OF COUNSEL (WHICH
SHALL NOT BE AT THE EXPENSE OF MAKER)
REASONABLY SATISFACTORY TO MAKER THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE
ACT, AND DOES NOT REQUIRE
REGISTRATION OR QUALIFICATION UNDER ANY
STATE SECURITIES LAWS.
THE OPINION
SHALL ALSO STATE THAT AS A RESULT OF SUCH
TRANSFER, MAKER IS UNDER NO
OBLIGATION TO REGISTER UNDER THE SECURITIES
ACT OF 1934, AS AMENDED, THE
INVESTMENT COMPANY ACT OF 1940 OR ANY OTHER
FEDERAL OR STATE SECURITIES LAW.
CONVERTIBLE PROMISSORY NOTE
May 4, 2005
$3,150,000.00
FOR VALUE
RECEIVED, the undersigned, MILLER PETROLEUM, INC., a Tennessee
corporation ("Maker"), promises to pay to
the order of PROSPECT ENERGY
CORPORATION (herein called "Payee", which
term shall herein in every instance
refer to any owner or holder of this Note)
the sum of THREE MILLION ONE
HUNDRED FIFTY THOUSAND DOLLARS
($3,150,000.00) or so much thereof as may be
advanced to Maker by Payee from time to
time, together with interest on the
principal hereof outstanding until
maturity, said principal and interest being
payable in lawful money of the United
States of America as more particularly
provided in that certain Credit Agreement
of even date herewith, between Maker
and Payee, as such may be amended or
restated from time to time (the "Credit
Agreement"). Capitalized terms used, but not
otherwise defined, herein shall
have the meaning given such terms in the
Credit Agreement.
At the closing
of each Equity Offering by Maker Holder shall have the
option, exercisable in its sole discretion,
to convert part or all of the
unpaid principal balance of and accrued
unpaid interest on this Convertible
Promissory Note into fully paid and
non-assessable shares of stock in
connection with such Equity Offering, with
the same rights and preferences, if
any, as other shares of stock. Such voluntary conversion shall be
exercised
at any time during or following the Equity
Offering and on or before the
Maturity Date by giving written notice
thereof to Maker. The
number of shares
of stock to be issued upon such conversion
shall be equal to the quotient
obtained by dividing (a) the unpaid
principal of and accrued unpaid interest
on this Convertible Promissory Note on the
date of conversion, by (b) the
price per share equal to the lesser of (i)
the price of the stock issued to
the investors in the Equity Offering and
(ii) $1.50 per share (the "Conversion
Price"), and this Convertible Promissory
Note shall be cancelled as to the
number of shares received by Holder times
the Non-Qualified Conversion Price.
If the Equity Offering does not occur prior
to the Maturity Date, Holder will
be entitled to cash only.
Upon conversion
of this Convertible Promissory Note into stock, Holder
shall surrender this Convertible Promissory
Note at the offices of Maker at
3651 Baker Highway, Huntsville, Tennessee
37756, and Maker shall, at its
expense, deliver to Holder as soon as
practicable a certificate representing
the number of shares of stock provided in
the immediately preceding paragraph.
Irrespective of the date of issuance and
delivery of any certificates with
respect thereto, shares of stock purchased
by conversion as provided herein
shall be, and be deemed to be, issued to
Holder as the record owner of such
shares as of the close of business on the
date on which this Convertible
Promissory Note shall have been surrendered
as aforesaid.
Maker covenants
that all shares of stock that may be issued upon
conversion of this Convertible Promissory
Note will, upon issuance thereof, be
validly issued, fully paid and
nonassessable and free from all preemptive
rights, taxes, liens and charges in respect
of the issue thereof.
No
fractional shares or scrip representing
fractional shares shall be issued upon
the exercise of the conversion rights
provided herein. In
lieu thereof, Maker
shall pay cash equal to any such fractional
shares, based upon the Conversion
Price. Issuance of certificates for stock
upon the conversion provid
