Exhibit 10.1
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY FEDERAL OR
STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE
DISPOSED OF ABSENT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE
STATE
SECURITIES LAWS UNLESS AND UNTIL THE HOLDER HEREOF PROVIDES (i)
INFORMATION
REASONABLY NECESSARY TO CONFIRM THAT SUCH REGISTRATION IS NOT
REQUIRED OR (ii)
AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$__________.00
_________________, 2005
THE
BEARD COMPANY, an Oklahoma corporation (the "Company"), promises to
pay
to the order of _______________________________ at Suite 320, 5600
North May
Avenue, Oklahoma City, Oklahoma 73112, or at such other place as
may be
designated in writing by the Holder, the amount of
________________________
DOLLARS ($___________.00) and interest thereon at the rate stated
below.
The
holder of this Note shall be referred to as the "Holder."
This
Note is part of a series of promissory notes issued in connection
with
a private offering (the "Private Placement Offering") made by the
Company
pursuant to a Private Placement Memorandum dated December 21, 2004,
as amended
on December 29, 2004, and as amended by Supplement #1 dated January
11, 2005.
The promissory notes shall be referred to collectively as the
"Notes."
1. Terms of the Note
1.1
Payment of Principal and Interest.
(a)
Prior to an Event of Default, the unpaid principal balance of this
Note
will accrue interest at 12% per annum. Commencing on August 15,
2005, and
continuing on each February 15 and August 15 thereafter until the
Maturity Date
the Company shall pay all accrued interest.
(b)
All interest will be computed on the basis of a 360 day year for
the
actual number of days in the period for which interest is
payable.
(c)
The entire unpaid principal balance of this Note plus all
accrued
interest shall be due and payable without notice on February 15,
2010 (the
"Maturity Date").
(d)
All payments received by the Holder shall be applied first to
interest
and any balance shall be applied to principal. During the existence
of any Event
of Default, the Holder may apply payments received as the Holder
may determine.
(e)
The obligations of the Company to pay principal and interest and
any
other amounts under this Note are collectively referred to as the
"Obligations."
1.2
Payments. Whenever any payment required by this Note is due on a
day
other than a Business Day, the payment shall be made on the next
succeeding
Business Day and the payment shall include interest for the days
the payment due
date was so extended.
1.3
Expenses. The Company will pay to the Holder its reasonable
attorneys'
fees, court costs, and other expenses incurred in collecting this
Note.
1.4
Additional Interest. Any amount not paid when due shall accrue
interest
at the rate specified above plus 3% per annum (the "Additional
Interest") and
all Additional Interest shall be paid as a condition precedent to
curing any
Event of Default hereunder.
1.5
Security and Collateral Agent Agreement. This Note shall be subject
to
all the terms and condition of the Security And Collateral Agent
Agreement dated
as of January 26, 2005, between InvesTrust, N.A. as the Collateral
Agent, the
Company, and Beard Technologies, Inc. in the form attached hereto
as Exhibit B
(the "Security Agreement") until the Security Agreement is
terminated.
1.6
Events of Default. Events of Default are: (a) the Company's failure
to
pay any Obligation when due that is not cured within 30 days; (b)
the occurrence
of any "Event of Default" as defined in the Security Agreement; or
(c) the
Company's failure to perform its obligations under Section 2.9 of
this Note when
due.
1.7
Acceleration. Subject to the provisions of the Security Agreement,
upon
the occurrence of an Event of Default, the Holder may at any time
thereafter
declare the Obligations evidenced hereby immediately due and
payable.
2. Conversion of the Note
2.1
Conversion Agent. The Company shall initially serve as its own
conversion agent. The Company may appoint another conversion agent
at any time.
The Company shall send Holder written notice within 30 days of any
change of
conversion agent. References in this Note to the "Conversion Agent"
shall refer
to the Company unless the Company has appointed another conversion
agent in
which case "Conversion Agent" shall mean the acting conversion
agent appointed
by the Company.
2.2
Conversion Privilege. At any time following the date of
original
issuance of this Note and prior to the close of business on the
business day
immediately preceding February 15, 2010, the Holder of this Note
may convert
such Note or any portion thereof into shares of the Company's
common stock (the
"Common Stock") (the shares of Common Stock issuable upon such
conversion, the
"Conversion Shares"), at the Conversion Price then in effect. The
number of
shares of Common Stock issuable upon conversion of this Note shall
be determined
by dividing the principal amount of the Note or portion thereof
surrendered for
conversion by the Conversion Price in effect on the conversion
date. The initial
conversion price of the Note is $1.00 per share (the "Conversion
Price") and is
subject to adjustment as provided in Section 2.7.
Upon
conversion of only a portion of the principal balance of the
Notes
surrendered for conversion, the Company shall issue and deliver
upon the written
order of the Holder, at the expense of the Company, a new Note for
any remaining
unpaid principal balance so surrendered as well as a certificate or
certificates
for the number of shares of Common Stock to which such Holder is
entitled, as
provided below. The Holder is not entitled to any rights of a
holder of Common
Stock until such Holder has converted this Note into Common
Stock.
2.3
Conversion Procedure. To convert this Note, the Holder must (i)
complete and manually sign the Conversion Notice, a form of which
is attached
hereto as Exhibit A and deliver it to the Conversion Agent (ii)
surrender the
Note to the Conversion Agent, (iii) furnish appropriate
endorsements and
transfer documents to the Conversion Agent and (iv) pay any
transfer or other
tax, if required. The date on which the Holder satisfies all of the
foregoing
requirements is the conversion date. As soon as practicable after
the conversion
date, the Company shall deliver to the Holder through its transfer
agent a
certificate for the number of whole shares of Common Stock issuable
upon the
conversion.
No
fractional shares of Common Stock shall be issued upon conversion
of the
Note. If more than one Note shall be surrendered for conversion at
one time by
the same holder, the number of full shares which shall be issuable
upon
conversion shall be computed on the basis of the aggregate
principal amount of
the Notes (or specified portions thereof to the extent permitted
hereby) so
surrendered. If any fractional share of Common Stock would be
issuable upon the
conversion of any Note or Notes, the Conversion Agent shall make an
adjustment
thereof in cash at the current market value thereof. For these
purposes, the
current market value of a share of Common Stock shall be the
closing price on
the first business day immediately preceding the day on which the
Note or Notes
are deemed to have been converted.
The
person in whose name the certificate is registered shall be deemed
to
be a stockholder of record on the conversion date; provided,
however, that no
surrender of this Note on any date when the stock transfer books of
the Company
shall be closed shall be effective to constitute the person or
persons entitled
to receive the shares of Common Stock upon such conversion as the
record holder
or holders of such shares of Common Stock on such date, but such
surrender shall
be effective to constitute the person or persons entitled to
receive such shares
of Common Stock as the record holder or holders thereof for all
purposes at the
close of business on the next succeeding day on which such stock
transfer books
are open; provided, further, that such conversion shall be at the
Conversion
Price in effect on the date that this Note shall have been
surrendered for
conversion, as if the stock transfer books of the Company had not
been closed.
Upon conversion of this Note, Holder shall no longer be a Holder of
this Note.
No
payment or adjustment will be made for accrued interest on a
converted
Note or for dividends or distributions on shares of Common Stock
issued upon
conversion of a Note, but if any Holder surrenders this Note for
conversion
between the record date for the payment of an installment of
interest and the
next interest payment date, then, notwithstanding such conversion,
the interest
payable on such interest payment date shall be paid to the Holder
on such record
date.
If
the Holder converts more than one Note at the same time, the number
of
shares of Common Stock issuable upon the conversion shall be based
on the
aggregate principal amount of Notes converted.
2.4
Forced Conversion. At any time after February 15, 2007, if the
weighted
average sales price of the Company's common stock has been more
than two times
the Conversion Price for sixty (60) consecutive trading days, the
Company may
give the Note holders written notice that they must convert their
Notes within
thirty (30) days after the date of such notice or that the Notes
will terminate
and become void as of 5:00 p.m., New York time on the thirty-first
(31st) day
(the "Forced Conversion Date") after the date of such notice.
Upon
such Forced Conversion, the person or persons entitled to receive
the
shares of Common Stock issuable upon such conversion will be
treated for all
purposes as the record holder or holders of such Common Stock on
the Forced
Conversion Date whether or not such holder or holders shall have
surrendered
their Notes to the Conversion Agent. Upon the Forced Conversion
Date, the
principal balance of the Notes shall be deemed paid and all
interest on the
Notes shall cease to accrue. As soon as practicable after the
surrender in
accordance with the procedures set forth in Section 2.3, the
Company shall then
issue and the Conversion Agent shall deliver to such holder a
certificate or
certificates for the number of shares of Common Stock to which such
holder shall
be entitled.
2.5
Taxes on Conversion. If the Holder converts a Note, he shall pay
any
documentary, stamp or similar issue or transfer tax due on the
issue of shares
of Common Stock upon such conversion. The Conversion Agent may
refuse to deliver
the certificates representing the Common Stock being issued in a
name other than
the Holder's name until the Conversion Agent receives a sum
sufficient to pay
any tax which will be due because the shares are to be issued in a
name other
than the Holder's name. Nothing herein shall preclude any tax
withholding
required by law or regulations.
2.6
Company To Provide Stock. The Company shall reserve out of its
authorized but unissued Common Stock a sufficient number of shares
of Common
Stock to permit the conversion of all outstanding Notes for shares
of Common
Stock. The shares of Common Stock or other securities issued upon
conversion of
this Notes shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY FEDERAL OR
STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF ABSENT REGISTRATION UNDER THE SECURITIES ACT
OF
1933 AND ANY APPLICABLE STATE SECURITIES LAWS UNLESS AND UNTIL
THE
HOLDER HEREOF PROVIDES (i) INFORMATION REASONABLY NECESSARY TO
CONFIRM
THAT SUCH
REGISTRATION IS NOT REQUIRED OR (ii) AN OPINION OF COUNSEL
TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
The
Company covenants that all shares of Common Stock delivered
upon
conversion of the Notes, shall be duly authorized, validly issued,
fully paid
and non-assessable and shall be free from preemptive rights and
free of any lien
or adverse claim.
2.7
Adjustment of Conversion Price. The Conversion Price shall be
that
price set forth in Section 2.2 of this Note and shall be adjusted
from time to
time by the Conversion Agent in the event the Company shall (i) pay
a dividend
or other distribution in shares of Common Stock to holders of
Common Stock, (ii)
subdivide its outstanding Common Stock into a greater number of
shares, (iii)
combine its outstanding Common Stock into a smaller number of
shares or (iv)
reclassify its outstanding Common Stock, the Conversion Price in
effect
immediately prior thereto shall be adjusted so that the Holder of
any Note
thereafter surrendered for conversion shall be entitled to receive
the number
