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
