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NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE
IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ SECURITIES ACT
”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.
HYPERDYNAMICS
CORPORATION
Secured Note
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Issuance
Date: February 6, 2008
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Original
Principal
Amount: $910,526
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No.
HDY 201
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FOR VALUE RECEIVED, HYPERDYNAMICS CORPORATION, a Delaware
corporation (the “ Company
”), hereby promises to pay to the order of YA GLOBAL
INVESTMENTS, L.P. or registered assigns (the “ Holder
”) the amount set out above as the Original Principal Amount
(as reduced pursuant to the terms hereof pursuant to redemption,
conversion or otherwise, the “ Principal
”) when due, whether upon the Maturity Date (as defined
below), on any Installment Date with respect to the Installment
Amount due on such Installment Date (each, as defined herein),
acceleration, redemption or otherwise (in each case in accordance
with the terms hereof) and to pay interest (“ Interest
”) on any outstanding Principal at the applicable Interest
Rate from the date set out above as the Issuance Date (the “
Issuance
Date ”) until the same becomes due and payable,
whether upon any Installment Date or the Maturity Date or
acceleration, conversion, redemption or otherwise (in each case in
accordance with the terms hereof). This Secured Note
(including all Secured Notes issued in exchange, transfer or
replacement hereof, this “ Note ”)
is one of an issue of Secured Notes issued pursuant to the
Securities Purchase Agreement (collectively, the “
Notes ”
and such other Senior Notes, the “ Other Notes
”). Certain capitalized terms used herein are
defined in Section 17.
GENERAL TERMS
Payment of Principal . On September 1, 2008 and
each Installment Date thereafter, the Company shall pay to the
Holder Twenty-Two Thousand Seven Hundred Sixty-Three Dollars
($22,763) (the “ Installment
Amount ”) in accordance with Section 3. On
the Maturity Date, the Company shall pay to the Holder an amount in
cash representing all outstanding Principal, accrued and unpaid
Interest. The “ Maturity Date
” shall be July 6, 2010, as may be extended at the option of
the Holder (i) in the event that, and for so long as, an Event of
Default (as defined below) shall have occurred and be continuing on
the Maturity Date (as may be extended pursuant to this Section 1)
or any event shall have occurred and be continuing on the Maturity
Date (as may be extended pursuant to this Section 1) that with the
passage of time and the failure to cure would result in an Event of
Default. Other than as specifically permitted by this
Note, the Company may not prepay or redeem any portion of the
outstanding Principal without the prior written consent of the
Holder.
Interest . Interest shall accrue on the
outstanding principal balance hereof at an annual rate equal to
twenty percent (20%) (“ Interest Rate
”). Interest shall be calculated on the basis of a
365-day year and the actual number of days elapsed, to the extent
permitted by applicable law. Interest that will accrue
for the ninety (90) day period beginning on the date hereof will be
paid to the Company on the date hereof, thereafter Interest
hereunder shall be paid on each Installment Date and on the
Maturity Date (or sooner as provided herein) to the Holder or its
assignee in whose name this Note is registered on the records of
the Company regarding registration and transfers of Notes, in
accordance with Section 3.
Security . The Note is secured by a security
interest in all of the assets of the Company and of Trendsetter
Production Company as evidenced by the security agreement of even
date herewith between the Holder, the Company and Trendsetter
Production Company (the “ Security
Agreement ”).
Primary Market . As promptly as possible, but in
no event later than 5 p.m. New York City time on February 12, 2008,
the Company shall file an application for the listing with the
American Stock Exchange of one million and six hundred thousand
(1,600,000) shares of Common Stock to be issuable upon conversion
of this Note (such shares, the “ Listed Conversion
Shares ”) and upon notification that such Listed
Conversion Shares have been listed will use its best efforts to
secure and maintain such listing; provided, however ,
that any Listed Conversion Shares that have not been issued may be
issued to the Holder upon exercise of the Warrants (as defined in
the Securities Purchase Agreement) notwithstanding any designation
in the listing application or this Section 1(d) as Conversion
Shares. If upon conversion of the Notes there are an
insufficient number of unissued Listed Shares (as defined in the
Securities Purchase Agreement) for the Company to satisfy such
exercise, the Company shall as promptly as possible secure the
listing of an additional number of shares of Common Stock necessary
to satisfy such conversion.
EVENTS OF DEFAULT.
An
“ Event of
Default ”, wherever used herein, means any one of
the following events (whatever the reason and whether it shall
be voluntary or involuntary or effected by operation of law or
pursuant to any judgment, decree or order of any court, or any
order, rule or regulation of any administrative or
governmental body):
the
Company’s failure to pay to the Holder any amount of
Principal, Interest, or other amounts when and as due under
this Note (including, without limitation, the Company’s
failure to pay any redemption payments or amounts hereunder)
or any other Transaction Document; provided, however
, that only with respect to an Event of Default caused by a
failure set forth in this Section 2(a)(i), the Company will
have three (3) Business Days following notice from Buyers of
such non payment to cure such Event of Default;
The
Company or any subsidiary of the Company shall commence, or
there shall be commenced against the Company or any subsidiary
of the Company under any applicable bankruptcy or insolvency
laws as now or hereafter in effect or any successor thereto,
or the Company or any subsidiary of the Company commences any
other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency
or liquidation or similar law of any jurisdiction whether now
or hereafter in effect relating to the Company or any
subsidiary of the Company or there is commenced against the
Company or any subsidiary of the Company any such bankruptcy,
insolvency or other proceeding which remains undismissed for a
period of 61 days; or the Company or any subsidiary of the
Company is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is
entered; or the Company or any subsidiary of the Company
suffers any appointment of any custodian, private or court
appointed receiver or the like for it or any substantial part
of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Company or any
subsidiary of the Company makes a general assignment for the
benefit of creditors; or the Company or any subsidiary of the
Company shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they
become due; or the Company or any subsidiary of the Company
shall call a meeting of its creditors with a view to arranging
a composition, adjustment or restructuring of its debts
(provided, however, that one on one negotiations of debt
repayments will not in and of themselves be deemed an Event of
Default); or the Company or any subsidiary of the Company
shall by any act or failure to act expressly indicate its
consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the
Company or any subsidiary of the Company for the purpose of
effecting any of the foregoing;
The
Company or any subsidiary of the Company shall default in any
of its obligations, other than any obligation to a trade
creditor, under any other note or any mortgage, credit
agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued,
or by which there may be secured or evidenced any indebtedness
for borrowed money or money due under any long term leasing or
factoring arrangement of the Company or any subsidiary of the
Company in an amount exceeding $250,000, whether such
indebtedness now exists or shall hereafter be created and such
default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would
otherwise become due and payable;
If the Common Stock is quoted or
listed for trading on any of the following and it ceases to be so
quoted or listed for trading and shall not again be quoted or
listed for trading on any Primary Market within five (5) Trading
Days of such delisting: (a) the American Stock Exchange, (b) New
York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq
Capital Market, or (e) the Nasdaq OTC Bulletin Board
(“OTCBB”) (each, a “Primary Market”);
The
Company or any subsidiary of the Company shall be a party to
any Change of Control Transaction (as defined in Section 17)
unless in connection with such Change of Control Transaction
this Note is retired;
The
Company’s (A) failure to cure a Conversion Failure (as
defined herein) by delivery of the required number of shares
of Common Stock within five (5) Business Days after the
applicable Conversion Failure or (B) notice, written or oral,
to any holder of the Notes including by way of public
announcement, at any time, of its intention not to comply with
a request for conversion of any Notes into shares of Common
Stock is tendered in accordance with the provision of the
Notes, other than pursuant to Section 4(c).
The
Company shall fail for any reason to deliver the payment in
cash pursuant to a Buy In (as defined herein) within three (3)
Business Days after such payment is due;
The
Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any
breach or default of any provision of this Note (except as may
be covered by Section 2(a)(i) through 2(a)(viii) hereof) or
any Transaction Document (as defined in Section 17) which is
not cured within the time prescribed, or if no time period is
prescribed, then within twenty (20) days after the Company is
provided with written notice thereof from the Holder;
provided,
however , that the Company’s failure to comply
with the covenants set forth in Section 4(k) of the Securities
Purchase Agreement shall not be deemed an Event of Default for
so long as the Deposit Agreements (as such term is defined in
the Security Agreement, dated February 6, 2008, by and between
the Company, the Holder and certain subsidiaries of the
Company) remain in full force and effect.
any
Event of Default (as defined in the Other Notes) occurs with
respect to any Other Notes.
During
the time that any portion of this Note is outstanding, if any
Event of Default has occurred, (i) the full unpaid Principal
amount of this Note, together with interest and other amounts
owing in respect thereof, to the date of acceleration shall
become immediately due and payable in cash, and (ii) the
Holder shall have the right (but not the obligation) to
convert this Note into Common Stock at the Conversion
Price. The Holder need not provide and the Company
hereby waives any presentment, demand, protest or other notice
of any kind, (other than required notice of conversion) and
the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled
by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.
During
the time that any portion of this Note is outstanding, if any
Event of Default has occurred, the Company shall by 4:59 p.m.,
New York Time, on the Business Day following learning of the
Event of Default, file with the U.S. Securities and Exchange
Commission (the “ SEC
”) a Current Report on Form 8-K (the “ Default Form
8-K ”) disclosing that (i) an Event of Default
has occurred and (ii) in accordance with their terms, the
Notes are convertible, at the option of the Holder, into
shares of Common Stock.
COMPANY PAYMENTS .
On
each applicable Installment Date, the Company shall pay to the
Holder of this Note by wire transfer of immediately available
funds, an amount equal to the accrued and unpaid interest due
on the Note and the Installment Amount, if any, due on such
date.
The
Company at its option shall have the right to redeem (“
Optional
Redemption ”) a portion or all amounts
outstanding under this Note in addition to any Installment
Amount prior to the Maturity Date. The Company
shall pay an amount equal to the principal amount being
redeemed plus a redemption premium (“ Redemption
Premium ”) equal to fifteen percent (15%) of the
Principal amount being redeemed, and accrued Interest,
(collectively referred to as the “ Company
Additional Redemption
Amount ”). In order to make a
redemption pursuant to this Section, the Company shall first
provide written notice to the Holder of its intention to make
a redemption (the “ Redemption
Notice ”) setting forth the amount of Principal
it desires to redeem. After receipt of the
Redemption Notice, if an Event of Default has occurred, the
Holder shall have fifteen (15) Business Days to elect to
convert all or any portion of this Debenture, subject to the
limitations set forth in Section 4(b). On the
fourth (4th) Business Day after the Redemption Notice, the
Company shall deliver to the Holder the Company Additional
Redemption Amount with respect to the Principal amount
redeemed after giving effect to any conversions effected
during the three (3) Business Day period.
CONVERSION OF DEBENTURE . At any time following an
Event of Default, this Note shall be convertible at the option of
the Holder, into shares of the Company’s Common Stock, on the
terms and conditions set forth in this Section 4.
Conversion Right . Subject to the provisions of
Section 4(c), at any time following an Event of Default, the Holder
shall be entitled to convert any portion of the outstanding and
unpaid Conversion Amount (as defined below) into fully paid and
nonassessable shares of Common Stock in accordance with Section
4(b), at the Conversion Rate (as defined below). The
number of shares of Common Stock issuable upon conversion of any
Conversion Amount pursuant to this Section 4(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price
(the “ Conversion
Rate ”). The Company shall not issue any
fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance
of a fraction of a share of Common Stock, the Company shall round
such fraction of a share of Common Stock up to the nearest whole
share. The Company shall pay any and all transfer, stamp
and similar taxes that may be payable with respect to the issuance
and delivery of Common Stock upon conversion of any Conversion
Amount.
“
Conversion
Amount ” means the full unpaid Principal amount
of this Note together with accrued Interest and other amounts
owing to the Conversion Date (as defined below).
“
Conversion
Price ” means, as of any Conversion Date or other
date of determination, the lesser of (i) Two Dollars ($2.00)
or (ii) seventy percent (70%) of the lowest Closing Bid Price
of the Common Stock during the fifteen (15) consecutive
Trading Days prior to the Conversion Date as quoted by
Bloomberg, in each case subject to adjustment as provided
herein.
Mechanics of Conversion .
Optional Conversion . Following an Event of
Default, to convert the Conversion Amount into shares of Common
Stock on any date (a “ Conversion
Date ”), the Holder shall (A) transmit by facsimile
(or otherwise deliver), for receipt on or prior to 11:59 p.m., New
York Time, on such date, a copy of an executed notice of conversion
in the form attached hereto as Exhibit I (the
“ Conversion
Notice ”) to the Company and (B) if required by
Section 4(b)(iii), surrender this Note to a nationally recognized
overnight delivery service for delivery to the Company (or an
indemnification undertaking reasonably satisfactory to the Company
with respect to this Note in the case of its loss, theft or
destruction). On or before 4:59 p.m., New York Time, on
the Business Day following the date of receipt of a the first
Conversion Notice the Company shall file or cause to be filed the
Default Form 8-K if such filing has not already been
made. On or before the third Business Day following the
date of receipt of a Conversion Notice (the “ Share Delivery
Date ”), the Company shall (X) if legends are not
required to be placed on certificates of Common Stock pursuant to
the Securities Purchase Agreement and provided that the Transfer
Agent is participating in the Depository Trust Company’s
(“ DTC ”)
Fast Automated Securities Transfer Program, credit such aggregate
number of shares of Common Stock to which the Holder shall be
entitled to the Holder’s or its designee’s balance
account with DTC through its Deposit Withdrawal Agent Commission
system or (Y) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and deliver to
the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be
entitled which certificates shall not bear any restrictive legends
unless required pursuant to Section 2(g) of the Securities Purchase
Agreement. If this Note is physically surrendered for
conversion and the outstanding Principal of this Note is greater
than the Principal portion of the Conversion Amount being
converted, then the Company shall as soon as practicable and in no
event later than three (3) Business Days after receipt of this Note
and at its own expense, issue and deliver to the holder a new Note
representing the outstanding Principal not
converted. The Person or Persons entitled to receive the
shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record holder or holders
of such shares of Common Stock upon the transmission of a
Conversion Notice. In the event of a partial conversion
of this Note pursuant hereto, the principal amount converted shall
be deducted from the Installment Amounts due on subsequent
Installment Dates.
Company’s Failure to Timely Convert . If
within three (3) Trading Days after the Company’s receipt of
the facsimile copy of a Conversion Notice the Company shall fail to
issue and deliver a certificate to the Holder or credit the
Holder’s balance account with DTC for the number of shares of
Common Stock to which the Holder is entitled upon such
holder’s conversion of any Conversion Amount (a “
Conversion
Failure ”), and if on or after such Trading Day the
Holder purchases (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by the Holder of
Common Stock issuable upon such conversion that the Holder
anticipated receiving from the Company (a “ Buy-In
”), then the Company shall, within three (3) Business Days
after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to
the Holder’s total purchase price (including brokerage
commissions and other out of pocket expenses, if any) for the
shares of Common Stock so purchased (the “ Buy-In Price
” ),
at which point the Company’s obligation to deliver such
certificate (and to issue such Common Stock) shall terminate, or
(ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay
cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of
Common Stock, times (B) the Closing Bid Price on the Conversion
Date.
Book-Entry . Notwithstanding anything to the contrary set
forth herein, upon conversion of any portion of this Note in
accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Company unless (A) the
full Conversion Amount represented by this Note is being converted
or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice)
requesting reissuance of this Note upon physical surrender of this
Note. The Holder and the Company shall maintain records
showing the Principal and Interest converted and the dates of such
conversions or shall use such other method, reasonably satisfactory
to the Holder and the Company, so as not to require physical
surrender of this Note upon conversion.
Limitations on Conversions .
Beneficial Ownership . The Company shall not
effect any conversions of this Note and the Holder shall not have
the right to convert any portion of this Note or receive shares of
Common Stock as payment of interest hereunder to the extent that
after giving effect to such conversion or receipt of such interest
payment, the Holder, together with any affiliate thereof, would
beneficially own (as determined in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder) in excess of
4.99% of the number of shares of Common Stock outstanding
immediately after giving effect to such conversion or receipt of
shares as payment of interest. Since the
Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of a conversion
hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 4.99% of the then
outstanding shares of Common Stock without regard to any other
shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this
Section will limit any particular conversion hereunder and to the
extent that the Holder determines that the limitation contained in
this Section applies, the determination of which portion of the
principal amount of this Note is convertible shall be the
responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of
this Note that, without regard to any other shares that the Holder
or its affiliates may beneficially own, would result in the
issuance in excess of the
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