Document:

Debenture

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: December 17, 2009

$_______________

6% SENIOR CONVERTIBLE DEBENTURE

DUE DECEMBER 17, 2011

THIS 6% SENIOR CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 6% Senior Convertible Debentures of EClips Energy Technologies, Inc., a Florida corporation, (the “Company”), having its principal place of business at 8200 Seminole Boulevard, St. Petersburg Florida 33714 designated as its 6% Senior Convertible Debenture due December 17, 2011 (this debenture, the “Debenture” and, collectively with the other debentures of such series, the “Debentures”).

FOR VALUE RECEIVED, the Company promises to pay to ________________________ or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ on December 17, 2011 (the “Maturity Date”) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof.  This Debenture is subject to the following additional provisions:

Section 1.

Definitions.  For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Subscription Agreement and (b) the following terms shall have the following meanings:

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Business Day” means any day except any Saturday, any Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, or (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the date hereof (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company  is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

“Closing Bid Price” means on any particular date (a) the last reported closing bid price per share of Common Stock on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price on such date, then the closing bid price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c)  if the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock are then reported in the “pink sheets” published by Pink Sheets LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) if the shares of Common Stock are not then publicly traded the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder  and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

“Conversion” shall have the meaning ascribed to such term in Section 4. 

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with the terms hereof.

“Debenture Register” shall have the meaning set forth in Section 2(c).

“

Event of Default

” shall have the meaning set forth in Section 7(a).

“Fundamental Transaction” shall have the meaning set forth in Section 5(e).

 

“Interest Payment Date” shall have the meaning set forth in Section 2(a).

“Late Fees” shall have the meaning set forth in Section 2(d).

“New York Courts” shall have the meaning set forth in Section 8(d).

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Original Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and regardless of the number of instruments which may be issued to evidence such Debentures.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Share Delivery Date” shall have the meaning set forth in Section 4(d)(ii).

“Subsidiary” shall have the meaning set forth in the Purchase Agreement.

“Securities Purchaser Agreement” means the Securities Purchase Agreement, dated as of December 17, 2009 among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

“Trading Day” means a day on which the New York Stock Exchange is open for business.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

“Transaction Documents” shall have the meaning set forth in the Subscription Agreement.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.

Section 2.

Interest.

a)

Payment of Interest. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of six (6%) percent per annum, on each Conversion Date (as to that principal amount then being converted) and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash.   

 

b)

[Intentionally Omitted]

c)

Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.  Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture Register”). 

d)

Late Fee.  All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.

Section 3.

 Registration of Transfers and Exchanges. 

 

a)

Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

 

b)

Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Subscription Agreement and may be transferred or exchanged only in compliance with the Subscription Agreement and applicable federal and state securities laws and regulations.  

c)

Reliance on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4.

  Conversion.

 

a)

Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time.  The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder.  To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion.  The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).  The Company may deliver an objection to any Notice of Conversion within 1 Business Day of delivery of such Notice of Conversion.  The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.

b)

Conversion Price.  The conversion price in effect on any Conversion Date shall be equal to the lesser of (i) $0.05 per share of Common Stock or (z) until the eighteen (18) months anniversary of the Original Issue Date, the lowest price paid per share (other than in connection with any Excepted  Issuance (as defined below)) or the lowest conversion price per share (other than in connection with any Excepted Issuance) in a subsequent sale of the Company’s equity and/or convertible debt securities paid by investors after the Original Issue Date (the “Conversion Price”).

c)

[Intentionally Omitted]

 

d)

Mechanics of Conversion.

 

i.

Conversion Shares Issuable Upon Conversion of Principal Amount.  The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted by (y) the Conversion Price.

1

ii.

Delivery of Certificate Upon Conversion. Not later than three Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which, on or after the six month anniversary of the Original Issue Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Debenture and (B) a bank check in the amount of accrued and unpaid interest. On or after the six month anniversary of the Original Issue Date, the Company shall use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section 4(d) electronically through the Depository Trust Company or another established clearing corporation performing similar functions.  

 

iii.

Failure to Deliver Certificates.  If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates representing the principal amount of this Debenture unsuccessfully tendered for conversion to the Company. 

 

iv.

Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Subscription Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

v.

Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Debenture.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

vi.

Transfer Taxes.  The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 

Section 5.

Certain Adjustments. 

 

a)

Stock Dividends and Stock Splits.  If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Debentures), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)

Subsequent Rights Offerings.  If the Company, at any time while the Debenture is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share that is lower than the VWAP on the record date referenced below, then the Conversion Price shall be multiplied by a fraction of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming delivery to the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.  

 

c)

Pro Rata Distributions. If the Company, at any time while this Debenture is outstanding, distributes to all holders of Common Stock (and not to the Holders) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security (other than the Common Stock, which shall be subject to Section 5(b)), then in each such case the Conversion Price shall be adjusted by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to 1 outstanding share of the Common Stock as determined by the Board of Directors of the Company in good faith.  In either case the adjustments shall be described in a statement delivered to the Holder describing the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to 1 share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

d)

Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of 1 share of Common Stock (the “Alternate Consideration”).  For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of 1 share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new debenture consistent with the foregoing provisions and evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 5(e) and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

 

e)

Calculations.  All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

f)

Notice to the Holder.

i.

Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.  

 

ii.

Notice to Allow Conversion by Holder.  If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Debenture Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder is entitled to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice. 

a)

Notwithstanding anything in this Agreement to the contrary, no adjustment under this Agreement shall be made in the event of any issuance that constitutes an Excepted Issuance.

  

Section 6.

Favored Nations Provision.  Other than in connection with: (i) full or partial consideration in connection with a strategic merger, acquisition, consolidation or purchase of substantially all of the securities or assets of a corporation or other entity which holders of such securities or debt are not at any time granted registration rights equal to or greater than those granted to the Holders, (ii) the Company’s issuance of securities in connection with strategic license agreements and other partnering arrangements so long as such issuances are not for the purpose of raising capital and which holders of such securities or debt are not at any time granted registration rights equal to or greater than those granted to the Holders, (iii) the Company’s issuance of Common Stock or the issuances or grants of options to purchase Common Stock to employees, directors, and consultants, pursuant to plans approved by the Board of Directors of the Company in an amount not to exceed fifteen (15%) of the outstanding primary shares of the Company on the date of issuance, (iv) securities upon the exercise or exchange of or conversion of any securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement on the terms in effect on the Closing Date including the permissible amendment thereof after the Closing Date, and pursuant to (v) above), (v) as a result of the exercise of Warrants or conversion of Notes which are granted or issued pursuant to this Agreement, and (vi) the Company’s issuance of Common Stock or the issuances or grants of options to purchase Common Stock to consultants and service providers approved by the Board of Directors other than as consideration for capital raising (collectively, the foregoing (i) through (vi) are “Excepted Issuances”), if at any time the Debenture is outstanding, the Company shall issue (the “Lower Price Issuance”) any Common Stock or securities convertible into or exercisable for shares of Common Stock (or modify any of the foregoing which may be outstanding) to any person or entity at a price per share or conversion or exercise price per share which shall be less than the Conversion Price in effect at such time (or provide other value to such person or entity in connection with an equivalent price issuance or Lower Price Issuance), without the consent of the Holders, then the Conversion Price shall automatically be reduced to such other lower price and the Holders shall be entitled to receive any additional consideration as shall be issued to such person or entity.  The provisions of this Section 6 shall terminate eighteen (18) months of the date of this Debenture.  Securities issued or issuable by the Company for no consideration or for consideration that cannot be determined at the time of issue will be deemed issuable or to have been issued for $0.001 per share of Common Stock.  The rights of Holders set forth in this Section 6 are in addition to any other rights the Holders have pursuant to this Agreement or the Debentures and any other agreement referred to or entered into in connection herewith or to which Holders and Company are parties.

 

Section 7.

Events of Default.  

a)

“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event 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):

i.

any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within 10 Trading Days;

 

ii.

the Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (xi) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 10 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 15 Trading Days after the Company has become or should have become aware of such failure;

iii.

a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);

iv.

any representation or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

v.

the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)  shall be subject to a Bankruptcy Event;

 

vi.

the Company or any Subsidiary shall default on any of its obligations under 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 that (a) involves an obligation greater than $150,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; 

vii.

the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within seven Trading Days;

viii.

the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);

ix.

any Person shall breach any agreement delivered to the initial Holders pursuant to Section 2.2 of the Purchase Agreement; or

x.

any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.

a)

Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount.  Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law.  Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the Company.  In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, 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 acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b).  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 9.

Miscellaneous.  

 

a)

Notices.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purpose by notice to the Holder delivered in accordance with this Section 9(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears, at the principal place of business of the Holder.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the signature page prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the signature page between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

b)

Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed.  This Debenture is a direct debt obligation of the Company.  This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.   

 

c)

Lost or Mutilated Debenture.  If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory to the Company.

d)

Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of Florida, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the Middle District of Florida located in Pinellas County, Florida (the “Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Courts, or such Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e)

Amendment; Waiver.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Holders of at least 51% of the Debentures then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture.  

f)

Severability.  If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

g)

Next Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

h)

Headings.  The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof.

i)

Assumption.  Any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction, all of the obligations of the Company under this Debenture and the other Transaction Documents pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) and (ii) issue to the Holder a new debenture of such successor entity evidenced by a written instrument substantially similar in form and substance to this Debenture, including, without limitation, having a principal amount and interest rate equal to the principal amount and the interest rate of this Debenture and having similar ranking to this Debenture, which shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed).  The provisions of this Section 9(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Debenture.

*********************

(Signature pages to Follow)

2

IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.

	
	ECLIPS ENERGY TECHNOLOGIES, INC.

	By:/s/Benjamin Croxton_________________________

     Name:  Benjamin Croxton

     Title: Chief Executive Officer

Facsimile No. for delivery of Notices: _______________

	 

	 

3

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the 6% Senior Convertible Debenture due December __, 2009 of EClips Energy Technologies, Inc., a Florida corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Debenture to be Converted:

Number of shares of Common Stock to be issued:

Signature:

Name:

Address for Delivery of Common Stock Certificates:

Or

DWAC Instructions:

Broker No:

Account No:

4

Schedule 1

CONVERSION SCHEDULE

The 12% Subordinated Secured Convertible Debenture due on December __, 2009 in the original principal amount of $____________ is issued by EClips Energy Technologies, Inc., a Florida corporation.  This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.

Dated: 

				
	

Date of Conversion

(or for first entry, Original Issue Date)

	

Amount of Conversion

	

Aggregate Principal Amount Remaining Subsequent to Conversion

(or original Principal Amount)

	

Company Attest

	

	

	

	

	

	

	

	

	

 

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

5Unassociated Document

EXHIBIT 10.2

ATWOOD OCEANICS, INC.

RETENTION PLAN

FOR CERTAIN SALARIED EMPLOYEES

 

The Company (as defined herein) hereby adopts this Retention Plan for Certain Salaried Employees (the "Plan"), effective as of the 1st day of January,
2010.

INTRODUCTION

The purpose of this Plan is to secure the interests of the Company’s shareholders in the event of a change of control of the Company.  In such an event, this Plan would provide an enhanced severance payment and other benefits to encourage certain valued employees to remain employed
with the Company during that period of financial uncertainty preceding and following the change of control.  If such an event does not occur on or before December 31, 2010, this Plan will terminate automatically, unless otherwise renewed by the Company’s Board of Directors.

ARTICLE I

DEFINITIONS

Terms defined above and initially capitalized shall have the respective meanings so ascribed.  When used in this Plan and initially capitalized, the following words and phrases shall have the following respective meanings unless the context clearly requires otherwise:

1.1           "Base Salary" as
to any Covered Employee for any period, shall mean the greater of the sum of such individual’s monthly base salary and Bonus as of the Termination of Employment or as of the date immediately preceding the Effective Date, which is paid to such individual by the Company during employment for such period, before reduction because of an election between benefits or cash provided under a plan of the Company maintained pursuant to Section 125 or 401(k) of the Internal Revenue Code of 1986, as amended, and before
reduction for any other amounts contributed by the Company on such individual’s behalf to any other employee-benefit plan.

1.2           “Bonus” as
to Covered Employee for any period, shall mean the average of bonus payments, if any, made over the preceding three years, including any year for which a bonus has been awarded but not paid, divided by twelve.  If the Covered Employee has not been an employee of the Company for at least three years, then Bonus shall be calculated over the period for which the employee has been employed with the Company.

1.3           "Company" shall
mean Atwood Oceanics, Inc., a Texas corporation, or any entity that is a successor to it in ownership of substantially all its assets and their affiliates (“Atwood”) and its direct and indirect subsidiaries.

1.4           "Covered Employee" shall
mean an employee described in Article II of the Plan.

1.5           "Effective Date" shall
mean the date on or before December 31, 2010, on which any of the following is effective:

	
  
	
(a)
	
The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of either (i) the then outstanding shares of common stock of Atwood or (ii) the combined voting power of the then outstanding voting securities of Atwood entitled to vote generally in the election of directors; provided, however, that the following acquisitions shall not constitute a Change of Control:  (i) any acquisition directly from Atwood; (ii) any acquisition by Atwood; (iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company; or

	
  
	
(b)
	
Atwood shall sell substantially all of its assets to another corporation which is not a wholly owned subsidiary; or

 

 

 

	
  
	
(c)
	
Individuals who, as of the date hereof, constitute the Board of Atwood (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Atwood’s shareholders, was approved by
a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

1.6           "Employment Year" shall
mean a period which commences on the first date of employment or any anniversary of such date and ends one year from such date.

1.7           "Good Cause" shall
mean a material violation of a Company policy or procedure applicable to employees in the same or similar job position, the willful disregard or failure to follow the reasonable instructions of a superior, the taking of any action, or the failure to take any action, which results in a damage or detriment to the Company, or the conviction of an employee of a felony involving moral turpitude.

1.8           "Health and Life Benefits" shall
mean as to any employee, the group-health and life-insurance benefits sponsored by the Company for its full-time employees and provided to or elected by such individual as of the date immediately preceding the Effective Date.

1.9           "Other Severance" shall
have the meaning set forth in Section 2.2 of the Plan.

1.10           "Severance Pay" shall
mean the sum payable to a Covered Employee upon Termination of Employment as set forth in Section 3.1 of the Plan.

1.11           “Term” shall
mean the period commencing on the Effective Date and ending one year after that date.

1.12           "Termination of Employment" shall
mean a termination of employment with the Company at the option of the Company for any reason, except a termination of employment for Good Cause shall not mean a Termination of Employment.

1.13           "Years of Continuous Service" shall
mean, as to any employee, all full or partial years during which he was employed on a full-time basis by the Company.

ARTICLE II.

COVERED EMPLOYEES

2.1           Who is a Covered Employee.  Any
employee of the Company who upon the occurrence of an Effective Date, shall be listed in Schedule 3.1 hereto, which Schedule 3.1 shall be amended from time to time by the Company, and who has a Termination of Employment during the Term shall be a Covered Employee and eligible to receive the benefits described in this Plan.

2.2           Exclusions.  Any
employee who otherwise is a Covered Employee but who, pursuant to a separate agreement signed on behalf of the Company, receives severance or other salary continuation benefits upon a Termination of Employment (other than payments or benefits under the Company’s Executive Life Insurance Plan) shall not be a Covered Employee under this Plan.  This Plan shall be in lieu of any plan, program, policy or practice of or contract or agreement with the Company relating to severance of employment ("Other
Severance") and any and all benefits of payments arising out of or relating to Other Severance shall be fully offset against any benefits or payments due and owing hereunder.

  

  

  

ARTICLE III

SEVERANCE PAY AND OTHER BENEFITS

3.1           Amount of Severance Pay.  The Company shall pay Severance Pay to
a Covered Employee upon a Termination of Employment in an amount equal to the greater of (a) or (b):

	
  
	
(a)
	
such individual’s weekly Base Salary multiplied by such individual’s Years of Continuous Service; or

	
  
	
(b)
	
a payment, depending upon the category of employee as identified in Schedule 3.1 hereto, as follows:

	
 Category of Employee
	
Payment

	
Houston Management A:
	
(i)           Less than 4 Years of Continuous Service - 6 months' Base Salary; or

	  	
 

(ii)           4 Years but less than 8 Years of Continuous Service - 12 months' Base Salary; or

	  	
 

(iii)           8 or greater Years of Continuous Service - 18 months' Base Salary

	
 

Houston Management B,

Houston Technical,

Rig Management and

Other Administration:
	
 

 

 

 

(i)           Less than 4 Years of Continuous Service - 1 month Base Salary; or

	  	
 

(ii)           4 Years but less than 8 Years of Continuous Service - 4 months' Base Salary; or

	  	
 

(iii)           8 Years but less than 12 Years of Continuous Service - 8 months' Base Salary; or

	  	
 

(iv)           12 or greater Years of Continuous Service - 12 months' Base Salary

	
 

Houston Accounting A, Houston Accounting B and

Houston Staff:
	
 

 

 

(i)           Less than 4 Years of Continuous Service - 1 month Base Salary; or

	  	
 

(ii)           4 Years but less than 8 Years of Continuous Service - 3 months' Base Salary; or

	  	
 

(iii)           8 or greater Years of Continuous Service - 6 months' Base Salary

  

  

  

        3.2                      Health and Life Benefits.  Upon
a Termination of Employment, a Covered Individual’s Health and Life Benefits shall be treated as follows:

	
  
	
(a)
	
Upon a Termination of Employment and if applicable, the Company will notify each Covered Employee of the right to elect to continue any Company-provided health or disability benefits, all in accordance with and subject to the provisions of the Consolidated Omnibus Budget Reconciliation Act ("COBRA").  The Company shall charge the maximum allowable
premium in connection with any COBRA benefits so provided.  Other than the benefits provided under COBRA, the Company shall have no further obligation to provide health or disability insurance benefits to any Covered Individual following a Termination of Employment.

	
  
	
(b)
	
Upon written request by a Covered Individual within five (5) days of a Termination of Employment, the Company shall assign any life, salary continuation or travel insurance plans or policies to such Covered Individual which by their terms are so assignable, and such Covered Individual will thenceforth become responsible for the payment of any premiums required to maintain said plans or policies from and after the date
of Termination of Employment; otherwise, the Company will cease to continue such life insurance plans or policies on behalf of any Covered Employee effective as of the date of Termination of Employment.

3.3               Payment for Unused Vacation.  Upon
a Termination of Employment, the Company will pay a Covered Employee an amount equal to such individual’s weekly Base Salary multiplied by each full and partial week of vacation, which was accrued but unused during the Employment Year in which occurred such individual’s Termination of Employment.  For purposes of determining payment under this Section 3.3, a full week of vacation consists of five (5) vacation days.

ARTICLE IV

DISTRIBUTION OF CASH PAYMENTS

The Company shall pay a Covered Employee the amount to which he or she is entitled under (as applicable) Plan Section 3.1 (relating to Severance Pay) and Plan Section 3.3 (relating to Payment for Unused Vacation) in one lump sum within a reasonable time, but in no event greater than ten (10)
business days, after such Covered Employee’s Termination of Employment.

ARTICLE V

ADMINISTRATION OF PLAN

5.1               In General.  The
Plan shall be administered by Atwood, which shall be the named fiduciary under the Plan.  Atwood may delegate any of its administrative duties, including without limitation duties with respect to the processing, review, investigation, approval, and payment of benefits under the Plan, to a named administrator or administrators.

5.2               Regulations.  Atwood
shall promulgate any rules and regulations that it deems necessary to carry out the purposes of the Plan, or to interpret the terms and conditions of the Plan; provided that no rule, regulation, or interpretation shall be contrary to the provisions of the Plan.  The rules, regulations, and interpretations made by the Atwood shall, subject only to the claims procedure outlined in Section 5.3 hereof, be final and binding on any employee or former employee of the Company, or any successor in interest of
either.

5.3               Claims Procedure.  The
Company shall determine the rights of any employee or former employee of the Company to any benefits hereunder.  Any employee or former employee of the Company who believes that he is entitled to receive any benefits other than as initially determined by the Company, may file a claim in writing with Atwood’s President.  Atwood shall no later than ninety (90) days after the receipt of a claim either allow or deny the claim in writing.

A denial of a claim, wholly or partially, shall be written in a manner calculated to be understood by the claimant and shall include:

 

 

 

	
  
	
(a)
	
the specific reason or reasons for the denial;

	
  
	
(b)
	
specific reference to pertinent Plan provisions on which the denial is based;

	
  
	
(c)
	
a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

	
  
	
(d)
	
an explanation of the claim-review procedure.

A claimant whose claim is denied (or his duly authorized representative), may within 30 days after receipt of denial of his claim:

	
  
	
(a)
	
request a review upon written application to the Company’s personnel administrator;

	
  
	
(b)
	
review pertinent documents; and

	
  
	
(c)
	
submit issues and comments in writing.

Atwood shall notify the claimant of its decision on review within sixty (60) days after receipt of a request for review.  Notice of the decision on review shall be in writing.

5.4               Revocability of Company Action.  Any
action taken by Atwood with respect to the rights under the Plan of any employee or former employee shall be revocable by Atwood as to payments or distributions not yet made to such person, and acceptance of any benefits under the Plan constitutes acceptance of and agreement to any appropriate adjustments made by the Company in future payments or distributions to such person to offset any excess of underpayment previously made to him with respect to any benefits.

ARTICLE VI

AMENDMENT OR TERMINATION OF PLAN

6.1               Right to Amend or Terminate.  Atwood
reserves the right at any time prior to the Effective Date, and without prior or other approval of any employee or former employee, to change, modify, amend, or terminate the Plan.  All such changes, modifications, or amendments may be retroactive to any date up to and including the original effective date of the Plan, and shall be retroactive to that date unless other provision is specifically made; provided that no such change, modification, or amendment shall adversely affect any benefit under the
Plan previously paid or provided to a Covered Employee (or his or her successor in interest).

6.2               Automatic Termination.  This
Plan shall terminate automatically as of December 31, 2010, or such other extended termination date duly adopted in accordance with the provisions of Section 6.1 above, if there is no Effective Date on or before that date.  Termination pursuant to this Plan Section 6.2 shall occur without any action on the part of the Company and shall be effective without prior notice to or approval of any employee or former employee of the Company.

ARTICLE VII

METHOD OF FUNDING

The Company shall pay benefits under the Plan from current operating funds.  No property of the Company is or shall be, by reason of this Plan, held in trust for any employee of the Company, nor shall any person have any interest in or any lien or prior claim upon any property of
the Company by reason of the Plan or the Company's obligations to make payments hereunder.

  

  

  

ARTICLE VIII

LEGAL FEES AND EXPENSES; ENFORCEMENT

It is the intent of the Company that no Covered Employee be required to incur the expenses associated with the enforcement of his rights under this Plan by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended
to a Covered Employee hereunder.  Accordingly, if it should appear to a Covered Employee that the Company has failed to comply with any of its obligations under this Plan or in the event that the Company or any other person takes any action inconsistent with the terms of this Plan to declare this Plan void or unenforceable, or institutes any litigation designed to deny, or to recover from, the Covered Employee the benefits intended to be provided to such Covered Employee hereunder, the Company irrevocably
authorizes such Covered Employee from time to time to retain counsel of his choice, at the expense of the Company as thereafter provided, to represent such Covered Employee in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, stockholder, or other person affiliated with the Company in any jurisdiction.  Notwithstanding any existing prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to such Covered employee's entering into an attorney-client relationship with such counsel, and in that connection the Company and such Covered Employee agree that a confidential relationship shall exist between such Covered Employee and such counsel.  The Company shall pay and be solely responsible for any and all attorneys' and related fees and expenses incurred by such Covered Employee as a result of the Company's failure to perform under this Plan or any provision thereof;
or as a result of the Company or any person contesting the validity or enforceability of this Plan or any provision thereof.

ARTICLE IX

MISCELLANEOUS

9.1               Limitation on Rights.  Participation
in the Plan shall not give any employee the right to be retained in the service of the Company or any rights to any benefits whatsoever, except to the extent specifically set forth herein.  Unless otherwise agreed in writing, employment with the Company is "at will."

9.2               Headings.  Headings
of Articles and Sections in this instrument are for convenience only, and do not constitute any part of the Plan.

9.3               Gender and Number.  Unless
the context clearly indicates otherwise, the masculine gender when used in the Plan shall include the feminine, and the singular number shall include the plural and the plural number the singular.

EXECUTED as of the date first set forth above.

ATWOOD OCEANICS, INC.

/S/ ROBERT J. SALTIEL                                                          

Name: Robert J. Saltiel

Title: President & Chief Executive Officer

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