Document:

Exhibit 4.1.2

    
      
        

      

    Exhibit
      4.1.2 Second
      Convertible Debenture. 

     

    Dated:
      June 28, 2006

     

    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 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.

     

    
      	
              No.
                CCP-2

            	
              $2,000,000

            

    

     

    HYPERDYNAMICS
      CORPORATION

     

    Secured
      Convertible Debenture

     

    Due:
      June 28, 2009

     

    This
      Secured Convertible Debenture (the “Debenture”)
      is
      issued by HYPERDYNAMICS
      CORPORATION, a
      Delaware corporation (the “Obligor”),
      to
CORNELL
      CAPITAL PARTNERS, LP
      (the
“Holder”),
      pursuant to that certain Securities Purchase Agreement (the “Securities
      Purchase Agreement”)
      dated
      June 19, 2006. 

     

    FOR
      VALUE RECEIVED,
      the
      Obligor hereby promises to pay to the Holder or its successors and assigns
      the
      principal sum of Two Million Dollars ($2,000,000) together with accrued but
      unpaid interest on or before June 28, 2009 (the “Maturity
      Date”)
      in
      accordance with the following terms:

     

    Interest.
      Interest shall accrue on the outstanding principal balance hereof at an annual
      rate equal to ten percent (10%). 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 hereunder will be paid to the Holder or its assignee
      (as defined in Section
      5)
      in
      whose name this Debenture is registered on the records of the Obligor regarding
      registration and transfers of Debentures (the “Debenture
      Register”).

     

    Monthly
      Payments.
      The
      Obligor shall make monthly scheduled payments (“Scheduled
      Payments”)
      on
      this Debenture and all other debentures issued in connection with the Securities
      Purchase Agreement consisting of a total of $175,000 of principal plus accrued
      and unpaid interest, commencing with the first Scheduled Payment which shall
      be
      due and payable on the earlier of (a) September 1, 2006 or (b) three days after
      the date that the Underlying Shares Registration Statement (as defined in
Section
      5)
      is
      declared effective and continuing on the first business day of each calendar
      month thereafter until paid in full. Nothing contained in this paragraph shall
      limit the Holder’s conversion rights set forth in Section
      3.
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    All
      payments in respect of the indebtedness evidenced hereby shall be made in
      collected funds, and shall be applied to principal, accrued interest and charges
      and expenses owing under or in connection with this Debenture in such order
      as
      the Holder elects, except that payments shall be applied to accrued interest
      before principal. Notwithstanding the foregoing, this Debenture shall become
      due
      and immediately payable, including all accrued but unpaid interest, upon an
      Event of Default (as defined in Section
      2
      hereof).

     

    However,
      If the Holder converts a portion of the principal amount outstanding under
      this
      Debenture or any other debenture issued in connection with the Securities
      Purchase Agreement prior to a Scheduled Payment due date, the Obligor shall
      be
      entitled to an off-set of the amount due pursuant to such Schedule Payment
      equal
      to the amount converted (the “Off-Set Amount”). In such event the Obligor shall
      still be obligated to make a Scheduled Payment reduced by the Off-Set Amount
      as
      contemplated hereunder, if applicable

     

    Right
      of Redemption.
      The
      Obligor at its option shall have the right to redeem a portion or all amounts
      outstanding under this Debenture prior to the Maturity Date, which are not
      otherwise due pursuant to a Scheduled Payment, provided that the Closing Bid
      Price of the of the Obligor’s Common Stock, as reported by Bloomberg, LP, is
      less than the Fixed Conversion Price at the time of the Redemption Notice.
      The
      Obligor shall pay an amount equal to the principal amount being redeemed plus
      a
      redemption premium (“Redemption
      Premium”)
      equal
      to twenty percent (20%) of the principal amount being redeemed, and accrued
      interest, (collectively referred to as the “Redemption
      Amount”).
      In
      order to make a redemption, the Obligor 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 the Holder shall have three (3) business days to elect to
      convert all or any portion of this Debenture, subject to the limitations set
      forth in Section
      3(b)(i).
      Upon
      the expiration of this three (3) business day period, the Obligor shall deliver
      to the Holder the Redemption Amount with respect to the principal amount
      redeemed after giving effect to conversions effected during the three (3)
      business day period. 

     

    Security
      Agreements.
      This
      Debenture is secured by a Security Agreement dated June 19, 2006 between the
      Holder and Trendsetters Production Company (the “Security
      Agreement”)
      and a
      Subsidiary Security Agreement dated June 19, 2006 among the Holder and certain
      subsidiaries of the Company (the “Subsidiary
      Security Agreement”).

     

    This
      Debenture is subject to the following additional provisions:

     

    Section
      1.   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 made for such registration of transfer
      or
      exchange.

     

    Section
      2.   Events
      of Default.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)   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):

     

    (i)    Any
      default in the payment of the principal of, interest on or other charges in
      respect of this Debenture, free of any claim of subordination (whether on a
      Scheduled Payment due date, a Conversion Date or the Maturity Date or by
      acceleration or otherwise), which is not cured within three (3) business days
      of
      notice of such breach;

     

    (ii)   The
      Obligor or any material subsidiary of the Obligor shall commence, or there
      shall
      be commenced against the Obligor or any material subsidiary of the Obligor
      under
      any applicable bankruptcy or insolvency laws as now or hereafter in effect
      or
      any successor thereto, or the Obligor or any material subsidiary of the Obligor
      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
      Obligor or any material subsidiary of the Obligor or there is commenced against
      the Obligor or any material subsidiary of the Obligor any such bankruptcy,
      insolvency or other proceeding which remains undismissed for a period of 61
      days; or the Obligor or any material subsidiary of the Obligor is adjudicated
      insolvent or bankrupt; or any order of relief or other order approving any
      such
      case or proceeding is entered; or the Obligor or any material subsidiary of
      the
      Obligor 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
      Obligor or any material subsidiary of the Obligor makes a general assignment
      for
      the benefit of creditors; or the Obligor or any material subsidiary of the
      Obligor 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 Obligor or any
      material subsidiary of the Obligor shall call a meeting of its creditors with
      a
      view to arranging a composition, adjustment or restructuring of its debts;
      or
      the Obligor or any material subsidiary of the Obligor 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 Obligor
      or any material subsidiary of the Obligor for the purpose of effecting any
      of
      the foregoing. For the purposes of this Section
      2(a)(ii)
      the term
“material subsidiary” shall mean any subsidiary with total assets in excess of
      $100,000; 

     

    (iii)   The
      Obligor shall default in any of its obligations under any other debenture 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 Obligor in an amount
      exceeding $500,000, 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, except those being contested in good faith;

     

    (iv)   The
      Common Stock shall cease to be quoted for trading or listing for trading on
      any
      of (a) the American Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq
      National Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin
      Board (“OTC”)
      (each,
      a “Subsequent
      Market”)
      and
      shall not again be quoted or listed for trading on any Subsequent Market within
      five (5) Trading Days of such delisting;

     

    (v)    The
      Obligor shall fail to file the Underlying Shares Registration Statement (as
      defined in Section
      5)
      with
      the Commission (as defined in Section
      5)
      within
      the time periods set forth in the Investor Registration Rights Agreement
      (“Registration
      Rights Agreement”)
      dated
      June 19, 2006 between the Obligor and the Holder, or the Underlying Shares
      Registration Statement shall not have been declared effective by the Commission
      within forty five (45) days of the Scheduled Effective Deadline as set forth
      in
      the Registration Rights Agreement, provided however, that a default shall not
      occur if a delay in the effectiveness is the result of the SEC commenting that
      a
      specific part of the Transaction Document is adverse to the SEC ordering
      effectiveness and the Obligor has used its best efforts to respond to, and
      resolve such comment, which shall be determined in the reasonable discretion
      of
      the Holder;

     

    (vi)   If
      the
      effectiveness of the Underlying Shares Registration Statement lapses for any
      reason or the Holder shall not be permitted to resell the shares of Common
      Stock
      underlying this Debenture under the Underlying Shares Registration Statement,
      in
      either case, for more than ten (10) consecutive Trading Days or an aggregate
      of
      thirty (30) Trading Days (which need not be consecutive Trading
      Days);

     

    (vii)         
      The
      Obligor shall fail for any reason to deliver Common Stock certificates to a
      Holder prior to the fifth (5th)
      Trading
      Day after a Conversion Date or the Obligor shall provide notice to the Holder,
      including by way of public announcement, at any time, of its intention not
      to
      comply with requests for conversions of this Debenture in accordance with the
      terms hereof and such breach is not cured within three (3) days of notice of
      such breach; 

     

    (viii)        
      The
      Obligor shall fail for any reason to deliver the payment in cash pursuant to
      a
      Buy-In (as defined herein) within five (5) days after notice is claimed
      delivered hereunder; 

     

    (x)    
The
      Obligor shall fail to observe or perform in any material respect any other
      covenant, agreement or warranty contained in, or otherwise commit any breach
      or
      default of any provision of this Debenture (except as may be covered by
Section
      2(a)(i)
      through
2(a)(ix)
      hereof)
      or any Transaction Document (as defined in Section
      5)
      which
      is not cured within twenty (20) business days after the Obligor is provided
      with
      written notice thereof from the Holder. This Section2 (x) shall be the notice
      and cure period in relation to references made to such in other Transaction
      Document or related transactions. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)   During
      the time that any portion of this Debenture is outstanding, if any Event of
      Default has occurred, the full principal amount of this Debenture, together
      with
      interest and other amounts owing in respect thereof, to the date of acceleration
      shall become at the Holder's election, immediately due and payable in cash,
      provided
      however,
      the
      Holder may request (but shall have no obligation to request) payment of such
      amounts in Common Stock of the Obligor. Furthermore, if an Event of Default
      occurs and remains uncured, the Holder shall have the rights set forth in
Section
      3(c)(xii) hereof.
      In addition to any other remedies, the Holder shall have the right (but not
      the
      obligation) to convert this Debenture at any time after (x) an Event of Default
      or (y) the Maturity Date at the Conversion Price then in-effect (including,
      without limitation, the Default Conversion Price). The Holder need not provide
      and the Obligor 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 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. Upon an Event of Default, notwithstanding any
      other provision of this Debenture or any Transaction Document, the Holder shall
      have no obligation to comply with or adhere to any limitations, if any, on
      the
      conversion of this Debenture or the sale of the Underlying Shares. 

     

    Section
      3.   Conversion.

     

    (a)   Conversion
      at Option of Holder.

     

    (i)   This
      Debenture shall be convertible into shares of Common Stock at the option of
      the
      Holder, in whole or in part at any time and from time to time, after the
      Original Issue Date (as defined in Section
      5)
      (subject to the limitations on conversion set forth in Section
      3(b)
      hereof).
      The number of shares of Common Stock issuable upon a conversion hereunder equals
      the quotient obtained by dividing (x) the outstanding amount of this Debenture
      to be converted by (y) the Conversion Price (as defined in Section
      3(c)(i)).
      The
      Obligor shall deliver Common Stock certificates to the Holder prior to the
      Fifth
      (5th)
      Trading
      Day after a Conversion Date.

     

    (ii)   Notwithstanding
      anything to the contrary contained herein, if on any Conversion Date and subject
      to notice and cure: (1) the number of shares of Common Stock at the time
      authorized, unissued and unreserved for all purposes, or held as treasury stock,
      is insufficient to pay principal and interest hereunder in shares of Common
      Stock; (2) the Common Stock is not listed or quoted for trading on the OTC
      or on
      a Subsequent Market; or (3) the Obligor has failed to timely satisfy its
      conversion, then, at the option of the Holder, the Obligor, in lieu of
      delivering shares of Common Stock pursuant to Section
      3(a)(i),
      shall
      deliver, within three (3) Trading Days of each applicable Conversion Date,
      an
      amount in cash equal to the product of the outstanding principal amount to
      be
      converted plus any interest due therein divided by the Conversion Price, and
      multiplied by the highest closing price of the stock from date of the conversion
      notice till the date that such cash payment is made.

     

    Further,
      if the Obligor shall not have delivered any cash due in respect of conversion
      of
      this Debenture or as payment of interest thereon by the fifth (5th)
      Trading
      Day after the Conversion Date, the Holder may, by notice to the Obligor, require
      the Obligor to issue shares of Common Stock pursuant to Section
      3(c),
      except
      that for such purpose the Conversion Price applicable thereto shall be the
      lesser of the Conversion Price on the Conversion Date and the Conversion Price
      on the date of such Holder demand. Any such shares will be subject to the
      provisions of this Section.

     

    (iii)         
      The
      Holder shall effect conversions by delivering to the Obligor a completed notice
      in the form attached hereto as Exhibit A (a “Conversion
      Notice”).
      The
      date on which a Conversion Notice is delivered is the “Conversion
      Date.”
Unless
      the Holder is converting the entire principal amount outstanding under this
      Debenture, the Holder is not required to physically surrender this Debenture
      to
      the Obligor in order to effect conversions. Conversions hereunder shall have
      the
      effect of lowering the outstanding principal amount of this Debenture plus
      all
      accrued and unpaid interest thereon in an amount equal to the applicable
      conversion. The Holder and the Obligor shall maintain records showing the
      principal amount converted and the date of such conversions. In the event of
      any
      dispute or discrepancy, the records of the Holder shall be controlling and
      determinative in the absence of manifest error.

     

    (b)   Certain
      Conversion Restrictions.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (i)   A
      Holder
      may not convert this Debenture or receive shares of Common Stock as payment
      of
      interest hereunder to the extent such conversion or receipt of such interest
      payment would result in the Holder, together with any affiliate thereof,
      beneficially owning (as determined in accordance with Section 13(d) of the
      Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the
      then issued and outstanding shares of Common Stock, including shares issuable
      upon conversion of, and payment of interest on, this Debenture held by such
      Holder after application of this Section. Since the Holder will not be obligated
      to report to the Obligor 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
      Debenture 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 Debenture 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 permitted amount hereunder, the Obligor shall notify the Holder of this
      fact
      and shall honor the conversion for the maximum principal amount permitted to
      be
      converted on such Conversion Date in accordance with the periods described
      in
Section
      3(a)(i)
      and, at
      the option of the Holder, either retain any principal amount tendered for
      conversion in excess of the permitted amount hereunder for future conversions
      or
      return such excess principal amount to the Holder. The provisions of this
      Section may be waived by a Holder (but only as to itself and not to any other
      Holder) upon not less than 65 days prior notice to the Obligor. Other Holders
      shall be unaffected by any such waiver.

     

    (ii)   The
      Total
      Transaction Shares shall not be greater than 9,215,406 shares (which does not
      exceed 19.99% of the 46,308,573 outstanding shares of Common Stock as of the
      date of the Securities Purchase Agreement), until the Obligor’s shareholders
      approve (without the vote of any shares acquired in this transaction and related
      transactions) the issuance of the Total Transaction Shares. “Total
      Transaction Shares”
shall
      mean, in the aggregate, any shares of Common Stock issued under (a) this
      Debenture to the Holder, or its affiliates, and transferees, subsequent
      transferees, or any other debenture issued pursuant to the Securities Purchase
      Agreement (b) the Warrant Shares (as defined in the Securities Purchase
      Agreement), and (c) any shares of Common Stock issued as Liquidated Damages
      (as
      defined in the Registration Rights Agreement).

     

    (c)   Conversion
      Price and Adjustments to Conversion Price.

     

    (i)   The
      conversion price (the “Fixed
      Conversion Price”
or
      “Conversion
      Price”)
      in
      effect on any Conversion Date shall be equal to $2.00, subject to adjustment
      as
      provided herein. 

     

    (ii)   If
      the
      Obligor, at any time while this Debenture is outstanding, shall (a) pay a
      stock dividend or otherwise make a distribution or distributions on shares
      of
      its Common Stock or any other equity or equity equivalent securities payable
      in
      shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
      a
      larger number of shares, (c) combine (including by way of reverse stock split)
      outstanding shares of Common Stock into a smaller number of shares, or (d)
      issue
      by reclassification of shares of the Common Stock any shares of capital stock
      of
      the Obligor, then the Fixed Conversion Price shall be multiplied by a fraction
      of which the numerator shall be the number of shares of Common Stock (excluding
      treasury shares, if any) outstanding before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding 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. However, dividends paid for Preferred Stock currently
      outstanding shall be excluded from any and all adjustments in this Section
      3(c).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii)   If
      the
      Obligor, at any time while this Debenture is outstanding, shall issue rights,
      options or warrants to all holders of Common Stock (and not to the Holder)
      entitling them to subscribe for or purchase shares of Common Stock at a price
      per share less than the Fixed Conversion Price, then the Fixed Conversion Price
      shall be multiplied by a fraction, of which the denominator shall be the number
      of shares of the Common Stock (excluding treasury shares, if any) 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 (excluding treasury
      shares, if any) 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 would purchase at the Fixed Conversion Price. 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. However,
      upon
      the expiration of any such right, option or warrant to purchase shares of the
      Common Stock the issuance of which resulted in an adjustment in the Fixed
      Conversion Price pursuant to this Section, if any such right, option or warrant
      shall expire and shall not have been exercised, the Fixed Conversion Price
      shall
      immediately upon such expiration be recomputed and effective immediately upon
      such expiration be increased to the price which it would have been (but
      reflecting any other adjustments in the Fixed Conversion Price made pursuant
      to
      the provisions of this Section after the issuance of such rights or warrants)
      had the adjustment of the Fixed Conversion Price made upon the issuance of
      such
      rights, options or warrants been made on the basis of offering for subscription
      or purchase only that number of shares of the Common Stock actually purchased
      upon the exercise of such rights, options or warrants actually
      exercised.

     

    (iv)   If
      the
      Obligor or any subsidiary thereof, as applicable, at any time while this
      Debenture is outstanding, shall issue shares of Common Stock or rights,
      warrants, options or other securities or debt that are convertible into or
      exchangeable for shares of Common Stock (“Common
      Stock Equivalents”)
      entitling any Person to acquire shares of Common Stock, at a price per share
      less than the Fixed Conversion Price (if the holder of the Common Stock or
      Common Stock Equivalent so issued shall at any time, whether by operation of
      purchase price adjustments, reset provisions, floating conversion, exercise
      or
      exchange prices or otherwise, or due to warrants, options or rights per share
      which is issued in connection with such issuance, be entitled to receive shares
      of Common Stock at a price per share which is less than the Fixed Conversion
      Price, such issuance shall be deemed to have occurred for less than the Fixed
      Conversion Price), then, at the sole option of the Holder, the Fixed Conversion
      Price shall be adjusted to mirror the conversion, exchange or purchase price
      for
      such Common Stock or Common Stock Equivalents (including any reset provisions
      thereof) at issue. Such adjustment shall be made whenever such Common Stock
      or
      Common Stock Equivalents are issued. The Obligor shall notify the Holder in
      writing, no later than one (1) business day following the issuance of any Common
      Stock or Common Stock Equivalent subject to this Section, indicating therein
      the
      applicable issuance price, or of applicable reset price, exchange price,
      conversion price and other pricing terms. No adjustment under this Section
      shall
      be made as a result of issuances and exercises of options to purchase shares
      of
      Common Stock issued for compensatory purposes pursuant to any of the Obligor's
      stock option or stock purchase plans. However, equity line puts in connection
      with the Dutchess Private Equities Fund II ,LP equity line of credit are
      excluded from this Section 3(c). (v) If
      the
      Obligor, at any time while this Debenture is outstanding, shall distribute
      to
      all holders of Common Stock (and not to the Holder) evidences of its
      indebtedness or assets or rights or warrants to subscribe for or purchase any
      security, then in each such case the Fixed Conversion Price at which this
      Debenture shall thereafter be convertible shall be determined by multiplying
      the
      Fixed 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 Closing Bid Price determined
      as
      of the record date mentioned above, and of which the numerator shall be such
      Closing Bid Price 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 one outstanding share of the Common Stock as
      determined by the Board of Directors in good faith. In either case the
      adjustments shall be described in a statement provided to the Holder of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one 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.

     

    (vi)   In
      case
      of any reclassification of the Common Stock or any compulsory share exchange
      pursuant to which the Common Stock is converted into other securities, cash
      or
      property, the Holder shall have the right thereafter to, at its option, (A)
      convert the then outstanding principal amount, together with all accrued but
      unpaid interest and any other amounts then owing hereunder in respect of this
      Debenture into the shares of stock and other securities, cash and property
      receivable upon or deemed to be held by holders of the Common Stock following
      such reclassification or share exchange, and the Holder of this Debenture shall
      be entitled upon such event to receive such amount of securities, cash or
      property as the shares of the Common Stock of the Obligor into which the then
      outstanding principal amount, together with all accrued but unpaid interest
      and
      any other amounts then owing hereunder in respect of this Debenture could have
      been converted immediately prior to such reclassification or share exchange
      would have been entitled, or (B) require the Obligor to prepay the outstanding
      principal amount of this Debenture, plus all interest and other amounts due
      and
      payable thereon. The entire prepayment price shall be paid in cash. This
      provision shall similarly apply to successive reclassifications or share
      exchanges.

     

    (vii)         
      The
      Obligor shall at all times reserve and keep available out of its authorized
      Common Stock the full number of shares of Common Stock issuable upon conversion
      of all outstanding amounts under this Debenture; and within three (3) Business
      Days following the receipt by the Obligor of a Holder's notice that such minimum
      number of Underlying Shares is not so reserved, the Obligor shall promptly
      reserve a sufficient number of shares of Common Stock to comply with such
      requirement.

     

    (viii)        
      All
      calculations under this Section
      3
      shall be
      rounded up to the nearest $0.001 or whole share.

     

    (ix)    Whenever
      the Conversion Price is adjusted pursuant to Section
      3
      hereof,
      the Obligor shall promptly mail to the Holder a notice setting forth the
      Conversion Price after such adjustment and setting forth a brief statement
      of
      the facts requiring such adjustment.

     

    (x)    
If
      (A)
      the Obligor shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Obligor shall declare a special nonrecurring cash dividend on
      or
      a redemption of the Common Stock; (C) the Obligor shall authorize the granting
      to all holders of the Common Stock 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 Obligor shall be required in connection
      with
      any reclassification of the Common Stock, any consolidation or merger to which
      the Obligor is a party, any sale or transfer of all or substantially all of
      the
      assets of the Obligor, of any compulsory share exchange whereby the Common
      Stock
      is converted into other securities, cash or property; or (E) the Obligor shall
      authorize the voluntary or involuntary dissolution, liquidation or winding
      up of
      the affairs of the Obligor; then, in each case, the Obligor shall cause to
      be
      filed at each office or agency maintained for the purpose of conversion of
      this
      Debenture, and shall cause to be mailed to the Holder at its last address as
      it
      shall appear upon the stock books of the Obligor, 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 mail such notice or any defect therein or in
      the
      mailing 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 calendar period commencing the date of such notice to the
      effective date of the event triggering such notice.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (xi)   In
      case
      of any (1) merger or consolidation of the Obligor or any subsidiary of the
      Obligor with or into another Person, or (2) sale by the Obligor or any
      subsidiary of the Obligor of more than one-half of the assets of the Obligor
      in
      one or a series of related transactions, a Holder shall have the right to (A)
      exercise any rights under Section
      2(b),
      (B)
      convert the aggregate amount of this Debenture then outstanding into the shares
      of stock and other securities, cash and property receivable upon or deemed
      to be
      held by holders of Common Stock following such merger, consolidation or sale,
      and such Holder shall be entitled upon such event or series of related events
      to
      receive such amount of securities, cash and property as the shares of Common
      Stock into which such aggregate principal amount of this Debenture could have
      been converted immediately prior to such merger, consolidation or sales would
      have been entitled, or (C) in the case of a merger or consolidation, require
      the
      surviving entity to issue to the Holder a convertible Debenture with a principal
      amount equal to the aggregate principal amount of this Debenture then held
      by
      such Holder, plus all accrued and unpaid interest and other amounts owing
      thereon, which such newly issued convertible Debenture shall have terms
      identical (including with respect to conversion) to the terms of this Debenture,
      and shall be entitled to all of the rights and privileges of the Holder of
      this
      Debenture set forth herein and the agreements pursuant to which this Debentures
      were issued. In the case of clause (C), the conversion price applicable for
      the
      newly issued shares of convertible preferred stock or convertible Debentures
      shall be based upon the amount of securities, cash and property that each share
      of Common Stock would receive in such transaction and the Conversion Price
      in
      effect immediately prior to the effectiveness or closing date for such
      transaction. The terms of any such merger, sale or consolidation shall include
      such terms so as to continue to give the Holder the right to receive the
      securities, cash and property set forth in this Section upon any conversion
      or
      redemption following such event. This provision shall similarly apply to
      successive such events.

     

    (xii)    If
      an
      Event of Default occurs (after the expiration of any applicable cure period
      as
      set forth in Section
      2(a)hereof)
      and remains uncured for ten (10) days after the Holder sends notice of such
      Event of Default to the Obligor, the Holder may elect to switch the Fixed
      Conversion Price to the Default Conversion Price. The “Default
      Conversion Price”
shall
      mean the lesser of (a) the Fixed Conversion Price, or (b) seventy percent (70%)
      of the lowest Closing Bid Price of the Common Stock as quoted by Bloomberg,
      LP
      during the fifteen (15) trading days immediately preceding the Conversion Date.
      Upon the Obligor’s receipt of written notice by the Holder of such an Event of
      Default and the Holder’s election to exercise the remedy to switch the
      conversion price to the Default Conversion Price, the Company shall file a
      registration statement within forty five (45) days of notice of such Event
      of
      Default to register an amount of stock equal to two times the remaining amount
      outstanding under this Debenture and all other debentures issued pursuant to
      the
      Securities Purchase Agreement and use its best efforts to ensure that such
      registration statement is declared effective within ninety days of filing
      thereof. Further, the Obligor agrees that the date that full consideration
      was
      paid for this Debenture shall remain the Original Issue Date. The Company shall
      provide an opinion letter from counsel within two (2) days of written request
      by
      the Holder stating that the date full consideration was paid for this Debenture
      is the Original Issue Date. In the event that counsel to the Company fails
      or
      refuses to render an opinion as required to issue the conversion shares in
      accordance with this paragraph (either with or without restrictive legends,
      as
      applicable), then the Company irrevocably and expressly authorizes counsel
      to
      the Holder to render such opinion and shall authorize the Obligor’s transfer
      agent to accept and be entitled to rely on such opinion for the purposes of
      issuing the conversion shares. 

    

    (d)   Other
      Provisions.

     

    (i)   The
      Obligor covenants that it will at all times reserve and keep available out
      of
      its authorized and unissued shares of Common Stock solely for the 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, not less
      than such number of shares of the Common Stock as shall (subject to any
      additional requirements of the Obligor as to reservation of such shares set
      forth in this Debenture) be issuable (taking into account the adjustments and
      restrictions of Sections
      2(b) and 3(c))
      upon
      the conversion of the outstanding principal amount of this Debenture and payment
      of interest hereunder. The Obligor covenants that all shares of Common Stock
      that shall be so issuable shall, upon issue, be duly and validly authorized,
      issued and fully paid, nonassessable and, if the Underlying Shares Registration
      Statement has been declared effective under the Securities Act, registered
      for
      public sale in accordance with such Underlying Shares Registration
      Statement.

     

    (ii)   Upon
      a
      conversion hereunder the Obligor shall not be required to issue stock
      certificates representing fractions of shares of the Common Stock, but may
      if
      otherwise permitted, make a cash payment in respect of any final fraction of
      a
      share based on the Closing Bid Price at such time. If the Obligor elects not,
      or
      is unable, to make such a cash payment, the Holder shall be entitled to receive,
      in lieu of the final fraction of a share, one whole share of Common
      Stock.

     

    (iii)   The
      issuance of certificates for shares of the Common Stock on conversion of this
      Debenture shall be made without charge to the Holder thereof for any documentary
      stamp or similar taxes that may be payable in respect of the issue or delivery
      of such certificate, provided that the Obligor 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 such Debenture so converted and the Obligor 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 Obligor the amount of
      such tax or shall have established to the satisfaction of the Obligor that
      such
      tax has been paid.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iv)   Nothing
      herein shall limit a Holder's right to pursue actual damages or declare an
      Event
      of Default pursuant to Section
      2
      herein
      for the Obligor 's failure to deliver certificates representing shares of Common
      Stock upon conversion within the period specified herein and such Holder shall
      have the right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief, in each case without the need to post a bond or provide
      other
      security. The exercise of any such rights shall not prohibit the Holder from
      seeking to enforce damages pursuant to any other Section hereof or under
      applicable law. 

     

    (v)   In
      addition to any other rights available to the Holder, if the Obligor fails
      to
      deliver to the Holder such certificate or certificates pursuant to Section
      3(a)(i) by
      the
      fifth (5th)
      Trading
      Day after the Conversion Date, and if after such fifth (5th)
      Trading
      Day the Holder purchases (in an open market transaction or otherwise) Common
      Stock to deliver in satisfaction of a sale by such Holder of the Underlying
      Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”),
      then
      the Obligor shall (A) pay in cash to the Holder (in addition to any remedies
      available to or elected by the Holder) the amount by which (x) the Holder's
      total purchase price (including brokerage commissions, if any) for the Common
      Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
      of Common Stock that such Holder anticipated receiving from the conversion
      at
      issue multiplied by (2) the market price of the Common Stock at the time of
      the
      sale giving rise to such purchase obligation and (B) at the option of the
      Holder, either reissue a Debenture in the principal amount equal to the
      principal amount of the attempted conversion or deliver to the Holder the number
      of shares of Common Stock that would have been issued had the Obligor timely
      complied with its delivery requirements under Section
      3(a)(i).
      For
      example, if the Holder purchases Common Stock having a total purchase price
      of
      $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
      with respect to which the market price of the Underlying Shares on the date
      of
      conversion was a total of $10,000 under clause (A) of the immediately preceding
      sentence, the Obligor shall be required to pay the Holder $1,000. The Holder
      shall provide the Obligor written notice indicating the amounts payable to
      the
      Holder in respect of the Buy-In.

     

    Section
      4.   Notices.
       Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms hereof must be in writing and will be deemed to have
      been
      delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
      when
      sent by facsimile (provided confirmation of transmission is mechanically or
      electronically generated and kept on file by the sending party); or (iii) one
      (1) trading day after deposit with a nationally recognized overnight delivery
      service, in each case properly addressed to the party to receive the same.
      The
      addresses and facsimile numbers for such communications shall be:

     

    
      	
              If
                to the Company, to:

            	
              Hyperdynamics
                Corporation

            
	 	
              One
                Sugar Creek Center Boulevard, Suite 125

            
	 	
              Sugar
                Land, Texas 77478

            
	 	
              Attention:

            	
              Kent
                P. Watts

            
	 	
              Telephone:

            	
              (713)
                353-9400

            
	 	
              Facsimile:

            	
              (713)
                353-9421

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
              With
                a copy to: 

            	
              Joel
                Seidner, Esq.

            
	 	
              880
                Tully Road #50

            
	 	
              Houston,
                TX 77079

            
	 	
              Telephone:

            	
              (281)
                493-1311

            
	 	
              Facsimile:

            	
              (281)
                667-3292

            
	 	 
	
              If
                to the Holder:

            	
              Cornell
                Capital Partners, LP

            
	 	
              101
                Hudson Street, Suite 3700

            
	 	
              Jersey
                City, NJ 07303

            
	 	
              Attention:

            	
              Mark
                Angelo

            
	 	
              Telephone:

            	
              (201)
                985-8300

            
	 	 
	
              With
                a copy to:

            	
              David
                Gonzalez, Esq. 

            
	 	
              101
                Hudson Street - Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Telephone:

            	
              (201)
                985-8300

            
	 	
              Facsimile:

            	
              (201)
                985-8266

            

    

    

    or
      at
      such other address and/or facsimile number and/or to the attention of such
      other
      person as the recipient party has specified by written notice given to each
      other party three (3) business days prior to the effectiveness of such change.
      Written confirmation of receipt (i) given by the recipient of such notice,
      consent, waiver or other communication, (ii) mechanically or electronically
      generated by the sender's facsimile machine containing the time, date, recipient
      facsimile number and an image of the first page of such transmission or (iii)
      provided by a nationally recognized overnight delivery service, shall be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively.

     

    Section
      5.   Definitions.
      For the
      purposes hereof, the following terms shall have the following
      meanings:

     

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

     

    “Change
      of Control Transaction”
means
      the occurrence 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 Obligor, by contract or otherwise) of in
      excess of fifty percent (50%) of the voting securities of the Obligor (except
      that the acquisition of voting securities by the Holder shall not constitute
      a
      Change of Control Transaction for purposes hereof), (b) a replacement at one
      time or over time of more than one-half of the members of the board of directors
      of the Obligor 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), (c) the merger,
      consolidation or sale of fifty percent (50%) or more of the assets of the
      Obligor or any subsidiary (other than any subsidiary with less than $100,000
      in
      assets) of the Obligor in one or a series of related transactions with or into
      another entity, or (d) the execution by the Obligor of an agreement to which
      the
      Obligor is a party or by which it is bound, providing for any of the events
      set
      forth above in (a), (b) or (c).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Closing
      Bid Price”
means
      the price per share in the last reported trade of the Common Stock on the OTC
      or
      on the exchange which the Common Stock is then listed as quoted by Bloomberg,
      LP.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock, par value $.001, of the Obligor and stock of any other class
      into which such shares may hereafter be changed or reclassified.

     

    “Conversion
      Date”
shall
      mean the date upon which the Holder gives the Obligor notice of their intention
      to effectuate a conversion of this Debenture into shares of the Company’s Common
      Stock as outlined herein.

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

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

     

    “Person”
means
      a
      corporation, an association, a partnership, organization, a business, an
      individual, a government or political subdivision thereof or a governmental
      agency.

     

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

     

    “Trading
      Day”
means
      a
      day on which the shares of Common Stock are quoted on the OTC or quoted or
      traded on such Subsequent Market on which the shares of Common Stock are then
      quoted or listed; provided, that in the event that the shares of Common Stock
      are not listed or quoted, then Trading Day shall mean a Business
      Day.

     

    “Transaction
      Documents”
means
      the Securities Purchase Agreement or any other agreement delivered in connection
      with the Securities Purchase Agreement, including, without limitation, the
      Security Agreement, the Subsidiary Security Agreement, the Irrevocable Transfer
      Agent Instructions, and the Registration Rights Agreement and any related
      transactions.

     

    “Underlying
      Shares”
means
      the shares of Common Stock issuable upon conversion of this Debenture or as
      payment of interest in accordance with the terms hereof.

     

    “Underlying
      Shares Registration Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement, covering among other things the resale of the Underlying
      Shares and naming the Holder as a “selling stockholder” thereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      6.   Except
      as
      expressly provided herein, no provision of this Debenture shall alter or impair
      the obligations of the Obligor, which are absolute and unconditional, to pay
      the
      principal of, interest and other charges (if any) on, this Debenture at the
      time, place, and rate, and in the coin or currency, herein prescribed. This
      Debenture is a direct obligation of the Obligor. This Debenture ranks pari
      passu
      with all other Debentures now or hereafter issued under the terms set forth
      herein. As long as this Debenture is outstanding, the Obligor shall not and
      shall cause their subsidiaries not to, without the consent of the Holder, (i)
      amend its certificate of incorporation, bylaws or other charter documents so
      as
      to adversely affect any rights of the Holder; (ii) repay, repurchase or offer
      to
      repay, repurchase or otherwise acquire shares of its Common Stock or other
      equity securities other than as to the Underlying Shares to the extent permitted
      or required under the Transaction Documents; or (iii) enter into any agreement
      with respect to any of the foregoing. 

     

    Section
      7.   This
      Debenture shall not entitle the Holder to any of the rights of a stockholder
      of
      the Obligor, including without limitation, the right to vote, to receive
      dividends and other distributions, or to receive any notice of, or to attend,
      meetings of stockholders or any other proceedings of the Obligor, unless and
      to
      the extent converted into shares of Common Stock in accordance with the terms
      hereof.

     

    Section
      8.   If
      this
      Debenture is mutilated, lost, stolen or destroyed, the Obligor shall execute
      and
      deliver, in exchange and substitution for and upon cancellation of the 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,
      and
      indemnity, if requested, all reasonably satisfactory to the
      Obligor.

     

    Section
      9.   No
      indebtedness of the Obligor is senior to this Debenture in right of payment,
      whether with respect to interest, damages or upon liquidation or dissolution
      or
      otherwise. 

     

    Section
      10.       
      This
      Debenture shall be governed by and construed in accordance with the laws of
      the
      State of New Jersey, without giving effect to conflicts of laws thereof. Each
      of
      the parties consents to the jurisdiction of the Superior Courts of the State
      of
      New Jersey sitting in Hudson County, New Jersey and the U.S. District Court
      for the District of New Jersey sitting in Newark, New Jersey in connection
      with
      any dispute arising under this Debenture and hereby waives, to the maximum
      extent permitted by law, any objection, including any objection based on
forum non conveniens
      to the
      bringing of any such proceeding in such jurisdictions. 

     

    Section
      11.       
      If
      the
      Obligor fails to strictly comply with the terms of this Debenture, then the
      Obligor shall reimburse the Holder promptly for all fees, costs and expenses,
      including, without limitation, attorneys’ fees and expenses incurred by the
      Holder in any action in connection with this Debenture, including, without
      limitation, those incurred: (i) during any workout, attempted workout, and/or
      in
      connection with the rendering of legal advice as to the Holder’s rights,
      remedies and obligations, (ii) collecting any sums which become due to the
      Holder, (iii) defending or prosecuting any proceeding or any counterclaim to
      any
      proceeding or appeal; or (iv) the protection, preservation or enforcement of
      any
      rights or remedies of the Holder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      12.        
      Any
      waiver by 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
      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. Any waiver must be in writing.

     

    Section
      13.         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 shall violate applicable laws governing
      usury, the applicable rate of interest due hereunder shall automatically be
      lowered to equal the maximum permitted rate of interest. The Obligor 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 Obligor 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 Obligor (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 impeded
      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.

     

    Section
      14.         
      Whenever
      any payment or other obligation, notice or cure hereunder shall be due on a
      day
      other than a Business Day, such payment shall be made on the next succeeding
      Business Day.

     

    Section
      15.        
      THE
      PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
      OF
      THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
      OR
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
      DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
      OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
      FOR
      THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

     

    [REMAINDER
      OF PAGE INTENTIONLLY LEFT BLANK]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Obligor has caused this Secured Convertible Debenture to be duly executed by
      a
      duly authorized officer as of the date set forth above.

     

    
      	 	
              HYPERDYNAMICS
                CORPORATION 

            
	 	 
	 	
              By:
                /s/ Kent P. Watts

            
	 	
              Name:    
                Kent
                P. Watts

            
	 	
              Title:      
                President
                and Chief Executive Officer

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      EXHIBIT
        “A”

       

      NOTICE
        OF CONVERSION

       

      (To
        be executed by the Holder in order to convert the
        Debenture)

      
        TO:

      

      

      The
        undersigned hereby irrevocably elects to convert
        $____________________of
        the
        principal amount of the above Debenture into Shares of Common Stock of
        Hyperdynamics Corporation, according to the conditions stated therein, as
        of the
        Conversion Date written below.

       

      
        	
                Conversion
                  Date:

              	 	 
	
                Applicable
                  Conversion Price:

              	 	 
	
                Signature:

              	 	 
	
                Name:

              	 	 
	
                Address:

              	 	 
	
                Amount
                  to be converted:

              	 	
                $

              	 
	
                Amount
                  of Debenture unconverted:

              	 	
                $

              	 
	
                Conversion
                  Price per share: 

              	 	
                $

              	 
	
                Number
                  of shares of Common Stock to be issued:

              	 	 
	
                Please
                  issue the shares of Common Stock in the following name and to the
                  following address:

              	 	 
	
                Issue
                  to:

              	 	 
	
                Authorized
                  Signature:

              	 	 
	
                Name:

              	 	 
	
                Title:

              	 	 
	
                Phone
                  Number:

              	 	 
	
                Broker
                  DTC Participant Code:

              	 	 
	
                Account
                  Number:MANCHESTER INC.

                                 PROMISSORY NOTE

U.S. $19,600.00                                                  JANUARY 6, 2006

1.    FOR VALUE RECEIVED, Manchester Inc., a Nevada corporation (the
      "Borrower"), hereby promises to pay to the order of Brazos Equities LLC
      ("Lender"), at such time, place and in such manner as Lender may specify
      in writing, the principal amount of NINETEEN THOUSAND SIX HUNDRED US
      DOLLARS (U.S. $19,600.00) (the "Principal"). The Borrower shall pay
      interest on the outstanding principal of this Note at the annual rate of
      6% per annum, calculated based on a year of 365 days and actual days
      elapsed (the "Interest").

2.    The Borrower hereby promises to pay to the order of the Lender the
      Principal and all Interest due thereon within thirty (30) days upon
      delivery to the Company of written demand by the Lender (the "Due Date"),
      at such place and in such manner as Lender may specify in writing.

3.    Any and all fees, costs, expenses and disbursements charged by financial
      institutions with respect to wire transfer or other transmittal charges
      incurred in connection with delivery of the Principal from the Lender to
      the Borrower shall be deemed to have been received by the Borrower from
      the Lender and all such amounts shall be included in the calculation of
      Principal hereunder.

4.    This Note shall not be transferable by Borrower and the Borrower may not
      assign, transfer or sell all or a portion of its rights and interests to
      and under this Note to any persons and any such purported transfer shall
      void ab initio. The Lender may transfer and assign this Note at its sole
      discretion.

5.    The failure at any time of the Lender to exercise any of its options or
      any other rights hereunder shall not constitute a waiver thereof, nor
      shall it be a bar to the exercise of any of its options or rights at a
      later date. All rights and remedies of the Lender shall be cumulative and
      may be pursued singly, successively or together, at the option of the
      Lender. The acceptance by the Lender of any partial payment shall not
      constitute a waiver of any default or of any of the Lender's rights under
      this Note. No waiver of any of its rights hereunder, and no modification
      or amendment of this Note, shall be deemed to be made by the Lender unless
      the same shall be in writing, duly signed on behalf of the Lender; and
      each such waiver shall apply only with respect to the specific instance
      involved, and shall in no way impair the rights of the Lender in any other
      respect at any other time.

6.    Any term or condition of this Note may be waived at any time by the party
      that is entitled to the benefit thereof, but no such waiver shall be
      effective unless set forth in a written instrument duly executed by or on
      behalf of the party waiving such term or condition.

                                   Page 1 of 4

<PAGE>

7.    The Borrower represents and warrants that this Note is the valid and
      binding obligation of the Borrower, fully enforceable in accordance with
      its terms. The execution and delivery by the Borrower of this Note, the
      performance by the Borrower of its obligations hereunder and the
      consummation of the transactions contemplated hereby and thereby does not
      and will not: (a) conflict with or result in a violation or breach of any
      of the terms, conditions or provisions of the Borrower's charter
      instruments; (b) conflict with or result in a violation or breach of any
      term or provision of any law or order applicable to the Borrower or any of
      its assets and properties; or (c) (i) conflict with or result in a
      violation or breach of, or (ii) result in or give to any person any rights
      or create any additional or increased liability of the Borrower under or
      create or impose any lien upon, the Borrower or any of its assets and
      properties under, any contract or permit to which the Borrower is a party
      or by which its assets and properties are bound.

8.    If any provision of this Note is held to be illegal, invalid or
      unenforceable under any present or future Law, and if the rights or
      obligations of any party hereto under this Note will not be materially and
      adversely affected thereby, (i) such provision will be fully severable;
      (ii) this Note will be construed and enforced as if such illegal, invalid
      or unenforceable provision had never comprised a part hereof; (iii) the
      remaining provisions of this Note will remain in full force and effect and
      will not be affected by the illegal, invalid or unenforceable provision or
      by its severance here from; and (iv) in lieu of such illegal, invalid or
      unenforceable provision, there will be added automatically as a part of
      this Note a legal, valid and enforceable provision as similar in terms to
      such illegal, invalid or unenforceable provision as may be possible.

9.    Any notice, authorization, request or demand required or permitted to be
      given hereunder shall be in writing and shall be deemed to have been duly
      given two days after it is sent by an internationally recognized delivery
      service to the address of record of the Lender or the Borrower,
      respectively. Any party may change its address for such communications by
      giving notice thereof to the other parties in conformity with this
      Section.

10.   This Note shall be governed by and construed under the laws of the State
      of Nevada as applied to agreements entered into and to be performed
      entirely within such State. Each party hereby irrevocably consents to the
      jurisdiction of the courts of any competent jurisdiction over one or more
      of the parties. In any such litigation the Borrower waives personal
      service of any summons, complaint or other process and agrees that the
      service thereof may be made by certified or registered mail directed to
      the registered corporate office of Borrower in the State of its
      incorporation. The company hereby waives trial by jury in any litigation
      in any court with respect to, in connection with, or arising out of this
      note or the validity, protection, interpretation, collection or
      enforcement hereof and the company hereby waives the right to interpose
      any setoff or non-compulsory counterclaim or cross-claim in connection
      with any such litigation, irrespective of the nature of such setoff,
      counterclaim or cross-claim.

                                   Page 2 of 4

<PAGE>

11.   A default shall exist on this Note if any of the following occurs and is
      continuing: (i) Failure to pay Principal and any accrued Interest on the
      Note on or before the Due Date; (ii) Failure by the Borrower to perform or
      observe any other covenant or agreement of the Borrower contained in this
      Note; (iii) A custodian, receiver, liquidator or trustee of the Borrower,
      or any other person acting under actual or purported force of law takes
      ownership, possession or title to Borrower property; (iv) any of the
      property of the Borrower is sequestered by court order; (v) a petition or
      other proceeding, voluntary or otherwise is filed by or against the
      Borrower under any bankruptcy, reorganization, arrangement, insolvency,
      readjustment of indebtedness, dissolution or liquidation law of any
      jurisdiction, whether now or hereafter in effect; or (vi) the Borrower
      makes an assignment for the benefit of its creditors, or generally fails
      to pay its obligations as they become due, or consents to the appointment
      of or taking possession by a custodian, receiver, liquidator or trustee of
      the Borrower or all or any part of its property. Upon any such default,
      the Borrower shall immediately notify the Lender, and upon notice to the
      Borrower, the Lender may declare the Principal of the Note, plus accrued
      Interest, to be immediately due and payable, upon which such Principal and
      accrued Interest shall become due and payable immediately. Interest upon
      default shall thereafter accrue at the rate of 15% per annum, calculated
      based on a year of 365 days and actual days elapsed from the date of such
      default.

12.   The Borrower, any endorser, or guarantor hereof or in the future
      (individually an "Obligor" and collectively "Obligors") and each of them
      jointly and severally: (a) waive presentment, demand, protest, notice of
      demand, notice of intent to accelerate, notice of acceleration of
      maturity, notice of protest, notice of nonpayment, notice of dishonor, and
      any other notice required to be given under the law to any Obligor in
      connection with the delivery, acceptance, performance, default or
      enforcement of this Note, any endorsement or guaranty of this Note, any
      pledge, security, guaranty or other documents executed in connection with
      this Note; (b) consent to all delays, extensions, renewals or other
      modifications of this Note, or waivers of any term hereof or thereof, or
      release or discharge by the Lender of any of Obligors, or release,
      substitution or exchange of any security for the payment hereof, or the
      failure to act on the part of the Lender or any indulgence shown by the
      Lender (without notice to or further assent from any of Obligors), and
      agree that no such action, failure to act or failure to exercise any right
      or remedy by the Lender shall in any way affect or impair the Obligations
      (as hereinafter defined) of any Obligors or be construed as a waiver by
      the Lender of, or otherwise affect, any of the Lender's rights under this
      Note, under any endorsement or guaranty of this Note; (c) if the Borrower
      fails to fulfill its obligations hereunder when due, agrees to pay, on
      demand, all costs and expenses of enforcement of collection of this Note
      or of any endorsement or guaranty hereof and/or the enforcement of the
      Lender's rights with respect to, or the administration, supervision,
      preservation, protection of, or realization upon, any property securing
      payment hereof, including, without limitation, all attorney's fees, costs,
      expenses and disbursements, including, without further limitation, any and
      all fees related to any legal proceeding, suit, mediation arbitration, out
      of court payment agreement, trial, appeal, bankruptcy proceedings or any
      other actions of any nature whatsoever required on the part of Lender or
      Lender's representatives to enforce this Note and the rights hereunder;
      and (d) waive the right to interpose any defense, set-off or counterclaim
      of any nature or description.

                                   Page 3 of 4

<PAGE>

13.   The Borrower will not, by amendment of its Certificate of Incorporation or
      through any reorganization, recapitalization, transfer of assets,
      consolidation, merger, dissolution, issue or sale of securities or any
      other voluntary action, avoid or seek to avoid the observance or
      performance of any of the terms to be observed or performed hereunder by
      the Borrower, but will at all times in good faith assist in the carrying
      out of all the provisions of this Agreement and in the taking of all such
      action as may be necessary or appropriate in order to protect the rights
      of the Lender of this Note against impairment. This Note shall be
      enforceable against all successors and assigns of Borrower. Borrower
      hereby covenants that all of its subsidiaries and affiliates shall jointly
      and severally perform this Agreement to the same and full extent on behalf
      of Borrower if Borrower is unable to perform.

14.   This Note supersedes all prior discussions and agreements between the
      parties with respect to the subject matter hereof and thereof and contains
      the sole and entire agreement between the parties hereto with respect to
      the subject matter hereof.

15.   If the Lender loses this Note, the Borrower shall issue an identical
      replacement note to the Lender upon the Lender's delivery to the Borrower
      of a customary agreement to indemnify the Borrower reasonably satisfactory
      to the Borrower for any losses resulting from issuance of the replacement
      note.

16.   The terms and conditions of this Note shall inure to the benefit of and be
      binding upon the respective successors and assigns of the parties. Nothing
      in this Note, express or implied, is intended to confer upon any party
      other than the parties hereto or their respective successors and assigns
      any rights, remedies, obligations, or liabilities under or by reason of
      this Note, except as expressly provided in this Note.

IN WITNESS WHEREOF, the Borrower has caused this Note to be dated, executed and
issued on its behalf, by its duly appointed and authorized officer, as of the
6th day of January, 2006.

MANCHESTER INC.

                       By:   /s/ Richard D. Gaines
                             --------------------------
                             Name: Richard D. Gaines
                             Title: Corporate Secretary

                                   Page 4 of 4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}]]