Document:

CC Filed by Filing Services Canada Inc. 403-717-3898

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Exhibit 4.17

CONTRACTOR AGREEMENT

THIS AGREEMENT is made as of the 15th day of December, 2005.

BETWEEN: 

Northern Canadian Minerals Inc.

Suite 1304 – 925 West Georgia Street

Vancouver, BC V6C 3L2

Canada

(hereinafter called the “Company”)

OF THE FIRST PART

AND:

KAL Exploration Inc.

23756 Currant Drive

Golden, CO., 80401

(hereinafter called the “Contractor”)

OF THE SECOND PART

WHEREAS the Company is incorporated under the laws of Canada and carries on business as a mineral exploration, development and production company;

WHEREAS the Contractor is incorporated under the laws of the State of Colorado and carries on an independent consulting business for the mining industry;

 WHEREAS the Company wishes to employ the Contractor  to act as its Chief Geologist and Exploration Manager, to act in that capacity as is customary in the mining industry, and the Contractor has agreed to such employment, on the terms and subject to the conditions herein set forth;

AND WHEREAS the parties wish to formally record the terms of employment of the Contractor and its responsibilities, remuneration and other benefits;

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and mutual covenants herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by both parties, the parties hereby covenant and agree with each other as follows:

1.0

EMPLOYMENT

1.01

The Company agrees to employ and to continue to employ the Contractor and the Contractor agrees to serve the Company (and its associates or affiliates if so requested by the Company) in the capacity of Chief Geologist and Exploration Manager, pursuant to the authority vested in it hereby and in accordance with all laws during the term of this Agreement (“Term”).

1.02

The Term of employment of the Contractor under this Agreement shall commence 

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3

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(b)

Any amounts which the Contractor may be entitled to under any such plan or program shall not, for the purposes of this Agreement, be treated as salary.

(c)

The Contractor agrees that the Company may pursuant hereto, substitute, reduce, modify, or if necessary, eliminate such plans or programs at any time.  All such plans or programs shall be governed by the policies of the various regulatory bodies which have jurisdiction over the affairs of the Company.

2.06

The Contractor shall be reimbursed by the Company for all out of pocket expenses actually, necessarily and properly incurred by him in the discharge of its duties for the Company.  The Contractor agrees that such reimbursements shall be due only after he has rendered an itemized expense account, together with receipts where applicable, showing all monies actually expended on behalf of the Company and such other information as may reasonably be required and requested by the Company.

2.07

The Company shall make payment of all salary, fees, and bonuses  to Contractor by direct wire transfer to a designated bank account. Company shall be responsible for any additional fees or expenses that result from any dual taxation that may arise, as a result of the Contractor residing in the U.S., and working in Canada. Contractor shall be responsible for all U.S. withholdings, taxes and fees. 

 

1.8

The Company shall assist the Contractor, in any requirements for work permits necessary for the Contractor to perform the duties of this Agreement in Canada.  The Company shall reimburse the Contractor for any expenses necessary to perform the duties of this Agreement.

 

3.0

DUTIES OF THE CONTRACTOR

3.01

The Contractor will diligently and faithfully devote its best efforts to advance the Company’s interest throughout the term of this Agreement.  

3.02

During the term of this Agreement, the Contractor shall devote a sufficient amount of its working time, attention and energies to the business of the Company to carry out its duties hereunder and may serve as a director, officer, Contractor or consultant of such other companies or legal entities as determined by the Contractor so long as such positions do not interfere in any material respect with its duties hereunder.  

3.03

The Contractor will not, at any time or in any manner during the continuance of its employment hereunder, or at any time within one year after the termination of its employment, divulge any of the confidential affairs or secrets of the Company to any person or persons, without the previous consent in writing of the Directors, and will not use or attempt to use any information which he may acquire in the course of its employment for its own benefit, directly or indirectly.

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3.04

The Contractor agrees to communicate at once to the Company all Primary Uranium and related exploration, development and  business opportunities, inventions and improvements in the nature of the Uranium Exploration business of the Company which, while its employment continues, it may conceive, make or discover, become aware of, directly or indirectly, or have presented to him in any manner, that relate in any way to the type of business of the Company, either as it is now or as it may develop, and such business opportunities, inventions and improvements shall become the exclusive property of the Company without any obligation on the part of the Company to make any payment therefore in addition to the salary and benefits described herein to the Contractor.

 

4.0

TERMINATION

4.01

The Contractor may terminate this Agreement and its employment by giving the Company at least  two  (2) months’ written notice (the “Contractor’s Termination Notice”), provided that the Company shall have the right to give written notice to the Contractor that the Company is waiving the full notice period and is permitting this Agreement and the employment of the Contractor to be terminated upon a date that is less than one month after the date of the Contractor’s Termination Notice as determined by the Company and further provided that all salary, benefits and bonuses payable to the Contractor hereunder and all other obligations of the Company  to the Contractor hereunder shall cease after the effective date of termination, and  upon such termination notwithstanding  the provisions of  Section 1.01 or any other Section hereof.  Any monies owed by the Contractor to the Company up to the date of termination shall be then paid by the Contractor to the Company.

4.02

The Company may terminate this Agreement by giving the Contractor at least  two (2) months’ written notice (the “Company’s Termination Notice”), and further provided that Contractor shall receive payment for a minimum of 10 days per month for services provided during the Company’s Termination Notice period.  All salary, benefits and bonuses payable to the Contractor hereunder and all other obligations of the Company  to the Contractor hereunder shall cease after the effective date of termination, and  upon such termination notwithstanding  the provisions of  Section 1.01 or any other Section hereof.  Any monies owed by the Contractor to the Company up to the date of termination shall be then paid by the Contractor to the Company 

 

Termination of the Agreement in accordance with this Section shall relieve the Parties  from any and all obligation, liability or claim to each other  exclusive of monies owing to the Contractor up to the date of termination.  Company shall provide a formal separation agreement to Contractor,  releasing Contractor from any future liabilities, subject to terms and conditions herein. 

4.03

On the termination of its employment for any reason, the Contractor agrees to deliver up to the Company all documents, financial statements, records, plans, drawings and papers of every nature in any way relating to the affairs of the Company and its associated or affiliated companies which may be in its possession or under its control.

4.04

At any time during the term hereof, in the event a third party acquires, whether through takeover bid, private purchase, merger, amalgamation, corporate reorganization or any other form of business combination, more than twenty percent (20%) of the issued and outstanding shares of the Company and assumes control of the Company, and if, as a result of that change of control, the Contractor's position with the Company is either terminated or substantially changed from the responsibilities contemplated in the Contractor's job description, as provided for herein, without the agreement of the Contractor the Contractor will be entitled to a severance payment equal to that described in section 4.02. Furthermore, all Warrants issued to the Contractor, subject to Section 2.02 shall become immediately and fully vested to the Contractor. 

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4.07

If the Contractor should die during the period of its employment hereunder, termination of its employment shall be deemed to have been effected by the Company and the provisions of Section 4.02 shall apply.  In such event, any payment to be made to the Contractor pursuant to this Agreement shall be paid to the legal representatives of the Contractor provided the Company has received notice of claim from the Contractor’s legal representative within sixty (60) days of the Contractor’s death, provided further that any outstanding stock options shall continue to be exercisable by the legal representatives of the Contractor until the earlier of the expiry date of the options and twelve (12) months following the date of death of the Contractor.

5.0

SUCCESSORS OR ASSIGNS

5.01

The rights and obligations of the Company under this Agreement shall enure to the benefit of and be binding upon the successors or assigns of the Company.

The Company shall  require any successor (whether direct or indirect, by purchase, amalgamation, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place, provided that, if the Contractor agrees, an express agreement may not be required if such results by operation of law.  Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Contractor to compensation from the Company in the same amount and on the same terms as the Contractor would be entitled hereunder  as if such succession had not occurred except that, for purposes of implementing the foregoing, the date of which any such succession becomes effective shall be deemed the Date of Termination.  As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this paragraph 5.01 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

6.0

MISCELLANEOUS

6.01

This Agreement and the employment of the Contractor shall be governed, interpreted, construed and enforced according to the laws of the province of British Columbia and the laws of Canada applicable therein.

6.02

This Agreement shall inure to the benefit of and be enforceable by the Contractor's legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If the Contractor should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees or, if there be no such designee, to  his estate.

6.03

References herein to “associates” or “affiliates” shall mean associates and affiliates as defined in the Canada Business Corporations Act.

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6.04

This Agreement represents the entire agreement between the Contractor and the Company concerning the subject matter hereof and supersedes any previous oral or written communications, representations, understandings or agreements with the Company or any officer or agent thereof.

6.05

Any notice, acceptance or other document required or permitted hereunder shall be considered and deemed to have been duly given if delivered by hand or mailed by postage (Special Delivery) prepaid and addressed as follows:

To the Contractor:

KAL Exploration Inc.

23756 Currant Drive

Golden, Colorado 80401

(303) 526-4808

FAX: 303 526 4807

To the Company:

Northern Canadian Minerals Inc.

Suite 1304 – 925 West Georgia Street

Vancouver, B.C.   V6C 3L2

Canada

or to such other address as any party may specify in writing to the other and shall be deemed to have been received, if delivered, on the date of delivery and if mailed as aforesaid, then on the second business day following the date of mailing thereof provided that if there shall be, at the time of mailing or within two business days thereof, a strike, slowdown or other labour dispute which might affect delivery of notice by the mails then the notice shall only be effective if actually delivered.

6.06

The waiver by the Contractor or by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by the Company or by the Contractor.

6.07

Time shall be of the essence of this Agreement.

6.08

All references herein to dollar amounts shall be deemed to refer to Canadian funds.

7.0

AGREEMENT VOLUNTARY AND EQUITABLE

7.01

The Company and the Contractor further acknowledge and declare that they each have carefully considered and understand the terms of employment contained in this Agreement including, but without limiting the generality of the foregoing, the Contractor's rights upon termination and the restrictions on the Contractor after termination, and acknowledge and agree that the said terms of employment and rights and restrictions upon termination are mutually fair and equitable, and that they executed this Agreement voluntarily and of their own free will.EXHIBIT  4.1-CONVERTIBLE  DEBENTURE

                                                           DATED:  JUNE 19, 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-1                                                             $2,000,000

                            HYPERDYNAMICS CORPORATION

                          SECURED CONVERTIBLE DEBENTURE

                               DUE:  JUNE 19, 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") of even date herewith.
                          -----------------------------

     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 19, 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

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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.

                                        2
<PAGE>
     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

                                        3
<PAGE>
("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") of even date herewith 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

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<PAGE>
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

                                        5
<PAGE>
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).

                                        6
<PAGE>
     (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

                                        7
<PAGE>
("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.

                                        8
<PAGE>
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

                                        9
<PAGE>
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.

                                       10
<PAGE>
     (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

                                       11
<PAGE>
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

                                       12
<PAGE>
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.
      ----------

                                       13
<PAGE>
     "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.

                                       14
<PAGE>
     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

                                       15
<PAGE>
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]

                                       16
<PAGE>
     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

                                       17
<PAGE>
                                  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:
                                   ---------------------------------------------

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