Document:

ex4_1.htm

    
      

    

    Exhibit
4.1-----10% Convertible Debenture

    

    $5,000,000

    

    10%
CONVERTIBLE DEBENTURE

    DUE
SEPTEMBER 12, 2012

    

    THIS 10% CONVERTIBLE DEBENTURE is one
of a series of duly authorized and validly issued 10% Convertible Debentures of
Hyperdynamics Corporation, a Delaware corporation, (the “Company”), having its
principal place of business at One Sugar Creek Center

    Blvd.
#125, Sugar Land, Texas 77478, designated as its 10% Convertible Debenture due
September 12, 2012 (this debenture, the “Debenture” and,
collectively with the other debentures of such series, the “Debentures”).

    

    FOR VALUE
RECEIVED, the Company promises to pay to ENABLE GROWTH PARTNERS LP or
its registered assigns (the “Holder”), or shall
have paid pursuant to the terms hereunder, the principal sum of $5,000,000, on September 12,
2012 (the “Maturity
Date”) or such earlier date as this Debenture is required or permitted to
be repaid as provided hereunder, and to pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Debenture in
accordance with the provisions hereof.  This Debenture is subject to
the following additional provisions:

    

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

    

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

    

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    debts or
(g) the Company or any Significant Subsidiary thereof, by any act or failure to
act, expressly indicates its consent to, approval of or acquiescence in any of
the foregoing or takes any corporate or other action for the purpose of
effecting any of the foregoing.

    

    “Base Conversion
Price” shall have the meaning set forth in Section 5(b).

    

    “Beneficial Ownership
Limitation” shall have the meaning set forth in Section
4(c)(ii).

    

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

    

    “Buy-In” shall have
the meaning set forth in Section 4(d)(v).

    

    “Change of Control
Transaction” means the occurrence after the date hereof of any of (a) an
acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company (other than by means of conversion or exercise
of the Debentures and the Securities issued together with the Debentures), (b)
the Company merges into or consolidates with any other Person, or any Person
merges into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such
transaction own less than 66% of the aggregate voting power of the Company or
the successor entity of such transaction, or (c) the Company sells or transfers
all or substantially all of its assets to another Person and the stockholders of
the Company immediately prior to such transaction own less than 66% of the
aggregate voting power of the acquiring entity immediately after the
transaction, (d) a replacement at one time or within a three year period of more
than one-half of the members of the Board of Directors which is not approved by
a majority of those individuals who are members of the Board of Directors on the
date hereof (or by those individuals who are serving as members of the Board of
Directors on any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members on the date
hereof), or (e) the execution by the Company of an agreement to which the
Company  is a party or by which it is bound, providing for any of the
events set forth in clauses (a) through (d) above.

    

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

    

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

    

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

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

    

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

    

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

    

    “Dilutive Issuance”
shall have the meaning set forth in Section 5(b).

    

    “Dilutive Issuance
Notice” shall have the meaning set forth in Section 5(b).

    

    “Equity Conditions”
means, during the period in question, (a) the Company shall have duly honored all conversions
and redemptions scheduled to occur or occurring by virtue of one or more
Notices of Conversion of
the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing
to the Holder in respect of this
Debenture, (c)(i) with respect
to shares of Common Stock issuable as Interest Conversion Shares only, there is
an effective registration statement pursuant to which the Company is permitted
to utilize the prospectus thereunder to issue the Interest Conversion Shares or
the Holder is permitted to utilize the prospectus thereunder to resell all of
the Interest Conversion Shares (and the Company believes, in good faith, that
such effectiveness will continue uninterrupted for the foreseeable future) or
(ii) with respect to shares of Common Stock issuable pursuant to Section 4 or 6
hereof (including shares issuable in lieu of a cash payment of interest a
Monthly Redemption Make-Whole Interest Amount, Optional Redemption Make-Whole
Interest Amount  and Voluntary Conversion Make-Whole Interest
Payment), there is an
effective Registration Statement pursuant to which the Company is permitted to
utilize the prospectus thereunder to issue or the Holder is permitted to utilize
the prospectus thereunder to sell all of the other shares of Common Stock
issuable pursuant to the Transaction Documents (and the Company believes, in
good faith, that such effectiveness will continue uninterrupted for the
foreseeable future), (d) the Common Stock is trading on a Trading Market and all
of the shares issuable pursuant to the Transaction Documents are listed or
quoted for trading on such Trading Market (and the Company believes, in good
faith, that trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (e) there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction Documents,
(f) there is no existing Event of Default or no existing event which, with the
passage of time or the giving of notice, would constitute an Event of Default,
(g) the issuance of the shares in question (or, in the case of an Optional
Redemption or Monthly Redemption, the shares issuable upon conversion in full of
the Optional Redemption Amount or Monthly Redemption Amount) to the Holder would not
violate the limitations set forth in Section 4(c)(i) and Section 4(c)(ii)
herein, (h) there has been no
public announcement of a pending or proposed Fundamental Transaction or Change of
Control Transaction that has not been consummated, (i) the Holder is not in possession of
any information provided by the Company that constitutes, or may
constitute, material non-

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    public information and (j) for each Trading Day in a
period of 20 consecutive Trading Days prior to the applicable date in question, the daily trading volume for the
Common Stock on the principal Trading Market
exceeds 75,000 shares (subject to
adjustment for forward and reverse stock splits and the like) per Trading
Day.

    

    “Event of Default” shall have the
meaning set forth in Section 8(a).

    

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

    

    “Interest Conversion
Rate” means the lesser of (a) the Conversion Price or (b) 85% of the
lesser of (i) the average of the VWAPs for the 10 consecutive Trading Days
ending on the Trading Day that is immediately prior to the applicable Interest
Payment Date or (ii) the average of the VWAPs for the 10 consecutive Trading
Days ending on the Trading Day that is immediately prior to the date the
applicable Interest Conversion Shares are issued and delivered if such delivery
is after the Interest Payment Date.

    

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

    

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

    

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

    

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

    

    “Issuable Maximum”
shall have the meaning set forth in Section 4(c)(i).

    

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

    

    “Mandatory Default
Amount”  means the sum of (a) the greater of (i) the
outstanding principal amount of this Debenture, plus all accrued and unpaid
interest hereon, divided by the Conversion Price on the date the Mandatory
Default Amount is either (A) demanded (if demand or notice is required to create
an Event of Default) or otherwise due or (B) paid in full, whichever has a lower
Conversion Price, multiplied by the VWAP on the date the Mandatory Default
Amount is either (x) demanded or otherwise due or (y) paid in full, whichever
has a higher VWAP, or (ii) 130% of the outstanding principal amount of this
Debenture, plus 100% of accrued and unpaid interest hereon, (b) all other
amounts, costs, expenses and liquidated damages due in respect of this Debenture
and (c) an amount equal to all interest that would have accrued if the principal
amount subject to such Mandatory Default had remained outstanding through
September 12, 2012.

    

    “Monthly Conversion
Period” shall have the meaning set forth in Section 6(b)
hereof.

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    “Monthly Conversion
Price” shall have the meaning set forth in Section 6(b)
hereof.

    

    “Monthly Redemption”
means the redemption of this Debenture pursuant to Section 6(b)
hereof.

    

     “Monthly Redemption
Amount” means, as to a Monthly Redemption, the sum of (a) $138,888.89, (b) plus accrued
but unpaid interest, liquidated damages and any other amounts then owing to the
Holder in respect of this Debenture and (c) an
amount equal to all interest that would have accrued if the principal amount
subject to such Monthly Redemption had remained outstanding through September 12, 2012
(such amount, the “Monthly Redemption
Make-Whole Interest Amount”).

    

    “Monthly Redemption
Date” means the 12th day of
each month, commencing immediately upon the one year anniversary of the Original
Issue Date.

    

    “Monthly Redemption
Notice” shall have the meaning set forth in Section 6(b)
hereof.

    

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

    

    “Optional Redemption”
shall have the meaning set forth in Section 6(a).

    

    “Optional Redemption
Amount” means the sum of (a)(i) from the Original Issue Date until the
120th day
following the Original Issue Date, 110% of the then outstanding principal amount
of the Debenture and (ii) from the 120th day
following the Original Issue Date until the Debenture is no longer outstanding,
(x) 100% of the then outstanding principal amount of the Debenture plus (y)
an amount equal to all interest that would have
accrued if the principal amount subject to such Optional Redemption had remained
outstanding through September 12,
2012 (such amount, the “Optional Redemption
Make-Whole Interest Amount”), (b)
accrued but unpaid interest, and (c) all
liquidated damages and other amounts due in respect of the
Debenture.

    

    “Optional Redemption
Date” shall have the meaning set forth in Section 6(a).

    

    “Optional Redemption
Notice” shall have the meaning set forth in Section 6(a).

    

     “Optional Redemption Notice
Date” shall have the meaning set forth in Section 6(a).

    

    “Optional Redemption
Period” shall have the meaning set
forth in Section 6(a).

    

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

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    “Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b)
the Indebtedness existing on the Original Issue Date and set forth on Schedule 3.1(z)
attached to the Purchase Agreement, (c) lease obligations and purchase money
indebtedness of up to $2,000,000, in the aggregate, incurred in connection with
the acquisition of capital assets and lease obligations with respect to newly
acquired or leased assets and (d) up to $10,000,000 of non-equity linked
indebtedness owing to a commercial lender under commercial lines of
credit.

    

    “Permitted Lien” means
the individual and collective reference to the following: (a) Liens for taxes,
assessments and other governmental charges or levies not yet due or Liens for
taxes, assessments and other governmental charges or levies being contested in
good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with GAAP; (b) Liens imposed by law which were incurred in the
ordinary course of the Company’s business, such as carriers’, warehousemen’s and
mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
the ordinary course of the Company’s business, and which (x) do not individually
or in the aggregate materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the business of the
Company and its consolidated Subsidiaries or (y) are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the property or
asset subject to such Lien; (c) Liens incurred in connection with Permitted
Indebtedness under clauses (a) and (b) thereunder; and (d) Liens incurred in
connection with Permitted Indebtedness under clause (c) thereunder, provided
that such Liens are not secured by assets of the Company or its Subsidiaries
other than the assets so acquired or leased.

     

    “Pre-Redemption Conversion
Shares” shall have the meaning set forth in Section 6(b)
hereof.

    

    “Purchase Agreement”
means the Securities Purchase Agreement, dated as of August 29, 2008 among the
Company and the original Holders, as amended, modified or supplemented from time
to time in accordance with its terms.

    

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

    

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

    

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

    

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

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

    “Voluntary Conversion
Make-Whole Interest Payment” shall have the meaning set forth in Section
4(d)(ii).

    

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

    

    Section
2.     Interest.

    

    a) Payment of Interest in Cash
or Kind. The Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture at the rate
of 10% per annum, payable quarterly on January 1, April 1, July 1 and October 1,
beginning on the first such date after the Original Issue Date, on each Monthly
Redemption Date (as to that principal amount then being redeemed), on each
Conversion Date (as to that principal amount then being converted), on each
Optional Redemption Date (as to that principal amount then being redeemed) and
on the Maturity Date (each such date, an “Interest Payment
Date”) (if any Interest Payment Date is not a Business Day, then the
applicable payment shall be due on the next succeeding Business Day), in cash
or, at the Company’s option, in duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock at the Interest Conversion Rate (the
dollar amount to be paid in shares, the “Interest Share
Amount”) or a combination thereof; provided, however, that payment
in shares of Common Stock may only occur if (i) all of

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    the
Equity Conditions have been met (unless waived by the Holder in writing) during
the 20 Trading Days immediately prior to the applicable Interest Payment
Date  (the “Interest Notice
Period”) and through and including the date such shares of Common Stock
are actually issued to the Holder, (ii) the Company shall have given the Holder
notice in accordance with the notice requirements set forth below and (iii) as
to such Interest Payment Date, prior to such Interest Notice Period (but not
more than five (5) Trading Days prior to the commencement of such Interest
Notice Period), the Company shall have delivered to the Holder’s account with
The Depository Trust Company a number of shares of Common Stock to be applied
against such Interest Share Amount equal to the quotient of (x) the applicable
Interest Share Amount divided by (y) the lesser of the (i) then Conversion Price
and (ii) the Interest Conversion Rate assuming for such purposes that the
Interest Payment Date is the Trading Day immediately prior to the commencement
of the Interest Notice Period (the “Interest Conversion
Shares”).  In addition, in connection with all conversions
pursuant to Section 4 and all Monthly and Optional Redemptions, the Company
shall pay the Holder the Voluntary Conversion Make-Whole Interest Payment,
Monthly Redemption Make-Whole Interest Amount and Optional Redemption Make-Whole
Interest Amount, as applicable.

    

    b) Company’s Election to Pay
Interest in Cash or Shares of Common Stock.  Subject to the
terms and conditions herein, the decision whether to pay interest hereunder in
cash, shares of Common Stock or a combination thereof shall be at the sole
discretion of the Company.  Prior to the commencement of any Interest
Notice Period, the Company shall deliver to the Holder a written notice of its
election to pay interest hereunder on the applicable Interest Payment Date
either in cash, shares of Common Stock or a combination thereof and the Interest
Share Amount as to the applicable Interest Payment Date, provided that the
Company may indicate in such notice that the election contained in such notice
shall apply to future Interest Payment Dates until revised by a subsequent
notice.  During any Interest Notice Period, the Company’s election
(whether specific to an Interest Payment Date or continuous) shall be
irrevocable as to such Interest Payment Date.  Subject to the
aforementioned conditions, failure to timely deliver such written notice to the
Holder shall be deemed an election by the Company to pay the interest on such
Interest Payment Date in cash.  The aggregate number of shares of
Common Stock otherwise issuable to the Holder on an Interest Payment Date shall
be reduced by the number of Interest Conversion Shares previously issued to the
Holder in connection with such Interest Payment Date.

    

    c) Interest
Calculations. Interest shall be calculated on the basis of a 360-day
year, consisting of twelve 30 calendar day periods, and shall accrue daily
commencing on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest, liquidated damages and
other amounts which may become due hereunder, has been made.  Payment
of interest in shares of Common Stock (other than the Interest Conversion Shares
issued prior to an Interest Notice Period) shall otherwise occur pursuant to
Section 4(d)(ii) herein and, solely for purposes of the payment of interest in
shares, the Interest Payment Date shall be deemed the Conversion
Date.  Interest shall cease to accrue with respect to any principal
amount converted,

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    provided
that, the Company actually delivers the Conversion Shares within the time period
required by Section 4(d)(ii) herein.  Interest hereunder will be paid
to the Person in whose name this Debenture is registered on the records of the
Company regarding registration and transfers of this Debenture (the “Debenture Register”).
Except as otherwise provided herein, if at any time the Company pays interest
partially in cash and partially in shares of Common Stock to the holders of the
Debentures, then such payment of cash shall be distributed ratably among the
holders of the then-outstanding Debentures based on their (or their
predecessor’s) initial purchases of Debentures pursuant to the Purchase
Agreement.

    

    d) Late
Fee.  All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 18%
per annum or the maximum rate permitted by applicable law (the “Late Fees”) which
shall accrue daily from the date such interest is due hereunder through and
including the date of actual payment in full. Notwithstanding anything to the
contrary contained herein, if, on any Interest Payment Date the Company has
elected to pay accrued interest in the form of Common Stock but the Company is
not permitted to pay accrued interest in Common Stock because it fails to
satisfy the conditions for payment in Common Stock set forth in Section 2(a)
herein, then, at the option of the Holder, the Company, in lieu of delivering
either shares of Common Stock pursuant to this Section 2 or paying the regularly
scheduled interest payment in cash, shall deliver, within three (3) Trading Days
of each applicable Interest Payment Date, an amount in cash equal to the product
of (x) the number of shares of Common Stock otherwise deliverable to the Holder
in connection with the payment of interest due on such Interest Payment Date
multiplied by (y) the highest VWAP during the period commencing on the Interest
Payment Date and ending on the Trading Day prior to the date such payment is
actually made.  If any Interest Conversion Shares are issued to the
Holder in connection with an Interest Payment Date and are not applied against
an Interest Share Amount, then the Holder shall promptly return such excess
shares to the Company.

    

    e) Prepayment.  Except
as otherwise set forth in this Debenture, the Company may not prepay any portion
of the principal amount of this Debenture without the prior written consent of
the Holder.

    

    Section
3.     Registration of Transfers
and Exchanges.

    

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

    

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

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

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

    

    Section
4.      Conversion.

    

    a) Voluntary Conversion.
At any time after the Original Issue Date until this Debenture is no longer
outstanding, this Debenture shall be convertible, in whole or in part, into
shares of Common Stock at the option of the Holder, at any time and from time to
time (subject to the conversion limitations set forth in Section 4(c)
hereof).  The Holder shall effect conversions by delivering to the
Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a
“Notice of
Conversion”), specifying therein the principal amount of this Debenture
to be converted and the date on which such conversion shall be effected (such
date, the “Conversion
Date”).  If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is deemed delivered hereunder.  To effect conversions hereunder, the
Holder shall not be required to physically surrender this Debenture to the
Company unless the entire principal amount of this Debenture, plus all accrued
and unpaid interest thereon, has been so converted. Conversions hereunder shall
have the effect of lowering the outstanding principal amount of this Debenture
in an amount equal to the applicable conversion.  The Holder and the
Company shall maintain records showing the principal amount(s) converted and the
date of such conversion(s).  The Company may deliver an objection to
any Notice of Conversion within 1 Business Day of delivery of such Notice of
Conversion.  In the event of any dispute or discrepancy, the records
of the Holder shall be controlling and determinative in the absence of manifest
error. The Holder, and any
assignee by acceptance of this Debenture, acknowledge and agree that, by reason
of the provisions of this paragraph, following conversion of a portion of this
Debenture, the unpaid and unconverted principal amount of this Debenture may be
less than the amount stated on the face hereof.

    

    b) Conversion
Price.  The conversion price in effect on any Conversion Date
shall be equal to $2.25,
subject to adjustment herein (the “Conversion
Price”).

    

    c) Conversion
Limitations.

    

    i. Issuance
Limitations.   Notwithstanding anything herein to the
contrary, if the Company has not obtained Shareholder Approval, then the Company
may not issue, upon conversion of this Debenture, a number of shares of Common
Stock which, when aggregated with any shares of Common Stock issued on or after
the Original Issue Date and prior to such Conversion Date (A)

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    in
connection with the conversion of any Debentures issued pursuant to the Purchase
Agreement, (B) in connection with the exercise of any Warrants issued pursuant
to the Purchase Agreement and (C) in connection with any warrants issued to any
registered broker-dealer as a fee in connection with the issuance of the
Securities pursuant to the Purchase Agreement, would exceed 11,304,746 shares of
Common Stock (subject to adjustment for forward and reverse stock splits,
recapitalizations and the like) (such number of shares, the “Issuable
Maximum”).  Each Holder shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing (x) the original
principal amount of the Holder’s Debenture by (y) the aggregate original
principal amount of all Debentures issued on the Original Issue Date to all
Holders.  In addition, each Holder may allocate its pro-rata portion
of the Issuable Maximum among Debentures and Warrants held by it in its sole
discretion. Such portion shall be adjusted upward ratably in the event a Holder
no longer holds any Debentures or Warrants and the amount of shares issued to
the Holder pursuant to the Holder’s Debentures and Warrants was less than the
Holder’s pro-rata share of the Issuable Maximum.  For avoidance of
doubt, unless and until any required Shareholder Approval is obtained and
effective, warrants issued to any registered broker-dealer as a fee in
connection with the Securities issued pursuant to the Purchase Agreement as
described in (C) above shall provide that such warrants shall not be allocated
any portion of the Issuable Maximum and shall be unexercisable unless and until
such Shareholder Approval is obtained and effective.

    

    ii. Holder’s Restriction on
Conversion. The Company shall not effect any conversion of this
Debenture, and a Holder shall not have the right to convert any portion of this
Debenture, to the extent that after giving effect to the conversion set forth on
the applicable Notice of Conversion, the Holder (together with the Holder’s
Affiliates, and any other person or entity acting as a group together with the
Holder or any of the Holder’s Affiliates) would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below).  For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon conversion of this Debenture with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which are issuable upon (A) conversion of the remaining, unconverted
principal amount of this Debenture beneficially owned by the Holder or any of
its Affiliates and (B) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company  subject to a
limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, any other Debentures or the Warrants)
beneficially owned by the Holder or any of its Affiliates.  Except as set
forth in the preceding sentence, for purposes of this Section 4(c)(ii),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.  To
the extent that the limitation contained in this Section 4(c)(ii) applies, the
determination of whether

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    this
Debenture is convertible (in relation to other securities owned by the Holder
together with any Affiliates) and of which principal amount of this Debenture is
convertible shall be in the sole discretion of the Holder, and the submission of
a Notice of Conversion shall be deemed to be the Holder’s determination of
whether this Debenture may be converted (in relation to other securities owned
by the Holder together with any Affiliates) and which principal amount of this
Debenture is convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, the Holder will be
deemed to represent to the Company each time it delivers a Notice of Conversion
that such Notice of Conversion has not violated the restrictions set forth in
this paragraph and the Company shall have no obligation to verify or confirm the
accuracy of such determination.  In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.   For purposes
of this Section 4(c)(ii), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares of Common
Stock as stated in the most recent of the following: (A) the Company’s most
recent periodic or annual report, as the case may be; (B) a more recent public
announcement by the Company; or (C) a more recent notice by the Company or the
Company’s transfer agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this
Debenture, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Debenture held by the
Holder.  The Holder, upon not less than 61 days’ prior notice to the
Company, may increase or decrease the Beneficial Ownership Limitation provisions
of this Section 4(c)(ii), provided that the Beneficial Ownership Limitation in
no event exceeds 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon
conversion of this Debenture held by the Holder and the Beneficial Ownership
Limitation provisions of this Section 4(c)(ii) shall continue to
apply.  Any such increase or decrease will not be effective until the
61st
day after such notice is delivered to the Company.  The Beneficial Ownership
Limitation provisions of this paragraph shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this Section
4(c)(ii) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Debenture.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    
      	
              d)  

            	
              Mechanics of
      Conversion.

            

    

    

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

    

    ii. Delivery of Certificate Upon
Conversion. Not later than three Trading Days after each Conversion Date
(the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the
Holder (A) a certificate or certificates representing the Conversion Shares
which shall be free of restrictive legends and trading restrictions representing
the number of shares of Common Stock being acquired upon the conversion of this
Debenture (including, if the Company has given continuous notice pursuant to
Section 2(b) for payment of interest in shares of Common Stock at least 20
Trading Days prior to the date on which the Notice of Conversion is delivered to
the Company, shares of Common Stock representing the payment of accrued interest
otherwise determined pursuant to Section 2(a) but assuming that the Interest
Notice Period is the 20 Trading Days period immediately prior to the date on
which the Notice of Conversion is delivered to the Company and excluding for
such issuance the condition that the Company deliver Interest Conversion Shares
as to such interest payment), (B) a bank check in the amount of accrued and
unpaid interest (if the Company has elected or is required to pay accrued
interest in cash) and (C) a bank check or wire
transfer in the amount equal to all interest that would have accrued if the
principal amount subject to such Notice of Conversion had remained outstanding
through September 12, 2012 (the amount of such interest on each conversion of this
Debenture, a “Voluntary Conversion
Make-Whole Interest Payment”). The
Company shall use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section 4(d) electronically
through the Depository Trust Company or another established clearing corporation
performing similar functions.  Notwithstanding the foregoing, the Company shall be
permitted to make a Voluntary Conversion Make-Whole Interest Payment in shares
of Common Stock based on a conversion price equal to the lesser of (i) the then
Conversion Price, (ii) 85% of the average of the VWAPs for the 20 consecutive
Trading Days ending on the Trading Day that is immediately prior to the
applicable Share Delivery Date (subject to adjustment for any stock dividend,
stock split, stock combination or other similar event affecting the Common Stock
during such 10 Trading Day period) or (iii) 85% of the average
of the VWAPs for the 10 consecutive Trading Days ending on the Trading Day
that is immediately prior to the date of the applicable Notice of Conversion
(subject to adjustment for any stock dividend, stock split, stock combination or
other similar event affecting the Common Stock during such 20 Trading Day
period) if: (x) all of the Equity Conditions have been met (unless waived by the
Holder in writing) during the 20 

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    Trading Days immediately prior to the applicable
Conversion Date and through and including the date such shares of Common Stock
are actually issued to the Holder and (y) the Company shall have provided
written notice to the Holder at least 20 Trading Days prior to such conversion
(which notice may be given on a continuous basis to the Holder) that the Company
elects to make the Voluntary Conversion Make-Whole Interest Payment in shares of
Common Stock rather than cash, provided that the Company shall have the right to
deliver such notice to the Holder at the Closing which notice shall be effective
immediately without having to meet the 20 Trading Day prior notice
requirement.  The Company’s election to
pay a Voluntary Conversion Make-Whole Interest Payment in shares of Common Stock
shall be applied ratably to all of the holders of the then outstanding
Debentures that submit a Notice of
Conversion on the same day based on their
(or their predecessor’s) initial purchases of Debentures pursuant to the
Purchase Agreement.

    

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

    

    iv. Obligation Absolute; Partial
Liquidated Damages.  The Company’s obligations to issue and
deliver the Conversion Shares upon conversion of this Debenture in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of such Conversion Shares; provided, however, that such
delivery shall not operate as a waiver by the Company of any such action the
Company may have against the Holder.  In the event the Holder of this
Debenture shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the Holder
or anyone associated or affiliated with the Holder has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and or enjoining conversion of all or
part of this Debenture shall have been sought and obtained, and the Company
posts a surety bond for the benefit of the Holder 

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    in the
amount of 150% of the outstanding principal amount of this Debenture, which is
subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to the Holder to the extent it obtains
judgment.  In the absence of such injunction, the Company shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed
conversion.  If the Company fails for any reason to deliver to the
Holder such certificate or certificates pursuant to Section 4(d)(ii) by the
third Trading Day after the Conversion Date, the Company shall pay to the
Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of
principal amount being converted, $10 per Trading Day (increasing to $20 per
Trading Day on the fifth (5th)
Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such third (3rd)
Trading Day until such certificates are
delivered.    Nothing herein shall limit a Holder’s right to
pursue actual damages or declare an Event of Default pursuant to Section 8
hereof for the Company’s failure to deliver Conversion Shares within the period
specified herein and the Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.  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. Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for any reason to
deliver to the Holder such certificate or certificates by the Share Delivery
Date pursuant to Section 4(d)(ii), and if after such Share Delivery Date the
Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any other remedies
available to or elected by the Holder) the amount by which (x) the Holder’s
total purchase price (including any brokerage commissions) for the Common Stock
so purchased exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that the Holder was entitled to receive from the conversion at
issue multiplied by (2) the actual sale price at which the sell order giving
rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Debenture in a 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 if the Company had timely complied with
its delivery requirements under Section 4(d)(ii).  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 this Debenture with respect
to which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to 

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    such
purchase obligation was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the Holder
$1,000.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
conversion of this Debenture as required pursuant to the terms
hereof.

    

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

    

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

    

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

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    Section
5.     Certain
Adjustments.

    

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

    

    b) Subsequent Equity
Sales.  If, at any time while this Debenture is
outstanding,  the Company or any Subsidiary, as applicable, sells or
grants any option to purchase or sells or grants any right to reprice, or
otherwise disposes of or issues (or announces any sale, grant or any option to
purchase or other disposition), any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock at an effective price per
share that is lower than the then Conversion Price (such lower price, the “Base Conversion
Price” and such issuances, collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents 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 are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share that is lower than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price on such date of the
Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base
Conversion Price.  Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no
adjustment will be made under this Section 5(b) in respect of an Exempt
Issuance.  In addition, for clarity, any adjustment to the conversion
price, exchange price or exercise price of the Yorkville Warrants shall not
constitute an Exempt Issuance, and, any such adjustment to an effective price
per share that is lower than the then Conversion Price shall constitute a
Dilutive Issuance subject to this Section 5(b). If the Company enters into a
Variable Rate Transaction, despite the prohibition set forth in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion price at which such
securities may be 

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    converted
or exercised. The Company shall notify the Holder in writing, no later than 1
Business Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 5(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon
the occurrence of any Dilutive Issuance, the Holder is entitled to receive a
number of Conversion Shares based upon the Base Conversion Price on or after the
date of such Dilutive Issuance, regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of Conversion.

     

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

    

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

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

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

    

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

    

    g) Notice to the
Holder.

    

               
 i. Adjustment to Conversion
Price.  Whenever the Conversion Price is adjusted pursuant to
any provision of this Section 5, the Company shall promptly deliver to each
Holder a notice setting forth the Conversion Price after

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.

     

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

    

    Section
6.     Redemption.

    

    a) Optional Redemption at
Election of Company.  Subject to
the provisions of this Section 6(a), at any
time after the Original Issue Date, the
Company may deliver a notice to the Holder (an “Optional Redemption
Notice” and the date such notice is deemed
delivered hereunder, the “Optional Redemption Notice
Date”) of its irrevocable election to
redeem some or all of the then outstanding principal amount of this Debenture
for cash in an amount equal to the Optional
Redemption Amount on (i) as to an Optional

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    Redemption prior to the 120th day following the Original Issue Date, the
10th Trading Day following the Optional Redemption Notice
Date and (ii) as to an Optional Redemption following the 120th day following the Original Issue Date, the
20th Trading Day following the Optional Redemption Notice
Date (such date, the “Optional Redemption
Date”, such 10 Trading Day period or 20 Trading Day period, as applicable, the “Optional Redemption
Period” and such redemption, the
“Optional
Redemption”).  The Optional
Redemption Amount is payable in full on the Optional Redemption
Date.  The Company may only effect an Optional Redemption if each of
the applicable Equity
Conditions shall have been met (unless
waived in writing by the Holder) on each Trading Day during the period
commencing on the Optional Redemption Notice Date through to the Optional
Redemption Date and through and including the date payment of the
Optional Redemption Amount is actually made in full.  If any of the applicable Equity Conditions
shall cease to be satisfied at any time during the Optional Redemption Period,
then the Holder may elect to nullify the Optional Redemption Notice by notice to
the Company within 3 Trading Days after the first day on which any such Equity
Condition has not been met (provided that if, by a provision of the Transaction
Documents, the Company is obligated to notify the Holder of the non-existence of
an Equity Condition, such notice period shall be extended to the third Trading
Day after proper notice from the Company) in which case the Optional Redemption
Notice shall be null and void, ab initio.  The Company covenants and agrees that it
will honor all Notices of Conversion (and pay all Voluntary Conversion
Make-Whole Interest Payments in connection therewith) tendered from the time of
delivery of the Optional Redemption Notice through the date all amounts owing
thereon are due and paid in full. The Company’s determination to pay an
Optional Redemption in cash shall be applied ratably to all of the holders of
the then outstanding Debentures based on their (or their predecessor’s) initial
purchases of Debentures pursuant to the Purchase Agreement. Notwithstanding the foregoing, as to Optional Redemptions that occur on or after the
120th day
following the Original Issue Date, the Company
shall be permitted to make pay the Optional Redemption Make-Whole Interest
Amount portion of an Optional Redemption Amount in shares of Common Stock based
on a conversion price equal to the lesser of (i) the then Conversion Price, (ii)
85% of
the average of the VWAPs for the 10 consecutive
Trading Days ending on the Trading Day that is immediately prior to the
applicable Optional Redemption Date (subject to adjustment for any stock
dividend, stock split, stock combination or other similar event affecting the
Common Stock during such 20 Trading Day period) or (iii) 85% of the average
of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that
is immediately prior to the date of the applicable Optional Redemption Notice
Date (subject to adjustment for any stock dividend, stock split, stock
combination or other similar event affecting the Common Stock during such 20
Trading Day period) if: (x) all of the Equity Conditions have been met (unless
waived by the Holder in writing) during the 20 Trading Days immediately prior to
the applicable Optional Redemption Notice
Date and through and including the date
such shares of Common Stock are actually issued to the Holder and (y) the
Company shall have provided the Holder notice on the same day it delivers the
applicable Optional Redemption Notice of
its intention to pay all or a portion of the Optional Redemption Make-Whole
Interest Amount in shares of Common Stock.  The Company’s election
to

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    pay an Optional Redemption Make-Whole Interest Amount in
shares of Common Stock shall be applied ratably to all of the holders of the
then outstanding Debentures based on their (or their predecessor’s) initial
purchases of Debentures pursuant to the Purchase Agreement.

    

    b) Monthly
Redemption.  On each Monthly Redemption Date, the Company shall
redeem the Monthly Redemption Amount (the “Monthly Redemption”).
The Monthly Redemption Amount payable on each Monthly Redemption Date shall be
paid in cash; provided, however, as to any
Monthly Redemption and upon 10 Trading Days’ prior written irrevocable notice
(the “Monthly
Redemption Notice”), in lieu of a cash redemption payment the Company may
elect to pay all or part of a Monthly Redemption Amount in Conversion Shares
based on a conversion price equal to the lesser of (i) the then Conversion Price
and (ii) 85% of the average of the VWAPs for the 10 consecutive Trading Days
ending on the Trading Day that is immediately prior to the applicable Monthly
Redemption Date (subject to adjustment for any stock dividend, stock split,
stock combination or other similar event affecting the Common Stock during such
10 Trading Day period) (the price calculated during the 10 Trading Day period
immediately prior to the Monthly Redemption Date, the “Monthly Conversion
Price” and such 10 Trading Day period, the “Monthly Conversion
Period”); provided, further, that the
Company may not pay the Monthly Redemption Amount in Conversion Shares unless
(y) from the date the Holder receives the duly delivered Monthly Redemption
Notice through and until the date such Monthly Redemption is paid in full, the
applicable Equity Conditions have been
satisfied, unless waived in writing by the Holder, and (z) as to such Monthly
Redemption, prior to such Monthly Conversion Period (but not more than 5 Trading
Days prior to the commencement of the Monthly Conversion Period), the Company
shall have delivered to the Holder’s account with The Depository Trust Company a
number of shares of Common Stock to be applied against such Monthly Redemption
Amount equal to the quotient of (x) the applicable Monthly Redemption Amount
divided by (y) the lesser of (A) the Conversion Price and (B) 85% of the average
of the 10 VWAPs during the period ending on the 3rd Trading
Day immediately prior to the date of the Monthly Redemption Notice (the “Pre-Redemption Conversion
Shares”).  The Holder may convert, pursuant to Section 4(a),
any principal amount of this Debenture subject to a Monthly Redemption at any
time prior to the date that the Monthly Redemption Amount, plus accrued but
unpaid interest, liquidated damages and any other amounts then owing to the
Holder are due and paid in full.  Unless otherwise indicated by the
Holder in the applicable Notice of Conversion, any principal amount of this
Debenture converted during the applicable Monthly Conversion Period until the
date the Monthly Redemption Amount is paid in full shall be first applied to the
principal amount subject to the Monthly Redemption Amount payable in cash and
then to the Monthly Redemption Amount payable in Conversion
Shares.  Any principal amount of this Debenture converted during the
applicable Monthly Conversion Period in excess of the Monthly Redemption Amount
shall be applied against the last principal amount of this Debenture scheduled
to be redeemed hereunder, in reverse time order from the Maturity Date; provided, however, if any such
conversion is applied against such Monthly Redemption Amount, the Pre-Redemption
Conversion Shares, if any were issued in connection with such Monthly Redemption
or were not already applied to such conversions, shall be first applied against
such conversion.  The Company covenants and 

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    agrees
that it will honor all Notices of Conversion tendered up until such amounts are
paid in full.  The Company’s determination to pay a Monthly Redemption
in cash, shares of Common Stock or a combination thereof shall be applied
ratably to all of the holders of the then outstanding Debentures based on their
(or their predecessor’s) initial purchases of Debentures pursuant to the
Purchase Agreement.  At any time the Company delivers a notice to the
Holder of its election to pay the Monthly Redemption Amount in shares of Common
Stock, the Company shall file a prospectus supplement pursuant to Rule 424
disclosing such election.

    

    c) Redemption
Procedure.  The payment of cash or issuance of Common Stock, as
applicable, pursuant to an Optional Redemption or a Monthly Redemption] shall be
payable on the Optional Redemption Date or the Monthly Redemption
Date.  If any portion of the payment pursuant to an Optional
Redemption or a Monthly Redemption shall not be paid by the Company by the
applicable due date, interest shall accrue thereon at an interest rate equal to
the lesser of 18% per annum or the maximum rate permitted by applicable law
until such amount is paid in full.  Notwithstanding anything herein
contained to the contrary, if any portion of the Optional Redemption Amount or
the Monthly Redemption Amount remains unpaid after such date, the Holder may
elect, by written notice to the Company given at any time thereafter,
to invalidate such Optional Redemption or Monthly Redemption, ab initio, and, with
respect to the Company’s failure to honor the Optional Redemption, the Company
shall have no further right to exercise such Optional
Redemption.  Notwithstanding anything to the contrary in this Section
6, the Company’s determination to redeem in cash or its elections under Section
6(b) shall be applied ratably among the Holders of Debentures. The Holder may elect to convert the outstanding
principal amount of the Debenture pursuant to Section 4 prior to actual payment
in cash for any redemption under this
Section 6 by the delivery of a Notice of
Conversion to the Company.

    

    Section
7.     Negative Covenants.
As long as any portion of this Debenture remains outstanding, the Company shall
not, and shall not permit any of its subsidiaries (whether or not a Subsidiary
on the Original Issue Date) to, directly or indirectly:

    

    a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
suffer to exist any indebtedness for borrowed money of any kind,
including, but not limited to, a guarantee, on or with respect to
any of its property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom;

    

    b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom;

    

    c) amend its charter documents, including, without
limitation, its certificate of incorporation and bylaws, in any manner that
materially and adversely affects any rights of the
Holder;

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    

    d) repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of
shares of its Common Stock or Common Stock Equivalents other than as to (i) the
Conversion Shares or Warrant Shares as permitted or required under the
Transaction Documents and (ii) repurchases of Common Stock or Common Stock
Equivalents of departing officers and directors of the Company, provided that
such repurchases shall not exceed an aggregate of $100,000 for all officers and
directors during the term of this Debenture;

    

    e) repay, repurchase or offer to repay, repurchase or
otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata
basis;

    

    f) pay cash dividends or distributions on any equity
securities of the Company;

    

    g) enter
into any transaction with any Affiliate of the Company which would be required
to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or

    

    h) enter
into any agreement with respect to any of the foregoing.

    

    Section
8.     Events of
Default.

    

    a) “Event of Default”
means, wherever used herein, any of the following events (whatever the reason
for such event and whether such event shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):

    

    i. any default in the payment of (A) the principal amount of any Debenture or (B) interest,
liquidated damages and other amounts owing to a Holder on
any Debenture, as and when the same shall
become due and payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, solely in the case of an interest
payment or other default under clause (B)
above, is not cured within 3 Trading
Days;

    

    ii. the
Company shall fail to observe or perform any other covenant or agreement
contained in the Debentures (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion,
which breach is addressed in clause (x) below) which failure is not cured, if
possible to cure, within the earlier to occur of (A) 5 Trading Days after notice
of such failure sent by the Holder or by any other Holder to the Company and (B)
10 Trading Days after the Company has become or should have become aware of such
failure;

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

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

    

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

    

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

    

    vi. the
Company or any Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced, any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement that (a) involves an
obligation greater than $150,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;

    

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

    

    viii. the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 33% of its
assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);

    

    ix. if the
Company fails (after written demand from the Holder) to provide at all times the
Registration Statement or usable prospectus that permits the Company to issue
the Conversion Shares or which allows the Holder to sell the Conversion Shares
pursuant thereto, subject to a grace period of 20 calendar days in the aggregate
in any 365-day period;

    

    x. the
Company shall fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day after a Conversion Date pursuant to Section 4(d) or the
Company shall provide at any time notice to the Holder, including by

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    way of
public announcement, of the Company’s intention to not honor requests for
conversions of any Debentures in accordance with the terms hereof;
or

    

    xi. any
monetary judgment, writ or similar final process shall be entered or filed
against the Company, any subsidiary or any of their respective property or other
assets for more than $150,000, and such judgment, writ or similar final process
shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.

    

    b) Remedies Upon Event of
Default. If any Event of Default occurs, the outstanding principal amount
of this Debenture, plus accrued but unpaid interest, liquidated damages and
other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable in cash at the
Mandatory Default Amount.  Commencing 5 days after the occurrence of
any Event of Default that results in the eventual acceleration of this
Debenture, the interest rate on this Debenture shall accrue at an interest rate
equal to the lesser of 18% per annum or the maximum rate permitted under
applicable law.  Upon the payment in full of the Mandatory Default
Amount, the Holder shall promptly surrender this Debenture to or as directed by
the Company.  In connection with such acceleration described herein,
the Holder need not provide, and the Company hereby waives, any presentment,
demand, protest or other notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable
law.  Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of the Debenture until such time, if any, as the Holder receives full payment
pursuant to this Section 8(b).  No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.

    

    Section
9.     Miscellaneous.

    

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

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    following
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified on the signature page between 5:30
p.m. (New York City time) and 11:59 p.m. (New York City time) on any date, (iii)
the second Business Day following the date of mailing, if sent by nationally
recognized overnight courier service or (iv) upon actual receipt by the party to
whom such notice is required to be given.

    

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

    

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

    

    d) Governing Law,
Arbitration.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with, and any dispute
between the parties relating to or arising from the Transaction Documents shall
be governed by, the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.  Each party agrees that
all legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Debenture and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents), as well as any dispute
between the parties relating to the Transaction Documents, shall be resolved by
binding arbitration in San Francisco, California before an arbitrator with
experience in commercial disputes relating to securities.  The
arbitration shall be administered by JAMS pursuant to its Comprehensive
Arbitration Rules and Procedures, or, if for any reason JAMS refuses to
administer such arbitration or JAMS is no longer in business, by the American
Arbitration Association (“AAA”) in accordance
with its rules and procedures. Unless the arbitrator determines that there is
exceptional need for additional discovery, discovery in the arbitration shall be
limited as follows:  (1) the parties
shall exchange non-privileged relevant documents including, without
limitation, all documents that the parties intend to use as evidence in the
arbitration; and (2) each party shall be entitled to take one
deposition of seven hours duration of either an opposing party or a
non-party.  If one party fails to respond within 20 days after the
other party mails a written list of proposed arbitrators to that party by either
agreeing to one of the 

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    proposed
arbitrators or suggesting 3 or more alternate arbitrators, the proposing party
may select the arbitrator from among its initial list of proposed arbitrators
and JAMS (or AAA if it is administering the arbitration) shall then appoint that
arbitrator to preside over the arbitration.  If the parties are unable to
agree on an arbitrator, the parties shall select an arbitrator pursuant to the
rules of JAMS (or AAA if it is administering the arbitration). Where reasonable,
the arbitrator shall schedule the arbitration hearing within four (4) months
after being appointed.  The arbitrator must render a decision in
writing, explaining the legal and factual basis for decision as to each of the
principal controverted issues.  The arbitrator’s decision will be final and
binding upon the parties.  A judgment upon any award may be entered in any
court of competent jurisdiction.  This clause shall not preclude the
parties from seeking provisional remedies in aid of arbitration, such as
injunctive relief, from any court of competent jurisdiction. Each party
shall be responsible for advancing one-half of the costs of arbitration,
including all JAMS (or AAA) fees; provided that, in the award, the prevailing
party shall be entitled to recover all of its costs and expenses, including
reasonable attorneys’ fees and costs, arbitrator fees, JAMS (or AAA) fees and
costs, and any attorneys’ fees and costs incurred in compelling arbitration.
 The parties are not waiving, and expressly reserve, any rights they may
have under federal securities laws, rules, and regulations, and any such rights
shall be determined in the arbitration provided for herein.  Each
party hereby irrevocably agrees and submits to the jurisdiction of the federal
and state courts located in the City of San Francisco, California, for any suit,
action or proceeding enforcing this arbitration provision or entering judgment
upon any arbitral award made pursuant to this arbitration provision, and each
party hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such courts, or that such suit, action or proceeding is an inconvenient
venue.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Debenture and agrees that such service shall
constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by law.  This
provision will be interpreted, construed and governed according to the Federal
Arbitration Act (9 U.S.C. Sections 1 et seq.).

    

    e) Waiver.  Any
waiver by the Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture.  The failure of the Company or the Holder to insist upon
strict adherence to any term of this Debenture on one or more occasions shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Debenture.  Any waiver by the Company or the Holder must be in
writing.

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    

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

    

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

    

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

    

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

    

    

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

    

    (Signature
Pages Follow)

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

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

    

    

    
      	
               

               

            	

              HYPERDYNAMICS
      CORPORATION

            
	
            	

              By:/s/
      Kent Watts

                   Name:
      Kent Watts

                   Title:
      President

              Facsimile
      No. for delivery of Notices:
_______________

            

    

    

    
      
         

      

      
        29  

        
          

        

      

      
         

      

    

    ANNEX
A

    

    NOTICE
OF CONVERSION

    

    

    The undersigned hereby elects to
convert principal under the 10% Convertible Debenture due September 12, 2012 of
Hyperdynamics Corporation, a Delaware corporation (the “Company”), into
shares of common stock (the “Common Stock”), of
the Company according to the conditions hereof, as of the date written
below.  If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.

    

    By the delivery of this Notice of
Conversion the undersigned represents and warrants to the Company that its
ownership of the Common Stock does not exceed the amounts specified under
Section 4 of this Debenture, as determined in accordance with Section 13(d) of
the Exchange Act.

    

    The undersigned agrees to comply with
the prospectus delivery requirements under the applicable securities laws in
connection with any transfer of the aforesaid shares of Common
Stock.

    

    Conversion
calculations:

    Date to
Effect Conversion:

    

    Principal
Amount of Debenture to be Converted:

    

    Payment
of Interest in Common Stock __ yes  __ no

    If yes,
$_____ of Interest Accrued on Account of Conversion at Issue.

    

    Number of
shares of Common Stock to be issued:

    

    

    Signature:

    

    Name:

    

    Address
for Delivery of Common Stock Certificates:

    

    Or

    

    DWAC
Instructions:

    

    Broker
No:                                                      

    Account
No:                                                      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
1

    

    CONVERSION
SCHEDULE

    

    This 10%
Convertible Debenture due on September 12, 2012 in the original principal amount
of $5,000,000 is issued
by Hyperdynamics Corporation, a Delaware corporation.  This Conversion
Schedule reflects conversions made under Section 4 of the above referenced
Debenture.

    

    Dated:

    

    

    
      	
               

              Date
      of Conversion

              (or
      for first entry, Original Issue Date)

            	
               

              Amount
      of Conversion

            	
               

              Aggregate
      Principal Amount Remaining Subsequent to Conversion

              (or
      original Principal Amount)

            	
               

              Company
      Attestex4_2.htm

    
      
        

      
Exhibit 4.2-----$3.00 Warrant

    

    SERIES
B COMMON STOCK PURCHASE WARRANT

    

     HYPERDYNAMICS
CORPORATION

     

                                                                                                   

    
      	Warrant Shares:
      1,111,111 	
               Initial
      Exercise Date: September 12, 2008

            

    

     

     

    THIS
SERIES B COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, ENABLE GROWTH PARTNERS LP (the
“Holder”) is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof (the
“Initial Exercise
Date”) and on or prior to the close of business on the seventh year anniversary of
the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from Hyperdynamics
Corporation, a Delaware corporation (the “Company”), up to
1,111,111 shares (the
“Warrant
Shares”) of Common Stock.   The purchase price of one
share of Common Stock under this Warrant shall be equal to the Exercise Price,
as defined in Section 2(b).

     

    Section
1.     Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated August 29, 2008, among the Company and the purchasers signatory
thereto.

     

    Section
2.     Exercise.

     

    a) Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto; and, within 3 Trading Days of the date
said Notice of Exercise is delivered to the Company, the Company shall have
received  payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank.  Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company until
the Holder has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall surrender
this Warrant to the Company for cancellation within 3 Trading Days of the date
the final Notice of Exercise is delivered to the Company.  Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased.  The
Holder and the Company shall maintain records showing the number of

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Warrant
Shares purchased and the date of such purchases.  The Company shall
deliver any objection to any Notice of Exercise Form within 1 Business Day of
receipt of such notice.  In the event of any dispute or discrepancy,
the records of the Holder shall be controlling and determinative in the absence
of manifest error. The Holder
and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.

     

    b) Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $3.00, subject to adjustment
hereunder (the “Exercise
Price”).

     

    c) Cashless
Exercise.  If at any time during the term of this Warrant there
is no effective Registration Statement registering, or no current prospectus
available for, the issuance or resale of the Warrant Shares by the Holder, then
this Warrant may also be exercised at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive a certificate for the
number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)]
by (A), where:

    
    

     

    
      	 	      
              (A)
      = the VWAP on the Trading Day immediately preceding the date of such
      election;

            
	 	 
	 	      
              (B)
      = the Exercise Price of this Warrant, as adjusted;
    and

            
	 	 
	 	(X) = the number of
      Warrant Shares issuable upon exercise of this Warrant in accordance with
      the terms of this Warrant by means of a cash exercise rather than a
      cashless exercise.

    

     

    Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section
2(c).

    

    d) Exercise
Limitations.

     

    i. Holder’s
Restrictions.  The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any portion of
this Warrant, pursuant to Section 2 or otherwise, to the extent that after
giving effect to such issuance after exercise as set forth on the applicable
Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any
other person or entity acting as a group together with the Holder or any of the
Holder’s Affiliates), would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below).  For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the Holder
and its Affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which would be
issuable upon (A) exercise of the remaining, nonexercised portion of this
Warrant beneficially owned by the Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (including,
without limitation, any other  Common Stock Equivalents) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates.  Except
as set forth in the preceding sentence, for purposes of this Section 2(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to the Holder
that such calculation is in compliance with Section 13(d) of the Exchange Act
and the Holder is solely responsible for any schedules required to be filed in
accordance therewith.   To the extent that the limitation
contained in this Section 2(d)(i) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the submission of
a Notice of Exercise shall be deemed to be the Holder’s determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination.   In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 2(d)(i), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (A) the Company’s most recent
periodic or annual report, as the case may be, (B) a more recent public
announcement by the Company or (C) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  The Holder, upon not
less than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 2(d)(i), provided
that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number
of shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(d)(i) shall continue to
apply.  Any such increase or decrease will not be effective until the
61st

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    day after
such notice is delivered to the Company.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(d)(i) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

     

    ii. Issuance
Restrictions.  If the Company has not obtained Shareholder
Approval, then the Company may not issue upon exercise of this Warrant a number
of shares of Common Stock, which, when aggregated with any shares of Common
Stock issued (A) pursuant to the Purchase Agreement, (B) upon prior exercise of
this or any other Warrant issued pursuant to the Purchase Agreement and (C)
pursuant to any warrants issued to any registered broker-dealer as a fee in
connection with the issuance of Securities pursuant to the Purchase Agreement,
would exceed 11,304,746, subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of the Purchase Agreement (such
number of shares, the “Issuable
Maximum”).  The Holder and the holders of the other Warrants
issued pursuant to the Purchase Agreement shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing (x) the Holder’s
original Subscription Amount by (y) the aggregate original Subscription Amount
of all holders pursuant to the Purchase Agreement. In addition, the Holder may
allocate its pro-rata portion of the Issuable Maximum among Warrants held by it
in its sole discretion. Such portion shall be adjusted upward ratably in the
event a Purchaser no longer holds any Warrants and the amount of shares issued
to such Purchaser pursuant to its Warrants was less than such Purchaser’s
pro-rata share of the Issuable Maximum.  For avoidance of doubt,
unless and until any required Shareholder Approval is obtained and effective,
warrants issued to any registered broker-dealer as a fee in connection with the
Securities issued pursuant to the Purchase Agreement as described in (C) above
shall provide that such warrants shall not be allocated any portion of the
Issuable Maximum and shall be unexercisable unless and until such Shareholder
Approval is obtained and effective.

     

    e) Mechanics of
Exercise.

     

    i. Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s prime broker with the Depository Trust Company through
its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is then a participant in such system and either (A) there is an
effective Registration Statement permitting the resale of the Warrant Shares by
the Holder or this Warrant is being exercised via cashless exercise, and
otherwise by physical

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    delivery
to the address specified by the Holder in the Notice of Exercise within 3
Trading Days from the delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant (if required) and payment of the aggregate Exercise
Price as set forth above (the “Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on
the date the Exercise Price is received by the Company.  The Warrant
Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price (or by cashless exercise, if
permitted) and all taxes required to be paid by the Holder, if any, pursuant to
Section 2(e)(vi) prior to the issuance of such shares, have been paid. If the
Company fails for any reason to deliver to the Holder certificates evidencing
the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery
Date, the Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares subject to such exercise
(based on the VWAP of the Common Stock on the date of the applicable Notice of
Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth
Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such Warrant Share Delivery Date until such certificates are
delivered.

     

    ii. Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

     

    iii. Rescission
Rights.  If the Company fails to cause the Transfer Agent to
transmit to the Holder a certificate or the certificates representing the
Warrant Shares pursuant to Section 2(e)(i) by the Warrant Share Delivery Date,
then the Holder will have the right to rescind such exercise.

     

    iv. Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder a certificate or the
certificates representing the Warrant Shares pursuant to an exercise on or
before the Warrant Share Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or otherwise)
or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the
Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    Holder
the amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (1) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the exercise at issue
times (2) the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder, either reinstate
the portion of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with
its exercise and delivery obligations hereunder. 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 exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

     

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

     

    vi. Charges, Taxes and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

     

    vii. Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

     

    Section
3.     Certain
Adjustments.

     

    a) Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(i) pays 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 (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issues by reclassification of shares of the Common Stock any shares of capital
stock of the Company, then in each case the Exercise 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 immediately before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged.  Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

     

    b) Subsequent Equity
Sales. If the Company or any Subsidiary thereof, as applicable, at any
time while this Warrant is outstanding, shall sell or grant any option to
purchase, or sell or grant any right to reprice, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than the
then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents 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 are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share which is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then, the Exercise Price shall be reduced and only reduced
to equal the Base Share Price.  Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are
issued.  Notwithstanding the foregoing, no adjustments shall be made,
paid or issued under this Section 3(b) in respect of an Exempt
Issuance.  In addition, for clarity, any adjustment to the conversion
price, exchange price or exercise price of the Yorkville Warrants shall not
constitute an Exempt Issuance, and, any such

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    adjustment
to an effective price per share that is lower than the then Exercise Price shall
constitute a Dilutive Issuance subject to this Section 3(b).  The
Company shall notify the Holder, in writing, no later than the Trading Day
following the issuance of any Common Stock or Common Stock Equivalents subject
to this Section 3(b), indicating therein the applicable issuance price, or
applicable reset price, exchange price, conversion price and other pricing terms
(such notice, the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise.

     

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

     

    d) Pro Rata
Distributions.  If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including cash
and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then per share 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

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    distribution
is made and shall become effective immediately after the record date mentioned
above.

     

    e) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the
Company effects any merger or consolidation of the Company with or into another
Person, (ii) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (iii) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (each “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction.  To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 3(e)
and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a
Fundamental Transaction involving a person or entity not traded on a national
securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market,
or the Nasdaq Capital Market, the Company or any successor entity shall pay at
the Holder’s option, exercisable at any time concurrently with or within 30 days
after the consummation of the Fundamental Transaction, an amount of cash equal
to the value of this

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    Warrant
as determined in accordance with the Black Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg L.P. using (A) a price per share of Common
Stock equal to the VWAP of the Common Stock for the Trading Day immediately
preceding the date of consummation of the applicable  Fundamental
Transaction, (B) a risk-free interest rate corresponding to the U.S. Treasury
rate for 30 day period immediately prior to the consummation of the applicable
Fundamental Transaction, (C) an expected volatility equal to the 100 day
volatility obtained from the “HVT” function on Bloomberg L.P. determined as of
the Trading Day immediately following the public announcement of the applicable
Fundamental Transaction, and (D) a remaining option time equal to the time
between the date of the public announcement of such transaction and the
Termination Date.

     

    f) Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

     

    g) Notice to
Holder.

     

    i. Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. If the Company enters into a
Variable Rate Transaction, despite the prohibition thereon in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise price at which
such securities may be converted or exercised.

     

    ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock, (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    appear
upon the Warrant Register of the Company, at least 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 exercise this Warrant
during the period commencing on the date of such notice to the effective date of
the event triggering such notice.

     

    Section
4.     Transfer of
Warrant.

     

    a) Transferability.  This
Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled.  The Warrant, if properly
assigned, may be exercised by a new holder for the purchase of Warrant Shares
without having a new Warrant issued.

     

    b) New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued on transfers or exchanges shall be dated
the Initial Exercise Date and

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    shall be
identical with this Warrant except as to the number of Warrant Shares issuable
pursuant thereto.

     

    c) Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

     

    Section
5.     Miscellaneous.

     

    a) No Rights as Stockholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a stockholder of the Company prior to the
exercise hereof as set forth in Section 2(e)(i).

     

    b) Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

     

    c) Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then, such action may be taken or such right may be exercised
on the next succeeding Business Day.

     

    d) Authorized
Shares.

     

    The
Company covenants that, during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.  The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    of the
purchase rights represented by this Warrant, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges created
by the Company in respect of the issue thereof (other than taxes in respect of
any transfer occurring contemporaneously with such issue).

     

    Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, 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 of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment.  Without limiting the generality of the foregoing, the
Company will (i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (ii) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant and (iii) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may be,
necessary to enable the Company to perform its obligations under this
Warrant.

     

    Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

     

    e) Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.

     

    f) Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

     

    g) Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.

     

    h) Notices.  Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.

     

    i) Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

     

    j) Remedies.  The
Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Warrant.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law
would be adequate.

     

    k) Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.

     

    l) Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and Holders holding Warrants at least equal to
67% of the Warrant Shares issuable upon exercise of all then outstanding
Warrants.

     

    m) Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

     

    n) Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

     

    

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

    

    (Signature
Pages Follow)

    

    

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

     

    

    
 

    
      	 
      	
              HYPERDYNAMICS
      CORPORATION

               

               

            
	 
      	
              By:
      /s/ Kent Watts

                   Name:
      Kent Watts

                   Title:
      President

               

            

    

    

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    

    NOTICE
OF EXERCISE

    

    TO:           HYPERDYNAMICS
CORPORATION

    

    (1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

     

    (2) Payment
shall take the form of (check applicable box):

     

    [  ]
in lawful money of the United States; or

     

    [ ] [if
permitted] the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection
2(c).

     

    (3) Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

     

    _______________________________

    

    

    The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    

    [SIGNATURE
OF HOLDER]

    

    Name of
Investing Entity:
________________________________________________________________________

    Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

    Name of
Authorized Signatory:
___________________________________________________________________

    Title of
Authorized Signatory:
____________________________________________________________________

    Date:
________________________________________________________________________________________

    

    

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

     

    ASSIGNMENT
FORM

    

    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

    

    

    

    FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

     

    

    _______________________________________________
whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:  ______________,
_______

    

    

    Holder’s
Signature:               _____________________________

    

    Holder’s
Address:                 _____________________________

    

     
_____________________________

    

    

    

    Signature
Guaranteed:  ___________________________________________

    

    

    NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

    

     

    16

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}]]