Exhibit 10.02
NEITHER THIS SECURITY NOR THE SECURITIES
INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE
UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER
OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
| Original Issue Date: May 27, 2016 |
$3,500,000.00 |
SENIOR SECURED CONVERTIBLE DEBENTURE
DUE MAY 27, 2021
THIS SENIOR SECURED
CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued Senior Secured Convertible Debentures of Discovery
Energy Corp., a Nevada corporation, (the “Company”), having its principal place of business at Xxx Xxxxxxxx
Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, designated as its Senior Secured Convertible Debentures due May 27, 2021 (this debenture,
the “Debenture” and, collectively with the other debentures of such series, the “Debentures”).
FOR VALUE RECEIVED,
Company promises to pay to DEC Funding LLC, a Texas limited liability company or its registered assigns (the “Holder”
and collectively with the holders of the other Debentures, the “Holders”), or shall have paid pursuant to the
terms hereunder, the principal sum of $3,500,000.00 on May 27, 2021 (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 Xxxxxx 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 (as defined below) and (b) the following terms shall have the
following meanings:
“Alternate
Consideration” shall have the meaning set forth in Section 5(d).
“Annual License
Milestone Compliance Certificate” shall have the meaning set forth in Section 8(a)(x).
“Bankruptcy
Event” means any of the following events: (a) 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 Company or any
Significant Subsidiary thereof, (b) there is commenced against Company or any Significant Subsidiary thereof any such case or
proceeding that is not dismissed within 20 days after commencement, (c) 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) Company or any
Significant Subsidiary thereof seeks or suffers any appointment of any administrator, receiver, custodian or the like for it or
any substantial part of its property that is not discharged or stayed within 20 calendar days after such appointment, (e) Company
or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) Company or any Significant
Subsidiary thereof calls a meeting of its creditors or makes application to a court to call a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its debts, (g) Company or any Significant Subsidiary becomes insolvent
or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due or (h)
Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Business
Day” means any day except any Saturday, any Sunday, any day which is 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(c)(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 Company, by contract or otherwise) of in
excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the
Securities issued together with the Debentures), (b) Company merges into or consolidates with any other Person, or any Person
merges into or consolidates with Company and, after giving effect to such transaction, the stockholders of Company immediately
prior to such transaction own less than 50% of the aggregate voting power of Company or the successor entity of such transaction,
(c) Company sells or transfers all or substantially all of its assets to another Person and the stockholders of Company immediately
prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction,
(d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which
is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (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
Company of an agreement to which 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
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(b).
“Event of
Default” shall have the meaning set forth in Section 8(a).
“Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees, officers or directors of Company pursuant to any stock
or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority
of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange
of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended
since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or
conversion price of such securities and (c) securities issued pursuant to acquisitions or strategic transactions approved by a
majority of the disinterested directors of Company, provided that any such issuance shall only be to a Person (or to the equityholders
of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset (including, but not primarily,
securities) in a business synergistic with the business of Company and shall provide to Company additional benefits in addition
to the investment of funds, but shall not include a transaction in which Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in securities, provided that such agreements have not been
amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange
price or conversion price of such securities.
“Fundamental
Transaction” shall have the meaning set forth in Section 5(d).
“Holder Optional
Redemption” shall have the meaning set forth in Section 6(a).
“Holder Optional
Redemption Date” shall have the meaning set forth in Section 6(a).
“Holder Optional
Redemption Notice” shall have the meaning set forth in Section 6(a).
“Holder Optional
Redemption Notice Date” shall have the meaning set forth in Section 6(a).
“Interest
Settlement Date” shall have the meaning set forth in Section 2(a)(i).
“Majority
Holders” means, at any time, one or more Holders holding over fifty percent (50%) in outstanding principal amount of
the Debentures at such time.
“Mandatory
Default Amount” means the sum of (a) 100% of the outstanding principal amount of this Debenture, (b) 100% of the accrued
and unpaid interest hereon and (c) 100% of the interest on the outstanding principal amount of this Debenture which would have
been payable under Section 2(a) between the date of the relevant Event of Default and the Maturity Date, plus all other amounts,
costs, expenses and liquidated damages due in respect of this Debenture.
“New York
Courts” shall have the meaning set forth in Section 9(d).
“Notice of
Conversion” shall have the meaning set forth in Section 4(a).
“Optional
Redemption Amount” means the sum of (a) 120% of the then outstanding principal amount of the Debenture and 100% of accrued
and unpaid interest on the outstanding principal amount of this Debenture, plus (b) all liquidated damages and other amounts due
hereunder in respect of the Debenture.
“Original
Issue Date” means the date of the first issuance of the first Debenture, regardless of any transfers of any Debenture
and regardless of the number of instruments which may be issued to evidence all such Debentures.
“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) indebtedness incurred in connection with any
inventory financing transaction and any refinancing or modification of the terms thereof; provided, that such financing is secured
only by inventory, (c) any indebtedness permitted pursuant to the definition of Permitted Lien, (d) any indebtedness that has
been expressly subordinated in right of payment to the indebtedness under the Debentures, provided that the terms of such subordination
have been approved by Majority Holders, (e) the Liberty Debt and Shareholder Debt and (f) Capital Raises provided by Original
Purchaser following the exercise of its Right of First Offer (as defined in the Purchase Agreement).
“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 Company) have
been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of 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 by banks and other financial institutions on deposit and securities accounts and other accounts with such banks
or financial institutions not to exceed $100,000 at any time, (d) purchase money security interest in equipment (including capital
leases), (e) Liens securing judgments for the payment of money not constituting an Event of Default and (f) Liens incurred in
connection with indebtedness referred to in clause (a) or (b) of Permitted Indebtedness.
“Petroleum
Exploration License” means that certain Petroleum Exploration License issued to Australian Subsidiary by the Energy
Resource Division of the Department for Manufacturing, Innovation, Trade, Resources and Energy on October 26, 2012, otherwise
referred to as PEL 512.
“Purchase
Agreement” means the Securities Purchase Agreement, dated as of May 27, 2016 among Company and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.
“Purchase
Right” shall have the meaning set forth in Section 5(c).
“Registration
Rights Agreement” means the Registration Rights Agreement, dated as of May 27, 2016 among Company and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.
“Registration
Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by Xxxxxx as provided for in the Registration Rights 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(c)(ii).
“Shareholder
Debt” means that certain Indebtedness (a) payable to Xxxxx X. Xxxxxxxxxxx in the aggregate principal amount of $96,200.00,
(b) payable to Xxxxxxx Xxxxxx in the aggregate principal amount of $33,153.00, and (c) payable to EMTEECO Holdings Ltd. in the
aggregate principal amount of $17,000.00, each as of the Closing Date.
“Successor
Entity” shall have the meaning set forth in Section 5(d).
“Trading
Day” means a day on which the principal Trading Market is open for trading.
“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board or the OTCQB over-the-counter bulletin board service maintained by OTC Markets
Group Inc. (or any successors to any of the foregoing).
Section 2. Interest
and Prepayment.
a) Interest.
i. So
long as no Event of Default has occurred and is continuing, the aggregate unconverted and then outstanding principal amount of
this Debenture shall accrue interest from the Original Issue Date at the rate of eight percent (8%) per annum, compounded quarterly,
which accrued interest shall be added to the outstanding principal balance of this Debenture on the last day of each calendar
quarter (each such date, an “Interest Settlement Date”) (or, if such Interest Settlement Date is not a Business
Day, on the immediately succeeding Business Day) and shall thereafter itself, as part of the principal balance, accrue interest
at the rate set forth above, compounding quarterly on each Interest Settlement Date. All such accrued interest added to the principal
balance of this Debenture pursuant to the immediately preceding sentence shall be payable on the same terms and subject to the
same conditions set forth herein.
ii. Notwithstanding
the foregoing clause (i), Company may provide Purchaser with written notice (each, a “Cash Pay Notice”) of
its intent to pay all or a portion of the interest which would otherwise accrue on the next succeeding Interest Settlement Date
in cash. Any Cash Pay Notice shall be delivered at least ten (10) Business Days prior to the applicable Interest Settlement Date
and shall be irrevocable.
iii. Upon
the occurrence and during the continuance of an Event of Default, the aggregate unconverted and then outstanding principal amount
of this Debenture shall accrue interest at the rate of twelve percent (12%) per annum and otherwise shall accrue and/or be paid
in cash consistent with clauses (i) and (ii) above.
b) Interest
Calculations. Interest shall be calculated on the basis of a 365-day year, and shall accrue daily commencing on the Original
Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages
and other amounts which may become due hereunder, has been made. Interest shall cease to accrue with respect to any
principal amount converted, provided that Company actually delivers the Conversion Shares within the time period required by Section
4(c)(ii) herein. Interest hereunder will be paid to the Person in whose name this Debenture is registered in the records
of Company regarding registration and transfers of this Debenture (the “Debenture Register”).
c) Prepayment. Except
as otherwise set forth in this Debenture, Company may not prepay any portion of the principal amount of this Debenture without
the prior written consent of 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 Xxxxxx 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.
c) Reliance
on Debenture Register. Prior to due presentment for transfer to Company of this Debenture, Company and any agent of 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 Company
nor any such agent shall be affected by notice to the contrary.
Section 4. Conversion.
a) Voluntary Conversion.
This Debenture shall be convertible, in whole or in part, into shares of Common Stock at the option of Holder, at any time and
from time to time. Holder shall effect conversions by delivering to 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, if Holder determines in its sole discretion to convert such accrued and unpaid interest (or a portion
thereof), the amount of accrued and unpaid interest thereon to be converted and the date on which such conversion shall be effected;
provided that Holder may only convert the portion of the accrued interest that corresponds to the principal being converted (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, Xxxxxx shall not be required to physically surrender this Debenture to Company unless the entire principal amount of
this Debenture, plus all accrued and unpaid interest thereon, has been so converted or otherwise been repaid to Holder. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the principal
amount converted in such conversion. Holder and Company shall maintain records showing the principal amount(s) converted
and the date of such conversion(s). Company may deliver an objection to any Notice of Conversion within two (2) Business
Days of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of Holder shall
be controlling and determinative in the absence of manifest error. Xxxxxx, 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 $0.16 and shall be subject to adjustment
as provided in Section 5 (the “Conversion Price”).
c) Mechanics of
Conversion.
i. Conversion
Shares Issuable Upon Conversion of Debenture. The number of Conversion Shares issuable upon a conversion hereunder
shall be determined by the quotient obtained by dividing (x) the sum of (a) the outstanding principal amount of this Debenture
to be converted plus (b) any accrued and unpaid interest on the principal amount of this Debenture to be converted, by
(y) the Conversion Price.
ii. Delivery
of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery
Date”), Company shall deliver, or cause to be delivered, to Holder a certificate or certificates representing the Conversion
Shares which, on a Legend Removal Qualification Event shall be free of restrictive legends and trading restrictions (other than
those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the
conversion of this Debenture. If (i) there is an effective registration statement permitting the issuance of Conversion Shares
to or resale of the Conversion Shares by Holder or (ii) following the six month anniversary of the Closing Date, the Conversion
Shares are eligible for sale under Rule 144 without volume or manner-of-sale restrictions and as of such date Company is in compliance
with the current public information required under Rule 144 as to such Conversion Shares, Company shall deliver any certificate
or certificates required to be delivered by Company under this Section 4(c) by causing such certificates to be transmitted by
the Transfer Agent to the Holder by crediting the account of Xxxxxx’s designated brokerage firm with The Depository Trust
Company through its Deposit or Withdrawal at Custodian (“DWAC”) system if Company is then a participant in
such system or another established clearing corporation performing similar functions.
iii. Failure
to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not
credited to the account of Xxxxxx’s broker with The Depository Trust Company through its DWAC system or another established
clearing corporation performing similar functions, if Company is then a participant in any such system, or delivered to or as
directed by Holder by the Share Delivery Date, Holder shall be entitled to elect by written notice to Company at any time on or
before such crediting or its receipt of such certificate or certificates, to rescind such Conversion, in which event Company shall
promptly return to Holder any original Debenture delivered to Company and Holder shall promptly return to Company the Common Stock
certificates (or any shares of Common Stock received electronically) issued to Holder pursuant to the rescinded Conversion Notice.
iv. Obligation
Absolute; Partial Liquidated Damages. 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 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 Holder or any other Person of any obligation to Company (other than Holder’s obligations hereunder
with respect to the conversion, including the delivery of a Notice of Conversion) or any violation or alleged violation of law
by Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of Company
to Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall
not operate as a waiver by Company of any such action Company may have against Holder. In the event Holder shall elect
to convert any or all of the outstanding principal amount hereof, Company may not refuse conversion based on any claim by Company
or any Affiliate thereof that Holder or anyone associated or affiliated with 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 benefit of the Holder
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 Holder to the extent it obtains judgment. In the absence of such injunction, Company shall issue Conversion Shares
or, if applicable, cash, upon a properly noticed conversion. If Company fails when required hereunder for any reason
to deliver to Holder such certificate or certificates pursuant to Section 4(c)(ii) by the third Trading Day following the Share
Delivery Date, the Company shall pay to Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal
amount being converted, $5 per Trading Day (increasing to $10 per Trading Day on the fifth (5th) Trading Day after such liquidated
damages begin to accrue) for each Trading Day commencing on the third Trading Day after such Share Delivery Date until such certificates
are delivered or Holder rescinds such conversion. Nothing herein shall limit Holder’s right to pursue actual damages (provided
such damages may be reduced by the payments previously made hereunder) or declare an Event of Default pursuant to Section 8 hereof
for Company’s failure to deliver Conversion Shares within the period specified herein and 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 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 Holder,
if Company fails for any reason to deliver to Holder such certificate or certificates by the Share Delivery Date pursuant to Section
4(c)(ii), and if after such Share Delivery Date Holder is required by its brokerage firm to purchase (in an open market transaction
or otherwise), or Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale
by Holder of the Conversion Shares which Holder was entitled to receive upon the conversion relating to such Share Delivery Date
(a “Buy-In”), then Company shall (A) pay in cash to Holder (in addition to any other remedies available to
or elected by Holder) the amount, if any, by which (x) 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 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 Holder, either reissue (if
surrendered) this Debenture in a principal amount equal to the principal amount of the attempted conversion (in which case such
conversion shall be deemed rescinded) or deliver to Holder the number of shares of Common Stock that would have been issued if
Company had timely complied with its delivery requirements under Section 4(c)(ii). For example, if 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 such purchase obligation
was a total of $10,000 under clause (A) of the immediately preceding sentence, Company shall be required to pay Holder $1,000.
Holder shall provide Company written notice indicating the amounts payable to Holder in respect of the Buy-In and, upon request
of Company, evidence of the amount of such loss. Nothing herein shall limit Xxxxxx’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 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. 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 Holder (and any other holder 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 then outstanding principal amount of this Debenture and payment of interest
hereunder. 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 the Registration Statement is then effective under the Securities Act, shall
be registered for public resale in accordance with such Registration Statement (subject to Holder’s compliance with its
obligations under the Registration Rights Agreement).
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, 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 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, 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 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 Company the amount of such tax or shall have established to the satisfaction
of Company that such tax has been paid.
Section 5. Certain
Adjustments.
a) Stock Dividends
and Stock Splits. If 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 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 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 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, Company or any Subsidiary, as applicable, sells or grants
any option to purchase or reprices or reduce the conversion or exercise price of any outstanding Securities, grants any right
to reprice, or otherwise disposes of or issues, 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, other than in connection with any
Common Stock Equivalents outstanding on the Original Issue Date (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. If Company enters into a Variable Rate Transaction, despite the prohibition set forth in the
Purchase Agreement, 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 converted or exercised. Company shall notify Holder in writing, no later than the Trading
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 Company provides a Dilutive Issuance
Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, 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 Holder
accurately refers to the Base Conversion Price in the Notice of Conversion.
c) Subsequent
Rights Offerings. If Company, at any time while this Debenture is outstanding, shall issue rights, options or
warrants to all holders of Common Stock (and not to Holder) entitling them to subscribe for or purchase shares of Common
Stock (the “Purchase Rights”), then, upon any conversion of this Debenture, Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights that Holder could have acquired if
Holder had held the number of Conversion Shares issued upon such conversion of this Debenture immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
d) Pro Rata
Distributions. If Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock
(and not to Holder) 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 (a “Distribution”), then, upon any conversion of this
Debenture, Holder shall be entitled to participate in such Distribution to the same extent that Holder would have participated
therein if Holder had held the number of Conversion Shares issued upon such conversion of this Debenture immediately before the
date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders
of shares of Common Stock are to be determined for the participation in such Distribution.
e) Fundamental
Transaction. If, at any time while this Debenture is outstanding, (i) Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of Company with or into another Person, (ii) Company, directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets
in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether
by Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange
their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common
Stock, (iv) Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization
or recapitalization 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, (v) Company, directly or indirectly, in one or more related transactions
consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making
or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or
other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this
Debenture, 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 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 Fundamental Transaction by a holder of the number of shares of Common
Stock for which this Debenture is convertible immediately prior to such Fundamental Transaction. 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 one (1) share of Common Stock in such Fundamental Transaction,
and 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 Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction. Company
shall cause any successor entity in a Fundamental Transaction in which Company is not the survivor (the “Successor Entity”)
to assume in writing all of the obligations of Company under this Debenture and the other Transaction Documents (as defined in
the Purchase Agreement) in accordance with the provisions of this Section 5(d) pursuant to written agreements in form and substance
reasonably satisfactory to Holder and approved by Holder (without unreasonable delay) prior to such Fundamental Transaction and
shall, at the option of the holder of this Debenture, deliver to Holder in exchange for this Debenture a security of the Successor
Entity evidenced by a written instrument substantially similar in form and substance to this Debenture which is convertible for
a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of
Common Stock acquirable and receivable upon conversion of this Debenture (without regard to any limitations on the conversion
of this Debenture) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder
to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being
for the purpose of protecting the economic value of this Debenture immediately prior to the consummation of such Fundamental Transaction),
and which is reasonably satisfactory in form and substance to Holder. Upon the occurrence of any such Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Debenture and the other Transaction Documents referring to “Company” shall refer instead to
the Successor Entity), and may exercise every right and power of Company and shall assume all of the obligations of Company under
this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as Company
herein.
e) Calculations. All
calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may
be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of
a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of Company) issued and
outstanding.
f) Notice
to Holder.
i. Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, Company
shall within 10 calendar days of such adjustment deliver to Holder a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice
to Allow Conversion by Xxxxxx. If (A) Company shall declare a dividend (or any other distribution in whatever form)
on the Common Stock, (B) Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C)
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 Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to which Company is a party, any sale or transfer of
all or substantially all of the assets of Company, or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property or (E) Company shall authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of Company, then, in each case, 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 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. To the extent that any notice provided hereunder constitutes,
or contains, material, non-public information regarding Company or any of its Subsidiaries, Company shall simultaneously file
such notice with the Commission pursuant to a Current Report on Form 8-X. Xxxxxx shall remain 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 except as may otherwise be expressly set forth herein.
Section 6. Redemption.
a) Optional
Redemption at Election of Holder. Subject to the provisions of this Section 6, at any time after either (i) the date
Company announces a Change of Control Transaction or (ii) the date Company or any Subsidiary enters into an agreement
providing for the sale of a material portion of their respective assets, Holder may deliver a notice to Company (a
“Holder Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the
“Holder Optional Redemption Notice Date”) of its irrevocable election to cause Company 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
the later of (i) the 5th Trading Day following the Holder Optional Redemption Notice Date or (ii) the date such applicable
transaction triggering such redemption right is consummated (such date, the “Holder Optional Redemption
Date” and such redemption, the “Holder Optional Redemption”). The Optional Redemption Amount is
payable in full on the Holder Optional Redemption Date. Any Holder Optional Redemption shall be applied ratably to all
Holders that submit a Holder Optional Redemption based on their (or their predecessor’s) initial purchases of
Debentures pursuant to the Purchase Agreement. Company xxxxxx agrees to publicly disclose any Change of Control
Transaction or entry into an asset sale agreement which would trigger a redemption right hereunder within one Trading Day
from the date such agreement or transaction is entered into.
b) Redemption
Procedure. The payment of cash pursuant to a Holder Optional Redemption shall be payable on the applicable Holder
Optional Redemption Date. If any portion of the payment pursuant to a Holder Optional Redemption shall not be paid
by Company by the Holder Optional Redemption Date, interest shall accrue on the aggregate amount payable by Company at the Default
Rate until such amount is paid in full.
Section 7. Negative
Covenants. As long as any portion of this Debenture remains outstanding, unless Holder shall have otherwise given prior written
consent, Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:
a) other than
for the Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness;
b) other than
for 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 Holder;
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 the Conversion Shares or Warrant Shares as permitted or required under the
Transaction Documents;
e) repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness using the proceeds of the Debentures issued on
the Closing Date;
f)
pay cash dividends or distributions on any equity securities of Company;
g) enter into
any transaction with any Affiliate of 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 Company (even if less than a quorum otherwise required for board approval);
h) issue any
additional Common Stock or securities of Company or any of its Subsidiaries other than (i) pursuant to an Exempt Capital
Raise; (ii) up to 1,400,000 shares of Common Stock to employees and other service providers of Company as compensation for
services provided to Company provided that the issue price for such Common Stock exceeds the then effective Conversion Price;
(iii) up to 1,150,895 shares of Common Stock to Liberty in partial payment of the Liberty Debt pursuant to the terms of the
Liberty Loan Documents or (iv) issuance of stock options (or shares of Common Stock in exchange for such stock options)
pursuant to Company’s stock option plan in effect on the Closing Date;
i)
make any investments other than (i) investments in cash and/or cash equivalents and (ii)
investments by Company in the Australian Subsidiary;
j) dissolve,
liquidate, merge, consolidate or otherwise alter or modify Company’s or any Subsidiaries’ corporate name, mailing
address, principal place of business, structure, status or existence or enter into or engage in any operation or activity materially
different from that presently conducted by Company or such Subsidiary; make any substantial change in its executive management,
or form any Subsidiary;
k) sell,
lease, transfer or otherwise dispose of its properties, assets, rights, licenses and franchises to any Person, except sales
of production or inventory in the ordinary course of its business or turn over the management of, or enter a management
contract with respect to, such properties, assets, rights, licenses and franchises or enter into any arrangement, directly or
indirectly, with any Person whereby it shall sell or transfer any property, real, personal or mixed, used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent or lease such property; or
l) 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 any Holder of a Debenture, as and when the same shall become due and payable (whether on an Interest Settlement Date, a Conversion
Date or the Maturity Date or by acceleration or otherwise), and solely with respect to payment of interest in cash after delivery
of a Cash Pay Notice such failure continues for three (3) Trading Days after an Interest Settlement Date;
ii. Company
shall fail to observe or perform any other covenant or agreement contained in a Transaction Document (other than (x) a breach
by Company of its obligations to deliver shares of Common Stock to Holder upon conversion or a breach by Company of its obligations
to deliver shares of Common Stock to the holder of a Warrant upon exercise thereof which breaches are addressed in clause (vii)
below or (y) any failure by Company to observe or perform any covenant or agreement contained in the Registration Rights Agreement,
except as set forth in clause (x) below) which failure, unless a cure period is specifically provided with respect to such failure
to observe or perform, is not cured, if possible to cure, within the earlier to occur of (A) 4 Trading Days after notice of such
failure sent by Holder or by any other Holder to Company and (B) 7 Trading Days after Company has become or should have become
aware of such failure;
iii. any
representation or warranty made in this Debenture or any other Transaction Documents, any written statement pursuant hereto or
thereto or any other report, financial statement or certificate made or delivered to Holder shall be untrue or incorrect in any
material respect as of the date when made or deemed made;
iv. a
Bankruptcy Event shall occur;
v. Company
or any Subsidiary shall default on any of its obligations under (A) the Liberty Debt or (B) 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, in the case of this clause (B): (1) involves an obligation greater than $75,000, whether such indebtedness now exists or
shall hereafter be created, and (2) results in such indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable;
vi. Company
shall be a party to any Change of Control Transaction or a Fundamental Transaction or shall agree to sell or dispose of all or
in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute
a Change of Control Transaction);
vii. Company
shall fail for any reason to deliver certificates to Holder prior to the third Trading Day after the Share Delivery Date pursuant
to Section 4(c) or fail to deliver certificates to a holder of Warrants prior to the third Trading Day after the Warrant Share
Delivery Date (as defined in the Warrants) or Company shall provide at any time notice to Holder, including by way of public announcement,
of Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof or exercise
of the Warrants in accordance with the terms thereof;
viii. any
monetary judgment, writ or similar final process shall be entered against Company, any Subsidiary or any of their respective property
or other assets for more than $75,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed
for a period of 45 calendar days;
ix. Company
fails to meet the current public information requirements under Rule 144 in respect of the Underlying Shares for more than 10
consecutive Trading Days;
x. Company shall fail to pay when due any liquidated damages under the Registration Rights Agreement as and when the same shall
become due and payable and such failure continues for 30 calendar days;
xi. Company
shall fail to deliver a certificate of a responsible officer of Company (each such certificate, an “Annual License Milestone
Certificate”) to Purchaser at least 90 days prior to the required completion date for each “minimum work requirement”
to be completed under the Petroleum Exploration License certifying (A) that Company has adequate funds to fulfill the applicable
annual minimum work requirement in accordance with the terms of the Petroleum Exploration License; (B) that Company expects to
be able to fulfill the applicable annual minimum work requirement in accordance with the terms of the Petroleum Exploration License
and (C) as to other matters relating to the Petroleum Exploration License as requested by Purchaser;
xii. termination
of the Petroleum Exploration License; or
xiii. either (A) Company delivers an Annual License Milestone Certificate which indicates a
prospective non-compliance with the certifications required by subclauses (A) and/or (B) in clause (xi) above or (B) Company
fails to meet any of the annual minimum work requirements set forth in the Petroleum Exploration License.
b) Remedies
Upon Event of Default. If any Event of Default has occurred and is continuing, 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 Majority Holders’ election, immediately due and payable in cash at the Mandatory Default Amount. Commencing
5 calendar days after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, interest
on the Mandatory Default Amount shall accrue at the Default Rate. Upon the payment in full of the Mandatory Default
Amount, Holder shall promptly surrender this Debenture to or as directed by Company. In connection with such acceleration
described herein, Holder need not provide, and 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 Xxxxxx at any time prior to payment hereunder and Xxxxxx shall have all rights as a holder of the Debenture until such time,
if any, as 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 Holder hereunder, including, without limitation, any
Notice of Conversion, shall be in writing and delivered personally, by facsimile or email, or sent by an internationally
recognized overnight courier service, addressed to Company, set forth in the Purchase Agreement, or such other facsimile
number, email address or address as Company may specify for such purposes by notice to Holder delivered in accordance with
this Section 9(a). Any and all notices or other communications or deliveries to be provided by Company hereunder
shall be in writing and delivered, by facsimile or email, or sent by an internationally recognized overnight courier service
addressed to each Holder at the facsimile number, email address or address of Holder appearing on the books of Company, or if
no such facsimile number, email address or address appears on the books of Company, at the principal place of business of
Holder, as set forth in the Purchase Agreement. 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 or email at the facsimile number or email address set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile or email at the facsimile number or email address set forth on the signature pages
attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the
second Trading Day following the date of mailing, if sent by U.S. recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be given. If an email address is provided for a party on the
signature pages attached hereto, notice to such party given by other means hereunder shall also be given by email,
provided, that failure to deliver a duplicate notice by email shall not constitute a failure to deliver the applicable
notice.
b) Absolute
Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of 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 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, 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 and a lost Debenture affidavit, reasonably satisfactory to Company.
d) Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement
and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts
sitting in the City of New York, County of New York (the “New York Courts”) unless otherwise specified therein. Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts
are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Debenture and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other manner permitted by applicable law. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS DEBENTURE OR THE TRANSACTIONS CONTEMPLATED HEREBY. IF ANY PARTY SHALL COMMENCE AN ACTION OR
PROCEEDING TO ENFORCE ANY PROVISIONS OF THIS DEBENTURE, THEN THE PREVAILING PARTY IN SUCH ACTION OR PROCEEDING SHALL BE REIMBURSED
BY THE OTHER PARTY FOR ITS ATTORNEYS FEES AND OTHER COSTS AND EXPENSES INCURRED IN THE INVESTIGATION, PREPARATION AND PROSECUTION
OF SUCH ACTION OR PROCEEDING.
e) Waiver. Any
waiver by Company or 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 Company or 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 on any other occasion. Any waiver by Company or Holder must be in writing.
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. 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 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 Debenture, and 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 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) Secured
Obligation. The obligations of Company under this Debenture are secured by all assets of Company and each Subsidiary
(other than the Petroleum Exploration License) pursuant to the Security Agreement and the Australian Security Agreement, each
dated as of May 27, 2016 among Company, the relevant Subsidiaries of Company and Agent.
j) Amendments. This
Debenture and each of the other Debentures issued under the Purchase Agreement may be amended upon the written consent of Company
and the Majority Holders.
(Signature Pages Follow)
IN WITNESS WHEREOF, Company has caused
this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.
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DISCOVERY ENERGY CORP. |
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By: |
/s/ Xxxxx X. Xxxxxxxxxxx |
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Xxxxx X. Xxxxxxxxxxx, Chairman |
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Facsimile No. for delivery of Notices:
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(000) 000-0000 |
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Email address for delivery of Notices:
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xxxxxxxxxxxx0@xxxxxxx.xxx |
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xxx@xxxxxxxxxxxxxxx.xxx |
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert
principal under the Senior Secured Convertible Debenture due May 27, 2021 of Discovery Energy Corp., a Nevada corporation (the
“Company”), into shares of common stock (the “Common Stock”), of 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 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 the undersigned’s representations and warranties contained in
Section 3.2 of the Purchase Agreement (as defined in the Debenture), including that the undersigned is either (i) an “accredited
investor” as defined in Rule 501(a) under the Securities Act or (ii) a “qualified institutional buyer” as defined
in Rule 144A(a) under the Securities Act as of the giving of this Notice of Conversion, are true and correct as of the giving
of this Notice of Conversion.
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:
Accrued and Unpaid Interest on Amount of Debenture to be Converted:
Number of shares of Common Stock to be issued:
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Signature: |
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Name: |
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Address for Delivery of Common Stock Certificates: |
| Or |
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| DWAC Instructions: |
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Schedule 1
CONVERSION SCHEDULE
The Senior Secured Convertible
Debentures due on May 27, 2021 in the aggregate principal amount of $3,500,000 issued by Discovery Energy Corp., a Nevada
corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.
Dated:
Date of Conversion
(or for first entry, Original
Issue Date) |
Amount of Conversion |
Aggregate Principal
Amount Remaining
Subsequent to
Conversion
(or original Principal
Amount) |
Company Attest |
