Execution Version

 

CONVERTIBLE NOTE PURCHASE AGREEMENT

 

This Convertible Note Purchase Agreement (the “Agreement”) is made and entered
into as of May 31, 2011, by and among Glori Energy Inc. (f/k/a Glori Oil
Limited), a Delaware corporation (the “Company”), and Energy Technology
Ventures, LLC, a Delaware limited liability company (the “Purchaser”).

 

A.            The Company currently requires funds for product development and
other general corporate purposes.

 

B.             The Purchaser is willing to advance funds to the Company in
exchange for the issuance to it of a convertible promissory note evidencing the
Company’s obligation to repay the Purchaser’s loan of the advanced funds, all as
provided in this Agreement.

 

NOW THEREFORE, the parties hereby agree as follows:

 

ARTICLE 1

 

PURCHASE, SALE AND TERMS OF NOTE

 

1.01         The Note. The Company has authorized the issuance and sale to the
Purchaser of the Company’s Convertible Promissory Note, in the original
aggregate principal amount of $1,500,000, in the form attached hereto as Exhibit
A (the “Note”).

 

1.02         Purchase and Sale of the Note.

 

(a)     The Closing. The Company agrees to issue and sell to the Purchaser, and,
subject to and in reliance upon the representations, warranties, covenants,
terms and conditions of this Agreement, the Purchaser agrees to purchase the
Note in the principal amount of $1,500,000 (such amount, the “Purchase Price”).
Such purchase and sale shall take place at a closing (the “Closing”) to be held
at the Washington D.C. offices of Goodwin Procter LLP, on the date hereof at
12:00 p.m., local time, or at such other time or place as may be mutually agreed
upon by the Company and the Purchaser. At the Closing, the Purchaser will
deliver to the Company, as payment in full for the Note to be purchased by the
Purchaser at the Closing, an amount equal to the Purchase Price by wire transfer
of immediately available funds to the Company. At the Closing, the Company will
issue and deliver to the Purchaser the duly executed Note. The Company shall
send the Note to the Purchaser at the address furnished to the Company for that
purpose.

 

 

 

 

1.03         No Usury. Each of this Agreement and the Note issued pursuant to
the terms of this Agreement is hereby expressly limited so that in no event
whatsoever, whether by reason of deferment or advancement of loan proceeds,
acceleration of maturity of the loan evidenced hereby, or otherwise, shall the
amount paid or agreed to be paid to the Purchaser hereunder for the loan, use,
forbearance or detention of money exceed the maximum interest rate permitted by
the laws of the State of New York. If at any time the performance of any
provision hereof or any Note involves a payment exceeding the limit of the price
that may be validly charged for the loan, use, forbearance or detention of money
under applicable law, then automatically and retroactively, ipso facto, the
agreed upon interest rate as set forth in the Note shall be reduced to such
limit, it being the specific intent of the Company and the Purchaser hereof that
all payments by the Company under the Note shall be applied first to any fees
and expenses due and payable thereunder, then to the accrued interest due and
payable thereunder and the remainder, if any, to the outstanding principal. All
payments by the Company under the Note shall be made without set-off or
counterclaim and be free and clear and without any deduction or withholding for
any taxes or fees of any nature whatever, unless the obligation to make such
deduction or withholding is imposed by law.

 

ARTICLE 2

 

CONDITIONS TO THE PURCHASER’S OBLIGATIONS

 

The obligations of the Purchaser to purchase and pay for the Note to be
purchased by it at the Closing are subject to the fulfillment or waiver, on or
before the Closing, of each of the following conditions:

 

2.01         Representations and Warranties. Each of the representations and
warranties of the Company set forth in Article 3 hereof shall be true in all
material respects on the date of the Closing.

 

2.02         Performance by the Company. The Company shall have performed and
complied in all material respects with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing and shall have obtained all
approvals, consents and qualifications necessary to complete the purchase and
sale described herein.

 

2.03         Delivery of Note. The Company shall have executed and delivered to
the Purchaser the Note, in the form attached hereto as Exhibit A.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to the Purchaser as follows, each of which
representation and warranty is true and correct as of the date hereof:

 

(a)     The Company is a corporation duly organized, validly existing, and in
good standing in the State of Delaware.

 

(b)     The Company has the corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as currently
proposed to be conducted.

 

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(c)     The Company has all requisite legal and corporate power and authority to
execute and deliver this Agreement and the Note and to carry out and perform its
obligations under the terms of this Agreement and the Note.

 

(d)     The execution and delivery of this Agreement and the Note by the Company
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all requisite corporate action on the part of the
Company. Each of this Agreement and the Note has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors’ rights and laws concerning
equitable remedies. The execution and delivery of this Agreement and the Note by
the Company and the consummation of the transactions contemplated hereby and
thereby will not (i) result in a material violation of any provision of law, any
order of any court or other agency of government, the certificate of
incorporation or bylaws of the Company, (ii) result in a material violation of
any provision of any indenture, agreement or other instrument to which the
Company, or any of its properties or assets is bound, or result in a material
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge, restriction, encumbrance, or, to the
Company’s knowledge, claim of any nature whatsoever upon any of the properties
or assets of the Company, or (iii) require the consent or approval of any third
party.

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

4.01         Representations of the Purchaser. The Purchaser represents and
warrants to the Company as follows, each of which representation and warranty is
true and correct as of the date hereof:

 

(a)     The Purchaser has full power and authority to enter into and perform
this Agreement in accordance with its terms, and it was not organized for the
specific purpose of acquiring the Note or any securities issuable upon
conversion of the Note.

 

(b)     This Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of it, enforceable in
accordance with the terms of the Agreement.

 

(c)     The Purchaser is an “accredited investor” as that term is defined in
Rule 501 promulgated under the Securities Act of 1933, as amended.

 

(d)     The Note is being acquired by the Purchaser, and any securities issuable
upon conversion of the Note will be acquired by the Purchaser, for investment
for the Purchaser’s own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The Purchaser further represents that the Purchaser does
not presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any securities issuable upon conversion of the Note.

 

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(e)     The Purchaser has had an opportunity to discuss the Company’s business,
management, financial affairs and the terms and conditions of the issuance of
the Note with the Company’s management and has had an opportunity to review the
Company’s facilities.

 

(f)      The Purchaser understands that any securities issuable upon conversion
of the Note have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser’s representations as
expressed herein. The Purchaser understands that any securities issuable upon
conversion of the Note are “restricted securities” under applicable U.S. federal
and state securities laws and that, pursuant to these laws, the Purchaser must
hold any securities issuable upon conversion of the Note indefinitely unless
they are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser acknowledges that the Company has no
obligation to register or qualify any securities issuable upon conversion of the
Note for resale except as set forth in the Rights Agreement (as defined below).

 

(g)     The Purchaser understands that no public market now exists for any
securities issuable upon conversion of the Note, and that the Company has made
no assurances that a public market will ever exist for any such securities.

 

(h)     The Purchaser understands that any securities issuable upon conversion
of the Note, may bear one or all of the following legends, or legends to the
following effect:

 

(A)      “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS THEY HAVE BEEN SO REGISTERED AND QUALIFIED OR PURSUANT TO AN EXEMPTION
FROM SUCH REGISTRATION OR QUALIFICATION. THE COMPANY SHALL BE ENTITLED TO
REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT WITH RESPECT TO
COMPLIANCE OF ANY PROPOSED SALE OR TRANSFER WITH THE REQUIREMENTS OF THE
SECURITIES ACT.”

 

(B)      Any legend required by the securities laws of any state to the extent
such laws are applicable to any securities issuable upon conversion of the Note
represented by the certificate so legended.

 

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ARTICLE 5

 

COVENANTS OF THE COMPANY

 

5.01         Affirmative Covenants. Until the Note is converted pursuant to the
provisions of Section 3 of the Note or all obligations thereunder are repaid in
full, the Company hereby covenants to do the following:

 

(a)     Notice of Default. The Company shall provide to the Purchaser, within
five (5) business days of becoming aware of the occurrence thereof, notice of
any Event of Default (as defined in Article 6).

 

(b)     Hiring of Chief Financial Officer or Controller. The Company shall use
its commercially reasonable efforts, on or before the Maturity Date (as defined
in the Note), to hire a Chief Financial Officer or Controller who is reasonably
acceptable to the Company’s Board of Directors.

 

(c)     Pilot Project Updates. The Company shall track the performance and costs
of its active pilot projects and deliver a report of such performance and costs
(the “Pilot Project Report”) to the Board of Directors of the Company within
thirty (30) calendar days after the end of each fiscal quarter, and the Company
shall deliver the Pilot Project Report to the Purchaser within ten (10) calendar
days after the delivery of the Pilot Project Report to the Board of Directors of
the Company.

 

(d)     Insurance. The Company shall maintain in full force and effect insurance
coverage that is adequate by industry standards for similarly situated
businesses.

 

(e)     Information and Inspection Rights. The Company shall (i) deliver the
same reports to the Purchaser as are required to be delivered to Major Investors
(as such term is defined in that certain Second Amended and Restated Investors’
Rights Agreement, dated as of October 15, 2009, by and among the Company and the
Purchasers named therein, as amended by that certain Amendment No. 1, dated as
of the same date hereof (such agreement, as amended, the “Rights Agreement”)
pursuant to Section 3.1 of the Rights Agreement, and (ii) provide the Purchaser
with the same visitation and inspection rights that are provided to Major
Investors (as such term is defined in the Rights Agreement) pursuant to Section
3.2 of the Rights Agreement.

 

(f)      Maintain Existence. The Company shall reserve and keep in full force
and effect its existence as a corporation in good standing and its right to
conduct its business in all jurisdictions in which it conducts business except
to the extent that the failure to do so would not have a material adverse effect
on the Company.

 

(g)     Licenses. The Company shall keep all licenses needed to operate the
Company’s business valid and in full force and effect except to the extent that
the failure to do so would not have a material adverse effect on the Company.

 

(h)     Compliance with Laws. The Company will comply in all material respects
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority.

 

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(i)      Tax. The Company will timely file any and all tax returns and timely
pay any and all taxes; provided, however, that the Company will not be required
to pay any such tax so long as (i) such tax is not yet due and payable without
penalty or interest, or (ii) the legality of such tax will be contested in good
faith and the Company has established adequate reserves with respect to such
contested tax.

 

5.02         Negative Covenants. Until the Note is converted or all obligations
thereunder are repaid in full, the Company hereby covenants that, from the
period beginning on the date hereof and ending on the Maturity Date (as defined
in the Note) or any earlier conversion or permitted repayment of the Note in
full, neither the Company nor any of its subsidiaries shall, without obtaining
the Purchaser’s prior written consent, which such consent shall not be
unreasonably withheld, delayed or conditioned, become a party to any other
instrument or agreement that evidences or otherwise incurs indebtedness for
borrowed money that is senior or pari passu to the indebtedness evidenced by the
Note excluding trade payables and other obligations incurred in the ordinary
course of business.

 

ARTICLE 6

 

EVENTS OF DEFAULT

 

6.01        Events of Default. The occurrence of any of the following events
shall constitute an “Event of Default” under this Agreement:

 

(a)     The Company shall fail to pay all principal and interest due at the
Maturity Date (as defined in the Note);

 

(b)     There shall occur any failure by the Company to perform any of its
obligations under this Agreement or the Note promptly when due which failure (i)
cannot be cured or (ii) if curable, is not cured by the Company within sixty
(60) days after written notice thereof is delivered by the Purchaser to the
Company describing such failure in reasonable detail (provided, that
notwithstanding the foregoing, any failure by the Company to perform its
obligations under Section 5.02 hereof shall automatically be deemed to be an
“Event of Default” without any period for cure; provided, further, no Event of
Default pursuant to Section 6.1(a) above shall be subject to cure);

 

(c)     There shall be any material breach or inaccuracy of the representations
and warranties of the Company contained in this Agreement or contained in that
certain First Amendment to Series B Preferred Stock Purchase Agreement, dated as
of the same date hereof, by and among the Company and the Purchasers named
therein.

 

(d)     The Company shall (i) voluntarily terminate operations or apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of it or of all or substantially all of its
assets, (ii) be generally unable to pay its debts as the debts become due, (iii)
make a general assignment for the benefit of its creditors, (iv) commence a
voluntary case under the Federal Bankruptcy Code of the United States as now or
hereafter in effect (the “Bankruptcy Code”), (v) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, (vi) fail to controvert
within ninety (90) days, or acquiesce in writing to, any petition filed against
it in an involuntary case under the Bankruptcy Code or other applicable
bankruptcy law or (vii) take any corporate action for the purpose of effecting
any of the foregoing;

 

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(e)     Without its application, approval or consent, a proceeding shall be
commenced, in any court of competent jurisdiction, seeking in respect of the
Company the liquidation, reorganization, dissolution, winding up, or composition
or readjustment of debt, the appointment of a trustee, receiver, liquidator or
the like of such entity or of all or any substantial part of its assets, or
other like relief in respect of such entity under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts; and, if the proceeding is being contested in good faith by such
entity, the same shall continue undismissed, or unstayed and in effect for any
period of sixty (60) consecutive days, or an order for relief against such
entity shall be entered in any case under the Bankruptcy Code or other
applicable bankruptcy law; or

 

(f)      Any material default or event of default under any other instrument or
agreement to which the Company or any subsidiary is a party that evidences
indebtedness in excess of $250,000 that has not otherwise been forgiven or cured
within 30 days of the date of such default or event of default.

 

ARTICLE 7

 

MISCELLANEOUS

 

7.01         No Waiver; Cumulative Remedies. No failure or delay on the part of
any party to this Agreement in exercising any right, power or remedy hereunder
shall operate as a waiver hereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.

 

7.02         Amendments, Waivers and Consents. Any provision in this Agreement
to the contrary notwithstanding, changes in or additions to this Agreement or
the Note may only be made, and compliance with any covenant or provision herein
or therein set forth may only be omitted or waived, in writing signed by the
Company and the Purchaser. Any amendment or waiver effected in accordance with
this Section 7.02 shall be binding upon the holder of Note then outstanding and
any future holder of the Note, and the Company.

 

7.03         Addresses for Notices. Any notice required or permitted hereunder
shall be given in writing and shall be conclusively deemed effectively given
upon personal delivery or delivery by courier, or on the first business day
after transmission if sent by confirmed facsimile transmission, or four (4)
business days after deposit in the United States mail, by registered or
certified mail, postage prepaid, addressed to the address set forth below the
Company’s and the Purchaser’s name on the signature page of this Agreement, or
at such other address as the Company or the Purchaser may designate by advance
written notice to the other party hereto.

 

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For purposes of this Section 7.03, a “business day” means a weekday on which
banks are open for general banking business in New York City, New York.

 

7.04         Binding Effect; Assignment. The terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the Company and the
Purchaser and their respective heirs, successors and assigns.

 

7.05         Headings; Interpretation. In this Agreement, (i) the meaning of
defined terms shall be equally applicable to both the singular and plural forms
of the terms defined; (ii) the captions and headings are used only for
convenience and are not to be considered in construing or interpreting this
Agreement and (iii) the words “including,” “includes” and “include” shall be
deemed to be followed by the words “without limitation”. All references in this
Agreement to sections, paragraphs, exhibits and schedules shall, unless
otherwise provided, refer to sections and paragraphs hereof and exhibits and
schedules attached hereto, all of which exhibits and schedules are incorporated
herein by this reference.

 

7.06         No Finder’s Fees. Each party represents that it neither is nor will
be obligated for any finder’s or broker’s fee or commission in connection with
the transactions contemplated by this Agreement. The Purchaser agrees to
indemnify and to hold harmless the Company from any liability for any commission
or compensation in the nature of a finder’s or broker’s fee (and any asserted
liability) for which the Purchaser or any of its directors, officers, partners,
members, employees or representatives is responsible. The Company agrees to
indemnify and hold harmless the Purchaser from any liability for any commission
or compensation in the nature of a finder’s or broker’s fee (and any asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.

 

7.07         Survival of Representations and Warranties. All representations and
warranties made in this Agreement or the Note, or made in any other instrument
or document delivered in connection herewith or therewith, shall survive the
execution and delivery hereof or thereof, and the Closing, and shall in no way
be affected by any investigation of the subject matter thereof made by or on
behalf of the Purchaser or the Company, as the case may be.

 

7.08         Prior Agreements. This Agreement and the Note (including any
provisions of other agreements specifically referred to herein or therein)
constitute the entire agreement between the parties and supersedes any other
prior understandings or agreements concerning the subject matter hereof.

 

7.09         Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.

 

7.10         Governing Law. This Agreement shall be governed by, and construed
in accordance with, the Delaware General Corporation Law as to matters within
the scope thereof, and as to all other matters shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to principles of conflict of laws or choice of laws.

 

7.11         Payment of Fees. At the Closing, all reasonable and documented
expenses, including legal fees and out of pocket expenses of the counsel for the
Purchaser, related to the financing to which this Agreement and the Note relate,
incurred by the Purchaser, up to an aggregate maximum amount of $10,000, shall
be paid by the Company.

 

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7.12         Counterpart; Facsimile Signatures. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement may be executed and delivered by facsimile, or by
e-mail in portable document format (.pdf) or other electronic means, and
delivery of the signature page by such method shall be deemed to have the same
effect as if the original signature had been delivered to the other parties.

 

7.13         Entire Agreement. This Agreement, together with all exhibits hereto
and the Note, constitutes the entire agreement and understanding of the parties
with respect to the subject matter hereof and supersede any and all prior
negotiations, correspondence, agreements, understandings, duties or obligations
between the parties with respect to the subject matter hereof.

 

7.14         Further Assurances. From and after the date of this Agreement, upon
the request of the Purchaser or the Company, the Company and the Purchaser shall
execute and deliver such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day,
month and year first above written.

 

  Company:       By: /s/ Stuart Page     Stuart Page     Chief Executive Officer
        Address:  4315 South drive                    Houston, Tx 77053        
ENERGY TECHNOLOGY VENTURES, LLC         By: /s/ Patrick Goff   Name: Patrick
Goff   Title: Senior Vice President       Address:       c/o GE Capital, Equity
  Attn: Account Manager, Equity   201 Merritt 7   Norwalk, CT 06851   Fax: (203)
956-4005       With a copy to (which shall not constitute notice):       c/o GE
energy Financial Services   Attn: Portfolio Manager, VC   800 Long Ridge Road  
Stamford, CT 06927   Fax: (203) 585-0758

 

Signature Page to Glori Oil Note Purchase Agreement

 

 

 

 

Exhibit A

 

Form of Convertible Promissory Note

 

A-1