Exhibit 10.5

 

 

SERIES B 6.0% CONVERTIBLE PREFERRED STOCK CONVERSION AGREEMENT

 

This Preferred Stock Conversion Agreement (this “Agreement”), dated as of this
25th day of April 2017 (the “Execution Date”), by and among Lilis Energy, Inc.
(the “Company”) and the holders of the Company’s Preferred Stock (as defined
below) (each a “Holder”).

 

RECITALS

 

WHEREAS, on June 15, 2016, the Company sold to the Holder pursuant to a
securities purchase agreement (the “Purchase Agreement”) shares of the Company’s
newly designated Series B 6% Convertible Preferred Stock (the “Preferred Stock”)
with such rights and preferences as set forth in the Certificate of Designation
of Preferences, Rights and Limitations of Preferred Stock (the “Certificate of
Designation” and collectively with the Purchase Agreement and any related
transaction documents, the “Transaction Documents”));

 

WHEREAS, the Holder currently holds the number of shares of Preferred Stock as
set forth on Schedule A, attached hereto;

 

WHEREAS, the Company deems it advisable and in the best interests of its
stockholders to restructure the Company’s capitalization as set forth herein;

 

WHEREAS, the Company and each Holder desire to amend the Certificate of
Designation, in the form attached hereto as Exhibit A (the “Amended and Restated
COD”), in order to remove any limitations upon beneficial ownership contained
therein; and

 

WHEREAS, in consideration for the execution and delivery of this Agreement,
immediately after the execution of this Agreement and the effectiveness of the
Amended and Restated COD (the “Conversion Time”), subject to the terms hereof,
all shares of Preferred Stock held by the Holder, including an increase to the
Stated Value resulting from the payment of dividends thereon that would have
accrued through December 31, 2017, shall be converted into shares of Common
Stock, based on the conversion price set forth in the Certificate of Designation
then in effect, without further action by the Holder (the “Conversion”).

  

NOW, THEREFORE, in consideration of the foregoing, of the mutual agreements
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and the Holder
hereby agree follows:

 

AGREEMENT

 

1.       Recitals. The parties hereto agree that the Recitals set forth above
are true and correct and are incorporated into this Agreement by this reference.

 

2.        Definitions. Unless otherwise defined herein, all terms used herein
shall have the definitions specified in the Certificate of Designation and the
Purchase Agreement.

 

3.        Company’s Representations and Warranties.  The Company represents and
warrants that each share of the Conversion Stock will be duly authorized,
validly issued, fully paid and nonassessable.

 

4.        Holders’ Representations, Warranties, Covenants and Agreements.  Each
Holder hereby represents and warrants to, and covenants and agrees with, the
Company as follows:

 

 

 

 

(a)                Such Holder is the record and beneficial holder of the
Preferred Stock set forth opposite such Holder’s name on Schedule A attached
hereto, free and clear of any liens and encumbrances.

 

(b)               Such Holder has had complete and unrestricted access to all
material information about the Company that could affect such Holder’s decision
to agree to the Conversion.  As a result of such Holder’s access to all such
material information, such Holder acknowledges that such Holder is fully
informed and knowledgeable about the Company, its business, operations and
plans, and has therefore made a fair and reasoned decision to consent to the
Conversion.

 

(c)                Such Holder acknowledges that an investment in the Conversion
Stock involves a substantial degree of risk and is suitable only for persons
with adequate means who have no need for liquidity in their investments.

 

(d)               Such Holder has knowledge and experience in financial and
business matters and is capable of evaluating the merits and risks of an
investment in the Conversion Stock and the suitability of the investment for
such Holder.

 

(e)                Such Holder is effecting the Conversion for investment
purposes only and has no present intention to sell or exchange the Conversion
Stock. Such Holder has adequate means for providing for his or her current needs
in any foreseeable contingency, and such Holder has no need to sell the
Conversion Stock in the foreseeable future.

 

(f)                Such Holder is an “accredited investor” as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended.

 

(g)                Such Holder acknowledges that no federal or state agency has
made any finding or determination as to the fairness of the Conversion, nor any
recommendation or endorsement, of the issuance of the Conversion Stock in
connection with the Conversion.

 

(h)               Such Holder acknowledges that none of the Conversion Stock has
been registered under the Securities Act of 1933, as amended (the “Act”), or the
blue sky laws of any state.

 

(i)                 Such Holder hereby acknowledges that Holder has relied on
his or her own independent tax counsel regarding the tax effects, if any, of the
Conversion.

 

(j)                 Holder has the requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby and
otherwise to carry out Holder’s obligations hereunder.

 

(k)               No consent, approval or agreement of any individual or entity
is required to be obtained by the Holder in connection with the execution and
performance by the Holder of this Agreement or the execution and performance by
the Holder of any agreements, instruments or other obligations entered into in
connection with this Agreement.

 

(l)                 There is no judgment, decree or order against the Holder
that could prevent, enjoin, alter or delay any of the transactions contemplated
by this Agreement.

 

(m)             There are no material claims, actions, suits, proceedings,
inquiries, labor disputes or investigations pending or, to the Holder’s
knowledge, threatened against the Holder or any of its assets, at law or in
equity or by or before any governmental entity or in arbitration or mediation.

 

 

 

 

(n)               No bankruptcy, receivership or debtor relief proceedings are
pending or, to the Holder’s knowledge, threatened against the Holder.

 

5.        Preferred Stock Conversion.

 

(a)  COD Amendment; Automatic Conversion. Immediately after the execution of
this Agreement, the Company shall file the Amended and Restated COD with the
Secretary of State for the State of Nevada. At the Conversion Time, the
Conversion shall automatically take effect without any action on the part of the
Holder such that the Holder shall receive that number of shares of Common Stock
(the “Conversion Shares”) as stipulated therein and as stated on Schedule A
attached hereto and the Holder acknowledges, accepts and authorizes the
foregoing Conversion.   

 

(b)    Cancellation of the Preferred Stock. The Holder unconditionally
acknowledges, affirms and agrees that simultaneously with the Conversion and
delivery to the Holder of the Conversion Shares, the Preferred Stock shall be
deemed canceled, null and void, and the Company shall have no further obligation
to the Holder with respect to the Preferred Stock or the Certificate of
Designation. Moreover, for the avoidance of doubt, from and after the Closing,
no further dividends shall be payable in respect of the shares of Preferred
Stock outstanding immediately prior to the Closing. The Parties agree that any
and all accrued dividends, liquidation preferences and other rights or
privileges afforded to the shares Preferred Stock shall be terminated and
cancelled upon the Closing.

 

(c)        Conversion Procedures. At the Conversion Time, (i) each Holder shall
deliver to the transfer agent for the shares of Preferred, Stock, the original
stock certificate(s) representing such Holders shares of Preferred Stock; and
(ii) the Company shall issue and deliver to each Preferred Shareholder the
number of Conversion Shares set forth for such Preferred Shareholder on Schedule
A, as evidenced by an original stock certificate dated the Closing Date and
registered in the name of such Preferred Shareholder.

 

6.        No Third Party Beneficiaries. Except as expressly set forth herein,
this Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.

   

7.        Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
The undersigned agrees, on its behalf and on behalf of its representatives, to
submit to the jurisdiction of any court of competent jurisdiction located in the
State of New York, County of New York, to resolve any dispute relating to this
agreement and waive any right to move to dismiss or transfer any such action
brought in any such court on the basis of any objection to personal jurisdiction
or venue.

 

8.        Counterparts. This Agreement may be executed by the Company and the
Holder in any number of counterparts, each of which will be deemed an original,
but all of which together will constitute one and the same instrument.

 

[Signature Page Follows]

 

 

 

  

IN WITNESS WHEREOF, the Company and the Holder have executed this Agreement as
of the Execution Date.

 

  COMPANY:       LILIS ENERGY, INC.       By:  /s/ Abraham Mirman   Name:
 Abraham Mirman   Title:  Chief Executive Officer

 

HOLDER:  

 

LOGIC CAPITAL 2016

      

By:   /s/ Terence Lui

Name:   Terrence Lui

Title:   General Counsel and Chief Compliance Officer

Registration:   Gundyco in trust for A/C 515-00597 22

 

 

LOGIC CAPITAL 2016

   

By:   /s/ Terence Lui

Name:   Terrence Lui

Title:   General Counsel and Chief Compliance Officer

Registration:   Gundyco in trust for A/C 515-00596 23

 

 

INVESTOR COMPANY 5J5505D 

 

By:   /s/ Matt Wood

Name:   Matt Wood

Title:   Portfolio Manager

 

 

 

 

BMO Nesbitt Burns

 

By:   /s/ Warren Irwin

Name:   Warren Irwin

Title:   Chief Investment Officer, Rosseau Asset Management Ltd.

Registration:   G10-Rosseau Special Situations Master Fund

 

 

BMO Nesbitt Burns

 

By:   /s/ Warren Irwin

Name:   Warren Irwin

Title:   Chief Investment Officer, Rosseau Asset Management Ltd.

Registration:   Rosseau Limited Partnership

 

 

THE BRALINA GROUP, LLC

 

By:   /s/ Abraham Mirman

Name:   Abraham Mirman

Title:   Managing Member

 

 

PERUGIA INVESTMENTS, LP

 

By:   /s/ Ronald Dean Ormand

Name:   Ronald Dean Ormand

Title:   General Partner

 

 

KURT ZIMMERMAN

 

By:   /s/ Kurt Zimmerman

Name:   Kurt Zimmerman

Title:   Owner

 

 

 

 

KKN HOLDINGS LLC

 

By:   /s/ Kevin Nanke

Name:   Kevin Nanke

Title:   Manager/Owner

 

 

J. STEVEN EMERSON ROTH IRA

 

By:   /s/ J. Steven Emerson

Name:   J. Steven Emerson

Title:   Sole Beneficiary

 

 

J. STEVEN EMERSON ROTH IRA ROLLOVER II

 

By:   /s/ J. Steven Emerson

Name:   J. Steven Emerson

Title:   Sole Beneficiary

 

 

PACIFIC CAPITAL MANAGEMENT LLC

 

By:   /s/ Jonathan Glaser

Name:   Jonathan Glaser

Title:   Managing Member

 

 

WALLINGTON INVESTMENT HOLDINGS LTD

 

By:   /s/ Pierre Caland

Name:   Pierre Caland

Title:   Director

 

 

 

 

EZRALOW FAMILY TRUST U/T/D 12/09/1980

 

By:   /s/ Bryan Ezralow

Name:   Bryan Ezralow

Title:   Trustee

 

 

EZRALOW MARITAL TRUST U/T/D 01/12/2002

 

By:   /s/ Bryan Ezralow

Name:   Bryan Ezralow

Title:   Trustee

 

 

MARSHALL S. EZRALOW ROTH IRA

 

By:   /s/ Marshall S. Ezralow

Name:   Marshall S. Ezralow

Title:   Participant

 

 

ELEVADO INVESTMENT CO, LLC 

 

By:   /s/ Bryan Ezralow

Name:   Bryan Ezralow as Trustee of the Ezralow Family Trust

Title:   Manager and Member

 

 

EMSE, LLC

 

By:   /s/ Bryan Ezralow

Name:   Bryan Ezralow as Trustee of the Bryan Ezralow 1994 Trust

Title:   Manager and Member

 

 

 

 

MARC EZRALOW 1997 TRUST U/T/D 11/26/1997

 

By:   /s/ Marc Ezralow

Name:   Marc Ezralow

Title:   Trustee

 

 

BRYAN EZRALOW 1994 TRUST U/T/D 12/22/1994

 

By:   /s/ Bryan Ezralow

Name:   Bryan Ezralow

Title:   Trustee

 

EZ COLONY PARTNERS, LLC

 

By:   /s/ Bryan Ezralow

Name:   Bryan Ezralow as Trustee of the Bryan Ezralow 1994 Trust

Title:   Manager and Member

 

 

MARC EZRALOW IRREVOCABLE TRUST 06/01/2004

  

By:   /s/ Bryan Ezralow

Name:   Bryan Ezralow

Title:   Trustee

 

 

SPA TRUST U/T/D 09/13/2004

 

By:   /s/ Marc Ezralow

Name:   Marc Ezralow

Title:   Trustee

 

 

 

 

FREEDMAN 2006 IRREVOCABLE TRUST U/T/D 02/27/2006

 

By:   /s/ Gary E. Freedman

Name:   Gary E. Freedman

Title:   Trustee

 

 

DAVID LEFF FAMILY TRUST U/T/D 02/03/1988 

   

By:   /s/ David Michael Leff

Name:   David Michael Leff

Title:   Trustee

 

 

C AND R IRREVOCABLE TRUST U/T/D 11/05/2007

 

By:   /s/ David Michael Leff

Name:   David Michael Lef

Title:   Trustee

 

 

THE RUNNELS FAMILY TRUST DTD 1-11-2000

 

By:   /s/ G. Tyler Runnels

Name:   G. Tyler Runnels

Title:   Trustee

 

 

TRW CAPITAL GROWTH FUND, LP

   

By:   /s/ G. Tyler Runnels

Name:   G. Tyler Runnels

Title:   Trustee

 

  

 

 

 

Exhibit A

 

Amended and Restated COD

 

[see attached]

 

 

 

 

Schedule A

 

Holder Amount of Series B Preferred Shares Remaining Shares Converted Based on
Stated Value of Remaining Series B Shares Amount of Interest Shares to be
Converted Calculated with a Conversion Date of 12/31/17 Total Amount of Common
Shares Converted Rosseau Asset Management Ltd. 2,000 1,818,182 168,485 1,986,667
LOGiQ Capital 2016 1,426 1,296,364 120,130 1,416,494 Investor Company 5J5505D
3,952 3,592,727 332,926 3,925,654 J. Steven Emerson Roth IRA Pershing LLC as
Custodian 750 681,818 63,182 745,000 J. Steven Emerson IRA Rollover II Pershing
LLC as Custodian 750 681,818 63,182 745,000 Perugia Investments LP 1,000 909,091
84,242 993,334 Bralina Group LLC 1,650 1,500,000 139,000 1,639,000 KKN Holdings
LLC 200 181,818 16,848 198,667 Pacific Capital Management, LLC 500 454,545
42,121 496,667 Wallington Investments Holdings, Ltd. 250 227,273 21,061 248,334
Kurt Zimmerman 125 113,636 10,530 124,167 Bryan Ezralow 1994 Trust DTD 12/22/94
300 272,727 25,273 298,000 Elevado Investment Company, LLC 150 136,364 12,636
149,000 EMSE, LLC 100 90,909 8,424 99,334 EZ Colony Patners, LLC 200 181,818
16,848 198,667 Marc Ezralow 1997 Trust u/t/d 11/26/97 150 136,364 12,636 149,000
Marshall S. Ezralow Roth IRA 100 90,909 8,424 99,334 Ezralow Marital Trust U/T/D
01/12/2002 50 45,455 4,212 49,667 Ezralow Family Trust U/T/D 12/09/1980 50
45,455 4,212 49,667 Freedman Family Trust u/t/d 02/27/2006 50 45,455 4,212
49,667 Marc Ezralow Irrevocable Trust u/t/d 06/01/04 50 45,455 4,212 49,667 SPA
Trust u/t/d 09/13/04 50 45,455 4,212 49,667 C&R Leff Irrevocable Trust U/T/D
11/05/2007 25 22,727 2,106 24,834 David Leff Family Trust U/T/D 02/03/1988 25
22,727 2,106 24,834 TRW Capital Growth Fund, L.P. 200 181,818 16,849 198,667 The
Runnels Family Trust DTD 1-11-2000 276 250,909 23,251 274,160 Total: 14,379
13,071,818 1,211,322 14,283,149