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