Document:

f8k053014ex10ii_lilisenerg.htm

Exhibit 10.2

 

Form of Warrant

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE 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 EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

LILIS ENERGY, INC.

 

	
Warrant Shares: _______

	
Initial Exercise Date: November 30, 2014

	  	
Issue Date:  May 30, 2014

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ or [his, her or its] assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after November 30, 2014 (the “Initial Exercise Date”) and on or prior to 3:00 p.m. Mountain Time on the three year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Lilis Energy, Inc., a Nevada corporation (the “Company”), up to ______ shares (as subject to adjustment hereunder, the “Warrant Shares”) of the Company’s common stock (“Common Stock”).  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.             Definitions.  In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated in this Section 1:

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

  

1

  

 

“Board of Directors” means the board of directors of the Company.

 

“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.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Liens” means a lien, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

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

 

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

 

“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 any successors to any of the foregoing).

 

“Transfer Agent” means Corporate Stock Transfer, the current transfer agent of the Company, with a mailing address of 3200 Cherry Creek South Dr, Suite 430, Denver, CO 80209-3246 and a facsimile number of (303) 777-3094, and any successor transfer agent of the Company.

 

  

2

  

 

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

 

Section 2.             Exercise.

 

a)           Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before 3:00 p.m. Mountain time on the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise form annexed hereto. Within three (3) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within two (2) Business Days of receipt of such notice.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

  

3

  

 

b)           Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $2.89, subject to adjustment hereunder (the “Exercise Price”).

 

c)           Cashless Exercise.  If at any time after the six month anniversary of the Initial Exercise Date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP of one share of Common Stock on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

 

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

 

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

d)            Mechanics of Exercise.

 

    i.          Delivery of Warrant Shares Upon Exercise.  Warrant Shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the latest of (A) the delivery to the Company of the Notice of Exercise and (B) surrender of this Warrant (if required) (such date, the “Warrant Share Delivery Date”).   The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid.

   

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

 

  

4

  

 

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

 

iv.         Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

  

5

  

 

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

 

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

 

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

 

  

6

  

 

e)           Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with the restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion, that such Notice of Conversion has not violated the restrictions set forth in this paragraph, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of the following: (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

  

7

  

 

Section 3.             Certain Adjustments.

 

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

 

b)           Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the 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 the 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) the 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, or (v) the 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 or group of Persons whereby such other Person or group 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 exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), 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 Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  At the Holder’s option and request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant substantially in the form of this Warrant and consistent with the foregoing provisions and evidencing the Holder’s right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof.  Any such successor or surviving entity shall be deemed to be required to comply with the provisions of this Section 4(d) and shall insure that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

 

  

8

  

 

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

 

f)           Notice to Holder.

 

  i.      Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

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

 

  

9

  

 

Section 4.             Transfer of Warrant.

 

a)           Transferability.  Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

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

 

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

 

  

10

  

 

d)           Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, may be required by the Company to provide an opinion of counsel with regard to such assignment or transfer in a form satisfactory to the Company in its reasonable discretion.

 

e)           Representation by the Holder.  The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.             Miscellaneous.

 

a)           No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.

 

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

 

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

 

d)           Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

  

11

  

 

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

 

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

 

e)           Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.

 

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

 

  

12

  

 

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

 

h)           Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.

 

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

 

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

 

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

 

l)           Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

  

13

  

 

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

 

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

 

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

 

(Signature Page Follows)

 

  

14

  

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

 

	 	
LILIS ENERGY, INC.

 

	 	By:	
 

	 	  	
Name: Abraham Mirman

	 	  	
Title:   Chief Executive Officer

 

  

15

  

NOTICE OF EXERCISE

TO:           LILIS ENERGY, INC.

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

 

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

 

o in lawful money of the United States; or

 

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

 

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

 

_______________________________

 

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

_______________________________

_______________________________

_______________________________

(4)      Accredited Investor.  The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity:                                                                                                                                                                  

 

Signature of Authorized Signatory of Investing Entity:                                                                                                              

 

Name of Authorized Signatory:                                                                                                                                                        

 

Title of Authorized Signatory:                                                                                                                                                          

 

Date:                                                                                                                                                                                                      

  

16

  

 

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

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

 

_______________________________________________ whose address is

 

_______________________________________________________________.

_______________________________________________________________

Dated:  ______________, _______

 

Holder’s Signature:              _____________________________

Holder’s Address:                _____________________________

 _____________________________

 

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

17Unassociated Document

Exhibit 10.3

 

SETTLEMENT AGREEMENT

 

This Settlement Agreement (this "Agreement") dated as of May 30, 2014, is made by and between Lilis Energy, Inc., a Nevada corporation formerly known as Recovery Energy, Inc. ("Lilis") and Hexagon, LLC, a Colorado limited liability company formerly known as Hexagon Investments, LLC ("Hexagon"). This Agreement is joined in by Labyrinth Enterprises LLC, The Reiman Foundation and Scott J. Reiman, (together with Hexagon, the "Hexagon Parties") solely for purposes of Sections 2 and 4(a) of this Agreement.

 

RECITALS

 

A.          Lilis and Hexagon entered into (i) a Credit Agreement, dated as of January 29, 2010, providing for a secured term loan in the original principal amount of $4,500,000 (as amended, modified, supplemented, substituted or replaced, "Credit Agreement No. 1"); (ii) a Credit Agreement, dated as of March 25, 2010, providing for a secured term loan in the original principal amount of $6,000,000 (as amended, modified, supplemented, substituted or replaced, “Credit Agreement No. 2”); and (iii) a Credit Agreement, dated as of April 14, 2010, providing for a term loan in the original principal amount of $15,000,000 (as amended, modified, supplemented, substituted or replaced, “Credit Agreement No. 3” and, together with Credit Agreement No. 1 and Credit Agreement No. 2, the "Credit Agreements").

 

B.           In connection with the Credit Agreements, Lilis executed, in favor of Hexagon, (i) a Promissory Note, dated as of January 29, 2010 (as amended, modified, supplemented, substituted or replaced, "Promissory Note No. 1"); (ii) a Promissory Note, dated as of March 25, 2010 (as amended, modified, supplemented, substituted or replaced, "Promissory Note No. 2"); and a Promissory Note, dated as of April 14, 2010 (as amended, modified, supplemented, substituted or replaced, "Promissory Note No. 3" and, together with Promissory Note No. 1 and Promissory Note No. 2, the "Promissory Notes").

 

C.           The obligations of Lilis under (i) Promissory Note No. 1 are secured by (a) that certain Mortgage, Security Agreement, Assignment Of Production And Proceeds, Financing Statement And Fixture Filing, dated as of January 29, 2010, by and between Lilis and Hexagon (as amended, the "Colorado Mortgage"), and (b) that certain Deed Of Trust, Mortgage, Security Agreement, Assignment Of Production And Proceeds, Financing Statement And Fixture Filing, dated as of January 29, 2010, by and among Lilis, Hexagon and Jacob B. Mueller, Trustee (as amended, the "First Nebraska Mortgage"); (ii) Promissory Note No. 2 are secured by (a) Deed Of Trust, Mortgage, Security Agreement, Assignment Of Production And Proceeds, Financing Statement And Fixture Filing, dated as of March 25, 2010, by and among Lilis, Hexagon and Jacob B. Mueller, Trustee (the "Second Nebraska Mortgage"), and (b) Mortgage, Security Agreement, Assignment Of Production And Proceeds, Financing Statement And Fixture Filing, dated as of March 25, 2010, by and between Lilis and Hexagon (the "First Wyoming Mortgage"); (iii) Promissory Note No. 3 are secured by Mortgage, Security Agreement, Assignment Of Production And Proceeds, Financing Statement And Fixture Filing, dated as of April 14, 2010, by and between Lilis and Hexagon (the "Second Wyoming Mortgage"); and all of the Promissory Notes are additionally secured by (a) that certain Mortgage, Security Agreement, Assignment Of Production And Proceeds, Financing Statement And Fixture Filing, dated as of March 1, 2013, by and between Lilis and Hexagon (the "Third Wyoming Mortgage"), and (b) that certain First Amendment To Deed Of Trust, Mortgage, Security Agreement, Assignment Of Production And Proceeds, Financing Statement And Fixture Filing, dated as of March 1, 2013, by and between Lilis and Hexagon (the "Amendment to Nebraska Mortgage" and, together with the Colorado Mortgage, the First Nebraska Mortgage, the Second Nebraska Mortgage, the First Wyoming Mortgage, the Second Wyoming Mortgage and the Third Wyoming Mortgage, the "Mortgages").

 

  

  

  

 

D.          On May 19, 2014, the parties agreed to extend the maturity date of the Promissory Notes to August 15, 2014 (the “Extension”).

 

E.           Lilis proposes to restructure and settle the Promissory Notes through (1) an immediate cash payment of $5 million (the “First Cash Payment”), of which $250,000 shall constitute a forbearance fee as consideration for the Extension, $225,000 shall constitute the monthly payment under the Promissory Notes for the month of May, and the remainder shall be applied against principal and interest under the Promissory Notes, (2) an additional cash payment of $5 million (the “Second Cash Payment” and, together with the First Cash Payment, the “Cash Payments”), (3) the issuance to Hexagon of a two-year $6 million unsecured note substantially in the form attached hereto as Exhibit A (the “Replacement Note”), bearing interest at an annual rate of 8%, requiring principal and interest payments of $90,000 per month, and (4) the issuance to Hexagon of 943,208 shares of unregistered common stock (the “Settlement Shares” and, together with the Cash Payments and the Replacement Note, the “Restructuring Consideration”), it being understood that Lilis shall deliver the Replacement Note and the Settlement Shares on the date it makes the Second Cash Payment.

 

F.           Pursuant to this Agreement, the parties desire that upon delivery by Lilis of the Restructuring Consideration, the Promissory Notes be extinguished and replaced with the Replacement Notes, and that the Credit Agreements and the Mortgages be terminated, and to address certain other matters relating to their relationship.

 

AGREEMENT

 

In consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.      Restructuring.  Hexagon hereby agrees and acknowledges that, upon Hexagon's receipt of (a) wire transfers in the aggregate amount of the Cash Payments, (b) a certificate representing the Settlement Shares, and (c) an executed Replacement Note, all outstanding obligations under the Credit Agreements and the Promissory Notes shall be deemed discharged and paid in full, and the Credit Agreements, the Promissory Notes and the Mortgages shall be deemed terminated, released and discharged.

 

2.      Release and Termination.

 

(a) Without further action necessary by any party, immediately upon Hexagon’s receipt of the Restructuring Consideration, the Hexagon Parties shall unconditionally and irrevocably release and forever discharge the obligations of Lilis under the Credit Agreements and the Promissory Notes, and shall terminate, release and discharge the Credit Agreements, the Promissory Notes and the Mortgages (the “Hexagon Release”).

 

  

2

  

 

(b) In exchange for, and effective simultaneously with, the Hexagon Release, Lilis shall unconditionally and irrevocably release and forever discharge the Hexagon Parties, and all of their respective present and former officers, directors, principals, managers, employees, equity holders, agents and representatives, as well as their respective successors and assigns, from any and all claims (whether known or unknown, absolute or contingent, liquidated or unliquidated, matured or unmatured, foreseeable or unforeseeable, previously existing, presently existing or hereafter discovered, at law, in equity or otherwise, whether arising by statute, common law, in contract, in tort or otherwise, of any kind, character or nature whatsoever), causes of action, damages, costs, losses, liens, and expenses arising out of the Credit Agreements, the Promissory Notes and the Mortgages which Lilis may have against Hexagon Parties as of the date upon which the Hexagon Release becomes effective (collectively, the "Released Claims"). This release is specifically intended to operate and be applicable even if it is alleged, charged, or proven that all or some of the Released Claims were solely and completely caused by any acts or omissions, whether negligent, grossly negligent, intentional or otherwise, of or by the released party.

 

(c)  In exchange for, and effective simultaneously with, the Hexagon Release, Lilis agrees to refrain from, directly or indirectly, asserting any Released Claim, or commencing, instituting or causing to be commenced, or assisting any party in the commencement of any action, proceeding, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative or informal) of any kind against Hexagon based upon or related to any Released Claims, unless required by applicable law.

 

3.      Mortgage Termination.  Without limiting the generality of Section 2 hereof, Hexagon hereby agrees that upon receipt of the Restructuring Consideration, Hexagon shall automatically be deemed to authorize Lilis to file Uniform Commercial Code termination statements and any other release documents necessary to evidence the release of the Mortgages, and Hexagon shall promptly take all reasonable actions and execute all necessary documents, as requested by Lilis, in order further effectuate such authorization.

 

4.      Specific Covenants of Hexagon. The Hexagon Parties hereby agree as follows:

 

(a) The Hexagon Parties will not, for a period commencing on the date hereof and ending on the earlier of June 30, 2014, or the date that Lilis achieves sustained average trading volume in excess 100,000 shares per day for at least ten (10) consecutive trading days (the "Release Date"), offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, or otherwise dispose of, directly or indirectly, any shares of common stock, par value $0.0001 per share, of Lilis ("Common Stock") or any securities convertible into, exercisable for, or exchangeable for Common Stock. Additionally, the Hexagon Parties agree that for the period commencing on the Release Date and ending on December 31, 2014, they will not offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, or otherwise dispose of, directly or indirectly, more than 10,000 shares per week of Common Stock or any securities convertible into, exercisable for, or exchangeable for Common Stock.

 

  

3

  

 

(b) Within three (3) business days of receipt of the full Restructuring Consideration, Hexagon shall return to Lilis the original Promissory Notes marked "paid in full."

 

(c) Within three (3) business days of receipt of the full Restructuring Consideration, Hexagon shall return to Lilis the original Mortgages.

 

5.      Specific Covenant of Lilis.  Lilis hereby agrees as follows:

 

(a) Within ninety (90) days from the date of the issuance of the Settlement Shares, Lilis shall, at its own expense, file, and thereafter shall use its reasonable best efforts to cause to become effective and thereafter to maintain the effectiveness of the registration of the Settlement Shares for resale pursuant to the U.S. Securities Act of 1933, as amended on a registration statement prepared by Lilis in form and substance reasonably acceptable to Lilis and the Hexagon Parties (the "Registration Statement").

 

(b) In the event that Lilis does not make the Second Cash Payment by June 30, 2014, an additional $1,000,000 in principal will be added to the Replacement Note, it being understood that Lilis’s obligations under the original Promissory Notes shall remain in effect until such time as the Second Cash Payment is made.

 

(c) In the event that Lilis does not fully retire the Replacement Note by December 31, 2014, Lilis shall, within three (3) business days, issue an additional 1,000,000 shares of Common Stock to Hexagon (the “Supplemental Shares”), which shall be registered for resale on the Registration Statement (or a successor thereto) within ninety (90) days from the date of the issuance of the Supplemental Shares.

 

(d) The Settlement Shares and the Supplemental Shares, if issued, constitute Registrable Securities under that certain Registration Rights Agreement, dated as of June 17, 2010, by and Hexagon and Lilis.

 

6.      Representations and Warranties.

 

(a) Lilis hereby represents and warrants to Hexagon that (i) Lilis has the corporate power and authority, and the legal right, to execute, deliver and perform this Agreement, (ii) Lilis has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement, (iii) no consent or authorization of, filing with, notice to or other act by, or in respect of, any governmental authority or any other person is required to be obtained by Lilis in connection with this Agreement or the execution, delivery, performance, validity or enforceability of this Agreement, except consents, authorizations, filings and notices which have been obtained or made and are in full force and effect; (iv) as of the date hereof Lilis is not a debtor or a co-debtor in a bankruptcy or insolvency proceeding, Lilis does not intend to file a petition for relief under the U.S. Bankruptcy Code or any other federal or state insolvency laws providing relief for debtors (“Insolvency Laws”), nor to the knowledge of Lilis, are any of Lilis’s creditors threatening to file an involuntary petition under any Insolvency Law with respect to Lilis as a debtor; and (v) the terms and conditions of this Agreement, including the Cash Payments, (A) are fair and reasonable; (B) are valid, binding and enforceable obligations of Lilis except as limited by Insolvency Laws; and (C) constitute reasonably equivalent value and fair consideration for the releases and other consideration granted by Hexagon.

 

  

4

  

 

(b) Hexagon hereby represents and warrants to Lilis that (i) Hexagon has the corporate power and authority, and the legal right, to execute, deliver and perform this Agreement, (ii) Hexagon has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement, (iii) no consent or authorization of, filing with, notice to or other act by, or in respect of, any governmental authority or any other person is required to be obtained by Hexagon in connection with this Agreement or the execution, delivery, performance, validity or enforceability of this Agreement, except consents, authorizations, filings and notices which have been obtained or made and are in full force and effect, (iv) the terms and conditions of this Agreement are valid, binding and enforceable obligations of Hexagon except as limited by Insolvency Laws, and (v) neither Hexagon nor any of its affiliates have assigned, conveyed or otherwise transferred any of its interest under the Credit Agreements, the Promissory Notes, the Mortgages or any other documents related thereto to any third party.

 

7.      Further Assurances.  Lilis and Hexagon each agrees that, from time to time after the date hereof, upon the reasonable request of the other party, it shall cooperate with the other party in executing and delivering any and all such further instruments and documents and take such further action as may be necessary to carry out the intent of this Agreement and the terms hereof.

 

8.      Severability.  If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party.  Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

9.      Legal Fees and Expenses.  Lilis agrees to pay all costs and expenses incurred (including reasonable attorneys’ fees), and disbursements made by Hexagon in connection with the execution of this Agreement and the Replacement Note.

 

10.    GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF COLORADO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF COLORADO.

 

11.    Submission to Jurisdiction.  Each of Lilis, on the one hand, and each of the Hexagon Parties, on the other hand, submits to the jurisdiction of any state or federal court sitting in the City and County of Denver, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court.  Each of the Borrower and the Lender waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of the other party with respect thereto.

 

  

5

  

 

12.    Indemnification.  If after receipt of the Cash Payments or any payment of all or part of the amounts due under the Replacement Note, Hexagon is for any reason compelled to surrender such payment to any person or entity, because such payment is determined to be void or voidable as a preference, impermissible setoff, or diversion of trust funds, or for any other reason, this Agreement and the Replacement Note will continue in full force and effect and Lilis will be liable to, and will indemnify, save and hold Hexagon, its officers, directors, attorneys, and employees harmless of and from the amount of such payment surrendered.  The provisions of this Section will be and remain effective notwithstanding any contrary action which may have been taken by Hexagon in reliance on such payment, and any such contrary action so taken will be without prejudice to Hexagon’s rights under this Agreement or the Replacement Note and will be deemed to have been conditioned upon such payment becoming final, indefeasible and irrevocable.  In addition, Lilis will indemnify, defend, save and hold Hexagon, its officers, directors, attorneys, and employees harmless of, from and against all claims, demands, liabilities, judgments, losses, damages, costs and expenses, joint or several (including all accounting fees and attorneys’ fees reasonably incurred), that Hexagon or any such indemnified party may incur arising out of this Agreement or the Replacement Note, or any act taken by Hexagon hereunder except for the willful misconduct or gross negligence of such indemnified party.  In no event shall Hexagon be liable to Lilis for any consequential, incidental, indirect, punitive, special or similar damages of any nature whatsoever, even if Hexagon has been advised of the possibility of such damages occurring.  The provisions of this Section will survive the termination of this Agreement and the Replacement Note.

 

13.    WAIVER OF JURY TRIAL. The parties hereto acknowledge and agree that there may be a constitutional right to a jury trial in connection with any claim, dispute or lawsuit arising between or among them, but that such right may be waived.  Accordingly, the parties agree that, notwithstanding such constitutional right, in this commercial matter the parties believe and agree that it shall in their best interests to waive such right, and, accordingly, hereby waive such right to a jury trial, and further agree that the best forum for hearing any claim, dispute, or lawsuit, if any, arising in connection with this Settlement Agreement, the Replacement Note or the relationship between the parties hereto, in each case whether now existing or hereafter arising, or whether sounding in contract or tort or otherwise, shall be a court of competent jurisdiction sitting without a jury. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY HEXAGON’S ABILITY TO PURSUE REMEDIES HEREUNDER, IN THE REPLACEMENT OR ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT RELATED THERETO.

 

  

6

  

 

14.    Miscellaneous.  This Agreement: (a) together with the Replacement Note, contains the entire agreement among the parties, (b) may not be amended nor may any rights hereunder be waived except by an instrument in writing signed by the party sought to be charged with such amendment or waiver, (c) will be binding upon and will inure to the benefit of the parties and their respective personal representatives, successors and assigns, (d) may be executed in any number of counterparts and by different parties on separate counterparts, each of which will be deemed an original, but all of which, when taken together, shall be deemed to constitute one agreement, and (e) signatures delivered by facsimile, pdf or other electronic means shall constitute original signatures.

 

[REMAINDER OF THE PAGE IS INTENTIONALLY BLANK.]

 

  

7

  

 

IN WITNESS WHEREOF, the parties have caused this Settlement Agreement to be duly executed and effective as of the date first set forth above.

 

	  	
LILIS ENERGY, INC., a Nevada corporation

	  	  	  
	  	
By:

	
/s/Abraham Mirman

	  	
Name:

	
Abraham Mirman

	  	
Title:

	
Chief Executive Officer

	  	  	  
	  	
THE HEXAGON PARTIES

	 	 
	  	
Hexagon, LLC, a Colorado limited liability company

	  	  	  
	  	
By:

	
/s/ Brian Fleischmann

	  	
Name:

	
Brian Fleischmann

	  	
Title:

	
Executive Vice President

	  	  	  
	  	
Labyrinth Enterprises LLC, a Colorado limited liability company

	  	  	  
	  	
By:

	
/s/ Brian Fleischmann

	  	
Name:

	
Brian Fleischmann

	  	
Title:

	
Executive Vice President

	  	  	  
	  	
The Reiman Foundation

	  	  	  
	  	
By:

	
/s/ Brian Fleischmann

	  	
Name:

	
Brian Fleischmann

	  	
Title:

	
Executive Vice President

	  	  	  
	  	
/s/ Scott J. Reiman

	  	
Scott J. Reiman

 

  

8

  

 

Exhibit A

 

Note

 

 

9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00231-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00231-of-00352.parquet"}]]