Document:

ex10-1.htm

Exhibit 10.1

 

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) is entered into as of October 29, 2012 (“Closing Date”), by and among Gulf United Energy, Inc., a Nevada corporation (“Gulf”), Gulf United Energy de Colombia Ltd., a company organized under the laws of the British Virgin Islands and a wholly-owned subsidiary of Gulf (“BVI Colombia”), Gulf United Energy de Cuenca Trujillo Ltd., a company organized under the laws of the British Virgin Islands and a wholly-owned subsidiary of Gulf (“BVI Peru”, together with BVI Colombia, the “BVI Subs”, and together with Gulf, each a “Company” and collectively, the “Companies”), Sydson Oil & Gas Investments, LLC, a Delaware limited liability company (“Sydson”), as administrative agent (in such capacity, “Administrative Agent”) for itself and the other investors set forth on the signature pages hereof and any New Investors (as defined below) party hereto from time to time (each an “Investor” and collectively, the “Investors”).

 

Recitals

 

A.           As of the date hereof, the Investors wish to purchase from Gulf, and Gulf wishes to sell and issue to the Investors, upon the terms and conditions stated in this Agreement, and during the Offering Period the Investors and the New Investors (described below) may Purchase and Gulf may Sell, convertible notes, all of the foregoing in the aggregate principal amount of up to $4,400,000 in the form attached hereto as Exhibit A (each a “Note” and collectively the “Notes”), which obligations under the Notes will be guaranteed by the BVI Subs pursuant to the guaranty agreements (each a “Guaranty” and collectively, the “Guaranties”); provided that any New Investor executes and delivers a Joinder Agreement in accordance with Section 9.1 in the form attached hereto as Exhibit B (the “Joinder Agreement”).

 

B.           In connection with entering into this Agreement and the sale of the Notes, Gulf will issue warrants (“Warrants”) to the Investors pursuant to a warrant agreement, the form of which is attached hereto as Exhibit C (as amended, restated, supplemented or otherwise modified from time to time, collectively, the “Warrant Agreement”) that will entitle the Investors, at their option, to purchase shares of Common Stock of Gulf.

 

C.           In connection with entering this Agreement, the issuance of the Notes and the issuance of the Warrants, the obligations and liabilities under the Notes and the other Transaction Documents will be secured pursuant to (a) a Pledge Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “BVI Colombia Pledge Agreement”), dated as of the date hereof, from Gulf to the Administrative Agent for the benefit of the Investors covering the equity interests of BVI Colombia and certain other collateral as set forth therein and (b) a Pledge Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “BVI Peru Pledge Agreement”), dated as of the date hereof, from Gulf to the Administrative Agent for the benefit of the Investors covering the equity interests of BVI Peru and certain other collateral as set forth therein (each a “Pledge Agreement” and, collectively, the “Pledge Agreements” and the property covered by the Pledge Agreements shall be hereinafter referred to as the “Collateral”), and the BVI Peru Pledge Agreement will also be subject to the terms of that certain Escrow Agreement, dated as of the date hereof, among the Gulf, Administrative Agent, the Investors and Gaston & Thanheiser, P.C. (the “Escrow Agent”) (as amended, restated, supplemented or otherwise modified from time to time, the “Escrow Agreement”).

 

  

  

  

D.           Subject to, and pursuant to, the Escrow Agreement, Gulf, as assignor, has executed, as of the date hereof, in favor of Administrative Agent, as assignee, for the benefit of the Investors, (i) an Assignment regarding the conditional assignment of all of the equity interests of BVI Colombia (the “BVI Colombia Assignment”) and (ii) an Assignment regarding the conditional assignment of all of the equity interests of BVI Peru (the “BVI Peru Assignment”; each an “Assignment” and, collectively, the “Assignments”).

 

E.           In connection with the execution of the Pledge Agreements, the Assignments and the Escrow Agreement, the Administrative Agent, the Investors and the Companies have entered into an Intercreditor Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), dated as of the date hereof, pursuant to which the Investors have appointed or will appoint Sydson, as Administrative Agent, to act on behalf of the Investors regarding the transactions described above.

 

F.           The Companies, the Administrative Agent and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“Regulation D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the 1933 Act.

 

G.           Notwithstanding the Offering Period and the potential of New Investors joining this Agreement pursuant to a Joinder Agreement, this Agreement and the other Transaction Documents are intended to be in full force and effect on the Closing Date, subject to the conditions set forth in this Agreement and the terms of the Escrow Agreement.

 

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

 

1. Definitions

 

In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below:

 

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

 

“ANH” means the National Hydrocarbon Agency of Colombia.

 

“Assignment and Ownership Rights” has the meaning set forth in Section 9.16.

“Business Day” means a day, other than a Saturday or Sunday, on which banks in Houston, Texas are open for the general transaction of business.

 

“Closing” has the meaning set forth in Section 3.

 

  

  

  

“Closing Date” has the meaning set forth in the preamble to this Agreement.

 

“Colombian Approval” means the approval of ANH to the assignment by SK Innovation of the Colombian Interest to BVI Colombia, obtained pursuant to the Colombian Farmout Agreements.

 

 “Colombian Farmout Agreements” means the CPO-4 Farmout Agreement,    SSJN-5 Farmout Agreement and VIM-2 Farmout Agreement.

 

“Colombian Interest” means (i) an undivided 12.5% interest in certain rights and obligations derived from that certain CPO-4 License, as set forth in the CPO-4 Colombian Farmout Agreement, (ii) certain undivided interests in certain rights and obligations derived from that certain VIM-2 License, as set forth in the VIM-2 Colombian Farmout Agreement and (iii) certain undivided interests in certain rights and obligations derived from that certain SSJN-5 License, as set forth in the SSJN-5 Colombian Farmout Agreement.

 

“Colombian JOAs” means the CPO-4 JOA, VIM-2 JOA and SSJN-5 JOA.

 

“Colombian Licenses” means the CPO-4 License, SSJN-5 License and VIM-2 License.

 

“Common Stock” means common stock of Gulf, par value $0.001.

 

“Confidential Information” means trade secrets, confidential information and know-how (including but not limited to ideas, formulae, compositions, processes, procedures and techniques, research and development information, computer program code, performance specifications, support documentation, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information).

 

“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“CPO-4 Farmout Agreement” means that certain Farmout Agreement dated July 31, 2010 by and between SK Innovation and BVI Colombia, as amended by that certain Amendment No. 1 to the Farmout Agreement for Block CPO-4 in Colombia effective August 25, 2011 by and between SK Innovation and BVI Colombia, as amended by that certain Amendment No. 2 to the Farmout Agreement for Block CPO-4 in Colombia effective November 28, 2011 by and between SK Innovation and BVI Colombia and as amended by that certain Amendment No. 3 to the Farmout Agreement for Block CPO-4 in Colombia effective April 30, 2012 by and between SK Innovation and BVI Colombia

 

“CPO-4 JOA” means the Joint Operating Agreement dated October 1, 2009, and effective as of May 31, 2009, by and between HAEC, SK Innovation and BVI Colombia, as amended by that certain Amendment No. 1 to the Joint Operating Agreement for Block CPO-4 in Colombia effective on July 31, 2010 by and between SK Innovation, HAEC and BVI Colombia.

 

  

  

  

“CPO-4 License” means the Contract for Exploration and Production No. 29 of 2008 Llanos Orientales – Area Occidental Block CPO-4 (Contrato de Exploración y Producción No. 29 de 2008 Llanos Orientales – Area Occidental CPO-4) dated December 18, 2008 by and between ANH and SK Innovation.

 

“Curative Actions” has the meaning set forth in Section 7(c).

 

“Disclosure Document” has the meaning set forth in Section 3.1(l).

“Escrow Agent” means Gaston and Thanheiser, P.C., a Texas professional corporation.

 

“Flow of Funds” means that certain Flow of Funds, dated as of the date hereof, in form and substance acceptable to Administrative Agent, the Investors and Gulf.

 

“GAAP” has the meaning set forth in Section 4.6.

 

“HAEC” means Houston American Energy Corp., a Delaware corporation.

 

“Indebtedness” shall mean, with respect to any Person, without duplication: (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services; (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments; (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); and (e) all capital lease obligations.

 

“Indemnified Person” and “Indemnified Persons” have the meanings set forth in Section 8.2.

 

“Korean Approval” means the approval of the Republic of Korea to (i) the assignment by SK Innovation of the Colombian Interests to BVI Colombia, obtained pursuant to the Colombian Farmout Agreements and (ii) the assignment by Sucursal Peruana of the Peruvian Interest to BVI Peru, obtained pursuant to the Peruvian Farmout Agreement.

 

 “Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business, or prospects of any Company and any of its Subsidiaries taken as a whole, (ii) the ability of the Companies to perform their respective obligations under the Transaction Documents, or (iii) any Company’s rights and interests in any of the Oil and Gas Contracts.  For avoidance of doubt, the drilling of, or completing, a well as a “dry hole” following the date of this Agreement in any of the areas covered by any Oil and Gas Contract shall be considered for all purposes a Material Adverse Effect.

 

“New Financing” means, subject to the terms hereof, any financing secured by Gulf to raise proceeds in the form of equity, equity equivalent, debt financing or any other source of funds, from one or more sources and from one transaction or a series of transactions.

 

  

  

  

“Note” and “Notes” has the meanings set forth in Recital A.

 

“Obligations” means (a) all principal, interest, fees, reimbursements, indemnifications and other amounts payable by the Companies to the Administrative Agent or the Investors under this Agreement, the Notes and the other Transaction Documents and (b) all other monetary and non-monetary obligations and liabilities of the Companies to the Administrative Agent and Investors under this Agreement and the other Transaction Documents, including, without limitation, Curative Actions consisting of the payment of money, and (c) all other obligations and liabilities of the Companies to the Administrative Agent under this Agreement and the other Transaction Documents (as each such Transaction Document may be amended, restated, modified and/or supplemented), whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due and whether under, pursuant to or evidenced by a note, agreement, guaranty, instrument or otherwise (in each case, irrespective of the genuineness, validity, regularity or enforceability of such obligations, or of any instrument evidencing any such obligations or of any collateral therefor or of the existence or extent of such collateral, and irrespective of the allowability, allowance or disallowance of any or all of such obligations in any case commenced by or against the any Company under Title 11, United States Code, including, without limitation, obligations of any Company for post-petition interest, fees, costs and charges that would have accrued or been added to the obligations but for the commencement of such case).

 

“Offering Period” means the thirty-day period beginning on the Closing Date and ending on November 28, 2012.

 

“Oil and Gas Contracts” means any and all of the Colombia Licenses, the Colombia JOAs, the Colombia Farmout Agreements, the Peruvian License, the Peruvian JOA and the Peruvian Farmout Agreement.

 

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

 

“Peruvian Approval” means the approval of Perupetro S.A. to the assignment by Sucursal Peruana of the Peruvian Interest to BVI Peru, obtained pursuant to the Peruvian Farmout Agreement.

 

“Peruvian Farmout Agreement” means that certain Farmout Agreement dated May 31, 2010 by and between Sucursal Peruana and BVI Peru regarding Block Z-46 in Peru, as amended by that certain First Amendment to the Farmout Agreement effective December 6, 2011 by and between Sucursal Peruana and BVI Peru.

 

“Peruvian Interest” means BVI Peru’s undivided forty percent (40%) interest in certain rights and obligations derived from the Peruvian License as set forth in the Peruvian Farmout Agreement and related to the offer and award of Block Z-46 by Perupetro S.A.

 

“Peruvian JOA” means the Joint Operating Agreement effective as of May 31, 2010, by and between Sucursal Peruana and BVI Peru regarding Block Z-46 in Peru.

 

  

  

  

“Peruvian License” means the License Contract for the Exploration and Exploitation of Hydrocarbons Block Z-46 (Contrato de Licencia para la Exploración y Explotación de Hidrocarburos – Lote Z-46) dated November 21, 2007 by and among Perupetro S.A. and Sucursal Peruana.

 

“Pledge and Collateral Rights” has the meaning set forth in Section 9.16.

 

“Purchase Price” means, as of the Closing Date, [$2,550,000], and together with any other Notes issued during the Offering Period, the aggregate amount of up to, $4,400,000.

 

“Registration Rights Agreement” means that certain Registration Rights Agreement dated as of the date hereof among Gulf and the Investors regarding the registration of the resale of the shares of Common Stock underlying the Notes and Warrants with the Securities and Exchange Commission.

 

“SEC Filings” means the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2011 (the “10-K”), and all other reports filed by the Company pursuant to the Securities Exchange Act of 1934, as amended, since the filing of the 10-K and prior to the date of this Agreement.

 

“SK Innovation” means SK Innovation Co, Ltd., (formerly known as SK Energy Co., Ltd.) a company organized under the laws of the Republic of Korea.

 

“SSJN-5 Farmout Agreement” means that certain Farmout Agreement, dated as of July 31, 2012, by and between SK Innovation and BVI Colombia regarding Block SSJN-5 in Colombia.

 

“SSJN-5 JOA” means the Joint Operating Agreement, dated effective as of July 1, 2012, by and among SK Innovation, as operator, and BVI Colombia, et al., as non-operators, regarding Block SSJN-5 in Colombia.

 

“SSJN-5 License” means the Hydrocarbon Exploration and Production Contract Regarding Block SSJN-5 (Contrato de Exploración y Produccion E&P) dated December 18, 2008, by and between ANH and SK Innovation.

 

“Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person.

 

“Sucursal Peruana” means SK Innovation, Sucursal Peruana, the registered Peruvian branch office of SK Innovation.

 

“Transaction Documents” means this Agreement, the Notes, the Guaranties, the Warrant Agreement, the Pledge Agreements, the Notices of Pledge, the Assignments, the Escrow Agreement, the Registration Rights Agreement, the Intercreditor Agreement, the Flow of Funds, each certificate, consent, approval and power of attorney executed by any Company in connection with any of the foregoing documents and transactions related thereto and such other documents and agreements executed in connection with such foregoing documents, related thereto and in support thereof.

 

  

  

  

“Transfer” has the meaning set forth in Section 6.4.

“Trigger Event” means, at any time after the Closing Date, the date on which each of the following events shall have occurred: (i) the Companies shall have given written notice to the Administrative Agent and Investors that a monetary demand has been made on one or more of the Companies by any other party to and pursuant to the terms of, the Peruvian JOA or the Peruvian Farmout Agreement; (ii) one or more of the Companies requests in writing that the Investors contribute funds to the Companies to satisfy all or any part of such demand; and (iii) the Administrative Agent, on behalf of the Investors, agrees in writing to honor such request to satisfy all or any part of such demand and thereafter satisfies such request.

 

“VIM-2 Farmout Agreement” means that certain Farmout Agreement, dated as of August 17, 2012, by and between SK Innovation and BVI Colombia regarding Block VIM-2 in Colombia.

 

“VIM-2 JOA” means the Joint Operating Agreement, dated effective as of July 1, 2012, by and among SK Innovation, as operator, and BVI Colombia, et al., as non-operators, regarding Block VIM-2 in Colombia.

 

“VIM-2 License” means the Contract for the Exploration and Exploitation of Hydrocarbons Block VIM-2 (Contrato de Licencia para la Exploración y Explotación de Hidrocarburos – Lote VIM-2), dated June 2010, by and between ANH and SK Innovation.

 

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

 

2.           Purchase and Issuance of the Notes

 

(a) Subject to the terms and conditions of this Agreement, on the Closing Date, the Investors shall purchase, severally and not jointly, and Gulf shall sell and issue to each of the Investors, a Note in the original principal amount and such number of Warrants as set forth opposite each of the Investors’ name on the signature page attached hereto in exchange for the Purchase Price.  Such Notes shall rank senior in priority to all other outstanding indebtedness of Gulf, except as otherwise expressly set forth in the Transaction Documents.  In no event shall the original principal amounts of the Notes issued on the Closing Date be less than $2,550,000.

 

(b) During the Offering Period, subject to the terms and conditions of this Agreement, the Investors party to this Agreement on the Closing Date or New Investors, as the case may be, may purchase, severally and not jointly, and Gulf may sell and issue to such Investors Notes in the aggregate principal amount of $1,850,000, and Gulf shall issue the respective number of Warrants thereto to such Investors, in such event.

 

  

  

  

(c) If, During the Offering Period, Gulf desires to incur additional indebtedness under the Notes (not to exceed $4,400,000 in the aggregate when taken together with all other amounts extended under the initial Notes on the Closing Date) and to issue the additional Warrants, then Gulf shall provide the initial Investors as of the Closing Date with notice thereof and the opportunity to provide all or any portion of such requested financing in accordance with the terms and conditions of the Transaction Documents.  To the extent such Investors determine not to provide any portion of such requested financing, Gulf shall be permitted to obtain the remainder of such financing from one or more third parties, as New Investors, in accordance with the terms and conditions of the Transaction Documents; provided that such third parties must execute and deliver a Joinder Agreement.

 

(d) In connection with the offer of Gulf of up to an aggregate of $4,400,000 of principal amount of Notes (and corresponding Warrants to purchase shares of Common Stock of Gulf) on the Closing Date and through and including the last day of the Offering Period, the number of shares of Common Stock Gulf that may be purchased pursuant to the Warrants shall be allocated among the Investors pro-rata based on the principal amounts under such Investor’s respective Notes (such allocation being 13.33 shares of Common Stock per U.S. dollar issued under the Notes, rounded to the nearest whole share).  For example, a Note amount of $850,000 would entitle an Investor to 11,333,333 shares of Common Stock under such Investor’s Warrant.  If the aggregate amount of $4,400,000 is in fact issued under the Notes, such Investors will hold Warrants to purchase up to approximately 58,666,667 shares of Common Stock of Gulf.

 

3. Closing

 

.  Subject to satisfaction of all conditions precedent set forth in this Section 3, the closing (the “Closing”) of the purchase and sale of the initial Notes in the aggregate amount of the Purchase Price shall take place as of the Closing Date.  The Closing of the purchase and sale of the initial Notes on the Closing Date shall take place at the offices of Porter Hedges LLP, 1000 Main Street, 36th Floor, Houston, Texas 77002.

 

3.1 Deliveries at Closing by Companies.  At, or prior to, the Closing, the Companies shall:

 

(a) execute and deliver to the Administrative Agent this Agreement and the other Transaction Documents;

 

(b) execute and deliver a Note and the Warrant Agreement to each Investor, registered in the names of and amounts owed to Investors as set forth on the signature pages attached hereto to the Investors;

 

(c) deliver to the Administrative Agent a certificate executed by the Chief Executive Officer of Gulf providing copies of (i) Gulf’s Articles of Incorporation; (ii) Gulf’s Bylaws, (iii) incumbency signatures, and (iv) resolutions duly adopted by all directors of Gulf authorizing Gulf to execute and deliver this Agreement and the other Transaction Documents and to perform its obligations hereunder and thereunder and certifying that each of the items described above in clauses (i), (ii), (iii) and (iv) is a true and correct copy;

 

  

  

  

(d) deliver to the Administrative Agent a certificate executed by the Director of BVI Colombia providing copies of (i) BVI Colombia’s Memorandum and Articles of Association, (ii) resolutions duly adopted by the sole director of BVI Colombia authorizing BVI Colombia to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder, (iii) incumbency signatures and (iv) powers of attorney, and certifying that each of the items described in clause (i), (ii), (iii) and (iv) is a true and correct copy;

 

(e) deliver to the Administrative Agent a certificate executed by the Director of BVI Peru providing copies of (i) BVI Peru’s Memorandum and Articles of Association, (ii) resolutions duly adopted by the sole director of BVI Peru authorizing BVI Peru to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder, (iii) incumbency signatures and (iv) powers of attorney, and certifying that each of the items described in clause (i), (ii), (iii) and (iv) is a true and correct copy;

 

(f) deliver to the Administrative Agent (i) one or more Letters of Resignation of Directors, undated and duly executed in blank by the sole director of each BVI Colombia and BVI Peru; (ii) one or more Acknowledgement and Undertaking, undated and duly executed in blank by the sole director of each BVI Colombia and BVI Peru; (iii) resolutions of BVI Colombia and BVI Peru to amend the Memorandum and Articles of Association of BVI Colombia and BVI Peru, respectively; (iv) a signed, undated shareholder proxy and power by the sole director of each BVI Colombia and BVI Peru; and (v) a blank signed and undated share transfer in respect of the ordinary shares of BVI Colombia and BVI Peru by the sole director of each BVI Colombia and BVI Peru;

 

(g) deliver to Administrative Agent updated accounts receivable and accounts payable schedules together with a schedule of currently expected billings for the Colombian Interests and the Peruvian Interest for the term of the Notes (which shall be delivered as part of the Disclosure Document (as defined below));

 

(h) deliver to the Administrative Agent, favorable legal opinions, such opinions to include, without limitation, valid existence, good standing, due authority, power to execute and deliver, no violation of law, governing documents and writs and orders, lien creation and perfection, investment company act, federal reserve regulations and such other standard opinions for transactions of this type, dated as of the Closing Date, and in form and substance satisfactory to the Administrative Agent and Investors, from Brewer & Pritchard, P.C., legal counsel for Gulf, and Hempel & Boyd, British Virgin Islands legal counsel regarding the BVI Subs;

 

(i) deliver to Administrative Agent lien searches as Administrative Agent may request, reflecting the absence of other liens and security interests in and to any assets or rights of the Companies other than those permitted by the Transaction Documents;

 

  

  

  

(j) pay all legal fees payable to Porter Hedges, Brewer & Pritchard, and Hempel & Boyd;

 

(k) deliver to Administrative Agent a summary as set forth on Exhibit D prepared by an authorized officer of Gulf describing the current status of, and unresolved issues (including outstanding approvals and consents) under, the Oil and Gas Contracts, including notice of any outstanding demands for payment received by the Companies under such contracts, each summary to be certified by an executive officer of Gulf (the “Disclosure Document”);

 

(l) deliver to the Administrative Agent a certificate executed by the Chief Executive Officer and the directors of Gulf setting forth the confirmation of Gulf’s approval and authority to enter into the Transaction Documents and the transactions related thereto, confirmation that the Transaction Documents are enforceable against Gulf, and their collective agreement to take all necessary actions to further confirm or to ensure such enforceability;

 

(m) original stock certificate of BVI Colombia;

 

(n) deliver to the Administrative Agent certificates of existence and good standing from each Company’s jurisdiction of organization;

 

(o) deliver to the Administrative Agent copies of the Oil and Gas Contracts; and

 

(p) such other documents and agreements as Administrative Agent or any Investor may reasonably request.

 

3.2 Deliveries at Closing by Investors.  At the Closing, the Administrative Agent and Investors shall:

 

(a) deliver as of the Closing Date, or as reasonably practical as soon thereafter to the Companies, the Purchase Price in immediately available funds pursuant to the Flow of Funds;

 

(b) execute and deliver to the Companies this Agreement and the other Transaction Documents to which the Administrative Agent and any Investor is a party; and

 

(c) executed and deliver to Porter Hedges LLP, counsel to Administrative Agent and Investors, that certain engagement letter by and among Porter Hedges LLP and Investors.

 

3.3 Escrow Agreement.  At the Closing, the Companies, the Administrative Agent and the Investors, as applicable, shall deliver to the Escrow Agent:

 

(a) a fully executed Escrow Agreement;

 

  

  

  

(b) fully executed Assignments and each ancillary document, notice, consent and certificate related to the foregoing documents as required by the terms of the such documents or by the Escrow Agreement;

 

(c) fully executed BVI Peru Pledge Agreement, together with each ancillary document, notice, consent and certificate related to the foregoing document, as required by the terms of such document or by the Escrow Agreement;

 

(d) to the extent not covered in (b) or (c) above, original stock certificate of, and related executed stock transfer powers for, BVI Peru; and

 

(e) payment in full of fees (paid by the Companies) of the Escrow Agent to the extent requested by the Escrow Agent.

 

4. Representations and Warranties of the Companies. The Companies hereby represent and warrant to the Administrative Agent and the Investors that:

 

4.1 Organization, Good Standing and Qualification. Gulf is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and to own its properties. The BVI Subs are duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all requisite corporate power and authority to carry on its business as now conducted and to own its properties.  Except as set forth in the Disclosure Document, each Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary unless the failure to so qualify has not had and could not reasonably be expected to have a Material Adverse Effect.

 

4.2 Authorization Each Company has full power and authority and has taken all requisite action on the part of such Company, its officers, directors and shareholders necessary for (i) the authorization, execution and delivery of the Transaction Documents to which it is a party, (ii) the authorization of the performance of all obligations of such Company hereunder or thereunder, and (iii) the authorization, issuance and delivery of the Notes and the Warrants.  The Transaction Documents constitute the legal, valid and binding obligations of the Companies, enforceable against the Companies in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.  Each Company has obtained any and all consents, permits, approvals, registrations and waivers, including from third parties to any Oil and Gas Contract, necessary or appropriate for consummation of the purchase and sale of the Notes and the Warrants and the consummation of the other transactions contemplated by the Transaction Documents, all of which are in full force and effect.

 

4.3 Valid Issuance The Notes have been duly and validly authorized and, when issued and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Transaction Documents and applicable securities laws).  The Warrants have been duly and validly authorized and, if and when the Common Stock is issued thereunder, such Common Stock will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Transaction Documents and applicable securities laws).

 

  

  

  

4.4 Consents.  The execution, delivery and performance by each Company of the Transaction Documents and the offer, issuance and sale by Gulf of the Notes and the Warrants require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than filings that have been made pursuant to applicable state and federal securities laws and post-sale filings pursuant to applicable state and federal securities laws which each Company undertakes to file within the applicable time periods.  Subject to the accuracy of the representations and warranties of the Investors set forth in Section 5 hereof, each Company has taken all action necessary to exempt (i) the issuance and sale of the Notes and the Warrants and (ii) the other transactions contemplated by the Transaction Documents from the provisions of any stockholder rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control share law or statute binding on such Company or to which such Company or any of its assets and properties may be subject and any provision of such Company’s Articles of Incorporation or Bylaws or applicable organizational documents that are or could reasonably be expected to become applicable to the Investors as a result of the transactions contemplated hereby, including without limitation, the issuance of the Notes and the Warrants and the ownership or disposition of the Notes and the Warrants by the Investors or the exercise of any right granted to the Investors pursuant to this Agreement or the other Transaction Documents.

 

4.5 No Conflict, Breach, Violation or Default.  The execution, delivery and performance of the Transaction Documents by the Companies and the issuance and sale by Gulf of the Notes and the Warrants will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) Gulf’s Articles of Incorporation or Gulf’s Bylaws, or the organizational documents of the BVI Subs or each of the other Subsidiaries, all as in effect on the date hereof, or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over any Company or any other Subsidiary or any of their respective assets or properties, or (b) any agreement or instrument to which any Company or any other Subsidiary is a party or by which any Company or any other Subsidiary are bound or to which any of their respective assets or properties are subject.  Except as set forth in the Disclosure Document, there are no defaults by any Company or by any other party under any Oil and Gas Contract, and the Companies and the other parties to the Oil and Gas Contracts are not in violation or breach of any provision thereof.

 

4.6 Financial Statements.  Gulf’s financial statements set forth in its SEC Filings present fairly, in all material respects, the consolidated financial position of Gulf as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis (“GAAP”).  Except as set forth in the SEC Filings and the Disclosure Document, no Company or any of their respective Subsidiaries have incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate have had or could reasonably be expected to have a Material Adverse Effect.

 

  

  

  

4.7 Judgments; Litigation.  No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued or, to any Company’s knowledge, threatened to be issued, and no action or proceeding shall have been instituted, or to any Company’s knowledge threatened to be issued, by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents or affecting any Company or its assets.

 

4.8 Indebtedness.  No Company or any of their respective Subsidiaries has any outstanding Indebtedness, except for the Obligations and as otherwise set forth on Schedule 4.8 attached hereto.

 

4.9 Colombian Interest, Colombian Farmout Agreements, Colombian JOAs and Colombian Licenses.   

 

(a) BVI Colombia is a party to the Colombian Farmout Agreements and the Colombian JOAs and has a present right and interest to the Colombian Interest, subject to the provisions set forth in the Colombian Farmout Agreements and the Colombian JOAs;

 

(b) After giving effect to the proceeds from the transactions described herein, BVI Colombia will have the financial and technical capability or wherewithal to meet its financial and technical obligations under the Colombian Farmout Agreements and the Colombian JOAs;

 

(c) The Colombian Approval and Korean Approval are being diligently pursued by Gulf and BVI Colombia; and

 

(d) Upon the execution of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated herein and therein, BVI Colombia shall have satisfied, in full, all outstanding joint interest billing costs incurred on Block CPO-4 through the date of this Agreement in the amount of approximately $2,060,000.

 

  

  

  

4.10 Peruvian Interest, Peruvian Farmout Agreement, Peruvian JOA and Peruvian License.   

 

(a) BVI Peru is a party to the Peruvian Farmout Agreement and the Peruvian JOA and has a present right and interest to the Peruvian Interest, subject to the provisions set forth in the Peruvian Farmout Agreement and the Peruvian JOA;

 

(b) After giving effect to the proceeds from the transactions described herein, BVI Peru will have the financial and technical capability or wherewithal to meet its financial and technical obligations under the Peruvian Farmout Agreement and the Peruvian JOA; and

 

(c) The Peruvian Approval and Korean Approval are being diligently pursued by Gulf and BVI Peru.

 

4.11 Liens.  Except as set forth on Schedule 4.11 attached hereto, there are no liens or security interests filed against any of the Companies or against any of their respective assets or properties, except for the liens and security interest granted under the Transaction Documents and securing the Obligations.

 

4.12 Qualified Commercial Loan.  The advances under the Notes and the other Transaction Documents qualify as a “qualified commercial loan” in accordance with Sections 306.001 and 306.101 of the Texas Finance Code.

 

5. Representations and Warranties of the Investors.  Each Investor, severally and not jointly, hereby represents and warrants to the Companies that:

 

5.1 Organization and Existence.  If Investor is an entity, such Investor is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Notes pursuant to this Agreement.  If Investor is a natural person, such Investor resides in the jurisdiction set forth on the signature pages affixed hereto and has all requisite authority to invest in the Notes pursuant to this Agreement.

 

5.2 Authorization.  The execution, delivery and performance by Investor of the Agreement and the Transaction Documents to which Investor is a party have been duly authorized and will each constitute the valid and legally binding obligation of such Investor, enforceable against Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

 

5.3 Purchase Entirely for Own Account.  The Notes to be received by Investor hereunder will be acquired for Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Notes in compliance with applicable federal and state securities laws.  Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Notes for any period of time.  Investor is not a broker-dealer registered with the Securities Exchange Commission under the 1934 Act or an entity engaged in a business that would require it to be so registered.

 

  

  

  

5.4 Investment Experience.  Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Notes and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.

 

5.5 Disclosure of Information.  Investor has had an opportunity to receive all information related to each Company (including its SEC Filings) requested by it and to ask questions of and receive answers from such Company regarding such Company, its business and the terms and conditions of the offering of the Notes and Warrants.  No inquiries by any Investor nor any other due diligence investigation conducted by such Investor shall modify, amend or affect Investor’s right to rely on each Company’s representations and warranties contained in this Agreement.

 

5.6 Restricted Securities.  Investor understands that the Notes, Warrants, and shares of Common Stock issuable upon the conversion of the Notes and exercise of the Warrants are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from Gulf in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.  The Investor understands that the Notes, Warrants, and shares of Common Stock issuable upon the conversion of the Notes and exercise of the Warrants are and will be offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that Gulf is relying in part upon the truth and accuracy of, and Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understanding of Investor set forth herein in order to determine the availability of such exemptions and the eligibility of Investor to acquire such securities.

 

5.7 Legends.  It is understood that, except as provided below, certificates evidencing the Notes, the Warrants and shares of Common Stock issuable upon the conversion of the Notes and exercise of the Warrants may bear the following or any similar legend:

 

(a) “The securities represented hereby may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144, or (iii) Gulf United Energy, Inc. has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws.  Notwithstanding the foregoing, the securities may be pledged in connection with a bona fide margin account secured by the securities.”

 

(b) If required by the authorities of any state in connection with the issuance of sale of the Notes, the legend required by such state authority.

 

  

  

  

5.8 Accredited Investor.  Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

 

5.9 No General Advertisement.  Investor did not learn of the investment in the Notes and Warrants as a result of any public advertisement, article, notice or other communication regarding the Notes and Warrants published in any newspaper, magazine or similar media or broadcast over television, radio or internet or presented at any seminar or other general advertisement.

 

5.10 Brokers and Finders.  No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon any Company or any other Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.

 

5.11 Patriot Act.  Neither Investor nor any of its Affiliates has been designated, and is not owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224.  None of the cash used to fund such Investor’s portion of the Purchase Price has been, or derived from, any activity that could cause any Company to be in violation of the United States Bank Secrecy Act, the United States International Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001.

 

6. Covenants and Agreements of the Companies.  

 

6.1 No Conflicting Agreements.  The Companies and their Subsidiaries will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with any Company’s obligations to the Administrative Agent or the Investors under the Transaction Documents.

 

6.2 Compliance with Laws.  The Companies and their Subsidiaries will comply in all material respects with all applicable laws, rules, regulations, orders and decrees of all governmental authorities. Gulf will make all SEC and other securities filings within the applicable time periods (including permitted extensions thereof), and the Companies will make all other filings with any Person, governmental body, agency, or official as required by applicable state and federal securities laws, or otherwise comply with all filing rules as required by such state and federal securities laws.

 

6.3 Disclosure of Information.  Administrative Agent and Investors shall have the right to conduct a full and technical financial review to their satisfaction of any Companies ownership rights, technical information (including all geophysical data, well logs and well test data), and current financial status; provided that any Investor shall first be required to enter into a reasonable non-disclosure agreement, pursuant to which, among other things, such Investors shall agree to comply with Regulation FD and to not trade in Gulf’s securities while in possession of material non-public information.

 

6.4 Colombian Interest, Colombian Farmout Agreements, Colombian JOAs and Colombian Licenses.  Until the repayment in full of the Obligations, the Companies and any other Subsidiaries will comply in all material respects with the terms and conditions of the Colombian Farmout Agreements and the Colombian JOAs.  Until the repayment in full of the Obligations, Gulf and BVI Colombia shall not, without the prior written consent of the Administrative Agent and the Investors, (i) sell, assign, gift, dispose, pledge or otherwise transfer (collectively, “Transfer”) any interest in the Colombian Farmout Agreements, the Colombian JOAs or the Colombian Interest; (ii) enter into any contract, option or other agreement or understanding with respect to the Transfer of any interest in the Colombian Farmout Agreements, the Colombian JOAs or the Colombian Interest; (iii) take any action which would adversely affect BVI Colombia’s ability to perform its obligations under the Colombian Farmout Agreements, the Colombian JOAs or adversely affect BVI Colombia’s rights to the Colombian Interest or take any other action that will otherwise have a Material Adverse Effect; or (iv) amend, restate or otherwise modify (or agree to any of the foregoing with regard to)  any terms under the Colombian Farmout Agreements or the Colombian JOAs.  Gulf and BVI Colombia shall take all reasonable action to pursue and complete the receipt of, or cause SK Innovation to pursue and complete the receipt of, the Korean Approval and Colombian Approval.

 

  

  

  

6.5 Peruvian Interest, Peruvian Farmout Agreement, Peruvian JOA and Peruvian License.  Until the repayment in full of the Obligations, the Companies and any other Subsidiaries will comply in all material respects with the terms and conditions of the Peruvian Farmout Agreement and the Peruvian JOA.  Until the repayment in full of the Obligations, Gulf and BVI Peru shall not, without the prior written consent of the Administrative Agent and the Investors, (i) Transfer any interest in the Peruvian Farmout Agreement, the Peruvian JOA or the Peruvian Interest (except to the extent permitted by Section 6.7(a)); (ii) enter into any contract, option or other agreement or understanding with respect to the Transfer of any interest in the Peruvian Farmout Agreement, the Peruvian JOA or the Peruvian Interest; (iii) take any action which would adversely affect BVI Peru’s ability to perform its obligations under the Peruvian Farmout Agreement, the Peruvian JOA or adversely affect BVI Peru’s rights to the Peruvian Interest or take any other action that will otherwise have a Material Adverse Effect; or (iv) amend, restate or otherwise modify (or agree to any of the foregoing with regard to)  any terms under the Peruvian Farmout Agreements or the Peruvian JOAs.  Gulf and BVI Peru shall take all reasonable action to pursue and complete the receipt of, or cause Sucursal Peruana to pursue and complete the receipt of, the Korean Approval and Peruvian Approval.

 

6.6 Notice of Events.  Until the repayment in full of the Obligations, the Companies shall immediately notify the Administrative Agent and Investors of (i) any default or violation by any Company under any Transaction Document or any Oil and Gas Contract or any other contract or agreement that any Company is a party to, (ii) the receipt of any demand notice for payment of moneys or the exercise (or threatened exercise) of any action or remedy from any other party to any Oil and Gas Contract or any other contract or agreement that any Company is a party to, (iii) within ten days of the due date of any such demand, Companies’ determination of their inability to pay such demand or to take such action.  Further, until the repayment in full of the Obligations, the Companies shall immediately notify the Administrative Agent and Investors of (i) any material adverse change affecting any of the Companies or any of their businesses or properties, or (ii) any event or occurrence that could be expected to result in a Material Adverse Effect.

 

 

 

  

  

  

6.7 Other Negative Covenants.  Until the repayment in full of the Obligations, no Company or any of its Subsidiaries shall, unless the Companies obtain the prior written approval of the Administrative Agent:

 

(a) Transfer any portion of any of its assets without the simultaneous payment in full of the Obligations; provided, however, that BVI Peru may sell up to 75% of its 40% Peruvian Interest pursuant to commercially reasonable terms without the Administrative Agent’s prior consent so long as (i) no Event of Default (as defined in the Notes) exists at the time of such sale or would result therefrom and (ii) no Material Adverse Effect has occurred prior to such sale or would result therefrom, it being understood that such sale alone will not constitute a Material Adverse Effect; provided, further, that any and all net proceeds received from such sale, whether received in one or more payments, shall be used to pay the outstanding indebtedness under the Notes (to be applied as set forth in Section 7 of the Notes) unless agreed to otherwise by the Administrative Agent at the request of the  Majority Investors;

 

(b) Dissolve, liquidate, or wind up its business;

 

(c) Conduct its business other than in its ordinary and usual course;

 

(d) Merge, consolidate with another entity or otherwise sell all, or substantially all, of its assets, including its equity interests ownership interests in any Subsidiary; or

 

(e) Sell any equity, equity equivalent, or debt securities to third parties (other than to the Investors, as provided herein), except that Gulf may enter into a New Financing if, contemporaneously therewith, the New Financing provides sufficient net proceeds for the Gulf to fully repay the Notes in cash and, at the Investors option, such Notes are contemporaneously repaid in full in cash; provided that, in any event, the Investors shall be entitled to the rights under Section 9(c) of the Notes.

 

6.8 Legal Fees.  On and as of the Closing Date and the Maturity Date (as defined in the Note), Companies agree to pay in full all reasonable attorney’s fees and expenses of Porter Hedges LLP, legal counsel to the Administrative Agent and the Investors regarding the Transaction Documents and the transactions related thereto, accrued and invoiced up to and including such dates.

 

6.9 Liens, Etc. The Companies shall not create, assume, incur, or suffer to exist, or permit any of their Subsidiaries to create, assume, incur, or suffer to exist, any lien or security interest on or in respect of any of their assets including the Oil and Gas Contracts, except as provided for pursuant to the terms of such Oil and Gas Contracts, whether now owned or hereafter acquired, or assign any right to receive proceeds therefrom, except that Companies may create, incur, assume, or suffer to exist:

 

(a) liens and security interests granted under the Transaction Documents and securing the Obligations;

 

  

  

  

(b) liens and security interests permitted in favor of the parties under the Oil and Gas Contracts to the extent set forth on Schedule 6.9(b) attached hereto.

 

6.10 Debts, Guaranties, and Other Obligations.  The Companies shall not, and shall not permit any of their Subsidiaries to, create, assume, suffer to exist, or in any manner become or be liable in respect of, any debt or contingent liability, except:

 

(a) the Obligations;

 

(b) indebtedness as of the Closing Date incurred to parties under and pursuant to the Oil and Gas Contracts to the extent set forth in the Disclosure Document;

 

(c) current liabilities for taxes, assessments or other governmental charges or levies, to the extent that such amounts are not delinquent, and are incurred in the ordinary course of any Company or any of its Subsidiaries’ business; or

 

(d) any other indebtedness incurred in the ordinary course of business to the extent (i) not overdue or delinquent and (ii) not to exceed at any time $250,000.

 

6.11 Restricted Payments.  The Companies shall not, and shall not permit any of their Subsidiaries to, make any dividends or distributions, except that if no Event of Default has occurred under any of the Transaction Documents or would result from the making of such dividends or distributions, the BVI Subs may make dividends and distributions to Gulf.

 

6.12 Organizational Documents.  Without the prior written consent of the Administrative Agent, the Companies shall not, and shall not permit any of their Subsidiaries to, (i) amend, restate or otherwise modify their respective governing documents in any way that would have a negative effect on the Transaction Documents or the Administrative Agent and the Investors or the Investors’ rights and benefits under the Transaction Documents.

 

6.13 Use of Proceeds.  The Companies shall not permit the proceeds of any funds advanced under the Notes to be used for any purpose other than (i) first, to pay approximately $2,060,000 for the payment due described as the Existing Default with regard to “CPO-4” on the Disclosure Schedule, (ii) second, to pay the fees and expenses required to be paid hereunder including under Section 3.1(k) above, and (iii) third, for reasonable and necessary expenses required under the Oil and Gas Contracts, employees’ salaries and related expenses and general and administrative expenses incurred in the ordinary course, and as otherwise permitted by the Transaction Documents.

 

6.14 Filing of Registration Agreement.  Gulf shall register the resale of the shares of Common Stock underlying the Notes and Warrants with the Securities and Exchange Commission pursuant to the terms set forth in the Registration Rights Agreement.

 

  

  

  

6.15 After-Acquired Property.  Until the repayment in full of the Obligations, and to the extent entered into, the applicable BVI Sub shall, and Gulf shall cause such applicable BVI Sub to, obtain, hold and retain ownership to any and all assets acquired after the Closing Date in and to the Oil and Gas Contracts.

 

6.16 Shareholder Securities Filings.  Until the repayment in full of the Obligations, Gulf agrees, upon the request of any Investor, to cooperate with and provide assistance to, and to cause its legal counsel to cooperate with and provide assistance to, any Investor regarding any securities filings required to be made by any such Investor, due to its status as a shareholder of Gulf, as required by applicable state and federal securities laws and the filing rules associated with such state and federal securities laws.

 

7. Events of Default; Rights and Remedies; Mechanics; Non-Exclusive.  

 

(a) If any “Event of Default” (as defined in the Notes, other than an Event of Default pursuant to Section 3(a)(iv) therein) occurs, then, the Administrative Agent (i) shall at the request, or may with the consent, of the Investors, by notice to Companies, declare the monetary Obligations (including all principal, interest, fees, reimbursements, indemnifications, and all other amounts payable under this Agreement and the other Transaction Documents) to be immediately due and payable in full, without notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices, all of which are hereby expressly waived by the Companies; and (ii) shall at the request of, or may with the consent of, the Investors proceed to enforce its rights and remedies hereunder and under any other Transaction Document for the ratable benefit of itself and the Investors by appropriate proceedings.

 

(b) If any Event of Default pursuant to Section 3(a)(iv) of the Notes shall occur, then (i) all principal, interest, fees, reimbursements, indemnifications, and all other amounts payable under this Agreement and the other Transaction Documents shall become and be forthwith due and payable in full, without notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices, all of which are hereby expressly waived by Borrower; and (ii) the Administrative Agent shall at the request of, or may with the consent of, the Investors proceed to enforce its rights and remedies hereunder and under any other Transaction Document for the ratable benefit of itself and the Investors by appropriate proceedings.

 

(c) If any Event of Default pursuant to Section 3(a)(vii) of the Notes shall occur regarding any contractual obligations of any Company under the Oil and Gas Contracts, then the Administrative Agent, on behalf and at the request of the Investors, may elect to cure such default by paying such amounts due and owing or taking, or cause to be taken, such action under the Oil and Gas Contracts.  If any Event of Default pursuant to Section 3(a)(viii) of the Notes shall occur regarding the Companies’ failure to pay a demand for payment by any party under any Oil and Gas Contract within the allotted time, then the Administrative Agent may elect, on behalf of the Investors, to cure such default by paying such amounts due and owing pursuant to such demand for payment (such actions, together with any such actions in the preceding sentence, “Curative Actions”).  The Curative Actions that require the payment of money shall be an Obligation of the Companies.

 

  

  

  

(d) Notwithstanding the foregoing, the parties agree that the BVI Peru Assignment and the Peru Pledge Agreement will, as of the Closing Date, be held in escrow subject to the terms of the Escrow Agreement.  Prior to July 15, 2013, the Administrative Agent shall be entitled to submit a “Disbursement Notice” covering the BVI Peru Assignment and the Peru Pledge Agreement upon the earlier of (i) the occurrence of a Trigger Event or (ii) the occurrence of an Event of Default pursuant to Section 3(a)(iv) of the Notes.  If no “Disbursement Notice” covering the BVI Peru Assignment and the Peru Pledge Agreement is submitted prior to July 15, 2013, then as of such date, (a) the BVI Peru Assignment shall remain in escrow pursuant to the Escrow Agreement, but (b) the Peru Pledge Agreement and all documents and certificates related thereto shall be released from escrow under the Escrow Agreement and shall be delivered (for all purposes) to the Administrative Agent upon written request to the Escrow Agent, and the Administrative Agent shall be entitled to exercise all rights and remedies thereunder pursuant to the terms thereof.  For the avoidance of doubt, on or after July 15, 2013, the Administrative Agent shall be entitled to submit a “Disbursement Notice” covering the BVI Peru Assignment upon the occurrence and continuance of any Event of Default.

 

(e) Upon the occurrence and during the continuance of an Event of Default, and subject to clause (d) above, the Administrative Agent may (i) exercise its rights and remedies available under the Pledge Agreements and otherwise under applicable law or (ii) deliver “Disbursement Notices” to the Escrow Agent in order to effectuate the delivery of one or both Assignments.  In connection with the Majority Investors’ option and direction, Administrative Agent is fully authorized, subject to the terms of the Escrow Agreement, to deliver any and all additional instructions, notices or directions to effectuate the delivery of the Assignments to Administrative Agent or the BVI Peru Pledge Agreement to Administrative Agent to permit Administrative Agent to exercise all rights or remedies under the Transaction Documents and available under applicable law.

 

(f) Upon the occurrence and continuance of an Event of Default, and if the Administrative Agent delivers “Disbursement Notices” to the Escrow Agent, and either (i) exercises remedies under any Pledge Agreement, forecloses on the lien and security interests in the Collateral secured thereunder and sells such Collateral at a sale (or otherwise enters a credit bid on behalf of the Investors and retains such Collateral), then the corresponding Assignment regarding such Collateral shall be of no further force and effect, or (ii) exercises the right to cause delivery of any Assignment, for the benefit of the Investors, of the equity interests subject thereto, then the corresponding Pledge Agreement regarding such equity interests shall be of no further force and effect, in each case, subject in all respects to the reinstatement terms pursuant to Section 9.15 hereof.

 

(g) No remedy or right conferred upon the Administrative Agent or any Investor is intended to be exclusive of any other remedy, and each remedy shall be cumulative of all other remedies existing by contract, at law, in equity, by statute or otherwise.

 

 

  

  

  

8. Survival and Indemnification.  

 

8.1 Survival.  All of the representations and warranties made herein shall survive the execution and delivery of this Agreement, any investigation by or on behalf of the Administrative Agent or the Investors, or acceptance of the Note and the shares of Common Stock and payment therefore and shall survive until such time as the Obligations have been fully paid and satisfied.  All covenants and indemnities made herein shall survive in perpetuity, unless otherwise provided in this Agreement.

 

8.2 Indemnification.  Each Company agrees to indemnify, protect and hold harmless the Administrative Agent, the Investors and their respective Affiliates and their respective directors, officers, employees, representatives, counsels and agents (each an “Indemnified Person” and collectively “Indemnified Persons”) from and against any and all losses, actions, proceedings, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) to which such Indemnified Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of such Company under the Transaction Documents, and will reimburse any such Indemnified Person for all such amounts as they are incurred by such Person unless such action is based upon a breach of any Investor’s representations, warranties or covenants under the Transaction Documents which causes a Material Adverse Effect on any Company or any conduct by the Administrative Agent or the Investors which constitutes fraud, gross negligence or willful misconduct related to the transactions contemplated by the Transaction Documents.

 

8.3 Conduct of Indemnification Proceedings. Promptly after receipt by any Indemnified Person of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall promptly notify the Companies in writing and the Companies shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Person so to notify the Companies shall not relieve the Companies of its obligations hereunder except to the extent that the Companies are materially prejudiced by such failure to notify.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) such Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  The Companies shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Companies shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.  Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Companies shall not affect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.

 

  

  

  

9. Miscellaneous.  

 

9.1 New Investors.

 

(a) Joinder of New Investors. The parties hereto acknowledge and agree that after the Closing Date, New Investors may purchase from Gulf and Gulf may sell and issue to New Investors additional Notes and Warrants.  Upon such purchase and sale and the execution and delivery by such New Investor of a Joinder Agreement, from and after the effective date specified in such Joinder Agreement, the New Investor thereunder shall be a party hereto, and shall become a party to the Intercreditor Agreement, the Registration Rights Agreement and the Escrow Agreement, for all purposes and have the rights and obligations of an Investor hereunder and under such other applicable Transaction Documents.  Investors, subject to the requirements of Section 2(c) hereof, hereby authorize the Administrative Agent to executed and deliver any such Joinder Agreement pursuant to the terms of the Transaction Documents.

 

(b) Terms of Joinder Agreement. By executing and delivering a Joinder Agreement, the New Investor thereunder confirms to and agrees with the other parties hereto as follows: (i) such New Investor confirms that it has received a copy of this Agreement, the other  Transaction Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Joinder Agreement; (ii) such New Investor will, independently and without reliance upon the Administrative Agent or any other Investor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (iii) such New Investor appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Transaction Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (iv) such New Investor agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and of the other applicable Transaction Documents are required to be performed by it as an Investor.

 

(c) Procedures. Upon its receipt of a Joinder Agreement executed by a New Investor, the Administrative Agent shall, if such Joinder Agreement has been completed and is in substantially the form of the attached Exhibit B, (i) use good faith reasonable efforts to provide a copy of such agreement to the Investors, (ii) accept such Joinder Agreement and (iii) give prompt notice thereof to Gulf.  Within three Business Days after its receipt of such notice, Gulf shall, or shall cause the BVI Subs to, execute and deliver to the Administrative Agent (A) a new Note payable to the order of such New Investor, (B) a Warrant in favor of such New Investor and (C) such other Transaction Documents as may be contemplated herein or therein.

 

  

  

  

9.2 Assignment; Successors and Assigns.  This Agreement may not be assigned by any Company without the prior written consent of the Administrative Agent and Investors.  This Agreement may not be assigned by any Investor without the prior written consent of the Administrative Agent and the other Investors, such consents not to be unreasonably withheld.  The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

9.3 Counterparts; Faxes.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed via facsimile, which shall be deemed an original.

 

9.4 Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

9.5 Notices.  Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iii) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier.  All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party:

 

If to the Companies:

 

Gulf United Energy, Inc.

P.O Box 22165

Houston, Texas  77227-2165

Attention:   John B. Connally III

 

With a copy to:

 

Brewer & Pritchard, PC

3 Riverway, Ste. 1800

Houston, Texas 77056

Attention:  Thomas Pritchard, Esq.

  

  

  

If to the Administrative Agent or Investors, to the addresses set forth on the signature pages.

 

With a copy to:

 

Porter Hedges LLP

1000 Main Street, 36th Floor

Houston, Texas 77002

Attention:  Ephraim del Pozo

9.6 Expenses.  The Companies shall pay on demand (a) all out-of-pocket costs and expenses of the Administrative Agent and the Investors in connection with the preparation, execution, waiver, delivery, administration, modification, and amendments of this Agreement and the other Transaction Documents including, without limitation, (x) the reasonable fees of counsel for the Administrative Agent and for the Investors and (y) the fees and out-of-pocket expenses of any and all accountants, technical experts and other consultants for Administrative Agent and Investors, (b) all out-of-pocket costs and expenses, if any, of the Administrative Agent and the Investors (including, without limitation, counsel fees and expenses of the Administrative Agent and the Investors) in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of this Agreement and the other Transaction Documents following an Event of Default, and (c) all out-of-pocket costs and expenses of any Investor in connection with any securities filings of any such Investor, due to its status as a shareholder of Gulf, as required by applicable state and federal securities laws and the filing rules associated with such state and federal securities laws.

 

9.7 Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Companies, the Administrative Agent and the Investors.

 

9.8 Publicity.  Except as required pursuant to any U.S. law, regulation, or order, no public release or announcement concerning the transactions contemplated hereby shall be issued by any Company or the Investors without the prior consent of such Company or the Investors.

 

9.9 Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

 

  

  

  

9.10 Entire Agreement.  THIS AGREEMENT, INCLUDING THE EXHIBITS AND THE OTHER TRANSACTION DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT AMONG THE PARTIES HEREOF WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, BOTH ORAL AND WRITTEN, BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

9.11 Further Assurances.  The parties hereto shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

9.12 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial; Damages.

 

(a) This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Texas without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of Texas located in Harris County and the United States District Court for the Southern District of Texas for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

(b) THE COMPANIES, THE ADMINISRATIVE AGENT AND EACH INVESTOR EXPRESSLY AND IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY ACTION AGAINST ANOTHER PARTY, ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.

 

  

  

  

9.13 Remedies Cumulative.  No failure or delay on the part of the Administrative Agent or the Investors in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein and in the other Transaction Documents are cumulative and are not exclusive of any remedies that may be available to the Administrative Agent or the Investors at law, in equity or otherwise.

 

9.14 Usury Savings.  Specific reference is made to Section 15 of each Note.

 

9.15 Effect of Conversion.  Notwithstanding anything herein or in any other Transaction Document to the contrary, if any Investor converts the entire amount of the indebtedness owed to it under its Note pursuant to the terms of its Note, or such indebtedness is otherwise converted pursuant to the terms of any other Transaction Document, then (i) upon such conversion, the indebtedness under such Note shall be paid and satisfied in full, (ii) such Investor will be deemed to no longer be a party to any of the Transaction Documents or retain any rights thereunder (except for rights that survive termination, including indemnity rights), and (iii) the Administrative Agent shall no longer act as Administrative Agent, including under and pursuant to the Intercreditor Agreement, for such Investor for any purpose.  For avoidance of doubt, any Investor may convert some, but not all, of the indebtedness owed to it under its Note pursuant to the terms of its Note and continue to remain a party to, and without affecting the enforceability of, the Transaction Documents to which such Investor is a party.

 

9.16 Reinstatement.  Notwithstanding anything in any Transaction Document to the contrary, if at any time, any Pledge Agreement, the ancillary documents related thereto, any attendant rights and benefits thereto or thereunder or the Collateral thereunder (collectively, the “Pledge and Collateral Rights”), on the one hand, or any Assignment, the ancillary documents related thereto or any attendant property rights and benefits thereunder (collectively, the “Assignment and Ownership Rights”), on the other hand, are revoked, rescinded, invalidated, or are otherwise determined to be null and void or must otherwise be restored or returned to Gulf, as determined by a court of competent jurisdiction under any applicable law, then (i) with respect to any such determination with regard to any Pledge and Collateral Rights, and without the need of any action, consent or approval by the Companies, the Administrative Agent or any Investor, the Assignment and Ownership Rights and any other Transaction Documents related thereto (including, without limitation, the Purchase Agreement, the Notes and the Guaranties) shall be fully and automatically reinstated, and all Assignment and Ownership Rights and such Transaction Documents shall be in full force and effect, and (ii) with respect to any such determination with regard to any Assignment and Ownership Rights, and without the need of any action, consent or approval by the Companies, the Administrative Agent or any Investor, the Pledge and Collateral Rights and any other Transaction Documents related thereto (including, without limitation, the Purchase Agreement, the Notes and the Guaranties) shall be fully and automatically reinstated and all Pledge and Collateral Rights and such Transaction Documents shall be in full force and effect.  In the event that any of the foregoing documents are deemed to be reinstated after any such document has been terminated and released by the Administrative Agent, the termination and release shall be deemed not to have occurred, and such documents shall be reinstated and shall be in full force and effect as if such documents had never been terminated or released.  If any of the foregoing documents have been returned to any Company, such Company shall promptly deliver such documents to the Administrative Agent and the Investors or the Administrative Agent may provide such Company with a copy of such documents and such Company shall promptly execute and deliver a copy of any such documents to the Administrative Agent.

 

  

  

  

9.17 Investor Decisions.  Each Investor acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Investor and based on the Companies’ financial statements and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Transaction Documents.  Each Investor also acknowledges that it shall, independently and without reliance upon the Administrative Agent or any other Investor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Transaction Documents.  For avoidance of doubt, each Investor further acknowledges that it has, to the extent it deems necessary, independently and without reliance upon legal counsel for the Administrative Agent or any other Investor, obtained its own legal counsel regarding the Transaction Documents and transactions related thereto.

 

9.18 Controlling Agreement.  With respect solely to the relative rights and obligations of the Administrative Agent and the Investors, and not with respect to any right or obligation of the Companies under any Transaction Document, in the event of any conflict between the provisions of this Agreement and the provisions of the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall govern and control.

 

[Signature pages follow]

 

 

 

 

 

 

 

 

 

 

 

  

  

  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

 

COMPANIES:

GULF UNITED ENERGY, INC.

By:                                                                                                                           

John B. Connally III

Chief Executive Officer

GULF UNITED ENERGY DE COLOMBIA LTD.

By:                                                                                                                       

John B. Connally III

Attorney-in-Fact

GULF UNITED ENERGY CUENCA TRUJILLO LTD.

By:                                                                                                                        

John B. Connally III

Attorney-in-Fact

ADMINISTRATIVE AGENT:

SYDSON OIL & GAS INVESTMENTS, LLC,

as Administrative Agent

By:                                                                                                                      

Michael J. Mayell

Manager

 

Address for Notice:

  

  

  

 

INVESTORS:

SYDSON OIL & GAS INVESTMENTS, LLC

By:                                                                

Michael J. Mayell

Manager

Purchase Price:

Principal Amount of Note:

Warrants:

 

 

 

Address for Notice:ex10-2.htm

Exhibit 10.2

 

 

PLEDGE AGREEMENT

 

 

THIS PLEDGE AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) is made and entered into as of October 29, 2012 by Gulf United Energy, Inc., a Nevada corporation (the “Debtor”), in favor of Sydson Oil & Gas Investments, LLC, a Delaware limited liability company (“Sydson”), in its capacity as Administrative Agent (herein called “Secured Party”) pursuant to the Intercreditor Agreement, dated as of the date hereof, for the benefit of itself and the Investors that are parties to the Purchase Agreement (defined below), together with other investors that join the Purchase Agreement pursuant to a Joinder Agreement, as defined therein, (each an “Investor” and collectively the “Investors”).

 

W I T N E S S E T H:

 

WHEREAS, on the date hereof, the Investors have purchased convertible notes issued by the Debtor and other investors or the Investors, through a certain time period described in the Purchase Agreement, may purchase additional convertible notes in an aggregate principal amount of up to $4,400,000 (such notes, together with any notes or other securities issued in exchange or substitution therefor or in addition or replacement thereof, and as any of the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, collectively, the “Notes”), which obligations under the Notes are guaranteed by Gulf United Energy de Colombia Ltd., a company organized under the laws of the British Virgin Islands and a wholly-owned subsidiary of Gulf (“BVI Colombia”), Gulf United Energy de Cuenca Trujillo Ltd., a company organized under the laws of the British Virgin Islands and a wholly-owned subsidiary of Gulf (“BVI Peru”, together with BVI Colombia, the “BVI Subs”, and together with Gulf, each a “Company” and collectively, the “Companies”), pursuant to the guaranty agreements (each a “Guaranty” and collectively, the “Guaranties”);

 

WHEREAS, in purchasing such Notes, the Investors have made or will make certain financial accommodations to the Companies pursuant to a Purchase Agreement, dated as of the date hereof, among the Companies, Secured Party and the Investors (as amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”);

 

WHEREAS, the Secured Party, Investors and Companies are parties to that certain Intercreditor Agreement, dated as of the date hereof, (as amended, supplemented, restated or otherwise modified from time to time, the “Intercreditor Agreement”) to govern, among other things, the rights of the Investors regarding the Secured Obligations and the Collateral (each defined below); and

 

WHEREAS, Debtor will derive substantial benefit and advantage from the financial accommodations to the Companies set forth in the Purchase Agreement.

 

NOW, THEREFORE, 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. Definitions.  Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Purchase Agreement and the Uniform Commercial Code in effect in the State of Texas on the date hereof (the “UCC”).

 

2. Grant of Security Interest.  To secure the prompt payment and performance in full when due, whether by lapse of time or otherwise, of the aggregate amount of the Notes, and payment and performance of all of the other Secured Obligations (as defined below), the Debtor hereby pledges, hypothecates, assigns, transfers, sets over, and delivers to Secured Party, and grants to Secured Party a first priority lien on, and security interest in, and charge on (the “Security Interest”) any and all right, title and interest of the Debtor in and to the following, whether now owned or existing or whether owned, acquired, or arising hereafter (collectively, the “Collateral”):

 

(a) BVI Colombia Equity Interests.  All ordinary shares of BVI  Colombia presently owned or hereinafter acquired, either directly or indirectly, by the Debtor, representing 100% of the issued and outstanding ordinary shares of BVI Colombia (the “Equity Interests”), and, whether or not evidenced or represented by any stock certificate, certificated security or other instrument, all certificates representing same, and all rights, benefits, and privileges of Debtor as a shareholder of BVI Colombia, and all rights, benefits, and privileges associated with the Equity Interests, including rights to profits, distributions, return of capital, and voting rights;

 

(b) All accounts and rights now or hereafter attributable to the Equity Interests and all rights, benefits, and privileges of Debtor now or hereafter arising under BVI Colombia’s governing documents by which BVI Colombia was formed, as the same may be amended from time to time (but without affecting Debtor’s obligations prohibiting such action under this Agreement or the other Transaction Documents), including, without limitation, all distributions (whether in the nature of securities, cash, other monies, or property), profits, return of capital, increases, proceeds, fees, preferences and payments in partial or complete liquidation or redemption, and other rights or benefits of whatever nature made with respect to or attributable to the Equity Interests or which Debtor is now or may hereafter become entitled to receive or exercise with respect to any of the Equity Interests;

 

(c) All subscriptions, warrants, options, and any other rights issued by BVI Colombia or any other person whatsoever upon or in connection with the Equity Interests or any part of the property described in this Section 2;

 

(d) All cash, securities, instruments, documents, dividends, increases, distributions and profits received as a result of reclassifications, readjustments, reorganizations, mergers, consolidations, combinations, or changes in the capital structure of BVI Colombia and any other property at any time and from time to time received, receivable or otherwise distributed or delivered to Secured Party, and all rights and privileges pertaining thereto;

 

(e) All securities hereafter delivered to Secured Party in substitution for, or in addition to any of the foregoing, or certificates representing or evidencing such securities, and all cash, securities, instruments, documents, dividends, increases, distributions and profits received therefrom, and any other property at any time and from time to time received by, receivable by or otherwise distributed or delivered to Secured Party in respect of or in exchange for any of the property described herein;

 

  

  

  

(f) All substitutes and replacements for the property described in this Section 2, and all proceeds (cash and non cash) arising out of the sale, assignment, exchange, liquidation, collection or other disposition of all or any portion of the Equity Interests, or the assets of BVI Colombia, or the other property described in this Section 2, and further including, without limitation, proceeds in the accounts, chattel paper, instruments, documents, consumer goods, inventory and equipment;

 

(g) All books and records of Debtor pertaining to any of the above; and

 

(h) All rights, powers and privileges under, and in and to, the foregoing.

 

3. Security for Secured Obligations.  The Security Interest created hereby in the Collateral constitutes continuing collateral security for the following obligations (collectively, the “Secured Obligations”): (a) the aggregate principal amount, interest and other payment obligations due, or which may  become due, under the Notes, (b) all other monetary and non-monetary obligations and liabilities of the Companies to the Secured Party and the Investors under the Purchase Agreement and the other Transaction Documents, including, without limitation, the Guaranties, and including Curative Actions consisting of the payment of money, and (c)  all other obligations and liabilities of the Companies to the Secured Party under this Agreement and the other Transaction Documents (as each such Transaction Document may be amended, restated, modified and/or supplemented), whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due and whether under, pursuant to or evidenced by a note, agreement, guaranty, instrument or otherwise (in each case, irrespective of the genuineness, validity, regularity or enforceability of such Secured Obligations, or of any instrument evidencing any of the Secured Obligations or of any collateral therefor or of the existence or extent of such collateral, and irrespective of the allowability, allowance or disallowance of any or all of such Secured Obligations in any case commenced by or against the Debtor under Title 11, United States Code, including, without limitation, obligations of the Debtor for post-petition interest, fees, costs and charges that would have accrued or been added to the Secured Obligations but for the commencement of such case).

 

4. Delivery of the Collateral.  The Debtor hereby agrees that:

 

(a) Delivery of Certificates.  The Debtor shall deliver to the Secured Party or its designee (i) all certificates and instruments representing or evidencing the Equity Interests presently owned by the Debtor and (ii) promptly upon the receipt by the Debtor, all certificates and instruments representing or evidencing the Equity Interests that are hereinafter received, whether directly or indirectly, by the Debtor.  Prior to delivery to the Secured Party or its designee, all such certificates and instruments constituting the Equity Interests shall be held in trust by the Debtor for the benefit of the Secured Party pursuant hereto.  All such certificates shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank in form and content satisfactory to Debtor and Secured Party.  To the extent that the Equity Interests are not certificated, Secured Party shall have been provided with evidence that BVI Colombia has agreed to comply with instructions originated by Secured Party without further consent by Debtor, all in form and substance satisfactory to Secured Party such that Secured Party shall have “control” thereof (as defined in Section 8.106 of the UCC or other sections thereof).

 

  

  

  

(b) Additional Securities.  If the Debtor shall receive by virtue of it being or having been the owner of the Collateral, any (i) share certificate or other certificate representing ordinary shares, including without limitation, any certificate representing a dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares or other equity interests, share splits, spin-off or split-off, promissory notes or other instruments; (ii) option or right, whether as an addition to, substitution for, or an exchange for, the Collateral or otherwise; (iii) dividends payable in securities; or (iv) distributions of securities in connection with a partial or total liquidation, dissolution or reduction of capital, capital surplus or paid-in surplus, then the Debtor shall receive such certificate, instrument, option, right, dividend or distribution in trust for the benefit of the Secured Party, shall segregate it from the Debtor’s other property and shall promptly deliver it to the Secured Party in the exact form received together with any necessary endorsement and/or appropriate transfer power, duly executed in blank, to be held by the Secured Party as Collateral and as further collateral security for the Secured Obligations.

 

(c) Financing Statements.  The Debtor authorizes the Secured Party to file all such necessary financing statements pursuant to the UCC and all other applicable financing statements, filings, documents and registrations, as may be reasonably requested by the Secured Party in order to perfect and protect and enforce the Security Interest created hereby in the Collateral under applicable law.

 

(d) Documentation under British Virgin Island Law.  In addition to the foregoing, the Debtor shall deliver to the Secured Party the following (on the date hereof, unless otherwise set forth below) in form and substance acceptable to the Secured Party as security in accordance with the terms of this Agreement:

 

	
(i)  

	
an executed and undated letter of resignation from each director of BVI Columbia in form and content satisfactory to Debtor and Secured Party;

 

	
(ii)  

	
a signed, undated shareholder proxy and power in favor of the Secured Party in form and content satisfactory to Debtor and Secured Party;

 

	
(iii)  

	
a certified true copy of the resolution passed by BVI Colombia on or before the date hereof amending, to the extent necessary, BVI Colombia memorandum and/or articles of association in form and content satisfactory to Debtor and Secured Party with evidence to the reasonable satisfaction of the Secured Party that an extract of such resolutions and/or an amended and restated version of the BVI Colombia memorandum and/or articles of association has been filed at the Registry of Corporate Affairs in the British Virgin Islands (the “Registry”);

 

  

  

  

	
(iv)  

	
a blank signed and undated transfer power in respect of the Equity Interests in form and content satisfactory to Debtor and Secured Party;

 

	
(v)  

	
cause BVI Colombia to execute the acknowledgement and undertaking in form and content satisfactory to Debtor and Secured Party and within three (3) business days from the date hereof, provide an executed original thereof to the Secured Party; and

 

	
(vi)  

	
a fully executed Notice of Pledge in the form set forth in Annex A hereto.

 

5. Other Obligations of the Debtor.

 

(a) Waiver.  The Debtor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Secured Obligations and this Agreement and any requirement that the Secured Party exhaust any right or take any action against the Companies or any other Person or any collateral.

 

(b) Subrogation.  The Debtor will not exercise any rights which the Debtor may acquire by way of subrogation under this Agreement, by any payment made hereunder or otherwise until all the Secured Obligations shall have been paid and performed in full (other than indemnification and other contingent obligations which by their terms survive termination of the Purchase Agreement and the other Transaction Documents).  If any amount shall be paid to the Debtor on account of such subrogation rights at any time when all the Secured Obligations shall not have been paid in full (other than indemnification and other contingent obligations which by their terms survive termination of the Purchase Agreement and the other Transaction Documents), such amount shall be held in trust for the benefit of the Secured Party and shall forthwith be paid to the Secured Party to be credited and applied upon the Secured Obligations, whether matured or unmatured, in any order which it may, in its discretion, elect.  If (i) the Debtor shall make payment to the Secured Party of all or any part of the Secured Obligations and (ii) all the Secured Obligations shall be paid in full (other than indemnification and other contingent obligations which by their terms survive termination of the Purchase Agreement and the other Transaction Documents), the Secured Party will, at the Debtor’s request, execute and deliver to the Debtor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Debtor of an interest in the Secured Obligations resulting from such payment by the Debtor.

 

6. Representations and Warranties.  The Debtor hereby represents and warrants to the Secured Party that as of the date hereof:

 

(a) Authorization of the Equity Interests.  The Equity Interests are duly authorized and validly issued, are fully paid and nonassessable and are not subject to the preemptive rights of any Person.  All other ordinary shares constituting Collateral will be duly authorized and validly issued, fully paid and nonassessable and not subject to the preemptive rights of any Person.

 

  

  

  

(b) Title.  The Debtor has good and indefeasible title to the Collateral and is and will at all times be the legal and beneficial owner of such Collateral free and clear of any attachments, levies, taxes, liens, security interests, hypothecations and encumbrances of every kind and nature (“Liens”).  There exists no “adverse claim” within the meaning of Section 8.102 of the UCC with respect to the Equity Interests.

 

(c) Exercising of Rights.  So long as done in accordance with laws affecting the offering and sale of securities and the UCC or other relevant law in the applicable jurisdiction, and in accordance with the applicable provisions under the applicable Joint Operating Agreements covering or related to Blocks CPO-4, SSJN-5, and VIM-2, as may be amended from time to time (collectively the “JOAs”), or the Colombian Farmout Agreements (as defined in the Purchase Agreement), the exercise by the Secured Party of its rights and remedies hereunder will not violate any material contractual restriction binding on or affecting the Debtor, the Collateral or any of the Debtor’s other property or any law or governmental regulation.

 

(d) Debtor’s Authority.  No authorization, approval or action by, and no notice or filing with any governmental authority or with the issuer of any Equity Interests is required for the pledges made by the Debtor or for the granting of the Security Interest by the Debtor pursuant to this Agreement; provided, however, that certain filings, including, without limitation, the execution and delivery of a transfer power regarding the Equity Interests, BVI Colombia board resignation letters and a proxy in favor of Secured Party to vote the Equity Interests, are required for the exercise by the Secured Party of its rights and remedies hereunder and the enforcement of the Security Interest under the laws of the British Virgin Islands.

 

(e) Security Interest/Priority.  This Agreement creates a valid first priority Security Interest and charge in favor of the Secured Party in the Collateral under the UCC.  The taking possession by the Secured Party of the certificates representing the Equity Interests, or, if the Equity Interests are not certificated, the filing of a UCC financing statement with the Secretary of State of Nevada, will perfect and establish the first priority of the Secured Party’s Security Interest in the Equity Interests.

 

(f) Litigation.  There are no pending or, to Debtor’s knowledge, threatened actions or proceedings before any court, judicial body, administrative agency or arbitrator which may materially adversely affect the Collateral;

 

(g) Power and Authority.  The Debtor has the requisite power and authority to enter into this Agreement and any related documents, perform its obligations hereunder and thereunder and to pledge and assign the Collateral to the Secured Party in accordance with the terms of this Agreement and in accordance with the governing documents of BVI Colombia, and that, after giving effect to the delivery of the Notice of Pledge to BVI Colombia as set forth on Annex A attached hereto, all provisions of Debtor’s or BVI Colombia’s governing documents have been fully complied with and that the provisions of such governing documents in no way affect the efficacy or enforceability of this Agreement or Debtor’s obligations under this Agreement;

 

(h) Transfer Restrictions.  There are no provisions contained in the certificate of incorporation or by-laws (or equivalent organizational documents) of the Debtor or BVI Colombia, or any other documents or agreements (other than as set forth in the JOAs and the Colombian Farmout Agreements), that impose any form of restriction on the transfer of the Equity Interests which have not otherwise been enforceably and legally waived by the necessary parties;

 

  

  

  

(i) Securities Laws.  None of the shares of the Equity Interests have been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject;

 

(j) Grant of Security Interest.  The pledge and assignment of the Equity Interests and the grant of a Lien in the Collateral under this Agreement vest in the Secured Party all rights of the Debtor in the Collateral as contemplated by this Agreement; and

 

(k) Principal Addresses; Legal or Other Names. The location of Debtor’s chief executive office and locations where records with respect to Collateral are kept (including in each case the county of such locations) is in Houston, Harris County, Texas.

 

7. Covenants.  The Debtor hereby covenants that so long as any of the Secured Obligations remain outstanding (other than indemnification and other contingent obligations which by their terms survive termination of the Purchase Agreement and the other Transaction Documents) or any Transaction Document is in effect, the Debtor shall:

 

(a) Books and Records.  Mark its books and records (and shall cause BVI Colombia to mark its books and records) to reflect the Security Interest granted to the Secured Party pursuant to this Agreement and the other Transaction Documents, including entering particulars of the share pledge in the share register of BVI Colombia, and to take all necessary steps to immediately reflect the Security Interest granted to the Secured Party pursuant to this Agreement in the Registry.

 

(b) Defense of Title.  Warrant and defend title to and ownership of the Collateral at its own reasonable expense against the claims and demands brought against the Secured Party and/or Debtor by any other parties claiming an interest therein, keep the Collateral free from all Liens, and not sell, exchange, transfer, convey, assign, lease or otherwise dispose of its rights in or to the Collateral or any interest therein nor create, incur or permit to exist any Lien whatsoever with respect to any of the Collateral or the proceeds thereof other than that created hereby or as otherwise permitted by the Purchase Agreement.

 

(c) Defend Against Claims.  At its reasonable expense, defend the Secured Party’s right, title and security interest in and to the Collateral against the claims of any other party.

 

(d) Additional Equity Interests.  Not consent to or approve the issuance to the Debtor or any other person of (i) any additional shares of any class of ordinary shares or other equity interests of BVI Colombia, (ii) any securities convertible either voluntarily by the holder thereof or automatically upon the occurrence or nonoccurrence of any event or condition into, or any securities exchangeable for, ordinary shares of BVI Colombia or (iii) any warrants or options of any nature of BVI Colombia.

 

  

  

  

(e) Further Assurances.  Promptly execute and deliver at its expense all further instruments and documents, cooperate with Secured Party in all respects and take all further action that may be reasonably necessary and desirable or that the Secured Party may reasonably request in order to (i) perfect and protect the Security Interest created hereby in the Collateral (including, without limitation, any and all action necessary to satisfy the Secured Party that the Secured Party has obtained a first priority perfected Security Interest in the Equity Interests); (ii) enable the Secured Party to exercise and enforce hereunder with respect to its rights and remedies relating to the Collateral; and (iii) otherwise effect the purposes of this Agreement, including, without limitation and if requested by the Secured Party, delivering to the Secured Party irrevocable proxies with respect to the Collateral, which irrevocable proxies will be strictly and only used for the purpose of allowing the Secured Party to perfect and protect the Security Interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to the Collateral (but only in accordance with the terms of this Agreement following the occurrence and continuance of an Event of Default).  The Debtor shall cause BVI Colombia to acknowledge in writing its receipt and acceptance thereof.  Such acknowledgement shall instruct BVI Colombia to follow instructions from the Secured Party without any Debtor’s consultation or consent.  Debtor agrees to take, and authorizes Secured Party to take on Debtor’s behalf, at any time when an Event of Default has occurred and is continuing any or all of the following actions with respect to any Equity Interests as Secured Party shall deem necessary to perfect the security interest and pledge created hereby or to enable Secured Party to enforce its rights and remedies hereunder: (A) to register in the name of the Investors the Equity Interests; (B) to endorse in the name of the Investors any Equity Interests issued in certificated form; and (C) by book entry or otherwise, identify as belonging to the Investors a quantity of securities that constitutes all or part of the Equity Interests registered in the name of the Investors.  Notwithstanding the foregoing, Debtor agrees that the Equity Interests which are not in certificated form or are otherwise in book-entry form shall be held for the account of the Investors.

 

(f) Contractual Rights in Colombian Interest.  Agree and acknowledge that any time, Secured Party’s enforcement of its rights and remedies regarding the Collateral hereunder may cause a change of control or such other adverse effect regarding ownership of the Equity Interests, and such enforcement may adversely affect the terms and conditions under the Colombian Farmout Agreements, the license agreements regarding each of Block CPO-4, SSJN-5 and VIM-2 with the National Hydrocarbon Agency of Colombia and the other agreements related thereto.  In such event, Debtor will, and will cause BVI Colombia to, (x) immediately take any and all actions reasonably requested by Secured Party or its designee to protect, retain and preserve all ownership and contract rights of BVI Colombia in and to the Colombian Interests (as defined in the Purchase Agreement) under the foregoing documents and to secure any necessary consents or approvals in relation thereto, (y) immediately take any and all actions reasonably requested by Secured Party or its designee to work with SK Innovation Co, Ltd. and the National Hydrocarbon Agency of Colombia in order to facilitate and accomplish the foregoing, and (z) refrain from taking any action to oppose, delay or otherwise hinder the efforts of Secured Party or its designee to protect, retain and preserve all ownership and contract rights of BVI Colombia in and to the Colombian Interests under the foregoing documents and to secure any necessary consents in relation thereto.

 

  

  

  

(g) Amendments.  Not make or consent to any amendment or other modification or waiver with respect to any of the Collateral or the governing documents of BVI Colombia or enter into any agreement or allow to exist any restriction with respect to any of the Collateral other than pursuant hereto, including, without limitation, any amendment that would (i) impair the Collateral or adversely affect in any respect the rights, privileges, benefits and security interests provided to or intended to be provided to the Secured Party or (ii) that in any way adversely affects the perfection of the Security Interest of the Secured Party in the Collateral.  Debtor shall not permit BVI Colombia to modify its governing documents in a manner which would affect the voting, liquidation, preference or other rights of a holder of the Equity Interests in a manner adverse to Secured Party’s interests.

 

(h) Compliance with Securities Laws.  File all reports and other information now or hereafter required to be filed by the Debtor with the United States Securities and Exchange Commission and any other state, federal or foreign agency, including all such agencies under the laws of the British Virgin Islands, in connection with the ownership of the Collateral.

 

(i) Application of Distributions.  At all times following the occurrence and during the continuance of an Event of Default, distribute to Secured Party any cash dividends or distributions received in respect of the Equity Interests, and all such amounts shall be immediately utilized by the Secured Party to repay the Notes and other obligations of the Companies to the Investors.

 

(j) Payment of Liabilities.  Debtor will pay all tax liabilities, assessments and governmental charges or levies in excess of $25,000 in the aggregate upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by Debtor.

 

(k) Additional Documentation.  Debtor shall:

 

	
(i)  

	
cause to be made on BVI Colombia’s register of shareholders (as held at BVI Colombia’s registered office, containing the names and addresses of the persons who hold shares in BVI Colombia, the number of each class and series of shares held by each shareholder, the date on which the name of each shareholder was entered in the register of shareholders, and the date on which any eligible person ceased to be a shareholder of BVI Colombia, the “Register of Members”), an annotation to include details of the pledge created by this Agreement; and

 

	
(ii)  

	
for so long as any Secured Obligations remain outstanding forthwith and from time to time deposit with the Secured Party:

 

	
(x)  

	
all original share certificates and any other documents of title relating to the Equity Interests (which for the avoidance of doubt includes all share certificates and other documents of title relating to any shares in BVI Colombia acquired by the Debtor after the date of this Agreement); and

 

	
(y)  

	
an executed and undated letter of resignation from each newly appointed director of BVI Colombia by the Debtor in form and content satisfactory to Debtor and Secured Party.

 

  

  

  

8. Advances by the Secured Party. Upon the occurrence and during the continuance of an Event of Default, the Secured Party may, at its sole option and in its sole discretion, take all such action as it deems appropriate and in so doing may expend such sums as the Secured Party may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Secured Party may make for the protection of the Collateral hereof or which may be compelled to make by operation of law.  All such sums and amounts so expended shall be reimbursed by the Debtor promptly upon timely notice thereof and demand therefore and shall constitute additional Secured Obligations.  No such performance of any covenant or agreement by the Secured Party on behalf of the Debtor, and no such advance or expenditure therefor, shall relieve the Debtor of any default under the terms of this Agreement or the other Transaction Documents.  The Secured Party may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by the Debtor in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP.

 

9. Events of Default.  As used herein “Event of Default” shall mean (i) an Event of Default as defined in the Notes or (ii) this Agreement shall for any reason cease to be in full force and effect or cease to give the Secured Party the liens, rights, powers and privileges purported to be created hereby.

 

10. Remedies.

 

(a) Demand Payment.  Upon the occurrence and during the continuance of an Event of Default, the Secured Party may declare all or part of the Secured Obligations immediately due and payable and enforce payment of the same by Debtor; provided that any partial payments by Debtor of the Secured Obligations shall not be deemed to be a payment in full of such amount, or an accord and satisfaction of such amount, or a waiver by Secured Party of any of its rights or remedies hereunder.

 

(b) General Remedies.  Upon the occurrence and during the continuance of an Event of Default, the Secured Party shall have, in respect of the Collateral, subject to the terms of the Intercreditor Agreement, in the Transaction Documents or by law, the rights and remedies of a secured party under the UCC or any other applicable law.  In addition, the Secured Party may exercise all rights with respect to the Collateral including, without limitation, all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any shares of the Collateral as if it were the absolute owner thereof, including, but without limitation, the right to exchange, at its discretion, any or all of the Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof, or upon the exercise by the issuer of any right, privilege or option pertaining to any of the Collateral, and, in connection therewith, to deposit and deliver any and all of the Collateral with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as it may determine, all without liability except to account for property actually received by it.

 

  

  

  

(c) Transfer and Sale of Collateral.  Upon the occurrence and during the continuance of an Event of Default, without limiting the generality of this Section and without notice, the Secured Party may, in its sole discretion and subject to the terms of the Intercreditor Agreement, sell or otherwise dispose of or realize upon the Collateral, or any part thereof, in one or more parcels, at public or private sale, at any exchange or broker’s board or elsewhere, at such price or prices and on such other terms as the Secured Party may deem commercially reasonable, for cash, credit or for future delivery or otherwise in accordance with applicable law.  To the extent permitted by law, the Secured Party may in such event bid for the purchase of such securities.  The Debtor agrees that, to the extent notice of sale shall be required by law and has not been waived by such Debtor, any requirement of reasonable notice shall be met if notice, specifying the place of any public sale or the time after which any private sale is to be made, is personally served on or mailed, postage prepaid, to the Debtor, in accordance with the notice provisions of the Purchase Agreement at least ten (10) days before the time of such sale.  The Secured Party shall not be obligated to make any sale of the Collateral regardless of notice of sale having been given.  The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  At any such sale, unless prohibited by applicable law, the Secured Party may bid for and purchase the whole or any part of the Collateral so sold free from any such right or equity of redemption.  All moneys received by the Secured Party hereunder, whether upon sale of the Collateral or any part thereof or otherwise, shall be held by the Secured Party and applied by it as provided in Section 15 hereof.  No failure or delay on the part of the Secured Party in exercising any rights hereunder shall operate as a waiver of any such rights nor shall any single or partial exercise of any such rights preclude any other or future exercise thereof or the exercise of any other rights hereunder.  The Secured Party shall have no duty as to the collection or protection of the Collateral or any income thereon nor any duty as to preservation of any rights pertaining thereto, except to apply the funds in accordance with the requirements of Section 15 hereof.  The Secured Party may exercise its rights with respect to property held hereunder without resort to other security for or sources of reimbursement for the Secured Obligations.  In addition to the foregoing, Secured Party shall have all of the rights, remedies and privileges of a secured party under the UCC regardless of the jurisdiction in which enforcement hereof is sought.

 

(d) Private Sale.  The Debtor recognizes that the Secured Party may be unable to effect (or to do so only after delay which would adversely affect the value that might be realized from the Collateral) or may deem it impracticable to effect a public sale of all or any part of the Equity Interests constituting the Collateral and that the Secured Party may, therefore, determine to make one or more private sales of any such collateral to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof.  The Debtor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sale shall be deemed to have been made in a commercially reasonable manner and that the Secured Party shall have no obligation to delay sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933, as amended.  The Debtor further acknowledges and agrees that any offer to sell such securities which has been made privately in the manner described above shall be deemed to involve a “public sale” under the UCC, notwithstanding that such sale may not constitute a “public offering” under the Securities Act of 1933, as amended, and the Secured Party may, in such event, bid for the purchase of such securities.

 

  

  

  

(e) Retention of Collateral.  Without limiting the application of, and Secured Party’s rights under Section 7(i) of this Agreement, in addition to the rights and remedies hereunder, upon the occurrence and during the continuance of an Event of Default, the Secured Party may, after providing the notices required by Section 9.620 of the UCC, and obtaining consent of Debtor, which consent shall not be unreasonably withheld, or otherwise complying with the requirements of applicable law of the relevant jurisdiction, retain all or any portion of the Collateral in satisfaction of the Secured Obligations.  Unless and until the Secured Party shall have provided such notices, however, the Secured Party shall not be deemed to have retained the Collateral in satisfaction of any Secured Obligations for any reason.

 

(f) Set Off.  Upon the occurrence and during the continuance of an Event of Default, the Secured Party may apply and set-off (i) any deposits of Debtor held by Secured Party or the Investors, (ii) all claims of Debtor against Secured Party or the Investors, now or hereafter existing (iii) any other property, rights or interests of Debtor which come into the possession or custody or under the control of Secured Party or the Investors and (iv) the proceeds of any of the foregoing as if the same were included in the Collateral.  Secured Party agrees to notify Debtor promptly after any such set off or application; provided that the failure of Secured Party to provide any such notice shall not affect the validity of such set-off or application.  The rights of Secured Party under this Section 10(f) are in addition to any other rights and remedies, including, without limitation, any other rights of set-off.

 

(g) Voting and Admission.  In addition to, and notwithstanding the forgoing, upon the occurrence and during the continuance of an Event of Default, Secured Party may take all necessary steps in order to (x) exercise the voting rights related to the Equity Interests, (y) take assignment of all or any portion of the Equity Interests in connection with any foreclosure or any transaction(s) entered into in lieu of or in connection with a foreclosure, and/or (z) be admitted as an equity owner of BVI Colombia, with all attendant rights thereto, without the taking of any further action by any Person, except as required by BVI Colombia’s governing documents and the BVI Business Companies Act, 2004.

 

(h) Completion of Documents.  Upon the occurrence and during the continuance of an Event of Default, the Secured Party may:

 

	
(i)  

	
complete the blank, signed and undated transfers;

 

  

  

  

	
(ii)  

	
cause to be dated each undated letter of resignation from each director; and

 

	
(iii)  

	
date the undated shareholder power and proxy,

 

delivered to it pursuant to this Agreement.

 

(i) Cumulative Rights.  Debtor further agrees that the rights and remedies of Secured Party under this Agreement are cumulative with and not exclusive of any other rights or remedies which it may have under the other Transaction Documents or applicable law.

 

11. Release of Collateral.  The Secured Party may release any of the Collateral from this Agreement or may substitute any of the Collateral for other Collateral without altering, varying or diminishing in any way the force, effect or Lien of this Agreement as to any Collateral not expressly released or substituted, and this Agreement shall continue as a first priority Lien on all Collateral not expressly released or substituted.

 

12. Waiver of Marshaling.  The Debtor hereby waives any right to compel any marshaling of any of the Collateral.

 

13. No Waiver.  Any and all of the Secured Party’s rights with respect to the rights granted under this Agreement shall continue unimpaired, and the Debtor shall be and remain obligated in accordance with the terms hereof, notwithstanding (a) the bankruptcy, insolvency or reorganization of the Debtor, (b) the release or substitution of any item of the Collateral at any time, or of any rights or interests therein, or (c) any delay, extension of time, renewal, compromise or other indulgence granted by the Secured Party in reference to any of the Secured Obligations.  The Debtor hereby waives all notice of any such delay, extension, release, substitution, renewal, compromise or other indulgence, and hereby consents to be bound hereby as fully and effectively as if the Debtor had expressly agreed thereto in advance.  No delay or extension of time by the Secured Party in exercising any power of sale, option or other right or remedy hereunder, and no failure by the Secured Party to give notice or make demand, shall constitute a waiver thereof, or limit, impair or prejudice the Secured Party’s right to take any action against any Debtor or to exercise any other power of sale, option or any other right or remedy.

 

14. Expenses.  The Collateral shall secure, and the Debtor shall pay to the Secured Party on demand, from time to time, all reasonable costs and expenses (including but not limited to, reasonable attorneys’ fees and costs, taxes, and all transfer, recording, filing and other charges) of, or incidental to, the custody, care, transfer, administration of the Collateral or any other collateral, or in any way relating to the enforcement, protection or preservation of the rights or remedies of the Secured Party under this Agreement or with respect to any of the Secured Obligations.

 

15. Rights of the Secured Party.

 

(a) Power of Attorney.  The Debtor hereby designates and appoints the Secured Party and each of its designees or agents as attorney-in-fact of the Debtor, irrevocably and with power of substitution, with authority to take any or all of the following actions, which power of attorney shall become effective upon the occurrence and during the continuance of an Event of Default:

 

	
(i)  

	
to demand, collect, settle, compromise, adjust and give discharges and releases concerning the Collateral, all as the Secured Party may reasonably determine;

 

  

  

  

	
(ii)  

	
to commence and prosecute any actions at any court for the purposes of collecting any of the Collateral and enforcing any other right in respect thereof;

 

	
(iii)  

	
to defend, settle or compromise any action brought and, in connection with the Collateral, give such discharge or release as the Secured Party may deem reasonably appropriate;

 

	
(iv)  

	
to pay or discharge taxes or Liens levied or placed on or threatened against the Collateral;

 

	
(v)  

	
to direct any parties liable for any payment under any of the Collateral to make payment of any and all monies due and to become due thereunder directly to the Secured Party or as the Secured Party shall direct;

 

	
(vi)  

	
to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at any time in respect of or arising out of any Collateral;

 

	
(vii)  

	
to sign and endorse any drafts, assignments, proxies, stock powers, verifications, notices and other documents relating to the Collateral;

 

	
(viii)  

	
to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Secured Party may deem reasonably appropriate;

 

	
(ix)  

	
to execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, pledge agreements, affidavits, notices and other agreements, instruments and documents that the Secured Party may determine necessary in order to perfect and maintain the Security Interests granted in this Agreement and in order to fully consummate all of the transactions contemplated therein;

 

	
(x)  

	
to exchange any of the Collateral or other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Collateral with any committee, depository, transfer agent, registrar or other designated agency upon such terms as the Secured Party may determine;

 

  

  

  

	
(xi)  

	
to vote for a shareholder, or to sign an instrument in writing, sanctioning the transfer of any or all of the Collateral into the name of the Secured Party or into the name of any transferee to whom the Collateral or any part thereof may be sold pursuant to Section 10 hereof; and

 

	
(xii)  

	
to do and perform all such other acts and things as the Secured Party may reasonably deem to be necessary, proper or convenient in connection with the Collateral.

 

This power of attorney is a power coupled with an interest and upon the occurrence and during the continuance of an Event of Default shall be irrevocable for so long as any of the Secured Obligations remain outstanding (other than indemnification and other contingent obligations which by their terms survive termination of the Purchase Agreement and the other Transaction Documents) and any Transaction Document is in effect.  The Secured Party shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Secured Party in this Agreement, and shall not be liable for any failure to do so or any delay in doing so.  The Secured Party shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence or willful misconduct.  This power of attorney is conferred on the Secured Party solely to protect, preserve and realize upon its security interest in Collateral.

 

(b) Performance by the Secured Party of the Debtor’s Obligations.  If the Debtor fails to perform any agreement or obligation contained herein, the Secured Party itself may perform, or cause performance of, such agreement or obligation, and the expenses of the Secured Party incurred in connection therewith shall be payable by the Debtor pursuant to Section 8 hereof.

 

(c) Assignment by the Secured Party.  The Secured Party may from time to time assign the Secured Obligations and any portion thereof and/or, upon and following an Event of Default, the Collateral and any portion thereof, and the assignee shall be entitled to all of the rights and remedies of the Secured Party under this Agreement in relation thereto.

 

(d) The Secured Party’s Duty of Care.  Other than the exercise of reasonable care to assure the safe custody of the Collateral while being held by the Secured Party hereunder, the Secured Party shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Debtor shall be responsible for preservation of all rights in the Collateral, and the Secured Party shall be relieved of all responsibility for the Collateral upon surrendering it or tendering the surrender of it to the Debtor.  The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property, which shall be no less than the treatment employed by a reasonable and prudent Person in the industry, it being understood that the Secured Party shall not have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Secured Party have or is deemed to have knowledge of such matters; or (ii) taking any necessary steps to preserve rights against any parties with respect to any Collateral.

 

  

  

  

(e) Voting Rights in Respect of the Collateral.

 

	
(i)  

	
So long as no Event of Default shall have occurred and be continuing, to the extent permitted by law, (i) the Debtor may exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or any other Transaction Document and (ii) shall be permitted to receive all dividends or other distributions, whether in cash or in kind, paid or other collateral to the extent permitted by the Purchase Agreement; and

 

	
(ii)  

	
Upon the occurrence and during the continuance of an Event of Default, all rights of the Debtor to exercise the voting and other consensual rights which they would otherwise be entitled to exercise pursuant to clause (i) of this subsection (e) shall cease and all such rights shall thereupon become vested in the Secured Party which shall then have the sole right to exercise such voting and other consensual rights.

 

16. Application of Proceeds.  Upon the occurrence and during the continuance of an Event of Default, any payments in respect of the Secured Obligations and any proceeds of any Collateral, when received by the Secured Party in cash or its equivalent, will be applied, subject in all respects to the Intercreditor Agreement, as follows:  first, to all reasonable costs and expenses of the Secured Party (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the implementation and/or enforcement of this Agreement and/or any of the other Transaction Documents; second, to the principal amount of the Secured Obligations; third, to such of the Secured Obligations consisting of accrued but unpaid interest and fees; fourth, to all other amounts payable with respect to the Secured Obligations; and fifth, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.

 

17. Costs of Counsel.  If at any time hereafter, whether upon the occurrence of an Event of Default or not, the Secured Party employs counsel to prepare or consider amendments, waivers or consents with respect to this Agreement, or to take action or make a response in or with respect to any legal or arbitral proceeding relating to this Agreement or relating to the Collateral, or to protect the Collateral or exercise any rights or remedies under this Agreement or with respect to the Collateral, then the Debtor agrees to promptly pay upon demand any and all such reasonable documented costs and expenses incurred by the Secured Party, all of which costs and expenses shall constitute Secured Obligations hereunder.

 

  

  

  

18. Continuing Agreement.

 

(a) This Agreement shall be a continuing agreement in every respect and shall remain in full force and effect so long as any Secured Obligations shall remain unpaid and outstanding (other than indemnification and other contingent obligations which by their terms survive termination of the Purchase Agreement and the other Transaction Documents).

 

(b) This Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Secured Party as a preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable costs and expenses (including, without limitation, any reasonable legal fees and disbursements) incurred by the Secured Party in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations.

 

19. Amendments; Waivers; Modifications.  This Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except in accordance with the terms of the Purchase Agreement.

 

20. Successors in Interest.  This Agreement shall create a continuing Lien in the Collateral and shall be binding upon the Debtor, its successors and permitted assigns and shall inure, together with the rights and remedies of the Secured Party hereunder, to the Secured Party and its successors and permitted assigns; provided, however, that the Debtor may not assign its rights or delegate its duties hereunder without the prior written consent of the Secured Party.  To the fullest extent permitted by law, the Debtor hereby releases the Secured Party and its successors and permitted assigns, from any liability for any act or omission relating to this Agreement or the Collateral, except to the extent such liability arose from the gross negligence or willful misconduct of the Secured Party.

 

21. Notices.  All notices required or permitted to be given under this Agreement shall be in conformance with the Purchase Agreement.

 

22. Counterparts.  This Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument.

 

23. Headings.  The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

 

24. Governing Law; Consent to Jurisdiction and Service of Process; Waiver of Jury Trial.

 

(a) THIS AGREEMENT AND THE OTHER DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

  

  

  

(b) THE DEBTOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF HARRIS, STATE OF TEXAS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE DEBTOR, ON THE ONE HAND, AND THE SECURED PARTY, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS.

 

(c) THE PARTIES HERETO DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  TO THE EXTENT NOT PROHIBITED BY LAW, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PLEDGEE AND/OR THE DEBTOR ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY OTHER DOCUMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

 

25. Severability.  If any provision of this Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions.

 

26. Entirety.  This Agreement and the other Transaction Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Transaction Documents or the transactions contemplated herein and therein.

 

27. Survival.  All representations and warranties of each Debtor hereunder shall survive the execution and delivery of this Agreement and the other Transaction Documents.

 

28. Other Security.  To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral (including, without limitation, real and other personal property owned by the Debtor), or by a guarantee, endorsement or property of any other Person, then the Secured Party shall have the right to proceed against such other property, guarantee or endorsement upon the occurrence and during the continuance of any Event of Default, and the Secured Party has the right, in its sole discretion, to determine which rights, Liens or remedies the Secured Party shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or any of the Secured Party’ rights or the Secured Obligations under this Agreement or under any other of the Transaction Documents.

 

29. Indemnification.  Debtor agrees to indemnify, defend and hold harmless Secured Party and Investors, any and all persons controlling, controlled by or under common control with Secured Party and Investors, and all officers, attorneys, directors, shareholders, agents and employees of such persons (all of the foregoing, collectively, “Indemnitees”) from and against (a) any taxes, liabilities, obligations, losses, penalties, suits, costs, actions, judgments, claims and damages, including reasonable fees, disbursements and out-of-pocket expenses of outside counsel, and other expenses incurred in connection with the taking of action by any Indemnitee, in good faith, in respect of any transaction effected under this Agreement or in connection with the lien provided for herein, including, without limitation, any taxes payable in connection with the delivery or registration of any of the Equity Interests as provided herein, and (b) any liabilities, obligations, losses, penalties, suits, costs, actions, judgments, claims and damages, including reasonable fees, disbursements and out-of-pocket expenses of outside counsel and other expenses incurred by any Indemnitee in any litigation, proceeding or investigation, including, without limitation, any of the foregoing brought under any federal or state securities laws which is threatened, instituted or conducted by any governmental agency or instrumentality or any other person with respect to any aspect of or any transaction contemplated by or referred to in this Agreement; provided that Debtor shall not be required to indemnify any Indemnitee against any of the matters described in the preceding clause (a) or clause (b) directly arising out of such Indemnitee’s gross negligence or willful misconduct as determined by a final non-appealable decision of any court of applicable jurisdiction. The obligations of Debtor under this Section shall survive the termination of this Agreement.

 

  

  

  

30. Controlling Agreement.  With respect solely to the relative rights and obligations of the Secured Party and the Investors, and not with respect to any right or obligation of the Companies under any Transaction Document, in the event of any conflict between the provisions of this Agreement and the provisions of the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall govern and control.

 

31. Termination.  Subject in all respects to the terms of the Escrow Agreement and the reinstatement provisions of the Purchase Agreement, upon payment in full of the Secured Obligations, Secured Party’s rights under this Agreement, and the Security Interest created hereby and under the other Documents, shall immediately terminate and Secured Party shall (i) execute and deliver to Debtor, without recourse, representation or warranty, (A) UCC-3 termination statements (or similar documents and agreements) required to terminate all of Secured Party’s rights under this Agreement and all other Documents and (B) such other agreements and documents reasonably required to terminate, or evidence the termination of, the Security Interest created hereby and under the other Documents and (ii) return to Debtor all certificates and other Collateral to the extent the same have not been sold or otherwise disposed of or applied in accordance with the terms hereof.

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed and delivered as of the day and year first above written.

 

DEBTOR:

GULF UNITED ENERGY, INC., a Nevada corporation

By:_______________________________

John B. Connally III

Chief Executive Officer

SECURED PARTY:

SYDSON OIL & GAS INVESTMENTS, LLC,

as Administrative Agent

 

By:_______________________________

Michael J. Mayell

Manager

 

 

  

  

  

Annex A

 

NOTICE OF PLEDGE

 

October 29, 2012

 

Gulf United de Colombia Ltd.

Sea Meadow House, Blackburne Highway

PO Box 116

Road Town, Tortola,

British Virgin Islands

 

Gentlemen:

 

This is to advise you that under the terms of that certain Pledge Agreement of even date herewith (the “Pledge Agreement”), Gulf United Energy, Inc., a Nevada corporation (the “Debtor”), has granted Sydson Oil & Gas Investments, LLC, a Delaware limited liability company, in its capacity as Administrative Agent (herein called “Secured Party”) pursuant to the Intercreditor Agreement of even date hereof, for the benefit of itself and the Investors that are parties to the Purchase Agreement, together with other investors that join the Purchase Agreement pursuant to a Joinder Agreement, as defined therein,  (each an “Investor” and collectively the “Investors”) a security interest in all of its ownership interests (“Equity Interests”) in and to Gulf United de Colombia Ltd., a company organized and existing under the laws of the British Virgin Islands and wholly-owned subsidiary of the Debtor (“Issuer”), whether now owned or hereafter acquired by Debtor (together with any distributions, including without limitation liquidating distributions, equity holder distributions, preemptive rights to acquire additional Equity Interests, distributions paid in cash or securities, or other properties to which Debtor hereafter may be entitled to receive on account of such Equity Interests), which Equity Interests presently constitute 100 ordinary shares in Issuer.  The security interest secures the Secured Obligations described in the Pledge Agreement to Secured Party, for the benefit of itself and the Investors.

 

Until notified otherwise in writing by Secured Party, following the occurrence and during the continuance of an Event of Default (as defined in the Pledge Agreement), you agree to follow directions of Secured Party regarding the Equity Interests and you hereby are directed to deliver after the date hereof any non-cash distributions and any and all other certificates, warrants or other property (other than cash) in which Secured Party has been granted a security interest as described above, directly to Secured Party at:

 

Sydson Oil & Gas Investments, LLC

[__]

  

  

  

Following the occurrence and during the continuance of an Event of Default, you are also directed to deliver all dividends, distributions and other property in the form of cash or other immediately available funds directly to Secured Party at the above noted address or if by wire transfer:

 

Sydson Oil & Gas Investments, LLC

[__]

 

By their signatures on this letter, each of Debtor and Issuer agrees that, following the occurrence and during the continuance of an Event of Default, (a) Secured Party may exercise the voting rights related to the Equity Interests in accordance with the terms of the Pledge Agreement and (b) Issuer shall not challenge, dispute or take any action to prevent Secured Party’s exercise of the voting rights provided for in the Pledge Agreement so long as those rights are exercised in accordance with the terms of the Pledge Agreement, and each of Debtor and Issuer hereby (x) consents to the assignment of all or any portion of the Equity Interests to Secured Party or any of its designees in connection with any foreclosure or any transaction(s) entered into in lieu of or in connection with a foreclosure in accordance with the Pledge Agreement, (y) consents to the admission of Secured Party or any of its designees as equity owners of Issuer without the taking of any further action by Issuer, Debtor, Secured Party or any of their designees, all notwithstanding any provision or requirement to the contrary in any of Issuer’s governing documents, to permit Secured Party and its designees to exercise its rights under the Pledge Agreement and (z) waives its rights, to the extent it has any, under their governing documents to the extent such rights conflict with the provisions of and rights granted to Secured Party herein or in the Pledge Agreement to permit Secured Party to exercise its rights under the Pledge Agreement.

 

Yours very truly,

SYDSON OIL & GAS INVESTMENTS, LLC,

as Administrative Agent and Secured Party

 

By:_______________________________

Michael J. Mayell

Manager

  

  

  

DEBTOR:

 

GULF UNITED ENERGY, INC., a Nevada corporation

 

 

By:_______________________________

John B. Connally III

Chief Executive Officer

 

 

Acknowledged and agreed to as of the day and year first written above.

 

ISSUER:

GULF UNITED ENERGY DE COLOMBIA LTD.

 

 

By:_______________________________

John B. Connally III

Attorney-in-Fact

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