Document:

Exhibit 10.1 - Amended and Restated Loan Agreement.

Exhibit 10.1

AMENDED AND RESTATED LOAN AGREEMENT

THIS AGREEMENT made the 26th day of June 2007

BETWEEN:

JAMES ASKEW, of 6417 Mercer, Houston, Texas, 77005; and

(the “Lender” or “Holder”)

OF THE FIRST PART

AND:

GULF UNITED ENERGY, INC., a company incorporated pursuant to the laws of 

Nevada with an office at 5858 Westheimer, Suite 850, Houston, Texas, 77057

(“Gulf United”, “Maker” or “Borrower”)

OF THE SECOND PART

WHEREAS:

	A.      	
The Maker issued that certain Loan Agreement, dated April 10th 2007 in favor of Lender for a total of US$1,388,985.00 (the “Original Loan”) pursuant to that certain letter of intent dated March 22, 2006 by and between Gulf United and Cia. Mexicana de Gas Natural, S.A. de C.V. (the “Letter of Intent”);

	 
	B.      	
The Lender and Maker wish to amend the Original Loan on the certain terms and conditions contained herein;

	

                  NOW THEREFORE THIS AGREEMENT WITNESSETH that for and in consideration of the set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.               The Original Loan is hereby amended and restated in it entirety.

2.               The Lender has advanced/loaned as of February 28, 2007 total principal and interest of $1,458,095 to Gulf United (the “Loan”). In addition, the Loan shall include any additional funds that the Lender may advance to Gulf United, or on its behalf, in the future, subject to Gulf United’s consent.

3.               The Loan shall bear simple interest at a rate of 10% per annum, calculated in arrears on a monthly basis commencing as of February 28, 2007 and for each additional advance on the date that such advance is made to Gulf United and continuing until the entire Loan amount is paid in full. The Loan shall be

 

 

secured by Gulf United’s equity interest in the Project Companies, as defined in the Letter of Intent. In the event of a default hereunder by Gulf United, such equity interest held by Gulf United in the Project Companies, as defined in the Letter of Intent, shall immediately be assigned to Lender at Lender’s sole discretion. 

4.               The Loan, as well as all accrued interest, shall be due and payable from Gulf United to the Lender on October 1, 2007. Gulf United shall not be penalized for early repayment.

5.               At any time, Gulf United may satisfy the repayment of the Loan and all interest accrued hereunder by transferring by way of bill of sale all of its rights, title and interest in the Letter of Intent to the Lender.

6.               All funds and dollar amounts referred to in this Agreement are in the lawful currency of the United States of America.

7.               Lender hereby waives any and all breaches or defaults on the Original Loan, including any late fees.

8.               This Agreement shall be interpreted in accordance with the laws in effect from time to time in the State of Texas.

                  IN WITNESS WHEREOF the parties hereto have hereunto affixed their respective hands, both as of the day and year first above written.

 

	  	GULF UNITED ENERGY, INC.  
	  
	  	By:       DON W. WILSON
	JAMES ASKEW  	Name:  Don W. Wilson  
	James Askew  	Title:     C.E.O.Exhibit 10.21

    Exhibit
      10.21

     

    PROMISSORY
      NOTE

     

    FACE
      AMOUNT $845,000 PRICE $650,000

    INTEREST
      RATE 12% per month 

    NOTE
      NUMBER July-2006-101

    ISSUANCE
      DATE July 14, 2006

    MATURITY
      DATE October 14, 2007

     

    FOR
      VALUE
      RECEIVED, US Energy Initiatives, Inc., a Georgia corporation, and all of its
      subsidiaries (the "Company") (OTC BB: USEI) hereby promises to pay to the order
      of DUTCHESS PRIVATE EQUITIES FUND, II, LP (collectively, the "Holder") by the
      Maturity Date, or earlier, the Face Amount of Eight Hundred and Forty-Five
      Thousand Dollars ($845,000) U.S., (this "Note") in such amounts, at such times
      and on such terms and conditions as are specified herein (sometimes hereinafter
      the Company and the Holder are referred to collectively as "the
      Parties").

     

    Any
      capitalized term not defined in this Note are defined in the Investment
      Agreement for the Equity Line of Credit between Dutchess Private Equities Fund,
      LP (the "Investor") and the Company (the "Equity Line"), which definitions
      the
      Company and the Holder incorporate herein by reference.

     

    ARTICLE
      1 Method of Payment/Interest

     

    Section
      1.1 Payments made to the Holder by the Company in satisfaction of this Note
      (referred to as a "Payment," or "Payments") shall be drawn from each Put under
      the Equity Line of Credit provided by the Investor to the Company. The Company
      shall make payments to the Holder in such amounts and at such times as outlined
      herein. On or before July 31, 2006 through November 30, 2006, the Company shall
      make a Payment totaling one hundred percent (100%) of each Put (as defined
      in
      the Investment Agreement between the Company and the Investor dated November
      4,
      2005) each week (the "Payment Amount") until the Face Amount is paid in full,
      minus any fees due. The First Payment will be due on July 31, 2006 and each
      subsequent Payment will be made at the Closing of each Put ("Payment Date"
      or
      "Payment Dates") until this Note is paid in full. Commencing on December 31,
      2006, the Payment Amount shall be the greater of a) 1/12th of the outstanding
      balances due on this Note and any notes currently outstanding between the
      Company and the Holder dated March 23, 2006 and December 20, 2005 ("Prior
      Notes"); or b) 100% of the proceeds of each Put. Notwithstanding any provision
      to the contrary in this Note, the Company may pay in full to the Holder the
      Face
      Amount, or any balance remaining thereon, in readily available funds at any
      time
      and from time to time without penalty.

     

    Section
      1.2 Payments pursuant to this Note shall be drawn directly from the Closing
      of
      each Put and shall be wired directly to the Holder on the Closing Date and
      shall
      be included in the calculation of the Threshold Amount (as defined in Section
      1.4, below). The Company agrees to fully execute and diligently carry out Puts
      to the Investor, on the terms set forth in the Investment Agreement. The Company
      agrees that the Put Amount shall be set forth as outlined in Article 20, below.
      Failure to comply with the terms of the Investment Agreement with respect to
      the
      Puts will result in an Event of Default as defined in this Agreement in Article
      4.

     

    Section
      1.3 In order to assist the Company in meeting its obligations under this Note
      and Prior Notes, the Company hereby authorizes the Investor to transfer funds
      from each Put directly to the Holder. A Put shall be deemed closed after the
      funds are transferred to the Holder.

     

    Section
      1.4 After Closing, the Company must make a Prepayment to the Holder when the
      aggregate amount of financing ("Financing") received by the Company is in excess
      of one dollar ($1.00) ("Threshold Amount"). The Company agrees to pay one
      hundred percent (100%) of any proceeds raised by the Company over the Threshold
      Amount toward the Prepayment of this Note and Prior Notes, Interest and any
      penalties until the Face Amount is paid in full. The Prepayments shall be made
      to the Holder within one (1) business day of the Company's receipt of the
      Financing. Failure to do so will result in an Event of Default. The Threshold
      Amount shall also pertain to any assets sold, transferred or disposed of by
      the
      Company.

     

    Section
      1.5 The Company shall pay twelve percent (12%) annual coupon on the unpaid
      Face
      Amount of this Note and all Prior Notes commencing on the date of this Note.
      The
      Interest shall compound daily, pro rata for partial periods.

     

    ARTICLE
      2 Collateral

     

    Section
      2.1 The Company does hereby agree to issue to the Holder for use as Collateral
      forty (40) signed Put Notices. In the event, the Holder uses the Collateral
      in
      full, the Company shall immediately deliver to the Holder additional Put Sheets
      as requested by the Holder.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      2.2 Upon the completion of the Company's obligation to the Holder of the Face
      Amount of this Note, the Company will not be under any further obligation to
      complete additional Puts. All remaining Put sheets shall be marked "VOID" by
      the
      Holder and returned to the Company at the Company's request.

     

    ARTICLE
      3 Unpaid Amounts

     

    Section
      3.1 In the event that on the Maturity Date the Company has any remaining amounts
      unpaid on this Note (the "Residual Amount"), the Holder can exercise its right
      to increase the Face Amount by ten percent (10%) as an initial penalty AND
      an
      additional two and one-half percent (2.5%) per month

    
       

      
        

      

       

    

    paid,
      pro
      rata for partial periods, compounded daily, as liquidated damages ("Liquidated
      Damages"). If a Residual Amount remains, the Company is in Default and the
      Holder may elect remedies as set forth in Article 4, below. The Parties
      acknowledge that Liquidated Damages are not interest and should not constitute
      a
      penalty.

     

    ARTICLE
      4 Defaults and Remedies

     

    Section
      4.1 Events of Default. An "Event of Default" occurs if any one of the following
      occur:

     

    (a)
      The
      Company does not make a Payment within two (2) business days of (i) the Closing
      of a Put; or (ii) a Payment Date; or, (iii) a Residual Amount on the Note exists
      on the Maturity Date; or

     

    (b)
      The
      Company, pursuant to or within the meaning of any Bankruptcy Law (as hereinafter
      defined): (i) commences a voluntary case; (ii) consents to the entry of an
      order
      for relief against it in an involuntary case; (iii) consents to the appointment
      of a Custodian (as hereinafter defined) of the Company or for its property;
      (iv)
      makes an assignment for the benefit of its creditors; or (v) a court of
      competent jurisdiction enters an order or decree under any Bankruptcy Law that:
      (A) is for relief against the Company in an involuntary case; (B) appoints
      a
      Custodian of the Company or for its property; or (C) orders the liquidation
      of
      the Company, and the order or decree remains unstayed and in effect for sixty
      (60) calendar days; or

     

    (c)
      The
      Company's $0.001 par value common stock (the "Common Stock") is suspended or
      is
      no longer listed on any recognized exchange, including an electronic
      over-the-counter bulletin board, for in excess of two (2) consecutive trading
      days; or

     

    (d)
      Either the registration statement for the underlying shares in the Equity Line
      is not effective for any reason and is not cured within five (5) days;
      or,

     

    (e)
      Any
      of the Company's representations or warranties contained in this Agreement
      were
      false when made; or,

     

    (f)
      The
      Company breaches this Agreement, and such breach, if and only if such breach
      is
      subject to cure, continues for a period of two (2) business days.

     

    As
      used
      in this Section 4.1, the term "Bankruptcy Law" means Title 11 of the United
      States Code or any similar federal or state law for the relief of debtors.
      The
      term "Custodian" means any receiver, trustee, assignee, liquidator or similar
      official under any Bankruptcy Law.

     

    Section
      4.2 Remedies. In the Event of Default, the Holder may elect to garnish Revenue
      from the Company in an amount that will repay the Holder on the schedules
      outlined in this Agreement and fully enforce the Security Agreement dated March
      23, 2006 between the Holder and the Company.

     

    For
      EACH
      AND EVERY Event of Default, as outlined in this Agreement, the Holder can
      exercise its right to increase the Face Amount of the Note by ten percent (10%)
      as an initial penalty. In addition, the Holder may elect to increase the Face
      Amount of the Note by two and one-half percent (2.5%) as Liquidated Damages,
      compounded daily. The Parties acknowledge that Liquidated Damages are not
      interest under the terms of this Agreement, and shall not constitute a
      penalty.

     

    In
      the
      event of a Default hereunder, the Holder, at its sole election, shall have
      the
      right, but not the obligation, to either:

     

    a)
      Switch
      the Residual Amount to a three-year ("Convertible Maturity Date"), eighteen
      percent (18%) interest bearing convertible debenture at the terms described
      hereinafter (the "Convertible Debenture"). In the Event of Default, the
      Convertible Debenture shall be considered closed ("Convertible Closing Date"),
      as of the date the Issuance Date of the this Note. If the Holder chooses to
      convert the Residual Amount to a Convertible Debenture, the Company shall have
      twenty (20) business days after notice of default from the Holder (the "Notice
      of Convertible Debenture") to file a registration statement covering an amount
      of shares equal to three hundred percent (300%) of the Residual Amount. Such
      registration statement shall be declared effective under the Securities Act
      of
      1933, as amended (the "Securities Act"), by the Securities and Exchange
      Commission (the "Commission") within sixty (60) business days of the Convertible
      Closing Date. In the event the Company does not file such registration statement
      within twenty (20) business days of the Holder's request, or such registration
      statement is not declared by the Commission to be effective under the Securities
      Act within the time period described above the Residual Amount shall increase
      by
      five thousand dollars ($5,000) per day. In the event the Company is given the
      option for accelerated effectiveness of the registration statement, the Company
      will cause such registration statement to be declared effective as soon as
      reasonably practicable and will not take any action to delay the registration
      to
      become effective. In the event that the Company is given the option for
      accelerated effectiveness of the registration statement, but chooses not to
      cause such registration statement to be declared effective on such accelerated
      basis, the Residual Amount shall increase by five thousand dollars ($5,000)
      per
      day commencing on the earliest date as of which such registration statement
      would have been declared to be effective if subject to accelerated
      effectiveness; or

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    b)
      The
      Holder may increase the Payment Amount described under Article 1 to fulfill
      the
      repayment of the Residual Amount. The Company shall provide full cooperation
      to
      the Holder in directing funds owed to the Holder on any Put made by the Company
      to the Investor. The Company agrees to diligently carry out the terms outlined
      in the Equity Line for delivery of any such shares. In the event the Company
      is
      not diligently fulfilling its obligation to direct funds owed to the Holder
      from
      Puts to the Investor, as reasonably determined by the Holder, the Holder may,
      after giving the Company two (2) business days advance notice to cure the same,
      elect to increase the Face Amount of the Note by 2.5% each day, compounded
      daily, in additional to and on top of additional remedies available to the
      Holder under this Note.

     

    Section
      4.3 Conversion Privilege

     

    (a)
      The
      Holder shall have the right to convert the Convertible Debenture into shares
      of
      Common Stock at any time following the Convertible Closing Date and before
      the
      close of business on the Convertible Maturity Date. The number of shares of
      Common Stock issuable upon the conversion of the Convertible Debenture shall
      be
      determined pursuant to Section 4.4, but the number of shares issuable shall
      be
      rounded up to the nearest whole share.

     

    (b)
      The
      Holder may convert the Convertible Debenture in whole or in part, at any time
      and from time to time.

     

    (c)
      In
      the event all or any portion of the Convertible Debenture remains outstanding
      on
      the Convertible Maturity Date (the "Debenture Residual Amount"), the unconverted
      portion of such Convertible Debenture will automatically be converted into
      shares of Common Stock on such date in the manner set forth in

     

    Section
      4.4.

     

    Section
      4.4 Conversion Procedure.

     

    (a)
      The
      Holder may elect to convert the Residual Amount in whole or in part any time
      and
      from time to time following the Convertible Closing Date. Such conversion shall
      be effectuated by providing the Company, or its attorney, with that portion
      of
      the Convertible Debenture to be converted together with a facsimile or
      electronic mail of the signed notice of conversion (the "Notice of Conversion").
      The date on which the Notice of Conversion is effective ("Conversion Date")
      shall be deemed to be the date on which the Holder has delivered to the Company
      a facsimile or electronic mail Notice of Conversion. The Holder can elect to
      either reissue the Convertible Debenture, or continually convert the existing
      Debenture. Any Notice of Conversion faxed or electronically mailed by the Holder
      to the Company on a particular day shall be deemed to have been received no
      later than the previous business day (receipt being via a confirmation of the
      time such facsimile or electronic mail to the Company is received).

     

    (b)
      Common Stock to be Issued. Upon the conversion of any Convertible Debentures
      by
      the Holder, the Company shall instruct its transfer agent to issue stock
      certificates without restrictive legends or stop transfer instructions, if,
      at
      that time, the aforementioned registration statement described in Section 4.2
      has been declared effective (or with proper restrictive legends if the
      registration statement has not as yet been declared effective), in specified
      denominations representing the number of shares of Common Stock issuable upon
      such conversion. In the event that the Debenture is deemed saleable under Rule
      144 of the Securities Exchange Act of 1933, the Company shall, upon a Notice
      of
      Conversion, instruct the transfer agent to issue free trading certificates
      without restrictive legends, subject to other applicable securities laws. The
      Company is responsible to for all costs associated with the issuance of the
      shares, including but not limited to the opinion letter, FedEx of the
      certificates and any other costs that arise. The Company shall act as registrar
      of the Shares of Common Stock to be issued and shall maintain an appropriate
      ledger containing the necessary information with respect to each Convertible
      Debenture. The Company warrants that no instructions have been given or will
      be
      given to the transfer agent which limit, or otherwise prevent resale and that
      the Common Stock shall otherwise be freely resold, except as may be set forth
      herein or subject to applicable law.

     

    (c)
      Conversion Rate. The Holder is entitled to convert the Debenture Residual
      Amount, plus accrued interest and penalties, anytime following the Convertible
      Closing Date, at the lesser of either (i) seventy-five percent (25%) of the
      lowest closing bid price during the fifteen (15) trading days immediately
      preceding the Notice of Conversion, or (ii) 100% of the lowest bid price for
      the
      twenty (20) trading days immediately preceding the Convertible Closing Date
      ("Fixed Conversion Price"). No fractional shares or scrip representing fractions
      of shares will be issued on conversion, but the number of shares issuable shall
      be rounded up to the nearest whole share.

     

    (d)
      Nothing contained in the Convertible Debenture shall be deemed to establish
      or
      require the Company to pay interest to the Holder at a rate in excess of the
      maximum rate permitted by applicable law. In the event that the rate of interest
      required to be paid exceeds the maximum rate permitted by governing law, the
      rate of interest required to be paid thereunder shall be automatically reduced
      to the maximum rate permitted under the governing law and such excess shall
      be
      returned with reasonable promptness by the Holder to the Company. In the event
      this Section 4.4(d) applies, the Parties agree that the terms of this Note
      shall
      remain in full force and effect except as is necessary to make the interest
      rate
      comply with applicable law.

     

    (e)
      The
      Holder shall be treated as a shareholder of record on the date the Company
      is
      required to issue the Common Stock to the Holder. If prior to the issuance
      of
      stock certificates, the Holder designates another person as the entity in the
      name of which the stock certificates requesting the Convertible Debenture are
      to
      be issued, the Holder shall provide to the Company evidence that either no
      tax
      shall be due and payable
      as a result of such transfer or that the applicable tax has been paid by the
      Holder or such person. If the Holder converts any part of the Convertible
      Debentures, or will be, the Company shall issue to the Holder a new Convertible
      Debenture equal to the unconverted amount, immediately upon request by the
      Holder.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (f)
      Within three (3) business days after receipt of the documentation referred
      to in
      this Section, the Company shall deliver a certificate, for the number of shares
      of Common Stock issuable upon the conversion. In the event the Company does
      not
      make delivery of the Common Stock as instructed by Holder within three (3)
      business days after the Conversion Date, the Company shall pay to the Holder
      an
      additional one percent (1%) per day in cash of the full dollar value of the
      Debenture Residual Amount then remaining after conversion, compounded
      daily.

     

    (g)
      The
      Company shall at all times reserve (or make alternative written arrangements
      for
      reservation or contribution of shares) and have available all Common Stock
      necessary to meet conversion of the Convertible Debentures by the Holder of
      the
      entire amount of Convertible Debentures then outstanding. If, at any time,
      the
      Holder submits a Notice of Conversion and the Company does not have sufficient
      authorized but unissued shares of Common Stock (or alternative shares of Common
      Stock as may be contributed by stockholders of the Company) available to effect,
      in full, a conversion of the Convertible Debentures (a "Conversion Default,"
      the
      date of such default being referred to herein as the "Conversion Default Date"),
      the Company shall issue to the Holder all of the shares of Common Stock which
      are available. Any Convertible Debentures, or any portion thereof, which cannot
      be converted due to the Compnay's lack of sufficient authorized common stock
      (the "Unconverted Debentures"), may be deemed null and void upon written notice
      sent by the Holder to the Company. The Company shall provide notice of such
      Conversion Default ("Notice of Conversion Default") to the Holder, by facsimile,
      within one (1) business days of such default.

     

    (h)
      The
      Company agrees to pay the Holder payments for a Conversion Default ("Conversion
      Default Payments") in the amount of (N/365) multiplied by .24 multiplied by
      the
      initial issuance price of the outstanding or tendered but not converted
      Convertible Debentures held by the Holder where N = the number of days from
      the
      Conversion Default Date to the date (the "Authorization Date") that the Company
      authorizes a sufficient number of shares of Common Stock to effect conversion
      of
      all remaining Convertible Debentures. The Company shall send notice
      ("Authorization Notice") to the Holder that additional shares of Common Stock
      have been authorized, the Authorization Date, and the amount of Holder's accrued
      Conversion Default Payments. The accrued Conversion Default shall be paid in
      cash or shall be convertible into Common Stock at the conversion rate set forth
      in the first sentence of this paragraph, upon written notice sent by the Holder
      to the Company, which Conversion Default shall be payable as follows: (i) in
      the
      event the Holder elects to take such payment in cash, cash payment shall be
      made
      to the Holder within five (5) business days, or (ii) in the event Holder elects
      to take such payment in stock, the Holder may convert at the conversion rate
      set
      forth in the first sentence of this paragraph until the expiration of the
      conversion period.

     

    (i)
      The
      Company acknowledges that its failure to maintain a sufficient number of
      authorized but unissued shares of Common Stock to effect in full a conversion
      of
      the Convertible Debentures in full will cause the Holder to suffer irreparable
      harm, and that the actual damages to the Holder will be difficult to ascertain.
      Accordingly, the parties agree that it is appropriate to include in this
      Agreement a provision for liquidated damages. The Parties acknowledge and agree
      that the liquidated damages provision set forth in this section represents
      the
      parties' good faith effort to quantify such damages and, as such, agree that
      the
      form and amount of such liquidated damages are reasonable, and under the
      circumstances, do not constitute a penalty. The payment of liquidated damages
      shall not relieve the Company from its obligations to deliver the Common Stock
      pursuant to the terms of this Convertible Debenture.

     

    (j)
      If,
      by the third (3rd) business day after the Conversion Date, any portion of the
      shares of the Convertible Debentures have not been delivered to the Holder
      and
      the Holder purchases, in an open market transaction or otherwise, shares of
      Common Stock (the "Covering Shares") necessary to make delivery of shares which
      would had been delivered if the full amount of the shares to be converted had
      been delivered to the Holder, then the Company shall pay to the Holder, in
      addition to any other amounts due to Holder pursuant to this Convertible
      Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as defined
      below). The "Buy In Adjustment Amount" is the amount equal to the excess, if
      any, of (x) the Holder's total purchase price (including brokerage commissions,
      if any) for the Covering Shares minus (y) the net proceeds (after brokerage
      commissions, if any) received by the Holder from the sale of the Sold Shares.
      The Company shall pay the Buy-In Adjustment Amount to the Holder in immediately
      available funds within five (5) business days of written demand by the Holder.
      By way of illustration and not in limitation of the foregoing, if the Holder
      purchases shares of Common Stock having a total purchase price (including
      brokerage commissions) of $11,000 to cover a Buy-In with respect to shares
      of
      Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
      which the Company will be required to pay to the Holder will be
      $1,000.

     

    ARTICLE
      5 Additional Financing and Registration Statements

     

    Section
      5.1 The Company will not enter into any additional financing agreements whether
      for debt or equity, without prior expressed written consent from the Holder.
      Violation of this Section 5.1 will result in an Event of Default and the Holder
      may elect to take the action or actions outlined in Article 4.

     

    Section
      5.2 The Company agrees that it shall not file any registration statement which
      includes any of its Common Stock, including those on Form S-8, until such time
      as the Note is paid off in full ("Lock-Up Period") or without the prior written
      consent of the Holder.

     

    Section
      5.3 If, at any time, while this Note is outstanding, the Company issues or
      agrees to issue to any entity or person ("Third Party") for any reason
      whatsoever, any common stock or securities convertible into or exercisable
      for
      shares of common stock (or modify any such terms in effect prior to the
      execution of this Note) (a "Third Party Financing"), at terms deemed by the
      Holder to be more favorable to the Third Party, then the Company grants to
      the
      Holder the right, at the Holder's election, to modify the terms of this Note
      to
      match or conform to the more favorable term or terms of the Third Party
      Financing. The rights of the Holder in this Section 5.3 are in addition to
      all
      other rights the Holder has pursuant to this Note and the Security Agreement
      between the Holder and the Company.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      5.4 During the period of time that this Note is in force, the Company's
      officers, insiders, affiliates or other related parties shall refrain from
      selling any Stock.

     

    ARTICLE
      6 Notice.

     

    Section
      6.1 Any notices, consents, waivers or other communications required or permitted
      to be given under the terms of this Note must be in writing and will be deemed
      to have been delivered (i) upon delivery, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided a confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) day after deposit with a nationally recognized overnight
      delivery service, so long as it is properly addressed. The addresses and
      facsimile numbers for such communications shall be:

     

    If
      to the Company:

     

    Mark
      Clancy

    US
      Energy
      Initiatives, Inc.

    12409
      Telecom Drive

    Tampa,
      FL
      33637

    Telephone:
      813-979-9222

    Facsimile:
      813-979-9224

    With
      copy
      to:

     

    If
      to the Holder:

     

    Dutchess
      Capital Management, LLC

    

    
      	
              Douglas
                Leighton

              50
                Commonwealth Ave, Suite 2

              Boston,
                MA 02116

              (617)
                301-4700

              (617)
                249-0947

            

    

     

    Section
      6.2 The Parties are required to provide each other with five (5) business days
      prior notice to the other party of any change in address, phone number or
      facsimile number.

     

    ARTICLE
      7 Time

     

    Where
      this Note authorizes or requires the payment of money or the performance of
      a
      condition or obligation on a Saturday or Sunday or a holiday on which the United
      States Stock Markets ("US Markets") are closed ("Holiday"), such payment shall
      be made or condition or obligation performed on the last business day preceding
      such Saturday, Sunday or Holiday. A "business day" shall mean a day on which
      the
      US Markets are open for a full day or half day of trading.

     

    ARTICLE
      8 No Assignment.

     

    This
      Note
      and the obligations hereunder shall not be assigned, except as otherwise
      provided herein.

     

    ARTICLE
      9 Rules of Construction.

     

    In
      this
      Note, unless the context otherwise requires, words in the singular number
      include the plural, and in the plural include the singular, and words of the
      masculine gender include the feminine and the neuter, and when the tense so
      indicates, words of the neuter gender may refer to any gender. The numbers
      and
      titles of sections contained in the Note are inserted for convenience of
      reference only, and they neither form a part of this Note nor are they to be
      used in the construction or interpretation hereof. Wherever, in this Note,
      a
      determination of the Company is required or allowed, such determination shall
      be
      made by a majority of the Board of Directors of the Company and, if it is made
      in good faith, it shall be conclusive and binding upon the Company.

     

    ARTICLE
      10 Governing Law

     

    The
      validity, terms, performance and enforcement of this Note shall be governed
      and
      construed by the provisions hereof and in accordance with the laws of the
      Commonwealth of Massachusetts applicable to agreements that are negotiated,
      executed, delivered and performed solely in the Commonwealth of
      Massachusetts.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      11 Disputes Subject to
      Arbitration

     

    The
      parties to this Note will submit all disputes arising under it to arbitration
      in
      Boston, Massachusetts before a single arbitrator of the American Arbitration
      Association ("AAA"). The arbitrator shall be selected by application of the
      rules of the AAA, or by mutual agreement of the parties, except that such
      arbitrator shall be an attorney admitted to practice law in the Commonwealth
      of
      Massachusetts. No party to this agreement will challenge the jurisdiction or
      venue provisions as provided in this section. Nothing in this section shall
      limit the Holder's right to obtain an injunction for a breach of this Agreement
      from a court of law.

     

    ARTICLE
      12 Conditions to Closing

     

    The
      Company shall have delivered the proper Collateral to the Holder before Closing
      of this Note.

     

    ARTICLE
      13 Structuring and Administration Expense

     

    The
      Company agrees to pay for related expenses associated with the proposed
      transaction of sixty-five thousand dollars ($65,000). This amount shall cover,
      but is not limited to, the following: due diligence expenses, document creation
      expenses, closing costs, and transaction administration expenses. All such
      structuring and administration expenses shall be deducted from the first
      closing.

     

    ARTICLE
      14 Indemnification

     

    In
      consideration of the Holder's execution and delivery of this Agreement and
      the
      acquisition and funding by the Holder of this Note and in addition to all of
      the
      Company's other obligations under the documents contemplated hereby, the Company
      shall defend, protect, indemnify and hold harmless the Holder and all of its
      shareholders, officers, directors, employees, counsel, and direct or indirect
      investors and any of the foregoing person's agents or other representatives
      (including, without limitation, those retained in connection with the
      transactions contemplated by this Agreement) (collectively, the "Indemnities")
      from and against any and all actions, causes of action, suits, claims, losses,
      costs, penalties, fees, liabilities and damages, and expenses in connection
      therewith (irrespective of whether any such Indemnitee is a party to the action
      for which indemnification hereunder is sought), and including, without
      limitation, reasonable attorneys' fees and disbursements (the "Indemnified
      Liabilities"), incurred by any Indemnitee as a result of, or arising out of,
      or
      relating to (i) any misrepresentation or breach of any representation or
      warranty made by the Company in the Note, or any other certificate, instrument
      or document contemplated hereby or thereby (ii) any breach of any covenant,
      agreement or obligation of the Company contained in the Note or any other
      certificate, instrument or document contemplated hereby or thereby, except
      insofar as any such misrepresentation, breach or any untrue statement, alleged
      untrue statement, omission or alleged omission is made in reliance upon and
      in
      conformity with written information furnished to the Company by, or on behalf
      of, the Holder or is based on illegal trading of the Common Stock by the Holder.
      To the extent that the foregoing undertaking by the Company may be unenforceable
      for any reason, the Company shall make the maximum contribution to the payment
      and satisfaction of each of the Indemnified Liabilities that is permissible
      under applicable law. The indemnity provisions contained herein shall be in
      addition to any cause of action or similar rights the Holder may have, and
      any
      liabilities the Holder may be subject to.

     

    ARTICLE
      15 Incentive Shares

     

    The
      Company shall issue six million (6,000,000) shares of unregistered, restricted
      Common Stock to the Holder as an incentive for the investment ("Incentive
      Shares"). The Incentive Shares shall be issued and delivered immediately to
      the
      Holder and shall carry piggyback registration rights. In the event the Shares
      are not registered in the next registration statement, the Company shall pay
      to
      the Holder, as a penalty, six million (6,000,000) additional shares of common
      stock for each time a registration statement is filed and the Shares are not
      included. The Holder at its sole discretion may waive such penalty. The
      Company's failure to issue the Incentive Shares constitutes an Event of Default
      and the Holder may elect to enforce the remedies outlined in Article 4. The
      Company's obligation to provide the Holder with the Incentive Shares, as set
      forth herein, shall survive the operation of the Agreement and any default
      on
      this obligation shall provide the Holder with all rights, remedies and default
      provisions set forth in this Note, or otherwise available by law.

     

    ARTICLE
      16 Use of Proceeds

     

    The
      Company shall use the funds for general corporate purposes.

     

    ARTICLE
      17 Waiver

     

    The
      Holder's delay or failure at any time or times hereafter to require strict
      performance by Company of any obligations, undertakings, agreements or covenants
      shall not waive, affect, or diminish any right of the Holder under this Note
      to
      demand strict compliance and performance herewith. Any waiver by the Holder
      of
      any Event of Default shall not waive or affect any other Event of Default,
      whether such Event of Default is prior or subsequent thereto and whether of
      the
      same or a different type. None of the undertakings, agreements and covenants
      of
      the Company contained in this Note, and no Event of Default, shall be deemed
      to
      have been waived by the Holder, nor may this Note be amended, changed or
      modified, unless such waiver, amendment, change or modification is evidenced
      by
      a separate instrument in writing specifying such waiver, amendment, change
      or
      modification and signed by the Holder.

     

    ARTICLE
      18 Senior Obligation

     

    The
      Company shall cause this Note to be senior in right of payment to all other
      current or future debt of the Company. The Company warrants that it has taken
      all necessary steps to subordinate its other obligations to the rights of the
      Holder in this Note.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      19 Transactions With Affiliates

     

    The
      Company shall not, and shall cause each of its Subsidiaries to not enter into,
      amend, modify or supplement, or permit any Subsidiary to enter into, amend,
      modify or supplement, any agreement, transaction, commitment or arrangement
      with
      any of its or any Subsidiary's officers, directors, persons who were officers
      or
      directors at any time during the previous two years, shareholders who
      beneficially own five percent (5%) or more of the Common Stock, or affiliates
      or
      with any individual related by blood, marriage or adoption to any such
      individual or with any entity in which any such entity or individual owns a
      five
      percent (5%) or more beneficial interest (each a "Related Party") during the
      Lock Up Period.

     

    ARTICLE
      20 Equity Line Obligations

     

    Section
      20.1 While the Company's Common Stock is trading below thirty cents ($.30)
      per
      share, the Company hereby gives consent to the Investor for the Put Amount
      to be
      equal to the greater of 1) twelve thousand five hundred dollars ($12,500) per
      week; or, 2) twenty percent (20%) of the total dollar volume per week during
      the
      Price Period of the Put.

     

    Section
      20.2 Upon the Company's Common Stock trading at or above thirty cents ($.30)
      per
      share, the Company hereby gives consent of the Investor for the Put Amount
      to be
      equal to the greater of 1) the maximum Put Amount as outlined in the Equity
      Line; or, 2) twenty percent (20%) of the total dollar volume per week during
      the
      Price Period of the Put.

     

    Section
      20.3 At the request of the Holder, at any time after the Company's current
      effective registration statement for the Equity Line of Credit with Dutchess
      Private Equities, LP (File No: 333-129928), has ten million (10,000,000) shares
      or less remaining for issuance, the Company shall immediately execute a new
      Investment Agreement for an Equity Line of Credit under the same terms and
      conditions as the previous Equity Line. The Company shall immediately prepare
      and file a registration statement for the registration of shares as set forth
      in
      the new Investment Agreement. The Holder shall also retain the right to
      determine the date of the filing of such registration statement. Failure to
      do
      any action outlined in this Article will result in an Event of
      Default.

     

    Section
      20.4 The Company shall diligently carry out all Puts and within twenty-four
      (24)
      hours, return all paperwork to the Investor.

     

    ARTICLE
      21 Security

     

    This
      Note
      is fully secured by the Security Agreement between the Company and the Holder
      dated March 23, 2006.

     

    ARTICLE
      22 Transfer Agent Instructions

     

    The
      Company shall continue to keep instructions on file with its transfer agent,
      irrevocably appointing Theodore Smith as the Company's agent for the purpose
      of
      having certificates issued, registered in the name of the Holder or Investor,
      for Shares representing such Puts, as specified from time to time by the Holder
      or Investor to the Company upon the Put Closing Date (as defined in the Equity
      Line), and for any and all Liquidated Damages, if any (as this term is defined
      in this Note or any Prior Notes ). Nothing in this Article 22 shall affect
      in
      any way the Holder's or Investor's obligations and agreement to comply with
      all
      applicable securities laws upon resale of Shares. The Company acknowledges
      that
      a breach by it of its obligations hereunder will cause irreparable harm to
      the
      Holder and Investor by vitiating the intent and purpose of the transaction
      contemplated hereby. Accordingly, the Company acknowledges that the remedy
      at
      law for a breach of its obligations under this Article 22 will be inadequate
      and
      agrees, in the event of a breach or threatened breach by the Company of the
      provisions of this Article 22, that the Holder shall be entitled, in addition
      to
      all other available remedies, to an injunction restraining any breach and
      requiring immediate issuance and transfer, without the necessity of showing
      economic loss and without any bond or other security being
      required.

     

    ARTICLE
      23 Integration

     

    The
      Company hereby acknowledges that with the execution of this Note, that Article
      1, Article 20, Article 21 and Article 22 of this Note, and all the Sections
      thereunder, shall supersede those respective Articles and Sections in the Prior
      Notes with the Holder dated March 23, 2006 and December 20, 2006. The Company
      hereby agrees that upon the completion of the obligations hereunder, this
      Article shall continue in full force and effect for the Prior Notes until such
      time as the full Face Amount have been paid in full.

     

    ARTICLE
      24 Miscellaneous

     

    Section
      24.1 This Note may be executed in two or more counterparts, all of which taken
      together shall constitute one instrument. Execution and delivery of this Note
      by
      exchange of facsimile copies bearing the facsimile signature of a party shall
      constitute a valid and binding execution and delivery of this Note by such
      party. Such facsimile copies shall constitute enforceable original
      documents.

     

    Section
      24.2 The Company warrants that the execution, delivery and performance of this
      Note by the Company and the consummation by the Company of the transactions
      contemplated hereby and thereby will not (i) result in a violation of the
      Articles of Incorporation, any Certificate of Designations, Preferences and
      Rights of any outstanding series of preferred stock of the Company or the
      By-laws or (ii) conflict with, or constitute a material default (or an event
      which with notice or lapse of time or both would become a material default)
      under, or give to others any rights of termination, amendment, acceleration
      or
      cancellation of, any material agreement, contract, indenture mortgage,
      indebtedness or instrument to which the Company or any of its Subsidiaries
      is a
      party, or result in a violation of any law, rule, regulation, order, judgment
      or
      decree, including United States federal and state securities laws and
      regulations and the rules and regulations of the principal securities exchange
      or trading market on which the Common Stock is traded or listed (the "Principal
      Market"), applicable to the Company or any of its Subsidiaries or by which
      any
      property or asset of the Company or any of its Subsidiaries is bound or
      affected. Neither the Company 

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    nor
      its Subsidiaries is in violation of any term of,
      or in default under, the Articles of Incorporation, any Certificate of
      Designations, Preferences and Rights of any outstanding series of preferred
      stock of the Company or the By-laws or their organizational charter or by-laws,
      respectively, or any contract, agreement, mortgage, indebtedness, indenture,
      instrument, judgment, decree or order or any statute, rule or regulation
      applicable to the Company or its Subsidiaries, except for possible conflicts,
      defaults, terminations, amendments, accelerations, cancellations and violations
      that would not individually or in the aggregate have a Material Adverse Effect
      as defined below. The business of the Company and its Subsidiaries is not being
      conducted, and shall not be conducted, in violation of any law, statute,
      ordinance, rule, order or regulation of any governmental authority or agency,
      regulatory or self-regulatory agency, or court, except for possible violations
      the sanctions for which either individually or in the aggregate would not have
      a
      Material Adverse Effect. The Company is not required to obtain any consent,
      authorization, permit or order of, or make any filing or registration (except
      the filing of a registration statement) with, any court, governmental authority
      or agency, regulatory or self-regulatory agency or other third party in order
      for it to execute, deliver or perform any of its obligations under, or
      contemplated by, this Note in accordance with the terms hereof or thereof.
      All
      consents, authorizations, permits, orders, filings and registrations which
      the
      Company is required to obtain pursuant to the preceding sentence have been
      obtained or effected on or prior to the date hereof and are in full force and
      effect as of the date hereof. The Company and its Subsidiaries are unaware
      of
      any facts or circumstances which might give rise to any of the foregoing. The
      Company is not, and will not be, in violation of the listing requirements of
      the
      Principal Market as in effect on the date hereof and on each of the Closing
      Dates and is not aware of any facts which would lead to delisting of the Common
      Stock by the Principal Market.

     

    Section
      24.3 The Company and its "Subsidiaries" (which for purposes of this Note means
      any entity in which the Company, directly or indirectly, owns capital stock
      or
      holds an equity or similar interest) are corporations duly organized and validly
      existing in good standing under the laws of the respective jurisdictions of
      their incorporation, and have the requisite corporate power and authorization
      to
      own their properties and to carry on their business as now being conducted.
      Both
      the Company and its Subsidiaries are duly qualified to do business and are
      in
      good standing in every jurisdiction in which their ownership of property or
      the
      nature of the business conducted by them makes such qualification necessary,
      except to the extent that the failure to be so qualified or be in good standing
      would not have a Material Adverse Effect. As used in this Note, "Material
      Adverse Effect" means any material adverse effect on the business, properties,
      assets, operations, results of operations, financial condition or prospects
      of
      the Company and its Subsidiaries, if any, taken as a whole, or on the
      transactions contemplated hereby or by the agreements and instruments to be
      entered into in connection herewith, or on the authority or ability of the
      Company to perform its obligations under the Note.

     

    Section
      24.4 Authorization; Enforcement; Compliance with Other Instruments.

     

    (i)
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Note, and to issue this Note and Incentive
      Shares in accordance with the terms hereof and thereof, (ii) the execution
      and
      delivery of this Note by the Company and the consummation by it of the
      transactions contemplated hereby and thereby, including without limitation
      the
      reservation for issuance and the issuance of the Incentive Shares pursuant
      to
      this Note, have been duly and validly authorized by the Company's Board of
      Directors and no further consent or authorization is required by the Company,
      its Board of Directors, or its shareholders, (iii) this Note has been duly
      and
      validly executed and delivered by the Company, and (iv) the Note constitutes
      the
      valid and binding obligations of the Company enforceable against the Company
      in
      accordance with their terms, except as such enforceability may be limited by
      general principles of equity or applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally, the enforcement of creditors' rights and
      remedies.

     

    Section
      24.5 This Note is the FINAL AGREEMENT between the Company and the Holder with
      respect to the terms and conditions set forth herein, and, the terms of this
      Note may not be contradicted by evidence of prior, contemporaneous, or
      subsequent oral agreements of the Parties. The execution and delivery of this
      Note is done in conjunction with the duly authorized and validly existing
      Security Agreement, as defined in Article 21.

     

    Section
      24.6 There are no disagreements of any kind presently existing, or reasonably
      anticipated by the Company to arise, between the Company and the accountants,
      auditors and lawyers formerly or presently used by the Company, including but
      not limited to disputes or conflicts over payment owed to such accountants,
      auditors or lawyers.

     

    Section
      24.7 All representations made by or relating to the Company of a historical
      nature and all undertakings described herein shall relate and refer to the
      Company, its predecessors, and the Subsidiaries.

     

    Section
      24.8 The only officer, director, employee and consultant stock option or stock
      incentive plan currently in effect or contemplated by the Company has been
      submitted to the Holder or is described or within past filings with the United
      States Securities and Exchange Commission. The Company aggress not to initiate
      or institute any such plan or to issue stock options.

     

    Section
      24.9 The Company acknowledges that its failure to timely meet any of its
      obligations hereunder, including, but without limitation, its obligations to
      make Payments, deliver shares and, as necessary, to register and maintain
      sufficient number of Shares, will cause the Holder to suffer irreparable harm
      and that the actual damage to the Holder will be difficult to ascertain.
      Accordingly, the parties agree that it is appropriate to include in this
      Debenture a provision for liquidated damages. The parties acknowledge and agree
      that the liquidated damages provision set forth in this section represents
      the
      parties' good faith effort to quantify such damages and, as such, agree that
      the
      form and amount of
      such
      liquidated damages are reasonable and do not constitute a penalty. The payment
      of liquidated damages shall not relieve the Company from its obligations to
      deliver the Common Stock pursuant to the terms of this Debenture.

     

    *.*
      *

     

    [BALANCE
      OF PAGE LEFT BLANK INTENTIONALLY]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Any
      misrepresentations shall be considered a breach of contract and an Event of
      Default under this Agreement and the Holder may seek to take actions as
      described under Article 4 of this Agreement.

     

    IN
      WITNESS WHEREOF, the Company has duly executed this Note as of the date first
      written above.

     

     

    
      US
        ENERGY INITIATIVES, INC.

    

    
      	 	 	 
	 	By:  	/s/ Mark
              Clancy
	 	
              
                

              

              Name:
                Mark Clancy

              Title:
                Chief Executive Officer

            
	 	 

    

     

    DUTCHESS
      PRIVATE EQUITIES FUND, II, L.P.

    BY
      ITS GENERAL PARTNER DUTCHESS

    CAPITAL
      MANAGEMENT, LLC

    
      	 	 	 
	 	By:  	/s/ Douglas
              Leighton
	 	
              
                

              

              Name:
                Douglas H. Leighton

              Title:
                A Managing Member

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