Document:

exhibit103transactionagr

                                                                 EXHIBIT 10.3                                                                                                                                                                                                                                              TRANSACTION AGREEMENT                              dated as of October 10, 2018                                                                            by and among                                LILIS ENERGY, INC.                            THE VÄRDE FUND VI-A, L.P.                       VÄRDE INVESTMENT PARTNERS, L.P.                        THE VÄRDE FUND XI (MASTER), L.P.            VÄRDE INVESTMENT PARTNERS (OFFSHORE) MASTER, L.P.                     THE VÄRDE SKYWAY MASTER FUND, L.P.                                        and                       THE VÄRDE FUND XII (MASTER), L.P.                                                                                                                                                                                                                                                                  KE 57151467  #5792953  

 

                               TABLE OF CONTENTS                                                                            Page   ARTICLE I. DEFINITIONS ........................................................................................................1        1.1         Definitions....................................................................................................1   ARTICLE II. PURCHASE AND SALE; ISSUE; AND GRANT ..............................................9        2.1         Purchase and Sale of Purchased Shares; Issue of Exchanged Shares ..........9        2.2         Deliveries ...................................................................................................10   ARTICLE III. REPRESENTATIONS AND WARRANTIES ................................................11        3.1         Representations and Warranties of the Company ......................................11        3.2         Representations and Warranties of the Värde Parties ................................21   ARTICLE IV. CONSENT OF THE SERIES C-1 HOLDERS................................................23   ARTICLE V. OTHER AGREEMENTS OF THE PARTIES .................................................23        5.1         Filings; Other Actions ................................................................................23        5.2         Transfer Restrictions ..................................................................................24        5.3         Furnishing of Information ..........................................................................25        5.4         Integration ..................................................................................................26        5.5         Securities Laws Disclosure; Publicity .......................................................26        5.6         Stockholder Rights Plan .............................................................................26        5.7         Use of Proceeds..........................................................................................27        5.8         Reservation and Listing of Securities ........................................................27        5.9         Company Stockholder Approval ................................................................28        5.10        Certain Transactions and Confidentiality ..................................................28        5.11        Form D; Blue Sky Filings ..........................................................................29        5.12        Tax Matters ................................................................................................30        5.13        Board Representation Right .......................................................................30   ARTICLE VI. MISCELLANEOUS ...........................................................................................30        6.1         Fees and Expenses .....................................................................................30        6.2         Survival; Limitation on Liability ...............................................................31        6.3         Entire Agreement .......................................................................................31        6.4         Notices .......................................................................................................31        6.5         Amendments; Waivers ...............................................................................32        6.6         Headings ....................................................................................................32        6.7         Successors and Assigns..............................................................................32        6.8         No Third-Party Beneficiaries .....................................................................32        6.9         Governing Law ..........................................................................................32        6.10        Waiver of Jury Trial ...................................................................................33        6.11        Execution ...................................................................................................33        6.12        Severability ................................................................................................33        6.13        Replacement of Securities..........................................................................33        6.14        Remedies ....................................................................................................33      

 

                             TABLE OF CONTENTS                                      (cont’d)                                                                            Page          6.15        Non-Recourse ............................................................................................34         6.16        Payment Set Aside .....................................................................................34         6.17        Independent Nature of Värde Parties’ Obligations and Rights ..................34         6.18        Liquidated Damages ..................................................................................35         6.19        Saturdays, Sundays, Holidays, etc .............................................................35         6.20        Construction and Interpretation .................................................................35      Schedule I:       Värde Party Allocation    Schedule 3.1(a):  Subsidiaries    Schedule 3.1(l):  Compliance    Schedule 3.1(v):  Registration Rights    Schedule 5.4:     Address for Notice    Exhibit A:        Registration Rights Agreement   Exhibit B:        Form of Second Lien Amendment    Exhibit C:        Form of Series C Certificate of Designation    Exhibit D:        Form of Series D Certificate of Designation    Exhibit E:        Form of Legal Opinion of Bracewell LLP    Exhibit F:        Form of Nevada Opinion                                               ii 

 

                                                                                                           TRANSACTION AGREEMENT          This Transaction Agreement (this “Agreement”) is dated as of October 10, 2018, between   Lilis Energy, Inc., a Nevada corporation (the “Company”), and The Värde Fund VI-A, L.P., Värde   Investment Partners, L.P., The Värde Fund XI (Master), L.P., Värde Investment Partners   (Offshore) Master, L.P., The Värde Skyway Master Fund, L.P. and The Värde Fund XII (Master),   L.P. (each, a “Värde Party” and collectively, the “Värde Parties”).          WHEREAS, the Company desires to issue and sell to the Värde Parties, and the Värde  Parties desire to purchase from the Company, 25,000 shares of the Series C-2 Preferred Stock (as   defined below), having the terms set forth in the Series C Certificate of Designation (as defined   below);          WHEREAS, shares of the Series C-2 Preferred Stock will be convertible into shares of the   Common Stock (as defined below) in accordance with the terms of the Series C Certificate of   Designation;          WHEREAS, the Company, the guarantors from time to time party thereto, the lenders party  thereto and Wilmington Trust, National Association, as administrative agent, are parties to the  Second Lien Credit Agreement (as defined herein);          WHEREAS, pursuant to Section 4 of the Second Lien Amendment (as defined herein), the  Company desires to issue to the Värde Parties, as consideration for the reduction of a portion of  the outstanding principal amount of the Term Loan (as defined herein), together with accrued and  unpaid interest thereon and the Make-Whole Amount (as defined herein) (such principal amount,  interest and Make-Whole Amount totaling $68,267,795 (the “Exchange Amount”)), (i) 5,952,763   shares of the Common Stock and (ii) 39,254 shares of the Series D Preferred Stock (as defined   below), having the terms set forth in the Series D Certificate of Designation (as defined below);           WHEREAS, shares of the Series D Preferred Stock will be convertible into shares of the   Common Stock in accordance with the terms of the Series D Certificate of Designation; and          WHEREAS, the Company and the Värde Parties are concurrently entering into the  Registration Rights Agreement (as defined below).         NOW, THEREFORE, in consideration of the mutual covenants contained in this  Agreement, and for other good and valuable consideration the receipt and adequacy of which are  hereby acknowledged, the Company and each Värde Party agree as follows:                                     ARTICLE I.                                                                             DEFINITIONS          1.1   Definitions. As used in this Agreement, the following terms have the meanings set   forth in this Section 1.1:                “2016 Plan” means the Lilis Energy, Inc. 2016 Omnibus Incentive Plan, as         amended from time to time.      

 

                       “Action” has the meaning ascribed to such term in Section 3.1(j).          “Affiliate” means any Person that, directly or indirectly through one or more   intermediaries, controls or is controlled by or is under common control with a Person, as   such terms are used in and construed under Rule 405 under the Securities Act; provided,   that no portfolio company of a Värde Party or its Affiliates shall be considered or otherwise  deemed an Affiliate thereof.          “Agreement” has the meaning ascribed to such term in the preamble.          “Articles of Incorporation” means the Amended and Restated Articles of   Incorporation of the Company, dated as of October 10, 2011, as amended from time to   time.          “Board of Directors” means the board of directors of the Company.          “Business Day” means any day except any Saturday, any Sunday, any day which   is a federal legal holiday in the United States or any day on which banking institutions in   the State of New York or Texas are authorized or required by law or other governmental   action to close.          “Capitalization Date” has the meaning ascribed to such term in Section 3.1(g).          “Certificates of Designation” means the Series C Certificate of Designation and the   Series D Certificate of Designation.          “Code” means the Internal Revenue Code of 1986, as amended from time to time.          “Commission” means the United States Securities and Exchange Commission.          “Common Stock” means the common stock of the Company, par value $0.0001 per   share, and any other class of securities into which such securities may hereafter be   reclassified or changed.          “Common Stock Equivalents” means any securities of the Company or the   Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,   including, without limitation, any debt, preferred stock, right, option, warrant or other   instrument that is at any time convertible into or exercisable or exchangeable for, or   otherwise entitles the holder thereof to receive, Common Stock.          “Company” has the meaning ascribed to such term in the preamble.          “Company Information” has the meaning ascribed to such term in Section 5.10(b).          “Company Stock Awards” has the meaning ascribed to such term in Section 3.1(g).          “Company Stockholders” means the holders of shares of the Common Stock.          “Effect” means any change, event, effect or circumstance.                                    2  

 

                       “Environmental Laws” means any Law relating in any way to protection of the   environment, preservation or reclamation of natural resources, pollution, occupational or   public health or safety, or the management, release or threatened release of, or exposure to,   any Hazardous Material.          “Environmental Liability” means any liability, contingent or otherwise (including   any liability for damages, costs of environmental remediation, fines, penalties or   indemnities), of any Värde Party directly or indirectly resulting from or based upon   (a) violation of or liability under any Environmental Law, (b) the generation, use, handling,   transportation, storage, treatment or disposal (or arrangement for the disposal) of any   Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or   threatened release of any Hazardous Materials into the environment or (e) any contract,   agreement, Proceeding or other arrangement pursuant to which liability is assumed or   imposed with respect to any of the foregoing.          “ERISA” means the Employee Retirement Income Security Act of 1974, as   amended from time to time.          “ERISA Affiliate” means any trade or business (whether or not incorporated) that,   together with the Company, is treated as a single employer under Section 414(b) or (c) of   the Code or, solely for purposes of Section 302 or Title IV of ERISA and Section 412 or   430 of the Code, is treated as a single employer under Section 414 of the Code.          “ERISA Event” means: (a) any “reportable event,” as defined in Section 4043 of   ERISA or the regulations issued thereunder with respect to a Plan (other than an event for  which the 30 day notice period is waived); (b) the failure of any Plan to satisfy the  minimum funding standard applicable to that Plan for a plan year under Section 412 or 430  of the Code or Section 302 of ERISA; (c) the filing pursuant to Section 412(c) of the Code  or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard  with respect to any Plan; (d) the incurrence by the Company or any ERISA Affiliate of any  liability under Title IV of ERISA with respect to the termination of any Plan or  Multiemployer Plan; (e) the receipt by the Company or any ERISA Affiliate from the  PBGC or a plan administrator of any notice relating to an intention to terminate any Plan  or Multiemployer Plan or to appoint a trustee to administer any Plan; (f) the incurrence by  the Company or any ERISA Affiliate of any liability with respect to the withdrawal or  partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Company  or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or  a determination that a Multiemployer Plan is, or is expected to be, insolvent within the  meaning of Title IV of ERISA.          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the   rules and regulations promulgated thereunder.          “Exchange Amount” had the meaning ascribed to such term in the recitals.          “Exchanged Common Shares” has the meaning ascribed to such term in   Section 2.1(b).                                     3  

 

                      “Exchanged Preferred Shares” has the meaning ascribed to such term in  Section 2.1(b).         “Exchanged Shares” has the meaning ascribed to such term in Section 2.1(b).         “FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.         “First Lien Credit Agreement” means that certain Amended and Restated Senior  Secured Term Loan Credit Agreement, dated as of January 30, 2018, by and among the  Company, the guarantors from time to time party thereto, the lenders party thereto and  Riverstone Credit Management, LLC, as administrative agent and collateral agent, as  amended.         “GAAP” has the meaning ascribed to such term in Section 3.1(h).         “Governmental Entity” means any court, administrative agency or commission or  other governmental or arbitral body or authority or instrumentality, whether federal, state,  local or foreign, and any applicable industry self-regulatory organization.         “Hazardous Materials” means all pollutants, contaminants, chemicals, materials,  substances, wastes, mixtures, pesticides, and any other substance for which liability or  standards of conduct may be imposed under any Environmental Law, including petroleum  or petroleum distillates, asbestos or asbestos containing materials, polychlorinated  biphenyls, radon gas, noise, odor, mold, infectious or medical wastes and all other  materials, substances or wastes of any nature regulated pursuant to any Environmental  Law.         “Intellectual Property Rights” has the meaning ascribed to such term in  Section 3.1(p).         “Knowledge of the Company” means the actual knowledge of one or more  executive officers of the Company.         “Law” means any federal, state, local, municipal, foreign or other law, statute,  constitution, principle of common law, resolution, ordinance, code, order, edict, decree,  rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented  or otherwise put into effect by or under the authority of any Governmental Entity.         “Legend Removal Date” has the meaning ascribed to such term in Section 5.2(d).         “Lien” means a lien, charge, pledge, security interest, encumbrance, right of first  refusal, preemptive right or other restriction.         “Make-Whole Amount” has the meaning ascribed to such term in the Second Lien  Credit Agreement.         “Material Adverse Effect” means, with respect to the Company, any Effect that,  individually or taken together with all other Effects that have occurred prior to the date of                                   4  

 

                determination of the occurrence of the Material Adverse Effect, is or is reasonably likely  to be materially adverse to the business, assets, results of operations or condition (financial  or otherwise) of the Company and its Subsidiaries, taken as a whole; provided, that in no  event shall any of the following, alone or in combination, be deemed to constitute a  Material Adverse Effect or be taken into account in determining whether a Material  Adverse Effect has occurred: (i) any change in the Company’s stock price or trading  volume, (ii) any failure by the Company to meet revenue, earnings production or other  projections, (iii) any change in commodity prices or other Effect affecting the oil and gas  industry generally, or the United States economy generally, or any Effect that results from  changes affecting general worldwide economic or capital market conditions, in each case  except to the extent such change of Effect disproportionately affects the Company and its  Subsidiaries, taken as a whole, relative to other oil and gas exploration and production  companies operating in the United States, (iv) any Effect caused by or resulting from the  announcement or pendency of the transactions contemplated by the Transaction  Documents or the RBL Credit Agreement or the identity of a Värde Party or any of its  Affiliates in connection with the transactions contemplated by this Agreement, (v) acts of  war or terrorism or natural disasters, (vi) the performance of the obligations under the  Transaction Documents and the consummation of the transactions contemplated hereby  and thereby, including compliance with the covenants set forth herein and therein, or any  action taken or omitted to be taken by the Company at the request or with the prior consent  of the Värde Parties, (vii) in and of itself, the commencement of any suit, action or  proceeding (provided, that such exclusion shall not apply to any underlying fact, event or  circumstance that may have caused or contributed to such action, suit or proceeding), or  any liability, sanction or penalty arising from any governmental proceeding or  investigation that was commenced prior to the date of this Agreement and disclosed by the  Company in this Agreement, in a correspondingly identified schedule attached hereto or in  any SEC Report filed with or furnished to the Commission prior to the date of this  Agreement, (viii) changes in GAAP or other accounting standards (or any interpretation  thereof) or (ix) changes in any Laws or other binding directives issued by any  Governmental Entity or interpretations or enforcement thereof; provided, that (A) the  exceptions in clause (i) or (ii) shall not prevent or otherwise affect a determination that any  Effect underlying such change or failure has resulted in, or contributed to, a Material  Adverse Effect, (B) without limiting clause (iii), with respect to clauses (viii) and (ix), such  Effects, alone or in combination, may be deemed to constitute, or be taken into account in  determining whether a Material Adverse Effect has occurred, but only to the extent that  such Effects disproportionately affect the Company and its Subsidiaries, taken as a whole,  relative to other oil and gas exploration and production companies operating in the United  States.         “Money Laundering Laws” has the meaning ascribed to such term in  Section 3.1(ii).         “Multiemployer Plan” means a multiemployer plan as defined in  Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate contributes  or has any obligations or liabilities (current or contingent).         “OFAC” has the meaning ascribed to such term in Section 3.1(gg).                                   5  

 

                       “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined   in ERISA and any successor entity performing similar functions.          “Person” means an individual or corporation, partnership, trust, incorporated or   unincorporated association, joint venture, limited liability company, joint stock company,   government (or an agency or subdivision thereof) or other entity of any kind.          “Plan” means any employee pension benefit plan (other than a Multiemployer Plan)   subject to the provisions of Title IV of ERISA or Section 412 or 430 of the Code or Section   302 of ERISA, and in respect of which the Company or any ERISA Affiliate is (or, if such  plan were terminated, would under Section 4069 of ERISA be deemed to be) an  “employer” as determined under ERISA.          “Preferred Stock” means the Series C-1 Preferred Stock, the Series C-2 Preferred   Stock and the Series D Preferred Stock.          “Proxy Statement” has the meaning ascribed to such term in Section 5.9.          “Purchased Shares” has the meaning ascribed to such term in Section 2.1(a).          “RBL Credit Agreement” means that certain Second Amended and Restated Senior   Secured Revolving Credit Agreement, dated as of October 10, 2018, by and among the   Company, the guarantors from time to time party thereto, the lenders party thereto and   BMO Harris Bank, N.A., as administrative agent and collateral agent, as amended from   time to time (in accordance with the Second Lien Credit Agreement, any applicable   intercreditor agreement and the Certificate of Designations).          “Registration Rights Agreement” means that certain Registration Rights   Agreement, dated as of the date hereof, by and among the Company and the Värde Parties,   in the form of Exhibit A attached hereto.           “Registration Statement” means a registration statement meeting the requirements   set forth in the Registration Rights Agreement and covering the resale of the Underlying   Shares by each Värde Party as provided for in the Registration Rights Agreement.          “Representatives” means, with respect to a specified Person, the investors, officers,   directors, managers, employees, agents, advisors, counsel, accountants, investment   bankers and other representatives of such Person.          “Required Approvals” has the meaning ascribed to such term in Section 3.1(e).          “Required Minimum” means, as of any date, the maximum aggregate number of   shares of the Common Stock then issuable upon conversion in full of all then outstanding   shares of the Purchased Shares and the Exchanged Preferred Shares, ignoring any   conversion limits set forth in the Certificates of Designation.          “Requisite Stockholder Approval” has the meaning ascribed to such term in   Section 5.9.                                    6  

 

                       “Rule 144” means Rule 144 promulgated by the Commission pursuant to the   Securities Act, as such Rule may be amended or interpreted from time to time, or any rule   or regulation hereafter adopted by the Commission having substantially the same purpose   and effect as such Rule.          “SEC Reports” has the meaning ascribed to such term in Section 3.1(h).          “Second Lien Amendment” means Amendment No. 6 to the Second Lien Credit   Agreement, dated as of the date hereof, by and among the Company, the guarantors party   thereto, the lenders party thereto and Wilmington Trust, National Association, as   administrative agent, in the form of Exhibit B attached hereto.          “Second Lien Credit Agreement” means that certain Credit Agreement, dated as of   April 26, 2017, by and among the Company, the guarantors from time to time party thereto,   the lenders party thereto and Wilmington Trust, National Association, as administrative   agent, as may be amended, restated, amended and restated, replaced, refinanced,   supplemented or otherwise modified from time to time (including, for the avoidance of   doubt, documentation evidencing the Term Loan Take Back Debt (as defined therein)).          “Securities” means the Exchanged Shares, the Purchased Shares and the   Underlying Shares.          “Securities Act” means the Securities Act of 1933, as amended, and the rules and   regulations of the Commission promulgated thereunder.          “Securities Purchase Agreement” means the Securities Purchase Agreement, dated   January 30, 2018 among the Company and the original Holders (as defined therein), as  amended, modified or supplemented from time to time in accordance with its terms.          “Series C Certificate of Designation” means the Amended and Restated Certificate   of Designation of Preferences, Rights and Limitations of Series C-1 9.75% Convertible   Participating Preferred Stock and Series C-2 9.75% Convertible Participating Preferred   Stock filed by the Company with the Secretary of State of Nevada, in the form of Exhibit C   attached hereto.          “Series C-1 Preferred Stock” means the Company’s Series C-1 9.75% Convertible   Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences   and privileges set forth in the Series C Certificate of Designation.          “Series C-2 Preferred Stock” means the Company’s Series C-2 9.75% Convertible   Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences   and privileges set forth in the Series C Certificate of Designation.          “Series D Certificate of Designation” means the Certificate of Designation of   Preferences, Rights and Limitations of Series D 8.25% Convertible Participating Preferred   Stock filed by the Company with the Secretary of State of Nevada, in the form of Exhibit D   attached hereto.                                     7  

 

                       “Series D Preferred Stock” means the Company’s Series D 8.25% Convertible   Participating Preferred Stock, par value $0.0001 per share, having the rights, preferences   and privileges set forth in the Series D Certificate of Designation.          “Stated Value” has the meaning ascribed to such term in the Certificates of   Designation, as applicable.          “Stockholder Meeting” has the meaning ascribed to such term in Section 5.9.          “Subscription Amount” means, as to each Värde Party, the aggregate amount to be   paid for the Purchased Shares purchased by such Värde Party hereunder as set forth   opposite such Värde Party’s name on Schedule I hereto under the heading “Purchase—  Subscription Amount.”          “Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a)   and, where applicable, also includes any direct or indirect subsidiary of the Company   formed or acquired after the date hereof.          “Tax” means any federal, state, local, or non-U.S. income, gross receipts, license,   payroll, employment, excise, severance, stamp, occupation, premium, windfall profits,   environmental, customs duties, capital stock, franchise, profits, withholding, social   security, unemployment, disability, real property, personal property, sales, use, transfer,   registration, value added, alternative or add-on minimum, estimated or other tax of any   kind whatsoever, including any interest, penalty or addition thereto.          “Tax Return” means any return, declaration, report, claim for refund or information   return or statement relating to Taxes, including any schedule or attachment thereto, and  including any amendment thereof.          “Term Loan” has the meaning ascribed to such term in the Second Lien Credit   Agreement.          “Trading Day” means a day on which the principal Trading Market is open for   trading.          “Trading Market” means any of the following markets or exchanges on which the   Common Stock is listed or quoted for trading on the date in question: the NYSE American,   the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,   the New York Stock Exchange or NYSE National (or any successors to any of the   foregoing).          “Transaction Documents” means this Agreement, the Certificates of Designation,   the Registration Rights Agreement, and the Second Lien Amendment, in each case   including all exhibits and schedules thereto and hereto.          “Transfer Agent” means Corporate Stock Transfer, Inc., the current transfer agent   and registrar for the Common Stock, and any successor transfer agent and registrar for the   Common Stock.                                    8  

 

                       “Underlying Shares” means the shares of Common Stock issuable upon conversion   of the Purchased Shares and the Exchanged Preferred Shares.          “Värde Party” and “Värde Parties” have the meanings ascribed to such terms in the   preamble.          “Värde Parties’ Transaction Expense Amount” means all reasonable and   documented out-of-pocket fees and expenses incurred by the Värde Parties in connection   with the transactions contemplated by the Transaction Documents.          “VWAP” means, for any date, the daily volume weighted average price of the   Common Stock for such date (or the nearest preceding date) on the Trading Market on   which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based   on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City   time)).          “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a   complete or partial withdrawal from such Multiemployer Plan, as such terms are defined   in Part I of Subtitle E of Title IV of ERISA.                                ARTICLE II.                                                   PURCHASE AND SALE; ISSUE; AND GRANT    2.1   Purchase and Sale of Purchased Shares; Issue of Exchanged Shares.          (a)   On the terms and subject to the conditions set forth herein, the Company   hereby sells to the Värde Parties, and the Värde Parties, severally and not jointly, hereby   purchase from the Company, an aggregate of 25,000 shares of the Series C-2 Preferred   Stock (the “Purchased Shares”) with an aggregate Stated Value of $25,000,000, with each   Värde Party purchasing such number of shares of the Series C-2 Preferred Stock as set  forth opposite such Värde Party’s name on Schedule I hereto, at a purchase price of $1,000   per share of Series C-2 Preferred Stock.          (b)   On the terms and subject to the conditions set forth herein and as   consideration for the reduction of a portion of the outstanding principal amount of the Term   Loan, together with accrued and unpaid interest thereon and the Make-Whole Amount  pursuant to Section 4 of the Second Lien Amendment, the Company hereby issues to the  Värde Parties (i) an aggregate of 5,952,763 shares of the Common Stock (the “Exchanged   Common Shares”), with each Värde Party receiving such number of shares of the Common   Stock as set forth opposite such Värde Party’s name on Schedule I hereto and (ii) an   aggregate of 39,254 shares of the Series D Preferred Stock (the “Exchanged Preferred   Shares” and, together with the Exchanged Common Shares, the “Exchanged Shares”), with   an aggregate Stated Value of $39,254,000, with each Värde Party receiving such number   of shares of the Series D Preferred Stock as set forth opposite such Värde Party’s name on   Schedule I hereto. The Exchanged Common Shares correspond to $29,013,795 of the   Exchange Amount, based on an agreed exchange price of $5.00 per share of Common   Stock plus an additional 150,000 shares of Common Stock; and the Exchanged Preferred                                    9  

 

                Shares correspond to $39,254,000 of the Exchange Amount, based on an agreed exchange  price of $1,000 per share of Series D Preferred Stock.   2.2   Deliveries.         (a)   On the date hereof, the Company shall deliver or cause to be delivered to  each Värde Party the following:               (i)   evidence of the number of shares of the Purchased Shares issued to        such Värde Party having been issued in book-entry form to such Värde Party;               (ii)  evidence of the number of shares of the Exchanged Shares issued to        such Värde Party having been issued in book-entry form to such Värde Party;               (iii) evidence that the Series C Certificate of Designation has been filed        with, and accepted by, the Secretary of State of the State of Nevada;               (iv)  evidence that the Series D Certificate of Designation has been filed        with, and accepted by, the Secretary of State of the State of Nevada;               (v)   the Registration Rights Agreement duly executed by the Company;              (vi)  the Second Lien Amendment duly executed by the Company and       the guarantors party thereto;              (vii) evidence that a number of Underlying Shares at least equal to the       Required Minimum has been reserved by the Company and approved, subject to       official notice of issuance, for listing on the NYSE American;              (viii) evidence that the First Lien Credit Agreement has been terminated       and no principal amount of the Term Loan (as defined in the First Lien Credit       Agreement) remains outstanding;              (ix)  a certificate of the Company’s Secretary, dated as of the date hereof,       certifying (A) the Articles of Incorporation and bylaws, as then in effect and       attached thereto, (B) the resolutions adopted by the Board of Directors authorizing       the transactions contemplated hereby and (C) as to the signatures and authority of       the Persons signing the Transaction Documents and related documents on behalf of       the Company;               (x)    an opinion from Bracewell LLP, in substantially the form attached        hereto as Exhibit E, which shall be addressed to the Värde Parties and dated as of        the date hereof;               (xi)  an opinion of Nevada counsel, in substantially the form attached        hereto as Exhibit F, which shall be addressed to the Värde Parties and dated as of        the date hereof;                                     10  

 

                       (xii) payment of the Värde Parties’ Transaction Expense Amount,               payable by wire transfer of immediately available funds to the accounts designated               by the Värde Parties prior to the date hereof; and                      (xiii) a cross-receipt, duly executed by the Company, acknowledging               receipt from the Värde Parties of the aggregate Subscription Amount.                (b)   On the date hereof, each Värde Party shall deliver or cause to be delivered        to the Company the following:                     (i)   payment of such Värde Party’s Subscription Amount in cash by wire              transfer of immediately available funds to the account designated by the Company              prior to the date hereof;                     (ii)   the Registration Rights Agreement duly executed by such Värde               Parties;                      (iii) the Second Lien Amendment duly executed by such Värde Parties               and the other lenders party thereto; and                      (iv)  a cross-receipt, duly executed by such Värde Party, acknowledging               such Värde Party’s receipt of the number of shares of the Purchased Shares and the               Exchanged Shares, respectively, set forth opposite such Värde Party’s name on               Schedule I hereto.                                      ARTICLE III.                                                                REPRESENTATIONS AND WARRANTIES          3.1   Representations and Warranties of the Company. The Company hereby represents   and warrants to each Värde Party, as of the date hereof, that, except as disclosed in the SEC Reports   filed with or furnished to the Commission and publicly available prior to the date of this Agreement   (excluding any risk factor disclosure and disclosure of risks included in any “forward-looking  statements” disclaimer or other statements included in such SEC Reports to the extent that they  are predictive, forward-looking or primarily cautionary in nature, in each case other than any  specific factual information contained therein, and excluding any supplement, modification or  amendment thereto made after the date hereof):                (a)   Subsidiaries. The Company owns, directly or indirectly, all of the capital         stock or other equity interests of each Subsidiary free and clear of any Liens (except for         Liens created under or expressly permitted by the RBL Credit Agreement and the Second         Lien Credit Agreement), and all of the issued and outstanding shares of capital stock or         other equity interests of each Subsidiary have been validly issued, are fully paid and         nonassessable (except in the case of any Subsidiary that is a limited liability company, as         such nonassessability may be affected by the applicable limited liability company Law)         and were not issued in violation of any preemptive or similar rights to subscribe for or         purchase securities. None of the Company’s Subsidiaries is currently prohibited, directly         or indirectly, from paying any dividends or distributions to the Company, from making any                                          11  

 

                other distribution on such Subsidiary’s capital stock or other equity securities, from  repaying to the Company any loans or advances to such Subsidiary from the Company or  from transferring any of such Subsidiary’s property or assets to the Company or any other  Subsidiary of the Company, except for (i) such prohibitions under applicable Law,  applicable organizational or charter documents, the RBL Credit Agreement or the Second  Lien Credit Agreement, (ii) restrictions on the subletting, assignment or transfer of any  property, right or asset that is subject to a lease, license or similar contract, or the  assignment or transfer of any such lease, license or other similar contract and (iii) other  restrictions incurred in the ordinary course of business under agreements or instruments  not relating to indebtedness of the Company or any of its Subsidiaries.         (b)   Organization and Qualification.               (i)   The Company and each of the Subsidiaries is an entity duly        incorporated or otherwise organized, validly existing and in good standing under        the laws of the jurisdiction of its incorporation or organization, with the requisite        corporate or other applicable entity power and authority to own and use its        properties and assets and to carry on its business as currently conducted. Neither        the Company nor any Subsidiary is in violation or default of any of the provisions        of its respective certificate or articles of incorporation, bylaws or other        organizational or charter documents.               (ii)  Each of the Company and the Subsidiaries is duly qualified to        conduct business and is in good standing as a foreign corporation or other entity in        each jurisdiction in which the nature of the business conducted or property owned        by it makes such qualification necessary, except to the extent that any failure to be        so qualified or in good standing has not had, and would not reasonably be expected        to have, a Material Adverse Effect.         (c)   Authorization; Enforcement. The Company has the requisite corporate  power and authority to enter into and to consummate the transactions contemplated by the  Transaction Documents and otherwise to carry out its obligations hereunder and  thereunder. Except for obtaining the Requisite Stockholder Approval, the execution and  delivery of the Transaction Documents by the Company and the consummation by it of the  transactions contemplated hereby and thereby have been duly authorized by all necessary  corporate action on the part of the Company and no further approval of the Board of  Directors or the Company’s stockholders is required in connection herewith or therewith.  The Transaction Documents to which the Company is a party have been (or upon delivery  or filing thereof will have been) duly executed by the Company and, when delivered or  filed with the Secretary of State of the State of Nevada, as applicable, in accordance with  the terms hereof and thereof, will constitute the valid and binding obligations of the  Company enforceable against the Company in accordance with their terms (except as  enforcement may be limited by applicable bankruptcy, insolvency, reorganization,  moratorium, fraudulent transfer and similar laws of general applicability relating to or  affecting creditors’ rights or by general equity principles).                                    12  

 

                       (d)   No Conflicts. The execution, delivery and performance by the Company of   the Transaction Documents to which it is a party and the consummation by it of the   transactions contemplated hereby and thereby do not and will not: (i) conflict with or   violate any provision of the Company’s or any Subsidiary’s certificate or articles of   incorporation, bylaws or other organizational or charter documents, (ii) assuming the due   execution and delivery of each of the RBL Credit Agreement and the Second Lien   Amendment by the parties thereto, conflict with, or constitute a material default (or an   event that with notice or lapse of time or both would become a material default) under,   result in the creation of any Lien upon any of the properties or assets of the Company or   any Subsidiary, or give to others any rights of termination, amendment, acceleration or   cancellation (with or without notice, lapse of time or both) of, any agreement, credit   facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise   and including, for the avoidance of doubt, the RBL Credit Agreement and the Second Lien   Credit Agreement) to which the Company or any Subsidiary is a party or by which any   property or asset of the Company or any Subsidiary is bound or, (iii) subject to the Required   Approvals, conflict with or result in a material violation of any law, rule, regulation, order,   judgment, injunction, decree or other restriction of any court or governmental authority to   which the Company or a Subsidiary is subject (including federal and state securities laws   and regulations), or by which any property or asset of the Company or a Subsidiary is   bound.          (e)   Filings, Consents and Approvals. Assuming the due execution and delivery   of each of the RBL Credit Agreement and the Second Lien Amendment by the parties   thereto, the Company is not required to obtain any consent, waiver, authorization or order   of, give any notice to, or make any filing or registration with, any Governmental Entity or   other Person in connection with the execution, delivery and performance by the Company   of the Transaction Documents, other than: (i) as contemplated by Sections 5.5, 5.8, 5.9 and   5.11; (ii) as contemplated by the Registration Rights Agreement; (iii) as required in   connection with the listing of the Exchanged Common Shares and the Underlying Shares   on the NYSE American; (iv) the filing of the Certificates of Designation with the Secretary   of State of the State of Nevada; and (v) as may be required under the Hart-Scott-Rodino   Antitrust Improvements Act of 1976, as amended in connection with the conversion of   shares of the Preferred Stock (collectively, the “Required Approvals”).          (f)   Issuance of the Securities. The Purchased Shares and the Exchanged Shares   have been duly authorized. When the Certificates of Designation have been filed with the   Secretary of State of the State of Nevada, the Purchased Shares have been issued and paid   for and the Exchanged Shares have been issued, in accordance with the Transaction   Documents, the Purchased Shares and the Exchanged Shares will be duly and validly   issued, fully paid and nonassessable and free and clear of all Liens imposed by, or arising  through, the Company other than restrictions on transfer provided for in the Transaction  Documents. Each of the Underlying Shares, when issued in accordance with the terms of  the Transaction Documents, will be validly issued, fully paid and nonassessable and free  and clear of all Liens imposed by, or arising through, the Company other than restrictions  on transfer provided for in the Transaction Documents. The Company has reserved from  its duly authorized Common Stock a number of shares of the Common Stock for issuance  of the Underlying Shares at least equal to the Required Minimum.                                    13  

 

                       (g)   Capitalization. The authorized shares of capital stock consist of   (i) 150,000,000 shares of the Common Stock and (ii) 10,000,000 shares of preferred stock,   par value $0.0001 per share. As of the close of business on September 30, 2018 (the   “Capitalization Date”), (i) 65,900,378 shares of the Common Stock were issued and   outstanding, (ii) 100,000 shares of preferred stock (all designated Series C-1 Preferred   Stock) were issued and outstanding, (iii) 5,099,450 shares of the Common Stock were   reserved for issuance upon the exercise of stock options outstanding on such date and   zero shares of the Common Stock were reserved for issuance upon the exercise or payment   of stock units (including deferred stock units, restricted stock and restricted stock units) or   other equity-based incentive awards granted pursuant to any plans, agreements or   arrangements of the Company and outstanding on such date (collectively, the “Company   Stock Awards”), (iv) 5,137,329 shares of the Common Stock were reserved for issuance   upon the exercise of outstanding warrants and 20,807,726 conversion of outstanding Series   C-1 Preferred Stock, (v) 24,143,977 shares of the Common Stock were reserved for   issuance upon conversion of the Second Lien Credit Agreement and (vi) 253,598 shares of   the Common Stock were held by the Company in its treasury. Since the Capitalization   Date, the Company has not sold or issued or repurchased, redeemed or otherwise acquired   any shares of the Company’s capital stock or other equity securities other than shares of   the Common Stock issued in respect of the exercise of Company Stock Awards in the   ordinary course of business. Except as contemplated by the Transaction Documents and   the Second Lien Credit Agreement and as set forth in this Section 3.1(g), there are no   outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any  character whatsoever relating to, or securities, rights or obligations convertible into or  exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire  any  shares of the Common Stock, or contracts, commitments, understandings or  arrangements by which the Company or any Subsidiary is or may become bound to issue  additional shares of the Common Stock or Common Stock Equivalents. None of (i) the   issuance and sale of the Purchased Shares or the issuance of the Exchanged Shares pursuant   to this Agreement or (ii) the issuance of shares of the Common Stock upon conversion of   the Preferred Stock will obligate the Company to issue shares of the Common Stock or   other securities to any Person (other than the Värde Parties) or result in a right of any holder   of Company securities to adjust the exercise, conversion, exchange or reset price under any   of such securities. All of the outstanding shares of capital stock of the Company have been   duly authorized and validly issued, are fully paid and nonassessable and have been issued   in compliance with all federal and state securities Laws, and none of such outstanding   shares was issued in violation of any preemptive rights or similar rights to subscribe for or   purchase securities. Except as provided in the Transaction Documents and the Second Lien   Credit Agreement, there are no stockholders agreements, voting agreements or other   similar agreements with respect to the Company’s capital stock to which the Company is   a party or, to the Knowledge of the Company, between or among any of the Company’s   stockholders.          (h)   SEC Reports; Financial Statements.                (i)   The Company has filed with or furnished to the Commission all         reports, schedules, forms, statements and other documents required to be filed with         or furnished to the Commission by the Company under the Securities Act and the                                    14  

 

                      Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, since        December 31, 2015 (all such materials filed or furnished by the Company, whether        or not required to be filed or furnished, including the exhibits thereto and        documents incorporated by reference therein, being collectively referred to herein        as the “SEC Reports”) on a timely basis or has received a valid extension of such        time of filing and has filed any such SEC Reports prior to the expiration of any such        extension. As of their respective dates, the SEC Reports complied in all material        respects with the requirements of the Securities Act and the Exchange Act, as        applicable, and none of the SEC Reports, when filed, contained any untrue        statement of a material fact or omitted to state a material fact required to be stated        therein or necessary in order to make the statements therein, in the light of the        circumstances under which they were made, not misleading. The financial        statements of the Company included in the SEC Reports complied in all material        respects with applicable accounting requirements and the rules and regulations of        the Commission with respect thereto as in effect at the time of filing. Such financial        statements have been prepared in accordance with United States generally accepted        accounting principles applied on a consistent basis during the periods involved        (“GAAP”), except as may be otherwise specified in such financial statements or the        notes thereto, and fairly present in all material respects the financial position of the        Company and its consolidated Subsidiaries as of and for the dates thereof and the       results of operations and cash flows for the periods then ended, subject, in the case       of unaudited statements, to normal, immaterial, year-end audit adjustments.               (ii)  The Company (i) has implemented and maintains disclosure        controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that        are reasonably designed to ensure that material information relating to the        Company, including its Subsidiaries, is made known to the individuals responsible        for the preparation of the Company’s filings with the Commission and (ii) has       disclosed, based on its most recent evaluation prior to the date of this Agreement,       to the Company’s outside auditors and the Board of Directors’ audit committee       (A) any significant deficiencies and material weaknesses in the design or operation       of internal controls over financial reporting (as defined in Rule 13a-15(f) under the       Exchange Act) that are reasonably likely to materially adversely affect the       Company’s ability to record, process, summarize and report financial information       and (B) any fraud, whether or not material, that involves management or other       employees who have a significant role in the Company’s internal controls over       financial reporting.         (i)   Material Changes; Undisclosed Events, Liabilities or Developments. Since  the date of the latest audited financial statements included within the SEC Reports, except  as specifically disclosed in a subsequent SEC Report filed or furnished prior to the date  hereof: (i) there has been no event, occurrence or development that has had or that would  reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not  incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued  expenses incurred in the ordinary course of business consistent with past practice,  (B) liabilities not required to be reflected in the Company’s financial statements pursuant  to GAAP and (C) liabilities under the Transaction Documents, the RBL Credit Agreement                                   15  

 

                and the Second Lien Credit Agreement and (iii) the Company has not altered its methods  of accounting.         (j)   Litigation. There is no action, suit, inquiry, notice of violation, proceeding  or investigation pending or, to the Knowledge of the Company, threatened against or  affecting the Company, any Subsidiary or any of their respective properties before or by  any Government Entity (collectively, an “Action”) which (i) adversely affects or  challenges the legality, validity or enforceability of any of the Transaction Documents or  (ii) if adversely determined, would reasonably be expected to have a Material Adverse  Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof (in his  or her capacity as a director or officer of the Company), is or has been the subject of any  Action involving a claim of violation of or liability under federal or state securities laws or  a claim of breach of fiduciary duty. There has not been, and to the Knowledge of the  Company, there is not pending or contemplated, any investigation by the Commission  involving the Company or any current or, to the Knowledge of the Company, former  director or officer of the Company (in his or her capacity as a director or officer of the  Company). The Commission has not issued any stop order or other order suspending the  effectiveness of any registration statement filed by the Company under the Exchange Act  or the Securities Act.         (k)  Labor Relations. No strike, concerted refusal to work or other similar  material labor dispute exists or, to the Knowledge of the Company, is imminent with  respect to any of the employees of the Company. None of the Company’s or its  Subsidiaries’ employees is a member of a union that relates to such employee’s  relationship with the Company or such Subsidiary, and neither the Company nor any of its  Subsidiaries is a party to a collective bargaining agreement. To the Knowledge of the  Company, no executive officer of the Company or any Subsidiary, is, or is now expected  to be, in violation of any material term of any employment contract, confidentiality,  disclosure or proprietary information agreement or noncompetition agreement, or any  other contract or agreement or any restrictive covenant in favor of any third party, and the  continued employment of each such executive officer does not subject the Company or  any of its Subsidiaries to any liability with respect to any of the foregoing matters. The  Company and its Subsidiaries are in material compliance with all Laws relating to  employment and employment practices, terms and conditions of employment and wages  and hours. There are no material Actions against the Company pending, or to the  Knowledge of the Company, threatened to be filed in connection with the employment of  any employee of the Company or any of its Subsidiaries.         (l)   Compliance. Neither the Company nor any Subsidiary: (i) is in default  under or in violation of (and no event has occurred that has not been waived that, with  notice or lapse of time or both, would result in a default by the Company or any Subsidiary  under), nor has the Company or any Subsidiary received notice of a claim that it is in default  under or that it is in violation of, any indenture, loan or credit agreement or any other  agreement or instrument to which it is a party or by which it or any of its properties is  bound (whether or not such default or violation has been waived), (ii) is in violation of any  judgment, decree or order of any Governmental Entity or (iii) is or has been in violation of                                    16  

 

                 any Laws, except, in each case, as would not reasonably be expected to have a Material   Adverse Effect or as set forth on Schedule 3.1(l).           (m)   Sarbanes-Oxley. The Company, the Subsidiaries and the Company’s   officers and directors (in their capacity as such) are in material compliance with any and   all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the  date hereof, and any and all applicable rules and regulations promulgated by the  Commission thereunder that are effective as of the date hereof.          (n)   Regulatory Permits. Except as would not reasonably be expected to have a   Material Adverse Effect, (i) the Company and the Subsidiaries possess all certificates,   authorizations and permits issued by the appropriate Governmental Entity necessary to   conduct their respective businesses as described in the SEC Reports and have fulfilled and   performed all of their respective obligations with respect to such certificates, authorizations   and permits and (ii) no event has occurred that allows, or after notice or lapse of time would   allow, revocation or termination thereof or result in any other impairment of the rights of   the holder of such certificates, authorizations and permits.          (o)   Title to Assets. The Company and the Subsidiaries have generally   satisfactory title to all of their interests in producing oil and gas properties and to all of  their material interests in non-producing oil and gas properties, in each case free and clear  of all Liens, except for Liens created under or expressly permitted by the RBL Credit  Agreement and the Second Lien Credit Agreement.          (p)   Intellectual Property. The Company and the Subsidiaries have, or have   rights to use, all trademarks, service marks, trade names, trade secrets, information,   copyrights, and other intellectual property rights and similar rights material to its business   as presently conducted (collectively, the “Intellectual Property Rights”). Neither the   Company nor any Subsidiary has received, since the date of the latest audited financial   statements included within the SEC Reports, a written notice of a claim that the Intellectual   Property Rights violate the intellectual property rights of any Person. To the Knowledge of   the Company, all such Intellectual Property Rights are enforceable and there is no existing   infringement by another Person of any of the Intellectual Property Rights.          (q)   Insurance. Each of the Company and its Subsidiaries carry, or are covered   by, insurance from insurers of recognized financial responsibility in such amounts and   covering such risks as is reasonably adequate for the conduct of their respective businesses   and the value of their respective properties and as is customary for companies engaged in   similar businesses in similar industries. All material policies of insurance of the Company   and its Subsidiaries are in full force and effect; the Company and its Subsidiaries are in   compliance with the terms of such policies in all material respects; there are no material   claims by the Company or any of its Subsidiaries under any such policy or instrument as   to which any insurance company is denying liability or defending under a reservation of   rights clause; and none of the Company or any of its Subsidiaries has any reason to believe   that it will not be able to renew its existing insurance coverage as and when such coverage   expires or to obtain similar coverage from similar insurers as may be necessary to continue   its business without a significant increase in cost.                                    17  

 

                       (r)   Related Party Transactions. Since December 31, 2015, neither the Company   nor any of its Subsidiaries has entered into (i) any transaction required to be disclosed in  SEC Reports prior to the date hereof pursuant to Item 404 of Regulation S-K promulgated  by the Commission that has not been so disclosed or (ii) any related party transaction  subject to the Company’s related party transactions policy that has not been approved in  accordance with such policy.          (s)   Certain Fees. No brokerage or finder’s fees or commissions are or will be   payable by the Company or any Subsidiary to any broker, financial advisor, finder,   placement agent, investment banker or other similar Person with respect to the offer and   sale of the Purchased Shares.          (t)   Private Placement. Assuming the accuracy of the Värde Parties’   representations and warranties set forth in Section 3.2, no registration under the Securities   Act is required for, the offer and sale of the Purchased Shares, the issue of the Exchanged   Shares or the issue of the Underlying Shares by the Company to the Värde Parties as   contemplated hereby. The issuance and sale of the Purchased Shares and the issuance of   the Exchanged Shares hereunder do not, and the issuance of the Underlying Shares will   not, contravene the rules and regulations of the NYSE American.          (u)   Investment Company. The Company is not, and immediately after the   issuance and sale of the Purchased Shares and receipt of payment therefor will not be, an   “investment company” within the meaning of the Investment Company Act of 1940, as   amended.          (v)   Registration Rights. Except as set forth on Schedule 3.1(v), no Person has   any right to cause the Company to effect the registration under the Securities Act of any   securities of the Company or any Subsidiary. The Company has not granted registration   rights to any Person other than the Värde Parties that would provide such Person priority   over the Värde Parties’ rights with respect to any registration pursuant to the Registration   Rights Agreement.          (w)   Registration and Transfer Requirements. The Common Stock is registered   pursuant to Section 12(b) of the Exchange Act and is listed on NYSE American and the   Company has not taken (and, to the Knowledge of the Company, no Person has taken) any   action designed to, or which to the Knowledge of the Company, is likely to have the effect   of, terminating the registration of the Common Stock under the Exchange Act nor has the   Company received any notification that the Commission is contemplating terminating (or   seeking to terminate) such registration or listing. No notice of delinquency or delisting from   the NYSE American has been received by the Company with respect to the Common Stock.   The Exchanged Common Shares and a number of Underlying Shares at least equal to the   Required Minimum have been approved, subject to official notice of issuance, for listing   on the NYSE American.          (x)   Application of Takeover Protections. The Company and the Board of   Directors have taken all necessary action, if any, in order to render inapplicable any control   share acquisition, business combination, poison pill (including any distribution under a                                    18  

 

                 rights agreement) or other similar anti-takeover provision under the Articles of   Incorporation (or similar charter documents) or the laws of its state of incorporation that is  or could become applicable to the Värde Parties as a result of the Värde Parties and the  Company fulfilling their obligations or exercising their rights under the Transaction  Documents, including, without limitation, as a result of the Company’s issuance of the  Securities and the Värde Parties’ ownership of the Securities.          (y)   No Integrated Offering. Assuming the accuracy of the Värde Parties’   representations and warranties set forth in Section 3.2, neither the Company, nor any of its   Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any   offers or sales of any security or solicited any offers to buy any security, under   circumstances that would cause the offering of the Securities to be integrated with prior   offerings by the Company for purposes of (i) the Securities Act which would require the   registration of any such securities under the Securities Act or (ii) any applicable   stockholder approval provisions of the NYSE American.          (z)   Tax Status. The Company and its Subsidiaries each (i) has made or filed all   United States federal, state and local income and all other material Tax Returns, reports   and declarations required by any jurisdiction to which it is subject and (ii) has paid all   Taxes and other governmental assessments and charges that are material in amount or   shown or determined to be due on such Tax Returns, reports and declarations, except those   being contested in good faith by appropriate proceedings and for which the Company or   such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance   with GAAP.          (aa)  ERISA. No ERISA Event has occurred or is reasonably expected to occur   that could reasonably be expected to result in a Material Adverse Effect.          (bb)  No General Solicitation. Neither the Company nor any Person acting on   behalf of the Company has offered or sold any of the Securities by any form of general   solicitation or general advertising (as those terms are used in Regulation D promulgated   under the Securities Act).          (cc)  Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to   the Knowledge of the Company or any Subsidiary, any agent or other person acting on   behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for  unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign  or domestic political activity; (ii) made any unlawful payment to foreign or domestic  government officials or employees or to any foreign or domestic political parties or  campaigns from corporate funds; (iii) failed to disclose fully any contribution made by the   Company or any Subsidiary (or made by any Person acting on its behalf of which the   Company is aware) which is in violation of law; or (iv) violated in any material respect any   provision of FCPA.          (dd)  Acknowledgment Regarding Värde Parties’ Purchase of Securities. The   Company acknowledges and agrees that each of the Värde Parties is acting solely in the   capacity of an arm’s length purchaser with respect to the Securities. The Company further                                    19  

 

                 acknowledges that no Värde Party is acting as a financial advisor or fiduciary of the   Company (or in any similar capacity) with respect to the Transaction Documents and the   transactions contemplated hereby and thereby and any advice given by any Värde Party or   any of their respective Representatives or agents in connection with the Transaction   Documents and the transactions contemplated thereby is merely incidental to the   transactions contemplated hereby and thereby. The Company further represents to each   Värde Party that the Company’s decision to enter into the Transaction Documents has been   based solely on the independent evaluation of the transactions contemplated hereby by the  Company and its Representatives. The Company acknowledges and agrees that no Värde  Party makes or has made any representations or warranties with respect to the transactions  contemplated hereby other than those specifically set forth in Section 3.2 hereof.          (ee)  Regulation M Compliance. The Company has not, and to the Knowledge of   the Company, no one acting on its behalf has, (i) taken, directly or indirectly, any action   designed to cause or to result in the stabilization or manipulation of the price of any security   of the Company to facilitate the sale or resale of any of the Securities, or (ii) sold, bid for,   purchased, or paid any compensation for soliciting purchases of any of the Securities.          (ff)  Stock Option Plans. To the Knowledge of the Company, each stock option   granted by the Company under the 2016 Plan was granted (i) in accordance with the terms   of the 2016 Plan and (ii) with an exercise price at least equal to the fair market value of the   Common Stock on the date such stock option would be considered granted under GAAP   and applicable law. To the Knowledge of the Company, no stock option granted under the   2016 Plan has been backdated. To the Knowledge of the Company, the Company has not   intentionally granted, and there is no and has been no Company policy or practice to   intentionally grant, stock options under the 2016 Plan prior to, or otherwise intentionally   coordinate the grant of stock options with, the release or other public announcement of   material information regarding the Company or its Subsidiaries or their financial results or   prospects.          (gg)  Office of Foreign Assets Control. Neither the Company nor any Subsidiary   nor, to the Knowledge of the Company, any director, officer, agent, employee or affiliate   of the Company or any Subsidiary is currently subject to any U.S. sanctions administered   by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).          (hh)  Environmental Matters.                (i)   Except as would not reasonably be expected to have a Material         Adverse Effect, the Company and its Subsidiaries (i) for the last 5 years have been         and are in compliance with all Environmental Laws, which compliance includes         and has included obtaining, maintaining and complying with any permit, license,         authorization or other approval required under any Environmental Law, (ii) have         not incurred, assumed, provided an indemnity with respect to, or otherwise become         subject to any Environmental Liability of any other Person and (iii) have not         received any notice, report, order, directive or other information regarding any         actual or alleged violation of or liability under Environmental Laws, and are not         subject to any pending or, to the Knowledge of the Company, threatened                                    20  

 

                 Proceedings arising under Environmental Laws, in each case the subject matter of               which is unresolved.                      (ii)  Except as would not reasonably be expected to have a Material               Adverse Effect, neither the Company nor any Subsidiary has treated, stored,               released, discharged, disposed of, arranged for or permitted the disposal of,               transported, handled, manufactured, distributed, or exposed any Person to, or               owned or operated any property or facility which is or has been contaminated by,               any Hazardous Materials, in each case so as to give rise to any Environmental               Liability of the Company or its Subsidiaries.                (ii)  Money Laundering. The operations of the Company and its Subsidiaries are         and have been conducted at all times in compliance with applicable financial record-        keeping and reporting requirements of the Currency and Foreign Transactions Reporting         Act of 1970, as amended, applicable money laundering statutes and applicable rules and         regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit         or proceeding by or before any court or governmental agency, authority or body or any         arbitrator involving the Company or any Subsidiary with respect to the Money Laundering         Laws is pending or, to the Knowledge of the Company or any Subsidiary, threatened.          Except for the representations and warranties made by the Company in this Section 3.1,   neither the Company nor any other Person makes any express or implied representation or   warranty with respect to the Company or any Subsidiaries or their respective businesses,   operations, assets liabilities, condition or prospects, and the Company hereby disclaims any such   other representations or warranties. In particular, without limiting the foregoing disclaimer, neither   the Company nor any other Person makes or has made any representation or warranty to the Värde   Parties, or any of their respective Affiliates or representatives with respect to (i) any financial  projection, forecast, estimate, budget or prospect information relating to the Company or any of  its Subsidiaries or their respective business, or (ii) except for the representations and warranties  made by the Company in this Section 3.1 and any certificate delivered in connection with Section   2.2(a)(vii) and 2.2(a)(ix), any oral or written information presented to the Värde Parties, or any of   their respective Affiliates or representatives, in the course of their due diligence investigation of   the Company, the negotiation of this Agreement or in the course of the transactions contemplated   hereby. Notwithstanding anything to the contrary herein, nothing in this Agreement shall limit the   right of the Värde Parties to rely on the representations, warranties, covenants and agreements   made to the Värde Parties expressly set forth in the Transaction Documents or in any certificate   delivered hereunder or thereunder.          3.2   Representations and Warranties of the Värde Parties. Each Värde Party, for itself   and for no other Värde Party, hereby represents and warrants to the Company, as of the date hereof,   that:                (a)   Organization; Authority. Such Värde Party is an entity duly incorporated or         formed, validly existing and in good standing under the laws of the jurisdiction of its         incorporation or formation with full right, corporate, partnership, limited liability company         or similar power and authority to enter into and to consummate the transactions         contemplated by the Transaction Documents and otherwise to carry out its obligations                                          21  

 

                hereunder and thereunder. The execution and delivery of the Transaction Documents and  performance by such Värde Party of the transactions contemplated by the Transaction  Documents have been duly authorized by all necessary corporate, partnership, limited  liability company or similar action, as applicable, on the part of such Värde Party. The  Transaction Documents to which such Värde Party is a party have been duly executed by  such Värde Party and, when delivered by such Värde Party in accordance with the terms  hereof, will constitute the valid and legally binding obligations of such Värde Party,  enforceable against it in accordance with their terms (except as enforcement may be limited  by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and  similar laws of general applicability relating to or affecting creditors’ rights or by general  equity principles).         (b)   Own Account. Such Värde Party understands that the Securities are  “restricted securities,” as defined in Section (a)(3) of Rule 144 of the Securities Act, and  have not been registered under the Securities Act or any applicable state securities law and  such Vade party is acquiring the Securities as principal for its own account and not with a  view to or for distributing or reselling the Securities or any part thereof in violation of the  Securities Act or any applicable state securities law, has no present intention of distributing  any of the Securities in violation of the Securities Act or any applicable state securities law  and has no direct or indirect arrangement or understandings with any other Persons to  distribute or regarding the distribution of the Securities in violation of the Securities Act  or any applicable state securities law (this representation and warranty not limiting such  Värde Party’s right to sell the shares of the Preferred Stock pursuant to a Registration  Statement or otherwise in compliance with applicable federal and state securities laws).  Such Värde Party is acquiring the Securities hereunder in the ordinary course of its  business.         (c)   Available Funds. Such Värde Party currently has sufficient cash, capital  commitments, available lines of credit or other sources of immediately available funds to  make payment of all amounts to be paid by such Värde Party hereunder.         (d)   Värde Party Status. At the time such Värde Party was offered the Securities,  it was, and as of the date hereof it is, an “accredited investor” as defined in Rule 501 of  Regulation D promulgated under the Securities Act.         (e)   Access to Information. Such Värde Party acknowledges that it has had the  opportunity to review the Transaction Documents (including all exhibits and schedules  thereto) and the SEC Reports and has been afforded: (i) the opportunity to ask such  questions as it has deemed necessary of, and to receive answers from, Representatives of  the Company concerning the terms and conditions of the offering of the Securities and the  merits and risks of investing in the Securities; (ii) access to information about the Company  and its financial condition, results of operations, business, properties, management and  prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain  such additional information that the Company possesses or can acquire without  unreasonable effort or expense that is necessary to make an informed investment decision  with respect to the investment.                                    22  

 

                 (f)   Experience of Such Värde Party. Such Värde Party, either alone or together         with its Representatives, has such knowledge, sophistication and experience in business         and financial matters so as to be capable of evaluating the merits and risks of the         prospective investment in the Securities, and has so evaluated the merits and risks of such         investment. Such Värde Party is able to bear the economic risk of an investment in the         Securities and, at the present time, is able to afford a complete loss of such investment.                (g)   General Solicitation. Such Värde Party is not purchasing the Securities as a         result of any advertisement, article, notice or other communication regarding the Securities         published in any newspaper, magazine or similar media or broadcast over television or        radio or presented at any seminar or any other general solicitation or general advertisement.                                      ARTICLE IV.                                                                 CONSENT OF THE SERIES C-1 HOLDERS         4.1   The Värde Parties hereby represent and warrant to the Company that, as of the date  hereof, they currently own a majority of the outstanding Series C-1 Preferred Stock.         4.2   The Värde Parties, in their capacity as holders of a majority of the outstanding  Series C-1 Preferred Stock, hereby consent to (i) the issuance by the Company of the Purchased  Shares and the Exchanged Preferred Shares and (ii) the amendment of the Series C Certificate of  Designation and the filing of the Series D Certificate of Designation with the Secretary of State of  the State of Nevada.                                      ARTICLE V.                                                                OTHER AGREEMENTS OF THE PARTIES          5.1   Filings; Other Actions. Following the execution of this Agreement, the Värde   Parties, on the one hand, and the Company, on the other hand, will cooperate and consult with the   other and use commercially reasonable efforts to prepare and file all necessary documentation, to   effect all necessary applications, notices, petitions, filings and other documents, and to obtain all   necessary permits, consents, orders, approvals and authorizations of, or any exemption by, all third   parties and Governmental Entities, and the expiration or termination of any applicable waiting   period, necessary or advisable to consummate the transactions contemplated by this Agreement,  and to perform the covenants contemplated by this Agreement. Each party shall execute and  deliver such further certificates, agreements and other documents and take such other actions as   the other parties may reasonably request to consummate or implement such transactions or to   evidence such events or matters. Each party hereto agrees to keep the other party apprised of the   status of matters referred to in this Section 5.1. The Värde Parties shall promptly furnish the   Company, and the Company shall promptly furnish the Värde Parties, to the extent permitted by   applicable Law, with copies of written communications received by it or its Subsidiaries from, or   delivered by any of the foregoing to, any Governmental Entity in respect of the transactions   contemplated by this Agreement.                                           23  

 

                5.2   Transfer Restrictions.         (a)   Prior to April 5, 2019, without the consent of the Company, no Värde Party  may transfer any of the Exchanged Common Shares other than to an affiliate of such Värde  Party or in connection with a business combination transaction involving the Company.  After April 5, 2019, the Exchanged Common Shares shall be unrestricted and freely  transferable, subject to applicable securities laws binding on such Värde Party or transfer.  No Värde Party may transfer any of the Purchased Shares, the Exchanged Preferred Shares  or the Underlying Shares except in accordance with the terms of the Certificates of  Designation. Any purported transfer of any shares of the Securities in violation of this  Section 5.2 or the Certificates of Designation shall be void ab initio, neither the Company  nor such Värde Party shall recognize the same and the Company shall not record such  purported transfer on its books or treat the purported transferee as the owner of any such  Securities for any purpose.         (b)   Certificates representing shares of the Securities will bear a legend  conspicuously thereon, as provided in the Certificates of Designation, or, with respect to  the Exchanged Common Shares, a substantially legend with appropriate modifications.         (c)   The Company acknowledges and agrees that a Värde Party may from time  to time pledge or grant a security interest in some or all of the Securities to a financial  institution that is an “accredited investor” as defined in Rule 501(a) under the Securities  Act and who agrees to be bound by the provisions of this Agreement and the Registration  Rights Agreement and, if required under the terms of such arrangement, such Värde Party  may transfer pledged or secured shares of the Securities to the pledgees or secured parties.  Such a pledge or transfer will not be subject to approval of the Company and no legal  opinion of legal counsel of the pledgee, secured party or pledger shall be required in  connection therewith. Further, no notice shall be required of such pledge. At the  appropriate Värde Party’s expense, the Company shall reasonably cooperate with the  Värde Party in connection with such pledge or transfer and will execute and deliver such  reasonable documentation as a pledgee secured party of the Securities may reasonably  request in connection with a transfer of the Securities.         (d)   Subject to the limitations set forth below, certificates evidencing the  Underlying Shares shall not contain any legend (except in respect of the restrictions set  forth in Section 13(a) of the Certificates of Designation, as relevant): (i) while a  Registration Statement covering the resale of such security is effective under the Securities  Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144 or (iii) if such  Underlying Shares are held by a Person who is not, and has not been for the preceding  90 days, an Affiliate of the Company and such Underlying Shares are eligible for sale under  Rule 144 without restriction and, in the case of this clause (iii), the Company’s counsel  (upon receipt of requested certifications from the of such Underlying Shares) has delivered  an opinion of counsel in form and substance reasonably acceptable to the Transfer Agent  if so requested by the Transfer Agent. The Company agrees that at such time as such legend  is no longer required under clause (i), (ii) or (iii) of the first sentence of this Section 5.2(d),  it will, no later than five Trading Days following the delivery by a Värde Party to the  Company or the Transfer Agent of a certificate representing Underlying Shares, as                                   24  

 

         applicable, issued with a restrictive legend (such third Trading Day, the “Legend Removal        Date”), deliver or cause to be delivered to such Värde Party a certificate representing such        shares that is free from all restrictive and other legends (except in respect of the restrictions        set forth in Section 13(a) of the Certificates of Designation, as relevant).               (e)   In connection with Section 5.2(d), each Värde Party, severally and not        jointly with the other Värde Parties, understands and hereby acknowledges that in order for        Rule 144 to be applicable to the sale of the Underlying Shares, the Company must be        current with respect to its filing obligations under the Exchange Act at the time of such        sale. Each Värde Party further understands and hereby acknowledges that any legal opinion       given by the Company’s counsel in connection with Section 5.2(d) may be limited as to        scope and in particular may expire or be withdrawn in the event that the requirements of        Rule 144 are not satisfied, including if the Company is not in compliance with the current        public information requirement of Rule 144. Finally, each Värde Party understands and        hereby acknowledges that the Company and its legal counsel will rely on such Värde        Party’s understanding and agreement in connection with the issuance of the legal opinion        and removal of the legends from the Underlying Shares in accordance with Section 5.2(d),        and that it is each Värde Party’s sole responsibility to confirm with the Company at the        time of any sale of Underlying Shares that the current public information requirement set        forth in Rule 144 has been met.               (f)   In addition to such Värde Party’s other available remedies, the Company        shall pay to a Värde Party, in cash, as partial liquidated damages and not as a penalty, for        each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date        such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive        legend and subject to Section 5.2(d) and (e), $5 per Trading Day for each Trading Day after        the Legend Removal Date until such certificate is delivered without a legend (except in        respect of the restrictions set forth in Section 13(a) of the Certificates of Designation, as        applicable). Nothing herein shall limit such Värde Party’s right to pursue actual damages        for the Company’s failure to deliver certificates representing any Securities as required by        the Transaction Documents, and such Värde Party shall have the right to pursue all        remedies available to it at law or in equity, including, without limitation, a decree of        specific performance or injunctive relief.               (g)   Each Värde Party, severally and not jointly with the other Värde Parties,        agrees with the Company that such Värde Party shall sell any of the Securities pursuant to        either the registration requirements of the Securities Act, including any applicable        prospectus delivery requirements, or an exemption therefrom and that, if any of the        Securities are sold pursuant to a Registration Statement, such of the Securities shall be sold        in compliance with the plan of distribution set forth therein, and acknowledges that the        removal of the restrictive legend from certificates representing the Securities as set forth in        this Section 5.2 is predicated, in part, upon the Company’s reliance upon this        understanding.         5.3   Furnishing of Information. Without limitation of any information delivery  requirements set forth in the Second Lien Credit Agreement, the Securities Purchase Agreement  or Certificates of Designation, as applicable, if, at any time while the Värde Parties and their                                         25  

 

     Affiliates beneficially own Underlying Shares representing at least 10% of the outstanding shares  of the Common Stock, the Company is not required to file reports under Section 13(a) or 15(d) of  the Exchange Act, the Company shall provide to each Värde Party who, together with its Affiliates,   beneficially owns at least 10% of the outstanding shares of the Common Stock:                (a)   quarterly unaudited financial statements prepared in accordance with         GAAP within 45 days after the end of each fiscal quarter, in each case, in form and         substance acceptable to the Värde Parties (by action of the Värde Parties who, together         with their Affiliates, beneficially own a majority of the Underlying Shares held by the         Värde Parties);                (b)   audited annual financial statements prepared in accordance with GAAP         within 90 days after the end of each fiscal year of the Company (certified by an independent         accounting firm of national standing); and                (c)   annually, within 90 days after the end of the fiscal year, a reserve report         prepared or audited by a third party engineering firm of national standing in accordance         with Commission guidelines with an “as of” date of December 31 of the preceding calendar         year.          5.4   Integration. The Company shall not sell, offer for sale or solicit offers to buy any   security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or   sale of the Purchased Shares in a manner that would require the registration under the Securities   Act of the sale of the Purchased Shares or that would be integrated with the offer or sale of the   Purchased Shares for purposes of the rules and regulations of any Trading Market such that it   would require stockholder approval prior to the closing of such other transaction unless   stockholder approval is obtained before the closing of such subsequent transaction.          5.5   Securities Laws Disclosure; Publicity. The Company shall (a) by 9:30 a.m. (New   York City time) on the Trading Day immediately following the date hereof, issue a press release   disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report   on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission   within the time required by the Exchange Act. The Company and each Värde Party shall consult   with each other in issuing any other press releases with respect to the transactions contemplated   hereby, and neither the Company nor any Värde Party shall issue any such press release nor   otherwise make any such public statement without the prior consent of the Company, with respect   to any press release of any Värde Party, or without the prior consent of each Värde Party, with   respect to any press release of the Company, which consent shall not unreasonably be withheld or   delayed, except if such disclosure is required by Law; provided, that no party shall be required to  seek the consent of any other party to this Agreement to disclose information with respect to the  transactions contemplated hereby that has previously been publicly disclosed in accordance with  this Section 5.5.          5.6   Stockholder Rights Plan. No claim shall be made or enforced by the Company or,   with the consent of the Company, any other Person, that any Värde Party is an “acquiring person”   under any control share acquisition, business combination, poison pill (including any distribution   under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter                                          26  

 

   adopted by the Company, or that any Värde Party could be deemed to trigger the provisions of any  such plan or arrangement, in each case, solely by virtue of receiving Securities under the  Transaction Documents.         5.7   Use of Proceeds. The Company shall use the net proceeds from the sale of the  Purchased Shares hereunder for general corporate purposes and to fund drilling and development,  acquisitions and for working capital purposes. The Company shall not use such proceeds for any  of the following: (a) for the redemption of any Common Stock or Common Stock Equivalents,  (b) for the settlement of any outstanding litigation or (c) in violation of FCPA or OFAC  regulations.         5.8   Reservation and Listing of Securities.               (a)   At any time that shares of the Preferred Stock are outstanding, the Company        shall from time to time take all lawful action within its control to cause the authorized        capital stock of the corporation to include a sufficient number of authorized but unissued        shares of the Common Stock to satisfy the conversion requirements for all shares of the        Preferred Stock then outstanding, or issuable as a dividend, including by accretion to the        Stated Value (assuming for the purposes of this calculation that the Requisite Stockholder        Approval has been obtained).               (b)   If, on any date, the number of authorized but unissued (and otherwise        unreserved) shares of the Common Stock is less than the Required Minimum on such date,        the Company shall take all lawful action to amend the Articles of Incorporation to increase        the number of authorized but unissued (and otherwise unreserved) shares of the Common        Stock to at least the Required Minimum at such time, as soon as possible and in any event        not later than the 90th day after such date; provided, that the Company will not be required        at any time to authorize a number of additional shares of the Common Stock greater than        the maximum remaining number of shares of the Common Stock that could possibly be        issued after such time pursuant to the Transaction Documents.               (c)   The Company hereby agrees to use reasonable best efforts to maintain the        listing of the Common Stock on the NYSE American or another Trading Market. The        Company shall, if applicable: (i) in the time and manner required by the principal Trading        Market or as may be otherwise necessary to permit the conversion of all outstanding shares        of the Preferred Stock, prepare and file with such Trading Market an additional shares        listing application covering a number of shares of the Common Stock at least equal to the        Required Minimum on the date of each such application; (ii) take all steps necessary to        cause such shares of the Common Stock to be approved for listing or quotation on such        Trading Market as soon as possible thereafter; and (iii) provide to the Värde Parties        evidence of such listing or quotation. The Company agrees to use reasonable best efforts        to maintain the eligibility of the Common Stock for electronic transfer through The        Depository Trust Company or another established clearing corporation, including, without        limitation, by timely payment of fees to The Depository Trust Company or such other        established clearing corporation in connection with such electronic transfer.                                          27  

 

                 (d)   The Company agrees, if the Company applies to have the Common Stock         traded on any other Trading Market, it will then include in such application the applicable         number of Underlying Shares specified in clause (i) of Section 5.8(c), and will take such         other action as is necessary to cause such Underlying Shares to be listed or quoted on such         other Trading Market as promptly as possible. The Company will then use reasonable best         efforts to continue the listing or quotation and trading of its Common Stock on a Trading         Market and will comply in all respects with the Company’s reporting, filing and other         obligations under the bylaws or rules of the Trading Market.                (e)   The Company agrees that, if any shares of the Common Stock to be         provided for the purpose of the conversion of the Preferred Stock require registration with         or approval of any Governmental Entity under any Law before such shares of the Common         Stock may be validly issued upon conversion, the Company will use commercially         reasonable efforts to secure such registration or approval, as the case may be.          5.9   Company Stockholder Approval. The Company agrees to use commercially   reasonable efforts to obtain, at the next annual meeting of the Company Stockholders (at which a   quorum is present) (the “Stockholder Meeting”), the approval by the Company Stockholders of   the conversion of (i) all shares of the Series C-1 Preferred Stock issued pursuant to the Securities  Purchase Agreement (assuming maximum conversion rates as set forth in the Series C Certificate  of Designation and that the Company elects to pay dividends in kind or otherwise accrues to Stated  Value in accordance with the terms of the Series C Certificate of Designation) and (ii) all shares  of the Purchased Shares and the Exchanged Preferred Shares issued or issuable pursuant to this  Agreement (assuming maximum conversion rates as set forth in the Certificates of Designation, as  applicable, and that the Company elects to pay dividends in kind or otherwise accrues to Stated  Value in accordance with the terms of the Certificates of Designation, as applicable) (such  approval, the “Requisite Stockholder Approval”) in accordance with the Articles of Incorporation   and the bylaws of the Company. The Company will prepare and file with the SEC a proxy   statement to be sent to the Company’s stockholders in connection with the Stockholder Meeting   (the “Proxy Statement”). Subject to the directors’ fiduciary duties, the Proxy Statement shall   include the Board of Directors’ recommendation that the holders of shares of the Common Stock   vote in favor of the Requisite Stockholder Approval. Each Värde Party agrees to furnish to the   Company information concerning such Värde Party and its Affiliates as the Company, on the   advice of outside counsel, reasonably determines is necessary for the Proxy Statement, the   Stockholder Meeting or any subsequent proxy solicitation; provided, that the Värde Party shall not   be obligated to provide (i) any information subject to confidentiality, non-disclosure, or similar   agreements or which cannot be disclosed under applicable Law, (ii) personally identifiable   information, (iii) information regarding the limited partners of such Värde Party and (iv) financial   information that the Värde Party reasonably deems to be material to its business, as determined in   good faith in its sole discretion. The Company shall promptly notify the Värde Parties of (i) the   receipt of the Requisite Stockholder Approval or (ii) any projected failure to obtain the Requisite   Stockholder Approval.          5.10  Certain Transactions and Confidentiality.                (a)   Each Värde Party, severally and not jointly with the other Värde Parties,         covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any                                          28  

 

         understanding with it, shall execute any purchases or sales, including short sales, of any of        the Company’s securities during the period commencing with the execution of this        Agreement and ending at such time that the transactions contemplated by this Agreement        are first publicly announced pursuant to the initial press release as described in Section 5.5.        Each Värde Party, severally and not jointly with the other Värde Parties, covenants that        until such time as the transactions contemplated by this Agreement are publicly disclosed        by the Company pursuant to the initial press release as described in Section 5.5, such Värde        Party shall maintain the confidentiality of the existence and terms of this transaction and        the information included in the Transaction Documents and the schedules hereto.        Notwithstanding the foregoing, in the case of a Värde Party that is a multi-managed        investment vehicle whereby separate portfolio managers manage separate portions of such        Värde Party’s assets and the portfolio managers have no direct knowledge of the        investment decisions made by the portfolio managers managing other portions of such        Värde Party’s assets and barriers are in place to prevent such portfolio managers from        obtaining such knowledge, the covenant set forth above shall only apply with respect to        the portion of assets managed by the portfolio manager that made the investment decision        to purchase the Securities covered by this Agreement.               (b)   Each Värde Party shall, and shall cause its respective Affiliates and its and        their Representatives to, (i) hold, in strict confidence, all non-public records, books,        contracts, instruments, computer data and other data and information concerning the        Company and its Subsidiaries furnished to it by the Company or its Representatives        pursuant to, or in connection with the negotiation of, this Agreement (collectively,        “Company Information”) (except to the extent that such Company Information was        (A) previously known by such Värde Party from other sources; provided, that such source        was not known by such Värde Party to be bound by a contractual, legal or fiduciary        obligation of confidentiality to the Company or any of its Subsidiaries, (B) in the public        domain through no violation of this Section 5.10(b) by such Värde Party or (C) later        lawfully acquired from other sources by such Värde Party), and (ii) not release or disclose        such Company Information to any other Person, except its Representatives and financing        sources who need to know such Company Information, who are aware of the confidential        nature of such Company Information and who have agreed to keep such Company        Information strictly confidential. Notwithstanding the foregoing, each Värde Party may        disclose Company Information to the extent that (i) disclosure to a regulatory authority is        necessary or appropriate in connection with any necessary regulatory approval required to        be obtained in connection with the Transaction Documents and the consummation of the        transactions contemplated hereby and thereby or (ii) disclosure is required by judicial or        administrative process or by other requirement of Law or the applicable requirements of        any regulatory agency or relevant stock exchange.         5.11  Form D; Blue Sky Filings. The Company shall timely file a Form D with respect to  the Securities if and as required under Regulation D. The Company shall take such action as the  Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify  the Securities for, sale to the Värde Parties under applicable securities or “Blue Sky” laws of the  states of the United States.                                          29  

 

         5.12  Tax Matters.               (a)   Absent a change in law or Internal Revenue Service practice, or a contrary        determination (as defined in Section 1313(a) of the Code), the Värde Parties and the        Company agree not to treat the Purchased Shares and the Exchanged Preferred Shares        (based on their terms as set forth in the Certificates of Designation, as applicable) as        “preferred stock” within the meaning of Section 305 of the Code, and Treasury Regulation        Section 1.305-5 for United States federal income Tax and withholding Tax purposes and        shall not take any position inconsistent with such treatment except pursuant to a        determination within the meaning of Section 1313 of the Code.               (b)   The Company shall pay any and all documentary, stamp or similar issue or        transfer Tax due on (x) the issue of the Purchased Shares and the Exchanged Preferred        Shares and (y) the issue of the Underlying Shares. However, in the case of conversion of        Preferred Stock, the Company shall not be required to pay any Tax or duty that may be        payable in respect of any transfer involved in the issue and delivery of shares of the        Underlying stock or Preferred Stock in a name other than that of the holder of the shares to        be converted, and no such issue or delivery shall be made unless and until the Person        requesting such issue has paid to the Company the amount of any such Tax or duty, or has        established to the satisfaction of the Company that such Tax or duty has been paid.               (c)   For U.S. federal and applicable state income tax purposes, the issuance to        the Värde Parties on the terms and subject to the conditions set forth herein and pursuant       to Section 4 of the Second Lien Amendment of (i) 5,952,763 shares of the Common Stock        and (ii) 39,254 shares of the Series D Preferred Stock shall be treated by the parties as a       tax-deferred “recapitalization” of the Company pursuant to Section 368(a)(1)(E) of the       Code except pursuant to a determination within the meaning of Section 1313 of the Code;       provided that, in the event that the transactions do not so qualify as a recapitalization, as       the result of a successful challenge by the Internal Revenue Service or other taxing        authority, then the Company shall be held harmless and shall not be required to indemnify        any person for losses incurred due to the failure of the transaction to so qualify or the        successful challenge, including the Värde Parties.         5.13  Board Representation Right. The parties agree that the rights granted to the  Purchasers (as defined in the Securities Purchase Agreement) under Section 4.14 of the Securities  Purchase Agreement are hereby granted to the Värde Parties and that, for the purposes of such  rights, the defined term the “Underlying Shares” as used in Section 4.14 of the Securities Purchase  Agreement shall be deemed to also include (in additional to the other “Underlying Shares”  thereunder) the shares of Common Stock to be issued and issuable upon conversion of the  Purchased Shares and the Exchanged Preferred Shares, respectively.                                     ARTICLE VI.                                                                         MISCELLANEOUS         6.1   Fees and Expenses. Except as expressly set forth in the Transaction Documents to  the contrary (including with respect to the Värde Parties’ Transaction Expense Amount), each                                         30  

 

     party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any,   and all other expenses incurred by such party incident to the negotiation, preparation, execution,   delivery and performance of this Agreement. The Company shall pay all fees of the Transfer Agent   (including, without limitation, any fees required for same-day processing of any instruction letter  delivered by the Company and any conversion or exercise notice delivered by a Värde Party) levied  in connection with the delivery of any Securities to the Värde Parties. Further, for the avoidance  of doubt, the Company shall be responsible for the fees, commissions and expenses of brokers,  financial advisors, finders, placement agents, investment banks or similar Persons engaged (or  purportedly engaged) by the Company or its Subsidiaries with respect to the offer and sale or issue  of any of the Securities.          6.2   Survival; Limitation on Liability. The representations and warranties of the parties   contained in this Agreement shall survive until the first anniversary of the date hereof, except for   (i) the representations and warranties of the Company contained in Sections 3.1(b)(i), 3.1(c),   3.1(d), 3.1(f), 3.1(g), 3.1(s), 3.1(u) and 3.1(w) and (ii) the representations and warranties of the   Värde Parties contained in Sections 3.2(a), 3.2(b) and 3.2(d), which will survive indefinitely and   (iii) the representations and warranties of the Company contained in Section 3.1(z), which will   survive until 30 days after the expiration of the applicable statute of limitations. All of the   covenants or other agreements of the parties contained in this Agreement shall survive until fully   performed or fulfilled, unless and to the extent that non-compliance with such covenants or   agreements is waived in writing by the party entitled to such performance. The Company shall not   be liable hereunder to the Värde Party or any other Person for any punitive, exemplary, treble,   special, indirect, incidental or consequential damages (including any loss of earnings or profits),   except for any such damages that are direct damages in the form of diminution of value or payable   to a third-party.          6.3   Entire Agreement. The Transaction Documents, together with the exhibits and   schedules thereto, contain the entire understanding of the parties with respect to the subject matter   hereof and thereof and supersede all prior agreements and understandings, oral or written, with   respect to such matters, which the parties acknowledge have been merged into such documents,   exhibits and schedules.          6.4   Notices. Any and all notices or other communications or deliveries required or   permitted to be provided hereunder shall be in writing and shall be deemed given and effective on   the earliest of: (a) the date of transmission (if there is no receipt of notice of a failed delivery to  the notice party), if such notice or communication is delivered e-mail attachment as set forth on   the signature pages attached hereto at or prior to 5:30 p.m. (Houston, Texas time) on a Business   Day, (b) the next Business Day after the date of transmission (if there is no receipt of notice of a   failed delivery to the notice party), if such notice or communication is delivered via e-mail   attachment as set forth on the signature pages attached hereto on a day that is not a Business Day   or later than 5:30 p.m. (Houston, Texas time) on any Business Day, (c) the second Business Day   following the date of mailing, if sent by U.S. nationally recognized overnight courier service or   (d) upon actual receipt by the party to whom such notice is required to be given. The initial address   for such notices and communications shall be as set forth on Schedule 5.4 attached hereto;   provided, that a party may update its address by notice duly given to the other parties.                                           31  

 

         6.5   Amendments; Waivers. No provision of this Agreement may be waived, modified,  supplemented or amended except in a written instrument signed, in the case of an amendment, by  the Company and the Värde Parties holding at least a majority in interest of the Securities held by  such Värde Parties then outstanding or, in the case of a waiver, by the party against whom  enforcement of any such waived provision is sought. No waiver of any default with respect to any  provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver  in the future or a waiver of any subsequent default or a waiver of any other provision, condition or  requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder  in any manner be deemed to impair the exercise of any such right.         6.6   Headings. The headings herein are for convenience only, do not constitute a part of  this Agreement and shall not be deemed to limit or affect any of the provisions hereof.         6.7   Successors and Assigns. This Agreement shall be binding upon and inure to the  benefit of the parties and their successors and permitted assigns. The Company shall not assign  this Agreement or any rights or obligations hereunder (other than by merger) without the prior  written consent of each Värde Party. No Värde Party may assign this Agreement or any rights or  obligations hereunder to any Person without the prior written consent of the Company, except that  a Värde Party may assign any or all of its rights hereunder to (i) an Affiliate of such Värde Party  or (ii) following April 26, 2021, to any Person, in each case, to which such Värde Party transfers  any Securities in accordance with the Transaction Documents; provided, that (x) such transferee  or Affiliate agrees with the Company in writing to be bound by the provisions of the Transaction  Documents that apply to the Värde Parties, (y) no such assignment by a Värde Party shall relieve  such Värde Party of its obligations hereunder without the prior written consent of the Company  and (z) the Värde Parties’ rights under Section 5.13 may not be assigned pursuant to clause (ii)  above unless such assignment has been approved by a majority of the members of the Board of  Directors.         6.8   No Third-Party Beneficiaries. This Agreement is intended for the benefit of the  parties hereto and their respective successors and permitted assigns and is not for the benefit of,  nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in  Section 6.15.         6.9   Governing Law. All questions concerning the construction, validity, enforcement  and interpretation of the Transaction Documents shall be governed by and construed and enforced  in accordance with the internal laws of the State of New York, without regard to the principles of  conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations,  enforcement and defense of the transactions contemplated by the Transaction Documents (whether  brought against a party hereto or its respective affiliates, directors, officers, stockholders, partners,  members, employees or agents) shall be commenced exclusively in the state and federal courts in  the state and federal courts, sitting in the City of New York. Each party hereby irrevocably submits  to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough  of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any  transaction contemplated hereby or discussed herein (including with respect to the enforcement of  any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any  suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such  court, that such suit, action or proceeding is improper or is an inconvenient venue for such                                         32  

 

     proceeding. Each party hereby irrevocably waives personal service of process and consents to   process being served in any such suit, action or proceeding by mailing a copy thereof via registered   or certified mail or overnight delivery (with evidence of delivery) to such party at the address in   effect for notices to it under this Agreement and agrees that such service will constitute good and   sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit   in any way any right to serve process in any other manner permitted by law. If either party   commences an action, suit or proceeding to enforce any provisions of the Transaction Documents,   the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its   reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation   and prosecution of such action or proceeding.          6.10  Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY   IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL   PROCEEDING ARISING OUT OF OR RELATED TO THE TRANSACTION DOCUMENTS   OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.          6.11  Execution. This Agreement may be executed in two or more counterparts, all of   which when taken together shall be considered one and the same agreement and shall become   effective when counterparts have been signed by each party and delivered to each other party, it   being understood that the parties need not sign the same counterpart. In the event that any signature   is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such  signature shall create a valid and binding obligation of the party executing (or on whose behalf  such signature is executed) with the same force and effect as if such facsimile or “.pdf signature  page were an original thereof.          6.12  Severability. If any term, provision, covenant or restriction of this Agreement is   held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder   of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and   effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their   commercially reasonable efforts to find and employ an alternative means to achieve the same or   substantially the same result as that contemplated by such term, provision, covenant or restriction.   It is hereby stipulated and declared to be the intention of the parties that they would have executed   the remaining terms, provisions, covenants and restrictions without including any of such that may   be hereafter declared invalid, illegal, void or unenforceable.          6.13  Replacement of Securities. If any certificate or instrument evidencing any of the   Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in   exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu   of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence   reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new   certificate or instrument under such circumstances shall also pay any reasonable third-party costs   (including customary indemnity) associated with the issuance of such new certificate or   instrument.          6.14  Remedies. In addition to being entitled to exercise all rights provided herein or   granted by law, including recovery of damages, each of the Värde Parties and the Company will   be entitled to specific performance under the Transaction Documents. The parties agree that                                          33  

 

   monetary damages may not be adequate compensation for any loss incurred by reason of any  breach of obligations contained in the Transaction Documents and hereby agree to waive and not  to assert in any action for specific performance of any such obligation the defense that a remedy  at law would be adequate.         6.15  Non-Recourse. Notwithstanding anything that may be expressed or implied in this  Agreement or any document, agreement, or instrument delivered contemporaneously herewith,  and notwithstanding the fact that any party may be a partnership or limited liability company, each  party hereto, by its acceptance of the benefits of the Transaction Documents, covenants, agrees  and acknowledges that no Persons other than the parties shall have any obligation hereunder and  that it has no rights of recovery hereunder against, and no recourse hereunder or under any  documents, agreements, or instruments delivered contemporaneously herewith or in respect of any  oral representations made or alleged to be made in connection herewith or therewith shall be had  against, any former, current or future director, officer, agent, Affiliate, manager, investment  manager, investment advisor, assignee, incorporator, controlling Person, fiduciary, representative  or employee of any party (or any of their successors or permitted assignees), against any former,  current, or future general or limited partner, manager, stockholder or member of any party (or any  of their successors or permitted assignees) or any Affiliate thereof or against any former, current  or future director, officer, agent, employee, Affiliate, manager, investment manager, investment  advisor, assignee, incorporator, controlling Person, fiduciary, representative, general or limited  partner, stockholder, manager or member of any of the foregoing, but in each case not including  the parties, whether by or through attempted piercing of the corporate veil, by or through a claim  (whether in tort, contract or otherwise) by or on behalf of such party against such Persons and  entities, by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue  of any statute, regulation or other applicable law, or otherwise; it being expressly agreed and  acknowledged that no personal liability whatsoever shall attach to, be imposed on, or otherwise be  incurred by any such Persons, as such, for any obligations of the applicable party under this  Agreement or the transactions contemplated hereby, under any documents or instruments delivered  contemporaneously herewith, in respect of any oral representations made or alleged to be made in  connection herewith or therewith, or for any claim (whether in tort, contract or otherwise) based  on, in respect of, or by reason of, such obligations or their creation. Notwithstanding anything in  the Transaction Documents to the contrary, the liability of the Värde Parties shall be several, not  joint.         6.16  Payment Set Aside. To the extent that the Company makes a payment or payments  to any Värde Party pursuant to any of the Transaction Documents or a Värde Party enforces or  exercises its rights hereunder or thereunder and such payment or payments or the proceeds of such  enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent  or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or  otherwise restored to the Company, a trustee, receiver or any other Person under any law  (including, without limitation, any bankruptcy law, state or federal law, common law or equitable  cause of action), to the extent of any such restoration the obligation or part thereof originally  intended to be satisfied shall be revived and continued in full force and effect as if such payment  had not been made or such enforcement or setoff had not occurred.         6.17  Independent Nature of Värde Parties’ Obligations and Rights. The obligations of  each Värde Party under any of the Transaction Documents are several and not joint with the                                         34  

 

   obligations of any other Värde Party hereunder or thereunder and no Värde Party will be  responsible in any way for the performance or non-performance of the obligations of any other  Värde Party under any of the Transaction Documents. Nothing contained in the Transaction  Documents, and no action taken by any Värde Party pursuant hereto or thereto, shall be deemed  to constitute the Värde Parties as a partnership, an association, a joint venture or any other kind of  entity, or create a presumption that the Värde Parties are in any way acting in concert or as a group  with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Värde Party shall be entitled to independently protect and enforce its rights, including,  without limitation, the rights arising out of the Transaction Documents, and it shall not be  necessary for any other Värde Party to be joined as an additional party in any proceeding for such  purpose.         6.18  Liquidated Damages. The Company’s obligations to pay any partial liquidated  damages or other amounts owing under the Transaction Documents is a continuing obligation of  the Company and shall not terminate until all unpaid partial liquidated damages and other amounts  have been paid, notwithstanding the fact that the instrument or security pursuant to which such  partial liquidated damages or other amounts are due and payable shall have been canceled.         6.19  Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any  action or the expiration of any right required or granted herein is not a Business Day, such action  may be taken or such right may be exercised on the next succeeding Business Day.         6.20  Construction and Interpretation.               (a)   The term “or” when used in the Agreement is not exclusive, unless the       context required otherwise. The parties agree that each of them and their respective counsel       have reviewed and had an opportunity to revise the Transaction Documents and, therefore,       the normal rule of construction to the effect that any ambiguities are to be resolved against       the drafting party shall not be employed in the interpretation of the Transaction Documents       or any amendments thereto. In addition, each and every reference to share prices and shares       of the Common Stock in any of the Transaction Documents shall be subject to adjustment       for reverse and forward stock splits, stock dividends, stock combinations and other similar       transactions of the Common Stock that occur after the date of this Agreement.              (b)   The words “hereof,” “herein” and “hereunder” and words of similar import       when used in this Agreement will refer to this Agreement as a whole and not to any       particular provision of this Agreement, and section and subsection references are to this       Agreement unless otherwise specified. The headings in this Agreement are included for       convenience of reference only and will not limit or otherwise affect the meaning or       interpretation of this Agreement. Whenever the words “include,” “includes” or “including”       are used in this Agreement, they shall be deemed to be followed by the words “without       limitation.” The phrases “the date of this Agreement,” “the date hereof” and terms of       similar import, unless the context otherwise requires, shall be deemed to refer to the date       set forth in the first paragraph of this Agreement. The meanings given to terms defined       herein will be equally applicable to both the singular and plural forms of such terms. Except       as otherwise specified herein, references to agreements, policies, standards, guidelines or       instruments, or to statutes or regulations, are to such agreements, policies, standards,                                         35  

 

                guidelines or instruments, or statutes or regulations, as amended or supplemented from  time to time (or to successors thereto).                         (Signature Pages Follow)                                    36  

 

           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly   executed by their respective authorized signatories as of the date first indicated above.    LILIS ENERGY, INC.            By:   /s/ Joseph C. Daches       Name: Joseph C. Daches  Title: President, Chief Financial Officer and Treasurer                    [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;                  SIGNATURE PAGES FOR VÄRDE PARTIES FOLLOW]                                     SIGNATURE PAGE                                TRANSACTION AGREEMENT  

 

         IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly  executed by their respective authorized signatories as of the date first indicated above.   SEVERALLY AND NOT JOINTLY FOR EACH ENTITY LISTED BELOW:                                            By:   /s/ Markus Specks         Name: Markus Specks  Title: Managing Director   THE VÄRDE FUND VI-A, L.P.,   By: Värde Investment Partners G.P., LLC, its General Partner  By: Värde Partners, L.P., its Managing Member  By: Värde Partners, Inc., its General Partner    VÄRDE INVESTMENT PARTNERS, L.P.,   By: Värde Investment Partners G.P., LLC, its General Partner  By: Värde Partners, L.P., its Managing Member  By: Värde Partners, Inc., its General Partner    THE VÄRDE FUND XI (MASTER), L.P.,   By: Värde Fund XI G.P., LLC, its General Partner  By: Värde Partners, L.P., its Managing Member  By: Värde Partners, Inc., its General Partner    VÄRDE INVESTMENT PARTNERS (OFFSHORE) MASTER, L.P.,   By: Värde Investment Partners G.P., LLC, its General Partner  By: Värde Partners, L.P., its Managing Member  By: Värde Partners, Inc., its General Partner    THE VÄRDE SKYWAY MASTER FUND, L.P.,   By: The Värde Skyway Fund G.P., LLC, its General Partner  By: Värde Partners, L.P., its Managing Member  By: Värde Partners, Inc., its General Partner    THE VÄRDE FUND XII (MASTER), L.P.,   By: The Värde Fund XII G.P., LLC, its General Partner  By: The Värde Fund XII UGP, LLC, its General Partner  By: Värde Partners, L.P., its Managing Member  By: Värde Partners, Inc., its General Partner                                    SIGNATURE PAGE                               TRANSACTION AGREEMENT  

 

                                                                               Schedule I                                                                                                                            Värde Party Allocation                                                                                      Purchase                               Exchange                                                                                                                            Amount of                                                                                                                           Reduction of                                                                                                                           Term Loan                                                                                            Exchanged        Exchanged     (pursuant to                                                           Subscription     Purchased        Common          Preferred     Second Lien  Värde Party                                                Amount           Shares          Shares          Shares       Amendment)  THE VÄRDE FUND VI-A, L.P. .................................................  $750,000  750   178,583    1,178            $2,048,034  VÄRDE INVESTMENT PARTNERS, L.P. ...............................  $1,700,000  1,700       404,788        2,669            $4,642,210  THE VÄRDE FUND XI (MASTER), L.P. .................................  $10,400,000  10,400   2,476,349     16,330           $28,399,403   VÄRDE INVESTMENT PARTNERS (OFFSHORE)                                                                      MASTER, L.P. ............................................................................  $1,500,000  1,500   357,166 2,355 $4,096,068  THE VÄRDE SKYWAY MASTER FUND, L.P........................  $3,250,000    3,250           773,859        5,103            $8,874,813  THE VÄRDE FUND XII (MASTER), L.P. ................................  $7,400,000  7,400    1,762,018      11,619           $20,207,267   Total:                                                  $25,000,000        25,000         5,952,763         39,254      $68,267,795                                                                 SCHEDULE I  

 

                                   Schedule 3.1(a)                                                                             Subsidiaries                                           Brushy Resources, Inc.  ImPetro Resources, LLC  ImPetro Operating, LLC  Lilis Operating Company, LLC  Hurricane Resources, LLC                                    SCHEDULE 3.1(A)  

 

                                   Schedule 3.1(l)                                           Failure to comply with Section 4.10 of the Securities Purchase Agreement.                                                                             SCHEDULE 3.1(V)  

 

                                   Schedule 3.1(v)                                           Registration Rights Agreement, dated as of April 26, 2017, by and among Lilis Energy, Inc. and  the Lenders party thereto.    Registration Rights Agreement, dated as of February 28, 2017, by and among the Company and  the Värde Parties party thereto.    The Registration Rights Agreement (as defined herein).                                                                              SCHEDULE 3.1(V)  

 

                                    Schedule 5.4                                                                          Address for Notice                                           If to the Company:    201 Main Street, Suite 1351  Fort Worth, Texas 76102  Attn: Joseph Daches  Email: JDaches@lilisenergy.com    with a copy to (which will not constitute notice):    Bracewell LLP  711 Louisiana Street  Suite 2300  Houston, Texas  Attn: Charles H. Still, Jr.  Fax:  (800) 404-3970  Email: charles.still@bracewell.com      If to the Värde Parties:    609 Main Street, Suite 3925  Houston, Texas 77002  Attn: Markus Specks  Email: mspecks@varde.com    901 Marquette Ave S., Suite 3300  Minneapolis, Minnesota 55402  Attn: Legal Department  Email: legalnotices@varde.com    with a copy to (which will not constitute notice):    Kirkland & Ellis LLP  609 Main Street  Houston, Texas 77002  Attn: Lucas E. Spivey, P.C.        Julian Seiguer, P.C.        Jhett R. Nelson  Email: lucas.spivey@kirkland.com        julian.seiguer@kirkland.com        jhett.nelson@kirkland.com                                     SCHEDULE 5.4  

 

                        Exhibit A                 Registration Rights Agreement                       [See Attached.]            EXHIBIT A  

 

                         Exhibit B                  Form of Second Lien Amendment                         [See Attached.]             EXHIBIT B  

 

                             Exhibit C                      Form of Series C Certificate of Designation                                 [See Attached.]                 EXHIBIT C  

 

                             Exhibit D                      Form of Series D Certificate of Designation                                 [See Attached.]                 EXHIBIT D  

 

                            Exhibit E                     Form of Legal Opinion of Bracewell LLP                               [See Attached.]                EXHIBIT E  

 

                                     Exhibit F                                                                       Form of Nevada Opinion                                           1.    The Company is a corporation duly incorporated under the laws of the State and in good  standing in the State of Nevada, with the corporate power and authority to conduct its business and  own its properties as presently conducted.    2.    The execution and delivery to the Purchasers by the Company of the Transaction  Agreement, the Second Lien Amendment, the Second Lien Credit Agreement, the Intercreditor  Agreement, the Certificates of Designations and the Registration Rights Agreement (collectively,  the “Opinion Documents”), and the performance by the Company of its obligations thereunder,  have been authorized by all necessary corporate action by the Company and the Opinion  Documents have been duly executed and delivered by the Company.    3.    The execution and delivery to the Purchasers by the Company of the Opinion Documents,  and the performance by the Company of its obligations thereunder, do not violate any provision  of the articles of incorporation or bylaws (together, the “Organizational Documents”) of the  Company.    4.    The execution and delivery to the Purchasers by the Company of the Opinion Documents,  and the performance by the Company of its obligations under each Opinion Document, do not  require under Nevada law any filing or registration by the Company with, or approval or consent  to the Company of, any governmental agency or authority of the State of Nevada, that has not been  made or obtained except that we express no opinion with respect to any securities laws.      5.    Issuance of the Issued Shares has been duly authorized by all necessary corporate action  on the part of the Company.    6.    Upon issuance of the Issued Shares, in accordance with the terms of the Transaction  Agreement and the Second Lien Amendment, the Issued Shares will be duly issued, fully paid and  non-assessable and, to the best of our knowledge, free and clear of all liens, and will not be issued  in violation of preemptive or other similar rights pursuant to (A) any statute, rule or regulation of  the State of Nevada (B) the Company’s Organizational Documents as in effect on the date hereof  or (C) to the best of our knowledge, any agreement to which the Company or any of its subsidiaries  is a party or bound.    7.    Issuance of (i) the Preferred Stock in accordance with the terms of the Transaction  Agreement and (ii) Common Stock issuable upon conversion of the Preferred Stock has been duly  authorized by all necessary corporate action on the part of the Company.    8.    Upon issuance of the Preferred Stock in accordance with the terms of the Transaction  Agreement, the Preferred Stock will be duly issued, fully paid and non-assessable and, to the best  of our knowledge, free and clear of all liens, and will not be issued in violation of preemptive or  other similar rights pursuant to (A) any statute, rule or regulation of the State of Nevada (B) the                                       EXHIBIT F  

 

   Company’s Organizational Documents in effect on the date hereof or (C) to the best of our  knowledge, any agreement to which the Company was a party or bound.    9.    The shares of Common Stock issuable upon conversion of the Preferred Stock, when issued  in accordance with the terms of the Certificates of Designations, will be duly issued, fully paid and  non-assessable and, to the best of our knowledge, free and clear of all liens, and will not be issued  in violation of preemptive or other similar rights pursuant to (A) any statute, rule or regulation of  the State of Nevada (B) the Company’s Organizational Documents as in effect on the date hereof  or (C) to the best of our knowledge, any agreement to which the Company or any of its subsidiaries  is a party or bound.                                         EXHIBIT Fexhibit104rra

                                                                 EXHIBIT 10.4                        REGISTRATION RIGHTS AGREEMENT                                  BY AND AMONG                                LILIS ENERGY, INC.                                       AND                       THE VÄRDE PARTIES PARTY HERETO           #5794930  

 

                                 TABLE OF CONTENTS   ARTICLE I     DEFINITIONS ................................................................................................. - 1 -         Section 1.01 Definitions............................................................................................... - 1 -         Section 1.02 Registrable Securities.............................................................................. - 4 -    ARTICLE II   REGISTRATION RIGHTS ............................................................................. - 5 -         Section 2.01 Shelf Registration.................................................................................... - 5 -         Section 2.02 Underwritten Shelf Offering Requests.................................................... - 7 -         Section 2.03 Delay and Suspension Rights.................................................................. - 9 -         Section 2.04 Piggyback Registration Rights. ............................................................... - 9 -         Section 2.05 Participation in Underwritten Offerings. .............................................. - 11 -         Section 2.06 Registration and Sale Procedures. ......................................................... - 12 -         Section 2.07 Cooperation by Holders. ....................................................................... - 14 -         Section 2.08 Restrictions on Public Sales by Holders. .............................................. - 15 -         Section 2.09 Expenses. .............................................................................................. - 15 -         Section 2.10 Indemnification and Contribution. ........................................................ - 15 -         Section 2.11 Rule 144 Reporting. .............................................................................. - 18 -         Section 2.12 Transfer or Assignment of Registration Rights. ................................... - 18 -         Section 2.13 Other Registration Rights. .................................................................... - 18 -    ARTICLE III  MISCELLANEOUS ...................................................................................... - 19 -         Section 3.01 Communications. .................................................................................. - 19 -         Section 3.02 Successors and Assigns......................................................................... - 19 -         Section 3.03 Recapitalization, Exchanges, Etc. Affecting the Shares. ...................... - 19 -         Section 3.04 Aggregation of Registrable Securities. ................................................. - 20 -         Section 3.05 Specific Performance. ........................................................................... - 20 -         Section 3.06 Counterparts. ......................................................................................... - 20 -         Section 3.07 Headings. .............................................................................................. - 20 -         Section 3.08 Governing Law. .................................................................................... - 20 -         Section 3.09 Severability of Provisions. .................................................................... - 21 -         Section 3.10 Entire Agreement. ................................................................................. - 21 -         Section 3.11 Amendment. .......................................................................................... - 21 -         Section 3.12 No Presumption. ................................................................................... - 21 -         Section 3.13 Obligations Limited to Parties to Agreement. ...................................... - 21 -         Section 3.14 Independent Nature of Holders’ Obligations. ....................................... - 22 -         Section 3.15 Interpretation. ........................................................................................ - 22 -       Annex A – Selling Stockholder Notice and Questionnaire                                          -i-  

 

                    REGISTRATION RIGHTS AGREEMENT         This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered  into as of October 10, 2018, by and among Lilis Energy, Inc., a Nevada corporation (the  “Company”), and The Värde Fund VI-A, L.P., Värde Investment Partners, L.P., The Värde Fund  XI (Master), L.P., Värde Investment Partners (Offshore) Master, L.P., The Värde Skyway Master  Fund, L.P. and The Värde Fund XII (Master), L.P. (each, a “Värde Party” and, collectively, the  “Värde Parties”).         WHEREAS, this Agreement is made pursuant to the Transaction Agreement, dated as of  October 10, 2018 (the “Transaction Agreement”), among the Company and the Värde Parties,  pursuant to which the Värde Parties acquired the Securities (as defined in the Transaction  Agreement); and         WHEREAS, the Company has agreed to provide the registration and other rights set forth  in this Agreement for the benefit of the Värde Parties pursuant to the Transaction Agreement.         NOW THEREFORE, in consideration of the mutual covenants and agreements set forth  herein and for good and valuable consideration, the receipt and sufficiency of which are hereby  acknowledged by each party hereto, the parties hereby agree as follows:                                    ARTICLE I                                  DEFINITIONS         Section 1.01 Definitions.           Capitalized terms used herein without definition shall have the meanings given to them in  the Transaction Agreement. The terms set forth below are used herein as so defined:         “Agreement” has the meaning specified therefor in the introductory paragraph of this  Agreement.         “Commission” means the U.S. Securities and Exchange Commission, including the staff  thereof as applicable.         “Common Share Price” means the volume weighted average closing price of the Common  Stock (as reported by the Primary Exchange on which the Common Stock is then traded) for the  ten (10) trading days immediately preceding the date on which the determination is made (or, if  such price is not available, as determined in good faith by the Board of Directors).         “Company” has the meaning specified therefor in the introductory paragraph of this  Agreement.         “Company Securities” has the meaning specified therefor in Section 2.04(c)(i).         “Effective Date” has the meaning specified therefor in Section 2.01(a).         “Effectiveness Period” has the meaning specified therefor in Section 2.01(e).                                        - 1 -  

 

       “Expenses” has the meaning specified therefor in Section 2.10(a).          “Holder” means the record holder of any Registrable Securities; provided, that each record   holder of Purchased Shares or Exchanged Preferred Shares shall be deemed to be the record holder   of the Registrable Securities issuable upon conversion of such Purchased Shares or Exchanged   Preferred Shares for purposes of this definition and all other references in this Agreement to   holding or owning Registrable Securities.          “Indemnified Party” has the meaning specified therefor in Section 2.10(c).          “Indemnifying Party” has the meaning specified therefor in Section 2.10(c).          “January Registrable Securities” means the Registrable Securities, as such term is defined   in the January Registration Rights Agreement.          “January Registration Rights Agreement” means that certain Registration Rights   Agreement dated as of January 31, 2018, by and among the Company and the purchasers party   thereto.          “January Shelf Registration Statement” means the effective shelf registration statement   (File No.: 333-224378) filed by the Company pursuant to the January Registration Rights  Agreement.          “Liquidated Damages” has the meaning specified in Section 2.01(c).          “Liquidated Damages Multiplier” means an amount equal to the sum of (a) the aggregate   purchase price for the Purchased Shares pursuant to the Transaction Agreement and (b) the   Exchange Amount.          “Losses” has the meaning specified therefor in Section 2.10(a).          “Majority Holders” means, at any time, the Holder or Holders of more than fifty percent   (50%) of the Registrable Securities at such time.          “Managing Underwriter” means, with respect to any Underwritten Offering, the lead book-  running manager(s) of such Underwritten Offering.          “Other Securities” has the meaning specified therefor in Section 2.04(c)(i).          “Piggybacking Holder” has the meaning specified therefor in Section 2.04(a).          “Piggyback Underwritten Offering” has the meaning specified therefor in Section 2.04(a).          “Registration Default” has the meaning specified therefor in Section 2.01(c).          “Registration Default Period” has the meaning specified therefor in Section 2.01(c).                                          - 2 -  

 

      “Registrable Securities” means the Exchanged Common Shares and the Underlying  Shares, in each case until such Registrable Securities cease to be Registrable Securities pursuant  to Section 1.02.         “Registrable Securities Amount” means the Common Share Price times the number of  applicable Registrable Securities.         “Registration Expenses” means all expenses, other than Selling Expenses, incident to the  Company’s performance under or compliance with this Agreement to effect the registration of  Registrable Securities on a Registration Statement and the disposition of such Registrable  Securities, including, without limitation, all registration, filing, securities exchange listing fees, all  registration, filing, qualification and other fees and expenses of complying with securities or blue  sky laws, fees of the Financial Industry Regulatory Authority, fees of transfer agents and registrars,  all word processing, duplicating and printing expenses and the fees and disbursements of counsel  to the Company and the independent public accountants for the Company, including the expenses  of any special audits or “comfort” letters required by or incident to such performance and  compliance, and the reasonable fees and expenses of one counsel for all Holders.         “Registration Statement” means (a) the Shelf Registration Statement and (b) any other  registration statement of the Company filed or to be filed with the Commission under the Securities  Act in which Registrable Securities are or, as the context requires, may be included in the securities  registered thereby pursuant to this Agreement.         “Requesting Holder” has the meaning specified therefor in Section 2.02(a).         “Requesting Holder and Shelf Piggybacking Holder Securities” has the meaning specified  therefor in Section 2.02(c)(i).         “Rule 415 Limitation” has the meaning specified therefor in Section 2.01(b).         “Section 2.02 Maximum Number of Shares” has the meaning specified therefor in Section  2.02(c).         “Section 2.04 Maximum Number of Shares” has the meaning specified therefor in Section  2.04(c).         “Selling Expenses” means all (a) underwriting fees, discounts and selling commissions  allocable to the sale of Registrable Securities, (b) transfer taxes allocable to the sale of the  Registrable Securities, (c) costs or expenses related to any roadshows conducted in connection  with the marketing of any Shelf Underwritten Offering, and (d) fees and expenses of any counsel  engaged by any Holder that are not expressly included in Registration Fees.         “Selling Holder” means a Holder selling Registrable Securities pursuant to a Registration  Statement.         “Selling Stockholder Questionnaire” has the meaning specified therefor in Section 2.07.         “Shelf Piggybacking Holder” has the meaning specified therefor in Section 2.02(b).                                        - 3 -  

 

       “Shelf Registration Statement” has the meaning specified therefor in Section 2.01(a),   subject to Section 2.01(f).          “Shelf Underwritten Offering” has the meaning specified therefor in Section 2.02(a).          “Transaction Agreement” has the meaning specified therefor in the recitals of this   Agreement.          “Underwritten Offering” means an offering (including an offering pursuant to the Shelf   Registration Statement) in which shares of Common Stock are sold to an underwriter on a firm   commitment basis for reoffering to the public.          “Underwritten Offering Filing” means (a) with respect to a Shelf Underwritten Offering, a   preliminary prospectus supplement (or prospectus supplement if no preliminary prospectus   supplement is used) to the Shelf Registration Statement relating to such Shelf Underwritten   Offering, and (b) with respect to a Piggyback Underwritten Offering, (i) a preliminary prospectus   supplement (or prospectus supplement if no preliminary prospectus supplement is used) to an   effective shelf Registration Statement (other than the Shelf Registration Statement) in which   Registrable Securities could be included and Holders could be named as selling security holders   without the filing of a post-effective amendment thereto (other than a post-effective amendment  that becomes effective upon filing) or (ii) a Registration Statement (other than the Shelf  Registration Statement), in each case relating to such Piggyback Underwritten Offering.          “Värde Party” and “Värde Parties” have the meaning specified therefor in the introductory   paragraph of this Agreement.          Section 1.02 Registrable Securities.            Any Registrable Security will cease to be a Registrable Security when (a) a Registration   Statement covering such Registrable Security has become effective under the Securities Act and   such Registrable Security has been sold or disposed of pursuant to such Registration Statement;   (b) such Registrable Security has been disposed of pursuant to any section of Rule 144 (or any   similar provision then in effect) under the Securities Act; (c) such Registrable Security is held by   the Company or one of its Subsidiaries; (d) such Registrable Security has been sold or disposed of   in a transaction in which the transferor’s rights under this Agreement are not assigned to the   transferee of such Registrable Security pursuant to Section 2.12; or (e) such Registrable Security   becomes eligible for resale without restriction and without volume limitations or the need for   current public information pursuant to any section of Rule 144 (or any similar provision then in   effect) under the Securities Act.  Any security that has ceased to be a Registrable Security shall   not thereafter become a Registrable Security, and any security that is issued or distributed in   respect of a security that has ceased to be a Registrable Security shall not be a Registrable Security.                                          - 4 -  

 

                                 ARTICLE II                             REGISTRATION RIGHTS         Section 2.01 Shelf Registration.           (a)   The Company shall prepare and file with the Commission, and use commercially  reasonable efforts to cause to be declared effective as soon as practicable after the filing thereof,  but in no event later than April 10, 2019 (the “Effective Date”), a Registration Statement under the  Securities Act relating to the offer and sale of all the Registrable Securities by the Holders thereof  (the “Shelf Registration Statement”) from time to time in accordance with the methods of  distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act.   Promptly following the effective date of the Shelf Registration Statement, the Company shall  notify the Holders of the effectiveness thereof.         (b)   Notwithstanding anything in Section 2.01(a), if for any reason the Commission  does not permit the Company to include any or all of the Registrable Securities in the initial Shelf  Registration Statement due to limitations on the use of Rule 415 under the Securities Act for the  resale of the Registrable Securities by the Holders (a “Rule 415 Limitation”), or the Commission  informs the Company that any of the Selling Holders would be deemed to be statutory  underwriters, the Company shall notify the Holders thereof and use commercially reasonable  efforts to promptly file amendments to the initial Shelf Registration Statement as required by the  Commission and/or withdraw the initial Shelf Registration Statement and file a new registration  statement on Form S-3 or such other form available for registration of the Registrable Securities  as a secondary offering, in either case covering the maximum number of Registrable Securities  permitted to be registered by the Commission and avoid the Selling Holders being deemed to be  statutory underwriters; provided, however, that prior to such amendment or subsequent Shelf  Registration Statement, the Company shall be obligated to use commercially reasonable efforts to  advocate with the Commission for the registration of all of the Registrable Securities and against  the Selling Holders’ being deemed statutory underwriters in accordance with Commission  guidance, including without limitation, the Compliance and Disclosure Interpretation “Securities  Act Rules” No. 612.09, and the Securities Act.  In the event the Company amends the initial Shelf  Registration Statement or files a subsequent Shelf Registration Statement, as the case may be, the  Company will use commercially reasonable efforts to file with the Commission, as promptly as  allowed by the Commission, Commission guidance or the Securities Act, one or more additional  Shelf Registration Statements covering those Registrable Securities not included in the initial Shelf  Registration Statement as amended or any subsequent Shelf Registration Statement previously  filed.  The number of Registrable Securities that may be included in each such Shelf Registration  Statement shall be allocated among the Holders thereof in proportion (as nearly as practicable) to  the number of Registrable Securities owned by each Holder or in such other proportion as is  necessary to avoid the Selling Holders being deemed to be statutory underwriters.  If the  Commission requires the Company to name any Holder as a statutory underwriter and such Holder  does not consent thereto, then such Holder’s Registrable Securities shall not be included on the  Shelf Registration Statement and the Company shall have no further obligations under this Section  2.01 or Section 2.02 with respect to the Registrable Securities held by such Holder.         (c)   If (i) the Shelf Registration Statement required by Section 2.01(a) does not become  or is not declared effective by the Effective Date or (ii) the Shelf Registration Statement is declared                                        - 5 -  

 

 effective but (A) the Shelf Registration Statement shall thereafter be withdrawn by the Company   or shall become subject to an effective stop order issued pursuant to Section 8(d) of the Securities   Act suspending the effectiveness of such Shelf Registration Statement (except as specifically   permitted pursuant to Section 2.03) without being succeeded by an additional Shelf Registration   Statement filed and declared effective within 3 Business Days, (B) the use of any prospectus that   is a part of the Shelf Registration Statement is suspended pursuant to Section 2.03 in excess of the   number of days permitted thereby or (C) except as addressed by the foregoing clauses (A) and (B)   or except as expressly permitted by Section 2.03, the Shelf Registration Statement fails to be   available for the resale by the Holders of all the Registrable Securities required to be included   therein during the Effectiveness Period (each such event referred to in clauses (i) and (ii), a   “Registration Default” and each period during which a Registration Default has occurred and is   continuing, a “Registration Default Period”), then each Holder shall be entitled to a payment (with   respect to each of the Holder’s pro rata share of Registrable Securities as liquidated damages   (which liquidated damages will not be exclusive of any other remedies available in equity,   including, without limitation, specific performance) and not as a penalty), (x) for the first 90 days   following the occurrence of such Registration Default, an amount equal to 0.25% of the Liquidated   Damages Multiplier, which shall accrue daily, and (y) for each non-overlapping 90-day period   beginning on the 91st day thereafter, an amount equal to the amount set forth in clause (x) plus an   additional 0.25% of the Liquidated Damages Multiplier for each subsequent 90 days (i.e., 0.5%   for 91-180 days, 0.75% for 181-270 days, 1.0% for 271-360, etc.), which shall accrue daily, up to   a maximum amount equal to 2.5% of the Liquidated Damages Multiplier per non-overlapping 90-  day period (the “Liquidated Damages”), until such time as such Registration Default is cured or   there are no longer any Registrable Securities outstanding. The Liquidated Damages shall be   payable within 10 Business Days after the end of each such 90-day period in immediately available   funds to the account or accounts specified by the applicable Holders. Any amount of Liquidated   Damages shall be prorated for any period of less than 90 days accruing during any period for which   a Holder is entitled to Liquidated Damages hereunder.          (d)   The Company may request a waiver of all or any portion of the Liquidated   Damages, which may be granted by the consent of the Majority Holders, in their sole discretion,   and which such waiver shall apply to all the Holders of Registrable Securities.          (e)   The Shelf Registration Statement shall be on Form S-3 (or any equivalent or   successor form) under the Securities Act or, if Form S-3 is not then available to the Company, on  Form S-1 or such other form of registration statements as is then available to effect a registration  for resale of the Registrable Securities; provided, however, that if the Company has filed the Shelf  Registration Statement on Form S-1 and subsequently becomes eligible to use Form S-3 or any  equivalent or successor form or forms, the Company shall (i) file a post-effective amendment to   the Shelf Registration Statement converting such Registration Statement on Form S-1 to a  Registration Statement on Form S-3 or any equivalent or successor form or forms or (ii) withdraw  the Shelf Registration Statement on Form S-1 and file a subsequent Shelf Registration Statement  on Form S-3 or any equivalent or successor form or forms.          (f)   Unless otherwise specifically stated herein, the term “Shelf Registration Statement”   shall refer individually to the initial Shelf Registration Statement and to each subsequent Shelf   Registration Statement, if any, filed pursuant to Section 2.01(b) or Section 2.01(e).                                          - 6 -  

 

       (g)   The Company shall use commercially reasonable efforts to cause the Shelf   Registration Statement to remain effective, and to be supplemented and amended to the extent   necessary to ensure that the Shelf Registration Statement is available for the resale of all the   Registrable Securities by the Holders until all of the Registrable Securities have ceased to be   Registrable Securities (the “Effectiveness Period”).          (h)   When effective, the Shelf Registration Statement (including the documents   incorporated therein by reference) will comply as to form in all material respects with all applicable   requirements of the Securities Act and the Exchange Act and will not contain an untrue statement   of a material fact or omit to state a material fact required to be stated therein or necessary to make   the statements therein not misleading (in the case of any prospectus contained in the Shelf   Registration Statement, in the light of the circumstances under which such statements are made).          (i)   If the Majority Holders request in writing, no later than the tenth Business Days   after the Company makes available to each Selling Holder complete drafts of the Shelf Registration   Statement pursuant to and in accordance with Section 2.06(b), that the Company include the   January Registrable Securities in the Shelf Registration Statement, then the Company shall use   commercially reasonable efforts to cause the January Registrable Securities to be included in the   Shelf Registration Statement; provided, that such inclusion is permitted under applicable Law and   would not, in the good faith determination of the Board of Directors, affect the Company in a   manner that is materially adverse to the Company.  In the event the January Registrable Securities   and any other securities covered by the January Shelf Registration Statement are included in the   Shelf Registration Statement at the time it becomes effective, the Company shall,   contemporaneously with such effectiveness, remove such securities from the January Shelf   Registration Statement.          Section 2.02 Underwritten Shelf Offering Requests.          (a)   In the event that any Holder or group of Holders elects to dispose of Registrable   Securities under the Shelf Registration Statement pursuant to an Underwritten Offering and   reasonably expects gross proceeds of at least $20,000,000 from such Underwritten Offering   (including proceeds attributable to any Registrable Securities included in such Underwritten   Offering by any Shelf Piggybacking Holders), the Company shall, at the request (a “Shelf   Underwritten Offering Request”) of such Holder or Holders (in such capacity, a “Requesting   Holder”), enter into an underwriting agreement in a form as is customary in Underwritten   Offerings of securities by the Company with the underwriter or underwriters selected pursuant to   Section 2.02(d) and shall take all such other reasonable actions as are requested by the Managing   Underwriter of such Underwritten Offering and/or the Requesting Holders in order to expedite or   facilitate the disposition of, subject to Section 2.02(c), such Registrable Securities and the   Registrable Securities requested to be included by any Shelf Piggybacking Holder (a “Shelf   Underwritten Offering”); provided, however, that the Company shall have no obligation to   facilitate or participate in more than one Shelf Underwritten Offering in any 180-day period or  more than two Shelf Underwritten Offerings per calendar year.          (b)   If the Company receives a Shelf Underwritten Offering Request, it will give written   notice of such proposed Shelf Underwritten Offering to each Holder (other than the Requesting   Holder) that, together with such Holder’s Affiliates, holds at least $5,000,000 of Registrable                                         - 7 -  

 

 Securities calculated based on the Registrable Securities Amount, which notice shall be held in   strict confidence by such Holders and shall include the anticipated filing date of the related   Underwritten Offering Filing and, if known, the number of shares of Common Stock that are   proposed to be included in such Shelf Underwritten Offering, and of such Holders’ rights under   this Section 2.02(b).  Such notice shall be given promptly (and in any event at least five Business   Days before the filing of the Underwritten Offering Filing or two Business Days before the filing   of the Underwritten Offering Filing in connection with a bought or overnight Underwritten   Offering); provided, that if the Shelf Underwritten Offering is a bought or overnight Underwritten  Offering and the Managing Underwriter advises the Company and the Requesting Holder that the  giving of notice pursuant to this Section 2.02(b) would adversely affect the offering, no such notice   shall be required (and such Holders shall have no right to include Registrable Securities in such   bought or overnight Underwritten Offering); and provided further, that the Company shall not so   notify any such other Holder that has notified the Company (and not revoked such notice)   requesting that such Holder not receive notice from the Company of any proposed Shelf   Underwritten Offering.  Each such Holder shall then have four Business Days (or one Business   Day in the case of a bought or overnight Underwritten Offering) after the date on which the Holders   received notice pursuant to this Section 2.2(b) to request inclusion of Registrable Securities in the   Shelf Underwritten Offering (which request shall specify the maximum number of Registrable   Securities intended to be disposed of by such Holder and include such other information as is   requested pursuant to clause (i) of Section 2.05(c)) (any such Holder making such request, a “Shelf   Piggybacking Holder”). If no request for inclusion from a Holder is received within such period,   such Holder shall have no further right to participate in such Shelf Underwritten Offering.          (c)   If the Managing Underwriter of the Shelf Underwritten Offering shall inform the   Company and the Requesting Holders in writing, with a copy to be provided upon request to any   Shelf Piggybacking Holder, of its belief that the number of Registrable Securities requested to be   included in such Shelf Underwritten Offering by the Requesting Holders and any Shelf   Piggybacking Holders (and any other shares of Common Stock requested to be included by any   other Persons having registration rights with respect to such offering) would materially adversely   affect such offering, then the Company shall include in the applicable Underwritten Offering   Filing, to the extent of the total number of Registrable Securities that the Company is so advised   can be sold in such Shelf Underwritten Offering without so materially adversely affecting such   offering (the “Section 2.02 Maximum Number of Shares”), Registrable Securities in the following   priority:                (i)   First, all Registrable Securities that the Requesting Holder and Shelf         Piggybacking Holders requested to be included therein (the “Requesting Holder and Shelf         Piggybacking Holder Securities”) (pro rata among the Requesting Holders and Shelf         Piggybacking Holders based on the number of Registrable Securities each requested to be         included; and                (ii)  Second, to the extent that the number of Requesting Holder and Shelf         Piggybacking Holder Securities is less than the Section 2.02 Maximum Number of Shares,         the shares of Common Stock requested to be included by any other Persons having         registration rights with respect to such offering, pro rata among such other Persons based         on the number of shares of Common Stock each requested to be included.                                          - 8 -  

 

      (d)   The Company shall select the Managing Underwriter and any other underwriters in  connection with such Shelf Underwritten Offering. The Requesting Holders shall determine the  pricing of the Registrable Securities offered pursuant to any Shelf Underwritten Offering and the  applicable underwriting discounts and commissions and determine the timing of any such Shelf  Underwritten Offering, subject to Section 2.03.           Section 2.03 Delay and Suspension Rights.           Notwithstanding any other provision of this Agreement, the Company may (a) delay filing  or effectiveness of the Shelf Registration Statement (or any amendment thereto) or effecting a  Shelf Underwritten Offering or (b) suspend the Holders’ use of any prospectus that is a part of a  Shelf Registration Statement upon written notice to each Holder whose Registrable Securities are  included in such Shelf Registration Statement (provided that in no event shall such notice contain  any material non-public information regarding the Company) (in which event such Holder shall  immediately discontinue sales of Registrable Securities pursuant to such Registration Statement  but may settle any then-contracted sales of Registrable Securities), in each case for a period of up  to 60 days, if the Company determines (i) that such delay or suspension is in the best interest of  the Company and its stockholders generally due to a pending transaction involving the Company  (including a pending securities offering by the Company, or any proposed financing, acquisition,  merger, tender offer, business combination, corporate reorganization, consolidation or other  significant transaction involving the Company), (ii) that such registration or offering would render  the Company unable to comply with applicable securities laws or (C) that such registration or  offering would require disclosure of material information that the Company has a bona fide  business purpose for preserving as confidential (any such period, a “Suspension Period”);  provided, however, that in no event shall any Suspension Periods collectively exceed an aggregate  of 120 days in any twelve-month period.         Section 2.04 Piggyback Registration Rights.         (a)   Subject to Section 2.04(c), if the Company at any time proposes to file an  Underwritten Offering Filing for an Underwritten Offering of shares of Common Stock for its own  account or for the account of any other Persons who have or have been granted registration rights  (a “Piggyback Underwritten Offering”), it will give written notice of such Piggyback Underwritten  Offering to each Holder that, together with such Holder’s Affiliates, holds at least the $5,000,000  of Registrable Securities calculated based on the Registrable Securities Amount, which notice shall  be held in strict confidence by such Holders and shall include the anticipated filing date of the  Underwritten Offering Filing and, if known, the number of shares of Common Stock that are  proposed to be included in such Piggyback Underwritten Offering, and of such Holders’ rights  under this Section 2.04(a).  Such notice shall be given promptly (and in any event at least five  Business Days before the filing of the Underwritten Offering Filing or two Business Days before  the filing of the Underwritten Offering Filing in connection with a bought or overnight  Underwritten Offering); provided, that if the Piggyback Underwritten Offering is a bought or  overnight Underwritten Offering and the Managing Underwriter advises the Company that the  giving of notice pursuant to this Section 2.04(a) would adversely affect the offering, no such notice  shall be required (and such Holders shall have no right to include Registrable Securities in such  bought or overnight Underwritten Offering).  Each such Holder shall then have four Business Days  (or one Business Day in the case of a bought or overnight Underwritten Offering) after the date on                                        - 9 -  

 

which the Holders received notice pursuant to this Section 2.04(a) to request inclusion of  Registrable Securities in the Piggyback Underwritten Offering (which request shall specify the  maximum number of Registrable Securities intended to be disposed of by such Holder and include  such other information as is requested pursuant to clause (i) of Section 2.05(c)) (any such Holder  making such request, a “Piggybacking Holder”).  If no request for inclusion from a Holder is  received within such period, such Holder shall have no further right to participate in such  Piggyback Underwritten Offering.  Subject to Section 2.04(c), the Company shall use  commercially reasonable efforts to include in the Piggyback Underwritten Offering all Registrable  Securities that the Company has been so requested to include by the Piggybacking Holders;  provided, however, that if, at any time after giving written notice of a proposed Piggyback  Underwritten Offering pursuant to this Section 2.04(a) and prior to the execution of an  underwriting agreement with respect thereto, the Company or such other Persons who have or have  been granted registration rights, as applicable, shall determine for any reason not to proceed with  or to delay such Piggyback Underwritten Offering, the Company shall give written notice of such  determination to the Piggybacking Holders (which such Holders will hold in strict confidence) and  (i) in the case of a determination not to proceed, shall be relieved of its obligation to include any  Registrable Securities in such Piggyback Underwritten Offering (but not from any obligation of  the Company to pay the Registration Expenses in connection therewith), and (ii) in the case of a  determination to delay, shall be permitted to delay inclusion of any Registrable Securities for the  same period as the delay in including the shares of Common Stock to be sold for the Company’s  account or for the account of such other Persons who have or have been granted registration rights,  as applicable.         (b)   Each Holder shall have the right to withdraw its request for inclusion of its  Registrable Securities in any Piggyback Underwritten Offering at any time prior to the execution  of an underwriting agreement with respect thereto by giving written notice to the Company of its  request to withdraw.         (c)   If the Managing Underwriter of the Piggyback Underwritten Offering shall inform  the Company of its belief that the number of Registrable Securities requested to be included in  such Piggyback Underwritten Offering, when added to the number of shares of Common Stock  proposed to be offered by the Company or such other Persons who have or have been granted  registration rights (and any other shares of Common Stock requested to be included by any other  Persons having registration rights on parity with the Piggybacking Holders with respect to such  offering), would materially adversely affect such offering, then the Company shall include in such  Piggyback Underwritten Offering, to the extent of the total number of securities which the  Company is so advised can be sold in such offering without so materially adversely affecting such  offering (the “Section 2.04 Maximum Number of Shares”), shares of Common Stock in the  following priority:               (i)   First, if the Piggyback Underwritten Offering is for the account of the        Company, all shares of Common Stock that the Company proposes to include for its own        account (the “Company Securities”) or, if the Piggyback Underwritten Offering is for the        account of any other Persons who have or have been granted registration rights, all shares        of Common Stock that such Persons propose to include (the “Other Securities”); and                                        - 10 -  

 

           (ii)   Second, if the Piggyback Underwritten Offering is for the account of the        Company, to the extent that the number of Company Securities is less than the Section 2.04        Maximum Number of Shares, the shares of Common Stock requested to be included by the        Piggybacking Holders; and holders of any other shares of Common Stock requested to be        included by Persons having rights of registration on parity with the Piggybacking Holders        with respect to such offering, pro rata among the Piggybacking Holders and such other        holders based on the number of shares of Common Stock each requested to be included        and, if the Piggyback Underwritten Offering is for the account of any other Persons who        have or have been granted registration rights, to the extent that the number of Other        Securities is less than the Section 2.04 Maximum Number of Shares, the shares of Common        Stock requested to be included by the Piggybacking Holders, pro rata among the        Piggybacking Holders.         (d)   The Company or the other Persons who have or have been granted registration  rights initiating such Piggyback Underwritten Offering (if so entitled pursuant to such registration  rights), as applicable, shall select the underwriters in any Piggyback Underwritten Offering and  shall determine the pricing of the shares of Common Stock offered pursuant to any Piggyback  Underwritten Offering, the applicable underwriting discounts and commissions and the timing of  any such Piggyback Underwritten Offering.         Section 2.05 Participation in Underwritten Offerings.         (a)   In connection with any Underwritten Offering contemplated by Section 2.02 or  Section 2.04, the underwriting agreement into which each Selling Holder and the Company shall  enter into shall contain such representations, covenants, indemnities (subject to Section 2.10) and  other rights and obligations as are customary in Underwritten Offerings by the Company.  No  Selling Holder shall be required to make any representations or warranties to or agreements with  the Company or the underwriters other than representations, warranties or agreements regarding  such Selling Holder’s authority to enter into such underwriting agreement and to sell, and  information provided by such Selling Holder for inclusion in the Registration Statement relating  thereto and its ownership of, the securities being registered on its behalf, its intended method of  distribution and any other representation required by law.         (b)   Any participation by Holders in a Piggyback Underwritten Offering shall be in  accordance with the plan of distribution of (i) the Company, if such Piggyback Underwritten  Offering is for the account of the Company, or (ii) any other Persons who have or have been  granted registration rights, if the Piggyback Underwritten Offering is for the account of such other  Persons.         (c)   In connection with any Piggyback Underwritten Offering in which any Holder has  the right to include Registrable Securities pursuant to Section 2.04, such Holder agrees (i) to supply  any information reasonably requested by the Company in connection with the preparation of a  Registration Statement and/or any other documents relating to such registered offering (including  a Selling Stockholder Questionnaire) and (ii) to execute and deliver any agreements and  instruments being executed by all holders on substantially the same terms reasonably requested by  the Company or the Managing Underwriter, as applicable, to effectuate such registered offering,  including, without limitation, underwriting agreements (subject to Section 2.05(a)), custody                                       - 11 -  

 

agreements, lock-up agreements pursuant to which such Holder agrees not to sell or purchase any  securities of the Company for the same period of time following the registered offering as is agreed  to by the Company and the other participating holders or such shorter period as the Managing  Underwriter shall agree to, powers of attorney and questionnaires.         (d)   If the Company or the Managing Underwriter, as applicable, requests that the  Holders take any of the actions referred to in clause (ii) of Section 2.05(c), the Holders shall take  such action promptly but in any event within two Business Days following the date of such request.         Section 2.06 Registration and Sale Procedures.           In connection with its obligations under this Article II and with respect to each Registration  Statement that includes Registrable Securities, the Company will:         (a)   promptly prepare and file with the Commission such amendments and supplements  to the Registration Statement and the prospectus used in connection therewith as may be necessary  to keep the Registration Statement effective and to comply with the provisions of the Securities  Act with respect to the disposition of all Registrable Securities covered by the Registration  Statement;         (b)   make available to each Selling Holder (i) as far in advance as reasonably practicable  before filing the Registration Statement, any prospectus used in connection therewith or any  supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such  documents proposed to be filed (including exhibits and each document incorporated by reference  therein to the extent then required by the rules and regulations of the Commission), and provide  each such Selling Holder the opportunity to object to any information pertaining to such Selling  Holder and its plan of distribution that is contained therein and make the corrections reasonably  requested by such Selling Holder with respect to such information prior to filing the Registration  Statement, prospectus or supplement or amendment thereto, and (ii) such number of copies of the  Registration Statement and the prospectus included therein and any supplements and amendments  thereto as such Selling Holder may reasonably request in order to facilitate the public sale or other  disposition of the Registrable Securities covered thereby;         (c)   if applicable, use commercially reasonable efforts to register or qualify the  Registrable Securities covered by the Registration Statement under the securities or blue sky laws  of such jurisdictions as the Selling Holders shall reasonably request; provided, however, that the  Company will not be required to qualify generally to transact business in any jurisdiction where it  is not then required to so qualify, take any action that would subject the Company to any material  tax in any such jurisdiction where it is not then so subject, or to take any action that would subject  it to general service of process in any such jurisdiction where it is not then so subject;         (d)   promptly notify each Selling Holder, at any time when a prospectus relating thereto  is required to be delivered by any of them under the Securities Act, of (i) the filing of the  Registration Statement or any prospectus or prospectus supplement to be used in connection  therewith, or any amendment or supplement thereto, and, with respect to the Registration  Statement or any post-effective amendment thereto, when the same has become effective; and (ii)  the receipt of any written comments from the Commission with respect to any filing referred to in                                       - 12 -  

 

 clause (i) and any written request by the Commission for amendments or supplements to the   Registration Statement or any prospectus or prospectus supplement thereto;          (e)   (i) immediately notify each Selling Holder, at any time when a prospectus relating  thereto is required to be delivered under the Securities Act, of (A) the happening of any event as a  result of which the prospectus or prospectus supplement contained in the Registration Statement,  as then in effect, includes an untrue statement of a material fact or omits to state any material fact  required to be stated therein or necessary to make the statements therein not misleading (in the  case of any prospectus contained therein, in the light of the circumstances under which such  statements were made); (B) the issuance or express threat of issuance by the Commission of any  stop order suspending the effectiveness of the Registration Statement, or the initiation of any  proceedings for that purpose; or (C) the receipt by the Company of any notification with respect   to the suspension of the qualification of any Registrable Securities for sale under the applicable   securities or blue sky laws of any jurisdiction; and (ii) following the provision of such notice, as   promptly as practicable amend or supplement the prospectus or prospectus supplement or take   other appropriate action so that the prospectus or prospectus supplement does not include an untrue   statement of a material fact or omit to state a material fact required to be stated therein or necessary   to make the statements therein not misleading in the light of the circumstances then existing and   take such other commercially reasonable action as is necessary to remove a stop order, suspension,   threat thereof or proceedings related thereto;          (f)   upon request and subject to appropriate confidentiality obligations, furnish to each   Selling Holder copies of any and all transmittal letters or other correspondence with the   Commission or any other governmental agency or self-regulatory body or other body having   jurisdiction (including any domestic or foreign securities exchange) relating to the Registration   Statement;          (g)   otherwise use commercially reasonable efforts to comply with all applicable rules   and regulations of the Commission, and make available to its security holders, as soon as   reasonably practicable, an earnings statement, which earnings statement shall satisfy the provisions   of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;          (h)   cause all such Registrable Securities registered pursuant to this Agreement to be   listed on each securities exchange or nationally recognized quotation system on which similar   securities issued by the Company are then listed;          (i)   use commercially reasonable efforts to cause the Registrable Securities to be   registered with or approved by such other governmental agencies or authorities as may be   necessary by virtue of the business and operations of the Company to enable the Selling Holders   to consummate the disposition of such Registrable Securities;          (j)   provide a transfer agent and registrar for all Registrable Securities covered by such   registration statement not later than the effective date of the Registration Statement;          (k)   if requested by a Selling Holder, (i) incorporate in a prospectus supplement or post-  effective amendment such information as such Selling Holder reasonably requests to be included   therein relating to the sale and distribution of Registrable Securities, including information with                                         - 13 -  

 

respect to the number of Registrable Securities being offered or sold, the purchase price being paid  therefor and any other terms of the offering of the Registrable Securities to be sold in such offering  and (ii) make all required filings of such prospectus supplement or post-effective amendment after  being notified of the matters to be incorporated in such prospectus supplement or post-effective  amendment;          (l)   in connection with an Underwritten Offering, use commercially reasonable efforts  to provide to each Selling Holder a copy of any auditor “comfort” letters, customary legal opinions  or reports of the independent petroleum engineers of the Company relating to the oil and gas  reserves of the Company, in each case that have been provided to the Managing Underwriter in  connection with the Underwritten Offering; and         (m)   make available for inspection by any Selling Holder of Registrable Securities, any  underwriter participating in any disposition pursuant to such Registration Statement and any  attorney, accountant or other agent retained by any such holder or underwriter (collectively, the  “Inspectors”), all financial and other records, pertinent corporate documents and properties of the  Company (collectively, the “Records”), and cause the Company’s officers, directors and  employees to supply all information reasonably requested by any such Inspector in connection  with such Registration Statement; provided, that the Company need not disclose any non-public  information to any such person unless and until such person has entered into a confidentiality  agreement with the Company.         Each Selling Holder, upon receipt of notice from the Company of the happening of any  event of the kind described in subsection (e) of this Section 2.06, shall forthwith discontinue offers  and sales of the Registrable Securities by means of a prospectus or prospectus supplement until  such Selling Holder’s receipt of the copies of the supplemented or amended prospectus  contemplated by subsection (e) of this Section 2.06 or until it is advised in writing by the Company  that the use of the prospectus may be resumed and has received copies of any additional or  supplemental filings incorporated by reference in the prospectus, and, if so directed by the  Company, such Selling Holder will deliver to the Company (at the Company’s expense) all copies  in their possession or control, other than permanent file copies then in such Selling Holder’s  possession, of the prospectus covering such Registrable Securities current at the time of receipt of  such notice.         Section 2.07 Cooperation by Holders.           The Company shall have no obligation to include Registrable Securities of a Holder in a  Registration Statement who has failed to furnish, within five Business Days of a request by the  Company, such information that the Company determines, after consultation with its counsel, is  reasonably required in order for the Registration Statement or prospectus supplement, as  applicable, to comply with the Securities Act.  The Company may require each Holder to furnish  to the Company a written statement as to the number of shares of Common Stock beneficially  owned by such Holder.  Without limiting the foregoing, with respect to the Shelf Registration  Statement, each Holder agrees to furnish to the Company a completed questionnaire in the form  attached to this Agreement as Annex A (a “Selling Stockholder Questionnaire”) on a date that is  not less than 45 days after the Closing Date or three Business Days following the date on which  such Holder receives draft materials in accordance with Section 2.06(b).                                       - 14 -  

 

       Section 2.08 Restrictions on Public Sales by Holders.          Each Holder agrees not to effect any public sale or distribution of Registrable Securities   for a period of up to 60 days following completion of an Underwritten Offering of equity securities   by the Company; provided that (i) the Company gives written notice to such Holder of the date of   the commencement and termination of such period with respect to any such Underwritten Offering   and (ii) the duration of the foregoing restrictions shall be no longer than the duration of the shortest  restriction generally imposed by the underwriters of such Underwritten Offering on the Company  or on the officers or directors or any other shareholder of the Company on whom a restriction is  imposed and (iii) the restrictions set forth in this Section 2.08 shall not apply to any Registrable   Securities that are included in such Underwritten Offering by such Selling Holder; provided   further, that this Section 2.08 shall not apply to any Holder that, together with such Holder’s   Affiliates, holds less than 5% of the outstanding shares of Common Stock.          Section 2.09 Expenses.            The Company will pay all reasonable Registration Expenses as determined in good faith.    Each Selling Holder shall pay its pro rata share of all Selling Expenses in connection with any sale   of its Registrable Securities hereunder.          Section 2.10 Indemnification and Contribution.            (a)   Indemnification by the Company.  The Company will indemnify and hold harmless   each Selling Holder, its directors, officers managers, employees, investment managers, agents and   Affiliates  and each other Person, if any, who controls such Selling Holder within the meaning of   Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any losses,   claims, damages or liabilities, joint or several (collectively, “Losses”) to which such Selling Holder   or any such director, officer or controlling person may become subject, under the Securities Act   or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened,   in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue  statement of any material fact contained in any Registration Statement or any preliminary  prospectus, free writing prospectus or final prospectus contained therein or related thereto, or any  amendment or supplement thereto, or any omission or alleged omission to state therein a material  fact required to be stated therein or necessary to make the statements therein not misleading (in  the case of any prospectus, in the light of the circumstances under which such statements were   made), or (ii) any violation or alleged violation by the Company of the Securities Act, the   Exchange Act, any state securities law, or any rule or regulations promulgated under the Securities   Act, the Exchange Act or any state securities law applicable to the Company and relating to action   or inaction required of the Company in connection with any such registration, qualification or   compliance required under this Agreement, and the Company will reimburse such Selling Holder   and each such director, officer, manager, employee, investment manager, agent, Affiliate and   controlling person for any legal or any other expenses reasonably incurred by them in connection   with investigating or defending any such Losses, actions or proceedings (collectively,   “Expenses”); provided that the Company shall not be liable in any such case to the extent that any   such Losses or Expenses arise out of or are based upon an untrue statement or alleged untrue   statement or omission or alleged omission made in such Registration Statement, preliminary   prospectus, free writing prospectus, final prospectus, amendment or supplement in reliance upon                                        - 15 -  

 

 and in conformity with information furnished to the Company in writing or electronically by or on   behalf of such Selling Holder expressly for use in the preparation thereof.  Such indemnity shall   remain in full force and effect regardless of any investigation made by or on behalf of such Selling   Holder or any such director, officer or controlling person and shall survive the transfer of such   securities by such Selling Holder.          (b)   Indemnification by Selling Holders.  Each Selling Holder, severally and not jointly,   will indemnify and hold harmless the Company, each director of the Company, its directors and   officers and each other Person, if any, who controls the Company within the meaning of the Section   15 of the Securities Act or Section 20 of the Exchange from and against any Losses to which the   Company or any such director, officer or controlling person may become subject, under the   Securities Act or otherwise, and will reimburse them for any Expenses reasonably incurred by any  of them (in each case in the same manner and to the same extent as set forth in Section 2.10(a)),   insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect   thereof) or Expenses arise out of or are based upon any untrue statement or alleged untrue   statement of any material fact contained in any Registration Statement or any preliminary   prospectus, free writing prospectus or final prospectus contained therein or related thereto, or any   amendment or supplement thereto, or any omission or alleged omission to state therein a material   fact required to be stated therein or necessary to make the statements therein not misleading (in   the case of any prospectus, in the light of the circumstances under which such statements were   made), if such statement or alleged statement or omission or alleged omission was made in reliance   upon and in conformity with information furnished to the Company in writing or electronically by   or on behalf of such Selling Holder expressly for use in the preparation thereof (it being understood   that any Selling Stockholder Questionnaire furnished by such Selling Holder is furnished expressly   for this purpose).  Such indemnity shall remain in full force and effect, regardless of any   investigation made by or on behalf of the Company or any such director, officer or controlling   person and shall survive the transfer of such securities by such Selling Holder.          (c)   Notices of Claims; Indemnification Procedures.  In case any proceeding (including   any governmental investigation) shall be instituted involving any Person in respect of which   indemnity may be sought pursuant to Section 2.10(a) or Section 2.10(b), such Person (the   “Indemnified Party”) shall promptly notify the Person against whom such indemnity may be   sought (the “Indemnifying Party”) in writing (provided that the failure of the Indemnified Party to   give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this   Section 2.10, except to the extent the Indemnifying Party is actually prejudiced by such failure to   give notice), and the Indemnifying Party shall be entitled to participate in such proceeding and,   unless in the reasonable opinion of outside counsel to the Indemnified Party a conflict of interest   between the Indemnified Party and Indemnifying Party may exist in respect of such claim, to   assume the defense thereof jointly with any other Indemnifying Party similarly notified, to the   extent that it chooses, with counsel reasonably satisfactory to such Indemnified Party, and after   notice from the Indemnifying Party to such Indemnified Party that it so chooses, the Indemnifying   Party shall not be liable to such Indemnified Party for any legal or other Expenses subsequently   incurred by such Indemnified Party in connection with the defense thereof other than reasonable   costs of investigation; provided, however, that (i) if the Indemnifying Party fails to assume the   defense or employ counsel reasonably satisfactory to the Indemnified Party, (ii) if such   Indemnified Party who is a defendant in any action or proceeding which is also brought against   the Indemnifying Party reasonably shall have concluded that there may be one or more legal                                        - 16 -  

 

 defenses available to such Indemnified Party that are not available to the Indemnifying Party or  (iii) if representation of both parties by the same counsel is otherwise inappropriate under  applicable standards of professional conduct then, in any such case, the Indemnified Party shall   have the right to assume or continue its own defense as set forth above (but with no more than one   firm of counsel for all Indemnified Parties (plus one firm of local counsel for all Indemnified   Parties in each relevant jurisdiction)), and the Indemnifying Party shall be liable for any Expenses   therefor.  No Indemnifying Party shall, without the written consent of the Indemnified Party, effect   the settlement or compromise of, or consent to the entry of any judgment with respect to, any   pending or threatened action or claim in respect of which indemnification or contribution may be   sought hereunder (whether or not the Indemnified Party is an actual or potential party to such   action or claim) unless such settlement, compromise or judgment (A) includes an unconditional   release of the Indemnified Party from all liability arising out of such action or claim and (B) does   not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on   behalf of any Indemnified Party.          (d)   Contribution.                (i)   If the indemnification provided for in this Section 2.10 is unavailable to an         Indemnified Party in respect of any Losses in respect of which indemnity is to be provided         hereunder, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,         shall to the fullest extent permitted by law contribute to the amount paid or payable by such         Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect         the relative fault of such party in connection with the statements or omissions that resulted         in such Losses, as well as any other relevant equitable considerations.  The relative fault of         the Company (on the one hand) and any Selling Holder (on the other hand) shall be         determined by reference to, among other things, whether the untrue or alleged untrue        statement of a material fact or the omission or alleged omission to state a material fact        relates to information supplied by such party and the parties’ relative intent, knowledge,        access to information and opportunity to correct or prevent such statement or omission.                (ii)  The Company and each Holder agree that it would not be just and equitable         if contribution pursuant to this Section 2.10(d) were determined by pro rata allocation or         by any other method of allocation that does not take account of the equitable considerations         referred to in Section 2.10(d)(i).  The amount paid or payable by an Indemnified Party as         a result of the Losses referred to in Section 2.10(d)(i) shall be deemed to include, subject         to the limitations set forth above, any Expenses reasonably incurred by such Indemnified         Party in connection with investigating or defending any such action or claim. No person         guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the         Securities Act) shall be entitled to contribution from any Person who was not guilty of such         fraudulent misrepresentation.          (e)   Limitation of Holders’ Liability.  Notwithstanding the provisions of this Section   2.10, no Holder shall be liable for indemnification or contribution pursuant to this Section 2.10 for   any amount in excess of the net proceeds received by such Holder from the sale of Registrable   Securities pursuant to a Registration Statement.                                         - 17 -  

 

       (f)   Indemnification Payments.  The indemnification and contribution required by this   Section 2.10 shall be made by periodic payments of the amount of any such Losses or Expenses   as and when bills are received or such Losses or Expenses are incurred.          Section 2.11 Rule 144 Reporting.            With a view to making available the benefits of certain rules and regulations of the   Commission that may permit the sale of the Registrable Securities to the public without   registration, the Company agrees to use its reasonable best efforts to:          (a)   make and keep public information regarding the Company available, as those terms   are understood and defined in Rule 144 under the Securities Act, at all times from and after the   date hereof;          (b)   file with the Commission in a timely manner all reports and other documents   required of the Company under the Securities Act and the Exchange Act at all times from and after   the date hereof; and          (c)   so long as a Holder owns any Registrable Securities, furnish, unless otherwise   available via EDGAR, to such Holder forthwith upon request a copy of the most recent annual or   quarterly report of the Company, and such other reports and documents so filed as such Holder   may reasonably request in availing itself of any rule or regulation of the Commission allowing   such Holder to sell any such securities without registration.          Section 2.12 Transfer or Assignment of Registration Rights.            The rights to cause the Company to register Registrable Securities granted to the Holders   by the Company under this Article II may be transferred or assigned by the Holders to one or more   transferees or assignees of Registrable Securities; provided, however, that (a) unless the transferee   or assignee is an Affiliate of, and after such transfer or assignment continues to be an Affiliate of,   the transferee, the number of Registrable Securities transferred or assigned to such transferee or   assignee, together with any other Registrable Securities held by such transferee or assignee, shall   be at least $5,000,000 in Registrable Securities calculated based on the Registrable Securities   Amount, (b) the Company is given written notice prior to such transfer or assignment, stating the   name and address of each such transferee or assignee and identifying the Registrable Securities   with respect to which such registration rights are being transferred or assigned, and (c) each such   transferee or assignee assumes in writing responsibility for its portion of the obligations of the   transferor under this Agreement.          Section 2.13 Other Registration Rights.          From and after the date hereof, the Company shall not, without the prior written consent of   the Majority Holders, enter into any agreement with any current or future holder of any securities   of the Company that would allow such current or future holder to require the Company to include   securities in any registration statement filed by the Company for such Holders on a basis other   than pari passu with, or expressly subordinate to, the piggyback rights of the Holders hereunder;  provided, that in no event shall the Company enter into any agreement that would permit another  holder of securities of the Company to participate on a pari passu basis (in terms of priority of cut-                                       - 18 -  

 

 back based on advice of underwriters) with a Requesting Holder or a Shelf Piggybacking Holder   in a Shelf Underwritten Offering.                                     ARTICLE III                                 MISCELLANEOUS          Section 3.01 Communications.            All notices and other communications provided for or permitted hereunder shall be made   in writing by electronic mail, courier service or personal delivery:          (a)   if to a Värde Party, to such Värde Party at its notice address set forth in the   Transaction Agreement;          (b)   if to any Holder other than a Värde Party, to such Holder at the address provided   pursuant to Section 2.12; and          (c)   if to the Company, to it at:                1800 Bering Drive, Suite 510               Houston, Texas 77057               Attn: Christa Garrett              Email: CGarrett@lilisenergy.com   ; or, in each case, to such other address for such party as shall have been communicated by such  party by like notice.         All such notices and communications shall be deemed to have been received at the time  delivered by hand, if personally delivered; when receipt acknowledged, if sent by electronic mail;  and when actually received, if sent by courier service.          Section 3.02 Successors and Assigns.            This Agreement shall inure to the benefit of and be binding upon the successors and   permitted assigns of each of the parties, including subsequent Holders of Registrable Securities to   the extent permitted herein; provided, however, that all or any portion of the rights and obligations   of any Holder under this Agreement may be transferred or assigned by such Holder only in   accordance with Section 2.12.          Section 3.03 Recapitalization, Exchanges, Etc. Affecting the Shares.            The provisions of this Agreement shall apply to the full extent set forth herein with respect   to any and all shares of the Company or any successor or assign of the Company (whether by   merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange   for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for   combinations, share splits, recapitalizations, pro rata distributions of shares and the like occurring   after the date of this Agreement.                                         - 19 -  

 

       Section 3.04 Aggregation of Registrable Securities.            All Registrable Securities held or acquired by Persons who are Affiliates of one another   shall be aggregated together for the purpose of determining the availability of any rights and   applicability of any obligations under this Agreement.          Section 3.05 Specific Performance.            Damages in the event of breach of this Agreement by a party hereto may be difficult, if not  impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without  limiting any other remedy or right it may have, will have the right to an injunction or other  equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing  specifically the terms and provisions hereof, and each of the parties hereto hereby waives any and  all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant  such an injunction or other equitable relief. The existence of this right will not preclude any such  Person from pursuing any other rights and remedies at law or in equity that such Person may have.            Section 3.06 Counterparts.            This Agreement may be executed in any number of counterparts and by different parties   hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall   be deemed to be an original and all of which counterparts, taken together, shall constitute but one   and the same Agreement.          Section 3.07 Headings.            The headings in this Agreement are for convenience of reference only and shall not limit   or otherwise affect the meaning hereof.          Section 3.08 Governing Law.            THIS AGREEMENT, AND ALL CLAIMS OR CAUSES OF ACTION (WHETHER IN   CONTRACT OR TORT) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO   THIS AGREEMENT OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS   AGREEMENT (INCLUDING ANY CLAIM OR CAUSE OF ACTION BASED UPON,   ARISING OUT OF OR RELATED TO ANY REPRESENTATION OR WARRANTY MADE   IN OR IN CONNECTION WITH THIS AGREEMENT), WILL BE CONSTRUED IN   ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK   WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION   AGAINST ANY PARTY RELATING TO THE FOREGOING SHALL BE BROUGHT IN ANY   FEDERAL OR STATE COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE   STATE OF NEW YORK, AND THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT   TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT   LOCATED WITHIN THE STATE OF NEW YORK OVER ANY             SUCH ACTION. THE   PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY   APPLICABLE LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE   TO THE LAYING OF VENUE OF ANY SUCH DISPUTE BROUGHT IN SUCH COURT OR   ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH                                        - 20 -  

 

 DISPUTE. EACH OF THE PARTIES HERETO AGREES THAT A JUDGMENT IN ANY   SUCH DISPUTE MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE   JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.          Section 3.09 Severability of Provisions.            Any provision of this Agreement which 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 or affecting or impairing the validity or   enforceability of such provision in any other jurisdiction.          Section 3.10 Entire Agreement.            This Agreement, the Transaction Agreement and the Certificates of Designation is intended   by the parties as a final expression of their agreement and intended to be a complete and exclusive   statement of the agreement and understanding of the parties hereto in respect of the subject matter   contained herein. There are no restrictions, promises, warranties or undertakings, other than those   set forth or referred to herein with respect to the rights granted by the Company set forth herein.   This Agreement supersedes all prior agreements and understandings between the parties with   respect to such subject matter.          Section 3.11 Amendment.            This Agreement may be amended only by means of a written amendment signed by the   Company and the Majority Holders; provided, however, that no such amendment shall materially   and adversely affect the rights of any Holder hereunder without the consent of such Holder.          Section 3.12 No Presumption.            If any claim is made by a party relating to any conflict, omission or ambiguity in this   Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact   that this Agreement was prepared by or at the request of a particular party or its counsel.          Section 3.13 Obligations Limited to Parties to Agreement.            Each of the parties hereto covenants, agrees and acknowledges that no Person other than   the Holders and the Company shall have any obligation hereunder and that, notwithstanding that   one or more of the Holders may be a corporation, partnership or limited liability company, no  recourse under this Agreement or under any documents or instruments delivered in connection  herewith or therewith shall be had against any former, current or future director, officer, employee,  agent, general or limited partner, manager, member, stockholder or Affiliate of any Holder or any  former, current or future director, officer, employee, agent, general or limited partner, manager,  member, stockholder or Affiliate of any of the foregoing, whether by the enforcement of any  assessment or by any legal or equitable proceeding, or by virtue of any applicable law, it being  expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be  imposed on or otherwise be incurred by any former, current or future director, officer, employee,  agent, general or limited partner, manager, member, stockholder or Affiliate of any Holder or any  former, current or future director, officer, employee, agent, general or limited partner, manager,                                        - 21 -  

 

 member, stockholder or Affiliate of any of the foregoing, as such, for any obligations of the   Holders under this Agreement or any documents or instruments delivered in connection herewith   or therewith or for any claim based on, in respect of or by reason of such obligation or its creation,   except in each case for any transferee or assignee of a Holder hereunder.          Section 3.14 Independent Nature of Holders’ Obligations.            The obligations of each Holder under this Agreement are several and not joint with the   obligations of any other Holder, and no Holder shall be responsible in any way for the performance   of the obligations of any other Holder under this Agreement.  Nothing contained herein, and no   action taken by any Holder pursuant thereto, shall be deemed to constitute the Holders as a   partnership, an association, a joint venture or any other kind of group or entity, or create a   presumption that the Holders are in any way acting in concert or as a group with respect to such   obligations or the transactions contemplated by this Agreement.  Each Holder shall be entitled to   independently protect and enforce its rights, including without limitation, the rights arising out of   this Agreement, and it shall not be necessary for any other Holder to be joined as an additional   party in any proceeding for such purpose.          Section 3.15 Interpretation.            Article and Section references are to this Agreement, unless otherwise specified.  All   references to instruments, documents, contracts and agreements are references to such instruments,   documents, contracts and agreements as the same may be amended, supplemented and otherwise   modified from time to time, unless otherwise specified. The word “including” shall mean   “including but not limited to.”  Whenever any determination, consent or approval is to be made or  given by a Holder under this Agreement, such action shall be in such Holder’s sole discretion  unless otherwise specified.                                [Signature pages follow]                                         - 22 -  

 

       IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the  date first above written.                                           COMPANY:                                           LILIS ENERGY, INC.                                           By:  /s/ Joseph C. Daches                                                        Name: Joseph C. Daches                                          Title: President, Chief Financial Officer and                                                Treasurer                                                                                      [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]  

 

                     SEVERALLY AND NOT JOINTLY FOR EACH                       ENTITY LISTED BELOW:                                                                      By:  /s/ Markus Specks                                          Name: Markus Specks                       Title:   Managing Director                                              THE VÄRDE FUND VI-A, L.P.                       By: Värde Investment Partners G.P., LLC, its General                       Partner                       By: Värde Partners, L.P., its Managing Member                       By: Värde Partners, Inc., its General Partner                                              VÄRDE INVESTMENT PARTNERS, L.P.                       By: Värde Investment Partners G.P., LLC, its General                       Partner                       By: Värde Partners, L.P., its Managing Member                       By: Värde Partners, Inc., its General Partner                                              THE VÄRDE FUND XI (MASTER), L.P.                       By: Värde Fund XI G.P., LLC, its General Partner                       By: Värde Partners, L.P., its Managing Member                       By: Värde Partners, Inc., its General Partner                                              VÄRDE INVESTMENT PARTNERS (OFFSHORE)                       MASTER, L.P.                       By: Värde Investment Partners G.P., LLC, its General                       Partner                       By: Värde Partners, L.P., its Managing Member                       By: Värde Partners, Inc., its General Partner                                              THE VÄRDE SKYWAY MASTER FUND, L.P.                       By: The Värde Skyway Fund G.P., LLC, its General                       Partner                       By: Värde Partners, L.P., its Managing Member                       By: Värde Partners, Inc., its General Partner                                              THE VÄRDE FUND XII (MASTER), L.P.                       By: The Värde Fund XII G.P., LLC, its General Partner                       By: The Värde Fund XII UGP, LLC, its General Partner                      By: Värde Partners, L.P., its Managing Member                      By: Värde Partners, Inc., its General Partner                                             [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]  

 

                                                                      Annex A                                LILIS ENERGY, INC.                      Selling Stockholder Notice and Questionnaire         The undersigned beneficial owner of common stock (the “Registrable Securities”) of Lilis  Energy, Inc., a Nevada corporation (the “Company”), understands that the Company has filed or  intends to file with the Securities and Exchange Commission (the “Commission”) a registration  statement (the “Registration Statement”) for the registration and resale under the Securities Act of  1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the  terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this  document is annexed. A copy of the Registration Rights Agreement is available from the Company  upon request at the address set forth below. All capitalized terms not otherwise defined herein shall  have the meanings ascribed thereto in the Registration Rights Agreement.         Certain legal consequences arise from being named as a selling stockholder in the  Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of  Registrable Securities are advised to consult their own securities law counsel regarding the  consequences of being named or not being named as a selling stockholder in the Registration  Statement and the related prospectus.                                      NOTICE         The undersigned beneficial owner (the “Selling Stockholder”) of Registrable Securities  hereby elects to include the Registrable Securities owned by it in the Registration Statement.         The undersigned hereby provides the following information to the Company and represents  and warrants that such information is accurate:                                 QUESTIONNAIRE   1.    Name.         (a)   Full Legal Name of Selling Stockholder         (b)   Full Legal Name of Registered Holder (if not the same as (a) above) through which              Registrable Securities are held:         (c)   Full Legal Name of Natural Control Person (which means a natural person who              directly or indirectly alone or with others has power to vote or dispose of the              securities covered by this Questionnaire):   2.    Address for Notices to Selling Stockholder:                                                                                                                                                                                                                                                    Telephone:                                                                         

 

 Fax:                                                                             Contact Person:                                                                   3.    Broker-Dealer Status:         (a)   Are you a broker-dealer?               Yes    No          (b)   If “yes” to Section 3(a), did you receive your Registrable Securities as              compensation for investment banking services to the Company?               Yes    No    Note:  If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified  as an underwriter in the Registration Statement.         (c)   Are you an affiliate of a broker-dealer?               Yes    No          (d)   If you are an affiliate of a broker-dealer, do you certify that you obtained the              Registrable Securities in the ordinary course of business, and at the time you              obtained the Registrable Securities to be resold, you had no agreements or              understandings, directly or indirectly, with any person to distribute the Registrable              Securities?               Yes    No    Note: If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified  as an underwriter in the Registration Statement.   4.    Beneficial Ownership of Securities of the Company Owned by the Selling        Stockholder.         Except as set forth below in this Item 4, the undersigned is not the beneficial or registered        owner of any securities of the Company other than the securities issuable pursuant to the        Transaction Agreement.         (a)   Type and Amount of other securities beneficially owned by the Selling              Stockholder:                                                                                                                                                                       5.    Relationships with the Company:          Except as set forth below, neither the undersigned nor any of its affiliates, officers,         directors or principal equity holders (owners of 5% of more of the equity securities of the      

 

       undersigned) has held any position or office or has had any other material relationship         with the Company (or its predecessors or affiliates) during the past two years.          State any exceptions here:                                                                                                                                                                             The undersigned agrees to promptly notify the Company of any material inaccuracies or   changes in the information provided herein that may occur subsequent to the date hereof at any   time while the Registration Statement remains effective; provided, that the undersigned shall not   be required to notify the Company of any changes to the number of securities held or owned by   the undersigned or its affiliates.          By signing below, the undersigned consents to the disclosure of the information contained  herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration  Statement and the related prospectus and any amendments or supplements thereto. The  undersigned understands that such information will be relied upon by the Company in connection  with the preparation or amendment of the Registration Statement and the related prospectus and  any amendments or supplements thereto.         IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice  and Questionnaire to be executed and delivered either in person or by its duly authorized agent.    Date:                               Beneficial Owner:                                                                 By:                                                                              Name:                                                                            Title:                                        PLEASE FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND   EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY   OVERNIGHT MAIL, TO:    Lilis Energy, Inc.    1800 Bering Drive, Suite 510   Houston, Texas 77057   Attn: Christa Garrett  Email: CGarrett@lilisenergy.com

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