DEBT CONVERSION AGREEMENT
Exhibit
10.5
This Debt
Conversion Agreement (“Agreement”) is effective as of March 12, 2010, by and
between Gulf United Energy, Inc., a Nevada corporation (the “Company”) and Xxxxx
X. Xxxxx (“Investor”).
WHEREAS, the Company and
Investor are parties to that certain promissory note dated April 10, 2007 (the
“Note”);
WHEREAS, on March 11, 2010,
Investor executed a letter agreement pursuant to which Investor forgave all
accrued and unpaid interest due under the Note through March 11,
2010.
WHEREAS, as of March 12, 2010,
there was an aggregate of $1,639,685 of outstanding principal due under the
Note;
WHEREAS, the Company and
Investor desire to convert $400,000 of the outstanding principal (the “Debt”)
into 40,000,000 shares of the Company’s restricted common stock (the
“Shares”);
WHEREAS, subsequent to the
conversion of the Debt into the Shares, there will be an aggregate of $1,239,685
of principal remaining under the Note;
WHEREAS, upon the execution of
this Agreement, the Company will issue Investor a new promissory note, in the
form attached hereto as Exhibit A (the “New Note”), representing an amount of
principal equal to $1,089,685 due under the Note and not converted hereunder,
bearing interest at the rate of 10% per annum, with the remaining $150,000 of
the principal amount due under the Note being payable by the Company to Investor
in cash.
NOW THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Investor
agrees to convert the Debt into the Shares and to accept the New Note as payment
for the principal amount of the Note not converted hereunder. The
Company shall thereafter issue to Investor or as Investor directs the Shares,
provided, however, that 20,000,000 of the Shares will not be issuable to
Investor until three days after the Company’s amendment to its articles of
incorporation to increase its authorized shares of common stock becomes
effective. The Company deliver certificates representing the Shares
as well as the New Note to Investor or as Investor otherwise directs promptly
following the execution of this Agreement. The Company shall make the
cash payment of $150,000 to Investor via certified check or wire transfer
concurrently upon the execution of this Agreement.
2. Representations
and Warranties
The
Investor hereby represents and warrants that:
A. Purchase for
Investment. The Investor is acquiring the Shares and the New
Note for his own account and not with a view to or for sale in connection with
the distribution thereof (other than a private sale). The Investor
has been advised that the Shares and the New Note to be issued and sold
hereunder have not been registered under the Securities Act of 1933, as amended
(“Securities Act”), or applicable state securities laws and that they must be
held indefinitely unless the offer and sale thereof are subsequently registered
under the Securities Act or any exemption from such registration is
available. The Investor understands and agrees that the Shares and
the New Note will be issued with a restrictive legend to the effect that: “THE SECURITIES REPRESENTED HEREBY
MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE
SOLD PURSUANT TO RULE 144, OR (III) THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY THE SECURITIES.”
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B. Investment
Risk. Because of the Investor’s financial positions and other
factors, the transactions contemplated by this Agreement may involve a high
degree of financial risk, and the Investor understands they may lose their
entire investment in the Shares and the New Note.
C. Access to
Information. Investor has all been afforded the opportunity to
discuss the transaction with legal and accounting professionals and to examine
and evaluate the financial impact of the transactions contemplated
herein.
D. Ability. This
Agreement has been duly executed and delivered by Investor and constitutes a
binding, and enforceable obligation of the Investor.
E. Third Party
Consent. No authorization, consent, or approval of, or
registration or filing with, any governmental authority or any other person is
required to be obtained or made by the Investor in connection with the
execution, delivery, or the Company’s performance of this
Agreement.
F. Accredited
Investor. The Investor (i) has such knowledge and
experience in financial and business matters that Investor is capable of
evaluating the merits and risks of the purchase of the Shares, (ii) has a net
worth significantly in excess of the amount of the purchase price for the Shares
and is able to bear the economic risk of a complete loss on the purchase of the
Shares, and (iii) is an “accredited investors” as that term is defined in
Rule 501(a) of Regulation D under the Securities Act.
3. Miscellaneous
A.
Entire
Agreement. This Agreement sets forth the entire understanding
between the parties hereto and no other prior written or oral statement or
agreement shall be recognized or enforced.
B. Severability. If
a court of competent jurisdiction determines that any clause or provision of
this Agreement is invalid, illegal or unenforceable, the other clauses and
provisions of the Agreement shall remain in full force and effect and the
clauses and provision which are determined to be void, illegal or unenforceable
shall be limited so that they shall remain in effect to the extent permissible
by law.
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C. Assignment. None
of the parties hereto may assign this Agreement without the express written
consent of the other parties and any approved assignment shall be binding on and
inure to the benefit of such successor or, in the event of death or incapacity,
on assignor’s heirs, executors, administrators and successors.
D. Applicable
Law. This Agreement shall be governed by the laws of the State
of Texas, without giving effect to the conflict of laws provisions
thereof.
E. Counterparts. It
is understood and agreed that this Agreement may be executed in any number of
identical counterparts, each of which may be deemed an original for all
purposes.
F. Further
Assurances. At any time, and from time to time after the debt
for equity swap, each party hereto will execute such additional instruments and
take such action as may be reasonably requested by the other party to carry out
the intent and purposes of this Agreement.
G. Amendment or
Waiver. Every right and remedy provided herein shall be
cumulative with every other right and remedy, whether conferred herein, at law,
or in equity, and may be enforced concurrently herewith, and no waiver by any
party of the Company’s performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. A writing signed by all parties
hereto may amend this Agreement.
H. Headings. The
section and subsection headings in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement.
I.
Facsimile. A
facsimile, telecopy or other reproduction of this Agreement may be executed by
one or more parties hereto and such executed copy may be delivered by facsimile
or similar instantaneous electronic transmission device pursuant to which the
signature of or on behalf of such party can be seen, and such execution and
delivery shall be considered valid, binding and effective for all
purposes. At the request of any party hereto, all parties agree to
execute an original of this Agreement as well as any facsimile, telecopy or
other reproduction hereof.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the date set forth above.
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Company:
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Investor:
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By:
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Name:
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Title:
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Investor:
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