Convertible Subordinated Promissory Note

Convertible Subordinated Promissory Note Conversion Agreement

Exhibit 10.1




THIS CONVERTIBLE SUBORDINATED PROMISSORY NOTE CONVERSION AGREEMENT (this “Agreement”) is made as of this 23rd day of June, 2016, by and between Lilis Energy, Inc., a Nevada corporation (the “Company”) and the parties designated on Exhibit A hereto as Holders (each a “Holder” and together the “Holders”).




WHEREAS, as of the date of this Agreement, there is approximately $5.83 million in outstanding aggregate principal amount of the Company’s 12% Convertible Notes (the “Notes”), which are convertible into shares of common stock of the Company, par value $0.0001 (the “Common Stock”), according to the terms of the Notes; and


WHEREAS, the Holders currently hold Notes with aggregate outstanding principal amounts as set forth opposite each Holder’s name on Exhibit A attached hereto.




NOW, THEREFORE, BE IT RESOLVED, that in consideration of the promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:


1.           Amendment and Conversion of Notes. The Company and each Holder hereby agree that (i) contemporaneous with the closing of the merger between Lilis Merger Sub, Inc., a wholly-owned subsidiary of the Company, and Brushy Resources, Inc. (the “Conversion Date”), Holder will be deemed to have converted such Holder’s Notes without any further action by the Holder, into shares of Common Stock (the “Conversion”) as determined by dividing the aggregate principal amount of such Holder’s Notes by $0.11 (the “Conversion Stock”) and (ii) that in consideration of the forgoing and on the Conversion Date, any right to payments owed as accrued and unpaid interest (whether in cash or kind) on the Notes is hereby waived and forfeited and no interest on the Notes will be due and payable. Except as amended hereby, all of the terms and conditions of the Note shall remain in full force and effect.


2.           Holders’ Representations, Warranties, Covenants and Agreements.  Each Holder hereby represents and warrants to, and covenants and agrees with, the Company as follows:


(a)           Such Holder is the record and beneficial holder of the Notes set forth opposite such Holder’s name on Exhibit A attached hereto, free and clear of any liens and encumbrances.


(b)           Such Holder has had complete and unrestricted access to all material information about the Company that could affect such Holder’s decision to agree to the Conversion.  As a result of such Holder’s access to all such material information, such Holder acknowledges that such Holder is fully informed and knowledgeable about the Company, its business, operations and plans, and has therefore made a fair and reasoned decision to consent to the Conversion.





(c)           Such Holder acknowledges that an investment in the Conversion Stock involves a substantial degree of risk and is suitable only for persons with adequate means who have no need for liquidity in their investments.


(d)           Such Holder has knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of an investment in the Conversion Stock and the suitability of the investment for such Holder.


(e)           Such Holder is effecting the Conversion for investment purposes only and has no present intention to sell or exchange the Conversion Stock. Such Holder has adequate means for providing for his or her current needs in any foreseeable contingency, and such Holder has no need to sell the Conversion Stock in the foreseeable future.


(f)            Such Holder is an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended.


(g)           Such Holder acknowledges that no federal or state agency has made any finding or determination as to the fairness of the Conversion, nor any recommendation or endorsement, of the issuance of the Conversion Stock in connection with the Conversion.


(h)           Such Holder acknowledges that none of the Conversion Stock has been registered under the Securities Act of 1933, as amended (the “Act”), or the blue sky laws of any state.


(i)            Such Holder understands that, in issuing the Conversion Stock, the Company has relied upon an exemption from registration provided in the Act and upon the foregoing representations and warranties of such Holder.


(j)            Such Holder hereby acknowledges that Holder has relied on his or her own independent tax counsel regarding the tax effects, if any, of the Conversion.


3.           Release of Indebtedness.


(a)           Upon each Holder’s receipt of a certificate evidencing the number of shares of Common Stock in accordance with the terms hereof or the repayment of the outstanding aggregate principal amount of the Note in full, in exchange for the cancellation in full of the Notes held by the Holder on or before the Conversion Date pursuant to this Agreement, Holder hereby (i) acknowledges and agrees that receipt of the Conversion Stock will constitute payment in full and complete satisfaction of the Notes held by the Holder, and (ii) agrees that effective upon receipt by Holder of the Conversion Stock or cash repayment of the aggregate principal amount of the Note in full, the Company shall have no further liabilities or obligations to Holder.


(b)           In consideration of the amendment of the conversion of price of each Holder’s Note, each Holder, on behalf of itself and its successors and assigns, do hereby forever release, discharge and acquit the Company and each of its subsidiaries, affiliates, officers, members, managers, agents and employees, and their respective successors, heirs, and assigns, and each of them (collectively and severally, “Releasees”) of and from any and all of the following: claims, demands, obligations, liabilities, indebtednesses, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of actions, debts, sums of money, accounts, compensations, contracts, controversies, promises, damages, costs, attorneys’ fees, losses and expenses, of every type, kind, nature, description or character, and irrespective of how, why, or by reason of what facts, whether heretofore, now existing or hereafter arising, or which could, might, or may be claimed to exist, or whatever kind or name, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, each as though fully set forth herein at length other than the Company’s obligations under this Agreement.





(c)           If Holder is afforded the protections of the Civil Code of California, each Holder further acknowledges that the release contained herein includes relinquishing all rights and benefits afforded by Section 1542 of the Civil Code of California (“Section 1542”), which provides as follows:


“A general release does not extend to claims which the [Holder] does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the Company.”


Holder understands and acknowledges the significance and consequences of a specific waiver of Section 1542, that Holder intends to waive, and assume the risk relating to, existing but as yet unknown claims and have been encouraged by the Releasees to consult independent legal counsel in relation to Holders’ relinquishment of all rights and benefits afforded by Section 1542.


4.           Miscellaneous.


(a)           All capitalized terms used in this Agreement but not defined herein shall have the meaning set forth in the Notes.


(b)           Any provision of this Agreement may be amended or waived if such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.


(c)           No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.


(d)           This Agreement shall be binding on and inure to the benefit of each party hereto and his or its legal representatives, successors and assigns.


(e)           This Agreement shall be governed by and construed in accordance with the law of the State of New York, without regard to the conflicts of law rules of such state.


(f)           This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.


(g)           The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement;


(h)           This Agreement constitutes the entire agreement between and among the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between and among the parties with respect to the subject matter hereof and thereof.  No provision of this Agreement is intended to confer upon any person other than the parties hereto any rights or remedies hereunder;





(i)            In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby;


(j)           Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.


(k)           Each Holder agrees that irreparable damage to the Company would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Company shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which the parties may be entitled by law or equity.


[Signatures Follow]





IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.


  By: /s/Abraham Mirman
  Name:  Abraham Mirman
  Title:  Chief Executive Officer
  Address for Notices:
  Lilis Energy, Inc.
  216 16th Street
  Suite 1350
  Denver, CO 80202
  Attention: Chief Financial Officer
  Telephone: 303-893-9000
  Fax: (303) 957-2234






  Wallington Investment Holdings, Ltd.
  /s/Pierre Caland
  Name:  Pierre Caland
  Title:    Director
  Siskey Capital Opportunity Fund II, LLC
  /s/Martin Sumichrast
  Name:  Martin Sumichrast
  Title:    Manager
  Siskey Capital, LLC
  /s/Martin Sumichrast
  Name:   Martin Sumichrast
  Title:     Manager
  Bruin Trust
  /s/Bruin Trust
  Name:  Jarrell B. Ormand
  Title: Trustee
  Abraham Mirman
  /s/Abraham Mirman
  Name: Abraham Mirman
  General Merrill A. McPeak
  /s/General Merrill A. McPeak
  Name:  General Merrill A. McPeak
  Nuno Brandolini
  /s/Nuno Brandolini
  Name:  Nuno Brandolini





  J. Steven Emerson
  /s/ J. Steven Emerson
  Name: J. Steven Emerson
  Emerson Partners
  /s/ J. Steven Emerson
  Name:  J. Steven Emerson
  Title: Authorized Trader
  JEB Partners, L.P.
  /s/James E. Besser
  Name:  James E. Besser
  Title:  Managing Member
  R. Glenn Dawson
  /s/ R. Glenn Dawson
  Name:  Glenn Dawson
  Kurt Zimmerman
  /s/ Kurt Zimmerman
  Name: Kurt Zimmerman





  Kevin Nanke
  /s/ Kevin Nanke
  Name: Kevin Nanke