Ex. 10.2
 
 
PROMISSORY NOTE
 NOTE NO. 17036732
 
$25,000,000.00
June 22nd, 2015 

 
 
FOR VALUE RECEIVED, Lazarus Energy LLC, a Delaware limited liability company
(hereinafter referred to as “Maker”), hereby unconditionally promises to pay to
the order of Sovereign Bank (“Payee”) at 17950 Preston Road, Suite 500, Dallas,
TX 75252, or at such other address given to Maker by Payee, the principal sum of
TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00), in lawful money of the
United States of America, together with interest per annum (calculated on the
basis of a 360-day year) on the unpaid principal balance from day-to-day
remaining, computed from the date of advance until maturity at the per annum
rate (the “Stated Rate”) equal to the lesser of (a) the Maximum Rate (as
hereinafter defined) or (b) Prime Rate (as hereafter defined) plus two and three
quarters percent (P + 2.75%)*.  The interest rate as of the date hereof is [six
percent (6.00%)].  Principal and interest under this promissory note (the
“Note”) are due and payable as follows:
 
Monthly payments of principal and interest shall be due and payable in the
amount of ONE HUNDRED EIGHTY-FIVE THOUSAND TWO HUNDRED EIGHTY-EIGHT AND 50/100
DOLLARS ($185,288.50), with the first such installment due on the [22nd] day of
July, 2015.  Monthly payments shall continue to be due and payable on the same
day of each calendar month thereafter until [June 22nd, 2034] (the “Maturity
Date”), when all unpaid principal and unpaid interest shall be due and payable
in full.  Monthly payments shall be increased or decreased based on the changes
in interest rate to ensure that the entire loan balance is paid in full on the
final Maturity Date.
 
*The interest rate will adjust on the first day of each calendar quarter (the
“Adjustment Date”) to a rate equal to two and three quarters percent (2.75%) per
annum (on the basis of actual days elapsed over a 360-day year) above the
minimum prime lending rate charged by large U.S. money center commercial banks
as published from time to time in the Money Rates Section of the Wall Street
Journal (“Prime Rate”), each change in the rate charged hereunder to become
effective without notice to the undersigned as of the Adjustment Date, but in no
event shall the rate charged hereunder exceed the Maximum Rate (as hereafter
defined).  The undersigned understands and acknowledges that Payee may from time
to time make various loans at rates of interest having no relationship to the
Prime Rate, and that the Prime Rate may not be the lowest interest rate charged
for loans by Payee.  In the event the Wall Street Journal is no longer published
or in the event the Wall Street Journal discontinues publishing a “Prime Rate”,
the Prime Rate shall be the nearest comparable published rate, as determined by
the holder of this Note.
 
The term “Maximum Rate,” as used herein, shall mean, with respect to each holder
hereof, the maximum nonusurious interest rate, if any, that at any time, or from
time to time, may under applicable law be contracted for, taken, reserved,
charged or received on the indebtedness evidenced by this Note under the laws
which are presently in effect of the United States and the State of Texas
applicable to such holder and such indebtedness or, to the extent allowed by law
under such applicable laws of the United States of America and the State of
Texas which may hereafter be in effect, which allow a higher maximum
non-usurious interest rate than applicable laws now allow; provided, that in
determining the Maximum Rate, due regard shall be given, to the extent required
by applicable law, to any and all relevant payments, fees, charges, deposits,
balances, agreements and calculations which may constitute or be deemed to
constitute interest, or be deducted from principal to calculate the interest
rate or otherwise affect interest rate determinations, so that in no event shall
the Payee contract for, charge, receive, take, collect, reserve or apply, on the
Note, any amount in excess of the maximum non-usurious rate of interest
permitted by applicable law.  To the extent that Texas law determines the
Maximum Rate, the Maximum Rate shall be determined by utilizing the “indicated
rate ceiling” from time to time in effect pursuant to the Texas Finance Code
(V.T.C.A. Finance Code Section 303.001 et seq.) (the “Texas Finance Code”) or
such successor statute, as then in effect, governing usury.  The Maximum Rate
shall not be limited to the applicable rate ceiling in the Texas Finance Code or
such successor statute if Federal laws or other state laws now or hereafter in
effect and applicable to this Note (and the interest contracted for, charged and
collected hereunder) shall permit a higher rate of interest.
 
 
 
Page 1

--------------------------------------------------------------------------------

 
 
Maker and Payee intend to comply with the applicable law governing the Maximum
Rate.  Interest contracted for, charged, or received shall not exceed the
Maximum Rate, and, if in any contingency whatsoever, Payee shall receive
anything of value deemed interest under applicable law which would cause the
interest contracted for, charged, or received by the holder thereof to exceed
the maximum amount of interest permissible under applicable law, the excessive
interest shall be applied to the reduction of the unpaid principal balance
hereof and not to the payment of interest, or if such excessive interest exceeds
the unpaid principal balance hereof such excess shall be refunded to Maker, and
the provisions of this Note and any demand on Maker shall immediately be deemed
reformed and the amounts thereafter collectible hereunder shall be reduced,
without the necessity of the execution of any new documents, so as to comply
with the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder.  All interest paid or agreed to be paid to the
holder hereof shall, to the extent permitted by applicable law, shall be
amortized, prorated, allocated, and spread throughout the full term of such
indebtedness until payment in full (including the period of any renewal or
extension hereof) so that the rate or amount of interest on account of such
indebtedness does not exceed the Maximum Rate.
 
Maker agrees to pay a late charge of five percent (5%) of the payment amount if
such payment is not received within ten (10) days of the due date.  Payments,
when made, shall be applied in a manner and order according to the sole
discretion of the holder of this Note.
 
In addition to the late charge in the preceding paragraph, all past-due
principal and, to the extent permitted by applicable law, past-due interest upon
this Note shall bear interest at the Maximum Rate.
 
Unless otherwise specified, Maker shall make each payment required to be made by
it hereunder (whether of principal, interest, or otherwise) or under any other
Loan Document (except to the extent otherwise provided therein) prior to 1:00
p.m., Dallas, Texas time, on the date when due, in immediately available funds,
without set-off or counterclaim.  All such payments shall be made to the Lender
at its offices the address specified in the first paragraph of this Note or
pursuant to most recent wire instructions provided by Payee to Maker from time
to time, except as otherwise expressly provided in the relevant Loan
Document.  All amounts owing under this Agreement or under any other Loan
Document are payable in United States Dollars.
 
Remittances in payment of any part of this Note other than in the required
amount in immediately available funds at the place where this Note is payable
shall not, regardless of any receipt or credit issued therefor, constitute
payment until the required amount is actually received by Payee in full
accordance herewith and shall be made and accepted subject to the condition that
any check or draft may be handled for collection in accordance with the practice
of the collecting bank or banks.  Acceptance by Payee of any payment in an
amount less than the full amount then due shall be deemed an acceptance on
account only, and the failure to pay the entire amount then due shall be and
continue to be an Event of Default (hereinafter defined).
 
 
 
Page 2

--------------------------------------------------------------------------------

 
 
This is the Promissory Note issued pursuant to, and referenced in, that certain
Loan Agreement dated as of the date hereof, among Maker, as Borrower, the
Guarantors identified therein, and Payee, as Lender (as amended, restated, or
otherwise modified from time to time, the “Loan Agreement”).  This Note is
secured in part by a Deed of Trust, Mortgage, Security Agreement, Assignment of
Leases and Rents, Financing Statement and Fixture Filing, dated as of the date
hereof, executed by Maker in favor of Robert Blount for the benefit of Payee, to
be recorded in the real property records of Wilson County, Texas.  Maker and
each surety, endorser, guarantor and other party ever liable for payment of any
stuns of money payable on this Note, jointly and severally waive presentment,
protest, notice of protest and nonpayment, notice of default and notice of
acceleration and intention to accelerate, and agree that their liability under
this Note shall not be affected by any renewal or extension in the time of
payment hereof, or in any indulgences, or by any release or change in any
security for the payment of this Note, and hereby consent to any and all
renewals, extensions, indulgences, releases or changes, regardless of the number
of such renewals, extensions, indulgences, releases or changes.
 
If this Note or any Loan Documents (as defined in the Loan Agreement) is given
by Payee to an attorney for collection or enforcement, or if suit is brought for
collection or enforcement, or if it is collected or enforced through probate,
bankruptcy, or other judicial proceeding, then Maker shall pay Payee all costs
of collection and enforcement, including reasonable attorney’s fees and court
costs, in addition to other amounts due.
 
No waiver by Payee of any of its rights or remedies under this Note or any Loan
Documents, shall be considered a waiver of any other right or remedy of Payee;
no delay or omission in the exercise or enforcement by Payee of any rights or
remedies shall ever be construed as a waiver of any right or remedy of Payee;
and no exercise or enforcement of any such rights or remedies shall ever be held
to exhaust any right or remedy of Payee.
 
Maker agrees that in the event any portion of this Note is prepaid in whole or
in part prior to the fifth anniversary of the date of this Note, so as to
constitute a Prepayment (as defined below), consideration will be tendered with
the prepayment to the Payee (“Prepayment Consideration”) in the amount of five
percent (5.0%) of the outstanding loan principal balance prepaid.  It is
understood and agreed that a “Prepayment” shall be any principal payment on this
Note other than scheduled monthly payments of principal and interest as provided
under this Note.  Maker acknowledges that the Prepayment Consideration is
consideration to Payee for the privilege of prepaying the indebtedness evidenced
by this Note prior to maturity, and Maker recognizes that Payee would incur
substantial additional costs and expenses in the event of a prepayment of the
indebtedness evidenced by this Note and that the Prepayment Consideration
compensates Payee for such costs and expenses (including without limitation, the
loss of Payee’s investment opportunity during the period from the date of
prepayment until the Maturity Date).  Maker agrees that Payee shall not, as a
condition to receiving the Prepayment Consideration, be obligated to actually
reinvest the amount prepaid in any manner whatsoever.
 
As used herein, an “Event of Default” shall mean any one or more of the
following: (i) the failure by Maker to pay any installment of principal or
interest under this Note when due, (ii) the failure by Maker to pay all sums
owed to Payee under this Note on or before the Maturity Date, or (iii) any Event
of Default (as defined in the Loan Agreement).
 
Upon the occurrence of an Event of Default: (i) under Section 7.1(h) or (i) of
the Loan Agreement, this Note shall be immediately become due and payable upon
the occurrence of an Event of Default, or (ii) other than as specified by clause
(i) immediately preceding, Payee may, at its option, without notice or demand,
declare the unpaid principal balance of, and the accrued but unpaid interest on
this Note immediately due and payable and exercise and pursue any and all other
rights and remedies as provided herein or in any of the Loan Documents or
otherwise available under applicable law.
 
 
 
Page 3

--------------------------------------------------------------------------------

 
 
Upon the occurrence of an Event of Default, Payee is hereby authorized at any
time and from time to time, without notice to Maker (any such notice being
expressly waived by each such Maker), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held, and
other indebtedness at any time owing, by the Payee to or for the credit or the
account of Maker, against any and all obligations of such Maker now or hereafter
existing under this Note, irrespective of whether or not Payee shall have made
demand under this Note and although such obligations may be contingent and
unmatured.  The rights of the Payee under this section are in addition to all
other rights and remedies (including, without limitation, other rights of
offset) which Payee may have hereunder or under any applicable law.
 
All obligations, covenants, and terms of payment are expressly performable
solely in Dallas County, Texas.  The substantive laws of the State of Texas
shall govern the validity, construction, enforcement and interpretation of this
Note.  In the event of a dispute involving this Note or any of the Loan
Documents, the undersigned irrevocably agrees that venue for such dispute shall
lie in any court of competent jurisdiction in Dallas County, Texas.
 
 
 

 
Maker:
 
Lazarus Energy LLC,
 
a Delaware limited liability company
 
By: Blue Dolphin Energy Company, a Delaware corporation, its sole member
 
By:   /s/ JONATHAN PITTS CARROLL, SR. 
Name: Jonathan Pitts Carroll, Sr.
Title:  President

 
 

 
 
Page 4

--------------------------------------------------------------------------------