Exhibit 10.01

RENEWAL PROMISSORY NOTE
(renewing and consolidating four (4) prior notes)

 

$5,579,847.00  Tyler, Texas
May 21, 2007

 
RECITALS

WHEREAS, on the dates described below, each of the four corporate entities
described below (collectively, the “Original Note Makers”) executed a separate
promissory note payable to Teton, Ltd., a Texas limited partnership (which
promissory notes are referred to herein as the “Original Notes”):

 
Date of Note:
 
Maker:
Original Stated
Principal
 
Current Balance
May 31, 2005
First Southern Crown, Ltd.
$6,000,000.00
$5,310,576.00
Dec. 31, 2006
TR Rodessa, L.L.C.
$164,000.00
$170,335.00
Dec. 31, 2006
59 Disposal, L.P.
$18,750.00
$19,474.00
Dec. 31, 2006
Pegasi Energy Resources Corporation
$65,249.00; plus an additional loan of   $11,692.00
$79,462.00

WHEREAS, each of the four Original Note Makers has changed its name and/or
entity type since the date of its Original Note; and consequently, the current
name and entity type of the four Original Note Makers is presently as follows:

Original Entity:
Current Name/Entity:
Cause of Change:
First Southern Crown, Ltd., a Texas limited partnership
Pegasi Energy Resources Corporation, a Texas corporation
conversion on March 30, 2007
TR Rodessa, L.L.C., a Texas limited liability company
TR Rodessa, Inc., a Texas corporation
conversion on March 30, 2007
59 Disposal, L.P., a Texas limited partnership
59 Disposal, Inc., a Texas corporation
conversion on April 10, 2007
Pegasi Energy Resources Corporation, a Texas corporation
Pegasi Operating Inc., a Texas corporation
name change on February 27, 2007

 

 
 
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WHEREAS, after the corporate changes referenced above, the following three
Original Note Makers each became wholly-owned subsidiaries of Pegasi Energy
Resources Corporation f/n/a First Southern Crown, Ltd., who itself was an
Original Note Maker: (i) TR Rodessa, Inc., f/n/a TR Rodessa, L.L.C.; (ii) 59
Disposal, Inc. f/n/a 59 Disposal, L.P.; and (iii) Pegasi Operating Inc. f/n/a
Pegasi Energy Resources Corporation;

WHEREAS, the Original Note Makers, on one hand, and Teton, Ltd., on the other
hand, desire to renew and extend the Original Notes and to replace them all with
this single Renewal Promissory Note; and

WHEREAS, in return for Teton, Ltd.’s agreement to extend the maturity dates of
the Original Notes as set forth herein, and in recognition that the Original
Note Makers share common ownership between themselves (in that three of the
Original Note Makers are now wholly-owned subsidiaries of the fourth Original
Note Maker), the Original Note Makers have each agreed to become jointly and
severally responsible for the repayment of this Renewal Promissory Note.

NOW, THEREFORE, the undersigned Original Note Makers hereby agree as follows:

AGREEMENT

FOR VALUE RECEIVED, the undersigned (i) Pegasi Energy Resources Corporation, a
Texas corporation, (ii) Pegasi Operating Inc., a Texas corporation; (iii) TR
Rodessa, Inc., a Texas corporation; and (iv) 59 Disposal, Inc., a Texas
corporation (each, a "Maker;” or collectively, “Makers”), promise to pay to the
order of Teton, Ltd., a Texas limited partnership ("Payee"), at P.O. Box 2033,
Tyler, TX 75710-2033, or such other address as Payee may from time to designate,
the sum of FIVE MILLION, FIVE HUNDRED SEVENTY-NINE THOUSAND, EIGHT HUNDRED
FORTY-SEVEN and No/100 DOLLARS ($5,579,847.00), in legal and lawful money of the
United States of America, plus simple interest thereon at the rate of eight
percent (8%) per annum from the date hereof until maturity, if timely paid.
Matured unpaid principal shall bear interest at a rate equal to the  lesser of
(i) fifteen percent (15%) per annum or (ii) the highest rate allowable by law
(the “Default Rate”).  Makers acknowledge that the stated principal amount of
this Note represents the combined current outstanding balances of the Original
Notes and that the Original Notes are being replaced by this Renewal Promissory
Note.

Annual payments of all accrued interest owed to the date of payment shall be
payable without demand on (i) May 21, 2008, and (ii) May 21, 2009.  In the event
that either of such annual interest payments are not timely paid, the entire
outstanding balance of this Note shall bear interest at the Default Rate
beginning on the missed payment date and ending on the date Makers pay the
above-referenced missed interest payment together with all default interest
arising after such missed payment.  This Note is due and payable on May 21,
2010.

All payments hereon shall be applied first to interest, if any, and thereafter
to the balance of principal.

It is expressly provided that upon default in the punctual payment of this Note
or any part thereof, principal or interest, as the same shall become due and
payable, then at the option of the holder, the entire indebtedness shall be
matured; and in the event default is made in the prompt payment of this Note
when due or declared due, and the same is placed in the hands of an attorney for
collection, or suit is brought on same, or the same is collected through
Probate, Bankruptcy or other judicial proceedings, then Makers agree and promise
to pay reasonable attorney's fees.  Each maker, surety and endorser of this Note
expressly waives all notices of any kind or character, demands for payment,
presentations for payment, notices of intention to accelerate the maturity,
protest and notice of protest, as to this Note and as to each, every and all
installments hereof.
 
 
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Additionally, upon the insolvency of any Maker, the appointment of a receiver
for all or any part of any Maker's property, an assignment for the benefit of
creditors of any Maker, a calling of a meeting of creditors of any Maker, the
commencement of any proceeding under any bankruptcy, insolvency or debtor relief
laws by or against any Maker or any guarantor or surety for Maker, the holder
hereof may, at its option, declare the entirety of this Note, principal and
interest, immediately due and payable, and pursue any and all other remedies
available to it at law or in equity, but failure to do so at any time shall not
constitute a waiver of such holder's right to do so at any other time.  Failure
to exercise this option upon any default shall not constitute a waiver of the
right to exercise it in the event of any subsequent defaults.

It is expressly provided and stipulated that notwith­standing any provision of
this Note, in no event shall the aggregate of all interest paid by Makers to the
Payee hereunder ever exceed the maximum rate of interest which may lawfully be
charged Makers under the applicable usury laws, now or hereafter in effect, on
the principal balance of this Note from time to time advanced and remaining
unpaid.  In this connection, it is expressly stipulated and agreed that it is
the intent of the Payee and Makers in the execution and delivery of this Note to
contract in strict compliance with the applicable usury laws.  In further­ance
thereof, none of the terms of this Note shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest at a
rate in excess of the maximum interest rate permitted to be charged under such
laws.  Neither Makers nor any guarantors, endorsers, sureties, or other parties
now or hereafter becoming liable for payment of this Note shall ever be liable
for interest in excess of the maxi­mum interest that may lawfully be charged
under such laws, and the provisions of this paragraph shall govern over all
other provisions of this Note­.

Makers may prepay this Note at anytime without penalty.

This Note shall be governed by and construed in accordance with the laws of the
State of Texas.

If this Note is signed by two or more parties (whether by all as makers or by
one or more as an accommodation party or otherwise), the obligations and
undertakings under this Note shall be that of all and any two or more jointly
and also of each severally. This Note shall bind the undersigned, and the
undersigned's respective heirs, personal representatives, successors and
assigns.
 
 
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The undersigned acknowledge(s) and agree(s) that there are no contrary
agreements, oral or written, establishing a term of this Note and agree(s) that
the terms and conditions of this Note may not be amended, waived or modified
except in a written document expressly stating that the writing constitutes an
amendment, waiver or modification of the terms of this Note. As used in this
Note, the word "undersigned" means, individually and collectively, each maker,
accommodation party, indorser and other party signing this Note in a similar
capacity. If any provision of this Note is unenforceable in whole or part for
any reason, the remaining provisions shall continue to be effective.

THE UNDERSIGNED AND PAYEE, BY ACCEPTANCE OF THIS NOTE, ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH
PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL
OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES
ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE
OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.

This Note is unsecured.  However, pursuant to the terms of a certain Memorandum
of Understanding of even date between Payee and Pegasi Energy Resources
Corporation, Pegasi Energy Resources Corporation has granted Payee an option,
exercisable by Payee in its sole discretion at any time after May 21, 2008
(unless the Note has been paid in full by such date), to acquire ownership of
certain common stock in Pegasi Energy Resources Corporation or its successor in
lieu of receiving payment of all or a portion of the payments due under this
Note.

(signatures on next page)
 
 
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THIS WRITTEN LOAN AGREEMENT (AS DEFINED BY SECTION 26.02 OF THE TEXAS BUSINESS
AND COMMERCE CODE) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

Pegasi Energy Resources Corporation, a Texas corporation

 
By:
_____________________________

Michael H. Neufeld, President

Pegasi Operating Inc., a Texas corporation

 
By:
_____________________________

Michael H. Neufeld, President

TR Rodessa, Inc., a Texas corporation

 
By:
________________________________

Michael H. Neufeld, President

59 Disposal, Inc., a Texas corporation

 
By:
________________________________

Michael H. Neufeld, President

 
 
 
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