Lucas Energy, Inc. 8-K [lei-8k_032816.htm]

 

Exhibit 10.6

 

SHORT TERM PROMISSORY NOTE

 

US $275,000 March 28, 2016

 

NOW THEREFORE FOR VALUE RECEIVED, the undersigned, Lucas Energy, Inc., a Nevada
corporation (“Lucas”), hereby promises to pay to the order of Alan Dreeban (the
“Lender”), the principal sum of Two Hundred and Seventy-Five Thousand Dollars
($275,000), in lawful money of the United States of America, which shall be
legal tender, bearing interest and payable as provided herein. This Promissory
Note (this “Note” or “Promissory Note”) has an effective date of March 28, 2016
(the “Effective Date”). This Note is entered into to evidence $250,000 loaned by
the Lender to Lucas on the Effective Date, plus a 10% original issue discount.

 

1.     This Note shall not accrue interest unless an Event of Default shall
occur hereunder at which time interest shall accrue at the rate of fifteen
percent (15%) per annum. This Note is payable on June [ ], 2016, the “Maturity
Date”.

 

2.     As additional consideration for the Lender agreeing to make make the loan
evidenced by this Note to Lucas, Lucas agrees to issue to the Lender, upon
receipt from the NYSE MKT of the additional listing of such shares, 15,000
shares of the Company’s restricted common stock (the “Shares”).

 

3.     This Note may be prepaid in whole or in part, at any time and from time
to time, without premium or penalty.

 

4.     If any payment of principal or interest on this Note shall become due on
a Saturday, Sunday or any other day on which national banks are not open for
business, such payment shall be made on the next succeeding business day.

 

5.     This Note shall be binding upon Lucas and inure to the benefit of the
Lender named herein and Lender’s respective successors and assigns.

 

6.     Notwithstanding anything to the contrary in this Note or any other
agreement entered into in connection herewith, whether now existing or hereafter
arising and whether written or oral, it is agreed that the aggregate of all
interest and any other charges constituting interest, or adjudicated as
constituting interest, and contracted for, chargeable or receivable under this
Note or otherwise in connection with this loan transaction, shall under no
circumstances exceed the Maximum Rate (as defined below).

 

7.     If an Event of Default (as defined below) occurs (unless all Events of
Default have been cured or waived by Lender), Lender may, by written notice to
Lucas, declare the principal amount then outstanding of, and the accrued
interest (if any) and all other amounts payable on, this Note to be immediately
due and payable. The following are “Events of Default” under this Note:

 

(a)     Lucas shall fail to pay, when and as due, the principal or interest
payable hereunder (if any) within fifteen (15) days from the due date of such
payment; or

 

(b)     Lucas shall: (i) make an assignment for the benefit of creditors, file a
petition in bankruptcy, petition or apply to any tribunal for the appointment of
a custodian, receiver or a trustee for it or a substantial portion of its
assets; (ii) commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation or statute of any
jurisdiction, whether now or hereafter in effect; (iii) have filed against it
any such petition or application in which an order for relief is entered or
which remains undismissed for a period of ninety (90) days or more; (iv)
indicate its consent to, approval of or acquiescence in any such petition,
application, proceeding or order for relief or the appointment of a custodian,
receiver or trustee for it or a substantial portion of its assets; or (v) suffer
any such custodianship, receivership or trusteeship to continue undischarged for
a period of ninety (90) days or more; or

 

Page 1 of 6 Short
Term Promissory Note

 

 

(c)     Lucas shall take any action authorizing, or in furtherance of, any of
the foregoing.

 

8.     If from any circumstance any holder of this Note shall ever receive
interest or any other charges constituting interest, or adjudicated as
constituting interest, the amount, if any, which would exceed the Maximum Rate
shall be applied to the reduction of the principal amount owing on this Note,
and not to the payment of interest; or if such excessive interest exceeds the
unpaid balance of principal hereof, the amount of such excessive interest that
exceeds the unpaid balance of principal hereof shall be refunded to Lucas. In
determining whether or not the interest paid or payable exceeds the Maximum
Rate, to the extent permitted by applicable law (i) any non-principal payment
shall be characterized as an expense, fee or premium rather than as interest;
and (ii) all interest at any time contracted for, charged, received or preserved
in connection herewith shall be amortized, prorated, allocated and spread in
equal parts during the period of the full stated term of this Note. The term
“Maximum Rate” shall mean the maximum rate of interest allowed by applicable
federal or state law.

 

9.     Lender represents and warrants to Lucas, and agrees, as follows
(collectively the “Representations”):

 

(a)    The Shares are being acquired by Lender for its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof;

 

(b)    Lender acknowledges that it is an “accredited investor” as such term is
defined in Rule 501 of the Securities Act of 1933, as amended (the “Act” or the
“Securities Act”), and has executed the Certificate of Accredited Investor
Status, attached hereto as Exhibit A;

 

(c)    Lender has sufficient knowledge and experience in financial and business
matters and is capable of evaluating the risks and merits of Lender’s investment
in Lucas; and Lender is able financially to bear the risk of losing Lender’s
full investment in this Note and the Shares;

 

(d)    Lender has not been offered the Shares by any form of general
solicitation or advertising, including, but not limited to, advertisements,
articles, notices or other communications published in any newspaper, magazine,
or other similar media or television or radio broadcast or any seminar or
meeting where, to Lender’s knowledge, those individuals that have attended have
been invited by any such or similar means of general solicitation or
advertising. Lender has had an opportunity to ask questions of and receive
satisfactory answers from Lucas, or persons acting on behalf of Lucas,
concerning the terms and conditions of the Shares and Lucas, and all such
questions have been answered to the full satisfaction of Lender. Lucas has not
supplied Lender any information regarding the Shares or an investment in the
Shares other than as contained in this Note, and Lender is relying on its own
investigation and evaluation of Lucas and the Shares and not on any other
information;

 

(e)    The Lender understands that the Shares are being offered to it in
reliance on specific exemptions from or non-application of the registration
requirements of federal and state securities laws and that Lucas is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Lender set forth herein in order to
determine the applicability of such exemptions and the suitability of Lender to
acquire the Note and Shares. Lucas is under no obligation to to register or seek
an exemption under any federal and/or state securities acts for any sale or
transfer of the Shares by Lender, and Lender is solely responsible for
determining the status, in its own hands, of the Shares acquired in connection
herewith and the availability, if required, of exemptions from registration for
purposes of sale or transfer of the Shares. All information which Lender has
provided to Lucas concerning the undersigned’s financial position and knowledge
of financial and business matters is correct and complete as of the date hereof;
and

 

Page 2 of 6 Short
Term Promissory Note

 

 

(f)    Lender understands that the Shares have not been registered under the
Securities Act or registered or qualified under any securities laws of any state
or other jurisdiction, are “restricted securities,” and cannot be resold or
otherwise transferred unless they are registered under the Securities Act, and
registered or qualified under any other applicable securities laws, or an
exemption from such registration and qualification is available. Each
certificate issued to evidence any Shares shall bear a legend as follows:

 

“The securities represented by this certificate have not been registered under
the Securities Act of 1933 or any state securities act. The securities have been
acquired for investment and may not be sold, transferred, pledged or
hypothecated unless (i) they shall have been registered under the Securities Act
of 1933 and any applicable state securities act, or (ii) the corporation shall
have been furnished with an opinion of counsel, satisfactory to counsel for the
corporation, that registration is not required under any such acts.”

 

10.   This Note may be executed in several counterparts, each of which is an
original. It shall not be necessary in making proof of this Note or any
counterpart hereof to produce or account for any of the other counterparts. A
copy of this Note signed by one party and faxed or scanned and emailed to
another party (as a PDF or similar image file) shall be deemed to have been
executed and delivered by the signing party as though an original. A photocopy
or PDF of this Note shall be effective as an original for all purposes.

 

11.   It is the intention of the parties hereto that the terms and provisions of
this Note are to be construed in accordance with and governed by the laws of the
State of Texas, except as such laws may be preempted by any federal law
controlling the rate of interest which may be charged on account of this Note.
The parties hereby consent and agree that, in any actions predicated upon this
Note, venue is properly laid in Texas and that the Circuit Court in and for
Harris Country, Texas, shall have full subject matter and personal jurisdiction
over the parties to determine all issues arising out of or in connection with
the execution and enforcement of this Note.

 

12.  Every provision of this Note is intended to be severable. If, in any
jurisdiction, any term or provision hereof is determined to be invalid or
unenforceable, (a) the remaining terms and provisions hereof shall be
unimpaired, (b) any such invalidity or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such term or provision in any other
jurisdiction, and (c) the invalid or unenforceable term or provision shall, for
purposes of such jurisdiction, be deemed replaced by a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision. In the event a court of competent
jurisdiction determines that any provision of this Note is invalid or against
public policy and cannot be so reduced or modified so as to be made enforceable,
the remaining provisions of this Note shall not be affected thereby, and shall
remain in full force and effect.

 

13.   No modification, amendment, addition to, or termination of this Note, nor
waiver of any of its provisions, shall be valid or enforceable unless in writing
and signed by all the parties hereto.

 

14.   The Note constitutes the entire agreement of the parties regarding the
matters contemplated herein, or related thereto, and supersedes all prior and
contemporaneous agreements, and understandings of the parties in connection
therewith. In this Note, words in the singular include the plural and words in
the plural include the singular, and words importing the masculine gender
include the feminine and neuter genders.

 

15.   This Note and the repayment of this Note shall be unsecured by Lucas and
Lender shall have no rights to any collateral or security interests in
connection herewith or the payment of this Note. 

 

[Remainder of page left intentionally blank. Signature pages follow.]

 

Page 3 of 6 Short
Term Promissory Note

 

 

IN WITNESS WHEREOF, Lucas has duly executed this Promissory Note as of the day
and year first above written, with an Effective Date as provided above.

 

    “Lucas”               Lucas Energy, Inc.
(A Nevada Corporation)               /s/ Anthony C. Schnur       Anthony C.
Schnur       President           “Lender”               /s/ Alan Dreeben      
Alan Dreeben      

 

Page 4 of 6 Short
Term Promissory Note

 

 

Exhibit A

 

CERTIFICATE OF ACCREDITED INVESTOR STATUS

 

Except as may be indicated by the undersigned below, the undersigned is an
“accredited investor,” as that term is defined in Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”). The undersigned has
initialed the box below indicating the basis on which he is representing his
status as an “accredited investor”:

 

__________a bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”); an insurance company as
defined in Section 2(13) of the Securities Act; an investment company registered
under the Investment Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of that Act; a small business investment company
licensed by the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958; a plan established and maintained
by a state, its political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit of its employees, and such
plan has total assets in excess of $5,000,000; an employee benefit plan within
the meaning of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
such Act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are “accredited investors”;

 

__________a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;

 

__________an organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000;

 

__________a natural person whose individual net worth, or joint net worth with
the undersigned’s spouse, at the time of this purchase exceeds $1,000,000. For
purposes of this item, “net worth” means the excess of total assets at fair
market value (including personal and real property, but excluding the estimated
fair market value of a person’s primary home) over total liabilities. Total
liabilities excludes any mortgage on the primary home in an amount of up to the
home’s estimated fair market value as long as the mortgage was incurred more
than 60 days before the Securities are purchased, but includes (i) any mortgage
amount in excess of the home’s fair market value and (ii) any mortgage amount
that was borrowed during the 60-day period before the closing date for the sale
of Securities for the purpose of investing in the Securities;

 

__________a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with the undersigned’s spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;

 

__________a trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a person who has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the prospective
investment;

 

__________an entity (not including a trust) in which all of the equity holders
are “accredited investors” by virtue of their meeting one or more of the above
standards; or

 

__________an individual who is a director or executive officer of Lucas Energy,
Inc.

 

Page 5 of 6 Short
Term Promissory Note

 

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Accredited
Investor Status effective as of March ___, 2016.

 

          By:        Alan Dreeben

 

Page 6 of 6 Short
Term Promissory Note