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Exhibit 10.2
 
THIS NOTE, AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
(THE “SECURITIES”) HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT
BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT” OR THE “SECURITIES ACT”) SHALL HAVE BECOME EFFECTIVE
WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE
ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN
VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED
UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE AND ANY SECURITIES ISSUABLE UPON
CONVERSION OF THIS NOTE (EXCEPT AS OTHERWISE PROVIDED BELOW).
 
FORM OF CONVERTIBLE PROMISSORY NOTE
 
[$__________]
[__________] to be Effective [__________] 
[Note #___]
 

 
FOR VALUE RECEIVED, Lucas Energy, Inc., a Nevada corporation (the “Company”),
hereby promises to pay to the order of [_______________], and/or permitted
assigns (the “Holder”), the aggregate principal amount of [_______________]
([$___________________])(“Principal”), together with interest on the unpaid
principal amount hereof, upon the terms and conditions hereinafter set forth.
 
1.
Note Amount. This Convertible Promissory Note (this “Note”, “Promissory Note” or
“Agreement”) evidences amounts payable by the Company to the Holder in
connection with an Advance made pursuant to that certain Non-Revolving Line of
Credit Agreement dated on or around August 30, 2015, but effective August 28,
2015, by and between the Company and the Holder (the “Line of Credit”). Certain
capitalized terms used herein, but not otherwise defined shall have the meanings
given to such terms in the Line of Credit and this Note shall be subject in all
cases to the terms and conditions of the Line of Credit.
 
 
 
2.
Payment Terms. The Company promises to pay to Holder the balance of Principal,
together with accrued and unpaid interest (which shall accrue until the Maturity
Date) on October 1, 2016 (the “Maturity Date”), unless this Note is earlier
prepaid as herein provided or earlier converted into Common Stock (as
hereinafter defined) of the Company pursuant to Sections 4 hereof. All payments
hereunder shall be made in lawful money of the United States of America. Payment
shall be credited first to the accrued interest then due and payable and the
remainder to Principal.
 
 
 

 
 
 
Secured Convertible Promissory Note
[Note #____]
 
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3.
Interest. Interest on the outstanding portion of Principal of this Note shall
accrue at a rate of six percent (6%) per annum. All past-due principal and
interest (which failure to pay such amounts shall be defined herein as an “Event
of Default”) shall bear interest at the rate of fifteen percent (15%) per annum
until paid in full (the “Default Rate”). All computations of interest shall be
made on the basis of a 360-day year for actual days elapsed.

 
a.
Notwithstanding any provision in this Note, the total liability for payments of
interest and payments in the nature of interest, including all charges, fees,
exactions, or other sums which may at any time be deemed to be interest, shall
not exceed the limit imposed by the usury laws of the State of Texas or the
applicable laws of the United States of America, whichever shall be higher (the
“Maximum Rate”).

 
b.
In the event the total liability for payments of interest and payments in the
nature of interest, including, without limitation, all charges, fees, exactions
or other sums which may at any time be deemed to be interest, which for any
month or other interest payment period exceeds the Maximum Rate, all sums in
excess of those lawfully collectible as interest for the period in question (and
without further agreement or notice by, among or to the Holder the undersigned)
shall be applied to the reduction of the principal balance, with the same force
and effect as though the undersigned had specifically designated such excess
sums to be so applied to the reduction of the principal balance and the Holder
had agreed to accept such sums as a premium-free prepayment of principal;
provided, however, that the Holder may, at any time and from time to time,
elect, by notice in writing to the undersigned, to waive, reduce or limit the
collection of any sums in excess of those lawfully collectible as interest
rather than accept such sums as a prepayment of the principal balance. The
undersigned does not intend or expect to pay nor does the Holder intend or
expect to charge, accept or collect any interest under this Note greater than
the Maximum Rate.

 
 
 
c.
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.
“Business Day” means a day other than (i) a Saturday, (ii) a Sunday or (iii) a
day on which commercial banks in Houston, Texas, are authorized or required to
be closed for business.

 
4.
Holder’s Option to Convert this Note.
 

 
 
a.
At any time prior to the payment in full by the Company of this Note, the Holder
shall have the option to convert the unpaid balance (Principal and accrued and
unpaid interest, in each case subject to Section 4(l) and 4(m)) on this Note (or
any portion thereof) into shares of Common Stock (the “Shares” and the “Common
Stock”) of the Company (the “Conversion Option”) at the Conversion Price (each a
“Conversion”). The “Conversion Price” shall equal $1.50 per Share;
 
 
 
 
b.
In order to exercise this Conversion Option, the Holder shall surrender this
Promissory Note to the Company, accompanied by written notice of its intentions
to exercise this Conversion Option, which notice shall set forth the amount of
this Promissory Note to be converted, and the Shares due, which shall be in the
form of Exhibit A, attached hereto (“Notice of Conversion”). The date that the
Company receives the Notice of Conversion shall be defined as the “Conversion
Date.” Within ten (10) Business Days of the Company’s receipt of the Notice of
Conversion and this Note, the Company shall deliver or cause to be delivered to
the Holder, written confirmation that the Shares have been issued in the name of
the Holder (the “Share Delivery Deadline”). Notwithstanding anything to the
contrary set forth in this Section 4, following conversion of any portion of
this Note in accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Company unless (A) the full amount of
the Note is being converted (in which event this Note shall be delivered to the
Company following conversion thereof) or (B) the Holder has provided the Company
with prior written notice (which notice may be included in a Notice of
Conversion) requesting reissuance of this Note upon physical surrender of this
Note. The Holder and the Company shall maintain records showing the principal
and interest converted and/or paid and/or adjusted (as the case may be) and the
dates of such conversions and/or payments and/or adjustments (as the case may
be) or shall use such other method, reasonably satisfactory to the Holder and
the Company, so as not to require physical surrender of this Note upon
conversion;
 
 
 

 
 
Secured Convertible Promissory Note
[Note #____]
 
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c.
If for any reason (including the operation of the adjustment provisions set
forth in this Note), the Conversion Price on any date of Conversion of this Note
shall not be lawful and adequate consideration for the issuance of the relevant
Shares, then the Company shall take such steps as are necessary (including the
amendment of its certificate of incorporation so as to reduce the par value of
the Common Stock) to cause such Conversion Price to be adequate and lawful
consideration on the date the payment thereof is due, but if the Company shall
fail to take such steps, then the Company acknowledges that the Holder shall
have been damaged by the Company in an amount equal to an amount, which, when
added to the total Conversion Price for the relevant Shares, would equal lawful
and adequate consideration for the issuance of such Shares, and the Company
irrevocably agrees that if the Holder shall then forgive the right to recover
such damages from the Company, such forgiveness shall constitute, and Company
shall accept such forgiveness as, additional lawful consideration for the
issuance of the relevant Shares;
 
 
 
 
d.
The Company shall at all times take any and all additional actions as are
necessary to maintain the required authority to issue the Shares to the Holder,
in the event the Holder exercises its rights under the Conversion Option;
 
 
 
 
e.
Payment to Company prior to Holder’s delivery of a Notice of Conversion shall
terminate Holder’s option to convert;
       
f.
Conversion calculations pursuant to this Section 4, shall be rounded to the
nearest whole share of Common Stock, and no fractional shares shall be issuable
by the Company upon conversion of this Note. Conversion of this Note in full
shall be deemed payment in full of this Note and this Note shall thereupon be
cancelled;
       
g.
If the Company at any time or from time to time on or after the effective date
of the issuance of this Note (the “Original Issuance Date”) effects a
subdivision of its outstanding Common Stock, the Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased, and
conversely, if the Company at any time or from time to time on or after the
Original Issuance Date combines its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price then in effect immediately before
the combination shall be proportionately increased;
       
h.
All Shares of Common Stock which may be issued upon Conversion of this Note
will, upon issuance by the Company in accordance with the terms of this Note, be
validly issued, free from all taxes and liens with respect to the issuance
thereof (other than those created by the holders), free from all pre-emptive or
similar rights and be fully paid and non-assessable;
       
i.
On the date of any Conversion, all rights of any Holder with respect to the
amount of this Note converted, will terminate, except only for the rights of any
such Holder to receive certificates (if applicable) for the number of Shares of
Common Stock which this Note has been Converted;
       
j.
Unless the Shares are eligible to be issued as free trading shares pursuant to
the requirements of Rule 144 or otherwise, which shall be determined by the
Company in its reasonable discretion, prior to the issuance date of such Shares,
such Shares shall be issued as restricted shares of Common Stock; and
       
k.
The Company shall not be required to pay any tax allocated or attributed to
Holder which may be payable in respect to any transfer involved in the issue and
delivery of shares of Common Stock upon Conversion in a name other than that in
which the shares of the Note so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Company the amount of any such tax, or has established,
to the satisfaction of the Company, that such tax has been paid. The Company
shall withhold from any payment due whatsoever in connection with the Note any
and all required withholdings and/or taxes the Company, in its sole discretion
deems reasonable or necessary, absent an opinion from Holder’s accountant or
legal counsel, acceptable to the Company in its sole determination, that such
withholdings and/or taxes are not required to be withheld by the Company.

 
 
Secured Convertible Promissory Note
[Note #____]
 
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l.
           
Notwithstanding anything herein to the contrary, the maximum number of shares of
Common Stock to be issued in connection with the Conversion of this Note, and
any other Notes issued in connection with the Line of Credit (“Other Notes”)
shall not (i) exceed 19.9% of the outstanding shares of Common Stock immediately
prior to the date of the Line of Credit, (ii) exceed 19.9% of the combined
voting power of the then outstanding voting securities of the Company
immediately prior to the date of the Line of Credit, in each of subsections (i)
and (ii) before the issuance of the Common Stock upon conversion of this Note or
the Other Notes, or (iii) otherwise exceed such number of shares of Common Stock
that would violate applicable listing rules of the NYSE MKT in the event the
Company’s shareholders do not approve the issuance of the Common Stock upon the
conversion of this Note or the Other Notes, in each of (i) through (iii), only
to the extent required by applicable NYSE MKT rules and guidance (the “Share
Cap”). In the event the number of shares of Common Stock to be issued upon
conversion of this Note or the Other Notes exceeds the Share Cap, then this Note
and the Other Notes, or applicable portions thereof shall cease being
convertible, and the Company shall instead repay such Note and Other Notes (or
portions thereof) in cash, or if required, the Company shall first obtain the
Stockholder Approval (as defined in the Line of Credit).
     
5.
Redemption. This Note may be redeemed by the Company by payment of the entire
Principal and interest outstanding under this Note in cash to Holder.

 
 
a.
This Note may be prepaid in whole or in part at any time without penalty
provided that the Company shall provide the Holder a minimum of thirty (30) days
prior written notice before the date of the Company’s planned prepayment.
 
 
 
 
b.
Any partial prepayment shall be applied first to any accrued interest and then
to any principal Loan amount outstanding.

 
 
Secured Convertible Promissory Note
[Note #____]
 
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6.
Events of Default. If an Event of Default (as defined herein or below) occurs
(unless all Events of Default have been cured or waived by Holder), Holder may,
by written notice to the Company, declare the principal amount then outstanding
of, and the accrued interest and all other amounts payable on, this Note to be
immediately due and payable. The following events shall constitute events of
default (“Events of Default”) under this Note, and/or any other Events of
Default defined elsewhere in this Note shall occur:

 
(a)
the Company shall fail to pay, when and as due, the Principal or interest
payable hereunder (or under any other outstanding Convertible Note issued by the
Company and held by Holder); or
 
(b)
If there shall exist final judgments against the Company aggregating in excess
of One Hundred Thousand Dollars ($100,000) and if any one of such judgments
shall have been outstanding for any period of forty-five (45) days or more from
the date of its entry and shall not have been discharged in full, released or
stayed pending appeal; or
 
(c)
the Company shall have breached in any respect any term, condition, warrant,
representation or covenant in this Note or the Line of Credit, and, with respect
to breaches capable of being cured, such breach shall not have been cured within
fifteen (15) days following the receipt of written notice of such breach by the
Holder to the Company; or
 
(d)
a Change of Control shall have occurred without the prior written consent of the
Holder; or
 
(e)
the Company fails to meet any deadlines or requirements set forth herein; or
 
(f)
the Company shall fail to comply with the reporting requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), at any time
the Company is subject to the Exchange Act; or
 
(g)
the Company shall cease to be subject to the reporting requirements of the
Exchange Act; or
 
(h)
the Company shall take or fail to take steps which cause the Company’s
securities to be ineligible for sale pursuant to Rule 144; or
 
(i)
the Company 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
 

 
 
Secured Convertible Promissory Note
[Note #____]
 
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(j)
the Company shall take any action authorizing, or in furtherance of, any of the
foregoing; or
 
(k)
the Company shall be in material default of any of its debt obligations which
separately or in aggregate have a value in default of more than $50,000, and
such default shall not have been cured within thirty (30) days following the
receipt by the Company of a notice of default in connection therewith by the
applicable debt holder(s).
 

In case any one or more Events of Default shall occur and be continuing, Holder
may proceed to protect and enforce its rights by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance of
any agreement contained herein or for an injunction against a violation of any
of the terms hereof, or in aid of the exercise of any power granted hereby or
thereby or by law or otherwise. In case of a default in the payment of any
principal of or premium, if any, or interest on this Note, the Company will pay
to Holder such further amount as shall be sufficient to cover the reasonable
cost and expenses of collection, including, without limitation, reasonable
attorneys’ fees, expenses and disbursements. No course of dealing and no delay
on the part of Holder in exercising any right, power or remedy shall operate as
a waiver thereof or otherwise prejudice Holder’s rights, powers or remedies. No
right, power or remedy conferred by this Note upon Holder shall be exclusive of
any other right, power or remedy referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise.

 
7.
Certain Waivers by the Company. Except as expressly provided otherwise in this
Note, the Company and every endorser or guarantor, if any, of this Note waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note, and assent to any extension or postponement of the time of payment or
any other indulgence, to any substitution, exchange or release of collateral
available to Holder, if any, and to the addition or release of any other party
or person primarily or secondarily liable.

 
Secured Convertible Promissory Note
[Note #____]
 
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8.
Assignment by Holder. If and whenever this Note shall be assigned and
transferred, or negotiated, including transfers to substitute or successor
trustees, in each case subject to applicable law and an exemption from
registration for such transfer, which shall be reasonably approved, and not
unreasonably delayed or conditioned by the Company. Notwithstanding the above,
the Holder may assign any of its rights under this Note (subject where
applicable to federal securities laws), to any Person (including, but not
limited to Affiliates or related parties of the Holder), with written notice to
the Company and the Company shall have no ability to restrict or condition such
assignment (subject where applicable to compliance with applicable federal
securities laws).
 
 
9.
Amendment. This Note may not be changed orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.

 
10.
Costs and Fees. Anything else in this Note to the contrary notwithstanding, in
any action arising out of this Agreement, the prevailing party shall be entitled
to collect from the non-prevailing party all of its attorneys’ fees. For the
purposes of this Note, the party who receives or is awarded a substantial
portion of the damages or claims sought in any proceeding shall be deemed the
“prevailing” party and attorneys’ fees shall mean the reasonable fees charged by
an attorney or a law firm for legal services and the services of any legal
assistants, and costs of litigation, including, but not limited to, fees and
costs at trial and appellate levels.
 
 
11.
Governing Law. 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.

 
12.
No Third Party Benefit. The provisions and covenants set forth in this Agreement
are made solely for the benefit of the parties to this Agreement and are not for
the benefit of any other person, except for Frank & McNear, LLC, and no other
person shall have any right to enforce these provisions and covenants against
any party to this Agreement.
 
 
13.
Jurisdiction, Venue and Jury Trial Waiver. 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 Houston, 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.
 
 
14.
Interpretation. The term “Company” as used herein in every instance shall
include the Company’s successors, legal representatives and assigns, including
all subsequent grantees, either voluntarily by act of the Company or
involuntarily by operation of law and shall denote the singular and/or plural
and the masculine and/or feminine and natural and/or artificial persons,
whenever and wherever the contexts so requires or properly applies. The term
“Holder” as used herein in every instance shall include the Holder’s successors,
legal representatives and assigns, as well as all subsequent assignees,
endorsees and holders of this Note (subject to the provisions of this Note
providing for transfers and assignments by Holder), either voluntarily by act of
the parties or involuntarily by operation of law. Captions and paragraph
headings in this Note are for convenience only and shall not affect its
interpretation. In this Agreement words importing the singular number include
the plural and vice versa; words importing the masculine gender include the
feminine and neuter genders and visa versa. The word “person” includes an
individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.
   

 
 
Secured Convertible Promissory Note
[Note #____]
 
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15.
WAIVER OF JURY TRIAL. THE COMPANY AND HOLDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
NOTE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF EITHER PARTY. THE COMPANY ACKNOWLEDGES THAT THIS WAIVER
OF JURY TRIAL IS A MATERIAL INDUCEMENT TO THE HOLDER IN EXTENDING CREDIT TO THE
COMPANY, THAT THE HOLDER WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY
TRIAL WAIVER, AND THAT THE COMPANY HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS
HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY
TRIAL WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.

16.
Entire Agreement. This Agreement and the Line of Credit constitutes the sole and
only agreement of the parties hereto and supersedes any prior understanding or
written or oral agreements between the parties respecting the subject matter
hereof.

17.
Effect of Facsimile and Photocopied Signatures. This Agreement may be executed
in several counterparts, each of which is an original. It shall not be necessary
in making proof of this Agreement or any counterpart hereof to produce or
account for any of the other counterparts. A copy of this Agreement 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 Agreement shall be
effective as an original for all purposes.

Secured Convertible Promissory Note
[Note #____]
 
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 IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to
be executed and delivered by a duly authorized officer as of the date first
above written, to be effective as of the effective date set forth above.
 
 
LUCAS ENERGY, INC.
 
 
 
 
 
 
 
By: _________________
 
 
Anthony C. Schnur
Chief Executive Officer
 

 
 
 
 
 
 
 
 
 
 
 
 
Secured Convertible Promissory Note
[Note #____]
 
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EXHIBIT A

Conversion Election Form
 
____________, 20__

Lucas Energy, Inc.

Re:      Conversion of Promissory Note

Gentlemen:

You are hereby notified that, pursuant to, and upon the terms and conditions of
that certain Convertible Promissory Note ([Note #___) of Lucas Energy, Inc. (the
“Company”), in the initial principal amount of [______________] (as increased
from time to time, the “Note”), held by us, we hereby elect to exercise our
Conversion Option (as such term in defined in the Note), in connection with
$__________ of the amount currently owed under the Note (including $___________
of accrued interest), effective as of the date of this writing, which amount
will convert into ________________ shares of the Company’s Common Stock (the
“Conversion”), based on the Conversion Price (as defined and described in the
Note). In connection with the Conversion, we hereby re-certify, re-confirm and
re-warrant the Representations as set forth in that certain Non-Revolving Line
of Credit Agreement dated on or around August 30, 2015, and effective August 28,
2015, by and between the Company and [___________] and further confirm and
acknowledge that conversion will not result in us exceeding the Beneficial
Ownership Percentage set forth in the Note.

Please issue certificate(s) for the applicable shares of the Company’s Common
Stock issuable upon the Conversion, in the name of the person provided below.

 
Very truly yours,
 
 
 
 
 
___________________________
 
Name:
     
If on behalf of Entity:
     
Entity Name:______________
     
Signatory’s Position with Entity:
_____________________________

 
Please issue certificate(s) for Common Stock as follows:
______________________________________________
Name
______________________________________________
Address
______________________________________________
Social Security No./EIN of Shareholder

Please send the certificate(s) evidencing the Common Stock to:

Attn:___________________________________________

Address:________________________________________
 
 
 
 
Secured Convertible Promissory Note
[Note #____]
 
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