Exhibit 10.6

 

NOTE EXCHANGE AGREEMENT

 

NOTE EXCHANGE AGREEMENT, dated as of December [ ], 2015 (this “Agreement”), by
and among Lilis Energy, Inc. (the “Company”) and each of the parties listed on
the signature pages hereto (each a “Noteholder”, and collectively, the
“Noteholders”). Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Original Note (as defined
herein).

 

WHEREAS, the Company has previously issued 12.0% Short-Term Notes due 2016
(together, the “Original Notes”) to certain affiliates and accredited investors
of the Company in an aggregate principal amount of $750,002;

 

WHEREAS, each Noteholder beneficially owns the aggregate principal amount of
Original Notes set forth opposite its name in Schedule A attached hereto; and

 

WHEREAS, contemporaneously with the execution and delivery of this Agreement,
each of the Noteholders will exchange its Original Notes for the Company’s 12%
Subordinated Convertible Notes in the form substantially attached as Exhibit A
hereto (the “Exchange Notes”), and the Company will issue such Exchange Notes at
a rate, expressed in principal amount of Exchange Notes, equal to $1.00 for
$1.00 in exchange for the cancellation of the Original Notes, with all amounts
due thereunder being cancelled and deemed to have been paid in full, including
any accrued but unpaid interest (the “Note Exchange”).

 

NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties hereto agree as follows:

 

1.   Note Exchange. Contemporaneously with the execution and delivery of this
Agreement, the parties shall effectuate the Note Exchange in the following
manner: (a) the Company shall issue and deliver to the Noteholders, an aggregate
principal amount of Exchange Notes equal to the aggregate principal amount of
the Original Notes exchanged hereunder and (b) the Noteholders severally (and
not jointly) shall deliver to the Company all of their respective Original
Notes. In addition, the Company shall cancel the amount of accrued but unpaid
interest owed to each Noteholder for the period from the execution of each
Original Note through the date hereof. The Exchange Notes issued pursuant to the
Note Exchange shall accrue interest in accordance with the provisions of the
Exchange Notes.

 

2.   Purchase Agreement. In connection with the Note Exchange, each Noteholder
shall execute and deliver to the Company a purchase agreement, in the form
substantially attached as Exhibit B, hereto and the Company will deliver to the
Noteholders warrants to purchase shares of the Company’s common stock, par value
$0.0001, in the form substantially attached as Exhibit C hereto, in an amount
specified therein.

 

3. Representations and Warranties of the Company. The Company represents and
warrants to the Noteholders effective as of the date hereof as follows:

 

(a) Due Organization. The Company is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization.

 

(b) Due Authorization; Binding Agreement; No Conflicts. The Company has full
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered by the Company and (assuming due
authorization, execution and delivery by the Noteholders) constitutes the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law). Neither
this Agreement nor the consummation of the Note Exchange will violate, conflict
with or result in a breach of or default under (i) the certificate of
incorporation or bylaws of the Company, (ii) any agreement or instrument to
which the Company is a party or by which the Company or any of its assets are
bound, or (iii) any laws, regulations or governmental or judicial decrees,
injunctions or orders applicable to the Company.

 

 

 

 

(c) Validity of Exchange Notes. The Exchange Notes issued pursuant to this
Agreement, when delivered in exchange for the Original Notes in accordance with
this Agreement, will be the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, and general equitable principles (whether considered in a proceeding
in equity or at law)..

 

4. Representations and Warranties of the Noteholders. Each Noteholder hereby,
severally and not jointly, represents and warrants to the Company as of the date
hereof as follows:

 

(a) Due Organization. If such Noteholder is a legal entity, it is duly organized
and validly existing under the laws of the jurisdiction of its organization.

 

(b) Due Authorization; Binding Agreement. Such Noteholder has full right, power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
authorized, executed and delivered by such Noteholder and (assuming due
authorization, execution and delivery by the Company) constitutes the valid and
binding obligation of such Noteholder enforceable against such Noteholder in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law).

 

(c) Ownership of the Original Notes. Such Noteholder is, and at all times since
execution of the Original Note has been, the beneficial owner of its Original
Notes, free and clear of any adverse claim, mortgage, pledge, lien, encumbrance,
option, charge or other security interest that would prevent such Noteholder’s
compliance with its obligations hereunder. Such Noteholder does not own,
beneficially or of record, any Original Notes of the Company or securities
convertible or exchangeable for Original Notes of the Company other than as set
forth in Schedule A hereto. Such Noteholder has the sole right and power to vote
and dispose of the Original Notes, and none of such Original Notes is subject to
any voting trust or other agreement, arrangement or restriction with respect to
the voting or transfer of any of the Original Notes, except for this Agreement.

 

(d) Investment Intent. The Exchange Notes to be acquired by such Noteholder
pursuant to this Agreement shall be acquired for such Noteholder’s own account
and not with a view to, or intention of, distribution thereof in violation of
the Securities Act of 1933, as amended (the “Securities Act”), or any applicable
state securities laws, and such Exchange Notes shall not be disposed of in
contravention of the Securities Act or any applicable state securities laws.

 

(e) Sophisticated Investor. Such Noteholder is a “qualified institutional buyer”
as defined in Rule 144A under the Securities Act or an “accredited investor” or
“institutional accredited investor” as defined in Rule 501 under Regulation D of
the Securities Act. Such Noteholder is able to bear the economic risk of its
investment in the Exchange Notes for an indefinite period of time and
acknowledges that no public market exists for the Exchange Notes and that there
is no assurance that a public market will ever develop for the Exchange Notes.
The Exchange Notes have not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available. Such Noteholder
understands that the tax consequences of the Note Exchange are complex, and
accordingly such Noteholder represents and warrants that it has consulted with
its own independent tax advisor concerning the Note Exchange and is not relying
on the Company or any of its respective affiliates or agents, including its
counsel and accountants, for any tax advice regarding the tax consequences of
the Note Exchange or any other transactions contemplated by this Agreement.

 

(f) Information. Such Noteholder has reviewed, or has had the opportunity to
review, with the assistance of professional and legal advisors of its choosing,
sufficient information (including all documents filed or furnished to the
Securities and Exchange Commission by Lilis Energy, Inc.) and has had sufficient
access to the Company necessary for such Noteholder to decide to exchange its
Original Notes for Exchange Notes in accordance with this Agreement.

 

4. General Provisions.

 

(a) Closing. The closing of the transactions contemplated by this Agreement
shall occur simultaneously with the execution and delivery of this Agreement.

 

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(b) Amendments, Etc. No amendment, modification, termination, or waiver of any
provision of this Agreement, and no consent to any departure by any of the
Noteholders or the Company from any provision of this Agreement, shall be
effective unless it shall be in writing and signed and delivered by the party
sought to be bound, and then it shall be effective only in the specific instance
and for the specific purpose for which it is given.

 

(c) Disclosure. Nothing contained in this Agreement shall be construed to limit
the Company or any Noteholder from making such disclosures as may be required by
law.

 

(d) Notice. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the Company at 216
16th Street, Suite #1350, Denver, Colorado 80202, Attention: General Counsel,
and to each Noteholder at the address set forth in the Exhibit A (or at such
other address for a party as shall be specified by like notice).

 

(e) Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.

 

(f) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

 

(g) Entire Agreement. This Agreement embodies the entire agreement and
understanding of the Noteholders and the Company with respect to the subject
matter hereof and thereof, and supersedes all prior agreements or
understandings, with respect to the subject matter of this Agreement.

 

(h) Specific Performance; Enforcement. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore, each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled at law or in equity. The parties agree that
they shall be entitled to enforce specifically the terms and provisions of this
Agreement in addition to any other remedy to which they may entitled at law or
in equity.

 

(i) Counterparts; Facsimile. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed by facsimile
signatures of the parties hereto.

 

(j) Expenses. All fees and expenses with respect to the negotiation of this
Agreement and the consummation of the transactions contemplated hereby shall be
borne by the party incurring such fees and expenses.

 

[Signature page follows]

  

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IN WITNESS WHEREOF, the Company and each Noteholder has caused this Agreement to
be executed on its behalf as of the date first written above.

 

  Lilis Energy, Inc.         By: /s/ Kevin Nanke   Name: Kevin Nanke   Title:
Executive Vice President and Chief Financial Officer         Noteholders:      
  By:  /s/ General Merrill McPeak   Name: General Merrill McPeak         By:
 /s/ Nuno Brandolini   Name: Nuno Brandolini         Siskey Capital, LLC.      
  By:  /s/ Martin A. Sumichrast   Name: Martin A. Sumichrast   Title: Manager  
      By:  /s/ Abraham Mirman   Name: Abraham Mirman

 

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Schedule A

 

Noteholder  Aggregate Principal Amount of Securities Outstanding  
Address for Notices  General Merrill McPeak  $250,002      Nuno Brandolini  
$150,000       Siskey Capital, LLC  $100,000       Abraham Mirman  $250,000  
   

 

 

 

 

EXHIBIT A

 

FORM OF EXCHANGE NOTE

 

[See Exhibit 4.1] 

 

 

 

 

EXHIBIT B

 

FORM OF PURCHASE AGREEMENT

 

[See Exhibit 10.5]

 

 

 

 

EXHIBIT C

 

FORM OF WARRANT

 

[See Exhibit 4.2]