Exhibit 10.1


 


SECOND AMENDMENT TO FORBEARANCE AGREEMENT







THIS SECOND AMENDMENT TO FORBEARANCE AGREEMENT (this “Amendment”) is dated March 9, 2016, and amends that certain Forbearance Agreement dated November 24, 2015 (as previously amended, the “Forbearance Agreement”) by and among (i) Brushy Resources, Inc. (f/k/a Starboard Resources, Inc.), a Delaware corporation (“Borrower”), (ii) ImPetro Resources, LLC, a Delaware limited liability company (“ImPetro Resources”), (iii) ImPetro Operating, LLC, a Delaware limited liability company (collectively with ImPetro Resources, the “Guarantors” and each a “Guarantor”), and (iv) Independent Bank, a Texas state bank (“Lender”).  Capitalized terms used but not defined herein have the meaning given such terms in the Forbearance Agreement, if defined therein, and if not defined in the Forbearance Agreement, then have the meaning given such terms in the Credit Agreement (as defined below).







R E C I T A L S:







WHEREAS, the Borrower, the Guarantors and the Lender entered into the Forbearance Agreement to set forth certain terms and conditions upon which the Lender would agree to forbear from exercising certain remedies available to it with respect to various Forbearance Defaults described in the Forbearance Agreement, which had occurred in connection with that certain Credit Agreement dated June 27, 2013 between the Borrower and the Lender (as previously amended, the “Credit Agreement”);







WHEREAS, pursuant to the First Amendment to Forbearance Agreement, the Forbearance Expiration Date was extended to February 26, 2016 (or such earlier date on which a Critical Default occurred);







WHEREAS, the Lender is entitled to exercise its remedies with respect to various Events of Default that have occurred; and







WHEREAS, the Borrower and Lilis Energy, Inc. (“Lilis”) have advised the Lender that Lilis desires to purchase the Note and the Lender’s Liens on the Borrower’s property which secure the Note (the “Lilis Sale”), and have requested that the Lender continue to forbear from exercising its remedies until March 30, 2016 to provide additional time for Lilis to facilitate such purchase and related corporate transactions among Lilis and the Borrower;







NOW, THEREFORE, in consideration of the premises and the mutual covenants made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Guarantors, the Lender and, as applicable, Lilis agree as follows:







1.           The following definition is hereby added to Section 4.1.1 of the Forbearance Agreement, and thereby, also to Section 1.1 of the Credit Agreement, in the proper alphabetical order:







“Second Amendment to Forbearance Agreement” means the Second Amendment to Forbearance Agreement dated March 9, 2016 by and among the Borrower, the Guarantors and the Lender, and acknowledged and agreed by Lilis Energy, Inc., amending the Forbearance Agreement.








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2.           The following definitions located in Section 4.1.1 of the Forbearance Agreement and Section 1.1 of the Credit Agreement are hereby amended and restated in their respective entireties as follows:







“Critical Default” means any of the following:







(a)           the occurrence of an Event of Default under Section 8.1.4 or Section 8.1.5 of the Credit Agreement;







(b)           the Borrower shall fail to observe or perform any covenant or agreement contained in Section 2.6.2 of the Forbearance Agreement;







(c)           the Borrower shall fail to observe or perform any covenant or agreement contained in Section 7.7 of the Credit Agreement;







(d)           any action, suit or proceeding shall be instituted which (i) relates to the Credit Agreement and names the Lender as a party, or (ii) prohibits or restricts the consummation of the Lilis Sale; or







(e)           any of the conditions to forbearance set forth in paragraph 4 of the Second Amendment to Forbearance Agreement shall not be satisfied by the applicable due date therefor.







“Scheduled Maturity Date” means March 30, 2016.







3.           Section 5.6 of the Forbearance Agreement is hereby amended and restated in its entirety to read as follows:







“5.6           Expiration of Forbearance Period.  The Forbearance Period will expire and terminate automatically and without notice upon the earlier to occur of the Scheduled Maturity Date or the occurrence of any Critical Default (such earlier date being the “Forbearance Expiration Date”).”







4.           Conditions to Forbearance.  The effectiveness of the agreements of the Lender set forth in Section 5.1 of the Forbearance Agreement is subject to the prior satisfaction of each of the following conditions:







(a)           The Lender shall have received a counterpart of this Amendment duly executed by the Borrower, the Guarantors and Lilis not later than March 9, 2016.







(b)           The Lender shall have received, not later than March 9, 2016, an estimated budget from the Borrower for the month of March 2016.








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(c)           The Borrower shall have made a payment to the Lender in immediately available funds in the amount of $86,538.78 as a prepayment of the non-default and default interest accrued and to be accrued under the Note through March 29, 2016.  The foregoing payment shall be made in full not later than March 9, 2016, notwithstanding the amendment of the definition of “Forbearance Expiration Date” and the use of such defined term as the deadline for interest payments that would otherwise apply under Section 2.3 of the Forbearance Agreement.  If the Lilis Sale is consummated prior to March 29, 2016, Lilis will receive a credit on the purchase price for the Note and related Liens with respect to such prepaid interest for the number of days prior to such date that the Lilis Sale was consummated.







(d)           No later than March 9, 2016, the Lender shall have received a payment from the Borrower equal to the total amount of all payments made by the Lender between March 3, 2016 and March 7, 2016 and on March 9, 2016 to honor checks written on, or wires originating from, the accounts of the Borrower or either Guarantor that are maintained with the Lender, which total equals $121,100.77.  Upon the Lender’s receipt of such payment, the Lender will apply it, together with $45,691.73 from the Borrower’s deposit account maintained at the Lender, to the Obligations.  The Borrower consents and agrees to the Lender’s application of all such amounts toward the Obligations.







(e)           No later than March 9, 2016, the Lender shall have received reimbursement from the Borrower of the estimated legal fees and expenses of counsel to the Lender incurred in connection with this Amendment and the transactions contemplated hereby, which total $17,562.11.







(f)           The Borrower shall liquidate all of its outstanding Hedging Transactions with Cargill, Incorporated and shall take such actions as may be necessary to cause Cargill, Incorporated to pay directly over to the Lender all proceeds of such liquidation for application to the Obligations not later than March 9, 2016.  The Borrower consents and agrees to the Lender’s application of all such proceeds toward the Obligations.







(g)           The representations and warranties of the Borrower, the Guarantors and Lilis contained in this Amendment are true and correct in all material respects on and as of the date of this Amendment.







(h)           The consummation of this Amendment does not contravene, violate, or conflict with any Requirements of Law.







(i)           All matters incident to the consummation of this Amendment are satisfactory to the Lender.







5.           Lilis Actions.  As a material inducement to the Lender’s willingness to enter into this Amendment and extend the Forbearance Period under the terms and conditions set forth herein, by its execution hereof, Lilis agrees to (i) use commercially reasonable efforts to consummate the Lilis Sale on or prior to March 30, 2016 and (ii) fund the reasonable and necessary operating expenses of the Borrower pending the closing of the Lilis Sale in an amount to be agreed upon between Lilis and the Borrower.  The amounts contemplated by clause (ii) preceding and clauses (c) and (e) of paragraph 4 of this Amendment shall be in addition to the principal amount of the Note and the amount of the Lender’s legal fees and expenses incurred in connection herewith which will be included in the total purchase price for the Note and related Liens.  Lilis acknowledges and agrees that the Lender would not be willing to enter into this Amendment but for Lilis’s agreements set forth in this paragraph 5, and that Lilis will derive material benefit from the extended forbearance period provided herein in conjunction with the proposed Lilis Sale and related corporate transactions among Lilis and the Borrower.  Furthermore, Lilis represents and warrants that it is not aware of the basis for any claims by Lilis against any of the Released Parties (defined below).








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6.           No Waiver.  No Forbearance Defaults or other Events of Default are being waived hereby, and all such Forbearance Defaults and other Events of Default which exist on the date of this Amendment shall continue to exist unless waived in writing by the Lender after the date of execution of this Amendment.







7.           Representation and Warranties.







(a)           Each of the Borrower and the Guarantors hereby represents and warrants to the Lender, with the intention that the Lender shall rely thereon without any investigation or verification by the Lender or its counsel, that this Amendment has been duly executed and delivered on behalf of the Borrower and the Guarantors, and that the execution, delivery and performance of this Amendment has been duly authorized by all necessary action on the part of the Borrower and the Guarantors.







(b)           Lilis hereby represents and warrants to the Lender, with the intention that the Lender shall rely thereon without any investigation or verification by the Lender or its counsel, that this Amendment has been duly executed and delivered on behalf Lilis, and that the execution, delivery and performance of this Amendment has been duly authorized by all necessary action on the part of Lilis.







8.           Further Assurances.  The Borrower and the Guarantors hereby agree to execute and deliver any and all documents, instruments and agreements, and to take such other actions, as the Lender may reasonably require to effect the transactions and arrangements contemplated by this Amendment.







9.           Amendments and Waivers.  Any provision of this Amendment may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) by a written instrument signed by each party hereto.  Delivery of an executed counterpart of such written instrument by telecopy, e-mail, facsimile or other electronic means shall be effective delivery of a manually executed counterpart of such written instrument.







10.           Highest Lawful Interest Rate.  Nothing in the Forbearance Agreement, as amended hereby, shall be construed or interpreted to be in violation of Section 9.2 of the Credit Agreement.







11.           Expenses.  The Borrower agrees to pay the expenses of the Lender incurred in connection with the preparation and negotiation of this Amendment in accordance with Section 9.4 of the Credit Agreement.








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12.           Conditions Precedent for the Benefit of Lender.  All of the conditions precedent to the obligations of the Lender set forth in this Amendment are solely for the benefit of the Lender, and no Person other than the Lender may rely thereon or insist on compliance therewith.







13.           GOVERNING LAW.  This Amendment has been negotiated, is being executed and delivered, and will be performed in whole or in part, in the State of Texas.  This Amendment and any litigation between the parties (whether grounded in contract, tort, statute, law or equity) shall be governed by, construed in accordance with, and interpreted and enforced pursuant to the Laws of the State of Texas (and the applicable federal Laws of the United States of America) without giving effect to its choice of law principles.







14.           NO DEFENSES OF BORROWER OR GUARANTORS.  The Borrower and the Guarantors each stipulate, warrant, represent and agree that, as of the date of this Amendment, it has no defenses against its obligations to pay any of the Obligations or to pay its Guaranty, as applicable, or to pay any other amount due and owing to the Lender pursuant to the Loan Documents.  The Borrower and the Guarantors each acknowledge, warrant and agree that the Lender has acted in good faith in all respects as to the Loan Documents and this Amendment, and has conducted in a commercially reasonable manner its relationship with the Borrower and the Guarantors in connection with the Loan Documents and this Amendment, and the Borrower and the Guarantors hereby waive and release any claims to the contrary.







15.           RELEASE OF CLAIMS.  The Borrower and the Guarantors, each for itself, its successors and assigns, and all those at interest therewith (collectively, the “Releasing Parties”), jointly and severally, hereby voluntarily and forever, RELEASE, DISCHARGE AND ACQUIT the Lender and its officers, directors, shareholders, employees, agents, counsel, successors, assigns, representatives, affiliates and insurers (sometimes referred to below collectively as the “Released Parties”) and all those at interest therewith of and from any and all claims, causes of action, liabilities, damages, costs (including, without limitation, attorneys’ fees and all costs of court or other proceedings), and losses of every kind or nature at this time known or unknown, direct or indirect, fixed or contingent, which the Releasing Parties have or hereafter may have arising out of any act, occurrence, transaction or omission occurring from the beginning of time to the date of this Amendment if related to the Note, the Credit Agreement or the other Loan Documents or any actions taken by any of the Released Parties in connection therewith (the “Released Claims”), except the future duties and obligations of the Lender under the Loan Documents and the future rights of the Borrower and the Guarantors to their respective funds on deposit with the Lender shall not be included in the term Released Claims.  IT IS THE EXPRESS INTENT OF THE RELEASING PARTIES THAT THE RELEASED CLAIMS SHALL INCLUDE ANY CLAIMS OR CAUSES OF ACTION ARISING FROM OR ATTRIBUTABLE TO THE NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY OF THE RELEASED PARTIES.







16.           Access to Counsel; Understanding of Terms; No Commitment to Renew.  By execution of this Amendment, each of the Borrower, the Guarantors and Lilis severally (but not jointly) warrants and represents to the Lender that (i) it was represented by (or had the opportunity to be represented by) counsel of its own selection; (ii) it understands the terms of this Amendment; and (iii) there is no commitment of the Lender or any other party for a renewal, extension, or modification of the Credit Agreement, the Note or the Forbearance Agreement in the future on any terms whatsoever.  This Amendment has been reviewed and negotiated by sophisticated parties with access to legal counsel, and no rule of construction shall apply hereto or thereto which would require or allow this Amendment to be construed against any party because of its role in drafting this Amendment.








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17.           Conditions to Effectiveness.  This Amendment shall be effective upon its execution by the Borrower, the Guarantors, the Lender and Lilis and the receipt thereof by the Lender.







18.           Counterparts.  This Amendment may be executed in a number of counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.  Delivery of an executed counterpart of a signature page of this Amendment by telecopy, e-mail, facsimile or other electronic means shall be effective as a delivery of a manually executed counterpart of this Amendment.







19.           Effect.  This Amendment is one of the Loan Documents.  Except as expressly provided hereby, the Credit Agreement, the Forbearance Agreement and the other Loan Documents shall remain unchanged and in full force and effect.







[Signature page follows]








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ENTIRE AGREEMENT.  THE FORBEARANCE AGREEMENT, AS AMENDED BY THIS AMENDMENT, CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF.  FURTHERMORE, IN THIS REGARD, THIS FORBEARANCE AGREEMENT, AS AMENDED BY THIS AMENDMENT,  REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES.







THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.







IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first set forth above.







	 	
BORROWER:


	 	
BRUSHY RESOURCES, INC.


	 	 	 
	 	
By:

	
/s/ Michael J. Pawelek


	 	
Name:

	
Michael J. Pawelek


	 	
Title:

	
Chief Executive Officer


	 	 	 
	 	
GUARANTORS:


	 	
IMPETRO RESOURCES, LLC


	 	 	 
	 	
By:

	
/s/ Michael J. Pawelek


	 	
Name:

	
Michael J. Pawelek


	 	
Title:

	
President and Chief Executive Officer


	 	 	 
	 	
IMPETRO OPERATING, LLC


	 	 	 
	 	
By

	
/s/ Michael J. Pawelek


	 	
Name:

	
Michael J. Pawelek


	 	
Title:

	
Chief Executive Officer










[Signature pages continue]




Signature Page to Brushy Resources, Inc.


Second Amendment to Forbearance Agreement


(Independent Bank)

















	 	
LENDER:


	 	
INDEPENDENT BANK


	 	 	 
	 	
By:

	
/s/ John E. Davis


	 	
Name:

	
John E. Davis


	 	
Title:

	
Executive Vice President










[Signature pages continue]









Signature Page to Brushy Resources, Inc.


Second Amendment to Forbearance Agreement


(Independent Bank)















Executed and agreed for purposes of being bound by the provisions of the foregoing Amendment, including without limitation paragraph 5 thereof:







	 	
LILIS ENERGY, INC.


	 	 	 
	 	
By:

	 
	 	 	
/s/ Abraham Mirman


	 	
Name:

	
Abraham Mirman


	 	
Title:

	
Chief Executive Officer







  



Signature Page to Brushy Resources, Inc.


Second Amendment to Forbearance Agreement


(Independent Bank)