Exhibit 10.21
 
 

AMENDED AND RESTATED CREDIT AGREEMENT
dated as of November 28, 2012
among
Synergy Resources Corporation,
as Borrower,
Community Banks of Colorado, a division of NBH Bank, N.A.,
as Lender and Administrative Agent,
CoBiz Bank, a Colorado corporation, dba Colorado Business Bank, as Lender
and
Amegy Bank National Association, as Lender

 

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TABLE OF CONTENTS
 
 
 
Page
ARTICLE I Definitions and Accounting Matters 
1
 
Section 1.01
Certain Defined Terms
1
 
Section 1.02
Types of Loans and Borrowings
20
 
Section 1.03
Terms Generally; Rules of Construction
20
 
Section 1.04
Accounting Terms and Determinations; GAAP
21
 
 
 
 
ARTICLE II The Credits
21
 
Section 2.01
Commitments
21
 
Section 2.02
Loans and Borrowings
21
 
Section 2.03
Requests for Borrowings
22
 
Section 2.04
Interest Elections; Conversions
23
 
Section 2.05
Funding of Borrowings
25
 
Section 2.06
Termination, Reduction and Increase of Aggregate Maximum Credit Amounts
25
 
Section 2.07
Borrowing Base
27
 
Section 2.08
Letters of Credit
30
 
 
 
 
ARTICLE III Payments of Principal and Interest; Prepayments; Fees
35
 
Section 3.01
Repayment of Loans
35
 
Section 3.02
Interest
35
 
Section 3.03
Alternate Rate of Interest
36
 
Section 3.04
Prepayments
36
 
Section 3.05
Fees
38
 
 
 
 
ARTICLE IV Payments; Pro Rata Treatment; Sharing of Set‑offs
40
 
Section 4.01
Payments Generally; Pro Rata Treatment; Sharing of Set‑offs
40
 
Section 4.02
Presumption of Payment by the Borrower
41
 
Section 4.03
Deductions by the Administrative Agent; Defaulting Lender
41
 
Section 4.04
Disposition of Proceeds
43
 
 
 
 
ARTICLE V Increased Costs; Break Funding Payments; Taxes; Illegality
44
 
Section 5.01
Increased Costs
44
 
Section 5.02
Break Funding Payments
45
 
Section 5.03
Taxes
46
 
Section 5.04
Illegality
47
 
 
 
 
ARTICLE VI Conditions Precedent
47
 
Section 6.01
Effective Date
47
 
Section 6.02
Each Credit Event
50
 
Section 6.03
Additional Conditions to Credit Events
51
 
 
 
 
ARTICLE VII Representations and Warranties
51
 
Section 7.01
Organization; Powers
51
 
Section 7.02
Authority; Enforceability
51
 
 
 
 

 
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Section 7.03
Approvals; No Conflicts
51
 
Section 7.04
Financial Condition; No Material Adverse Change
52
 
Section 7.05
Litigation
52
 
Section 7.06
Environmental Matters
53
 
Section 7.07
Compliance with the Laws and Agreements; No Defaults
54
 
Section 7.08
Investment Company Act
54
 
Section 7.09
Taxes
54
 
Section 7.10
ERISA
55
 
Section 7.11
Disclosure; No Material Misstatements
55
 
Section 7.12
Insurance
56
 
Section 7.13
Restriction on Liens
56
 
Section 7.14
Subsidiaries
56
 
Section 7.15
Location of Business and Offices
56
 
Section 7.16
Properties; Titles, Etc.
57
 
Section 7.17
Maintenance of Properties
57
 
Section 7.18
Gas Imbalances, Prepayments
58
 
Section 7.19
Marketing of Production
58
 
Section 7.20
Hedging Agreements
58
 
Section 7.21
Use of Loans and Letters of Credit
58
 
Section 7.22
Solvency
59
 
Section 7.23
Casualty Events
59
 
Section 7.24
Material Agreements
59
 
Section 7.25
No Brokers
59
 
Section 7.26
Reliance
60
 
Section 7.27
Payments by Purchasers of Production
60
 
Section 7.28
Existing Accounts Payable
60
 
Section 7.29
Foreign Corrupt Practices
60
 
Section 7.30
Money Laundering
61
 
Section 7.31
OFAC
61
 
 
 
 
ARTICLE VIII Affirmative Covenants
61
 
Section 8.01
Financial Statements; Other Information
61
 
Section 8.02
Notices of Material Events
64
 
Section 8.03
Existence; Conduct of Business
65
 
Section 8.04
Payment of Obligations
65
 
Section 8.05
Performance of Obligations under Loan Documents
65
 
Section 8.06
Operation and Maintenance of Properties
65
 
Section 8.07
Insurance
66
 
Section 8.08
Books and Records; Inspection Rights
66
 
Section 8.09
Compliance with Laws
66
 
Section 8.10
Environmental Matters
66
 
Section 8.11
Further Assurances
68
 
Section 8.12
Reserve Reports
68
 
Section 8.13
Title Information
69
 
Section 8.14
Additional Collateral; Additional Guarantors
70
 
Section 8.15
ERISA Compliance 71  
Section 8.16
Marketing Activities 71

 
 
 
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Section 8.17
Hedging Agreements
71
 
Section 8.18
Operating Accounts
71
 
ARTICLE IX Negative Covenants
72
 
Section 9.01
Financial Covenants
72
 
Section 9.02
Debt
72
 
Section 9.03
Liens
73
 
Section 9.04
Dividends and Distributions
73
 
Section 9.05
Investments, Loans and Advances
73
 
Section 9.06
Nature of Business
74
 
Section 9.07
Limitation on Leases
74
 
Section 9.08
Proceeds of Notes
74
 
Section 9.09
ERISA Compliance
75
 
Section 9.10
Mergers, Etc
75
 
Section 9.11
Sale of Properties
75
 
Section 9.12
Environmental Matters
76
 
Section 9.13
Material Agreements
76
 
Section 9.14
Transactions with Affiliates
77
 
Section 9.15
Subsidiaries
77
 
Section 9.16
Negative Pledge Agreements
77
 
Section 9.17
Gas Imbalances, Take‑or‑Pay or Other Prepayments
77
 
Section 9.18
Hedging Agreements
77
 
Section 9.19
Sale and Leasebacks
78
 
Section 9.20
Amendments to Organizational Documents
78
 
 
 
 
ARTICLE X Events of Default; Remedies
78
 
Section 10.01
Events of Default
78
 
Section 10.02
Remedies
80
 
Section 10.03
Limitation on Rights and Waivers
81
 
 
 
 
ARTICLE XI The Administrative Agent
81
 
Section 11.01
Appointment; Powers
81
 
Section 11.02
Duties and Obligations of Administrative Agent
81
 
Section 11.03
Action by Administrative Agent
82
 
Section 11.04
Reliance by Administrative Agent
83
 
Section 11.05
Subagents
83
 
Section 11.06
Resignation or Removal of Administrative Agent
83
 
Section 11.07
Administrative Agent as Lender
84
 
Section 11.08
No Reliance
84
 
Section 11.09
Administrative Agent May File Proofs of Claim
84
 
Section 11.10
Authority of Administrative Agent to Release Collateral and Liens
85
 
 
 
 
ARTICLE XII Miscellaneous
85
 
Section 12.01
Notices
85
  Section 12.02 Waivers; Amendments 86
 
Section 12.03
Expenses, Indemnity; Damage Waiver
87

 
 
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Section 12.04
Successors and Assigns
90
 
Section 12.05
Survival; Revival; Reinstatement
93
 
Section 12.06
Counterparts; Integration; Effectiveness
94
 
Section 12.07
Severability
94
 
Section 12.08
Right of Setoff
95
 
Section 12.09
Governing Law; Jurisdiction; Consent to Service of Process
95
 
Section 12.10
Headings
96
 
Section 12.11
Confidentiality
96
 
Section 12.12
Interest Rate Limitation
97
 
Section 12.13
Exculpation Provisions
98
 
Section 12.14
Collateral Matters; Hedging Agreements
98
 
Section 12.15
No Third Party Beneficiaries
98
 
Section 12.16
USA Patriot Act Notice
98
 
Section 12.17
Existing Credit Agreement
99
 
 
 
 
 
 
 
 
 

 
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ANNEXES, EXHIBITS AND SCHEDULES
Annex I 
List of Maximum Credit Amounts
 
 
 
 
 
 
Exhibit A
Form of Note
 
 
Exhibit B
Form of Borrowing Request
 
 
Exhibit C
Form of Interest Election Request
 
 
Exhibit D
Form of Compliance Certificate
 
 
Exhibit E
Security Instruments
 
 
Exhibit F
Form of Assignment and Assumption
 
 
Exhibit G
Form of Hedging Agreement Certificate
 
 
Exhibit H
Form of Reserve Report Certificate
 
 
Exhibit I
List of Mortgaged Properties
 
 
Exhibit J
Form of Guaranty Agreement
 
 
 
 
 
 
Schedule 7.05 
Litigation
 
 
Schedule 7.18
Gas Imbalances
 
 
Schedule 7.19
Marketing Agreements
 
 
Schedule 7.20
Hedging Agreements
 
 
Schedule 7.24
Material Agreements
 
 
Schedule 7.28
Existing Accounts Payable
 
 

 
                               
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AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement, dated as of November 28, 2012, is
made and entered into by and among Synergy Resources Corporation, a Colorado
corporation (the “Borrower”), each of the Lenders from time to time party
hereto, and Community Banks of Colorado, a division of NBH Bank, N.A.,
individually, as Issuing Lender and as administrative agent for the Lenders (in
such capacity, together with its successors in such capacity, the
“Administrative Agent”).
R E C I T A L S
A.            The Borrower and the Administrative Agent, formally known as Bank
of Choice, a division of Bank Midwest, N.A., entered into that certain Loan
Agreement effective November 30, 2011 (as amended before the date of this
Agreement, the “Existing Credit Agreement”) pursuant to which the Administrative
Agent, in its capacity as lender, provided the Borrower with a revolving credit
facility.
B.            The Borrower has requested certain amendments to the Existing
Credit Agreement which include, among other things, appointing the
Administrative Agent as administrative agent and the addition of other lenders.
C.            The Lenders have agreed to amend and restate in its entirety the
Existing Credit Agreement on the terms and conditions set forth herein, to renew
and rearrange the indebtedness outstanding under the Existing Credit Agreement
(but not to repay or pay off any such indebtedness) and to adjust their pro rata
shares.
B.            In consideration of the mutual covenants and agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I  
Definitions and Accounting Matters
Section 1.01    Certain Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:
 
                       “ABR”, when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
“Administration Fee” has the meaning assigned such term in Section 3.05(d).
“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to the sum of (a) the product of (i) the LIBO Rate
for such Interest Period, multiplied by (ii) the Statutory Reserve Rate.
“Affected Loans” has the meaning assigned such term in Section 5.04.
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
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“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06.
“Agreement” means this Amended and Restated Credit Agreement, as the same may
from time to time be amended, modified, supplemented or restated.
“Alternate Base Rate” means the Prime Rate in effect on such day.
“Applicable Margin” means, for any day, the rate per annum set forth in the
Utilization Grid below based upon the Type of Loan or Borrowing and the
Borrowing Base Utilization Percentage then in effect, subject to a minimum
interest rate floor of 2.5% per annum:
Borrowing Base Utilization
LIBOR Margin
ABR
Margin
≥ 90%
325 bps
100 bps
≥ 75% and < 90%
300 bps
75 bps
≥ 50% and < 75%
275 bps
50 bps
≥ 25% and < 50%
250 bps
25 bps
< 25%
250 bps
0 bps

 
“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I.
 “Approved Counterparty”  means (a) any Lender or any Affiliate of a Lender, or
(b) any other Person whose long term senior unsecured debt rating at the time of
entry into the applicable Hedging Agreement is A-/A3 by S&P or Moody’s (or their
equivalent) or higher.
 
“Approved Petroleum Engineers” means Ryder Scott Company or any independent
petroleum engineering consulting company reasonably acceptable to the Required
Lenders.
“Arrangement Fee” has the meaning assigned such term in Section 3.05(d).
“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(a)), and accepted by the Administrative Agent, in the form of
Exhibit F or any other form approved by the Administrative Agent.
“Availability Period” means the period from and including the Effective Date to
but excluding the Termination Date.
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 “Board” means the Board of Governors of the Federal Reserve System of the
United States of America or any successor Governmental Authority.
“Borrowing” means Loans of the same Type, made, converted or continued on the
same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect.
“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 2.07(f), Section 8.13(c) or Section 9.11(d).
“Borrowing Base Deficiency” occurs if at any time the total Revolving Credit
Exposures exceeds the Borrowing Base then in effect.
“Borrowing Base Hedging Agreement” means any Hedging Agreement in respect of
commodities that was in effect at the time of the most recent Borrowing Base
determination.
“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures of the Lenders on such day, and the denominator of which is the
Borrowing Base on such day, regardless of the Aggregate Maximum Credit Amounts.
“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Colorado are authorized or required by law to remain
closed; and if such day relates to a Borrowing or continuation of, a payment or
prepayment of principal of or interest on, or a conversion of or into, or the
Interest Period for, a Eurodollar Loan or a notice by the Borrower with respect
to any such Borrowing or continuation, payment, prepayment, conversion or
Interest Period, any day which is also a day on which banks are open for
dealings in dollar deposits in the London interbank market.
“Capital Expenditures” means, in respect of any Person, for any period, the
aggregate (determined without duplication) of all exploration and development
expenditures and costs that should be capitalized in accordance with GAAP and
any other expenditures that are capitalized on the balance sheet of such Person
in accordance with GAAP.
“Capital Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital leases
on the balance sheet of the Person liable (whether contingent or otherwise) for
the payment of rent thereunder.
“Cash Collateral” has the meaning assigned such term in Section 2.08(i).
“Cash Collateralize” means to pledge and deposit with or deliver to the
Administrative Agent (as a first‑priority, perfected security interest), for the
benefit of the Issuing Banks and the Lenders, cash in dollars, at a location and
pursuant to documentation in form and substance satisfactory to the
Administrative Agent.  “Cash Collateralized” has a correlative meaning.
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“Cash Receipts” means all cash or cash equivalents received by or on behalf of
the Borrower and its Subsidiaries with respect to the following: (a) sales from
the Oil and Gas Properties (including any other working interest owner receipts
received by the Borrower or its Affiliates as operator of Oil and Gas
Properties), (b) cash representing operating revenue earned or to be earned by
the Borrower and its Subsidiaries, (c) any insurance proceeds received by the
Borrower or its Subsidiaries, (d) any net proceeds from Hedging Agreements and
(e) any other cash or cash equivalents received by the Borrower from whatever
source; provided that advances under the Loans, and any capital contributions or
transfers made to the Borrower by any of its shareholders, or by the Borrower to
any of its Subsidiaries, shall not constitute “Cash Receipts”.
“Casualty Event” means any loss, casualty or other insured damage to any
Property of the Borrower or any of its Subsidiaries in an amount greater than
two and one-half percent (2.5%) of the Borrowing Base then in effect, or any
taking under power of eminent domain or by condemnation or similar proceeding
of, any Property of the Borrower or any of its Subsidiaries having a fair market
value in excess of two and one-half percent (2.5%) of the Borrowing Base then in
effect.
“Change in Control” means the occurrence of the following events:  (a) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Securities Exchange Act of 1934
and the rules of the SEC thereunder as in effect on the date hereof) of Equity
Interests so that such Person or group owns 50% or more of the aggregate
ordinary voting power represented by the issued and outstanding Equity Interests
of the Borrower, or (b) occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Borrower by Persons who were neither (i)
nominated by the board of directors of the Borrower nor (ii) appointed by
directors so nominated.
“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement by any Governmental Authority, (b) any change in any law,
rule or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by any
Lender or any Issuing Bank (or, for purposes of Section 5.01(b)), by such
Lender’s or Issuing Bank’s holding company, if any) with any request, guideline
or directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Agreement; provided that
notwithstanding anything herein to the contrary (i) the Dodd‑Frank Wall Street
Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (ii) all requests,
rules, guidelines or directives concerning capital adequacy promulgated by the
Bank for International Settlements, the Basel Committee on Banking Regulations
and Supervisory Practices (or any successor similar authority) or the United
States financial regulatory authorities, in each case pursuant to Basel III,
shall be deemed to be a “Change in Law”, regardless of the date enacted,
adopted, promulgated or issued.
“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.
“Collateral Account” has the meaning assigned such term in Section 2.08(i).
4

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“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s potential Revolving Credit Exposure hereunder, as such commitment may
be (a) modified from time to time pursuant to Section 2.06 and (b) modified from
time to time pursuant to assignments by or to such Lender pursuant to Section
12.04.  The amount representing each Lender’s Commitment shall at any time be
the lesser of such Lender’s Maximum Credit Amount and such Lender’s Applicable
Percentage of the then effective Borrowing Base.
“Commitment Reduction Notice” has the meaning assigned such term in Section
2.07(d).
 “Consolidated Net Income” means with respect to the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and the Consolidated Subsidiaries after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (a) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and the Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in cash during such period by such other Person to
the Borrower or to a Consolidated Subsidiary, as the case may be; (b) the net
income (but not loss) during such period of any Consolidated Subsidiary to the
extent that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted
by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary or is
otherwise restricted or prohibited, in each case determined in accordance with
GAAP; (c) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (d) any extraordinary gains or losses during such period; (e) the
cumulative effect of a change in accounting principles and any gains or losses
attributable to writeups or writedowns of assets; (f) any writeups or writedowns
of non-current assets; and (g) non-cash gain and loss under ASC 815. If the
Borrower or any of its Consolidated Subsidiaries have consummated an acquisition
or disposition during such period, Consolidated Net Income shall be determined
on a pro forma basis as if such acquisition or disposition had occurred on the
first day of such period; provided that such pro forma adjustments shall be
reasonably acceptable to the Administrative Agent.
 
 “Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now
existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.
 
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.  For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person.  “Controlling” and
“Controlled” have meanings correlative thereto.
5

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“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services that are
more than sixty (60) days past the due date other than those which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) all obligations of such Person
under Capital Leases; (e) all obligations of such Person under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the lesser of the
amount of such Debt and the maximum stated amount of such guarantee or assurance
against loss; (h) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or to
purchase the Debt or Property of others; (i) all obligations of such Person to
deliver commodities, goods or services, including Hydrocarbons, in consideration
of one or more advance payments, other than gas balancing arrangements in the
ordinary course of business; (j) any Debt of a partnership for which such Person
is liable either by agreement, by operation of law or by a Governmental
Requirement but only to the extent of such liability; (k) any Disqualified
Capital Stock issued by such Person; and (l) the undischarged balance of any
production payment created by such Person or for the creation of which such
Person received payment.  The Debt of any Person shall include all obligations
of such Person of the character described above to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is not included as a liability of such Person under GAAP.
“Default” means any event or condition which constitutes an Event of Default or
that upon notice, lapse of time or both would, unless cured or waived, become an
Event of Default.
“Defaulting Lender” means, at any time, a Lender as to which the Administrative
Agent has notified the Borrower that such Lender, as reasonably determined by
the Administrative Agent, has (a) failed to fund any portion of its Loans or
participations in Letters of Credit within three Business Days of the date
required to be funded by it hereunder (other than due to a failure of a
condition precedent to be satisfied), (b) notified the Borrower, the
Administrative Agent, any Issuing Bank or any Lender in writing that it does not
intend to comply with its funding obligations under this Agreement or has made a
public statement to the effect that it does not intend to comply with its
funding obligations under this Agreement or under any other agreement in which
it commits to extend credit (other than due to a failure of a condition
precedent to be satisfied), (c) failed, within three (3) Business Days after
request by the Administrative Agent, to confirm that it will comply with the
terms of this Agreement relating to its obligations to fund prospective Loans
and participations in then outstanding Letters of Credit (but such Lender shall
cease to be a Defaulting Lender upon providing this confirmation), (d) otherwise
failed to pay over to the Administrative Agent, any Issuing Bank or any Lender
any other amount required to be paid by it hereunder within three Business Days
of the date when due, unless the subject of a good faith dispute, (e) become or
is insolvent or has a parent company that has become or is insolvent, or (f)
become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.
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“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Termination Date and (b) the date on which there are no Loans, LC
Exposure or other obligations hereunder outstanding and all of the Commitments
are terminated.
“Dollars” or “$” refers to lawful money of the United States of America.
“EBITDAX” means, as of any date of determination, the sum of the Consolidated
Net Income for the four fiscal quarters ending on the last day of the most
recently completed fiscal quarter on or prior to such date of determination
plus (a) the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes, depreciation,
depletion, amortization (including amortization of deferred loan costs),
exploration expenditures and costs, unrealized losses on any Hedging Agreement,
accretion expense associated with asset retirement obligations and other similar
noncash charges, minus (b) without duplication and to the extent added to
Consolidated Net Income in such period: income tax benefits, unrealized gains on
Hedging Agreements, and gains on sales of assets.
“Effective Date” means the later of (i) date on which the conditions specified
in Section 6.01 are satisfied (or waived in accordance with Section 12.02) or
(ii) November 30, 2012.
“Eligible Assignee” means any Person that meets the requirements to be an
assignee under Section 12.04.
“Eligible Lender” means (a) a financial institution organized under the laws of
the United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000; or (b) a Person controlled by, controlling, or
under common control with any entity identified in clause (a) above.
“Engineering Reports” has the meaning assigned such term in Section 2.07(c).
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“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety, the environment, the preservation or reclamation of
natural resources, or the management, Release or threatened Release of any
Hazardous Materials, in effect in any and all jurisdictions in which the
Borrower or any Subsidiary is conducting, or at any time has conducted,
business, or where any Property of the Borrower or any Subsidiary is located,
including the Oil Pollution Act of 1990, as amended, the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and Liability
Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Law, as amended, and other environmental
conservation or protection Governmental Requirements.
“Environmental Permit” means any permit, registration, license, notice,
approval, consent, exemption, variance, or other authorization required under or
issued pursuant to applicable Environmental Laws.
“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute, and all regulations and guidance promulgated
thereunder.
“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Borrower or a Subsidiary would be deemed to be a “single
employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b),
(c), (m) or (o) of section 414 of the Code.
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.
“Event of Default” has the meaning assigned such term in Section 10.01.
“Excepted Liens” means:  (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other
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social security, old age pension or public liability obligations which are not
delinquent or which are being contested in good faith by appropriate action and
for which adequate reserves have been maintained in accordance with GAAP; (c)
statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s,
repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or
other like Liens arising by operation of law in the ordinary course of business
or incident to the exploration, development, operation and maintenance of Oil
and Gas Properties each of which is in respect of obligations that are not
delinquent or which are being contested in good faith by appropriate action and
for which adequate reserves have been maintained in accordance with GAAP; (d)
contractual Liens which arise in the ordinary course of business under operating
agreements, joint venture agreements, oil and gas partnership agreements, oil
and gas leases, farm‑out agreements, division orders, contracts for the sale,
transportation or exchange of oil and natural gas, unitization and pooling
declarations and agreements, area of mutual interest agreements, royalty
agreements, overriding royalty agreements, marketing agreements, processing
agreements, net profits agreements, development agreements, gas balancing or
deferred production agreements, injection, repressuring and recycling
agreements, salt water or other disposal agreements, seismic or other
geophysical permits or agreements and other agreements which are usual and
customary in the oil and gas business and are for claims which are not
delinquent or which are being contested in good faith by appropriate action and
for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Subsidiary or materially impair the
value of such Property subject thereto; (e) Liens arising solely by virtue of
any statutory or common law provision relating to banker’s liens, rights of
set‑off or similar rights and remedies and burdening only deposit accounts or
other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by
the Borrower or any of its Subsidiaries to provide collateral to the depository
institution; (f) easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, and Liens related
to surface leases and surface operations, that do not secure any monetary
obligations and which in the aggregate do not materially impair the use of such
Property for the purposes of which such Property is held by the Borrower or any
Subsidiary or materially impair the value of such Property subject thereto; (g)
Liens on cash or securities pledged to secure performance of tenders, surety and
appeal bonds, government contracts, performance and return of money bonds, bids,
trade contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business and (h)
judgment and attachment Liens not giving rise to an Event of Default, provided
that any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall not have expired and no
action to enforce such Lien has been commenced; provided, further that Liens
described in clauses (a) through (e) shall remain “Excepted Liens” only for so
long as no action to enforce such Lien has been commenced and no intention to
subordinate the first priority Lien granted in favor of the Administrative Agent
and the Lenders is to be hereby implied or expressed by the permitted existence
of such Excepted Liens.
 
“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder or under any other Loan
Document, (a) income taxes or franchise taxes (imposed in lieu of net income
taxes), by the United States of America or such other jurisdiction (or any
political subdivision) under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which
its applicable lending office is located, (b) any branch profits taxes imposed
by the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower is located, (c) in the case of a Foreign
Lender, any withholding tax that is imposed by the United States of America on
amounts payable to such Foreign Lender and (d) any U.S. Federal withholding
taxes imposed by FATCA.
 
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“Existing Credit Agreement” has the meaning assigned such term in the Recitals
to this Agreement.
“FATCA” means Sections 1471 through 1474 of the Code (or any amended or
successor version that is substantively comparable) and any current or future
regulations or official interpretations thereof.
“FCPA” means the U.S. Foreign Corrupt Practices Act of 1977, as amended.
“Federal Funds Effective Rate” means, for any day, an interest rate per annum
equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day by the Federal Reserve Bank of New
York, or if such rate is not so published for such day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it.
“Fee Letter” means that letter agreement dated October 11, 2012, by and between
the Borrower and the Administrative Agent, related to, among other things, the
payment of certain fees by the Borrower.
“Financial Officer” means, for any Person, the chief financial officer,
principal accounting officer, treasurer, manager or controller of such Person. 
Unless otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.
“Financial Statements” means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).
“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located.  For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.04.
“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.
“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, rules of common law, authorization or other
directive or requirement, whether now or hereinafter in effect, of any
Governmental Authority.
 
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“Guarantors” means any Subsidiary of the Borrower that guarantees the
Indebtedness.
“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law, including:  (a) any
chemical, compound, material, product, byproduct, substance or waste defined as
or included in the definition or meaning of “hazardous substance,” “hazardous
material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous
substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar
meaning or import found in any applicable Environmental Law; (b) Hydrocarbons,
petroleum products, petroleum substances, natural gas, oil, oil and gas waste,
crude oil, and any components, fractions, or derivatives thereof; and (c)
radioactive materials, explosives, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon, infectious or medical wastes.
“Hedging Agreement” means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement, whether
exchange traded, “over‑the‑counter” or otherwise, involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the
Subsidiaries shall be a Hedging Agreement.
“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.
“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.
“Increase Effective Date” has the meaning assigned such term in Section
2.06(c)(ii).
“Indebtedness” means any and all amounts owing or to be owing by the Borrower or
any Guarantor (whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising):  (a) to the Administrative Agent, any Issuing Bank, any
Lender or any Affiliate of a Lender, or any Secured Hedging Counterparty under
any Loan Document; and (b) all renewals, extensions and/or rearrangements of any
of the above; provided that solely with respect to any Guarantor that is not an
“eligible contract participant” under the Commodity Exchange Act, Excluded Swap
Obligations of such Guarantor shall in any event be excluded from “Indebtedness”
owing by such Guarantor.
 
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“Indemnified Taxes” means Taxes other than Excluded Taxes.
“Indemnitee” has the meaning set forth in Section 12.03.
“Initial Commitment” the aggregate Commitment made by Lenders as of the
Effective Date, as set forth in Annex I to this Agreement.
“Initial Reserve Report” means the report dated as of November 2, 2012, and
referencing an effective date of August 31, 2012, prepared by Ryder Scott
Company, with respect to certain Oil and Gas Properties of the Borrower.
“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.04.
“Interest Payment Date” means (a) with respect to any ABR Loan the last day of
each calendar quarter or, if sooner, the Termination Date and (b) with respect
to any Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part.
“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is thirty, sixty or ninety days
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
pertaining to a Eurodollar Borrowing that commences on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period.  For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.
“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).
“Interim Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to an Interim Redetermination becomes effective as
provided in Section 2.07(c).
“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person, the contribution of capital to any other Person or any agreement to make
any such acquisition (including any “short sale” or any sale of any securities
at a time when such securities are not owned by the Person entering into such
short sale) or capital contribution; (b) the making of any deposit with, or
advance, loan or capital contribution to, assumption of Debt of, purchase or
other acquisition of any other Debt or equity participation or interest in, or
other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such Property to such Person, but excluding
any such advance, loan or extension of credit having a term not exceeding ninety
(90) days representing the purchase price of inventory or supplies sold by such
Person in the ordinary course of business); (c) the purchase or acquisition (in
one or a series of transactions) of Property of another Person that constitutes
a business unit or (d) the entering into of any guarantee of, or other
contingent obligation (including the deposit of any Equity Interests to be sold)
with respect to, Debt or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person.
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“Issuing Bank” means Community Banks of Colorado, in its capacity as the issuer
of Letters of Credit and, from time to time as determined by the Administrative
Agent, any Lender that agrees to act as an Issuing Bank hereunder.  The Issuing
Bank may, in its discretion, arrange for one or more Letters of Credit to be
issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank”
shall include any such Affiliate with respect to Letters of Credit issued by
such Affiliate.
“LC Commitment” at any time means an amount equal to the lesser of (i) ten
percent (10%) of the lesser of (A) the aggregate Commitments of the Lenders or
(B) the Borrowing Base, and (ii) $15,00,000.
“LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter
of Credit issued by such Issuing Bank.
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time.  The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.
“Lenders” means the Persons listed on Annex I and any Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.
“Letter of Credit” means any letter of credit issued pursuant to this Agreement.
“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with any Issuing
Bank relating to any Letter of Credit.
“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate of interest per annum, expressed on the basis of a year of 360
days, determined by the Administrative Agent, which is equal to the offered rate
that appears on the on the relevant page of the Bloomberg Financial Market
Information System (or any other information service selected by the
Administrative Agent) that displays an average British Bankers Association
Interest Settlement Rate for deposits in dollars with a term equivalent to such
Interest Period, determined as of approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of such Interest Period.
 
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“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including (a) the lien or security interest
arising from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes
or (b) production payments and the like payable out of Oil and Gas Properties. 
The term “Lien” shall include easements, restrictions, servitudes, permits,
conditions, covenants, encroachments, exceptions or reservations.  For purposes
of this Agreement, the Borrower and its Subsidiaries shall be deemed to be the
owner of any Property which it has acquired or holds subject to a conditional
sale agreement, or leases under a financing lease or other arrangement pursuant
to which title to the Property has been retained by or vested in some other
Person in a transaction intended to create a financing.
“Loan Documents” means this Agreement, the Notes, the Fee Letter, any Secured
Hedging Agreement, the Letter of Credit Agreements, the Letters of Credit and
the Security Instruments.
“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.
“Material Adverse Effect” means a material adverse change in, or material
adverse effect on (a) the business, operations, Property condition (financial or
otherwise) or prospects of the Borrower and any of its Subsidiaries taken as a
whole, (b) the ability of the Borrower, any Subsidiary or any Guarantor to
perform any of its obligations under any Loan Document to which it is a party,
(c) the validity or enforceability of any Loan Document or (d) the rights and
remedies of or benefits available to the Administrative Agent, any Issuing Bank
or any Lender under any Loan Document.
“Material Agreements” has the meaning assigned such term in Section 7.24.
“Material Debt” means Debt (other than the Loans and Letters of Credit), or
obligations in respect of one or more Hedging Agreements, of the Borrower and
its Subsidiaries in an aggregate principal amount exceeding $200,000.  For
purposes of determining Material Debt, the “principal amount” of the obligations
of the Borrower or any Subsidiary in respect of any Hedging Agreement at any
time shall be the maximum aggregate amount (giving effect to any legally
enforceable netting agreements) that the Borrower would be required to pay if
such Hedging Agreement were terminated at such time.
“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Maximum Credit Amount”, as the
same may be (a) terminated in accordance with Section 2.06(b), (b) reduced from
time to time in Commitment Reduction Notice pursuant to Section 2.06(b), (c)
increased from time in connection with an increase of any Lender’s Maximum
Credit Amount pursuant to Section 2.06(c), or (d) modified from time to time
pursuant to any assignment permitted by Section 12.04.
“Money Laundering Laws” means the laws, rules and regulations created pursuant
to the Money Laundering Control Act of 1986.
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“Mortgaged Property” means any Property owned by Borrower which is subject to
the Liens existing and to exist under the terms of the Security Instruments.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that
is a nationally recognized rating agency.
“New Borrowing Base Notice” has the meaning assigned such term in Section
2.07(e).
“Non‑Defaulting Lender” means, at any time, each Lender that is not a Defaulting
Lender at such time.
“Notes” means the promissory notes of the Borrower described in Section 2.02(d)
and being substantially in the form of Exhibit A, together with all amendments,
modifications, replacements, extensions and rearrangements thereof.
“NPV” means, with respect to any Proved Reserves, the present value ascribed to
such Proved Reserves (taking into account the cash flows and expenses, including
capital expenditures, associated therewith) in the most recent Reserve Report,
based upon the economic assumptions (including the discount rate) provided to
the Approved Petroleum Engineers by the Administrative Agent.
“OFAC” means the U.S. Treasury Department Office of Foreign Assets Control.
“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including all units created under orders,
regulations and rules of any Governmental Authority) which may affect all or any
portion of the Hydrocarbon Interests; (d) all operating agreements, contracts
and other agreements, including production sharing contracts and agreements,
which relate to any of the Hydrocarbon Interests or the production, sale,
purchase, exchange or processing of Hydrocarbons from or attributable to such
Hydrocarbon Interests; (e) all Hydrocarbons in and under and which may be
produced and saved or attributable to the Hydrocarbon Interests, including all
oil in tanks, and all rents, issues, profits, proceeds, products, revenues and
other incomes from or attributable to the Hydrocarbon Interests; (f) all
tenements, hereditaments, appurtenances and Properties in any manner
appertaining, belonging, affixed or incidental to the Hydrocarbon Interests and
(g) all Properties, rights, titles, interests and estates described or referred
to above, including any and all Property, real or personal, now owned or
hereafter acquired and situated upon, used, held for use or useful in connection
with the operating, working or development of any of such Hydrocarbon Interests
or Property (excluding drilling rigs, automotive equipment, rental equipment or
other personal Property which may be on such premises for the purpose of
drilling a well or for other similar temporary uses) and including any and all
oil wells, gas wells, injection wells or other wells, buildings, structures,
fuel separators, liquid extraction plants, plant compressors, pumps, pumping
units, field gathering systems, tanks and tank batteries, fixtures, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, towers, casing, tubing and rods,
surface leases, rights‑of‑way, easements and servitudes together with all
additions, substitutions, replacements, accessions and attachments to any and
all of the foregoing.
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“Organizational Documents” means, with respect to any Person, (a) in the case of
any corporation, the articles or certificate of incorporation and by‑laws (or
similar documents) of such Person, (b) in the case of any limited liability
company, the certificate of formation and limited liability company agreement
(or similar documents) of such Person, (c) in the case of any limited
partnership, the certificate of formation and limited partnership agreement (or
similar documents) of such Person, (d) in the case of any general partnership,
the partnership agreement (or similar document) of such Person and (e) in any
other case, the functional equivalent of the foregoing.
“Orr Acquisition” shall mean the acquisition of certain oil and gas properties
of Orr Energy, LLC by the Borrower pursuant to that Purchase and Sale Agreement,
dated October 23, 2012, by and between such parties.
“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement and any other Loan Document, except
Excluded Taxes.
“Participant” has the meaning set forth in Section 12.04(c).
“Patriot Act” has the meaning assigned such term in Section 12.16.
“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which (a) is currently or hereafter sponsored, maintained or contributed
to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at any time
during the six calendar years preceding the date hereof, sponsored, maintained
or contributed to by the Borrower or a Subsidiary or an ERISA Affiliate.
“Post Default Rate” shall mean, in respect of the principal of any Loan or any
other amount payable by the Borrower under this Agreement or any other Loan
Document, a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to the Alternate Base Rate plus: 
(i) the Applicable Margin and (ii) two percent (2.0%) per annum, but in no event
to exceed the Highest Lawful Rate.
“Prime Rate” means the base rate on corporate loans posted by at least seventy
percent (70%) of the ten (10) largest US. banks as reported by the Eastern print
edition of the Wall Street Journal®.
“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including cash, securities,
accounts and contract rights.
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“Proposed Borrowing Base” has the meaning assigned to such term in Section
2.07(c)(i)(A).
“Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 2.07(c)(iii).
“Proved Reserves” means “Proved Reserves” as defined in the Definitions for Oil
and Gas Reserves (in this paragraph, the “Definitions”) promulgated by the
Society of Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question.  “Proved Developed Producing Reserves” means
Proved Reserves which are categorized as both “Developed” and “Producing” in the
Definitions, “Proved Developed Nonproducing Reserves” means Proved Reserves
which are categorized as both “Developed” and “Nonproducing” in the Definitions,
“Proved Developed Reserves” means collectively the Proved Developed Producing
Reserves and Proved Developed Nonproducing Reserves, and “Proved Undeveloped
Reserves” means Proved Reserves which are categorized as “Undeveloped” in the
Definitions.
“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt.  “Redeem” has the correlative meaning thereto.
“Regulation D” means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.
“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors (including attorneys, accountants and experts) of such Person and such
Person’s Affiliates.
“Release” means any depositing, spillings, leaking, pumping, pouring, placing,
emitting, discarding, abandoning, emptying, discharging, migrating, injecting,
escaping, leaching, dumping, or disposing.
“Remedial Work” has the meaning assigned such term in Section 8.10(a).
“Required Lenders”  means Lenders holding, in the aggregate, at least sixty-six
and two-thirds percent (66 2/3%) of the outstanding Revolving Credit Exposure,
unless there is no outstanding Credit Exposure at such time, and in such case,
then Lenders holding, in the aggregate, at least sixty-six and two-thirds
percent (66 2/3%) of the existing Commitments at such time.
“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each August 31 or February 28
(or such other date in the event of an Interim Redetermination) the oil and gas
reserves attributable to the Oil and Gas Properties of the Borrower and its
Subsidiaries, together with a projection of the rate of production and future
net income, taxes, operating expenses and Capital Expenditures with respect
thereto as of such date, based upon economic assumptions established by the
Administrative Agent and reflecting Hedging Agreements in place with respect to
such production.
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“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer, any Vice President or any Manager of such
Person.  Unless otherwise specified, all references to a Responsible Officer
herein shall mean a Responsible Officer of the Borrower.
“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in the
Borrower or any of its Subsidiaries, or any payment (whether in cash, securities
or other Property), including any return of capital, sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interests in the Borrower or any
of its Subsidiaries or any option, warrant or other right to acquire any such
Equity Interests in the Borrower or any of its Subsidiaries.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Loans and its LC
Exposure at such time.
“Scheduled Redetermination” has the meaning assigned such term in Section
2.07(b).
“Scheduled Redetermination Date” means the date on which a Borrowing Base that
has been redetermined pursuant to a Scheduled Redetermination becomes effective
as provided in Section 2.07(c)(iii)(B).
“SEC” means the U.S. Securities and Exchange Commission or any successor
Governmental Authority.
“Security Instruments” means the mortgages, deeds of trust and other agreements,
instruments or certificates described or referred to in Exhibit E, and any and
all other agreements, guarantees, instruments, consents or certificates now or
hereafter executed and delivered by the Borrower or any other Person (other than
Hedging Agreements with Secured Hedging Counterparties with respect to any
Indebtedness pursuant to this Agreement) in connection with, or as security for
the payment or performance of the Indebtedness, the Notes, if any, this
Agreement, or reimbursement obligations under the Letters of Credit, as such
agreements may be amended, modified, supplemented or restated from time to time.
“Secured Hedging Agreement” means any Hedging Agreement of the Borrower or any
Subsidiary with a Secured Hedging Counterparty.
“Secured Hedging Counterparty” means any Approved Counterparty that is party to
a Hedging Agreement with the Borrower or any Subsidiary, whether or not such
Person at any time ceases to be an Approved Counterparty; provided, however,
that in the case of any Approved Counterparty who is not a Lender, such Approved
Counterparty shall have entered into an intercreditor or similar agreement with
the Lenders, which agreement shall be in form and substance acceptable to the
Required Lenders.
“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw‑Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.
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“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve
percentages shall include those imposed pursuant to such Regulation D. 
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation.  The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
“Subsidiary” means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors or managers or other governing
body of such Person (irrespective of whether or not at the time Equity Interests
of any other class or classes of such Person shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner.  Unless otherwise indicated herein, each reference to the term
“Subsidiary” shall mean a Subsidiary of the Borrower.
“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.
“Tangible Net Worth” means the total assets of the Borrower less the total
liabilities and intangible assets of the Borrower and any amounts attributable
to promissory notes or other obligations of any employee or Affiliate of the
Borrower due or owing to the Borrower, all as determined in accordance with
GAAP.
“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
“Termination Date” means the earlier to occur of (i) November 28, 2016 or (ii)
the date that the Aggregate Maximum Credit Amount is sooner terminated pursuant
to Section 2.06 or Section 10.02.
“Total Funded Debt” means, at any date, all Debt of the Borrower and the
Consolidated Subsidiaries on a consolidated basis, excluding (a) non-cash
obligations under ASC 815, and (b) accounts payable and other accrued
liabilities (for the deferred purchase price of Property or services) from time
to time incurred in the ordinary course of business which are not greater than
sixty (60) days past the date of invoice or delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP.
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“Total Capitalization” means the Total Funded Debt plus Shareholders’ Equity (as
determined in accorandance with GAAP).
“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement, and each other Loan Document
to which it is a party, the borrowing of Loans, the use of the proceeds thereof
and the issuance of Letters of Credit hereunder, and the grant of Liens by the
Borrower on Mortgaged Properties and other Properties pursuant to the Security
Instruments, and (b) each Guarantor, the execution, delivery and performance by
such Guarantor of each Loan Document to which it is a party, the guaranteeing of
the Indebtedness and the other obligations under the Guaranty Agreement by such
Guarantor and such Guarantor’s grant of the security interests and provision of
collateral under the Security Instruments, and the grant of Liens by such
Guarantor on Mortgaged Properties and other Properties pursuant to the Security
Instruments.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Alternate Base Rate, the Adjusted LIBO Rate based
upon a 30-day Interest Period, the Adjusted LIBO Rate based upon a 60-day
Interest Period or the Adjusted LIBO Rate based upon a 90-day Interest Period.
“Unwinds” has the meaning assigned such term in Section 2.07(f)(i).
Section 1.02                          Types of Loans and Borrowings.  For
purposes of this Agreement, Loans and Borrowings, respectively, may be
classified and referred to by Type (e.g., a “Eurodollar Loan” or a “Eurodollar
Borrowing”).
 
Section 1.03                          Terms Generally; Rules of Construction. 
The definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.  The words
“include”, “includes” and “including” as used in this Agreement shall be deemed
to be followed by the phrase “without limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth in the Loan Documents), (b)
any reference herein to any law shall be construed as referring to such law as
amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference herein to any Person shall be construed to
include such Person’s successors and assigns (subject to the restrictions
contained in the Loan Documents), (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (e) with
respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference
herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to,
this Agreement.  No provision of this Agreement or any other Loan Document shall
be interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.
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Section 1.04                          Accounting Terms and Determinations;
GAAP.  Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Administrative Agent or the
Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with the Financial Statements except for changes in which the
Borrower’s independent certified public accountants concur and which are
disclosed to the Administrative Agent on the next date on which financial
statements are required to be delivered to the Lenders pursuant to Section
8.01(a); provided that, unless the Borrower and the Lenders shall otherwise
agree in writing, no such change shall modify or affect the manner in which
compliance with the covenants contained herein is computed such that all such
computations shall be conducted utilizing financial information presented
consistently with prior periods.
 
ARTICLE II  
The Credits
Section 2.01         Commitments.  Subject to the terms and conditions set forth
herein, each Lender agrees to make Loans to the Borrower during the Availability
Period in an aggregate principal amount that will not result in (a) such
Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the
total Revolving Credit Exposures exceeding the total Commitments.  Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, repay and reborrow the Loans.
 
Section 2.02        Loans and Borrowings.
 
(a)            Borrowings; Several Obligations.  Each Loan shall be made as part
of a Borrowing consisting of Loans made by the Lenders ratably in accordance
with their respective Commitments.  The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.
 
(b)            Types of Loans.  Subject to Section 3.03, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith.  Each Lender at its option may make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided that any exercise of such option shall not affect any other
obligation of such Lender or the obligation of the Borrower to repay such Loan
in accordance with the terms of this Agreement.
 
(c)            Minimum Amounts; Limitation on Number of Borrowings.  At the
commencement of each Interest Period for any Eurodollar Borrowing, such
Borrowing shall be in an aggregate amount that is an integral multiple of
$100,000 and not less than $1,000,000.  At the time that each ABR Borrowing is
made, such Borrowing shall be in an aggregate amount that is an integral
multiple of $100,000 and not less than $1,000,000; provided that an ABR
Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.08(e). 
Borrowings of more than one Type may be outstanding at the same time, provided
that there shall not at any time be more than a total of three (3) Types of
Borrowings outstanding.  Notwithstanding any other provision of this Agreement,
the Borrower shall not be entitled to request, or to elect to convert or
continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Termination Date.
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(d)            Notes.  The Loans made by each Lender shall be evidenced by a
single promissory note of the Borrower to such Lender in substantially the form
of Exhibit A, dated, in the case of (i) any Lender party hereto as of the date
of this Agreement, as of the date of this Agreement or (ii) any Lender that
becomes a party hereto pursuant to an Assignment and Assumption, as of the
effective date of the Assignment and Assumption, payable to such Lender or its
registered assigns in a principal amount equal to its Maximum Credit Amount as
in effect on such date, and otherwise duly completed.  In the event that any
Lender’s Maximum Credit Amount decreases for any reason (whether pursuant to
Section 2.06, Section 12.04 or otherwise), the Borrower shall deliver or cause
to be delivered on the effective date of such decrease, a new Note payable to
such Lender, in replacement of the Note then outstanding, in a principal amount
equal to its Maximum Credit Amount after giving effect to such decrease, and
otherwise duly completed.  The date, amount, Type, interest rate and, if
applicable, Interest Period of each Loan made by each Lender, and all payments
made on account of the principal thereof, shall be recorded by such Lender on
its books for its Note.  Failure to make any such notation shall not affect any
Lender’s or the Borrower’s rights or obligations in respect of such Loans. Upon
assignment of any Note in accordance with the terms in this Agreement and
surrender of such Note at the principal office of Administrative Agent for
registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder or its attorney duly
authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), and an assignment agreement in form
and substance acceptable to Administrative Agent whereby the assignee holder
agrees to be bound by the terms hereof that are applicable to holders, the
Borrower shall execute and deliver, at Borrower’s expense, a new Note in
exchange therefor.
 
Section 2.03     Requests for Borrowings.  To request a Borrowing, the Borrower
shall notify the Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m., Denver time, three
(3) Business Days before the date of the proposed Borrowing or (b) in the case
of an ABR Borrowing, not later than 11:00 a.m., Denver time, one (1) Business
Day before the date of the proposed Borrowing; provided that no such notice
shall be required for any deemed request of an ABR Borrowing to finance the
reimbursement of an LC Disbursement as provided in Section 2.08(e).  Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or facsimile transmission or, to the extent provided
in Section 12.01(c), electronic communication to the Administrative Agent of a
written Borrowing Request in substantially the form of Exhibit B and signed by
the Borrower.  Each such telephonic and written Borrowing Request shall specify
the following information:
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(i)
the aggregate amount of the requested Borrowing;

 
(ii)
the date of such Borrowing, which shall be a Business Day;

 
(iii)
whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

 
(iv)
in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period” and which shall not extend beyond the Termination
Date;

 
(v)
the amount of the then effective Borrowing Base (or Aggregate Maximum Credit
Amounts, if such amount is less than the then effective Borrowing Base), the
current total Revolving Credit Exposures (without regard to the requested
Borrowing) and the pro forma total Revolving Credit Exposures (giving effect to
the requested Borrowing); and

 
(vi)
the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.

 
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of thirty day’s duration.  Each Borrowing
Request shall constitute a representation that no Borrowing Base Deficiency
exists and that the amount of the requested Borrowing shall not cause the total
Revolving Credit Exposures to exceed the total Commitments (i.e., the lesser of
the Aggregate Maximum Credit Amounts and the then effective Borrowing Base).
Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.
Section 2.04           Interest Elections; Conversions.
 
(a)            Conversion and Continuance.  Each Borrowing initially shall be of
the Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request.  Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section 2.04; provided, however, that in the case of any Eurodollar
Borrowing, unless the Borrower timely delivers a conversion request in
accordance with Section 2.04(b), such Eurodollar Borrowing shall automatically
be continued at the expiration of the relevant Interest Period for a new
Eurodollar Borrowing of the same Type.  The Borrower may elect different options
with respect to different portions of the affected Borrowing, in which case each
such portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing; provided that, each such portion of the
affected Borrowing shall be in an aggregate amount that is an integral multiple
of $100,000 and not less than $1,000,000, and provided further that at no time
shall there be more than three (3) Types of Loans outstanding.
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(b)            Interest Election Requests; Conversion Requests.  To make an
election or conversion, as the case may be, pursuant to this Section 2.04, the
Borrower shall notify the Administrative Agent of such election by telephone by
the time that a Borrowing Request would be required under Section 2.03 if the
Borrower was requesting a Borrowing of the Type resulting from such election to
be made on the effective date of such election.  Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or facsimile transmission or, to the extent provided in Section
12.01(c), electronic communication to the Administrative Agent of a written
Interest Election Request in substantially the form of Exhibit C and signed by
the Borrower.
 
(c)            Information in Interest Election Requests.  Each telephonic and
written Interest Election Request shall specify the following information in
compliance with Section 2.02:
 
(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall
be specified for each resulting Borrowing);
 
(ii) the effective date of the election made pursuant to such Interest Election
Request, whch shall be a Business Day;
 
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
 
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period” and which
shall not extend beyond the Termination Date.
 
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of thirty day’s duration.
(d)            Notice to Lenders by the Administrative Agent.  Promptly
following receipt of an Interest Election Request, the Administrative Agent
shall advise each Lender of the details thereof and of such Lender’s portion of
each resulting Borrowing.
 
(e)            Effect of Failure to Deliver Timely Interest Election Request and
Events of Default on Interest Election.  If the Borrower fails to deliver a
timely Interest Election Request with respect to a Eurodollar Borrowing prior to
the end of the Interest Period applicable thereto, then, unless such Borrowing
is repaid as provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing.  Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing:  (i) no
outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing
(and any Interest Election Request that requests the conversion of any Borrowing
to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be
ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period applicable
thereto.
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Section 2.05           Funding of Borrowings.
 
(a)            Funding by Lenders.  Each Lender shall make each Loan to be made
by it hereunder on the funding date in the Borrowing Request by wire transfer of
immediately available funds by 12:00 noon, Denver time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders.  The Administrative Agent will make such Loans available to the
Borrower by promptly crediting the amounts so received, in like funds, to an
account of the Borrower and designated by the Borrower in the applicable
Borrowing Request; provided that ABR Loans made to finance the reimbursement of
an LC Disbursement as provided in Section 2.08(e) shall be remitted by the
Administrative Agent to the Issuing Bank.  Nothing herein shall be deemed to
obligate any Lender to obtain the funds for its Loan in any particular place or
manner or to constitute a representation by any Lender that it has obtained or
will obtain the funds for its Loan in any particular place or manner.
 
(b)            Presumption of Funding by the Lenders.  Unless the Administrative
Agent shall have received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender’s share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with
Section 2.05(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount.  In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to ABR Loans.  If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.
 
Section 2.06           Termination, Reduction and Increase of Aggregate Maximum
Credit Amounts.
 
(a)            Scheduled Termination of Commitments.  Unless previously
terminated, the Commitments shall terminate on the Termination Date.  If at any
time the Aggregate Maximum Credit Amounts are terminated or reduced to zero by
the Borrower in accordance with the provisions of this Agreement, or the
Borrowing Base is reduced to zero by the Lenders in accordance with the
provisions of this Agreement, then the Commitments shall terminate on the
effective date of such termination or reduction.
 
(b)            Optional Termination by the Borrower.
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(i)     The Borrower may at any time terminate and reduce to zero the Aggregate
Maximum Credit Amounts if (1) after giving effect to any concurrent prepayment
of the Loans in accordance with Section 3.04(a), there is no outstanding balance
on the Loans, and (ii) the LC Exposure at such time is zero.
 
(ii)     The Borrower shall notify the Administrative Agent of any election to
terminate the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least
three (3) Business Days prior to the effective date of such termination,
specifying such election and the effective date thereof.  Promptly following
receipt of any notice, the Administrative Agent shall advise the Lenders of the
contents thereof.  Each notice delivered by the Borrower pursuant to this
Section 2.06(b)(ii) shall be irrevocable.  Any termination of the Aggregate
Maximum Credit Amounts shall be permanent and may not be reinstated.
 

(c)            Optional Increases of Maximum Credit Amount.
 
(i)     Increase in Aggregate Maximum Credit Amount.  In connection with any
Scheduled Redetermination, the Borrower shall have the right (in consultation
with, and with the consent of, the Administrative Agent) to cause an increase in
the Aggregate Maximum Credit Amount by adding to this Agreement one or more
additional Eligible Lenders to become Lenders pursuant to a joinder agreement in
form and substance reasonably satisfactory to the Administrative Agent and its
counsel and/or by allowing one or more Lenders to increase their respective
Commitments, provided, however, (i) no Default shall exist, (ii) no such
increase shall result in the Aggregate Maximum Credit Amount exceeding
$150,000,000, (iii) no such increase shall be in an amount less than $5,000,000,
and (iv) no Lender’s Commitment shall be increased without the consent of such
Lender.
 
(ii)    Procedures for Increases.  If the Aggregate Maximum Credit Amount is
increased in accordance with Section 2.06(c)(i), the Administrative Agent and
the Borrower shall determine the effective date (the “Increase Effective Date”)
and the final allocation of such increase.  The Administrative Agent shall
promptly notify the Borrower and the Lenders of the final allocation of such
increase and the Increase Effective Date.  The Borrower shall pay any Loans
outstanding on the Increase Effective Date (and pay any additional amounts
required pursuant to Section 5.02), or the Lenders will assign their interests
in the Loans among themselves, to the extent necessary to keep the outstanding
Loans ratable with any revised Applicable Percentages arising from any
nonratable increase in the Commitments under this section.
 
(iii)     Conditions Precedent.  Any increase in the Aggregate Maximum Credit
Amount under this Section 2.06(c) shall become effective upon the later of the
Increase Effective Date and receipt by the Administrative Agent of:
 
(A)    An amendment to this Agreement, duly signed by the Borrower, the
Administrative Agent and all Lenders, modifying Annex I, setting forth any other
agreements of the Borrower, the Administrative Agent and the Lenders with
respect to pricing affecting such increase, and setting forth the agreement of
each Eligible Lender to become a party to this Agreement and to be bound by all
the terms and provisions hereof;
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(B)    Amendments to any other Loan Documents reasonably requested by the
Administrative Agent in relation to such increase, which amendments the
Administrative Agent is hereby authorized to execute and deliver on behalf of
the Lenders;
 
(C)    Notes, duly executed by the Borrower, as any Lender or Eligible Lender
may require;
 
(D)    Evidence of appropriate corporate authorization on the part of the
Borrower with respect to such increase and the execution and delivery of the
documents described in this Section 2.06(c)(iii);
 
(E)    A Responsible Officer certifies to the Administrative Agent and the
Lenders (including each Eligible Lender) that (x) the representations and
warranties of the Borrower set forth in the Agreement and in the other Loan
Documents are true and correct in all material respects, except to the extent
any such representations and warranties are expressly limited to an earlier
date, in which case, on and as of the Increase Effective Date, such
representations and warranties shall continue to be true and correct in all
material respects as of such specified earlier date; and (y) no Default exists;
 
(F)    Such opinions of counsel for the Borrower and other assurances as the
Administrative Agent may reasonably request; and
 
(G)    Reimbursement of the Administrative Agent’s out-of-pocket costs and
expenses (including reasonable attorney’s fees) incurred in connection
therewith.
 
Section 2.07           Borrowing Base.
 
(a)            Initial Borrowing Base.  For the period from and including the
Effective Date to but excluding the first Redetermination Date, the amount of
the Borrowing Base shall be $47,000,000.  Notwithstanding the foregoing, the
Borrowing Base may be subject to further adjustments from time to time pursuant
to Section 2.07(f), Section 8.13(c) or Section 9.11.
 
(b)            Scheduled and Interim Redeterminations.  The Borrowing Base shall
be redetermined semi‑annually in accordance with this Section 2.07 (a “Scheduled
Redetermination”).  In addition, (y) each of the Borrower and Required Lenders
shall have the right to request one additional Borrowing Base determination in
each period between scheduled Borrowing Base determinations, and (z) the
Required Lenders shall have the right to request an additional Borrowing Base
determination to the extent contemplated by Section 9.11 (each, an “Interim
Redetermination”) in accordance with this Section 2.07.  It is expressly agreed
that:
 
(i)    No Lenders shall have any obligation to agree upon or designate the
Borrowing Base at any particular amount;
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(ii)   No Lenders shall have any obligation to increase the Commitment
concurrent with any increase in the Borrowing Base; and
 
(iii)   The Borrowing Base shall be calculated by each Lender in accordance with
its usual and customary oil and gas lending practices without regard to the
current Borrowing Base or such Lender’s Commitment; and
 
(iv)    Increases in the Borrowing Base may require the addition of one or more
Lenders.
 
(c)            Scheduled and Interim Redetermination Procedure.
 
(i) Each Scheduled Redetermination shall be effectuated as follows:
 
(A)    Commencing on or about May 15, 2013, and on or about each November 15 and
May 15 thereafter, if the Administrative Agent has received (1) the Reserve
Report and the certificate required to be delivered by the Borrower to the
Administrative Agent pursuant to Section 8.12(a) and (c), and (2) such other
reports, data and supplemental information, including the information provided
pursuant to Section 8.12(b), as may, from time to time, be reasonably requested
by the Administrative Agent (the Reserve Report, such certificate and such other
reports, data and supplemental information being the “Engineering Reports”), the
Administrative Agent and the Lenders shall evaluate the information contained in
the Engineering Reports and shall, upon the consent of all Lenders for an
increase in the Borrowing Base or the consent of all Required Lenders for a
reduction or reaffirmation of the Borrowing Base, propose a new Borrowing Base
(the “Proposed Borrowing Base”) based upon such information and such other
information (including the status of title information with respect to the Oil
and Gas Properties as described in the Engineering Reports and the existence of
any other Debt, the internal credit evaluation and other financial information)
and factors (including each Lender’s usual and customary oil and gas lending
practices) as each Lender deems appropriate in its sole discretion.
 
(ii)    Each Interim Redetermination shall be effectuated as follows:
 
(A)    Upon receipt by the Administrative Agent of (1) the Reserve Report and
the certificate required to be delivered by the Borrower to the Administrative
Agent, pursuant to Section 8.12(b), (2) such other reports, data and
supplemental information, including the information provided pursuant to Section
8.12(b), as may, from time to time, be reasonably requested by the
Administrative Agent and (3) in the case of an Interim Determination requested
by the Borrower, a redetermination fee pursuant to Section 3.05(c)(ii), the
Administrative Agent shall evaluate the information contained in the Engineering
Reports and shall, upon the consent of all Lenders for an increase in the
Borrowing Base or the consent of all Required Lenders for a reduction or
reaffirmation of the Borrowing Base, propose a new Borrowing Base based upon
such information and such other information (including the status of title
information with respect to the Oil and Gas Properties as described in the
Engineering Reports and the existence of any other Debt, the internal credit
evaluation and other financial information) and factors (including each Lender’s
usual and customary oil and gas lending practices) as each Lender deems
appropriate in its sole discretion.
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(iii) The Administrative Agent shall notify the Borrower of the Proposed
Borrowing Base (the “Proposed Borrowing Base Notice”):
 

(A) in the case of a Scheduled Redetermination or an Interim Redetermination
initiated by the Borrower, within thirty (30) days after the Administrative
Agent has received the required Engineering Reports; and
 
 
(B) in the case of an Interim Redetermination initiated by the Administrative
Agent, promptly, and in any event within five (5) days, after the Lenders have
determined the Proposed Borrowing Base.
 

(d)            Notice of Reduction of Commitment.  After the receipt of the
Proposed Borrowing Base Notice, the Borrower may reduce the aggregate Commitment
of the Lenders (the “Reduced Commitment”), provided that (1) the reduction shall
be in an amount that is an integral multiple of $1,000,000 and not less than
$1,000,000, (2) the Revolving Credit Exposures do not exceed the Reduced
Commitment.  To effectuate a Reduced Commitment, within three (3) Business Days
after the Administrative Agent has sent out the Proposed Borrowing Base Notice,
the Borrower must submit a written notice to the Administrative Agent of its
election to reduce the Commitment (the “Commitment Reduction Notice”) within 5
Business Days of the receipt of such Proposed Borrowing Base Notice.  Each
Commitment Reduction Notice shall be irrevocable.  Each reduction of the
aggregate Commitment amounts shall be made ratably among the Lenders in
accordance with each Lender’s Applicable Percentage.  Notwithstanding any
Commitment Reduction Notice, all relevant determinations under this Agreement
based upon the Borrowing Base shall use the Borrowing Base as set forth in the
Proposed Borrowing Base Notice until the next Scheduled Redetermination or
Interim Redetermination.  If the Borrower desires to reinstate any Commitment
reduction set forth in a Commitment Reduction Notice, the Borrower may do so
only (i) with the written consent of all Lenders, and (ii) after paying to each
Lender (A) any fees that would have accrued to such Lender under Section 3.05
had such reduced Commitment not occurred, and (B) a processing fee of $2,500.
 
(e)            Effectiveness of a Redetermined Borrowing Base.  After a
redetermined Borrowing Base is established pursuant to Section 2.07(c), or
adjusted pursuant to Section 2.07(f), Section 8.13(c) or Section 9.11(d), the
Administrative Agent shall notify the Borrower and the Lenders of the amount of
the redetermined or adjusted Borrowing Base (the “New Borrowing Base Notice”). 
Any increase in the Borrowing Base from a Scheduled Redetermination or an
Interim Redetermination shall require approval of all Lenders.  Any decrease or
reaffirmation of the Borrowing Base by a Scheduled Redetermination or an Interim
Redetermination shall require approval of the Required Lenders.  Once approval
has been obtained by the relevant parties, such amount shall become the new
Borrowing Base, effective and applicable to the Borrower, the Administrative
Agent, any Issuing Bank and the Lenders in the case of a Scheduled or Interim
Redetermination, upon the earliest of three (3) Business Days following such
notice or the Administrative Agent’s receipt of the Commitment Reduction Notice
(the “Redetermination Date”).
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(f)            Borrowing Base Reduction Events.
 
(i)      If the Borrower or any Subsidiary novates, sells, assigns, unwinds,
terminates, restructures, modifies, amends or otherwise affects (“Unwinds”) any
Borrowing Base Hedging Agreement, the Borrowing Base then in effect shall
automatically be reduced by an amount equal to the mark-to-market value (as
determined by the Administrative Agent) of such Borrowing Base Hedging Agreement
as of the date of such Unwind, if any, resulting from such event (which right
shall be in addition to the Administrative Agent’s right to request Interim
Redetermination between each Scheduled Redetermination).
 
 
(ii)    If the Borrower or any Subsidiary sells any of the Oil and Gas
Properties during any period between two successive Scheduled Redetermination
Dates having a fair market value in excess of 2.5% of the then effective
Borrowing Base, individually or in the aggregate, the Borrowing Base then in
effect shall automatically be reduced by an amount equal to the value, if any,
assigned such Property in the most recently delivered Reserve Report (which
reduction shall be in addition to the Administrative Agent’s right to request an
Interim Redetermination between each Scheduled Redetermination).
 
Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 2.07(f), Section 8.13(c) or
Section 9.11, whichever occurs first.
Section 2.08            Letters of Credit.
 
(a)            General.  Subject to the terms and conditions set forth herein,
the Borrower may request the issuance of dollar denominated Letters of Credit
for its own account or for the account of any of its Subsidiaries, in a form
reasonably acceptable to the Administrative Agent and the Issuing Bank, at any
time and from time to time during the Availability Period; provided that (1) the
Borrower may not request the issuance, amendment, renewal or extension of
Letters of Credit hereunder if a Borrowing Base Deficiency exists at such time
or would exist as a result thereof and (2) the aggregate LC Exposure of the
Letters of Credit issued hereunder and the requested Letter of Credit shall not
exceed the LC Commitment.  In the event of any inconsistency between the terms
and conditions of this Agreement and the terms and conditions of any form of
letter of credit application or other agreement submitted by the Borrower to, or
entered into by the Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.
 
(b)            Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions.  To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
deliver by hand delivery or facsimile transmission (or, to the extent provided
in Section 12.01(c), electronic communication) to the Issuing Bank and the
Administrative Agent (not less than seven (7) Business Days in advance of the
requested date of issuance, amendment, renewal or extension) a notice:
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(i) requesting the issuance of a Letter of Credit or identifying the Letter of
Credit to be amended, renewed or extended;
 
(ii) specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day);
 
(iii) specifying the date on which such Letter of Credit is to expire (which
shall comply with Section 2.08(c));
 
(iv) specifying the amount of such Letter of Credit;
 
(v) specifying the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit; and
 
 
(vi) specifying the amount of the then effective Borrowing Base and whether a
Borrowing Base Deficiency exists at such time, the current total Revolving
Credit Exposures (without regard to the requested Letter of Credit or the
requested amendment, renewal or extension of an outstanding Letter of Credit)
and the pro forma total Revolving Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or extension of
an outstanding Letter of Credit).
 
Each notice shall constitute a representation that after giving effect to the
requested issuance, amendment, renewal or extension, as applicable, (i) the LC
Exposure shall not exceed the LC Commitment and (ii) the total Revolving Credit
Exposures shall not exceed the total Commitments (i.e., the lesser of the
Aggregate Maximum Credit Amounts and the then effective Borrowing Base).
 
If requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank’s standard form in connection with any
request for a Letter of Credit.
Subject to the terms and conditions contained herein, the Issuing Bank shall
then issue the requested Letter of Credit on the Borrower’s behalf.
(c)            Expiration Date.  Each Letter of Credit shall expire at or prior
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five (5) Business Days prior to the Termination Date.
 
(d)            Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each Lender hereby acquires from the Issuing
Bank, a participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit.  In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the Issuing Bank, such Lender’s Applicable Percentage of each
LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on
the date due as provided in Section 2.08(e), or of any reimbursement payment
required to be refunded to the Borrower for any reason.  Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this Section 2.08(d) in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or the
occurrence and continuance of a Default, the existence of a Borrowing Base
Deficiency or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
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(e)            Reimbursement.  If any Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse the
Administrative Agent (for itself or any of its Affiliates) such LC Disbursement
by paying to the Administrative Agent an amount equal to such LC Disbursement
not later than 11:00 a.m., Denver time, on the date that such LC Disbursement is
made, if the Borrower shall have received notice of such LC Disbursement prior
to 9:00 a.m., Denver time, on such date, or, if such notice has not been
received by the Borrower prior to such time on such date, then not later than
11:00 a.m., Denver time, on the Business Day immediately following the day that
the Borrower receives such notice; provided that any such LC Disbursement shall,
subject to the conditions to Borrowing set forth herein, be deemed to have
requested, and the Borrower does hereby request under such circumstances, that
such payment be financed with an ABR Borrowing in an equivalent amount and, to
the extent so financed, the Borrower’s obligation to make such payment shall be
discharged and replaced by the resulting ABR Borrowing.  If the Borrower fails
to make such payment when due, the Administrative Agent shall notify each Lender
of the applicable LC Disbursement, the payment then due from the Borrower in
respect thereof and such Lender’s Applicable Percentage thereof.  Promptly
following receipt of such notice, each Lender shall pay to the Administrative
Agent its Applicable Percentage of the payment then due from the Borrower, in
the same manner as provided in Section 2.05 with respect to Loans made by such
Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to
the Issuing Bank the amounts so received by it from the Lenders.  Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this Section 2.08(e), the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that any Lenders that have made
payments pursuant to this Section 2.08(e) to reimburse the Issuing Bank, then to
such Lenders and the Issuing Bank as their interests may appear.  Any payment
made by a Lender pursuant to this Section 2.08(e) to reimburse the Issuing Bank
for any LC Disbursement (other than the funding of ABR Loans as contemplated
above) shall not constitute a Loan and shall not relieve the Borrower of its
obligation to reimburse such LC Disbursement.
 
(f)            Obligations Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by any Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit or any Letter of Credit
Agreement, or (iv) any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section 2.08(f), constitute a legal or equitable discharge of, or provide a
right of setoff against, the Borrower’s obligations hereunder.  Neither the
Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related
Parties shall have any liability or responsibility by reason of or in connection
with the issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any document
required to make a drawing thereunder), any error in interpretation of technical
terms or any consequence arising from causes beyond the control of the Issuing
Bank or the Administrative Agent.  In furtherance of the foregoing and without
limiting the generality thereof, the Borrower agrees that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
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(g)            Disbursement Procedures.  The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit.  The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone, facsimile or
email of such demand for payment and whether the Issuing Bank has made or will
make an LC Disbursement thereunder; provided that any failure to give or delay
in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.
 
(h)            Interim Interest.  If the Issuing Bank shall make any LC
Disbursement, then, until the Borrower shall have reimbursed the Issuing Bank
for such LC Disbursement (either with its own funds or a Borrowing under Section
2.08(e)), the unpaid amount thereof shall bear interest, for each day from and
including the date such LC Disbursement is made to but excluding the date that
the Borrower reimburses such LC Disbursement, at the rate per annum then
applicable to ABR Loans.  Interest accrued pursuant to this Section 2.08(h)
shall be for the account of the Issuing Bank, except that interest accrued on
and after the date of payment by any Lender pursuant to Section 2.08(e) to
reimburse the Issuing Bank shall be for the account of such Lender to the extent
of such payment.
 
(i)            Cash Collateralization.
 
(i)    If (A) any Event of Default shall occur and be continuing and the
Borrower receives notice from the Administrative Agent demanding that the
Borrower Cash Collateralize the outstanding LC Exposure pursuant to this Section
2.08(i), (B) the Borrower is required to Cash Collateralize the excess
attributable to an LC Exposure in connection with any prepayment pursuant to
Section 3.04(c), or (C) the Borrower is required to Cash Collateralize a
Defaulting Lender’s LC Exposure pursuant to Section 4.03(c)(iii)(B), then the
Borrower shall Cash Collateralize such LC Exposure or the excess attributable to
such LC Exposure, as the case may be, as of such date plus any accrued and
unpaid interest thereon; provided that the obligation to Cash Collateralize
pursuant to this Section 2.08(i) shall become effective immediately, and
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default described in Section 10.01(g) or Section
10.01(h).
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(ii)    The Borrower hereby grants to the Administrative Agent, for the benefit
of each Issuing Bank and the Lenders, an exclusive first priority and continuing
perfected security interest in and Lien on each account (a “Collateral Account”)
in which the Borrower has Cash Collateralized any obligation hereunder and all
cash, checks, drafts, certificates and instruments, if any, from time to time
deposited or held in such Collateral Account, all deposits or wire transfers
made thereto, any and all investments purchased with funds deposited in such
account, all interest, dividends, cash, instruments, financial assets and other
Property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any or all of the foregoing, and all proceeds, products,
accessions, rents, profits, income and benefits therefrom, and any substitutions
and replacements therefor (collectively, the “Cash Collateral”).
 
(iii)     The Borrower’s obligation to Cash Collateralize pursuant to this
Section 2.08(i) shall be absolute and unconditional, without regard to whether
any beneficiary of any Letter of Credit has attempted to draw down all or a
portion of such amount under the terms of a Letter of Credit, and, to the
fullest extent permitted by applicable law, shall not be subject to any defense
or be affected by a right of set‑off, counterclaim or recoupment which the
Borrower or any Subsidiary may now or hereafter have against any such
beneficiary, any Issuing Bank, the Administrative Agent, the Lenders or any
other Person for any reason whatsoever.
 
(iv)     Each Collateral Account and all Cash Collateral shall secure the
payment and performance of the Borrower’s obligations under this Agreement and
the other Loan Documents.  The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over each
Collateral Account and the Cash Collateral.  Other than any interest earned on
the investment of such deposits, which investments shall be made at the option
and reasonable sole discretion of the Administrative Agent and at the Borrower’s
risk and expense, such deposits shall not bear interest.  Interest or profits,
if any, on such investments shall accumulate in each Collateral Account.  Moneys
in such account shall be applied by the Administrative Agent to reimburse each
Issuing Bank for LC Disbursements for which it has not been reimbursed and, to
the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time or,
if the maturity of the Loans has been accelerated, be applied to satisfy other
obligations of the Borrower and the Guarantors under this Agreement or the other
Loan Documents.  If the Borrower is required to Cash Collateralize hereunder as
a result of the occurrence of an Event of Default, and the Borrower is not
otherwise required to pay to the Administrative Agent the excess attributable to
an LC Exposure in connection with any prepayment pursuant to Section 3.04(c) or
Cash Collateralize a Defaulting Lender’s LC Exposure pursuant to Section
4.03(c)(iii)(B), then such amount (to the extent not applied as aforesaid) shall
be returned to the Borrower within one (1) Business Day after written notice by
the Borrower to the Administrative Agent that after all Events of Default have
been cured or waived and that no Defaults exist.
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(j)            Confirmation.  Upon written request of the Borrower, each Issuing
Bank shall provide the Borrower, at the sole cost and expense of the Borrower,
with a confirmation of the existence of an outstanding Letter of Credit issued
by such Issuing Bank within seven (7) days of such request.
 
ARTICLE III  
Payments of Principal and Interest; Prepayments; Fees
Section 3.01        Repayment of Loans.  The Borrower hereby unconditionally
promises to pay to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Loan in full in cash on the Termination
Date. All payments by the Borrower of principal, interest, fees and other
obligations shall be made in dollars in immediately available funds, and shall
be absolute and unconditional, without defense, rescission, recoupment, setoff
or counterclaim, free of any restriction or condition.
 
Section 3.02         Interest.
 
(a)            ABR Loans.  The Loans comprising each ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Margin, but in no event
to exceed the Highest Lawful Rate.
 
(b)            Eurodollar Loans.  The Loans comprising each Eurodollar Borrowing
shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect
for such Borrowing plus the Applicable Margin, but in no event to exceed the
Highest Lawful Rate.
 
(c)            Post Default Rate.  Notwithstanding the foregoing, if an Event of
Default has occurred and is continuing, or if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder or under
any other Loan Document is not paid when due, whether at stated maturity, upon
acceleration or otherwise, and including any payments in respect of a Borrowing
Base Deficiency under Section 3.04(c) then all Loans outstanding, in the case of
an Event of Default, and such overdue amount, in the case of a failure to pay
amounts when due, shall bear interest, until paid (whether before or after
judgment) at the lesser of (i) the Highest Lawful Rate or (ii) the Post Default
Rate.
 
(d)            Interest Payment Dates.  Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan and on the
Termination Date; provided that (i) interest accrued pursuant to Section 3.02(c)
shall be payable on demand, (ii) in the event of any repayment or prepayment of
any Loan (other than an optional prepayment of an ABR Loan prior to the
Termination Date), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment, and (iii) in the
event of any conversion of any Eurodollar Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.
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(e)            Interest Rate Computations.  All interest hereunder shall be
computed on the basis of a year of 360 days (or 365/366 days, in the case of an
ABR Loan), unless such computation would exceed the Highest Lawful Rate, in
which case interest shall be computed on the basis of a year of 365 days (or 366
days in a leap year), and in each case shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).  The
applicable Alternate Base Rate, Adjusted LIBO Rate or the LIBO Rate shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error, and be binding upon the parties hereto.
 
Section 3.03         lternate Rate of Interest.  If prior to the commencement of
any Interest Period for a Eurodollar Borrowing:
 

(a)            the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that (i) adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest
Period or (ii) deposits (whether in dollars or an alternative currency) are not
being offered to Lenders in the applicable offshore interbank market for such
currency for the applicable amount and Interest Period of such Eurodollar
Borrowing; or
 
(b)            the Administrative Agent is advised by the Lenders that the
Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period will
not adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans included in such Borrowing for such Interest Period;
 
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or facsimile transmission, or, to the extent provided in
Section 12.01(c), electronic communication, as promptly as practicable
thereafter and, until the Administrative Agent notifies the Borrower and the
Lenders that the circumstances giving rise to such notice no longer exist, (i)
any Interest Election Request that requests the conversion of any Borrowing to,
or continuation of any Borrowing as, a Eurodollar Borrowing shall be
ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing,
such Borrowing shall be made either as an ABR Borrowing or at an alternate rate
of interest (not to exceed the Alternate Base Rate) determined by all Lenders,
sufficient to cover each Lender’s cost of funds.
Section 3.04         Prepayments.
 
(a)            Optional Prepayments.  Subject to any break funding costs payable
pursuant to Section 5.02 and prior notice in accordance with Section 3.04(b),
the Borrower shall have the right at any time and from time to time to prepay
any Borrowing in whole or in part, in an aggregate amount that is an integral
multiple of $100,000 and not less than $1,000,000, or if less than $1,000,000,
the remaining balance of the Loans.
 
(b)            Notice and Terms of Optional Prepayment.  The Borrower shall
notify the Administrative Agent by telephone (confirmed by facsimile
transmission, or to the extent provided in Section 12.01(c), electronic
communication) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 11:00 a.m., Denver time, three (3) Business
Days before the date of prepayment, or (ii) in the case of prepayment of an ABR
Borrowing, not later than 11:00 a.m., Denver time, one Business Day before the
date of prepayment.  Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid.  Promptly following receipt of any such notice relating to a
Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof.  Each prepayment of a Borrowing shall be applied ratably to the Loans
included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued
interest to the extent required by Section 3.02.
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(c)            Mandatory Prepayments.
 
 
(i)    Upon any redetermination of or adjustment to the amount of the Borrowing
Base in accordance with Section 2.07 or Section 8.13(c), if the total Revolving
Credit Exposures exceeds the redetermined or adjusted Borrowing Base, then the
Borrower shall either:
 
(A)  prepay the Borrowings on the schedule set forth below in an aggregate
principal amount equal to such excess and if any excess remains as a result of
an LC Exposure, after prepaying all of the Borrowings, Cash Collateralize such
excess as provided in Section 2.08(i);
 
(B)    pledge additional collateral not included in the most recent Reserve
Report to the Administrative Agent having a fair market value (as determined by
the Administrative Agent, in its sole discretion) equal to at least the amount
of the deficiency or otherwise satisfactory to the Administrative Agent such
that the total Revolving Credit Exposures are less than or equal to the
Borrowing Base as redetermined or adjusted;
 
(C)   perform other forms of credit enhancement acceptable to all Lenders; or
 
(D)   take any combination of the actions outlined in Section 3.04(c)(i).
 

The Borrower shall be obligated to make any prepayment pursuant to Section
3.04(c)(i)(A) as follows: (i) twenty percent (20%) of such excess shall be paid
within forty-five (45) days following its receipt of the New Borrowing Base
Notice in accordance with Section 2.07(e) or the date the adjustment occurs;
(ii) forty percent (40%) of such excess shall be paid within sixty (60) days
following its receipt of the New Borrowing Base Notice in accordance with
Section 2.07(e) or the date the adjustment occurs; (iii) sixty percent (60%) of
such excess shall be paid within ninety (90) days following its receipt of the
New Borrowing Base Notice in accordance with Section 2.07(e) or the date the
adjustment occurs; (iv) eighty percent (80%) of such excess shall be paid within
one hundred and twenty (120) days following its receipt of the New Borrowing
Base Notice in accordance with Section 2.07(e) or the date the adjustment
occurs;  (v) and one-hundred percent (100%) of such excess shall be paid within
one hundred and fifty (150) days following its receipt of the New Borrowing Base
Notice in accordance with Section 2.07(e) or the date the adjustment occurs,
provided that all payments required to be made pursuant to this Section
3.04(c)(i) must be made on or prior to the Termination Date.
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(ii) Upon any adjustments to the Borrowing Base pursuant to Section 9.11, if the
total Revolving Credit Exposures exceed the Borrowing Base as adjusted, then the
Borrower shall (A) prepay the Borrowings in an aggregate principal amount equal
to such excess, and (B) if any excess remains after prepaying all of the
Borrowings as a result of an LC Exposure, Cash Collateralize such excess as
provided in Section 2.08(i).  The Borrower shall be obligated to make such
prepayment and/or Cash Collateralize such excess on the date it or any
Subsidiary receives proceeds as a result of such disposition; provided that all
payments required to be made pursuant to this Section 3.04(c)(ii) must be made
on or prior to the Termination Date.
 
(iii) If a Borrowing Base Deficiency exists, or during the period an Event of
Default remains uncured and has not been waived, the Borrower shall pay any
Borrowings with (a) all net cash proceeds received from sales and other
dispositions of Properties and (b) any proceeds received pursuant to the
termination of any Hedging Agreement.  In the case of a Borrowing Base
Deficiency, this clause (iii) shall only require prepayments of Borrowings until
the Borrowing Base Deficiency has been cured.
 
(iv) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied, first, ratably to any ABR Borrowings then outstanding, and, second, to
any Eurodollar Borrowings then outstanding, and if more than one Eurodollar
Borrowing is then outstanding, to each such Eurodollar Borrowing in order of
priority beginning with the Eurodollar Borrowing with the least number of days
remaining in the Interest Period applicable thereto and ending with the
Eurodollar Borrowing with the most number of days remaining in the Interest
Period applicable thereto.
 
(v) Each prepayment of Borrowings shall be applied ratably to the Loans of each
Lender included in the prepaid Borrowings.  Prepayment pursuant to this Section
3.04(c) shall be accompanied by accrued interest to the extent required by
Section 3.02.
 
 
(d)            No Premium or Penalty.  Prepayments permitted or required under
this Section 3.04 shall be without premium or penalty, except as required under
Section 5.02.
 
Section 3.05          Fees.
 
(a)            Letter of Credit Fees.  The Borrower agrees to pay (i) to the
Administrative Agent for the account of each Lender, a participation fee with
respect to its participations in Letters of Credit equal to (A) the aggregate LC
Exposure of such Lender from time to time, times (B) the Applicable Margin for a
LIBO Rate Borrowing, determined on a per annum basis during the period from and
including the date of this Agreement to but excluding the later of the date on
which such Lender’s Commitment terminates and the date on which such Lender
ceases to have any LC Exposure, and (ii) to the Issuing Bank, a fronting fee, of
0.125% per annum of the aggregate undrawn amount of all outstanding Letters of
Credit issued by such Issuing Bank. Participation fees and fronting fees accrued
through and including the last day of March, June, September and December of
each year shall be payable on such last day, commencing on the first such date
to occur after the date of this Agreement; provided that all such fees shall be
payable on the Termination Date and any such fees accruing after the Termination
Date shall be payable on demand.  All participation fees and fronting fees shall
be computed on the aggregate stated among of each Letter of Credit on the basis
of a year of 360 days, unless such computation would exceed the Highest Lawful
Rate, in which case interest shall be computed on the basis of a year of 365
days (or 366 days in a leap year), and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day). 
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(b)            Commitment Fee.  The Borrower agrees to pay to each Lender a
commitment fee equal to 0.5% of such Lender’s Commitment on the Effective Date. 
In addition, the Borrower shall pay an early response fee of (i) $12,500 to
CoBiz Bank, a Colorado corporation, dba Colorado Business Bank and (ii) $18,750
to Amegy Bank National Association.
 
(c)            Threshold Commitment Fee.  The Borrower agrees to pay to the
Administrative Agent for the account of each Lender (i) 0.375% of each increase
in the Borrowing Base and the resulting increase in the Commitment of such
Lender over such Lender’s Initial Commitment (as adjusted by previous increases
in its Commitment and after taking into account any Commitment Reduction
Notice); and (ii) in connection with each Interim Redetermination initiated by
the Borrower, a redetermination fee of $2,500 per Lender.
 
(d)            Administrative Agent Fees.  The Borrower agrees to pay to the
Administrative Agent, for its own account, (i) an arrangement fee as set forth
in the Fee Letter, which shall be payable upon the closing of this Agreement
(the “Arrangement Fee”); and (ii) an annual administration or agency fee as set
forth in the Fee Letter (the “Administration Fee”).  The Administration Fee
shall be paid on the Effective Date and on each annual anniversary thereof.  In
the event of any adjustment to the Administration Fee as contemplated by the
Engagement Letter, such adjusted amount shall be prorated for the remainder of
the period from the date such payment is due through the next annual anniversary
of the Effective Date and thereafter shall be included in the amount due and
payable on each anniversary of the Effective Date.
 
(e)            Unused Commitment Fee.  The Borrower agrees to pay to the
Administrative Agent for the account of each Lender an unused commitment fee
equal to 0.5% per annum of the average daily amount of the unused Commitment of
such Lender during the period from and including the date of this Agreement to
but excluding the later of the date of termination of the Commitments.  Fees
accrued under this Section 3.05(e) through and including the last day of March,
June, September and December of each year shall be payable on the third Business
Day following such last day, commencing on the first such date to occur after
the date of this Agreement; provided that all such fees shall be payable on the
Termination Date and any such fees accruing after the Termination Date shall be
payable on demand.  All unused commitment fees shall be computed on the basis of
a year of 360 days, unless such computation would exceed the Highest Lawful
Rate, in which case interest shall be computed on the basis of a year of 365
days (or 366 days in a leap year), and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).  Such fee
shall be disbursed by the Administrative Agent to the Lenders in accordance with
their respective Commitments.
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ARTICLE IV  
Payments; Pro Rata Treatment; Sharing of Set‑offs
Section 4.01                          Payments Generally; Pro Rata Treatment;
Sharing of Set‑offs.
 
(a)            Payments by the Borrower.  The Borrower shall make each payment
required to be made by it hereunder (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable under Section 5.01,
Section 5.02, Section 5.03 or otherwise) prior to 11:00 a.m., Denver time, on
the date when due, in immediately available funds, without defense, deduction,
recoupment, set‑off or counterclaim.  Fees, once paid, shall be fully earned and
shall not be refundable under any circumstances.  Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon.  All such payments shall be made to the account of
the Administrative Agent most recently designated by it for such purpose, except
payments to be made directly to the Issuing Bank as expressly provided herein
and except that payments pursuant to Section 5.01, Section 5.02, Section 5.03
and Section 12.03 shall be made directly to the Persons entitled thereto.  The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof.  If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension.  All payments
hereunder shall be made in dollars.
 
(b)            Application of Insufficient Payments.  If at any time
insufficient funds are received by and available to the Administrative Agent to
pay fully all amounts of principal, unreimbursed LC Disbursements, interest and
fees then due hereunder, such funds shall be applied (i) first, towards payment
of interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, towards payment of principal and unreimbursed LC
Disbursements then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements then
due to such parties.
 
(c)            Sharing of Payments by Lenders.  If any Lender shall, by
exercising any right of set‑off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Loans or participations in
LC Disbursements resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Loans and participations in LC
Disbursements and accrued interest thereon than the proportion received by any
other Lender, then the Lender receiving such greater proportion shall purchase
(for cash at face value) participations in the Loans and participations in LC
Disbursements of other Lenders to the extent necessary so that the benefit of
all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Loans
and participations in LC Disbursements; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this Section 4.01(c) shall apply).  The Borrower consents to the foregoing
and agrees, to the extent it may effectively do so under applicable law, that
any Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set‑off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
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Section 4.02         Presumption of Payment by the Borrower.  Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders or any Issuing Bank that the Borrower will not make such payment,
the Administrative Agent may assume that the Borrower has made such payment on
such date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the Issuing Bank, as the case may be, the amount
due.  In such event, if the Borrower has not in fact made such payment, then
each of the Lenders or the Issuing Bank, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so distributed
to such Lender or Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.
 
Section 4.03        Deductions by the Administrative Agent; Defaulting Lender.
 
(a)            If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.05(b), Section 2.08(d), Section 2.08(e) or Section
4.02, then the Administrative Agent may, in its sole discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully
paid in cash.
 
(b)            Payments to Defaulting Lenders.  If a Defaulting Lender (or a
Lender who would be a Defaulting Lender but for the expiration of the relevant
grace period) as a result of the exercise of a set‑off shall have received a
payment in respect of its Revolving Credit Exposure which results in its
Revolving Credit Exposure being less than its Applicable Percentage of the
aggregate Revolving Credit Exposures, then no payments will be made to such
Defaulting Lender until such time as such Defaulting Lender shall have complied
with Section 4.03(c) and all amounts due and owing to the Lenders have been
equalized in accordance with each Lender’s respective pro rata share of the
Indebtedness.  Further, if at any time prior to the acceleration or maturity of
the Loans, the Administrative Agent shall receive any payment in respect of
principal of a Loan or a reimbursement of an LC Disbursement while one or more
Defaulting Lenders shall be party to this Agreement, the Administrative Agent
shall apply such payment first to the Borrowing(s) for which such Defaulting
Lender(s) shall have failed to fund its pro rata share until such time as such
Borrowing(s) are paid in full or each Lender (including each Defaulting Lender)
is owed its Applicable Percentage of all Loans then outstanding.  After
acceleration or maturity of the Loans, subject to the first sentence of this
Section 4.03(b), all principal will be paid ratably as provided in Section
10.02(c).
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(c)            Defaulting Lenders.  Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting
Lender:
 
 
(i)    Fees otherwise payable pursuant to Section 3.05 shall cease to accrue on
the unfunded portion of the Commitment of such Defaulting Lender.
 
(ii)   The Commitment and Revolving Credit Exposure of such Defaulting Lender
shall not be included in determining whether all Lenders have taken or may take
any action hereunder (including any consent to any amendment or waiver pursuant
to Section 12.02), provided that any waiver, amendment or modification (A) that
would increase the Commitment or the Maximum Credit Amount of such Defaulting
Lender or (B) requiring the consent of all Lenders or each adversely affected
Lender which affects such Defaulting Lender differently than all other Lenders
or all other adversely affected Lenders, as the case may be, shall require the
consent of such Defaulting Lender; and provided further that any redetermination
or affirmation of the Borrowing Base shall occur without the participation of a
Defaulting Lender, but the Commitment (i.e. the Applicable Percentage of the
Borrowing Base of a Defaulting Lender) may not be increased without the consent
of such Defaulting Lender.
 
(iii)   If any LC Exposure exists at the time a Lender becomes a Defaulting
Lender then:
 
(A)    all or any part of such LC Exposure shall be reallocated among the
Non‑Defaulting Lenders in accordance with their respective Applicable
Percentages but only to the extent (1) the sum of all Non‑Defaulting Lenders’
Revolving Credit Exposures plus such Defaulting Lender’s LC Exposure does not
exceed the total of all Non‑Defaulting Lenders’ Commitments, (2) the conditions
set forth in Section 6.02 are satisfied at such time, and (3) the sum of each
Non‑Defaulting Lender’s Revolving Credit Exposure plus its reallocated share of
such Defaulting Lender’s LC Exposure does not exceed such Non‑Defaulting
Lender’s Commitment; provided, that no such reallocation will constitute a
waiver or release of any claim the Borrower, the Administrative Agent, any
Issuing Bank or any Lender may have against such Defaulting Lender or cause such
Defaulting Lender to be a Non‑Defaulting Lender;
 
(B)    if the reallocation described in Section 4.03(c)(iii)(A) cannot, or can
only partially, be effected, then the Borrower shall within three Business Days
following notice by the Administrative Agent Cash Collateralize such Defaulting
Lender’s LC Exposure (after giving effect to any partial reallocation pursuant
to Section 4.03(c)(iii)(A)) for so long as such LC Exposure is outstanding;
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(C)    if the Borrower Cash Collateralizes any portion of such Defaulting
Lender’s LC Exposure pursuant to Section 4.03(c)(iii)(B)), then the Borrower
shall not be required to pay any fees to such Defaulting Lender pursuant to
Section 3.05(a) with respect to such Defaulting Lender’s LC Exposure during the
period such Defaulting Lender’s LC Exposure is Cash Collateralized;
 
(D)    if the LC Exposure of the Non‑Defaulting Lenders is reallocated pursuant
to Section 4.03(c)(iii)(A), then the fees payable to the Lenders pursuant to
Section 3.05(a) shall be adjusted in accordance with such Non‑Defaulting
Lenders’ Applicable Percentages; and
 
(E)    if any Defaulting Lender’s LC Exposure is neither Cash Collateralized nor
reallocated pursuant to Section 4.03(c)(iii), then, without prejudice to any
rights or remedies of any Issuing Bank or any Lender hereunder, all letter of
credit fees payable under Section 3.05(a) with respect to such Defaulting
Lender’s LC Exposure shall be payable to each Issuing Bank (in proportion to the
undrawn amount of all outstanding Letters of Credit issued by each Issuing Bank)
until such LC Exposure is Cash Collateralized and/or reallocated.
 
(d)            In the event that the Administrative Agent, the Borrower and each
Issuing Bank each agrees that a Defaulting Lender has adequately remedied all
matters that caused such Lender to be a Defaulting Lender, then the LC Exposure
of the Lenders shall be readjusted to reflect the inclusion of such Lender’s
Commitment and on such date such Lender shall purchase at par such of the Loans
of the other Lenders as the Administrative Agent shall determine may be
necessary in order for such Lender to hold such Loans in accordance with its
Applicable Percentage; provided, that no adjustments will be made retroactively
with respect to fees accrued while such Lender was a Defaulting Lender; and
provided, further, that except to the extent otherwise expressly agreed by the
affected parties, no change hereunder from Defaulting Lender to Non‑Defaulting
Lender will constitute a waiver or release of any claim of any party hereunder
arising from such Lender having been a Defaulting Lender.
 
Section 4.04       Disposition of Proceeds.  The Security Instruments contain an
assignment by the Borrower unto and in favor of the Administrative Agent for the
benefit of the Lenders of all of the Borrower’s interest in and to production
and all proceeds attributable thereto which may be produced from or allocated to
the Borrower’s Property.  The Security Instruments further provide in general
for the application of such proceeds to the satisfaction of the Indebtedness and
other obligations described therein and secured thereby.  Notwithstanding the
assignment contained in such Security Instruments, until an Event of Default has
occurred and is continuing, (a) the Administrative Agent and the Lenders agree
that they will neither notify the purchaser or purchasers of such production nor
take any other action to cause such proceeds to be remitted to the
Administrative Agent or the Lenders, but the Lenders will instead permit such
proceeds to be paid to the Borrower and its Subsidiaries and (b) the Lenders
hereby authorize the Administrative Agent to take such actions as may be
necessary to cause such proceeds to be paid to the Borrower and/or such
Subsidiaries.
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ARTICLE V  
Increased Costs; Break Funding Payments; Taxes; Illegality
Section 5.01         Increased Costs.
 

(a)            Eurodollar Changes in Law.  If any Change in Law shall:
 
(i)   impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate); or
 
(ii)   impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender;
 
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.
 
(b)            Capital Requirements.  If any Change in Law regarding capital
requirements has the effect of reducing the rate of return on a Lender’s or
Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s
holding company, if any, as a consequence of this Agreement or the Loans made
by, or participations in Letters of Credit held by, such Lender, or the Letters
of Credit issued by any Issuing Bank, to a level below that which such Lender or
Issuing Bank or such Lender’s or Issuing Bank’s holding company could have
achieved but for such Change in Law (taking into consideration such Lender’s or
Issuing Bank’s policies and the policies of such Lender’s or Issuing Bank’s
holding company with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender or Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or Issuing Bank or
such Lender’s or Issuing Bank’s holding company for any such reduction suffered.
 
(c)            Certificates.  A certificate of a Lender or an Issuing Bank
setting forth the amount or amounts necessary to compensate such Lender or
Issuing Bank or its holding company, as the case may be, as specified in Section
5.01(a) or (b) shall be delivered to the Borrower and shall be conclusive absent
manifest error.  The Borrower shall pay such Lender or Issuing Bank, as the case
may be, the amount shown as due on any such certificate within ten (10) days
after receipt thereof.
 
(d)            Effect of Failure or Delay in Requesting Compensation.  Failure
or delay on the part of any Lender or any Issuing Bank to demand compensation
pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s or
Issuing Bank’s right to demand such compensation; provided that the Borrower
shall not be required to compensate a Lender or an Issuing Bank pursuant to this
Section 5.01 for any increased costs or reductions incurred more than 180 days
prior to the date that such Lender or Issuing Bank, as the case may be, notifies
the Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s or Issuing Bank’s intention to claim
compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 180‑day period
referred to above shall be extended to include the period of retroactive effect
thereof.
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Section 5.02                          Break Funding Payments.  In the event of
(a) the payment of any principal of any Eurodollar Loan other than on the last
day of an Interest Period applicable thereto (including as a result of an Event
of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan other
than on the last day of the Interest Period applicable thereto, (c) the failure
to convert, continue or prepay any Eurodollar Loan on the date specified in any
notice delivered pursuant hereto, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event.  In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), minus (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period, for dollar deposits of a comparable amount and period from other
banks in the Eurodollar market.
 
A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within ten (10) days
after receipt thereof.
Section 5.03           Taxes.
 
(a)            Payments Free of Taxes.  Any and all payments by or on account of
any obligation of the Borrower under any Loan Document shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes;
provided that if the Borrower shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 5.03(a)), the
Administrative Agent, each Lender or each Issuing Bank, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
 
(b)            Payment of Other Taxes by the Borrower.  The Borrower shall pay
any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.
 
(c)            Indemnification by the Borrower.  The Borrower shall indemnify
the Administrative Agent, each Lender and each Issuing Bank, within ten (10)
days after written demand therefor, for the full amount of any Indemnified Taxes
or Other Taxes paid by the Administrative Agent, such Lender or Issuing Bank, as
the case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section
5.03) and any penalties, interest and reasonable expenses arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate of the Administrative Agent, a Lender or an Issuing
Bank as to the amount of such payment or liability under this Section 5.03 shall
be delivered to the Borrower and shall be conclusive absent manifest error.
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(d)            Indemnification by the Lenders.  Each Lender shall severally
indemnify the Administrative Agent for the full amount of any Excluded Taxes
attributable to such Lender that are paid or payable by the Administrative Agent
in connection with any Loan Documents and any reasonable expenses arising
therefrom or with respect thereto, whether or not such Excluded Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  The indemnity under this Section 5.03(d) shall be paid within 10
days after the Administrative Agent delivers to the applicable Lender a
certificate stating the amount of Excluded Taxes so payable by the
Administrative Agent.  Such certificate shall be conclusive of the amount so
payable absent manifest error.
 
(e)            Evidence of Payments.  As soon as practicable after any payment
of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.
 
(f)            Effect of Tax Refund.  If a Lender determines, in its sole
discretion, that it has received a benefit in the nature of a refund, deduction
or credit (including a refund in the form of a deduction from or credit against
taxes that are otherwise payable by such Lender) of any Taxes or Other Taxes
with respect to which the Borrower has made a payment under this Section 5.03,
such Lender will notify the Borrower and agrees to reimburse the Borrower to the
extent of the benefit of such refund, deduction or credit, including any
interest paid by the relevant Governmental Authority, promptly after such Lender
reasonably determines that such refund, deduction or credit has become final;
provided, that the Borrower, upon request of the Lender, agrees to repay the
amount paid over to the Borrower (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to such Lender in the event that
such Lender is required to repay such refund to such Governmental Authority.
Nothing contained in this Section 5.03(f) shall require any Lender to make
available its tax returns (or any other information relating to its taxes which
it deems to be confidential) or to attempt to obtain any such refund, deduction
or credit (including any interest paid by the relevant Governmental Authority
and received by such Lender), which attempt would be inconsistent with any
reporting position otherwise taken by any Lender on its applicable tax returns.
 
(g)            FATCA.  If a payment made to a Lender under this Agreement would
be subject to U.S. Federal withholding tax imposed by FATCA if such Lender fails
to comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower or the Administrative Agent, at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
or the Administrative Agent, such documentation prescribed by applicable law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower or the Administrative
Agent to comply with its obligations under FATCA, to determine that such Lender
has complied with such Lender’s obligations under FATCA or to determine the
amount to deduct and withhold from any such  payments.  For purposes of this
Section 5.03(g), FATCA shall include any regulations or official interpretations
of FATCA.
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Section 5.04                          Illegality.  Notwithstanding any other
provision of this Agreement, in the event that it becomes unlawful for any
Lender to honor its obligation to make or maintain Eurodollar Loans either
generally or having a particular Interest Period hereunder, then (a) such Lender
shall promptly notify the Borrower and the Administrative Agent thereof and such
Lender’s obligation to make such Eurodollar Loans shall be suspended (the
“Affected Loans”) until such time as such Lender may again make and maintain
such Eurodollar Loans and (b) all Affected Loans which would otherwise be made
by such Lender shall be made instead as ABR Loans (and, if such Lender so
requests by notice to the Borrower and the Administrative Agent, all Affected
Loans of such Lender then outstanding shall be automatically converted into ABR
Loans on the date specified by such Lender in such notice) and, to the extent
that Affected Loans are so made as (or converted into) ABR Loans, all payments
of principal which would otherwise be applied to such Lender’s Affected Loans
shall be applied instead to its ABR Loans.
 
ARTICLE VI  
Conditions Precedent
Section 6.01                          Effective Date.  The obligations of the
Lenders to make Loans and of any Issuing Bank to issue Letters of Credit
hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 12.02):
 
(a)            The Administrative Agent and the Lenders shall have received all
fees required to be paid under Section 3.05, and all other fees and amounts due
and payable on or prior to the Effective Date, including, to the extent
invoiced, reimbursement or payment of all out‑of‑pocket expenses required to be
reimbursed or paid by the Borrower hereunder (including the fees and expenses of
Faegre Baker Daniels LLP, counsel to the Administrative Agent).
 
(b)            The Administrative Agent shall have received a certificate of the
Responsible Officer of the Borrower setting forth (i) resolutions of its board
of directors with respect to the authorization of the Borrower to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the Borrower
(A) who are authorized to sign the Loan Documents to which the Borrower is a
party and (B) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby, (iii) specimen
signatures of such authorized officers, and (iv) the Organizational Documents of
the Borrower, certified as being true and complete.  The Administrative Agent
and the Lenders may conclusively rely on such certificate until the
Administrative Agent receives notice in writing from the Borrower to the
contrary.
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(c)            The Administrative Agent shall have received certificates of the
appropriate State agencies with respect to the existence, qualification and good
standing of the Borrower.
 
(d)            The Administrative Agent shall have received a compliance
certificate which shall be substantially in the form of Exhibit D, duly and
properly executed by a Responsible Officer of the Borrower and dated as of the
Effective Date.
 
(e)            The Administrative Agent shall have received from each party
hereto counterparts (in such number as may be requested by the Administrative
Agent) of this Agreement signed on behalf of such party.
 
(f)            The Administrative Agent shall have received duly executed Notes
payable to each such Lender in a principal amount equal to its Maximum Credit
Amount dated as of the date hereof.
 
(g)            The Administrative Agent shall have received from each party
thereto duly executed counterparts (in such number as may be requested by the
Administrative Agent) of the Security Instruments described on Exhibit E.  In
connection with the execution and delivery of the Security Instruments, the
Administrative Agent shall be reasonably satisfied that the Security Instruments
create first priority, perfected Liens (subject only to Excepted Liens
identified in clauses (a) to (d) and (f) of the definition thereof, but subject
to the provisos at the end of such definition) on at least 80% of the Proved
Developed Reserves attributable to the Oil and Gas Properties evaluated in the
Initial Reserve Report, with such 80% first being satisfied from Proved
Developed Producing Reserves and thereafter from Proved Developed Nonproducing
Reserves.
 
(h)            The Administrative Agent shall have received from each Subsidiary
duly executed counterparts (in such number as may be requested by the
Administrative Agent) of the Guaranty Agreement.
 
(i)            The Administrative Agent shall be reasonably satisfied with the
environmental condition and compliance with Environmental Laws of the Oil and
Gas Properties of the Borrower and its Subsidiaries.
 
(j)            The Administrative Agent shall have completed a satisfactory due
diligence investigation of Borrower, including, without limitation, an
environmental assessment of both the Acquired Assets and existing Properties and
operations of Borrower.
 
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(k)            The Administrative Agent shall have received a certificate of a
Responsible Officer of the Borrower certifying that the Borrower has received
all consents and approvals required by Section 7.03.
 
(l)            The Administrative Agent shall have received the financial
statements referred to in Section 7.04(a) and the Initial Reserve Report
accompanied by a certificate covering the matters described in Section 8.12(b).
 
(m)            The Administrative Agent shall have received appropriate UCC
search certificates reflecting no prior Liens encumbering the Properties of the
Borrower and the Subsidiaries for Colorado and any other jurisdiction requested
by the Administrative Agent; other than those being assigned or released on or
prior to the Effective Date or Liens permitted by Section 9.03.
 
(n)            The Administrative Agent shall have received title information as
the Administrative Agent may reasonably require satisfactory to the
Administrative Agent setting forth the status of title to at least 80% of the
Proved Reserves attributable to the Oil and Gas Properties evaluated in the
Initial Reserve Report, with such 80% first being satisfied from Proved
Developed Producing Reserves and thereafter from Proved Developed Nonproducing
Reserves.
 
(o)            The Administrative Agent shall have received an opinion of Hart &
Trinen LLP counsel to the Borrower substantially in form and substance
satisfactory to the Administrative Agent.
 
(p)            The Administrative Agent shall have received a certificate of
insurance coverage of the Borrower evidencing that the Borrower is carrying
insurance in accordance with Section 7.12, which the Administrative Agent, in
its sole discretion, may determine is satisfactory.
 
(q)            The Administrative Agent shall have received from the Borrower a
list of all Oil and Gas Properties of the Borrower not subject to a Lien of the
Security Instruments as of the Effective Date substantially in the form of
Exhibit I attached hereto.
 
(r)            The absence of any action, suit investigation or proceeding
pending or threatened in any court or before any arbitrator or Governmental
Authority that purports to affect any transaction contemplated in the Loan
Documents or on the ability of the Borrower to perform its obligations under the
Loan Documents.
 
(s)            The Administrative Agent shall have received Borrower’s audited
consolidated balance sheet and statements of income, stockholders equity and
cash flows as of and for the fiscal year ended August 31, 2012.
 
(t)            The Administrative Agent shall have received a pro forma
consolidated balance sheet, income statement and cash flow statement and
projections (the “Pro Forma Statements”) reflecting the Orr Acquisition with
such information as the Administrative Agent may reasonably request to confirm
the tax, legal and business assumptions made in such Pro Forma Statements.  The
Pro Forma Statements must demonstrate, in reasonable judgment of the
Administrative Agent, together with all other information then available to the
Administrative Agent, that, after the Orr Acquisition, Borrower has the ability
to repay its Debts and satisfy its other obligations as and when due to comply
with the financial covenants set forth in the Loan Documents.
 
(u)            The Administrative Agent shall have received and reviewed, with
results satisfactory to the Administrative Agent, of information regarding
litigation, tax, accounting, labor, insurance, pension liabilities (actual or
contingent), real estate leases, material contracts, debt agreements, property
ownership, and contingent liabilities of Borrower and Guarantors.
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(v)            The Borrower and Lenders shall have received satisfactory credit
documentation.
 
(w)            The Administrative Agent shall have received such other documents
as the Administrative Agent or counsel to the Administrative Agent or any Lender
may reasonably request.
 
 
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Section 6.02                          Each Credit Event.  The obligation of each
Lender to make a Loan on the occasion of any Borrowing (including the initial
funding), and of any Issuing Bank to issue, amend, renew or extend any Letter of
Credit, is subject to the satisfaction of the following conditions:
 
(a)            At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.
 
(b)            At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no event, development or circumstance has occurred or
shall then exist that has resulted in, or could reasonably be expected to have,
a Material Adverse Effect.
 
(c)            The representations and warranties of the Borrower set forth in
this Agreement and in the other Loan Documents shall be true and correct on and
as of the date of such Borrowing or the date of issuance, amendment, renewal or
extension of such Letter of Credit, as applicable, except to the extent any such
representations and warranties are expressly limited to an earlier date, in
which case, on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, such
representations and warranties shall continue to be true and correct as of such
specified earlier date.
 
(d)            The making of such Loan or the issuance, amendment, renewal or
extension of such Letter of Credit, as applicable would not conflict with, or
cause any Lender or any Issuing Bank to violate or exceed, any applicable
Governmental Requirement, and no Change in Law shall have occurred that enjoins,
prohibits or restrains the making or repayment of any Loan, the issuance,
amendment, renewal, extension or repayment of any Letter of Credit or any
participations therein or the consummation of the transactions contemplated by
this Agreement or any other Loan Document.
 
(e)            No litigation shall be pending or threatened, which does or, with
respect to any threatened litigation, seeks to, enjoin, prohibit or restrain,
the making or repayment of any Loan, the issuance, amendment, renewal, extension
or repayment of any Letter of Credit or any participations therein or the
consummation of the transactions contemplated by this Agreement or any other
Loan Document.
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(f)            The receipt by the Administrative Agent of a Borrowing Request in
accordance with Section 2.03 or a request for a Letter of Credit in accordance
with Section 2.08(b), as applicable.
 
Each request for a Borrowing and each request for the issuance, amendment,
renewal or extension of any Letter of Credit shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the
matters specified in Section 6.02(a) through (f), except that the Borrower’s
representation and warranty with respect to Section 6.02(d) shall be deemed to
be to its knowledge.
Section 6.03      Additional Conditions to Credit Events.  In addition to the
conditions precedent set forth in Section 6.02, so long as any Lender is a
Defaulting Lender, any Issuing Bank shall not be required to issue, amend or
increase any Letter of Credit, unless it is satisfied that the LC Exposure will
be 100% covered by the Commitments of the Non-Defaulting Lenders and/or the
Borrower will Cash Collateralize the LC Exposure in accordance with Section
4.03(c)(iii)(B), and participating interests in any such newly issued or
increased Letter of Credit shall be allocated among the Non-Defaulting Lenders
in accordance with Section 4.03(c)(iii)(A) (and the Defaulting Lenders shall not
participate therein).
 
ARTICLE VII  
Representations and Warranties
The Borrower represents and warrants to the Lenders that:
Section 7.01    Organization; Powers.  Each of the Borrower and its Subsidiaries
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority, and has
all material governmental licenses, authorizations, consents and approvals
necessary, to own its assets and to carry on its business as now conducted, and
is qualified to do business in, and is in good standing in, every jurisdiction
where such qualification is required, except where failure to have such power,
authority, licenses, authorizations, consents, approvals and qualifications
could not reasonably be expected to have a Material Adverse Effect.
 

Section 7.02     Authority; Enforceability.  The Transactions are within the
Borrower’s and each Guarantor’s corporate power and authority and have been duly
authorized by all necessary corporate, and, if required, shareholder action. 
Each Loan Document to which the Borrower and each Guarantor is a party has been
duly executed and delivered by the Borrower and such Gurantor and constitutes a
legal, valid and binding obligation of the Borrower and such Guarantor, as
applicable, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
 
Section 7.03      Approvals; No Conflicts.  The Transactions (a) do not require
any consent or approval of, registration or filing with, or any other action by,
any Governmental Authority or any other third Person, nor is any such consent,
approval, registration, filing or other action necessary for the validity or
enforceability of any Loan Document or the consummation of the transactions
contemplated thereby, except such as have been obtained or made and are in full
force and effect other than (i) the recording and filing of the Security
Instruments as required by this Agreement, and (ii) those third party approvals
or consents which, if not made or obtained, would not cause a Default hereunder,
could not reasonably be expected to have a Material Adverse Effect or do not
have an adverse effect on the enforceability of the Loan Documents, (b) will not
violate any applicable law or regulation to which the Borrower or any Guarantor
is subject or any Organizational Document of the Borrower or any Guarantor or
any order of any Governmental Authority to which the Borrower or any Guarantor
is subject, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or any Guarantor or
their Properties, or give rise to a right thereunder to require any payment to
be made by the Borrower of any Guarantor and (d) will not result in the creation
or imposition of any Lien on the Properties of the Borrower or any Guarantor
(other than the Liens created by the Loan Documents).
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Section 7.04           Financial Condition; No Material Adverse Change.
 
(a)            The Borrower has heretofore furnished to the Lenders its
concolidated balance sheet and statements of income, shareholders equity and
cash flows as of and for the fiscal years ended August 31, 2011 and 2012,
audited by Ehrhardt Keefe Steiner & Hoffman P.C., independent public
accountants, certified by its chief financial officer.  Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower and its Consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to year‑end audit adjustments and the absence of footnotes in the case
of the unaudited quarterly financial statements.
 
(b)            Since August 31, 2012, (i) there has been no event, development
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Subsidiaries has
been conducted only in the ordinary course consistent with past business
practices.
 
(c)            On the date hereof, neither the Borrower nor any Subsidiary has
any Debt (including Disqualified Capital Stock) or any contingent liabilities,
off‑balance sheet liabilities or partnerships, liabilities for taxes or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the financial statements described
in Section 7.04(a) or in the most recent financial statements delivered pursuant
to Section 8.01(a) or (b).
 
Section 7.05           Litigation.
 
(a)            Except as set forth on Schedule 7.05 on the Effective Date or as
otherwise disclosed in writing to the Administrative Agent and the Lenders after
the Effective Date (which shall supplement Schedule 7.05), there are no actions,
suits, investigations or proceedings by or before any arbitrator or Governmental
Authority pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any Subsidiary (i) as to which there is a reasonable
possibility of an adverse determination that could be expected, individually or
in the aggregate, to result in a Material Adverse Effect or (ii) that involve
any Loan Document or the Transactions.
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(b)            Since the date of this Agreement, there has been no change in the
status of the matters disclosed in Schedule 7.05 that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.
 
Section 7.06            Environmental Matters.  Except for such matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect:
 
 
(a)            The Borrower and its Subsidiaries and each of their respective
Properties and operations thereon are, and within all applicable statute of
limitation periods have been, in compliance with all applicable Environmental
Laws.
 
(b)            The Borrower and its Subsidiaries have obtained all Environmental
Permits required for their operations on each of their Properties, with all such
Environmental Permits being currently in full force and effect, and neither the
Borrower nor any Subsidiary has received any written notice or otherwise has
knowledge that any such existing Environmental Permit will be revoked or that
any application for any new Environmental Permit or renewal of any existing
Environmental Permit will be protested or denied.
 
(c)            There are no claims, demands, suits, orders, inquiries, or
proceedings concerning any violation of, or any liability (including as a
potentially responsible party) under, any applicable Environmental Laws that is
pending or, to Borrower’s knowledge, threatened against the Borrower or any
Subsidiary or any of their respective Properties or as a result of any
operations at such Properties.
 
(d)            None of the Properties of the Borrower or any Subsidiary contain
or have contained any:  (i) underground storage tanks; (ii) asbestos‑containing
materials; (iii) landfills or dumps; (iv) hazardous waste management units as
defined pursuant to RCRA or any comparable state law; or (v) sites on or
nominated for the National Priority List promulgated pursuant to CERCLA or any
state remedial priority list promulgated or published pursuant to any comparable
state law.
 
(e)            There has been no Release or, to the Borrower’s knowledge,
threatened Release, of Hazardous Materials at, on, under or from any of the
Properties or the Borrower or any Subsidiary, there are no investigations,
remediations, abatements, removals, or monitorings of Hazardous Materials
required under applicable Environmental Laws at such Properties and, to the
knowledge of the Borrower, none of such Properties are adversely affected by any
Release or threatened Release of a Hazardous Material originating or emanating
from any other real property.
 
(f)            Neither the Borrower nor any Subsidiary has received any written
notice asserting an alleged liability or obligation under any applicable
Environmental Laws with respect to the investigation, remediation, abatement,
removal, or monitoring of any Hazardous Materials at, under, or Released or
threatened to be Released from any real properties offsite of the Borrower’s or
any Subsidiary’s Properties and, to the Borrower’s knowledge, there are no
conditions or circumstances that could reasonably be expected to result in the
receipt of such written notice.
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(g)            There has been no exposure of any Person or Property to any
Hazardous Materials as a result of or in connection with any operations and
businesses conducted on the Properties of the Borrower or any Subsidiary that
could reasonably be expected to form the basis for a claim for damages or
compensation.
 
 
(h)            The Borrower and each Subsidiary has provided to the Lenders
complete and correct copies of all environmental site assessment reports,
investigations, studies, analyses, and correspondence on environmental matters
(including matters relating to any alleged non‑compliance with or liability
under Environmental Laws) that are in the possession or control of the Borrower
or any Subsidiary and relating to any of their Properties or the operations
thereon.
 
Section 7.07            Compliance with the Laws and Agreements; No Defaults.
 
(a)            The Borrower and each Subsidiary is in compliance with all
Governmental Requirements applicable to it or its Property and all agreements
and other instruments binding upon it or its Property, and possesses all
licenses, permits, franchises, exemptions, approvals and other authorizations
granted by Governmental Authorities necessary for the ownership of its Property
and the conduct of its business, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
 
(b)            Neither the Borrower nor any Subsidiary is in default nor has any
event or circumstance occurred which, but for the expiration of any applicable
grace period or the giving of notice, or both, would constitute a default or
would require the Borrower or any Subisidary to Redeem or make any offer to
Redeem under any indenture, note, credit agreement or instrument pursuant to
which any Material Debt is outstanding or by which the Borrower or any
Subsidiary or any of their Properties is bound.
 
(c)            No Default or Borrowing Base Deficiency has occurred and is
continuing.
 
Section 7.08           Investment Company Act.  Neither the Borrower nor any
Subsidiary is an “investment company” or a company “controlled” by an
“investment company,” within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.
 
Section 7.09           Taxes.  Each of the Borrower and its Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or any Subsidiary, as
applicable, has set aside on its books adequate reserves in accordance with GAAP
or (b) to the extent that the failure to do so could not reasonably be expected
to result in a Material Adverse Effect.  The charges, accruals and reserves on
the books of the Borrower and its Subsidiaries in respect of Taxes and other
governmental charges are, in the reasonable opinion of the Borrower, adequate. 
No Liens for Taxes have been filed and, to the knowledge of the Borrower, no
claim is being asserted with respect to any such Tax or other such governmental
charge.
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Section 7.10           ERISA.
 
(a)            The Borrower, its Subsidiaries and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan except to the extent the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.
 
(b)            Each Plan is, and has been, established and maintained in
substantial compliance with its terms, ERISA and, where applicable, the Code
except to the extent the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.
 
(c)            No act, omission or transaction has occurred which could result
in imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary
duty liability damages under section 409 of ERISA except to the extent such
penalty or liability could not reasonably be expected to result in a Material
Adverse Effect.
 
(d)            Full payment when due has been made of all amounts which the
Borrower, the Subsidiaries or any ERISA Affiliate is required under the terms of
each Plan or applicable law to have paid as contributions to such Plan as of the
date hereof and no accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with respect
to any Plan.
 
(e)            Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by the
Borrower, any Subsidiary or any ERISA Affiliate in its sole discretion at any
time without any material liability.
 
(f)            Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any employee
pension benefit plan, as defined in section 3(2) of ERISA, that is subject to
Title IV of ERISA, section 302 of ERISA or section 412 of the Code.
 
Section 7.11        Disclosure; No Material Misstatements.  The Borrower has
disclosed to the Administrative Agent and the Lenders all agreements,
instruments and corporate or other restrictions to which it is subject, and all
other matters known to it, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.  None of the
reports, financial statements, certificates or other information furnished by or
on behalf of the Borrower or any Subsidiary to the Administrative Agent or any
Lender or any of their Affiliates in connection with the negotiation of this
Agreement or any other Loan Document or delivered hereunder or under any other
Loan Document (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, the Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.  There is no fact peculiar to the Borrower or any
Subsidiary which could reasonably be expected to have a Material Adverse Effect
or in the future is reasonably likely to have a Material Adverse Effect and
which has not been set forth in this Agreement or the Loan Documents or the
other documents, certificates and statements furnished to the Administrative
Agent or the Lenders by or on behalf of the Borrower or any Subsidiary prior to,
or on, the date hereof in connection with the transactions contemplated hereby. 
There are no statements or conclusions known to the Borrower in the preparation
of any Reserve Report which were based upon or include misleading information or
failed to take into account material information regarding the matters reported
therein, it being understood that projections concerning volumes attributable to
the Oil and Gas Properties of the Borrower and the Subsidiaries and production
and cost estimates contained in each Reserve Report are necessarily based upon
professional opinions, estimates and projections and that the Borrower and the
Subsidiaries do not warrant that such opinions, estimates and projections will
ultimately prove to have been accurate.
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Section 7.12               Insurance.  The Borrower has, and has caused its
Subsidiaries, to have (a) all insurance policies sufficient for its compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including public liability) that are usually insured against by companies
similarly situated and engaged in the same or a similar business for the assets
and operations of the Borrower and its Subsidiaries.  The Administrative Agent
and the Lenders have been named as additional insureds in respect of such
liability insurance policies and the Administrative Agent has been named as loss
payee with respect to the Property loss insurance maintained by the Borrower.
 
Section 7.13              Restriction on Liens.  Neither the Borrower nor any
Subsidiary is a party to any agreement or arrangement, or subject to any order,
judgment, writ or decree, which either restricts or purports to restrict its
ability to grant Liens to the Administrative Agent and the Lenders on or in
respect of their Properties to secure the Indebtedness and the Loan Documents.
 
Section 7.14             Subsidiaries.  The Borrower has no Subsidiaries (other
than the Guarantors listed on Schedule 7.14 and any Subsidiary that has been
approved in writing by the Administrative Agent pursuant to Section 9.15).
 
Section 7.15            Location of Business and Offices.  The Borrower’s
jurisdiction of organization is Colorado; the name of the Borrower as listed in
the public records of its jurisdiction of organization, as of the date hereof,
is Synergy Resources Corporation; and the organizational identification number
of the Borrower in its jurisdiction of organization is 20051109690 (or, in each
case, as set forth in a notice delivered to the Administrative Agent pursuant to
Section 8.01(l) in accordance with Section 12.01).  The Borrower’s principal
place of business and chief executive office is located at the address specified
in Section 12.01 (or as set forth in a notice delivered pursuant to Section
8.01(l) and Section 12.01(d)). Each Subsidiary’s jurisdiction of organization,
organizational identification number in its jurisdiction or organization, and
the location of its principal place of business and chief executive office is
stated on Schedule 7.15 (or as set forth in a notice delivered pursuant to
Section 8.01(l) in accordance with Section 12.01).
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Section 7.16            Properties; Titles, Etc.
 
(a)            The Borrower and its Subsidiaries have good and defensible title
to the Hydrocarbon Interests in the Oil and Gas Properties evaluated in the most
recently delivered Reserve Report and good title to all their personal
Properties, in each case, free and clear of all Liens except Liens permitted by
Section 9.03.  After giving full effect to the Excepted Liens, the Borrower owns
the net interests in production attributable to the Hydrocarbon Interests as
reflected in the most recently delivered Reserve Report, and the ownership of
such Properties shall not in any material respect obligate the Borrower to bear
the costs and expenses relating to the maintenance, development and operations
of each such Property in an amount in excess of the working interest of each
Property set forth in the most recently delivered Reserve Report that is not
offset by a corresponding proportionate increase in the Borrower’s net revenue
interest in such Property.
 
(b)            All material leases and agreements necessary for the conduct of
the business of the Borrower and its Subsidiaries are valid and subsisting, in
full force and effect, and there exists no default or event or circumstance
which with the giving of notice or the passage of time or both would give rise
to a default under any such lease or leases, which could reasonably be expected
to have a Material Adverse Effect.
 
(c)            The rights and Properties presently owned, leased or licensed by
the Borrower and its Subsidiaries including all easements and rights of way,
include all rights and Properties necessary to permit the Borrower and its
Subsidiaries to conduct their business in all material respects in the same
manner as its business has been conducted prior to the date hereof.
 
(d)            All of the material Properties of the Borrower and its
Subsidiaries which are reasonably necessary for the operation of their
businesses are in good working condition and are maintained in accordance with
prudent business standards.
 
(e)            The Borrower and each Subsidiary owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual Property
material to its business, and the use thereof by the Borrower and its
Subsidiaries does not and will not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.  Each of the
Borrower and its Subsidiaries either owns or has valid licenses or other rights
to use all databases, geological data, geophysical data, engineering data,
seismic data, maps, interpretations and other technical information used in its
business as presently conducted, subject to the limitations contained in the
agreements governing the use of the same, which limitations are customary for
companies engaged in the business of the exploration and production of
Hydrocarbons, with such exceptions as could not reasonably be expected to have a
Material Adverse Effect.
 
Section 7.17         Maintenance of Properties.  Except for such acts or
failures to act as could not be reasonably expected to have a Material Adverse
Effect, the Oil and Gas Properties (and Properties unitized therewith) of the
Borrower and its Subsidiaries have been maintained, operated and developed in a
good and workmanlike manner and in conformity with all Governmental Requirements
and in conformity with the provisions of all leases, subleases or other
contracts comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties of the Borrower and its
Subsidiaries.  Specifically in connection with the foregoing, except for those
as could not be reasonably expected to have a Material Adverse Effect, (a) no
Oil and Gas Property of the Borrower or its Subsidiaries is subject to having
allowable production reduced below the full and regular allowable (including the
maximum permissible tolerance) because of any overproduction (whether or not the
same was permissible at the time) and (b) none of the wells comprising a part of
the Oil and Gas Properties (or Properties unitized therewith) of the Borrower or
its Subsidiaries is deviated from the vertical more than the maximum permitted
by Governmental Requirements, and such wells are, in fact, bottomed under and
are producing from, and the well bores are wholly within, the Oil and Gas
Properties (or in the case of wells located on Properties unitized therewith,
such unitized Properties) of the Borrower and its Subsidiaries.  All pipelines,
wells, gas processing plants, platforms and other material improvements,
fixtures and equipment owned in whole or in part by the Borrower or its
Subsidiaries that are necessary to conduct normal operations are being
maintained in a state adequate to conduct normal operations, and in a manner
consistent with the past practices of the Borrower and its Subsidiaries (other
than those the failure of which to maintain in accordance with this Section 7.17
could not reasonably be expected to have a Material Adverse Effect).
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Section 7.18                          Gas Imbalances, Prepayments.  Except as
set forth on Schedule 7.18 or on the most recent certificate delivered pursuant
to Section 8.12(b), on a net basis there are no gas imbalances, take or pay or
other prepayments which would require the Borrower or any Subsidiary to deliver
Hydrocarbons produced from the Oil and Gas Properties of the Borrower or any
Subsidiary at some future time without then or thereafter receiving full payment
therefor exceeding two percent (2%) of the Borrower’s Proved Reserves of natural
gas (on an mcf equivalent basis) in the aggregate.
Section 7.19                          Marketing of Production.  Except as set
forth on Schedule 7.19 or on the most recent certificate delivered pursuant to
Section 8.12(b), neither the Borrower nor any Subsidiary a party to any material
agreements which is not cancelable on sixty (60) days notice or less without
penalty or detriment for the sale of production from the Borrower’s or any
Subsidiary’s Hydrocarbons (including calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that (a)
pertain to the sale of production at a fixed price and (b) have a maturity or
expiry date of longer than six (6) months from the date thereof.
 
Section 7.20                          Hedging Agreements.  Schedule 7.20, as of
the date hereof, and after the date hereof, each report required to be delivered
by the Borrower pursuant to Section 8.01(e), sets forth, a true and complete
list of all Hedging Agreements of the Borrower and each Subsidiary, the material
terms thereof (including the type, term, effective date, termination date and
notional amounts or volumes), all credit support agreements relating thereto
(including any margin required or supplied) and the counterparty to each such
agreement.
 
Section 7.21                          Use of Loans and Letters of Credit.  The
proceeds of the Loans and the Letters of Credit shall be used (a) to provide
working capital for exploration and production operations, acquisition of oil
and gas properties and general corporate purposes and (b) for Restricted
Payments permitted under Section 9.04.  A portion of the Borrowing Base (not to
exceed the LC Commitment) may be used for the issuance of Letters of Credit that
shall expire prior to the Termination Date. The Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose, whether immediate, incidental or ultimate, of buying or
carrying margin stock (within the meaning of Regulation T, U or X of the
Board).  No part of the proceeds of any Loan or Letter of Credit will be used
for any purpose which violates the provisions of Regulations T, U or X of the
Board.
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Section 7.22                          Solvency.  After giving effect to the
transactions contemplated hereby, (a) the aggregate assets (after giving effect
to amounts that could reasonably be received by reason of indemnity, offset,
insurance or any similar arrangement), at a fair valuation, of the Borrower and
the Guarantors will exceed the aggregate Debt of the Borrower and the Guarantors
on a consolidated basis as the Debt becomes absolute and matures, (b) each of
the Borrower and the Guarantors has not incurred and does not intend to incur,
and does not believe that it will incur, Debt beyond its ability to pay such
Debt (after taking into account the timing and amounts of cash to be received by
each of the Borrower and the Guarantors and the amounts to be payable on or in
respect of its liabilities, and giving effect to amounts that could reasonably
be received by reason of indemnity, offset, insurance or any similar
arrangement) as such Debt becomes absolute and matures and (c) the Borrower and
the Guarantors will not have (and has no reason to believe that it will have
thereafter) unreasonably small capital for the conduct of its business.
 
Section 7.23                          Casualty Events.  Since January 1, 2012,
neither the business nor any Properties of the Borrower or any Subsidiary have
been materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of property or cancellation of
contracts, permits or concessions by any domestic or foreign Governmental
Authority, riot, activities or armed forces or acts of God or of any public
enemy.
 
Section 7.24                          Material Agreements.  Set forth on
Schedule 7.24 hereto or as disclosed in writing to the Administrative Agent
(which shall promptly furnish a copy to the Lenders), which shall be a
supplement to Schedule 7.24, is a complete and correct list of all material
agreements and other instruments maintained by the Borrower  and the
Subsidiaries setting forth each counterparty thereto (other than the Loan
Documents, exploration and/or development agreements and joint operating
agreements to which the Borrower or any Subsidiary is a party) relating to the
purchase, transportation by pipeline, gas processing, marketing, development,
sale and supply of Hydrocarbons, farmout arrangements, contract operating
agreements or other material contracts (excluding oil and gas leases of the
Borrower or any Subsidiary and joint operating agreements to which the Borrower
or any Subsidiary is a party) to which the Borrower or any Subsidiary is a party
or by which its Properties are bound, in each case for which breach,
nonperformance, cancellation or failure to renew could reasonably be expected to
have a Material Adverse Effect (collectively “Material Agreements”) and copies
of such documents have been provided to the Administrative Agent.  All such
agreements are in full force and effect and neither the Borrower nor any
Subsidiary is in default thereunder, nor is there any uncured default by any
Affiliate predecessor in interest to the Borrower or any Subsidiary or, to the
Borrower’s knowledge, by any predecessor in interest to the Borrower or any
Subsidiary (other than an Affiliate predecessor) or counterparty thereto, nor
has the Borrower or any Subsidiary altered any material item of such agreements
since the Effective Date without the prior written consent of the Lenders.
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Section 7.25                          No Brokers.  No Person is entitled to any
brokerage fee or finder’s fee or similar fee or commission in connection with
arranging the Loans contemplated by this Agreement.
 
Section 7.26                          Reliance.  In connection with the
negotiation of and the entering into this Agreement, the Borrower and each
Subsidiary acknowledges and represents that none of the Lenders, the
Administrative Agent or any representative of any of the foregoing is acting as
a fiduciary or financial or investment advisor for it; it is not relying upon
any representations (whether written or oral) of such Persons; it has consulted
with its own legal, regulatory, tax, business investment, financial and
accounting advisors to the extent it has deemed necessary, and it has made its
own investment, hedging, and trading decisions based upon its own judgment and
upon any advice from such advisors as it has deemed necessary and not upon any
view expressed by any Lender, the Administrative Agent or any representative of
any of the foregoing; it has not been given by any Lender, the Administrative
Agent or any representative of any of the foregoing (directly or indirectly
through any other Person) any advice, counsel, assurance, guarantee, or
representation whatsoever as to the expected or projected success,
profitability, return, performance, result, effect, consequence, or benefit
(either legal, regulatory, tax, financial, accounting, or otherwise) of this
Agreement or the transactions contemplated hereby; and it is entering into this
Agreement and the other Loan Documents with a full understanding of all of the
risks hereof and thereof (economic and otherwise), and it is capable of assuming
and willing to assume (financially and otherwise) those risks.
 
Section 7.27                          Payments by Purchasers of Production.  All
proceeds from the sale of the Borrower’s and each Subsidiary’s interests in
Hydrocarbons from its Oil and Gas Properties are currently being paid in full by
the purchaser thereof on a timely basis and at prices and terms comparable to
market prices and terms generally available at the time such prices and terms
were negotiated for oil and gas production from producing areas situated near
such Oil and Gas Properties, and none of such proceeds are currently being held
in suspense by such purchaser or any other Person.
 
Section 7.28                          Existing Accounts Payable.  As of the
Effective Date, set forth on Schedule 7.28 hereto is a complete and correct list
of all existing accounts payable of the Borrower and its Subsidiaries that are
more than sixty (60) days past due.
 
Section 7.29                          Foreign Corrupt Practices.  Neither the
Borrower, nor any of its Subsidiaries, nor any director, officer, agent,
employee or Affiliate of the Borrower or any of its Subsidiaries is aware of or
has taken any action, directly or indirectly, that would result in a material
violation by such Persons of the FCPA, including making use of the mails or any
means or instrumentality of interstate commerce corruptly in furtherance of an
offer, payment, promise to pay or authorization of the payment of any money, or
other property, gift, promise to give, or authorization of the giving of
anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA; and, the Borrower, its
Subsidiaries and its and their Affiliates have conducted their business in
material compliance with the FCPA and have instituted and maintained policies
and procedures designed to ensure, and which are reasonably expected to continue
to ensure, continued compliance therewith.
 
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Section 7.30                          Money Laundering.  The operations of the
Borrower and its Subsidiaries are and have been conducted at all times in
material compliance with applicable financial recordkeeping and reporting
requirements of the Money Laundering Laws, and no action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Borrower or any of its Subsidiaries with respect to the Money
Laundering Laws is pending or, to the best knowledge of the Borrower,
threatened.
 
Section 7.31                          OFAC.  Neither the Borrower, its
Subsidiaries, nor any director, officer, agent, employee or Affiliate of the
Borrower or any of its Subsidiaries is currently subject to any material U.S.
sanctions administered by OFAC, and neither the Borrower nor any Subsidiary will
directly or indirectly use the proceeds from the Loans or lend, contribute or
otherwise make available such proceeds to any joint venture partner or other
Person, for the purpose of financing the activities of any Person currently
subject to any U.S. sanctions administered by OFAC.
 
ARTICLE VIII  
Affirmative Covenants
Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents shall have been paid in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:
Section 8.01       Financial Statements; Other Information.  The Borrower will
furnish to the Administrative Agent and each Lender:
 
(a)            Annual Financial Statements.  As soon as available, but in any
event in accordance with then applicable law and not later than (120) days after
the end of each fiscal year of the Borrower, its audited consolidated balance
sheet and related statements of operations (and, as the balance sheet and
statements of operations, accompanied by consolidated schedules), shareholders’
equity and cash flows as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all reported
on by a firm of independent public accountants of recognized national or
regional standing reasonably acceptable to the Administrative Agent (without a
“going concern” or like qualification or exception and without any qualification
or exception as to the scope of such audit), and certified by one of its
Financial Officers, to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied.
 
(b)            Quarterly Financial Statements.  Within sixty (60) days after the
end of each fiscal quarter of each fiscal year of the Borrower, a consolidated
balance sheet, income statement and statement of the cumulative cash flows of
the Borrower and its Consolidated Subsidiaries for the period from the beginning
of the then current fiscal year to the end of such fiscal quarter, prepared by
the Borrower and accompanied by a certification of a Responsible Officer of the
Borrower, dated the date of the delivery of the financial statements to the
Administrative Agent and each Lender, and further certifying that no Default
exists under this Agreement and that such financial statements present fairly in
all material respects the financial position and results of operations of the
Borrower in accordance with GAAP, subject to normal year‑end adjustments and the
absence of footnotes (other than those reasonably required to explain financial
data).
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(c)            Certificate of Financial Officer – Compliance.  Concurrently with
any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of the a Financial Officer in substantially the form of Exhibit D
attached hereto (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 8.14 and Section
9.01, (iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 7.04 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate, and (iv) if,
at any time, the Borrower has any Consolidated Subsidiaries, setting forth
consolidating spreadsheets that show all Consolidated Subsidiaries and
eliminating entries, in such detail as would be provided to the auditors of the
Borrower.
 
(d)            Certificate of Accounting Firm – Defaults.  Concurrently with any
delivery of financial statements under Section 8.01(a), a certificate of the
accounting firm that reported on such financial statements stating whether they
obtained knowledge during the course of their examination of such financial
statements of any Default (which certificate may be limited to the extent
required by accounting rules or guidelines).
 
(e)            Certificate of Financial Officer – Hedging Agreements. 
Concurrently with any delivery of financial statements under Section 8.01(a) or
Section 8.01(b), a certificate of a Financial Officer, in substantially the form
of Exhibit G attached hereto, setting forth as of the last Business Day of such
fiscal quarter or fiscal year, as the case may be, a true and complete list of
all Hedging Agreements of the Borrower, the material terms thereof (including
the type, term, effective date, termination date and notional amounts or
volumes), the net mark‑to‑market value therefor, any new credit support
agreements relating thereto not listed on Schedule 7.20, any margin required or
supplied under any credit support document, and the counterparty to each such
agreement.
 
(f)            Certificate of Insurer – Insurance Coverage.  Promptly following
any request therefor by the Administrative Agent or any Lender, a certificate of
insurance coverage from each insurer with respect to the insurance required by
Section 8.07, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the
applicable policies.
 
(g)            Other Accounting Reports.  Promptly upon receipt thereof, a copy
of each other report or letter (except standard and customary correspondence)
submitted to the Borrower or any of its Subsidiaries by independent accountants
in connection with any annual, interim or special audit made by them of the
books of the Borrower or any such Subsidiary, and a copy of any response by the
Borrower, or the board of directors of the Borrower, to such letter or report.
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(a)            SEC and Other Filings; Reports to Shareholders.  Promptly after
the same become publicly available, copies of all periodic and other reports,
proxy statements and other materials filed by the Borrower or any Subsidiary
with the SEC, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be.
 
(h)            Notices Under Material Instruments.  Promptly after the
furnishing thereof, copies of any financial statement, report or notice
furnished to or by any Person pursuant to the terms of any preferred stock
designation, indenture, loan or credit or other similar agreement, other than
this Agreement and not otherwise required to be furnished to the Lenders
pursuant to any other provision of this Section 8.01.
 
(i)            Lists of Purchasers.  Concurrently with the delivery of any
Reserve Report to the Administrative Agent pursuant to Section 8.12, a list of
all Persons purchasing Hydrocarbons from the Borrower or any Subsidiary produced
from the Oil and Gas Properties of the Borrower or its Subsidiaries included in
the latest Reserve Report.
 
(j)            Notice of Sales of Oil and Gas Properties.  In the event the
Borrower or any Subsidiary intends to sell, transfer, assign or otherwise
dispose of any of its Oil or Gas Properties or any Equity Interests in the
Borrower in accordance with Section 9.11, prior written notice of such
disposition, the price thereof and the anticipated date of closing and any other
details thereof requested by the Administrative Agent or any Lender.
 
(k)            Notice of Casualty Events.  Prompt written notice, and in any
event within three (3) Business Days of the occurrence of any Casualty Event or
the commencement of any action or proceeding that could reasonably be expected
to result in a Casualty Event.
 
(l)            Information Regarding the Borrower and Guarantors.  Prompt
written notice (and in any event within ten Business Days prior thereto) of any
change (i) in the Borrower’s or any Guarantor’s corporate name or in any trade
name used to identify such Person in the conduct of its business or in the
ownership of its Properties, (ii) in the location of the Borrower’s or any
Guarantor’s chief executive office or principal place of business, (iii) in the
Borrower’s or any Guarantor’s identity or corporate structure or in the
jurisdiction in which such Person is organized or formed, (iv) in the Borrower’s
or any Guarantor’s jurisdiction of organization or such Person’s organizational
identification number in such jurisdiction of organization and (v) in the
Borrower’s or any Guarantor’s federal taxpayer identification number.
 
(m)            Other Reports.  The Borrower shall prepare and provide the
Lenders and Administrative Agent the following reports:
 
(i) concurrently with any delivery of financial statements under Section
8.01(a), a 12 month budget for the Borrower and its Subsidiaries for the current
fiscal year prepared by the management of the Borrower;
 
(ii)  on a quarterly basis by the 45th day after the end of each fiscal quarter
of the Borrower, an updated report setting forth the forecasted Capital
Expenditure budget for the Borrower and its Subsidiaries for the following
twelve (12) month period; and
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(iii) such other information as the Administrative Agent may reasonably request,
including each of the following to the extent available: an unaudited income
statement, a consolidated balance sheet and a statement of cash flow (with such
statement to show any variations from the budget previously delivered), copies
of the Borrower’s and each Subsidiary’s bank account statements, statement of
expenses for the preceding month, notice of any material changes with regard to
oil and gas prices received, contracts or production expenses or any material
litigation affecting the operation of the Oil and Gas Properties of the Borrower
or its Subsidiaries.
 
 
(n)            Notices of Certain Changes.  Subject to Section 9.20, promptly,
but in any event within five (5) Business Days after the execution thereof,
copies of any amendment, modification or supplement to the Organizational
Documents, any preferred stock designation or any other organizational document
of the Borrower or any Subsidiary.
 
(o)            Notice of Purchase of Oil and Gas Properties.  In the event the
Borrower  or any Subsidiary acquires Oil and Gas Properties having an
acquisition cost in excess of $1,000,000 (which amount shall be applied on an
acquisition by acquisition basis, but continuing as one acquisition any group of
properties that are part of a single transaction or a series of related
transactions), the Borrower shall deliver promptly, but in any event within
forty‑five (45) days after the end of each fiscal quarter in which such
acquisition occurred, to the Administrative Agent a list of all Oil and Gas
Properties of the Borrower and its Subsidiaries (including each such newly
acquired Oil and Gas Property) not subject to a Lien of the Security Instruments
at the time of delivery of such list to the Administrative Agent, in
substantially the form of Exhibit I attached hereto.
 
(p)            Non‑Consent Election.  Written notice of any non-consent election
within five (5) Business Days after the Borrower’s or any Subsidiary’s election
to withhold consent to participate in any wells located on any of the Oil and
Gas Properties.
 
(q)            Other Requested Information.  Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrower compliance with the terms of this Agreement
or any other Loan Document, in each case, as the Administrative Agent or any
Lender may reasonably request.
 
Section 8.02           Notices of Material Events.  The Borrower will furnish to
the Administrative Agent and each Lender prompt written notice of the following:
 
(a)            the occurrence of any Default or threatened Default under this
Agreement or any of the other Loan Documents;
 
(b)            the filing or commencement of, or the threat in writing of, any
action, suit, proceeding, investigation or arbitration by or before any
arbitrator or Governmental Authority against or affecting the Borrower, any
Subsidiary or any Affiliate thereof not previously disclosed in writing to the
Lenders or any material adverse development in any action, suit, proceeding,
investigation or arbitration (whether or not previously disclosed to the
Lenders) that, in either case, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect; and
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(c)            any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
 
Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
 
Section 8.03           Existence; Conduct of Business.  The Borrower will, and
will cause each Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each jurisdiction in which its Oil and Gas Properties are located or the
ownership of its Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.10.
 
Section 8.04            Payment of Obligations.  The Borrower will, and will
cause each Subsidiary to,  pay its obligations, including Tax liabilities and
payables with rights to mechanic and materialman liens, before the same shall
become delinquent or in default, except where (a) the validity or amount thereof
is being contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect
or result in the seizure or levy of any Property of the Borrower or any
Subsidiary.
 
Section 8.05           Performance of Obligations under Loan Documents.  The
Borrower will pay the Notes according to the reading, tenor and effect thereof,
and the Borrower will, and will cause each Subsidiary to, do and perform every
act and discharge all of the obligations to be performed and discharged by them
under the Loan Documents, including this Agreement, at the time or times and in
the manner specified.
 
Section 8.06           Operation and Maintenance of Properties.  The Borrower,
at its own expense, will, and will cause each Subsidiary to:
 
(a)            operate its Oil and Gas Properties and other material Properties
or cause such Oil and Gas Properties and other material Properties to be
operated in a careful and efficient manner in accordance with the practices of
the industry and in compliance with all applicable contracts and agreements and
in compliance with all Governmental Requirements, including applicable proration
requirements and Environmental Laws, and all applicable laws, rules and
regulations of every other Governmental Authority from time to time constituted
to regulate the development and operation of its Oil and Gas Properties and the
production and sale of Hydrocarbons and other minerals therefrom, except, in
each case, where the failure to comply could not reasonably be expected to have
a Material Adverse Effect;
 
(b)            keep, preserve and maintain all Property that is material to the
conduct of its business in good working order and condition, ordinary wear and
tear excepted, and preserve, maintain and keep in good repair, working order and
efficiency (ordinary wear and tear excepted) all of its material Oil and Gas
Properties and other material Properties, including all equipment, machinery and
facilities;
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(c)            promptly pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Oil and Gas Properties and will do all other
things necessary, in accordance with customary industry standards, to keep
unimpaired their rights with respect thereto and prevent any forfeiture thereof
or default thereunder;
 
(d)            promptly perform or make reasonable and customary efforts to
cause to be performed, in accordance with industry standards, the obligations
required by each and all of the assignments, deeds, leases, sub‑leases,
contracts and agreements affecting its interests in its Oil and Gas Properties
and other material Properties; and
 
(e)            operate its Oil and Gas Properties and other material Properties
or cause or make reasonable and customary efforts to cause such Oil and Gas
Properties and other material Properties to be operated in accordance with the
practices of the industry and in material compliance with all applicable
contracts and agreements and in compliance in all material respects with all
Governmental Requirements.
 
Section 8.07          Insurance.  The Borrower will, and will cause each
Subsidiary to, maintain, with financially sound and reputable insurance
companies, insurance (a) in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations and (b) in accordance with all
Governmental Requirements.  The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as “additional insureds” and “loss payees”, as applicable, and
provide that the insurer will endeavor to give at least thirty (30) days prior
notice of any cancellation to the Administrative Agent.
 
Section 8.08         Books and Records; Inspection Rights.  The Borrower will,
and will cause each Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities.  The Borrower will, and will cause
each Subsidiary to, permit any representatives designated by the Administrative
Agent or any Lender, upon reasonable prior notice, to visit and inspect its
Properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
 
Section 8.09          Compliance with Laws.  The Borrower will, and will cause
each Subsidiary to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
 
Section 8.10            Environmental Matters.
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(a)            The Borrower shall at its sole expense: (i) comply, and shall
cause its Properties and operations and each Subsidiary and each Subsidiary’s
Properties and operations to comply, with all applicable Environmental Laws, the
breach of which could be reasonably expected to have a Material Adverse Effect;
(ii) not Release or threaten to Release any Hazardous Material on, under, about
or from such Property or any other property offsite from such Property to the
extent caused by the Borrower’s or any Subsidiary’s operations except in
 
 
compliance with applicable Environmental Laws, the Release or threatened Release
of which could reasonably be expected to have a Material Adverse Effect; (iii)
timely obtain or file, and shall cause each Subsidiary to timely obtain or file,
all Environmental Permits, if any, required under applicable Environmental Laws
to be obtained or filed in connection with the operation or use of such
Property, which failure to obtain or file could reasonably be expected to have a
Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each Subsidiary to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the “Remedial Work”) in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future Release or threatened Release of any Hazardous Material on, under, about
or from any of such Property, which failure to commence and diligently prosecute
to completion could reasonably be expected to have a Material Adverse Effect;
(v) conduct, and cause each Subsidiary to conduct, its operations and business
in a manner that will not expose such Property or Person to Hazardous Materials
that could reasonably be expected to form the basis for a claim for damages or
compensation that could reasonably be expected to have a Material Adverse
Effect; and (vi) establish and implement, and cause each Subsidiary to establish
and implement, such procedures as may be necessary to continuously determine and
assure that the Borrower’ obligations under this Section 8.10(a) are timely and
fully satisfied, which failure to establish and implement could reasonably be
expected to have a Material Adverse Effect.
 
(b)            The Borrower will promptly, but in no event later than five (5)
days of the occurrence of any of the following, notify the Administrative Agent
and the Lenders in writing of any threatened action, investigation or inquiry by
any Governmental Authority or any threatened demand or lawsuit by any Person
against the Borrower or its Subsidiaries or their Properties of which the
Borrower has knowledge in connection with any Environmental Laws if the Borrower
reasonably anticipates that such action will result in liability (whether
individually or in the aggregate) in excess of $200,000, not fully covered by
insurance, subject to normal deductibles.
 
(c)            The Borrower will, and will cause each Subsidiary to, undertake
reasonable environmental assessments, audits and tests in accordance with the
most current version of the American Society of Testing Materials standards upon
request by the Administrative Agent and the Lenders (i) if the Administrative
Agent reasonably believes (A) that there has been a Release of Hazardous
Materials or (B) non‑compliance with an Environmental Law has occurred, and that
such an event could reasonably be expected to cause a Material Adverse Effect
(or as otherwise required to be obtained by the Administrative Agent or the
Lenders by any Governmental Authority), in connection with any Oil and Gas
Properties or other Properties of the Borrower and its Subsidiaries
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(d)            To the extent the Borrower is not the operator of any Property,
the Borrower will use reasonable efforts to cause the operator to comply with
this Section 8.10.
 
Section 8.11      Further Assurances.
 
(a)            The Borrower at its sole expense will, and will cause each
Subsidiary to, promptly execute and deliver to the Administrative Agent all such
other documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of the Borrower or any
Subsidiary, as the case may be, in the Loan Documents, including the Notes, if
any, or to further evidence and more fully describe the collateral intended as
security for the Indebtedness, or to correct any defect, error or inaccuracy in
this Agreement or the Security Instruments, or to state more fully the
obligations secured therein, or to perfect, protect or preserve any Liens
created pursuant to this Agreement or any of the Security Instruments or the
priority thereof, or to make any recordings, file any notices or obtain any
consents, all as may be reasonably necessary or appropriate, in the sole
discretion of the Administrative Agent, in connection therewith.
 
(b)            The Borrower hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Mortgaged Properties without the signature of
the Borrower or any Guarantor where permitted by law.  A carbon, photographic or
other reproduction of the Security Instruments or any financing statement
covering the Mortgaged Property or any part thereof shall be sufficient as a
financing statement where permitted by law.  The Borrower acknowledges and
agrees that any such financing statement may describe the collateral as “all
assets” of the applicable party or words of similar effect as may be required by
the Administrative Agent.
 
Section 8.12           Reserve Reports.
 
(a)            Commencing on May 15, 2013 and on or before each November 15 and
May 15 thereafter and in connection with any Interim Redetermination, the
Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report (both in .pdf and Aries .mbd file format) evaluating the Oil and Gas
Properties of the Borrower and its Subsidiaries as of the immediately preceding
August 31st and February 28th or the relevant date established for purposes of
the Interim Redetermination, as applicable.  The Reserve Report shall be
prepared by one or more Approved Petroleum Engineers evaluating the Proved
Developed Producing Reserves, Proved Developed Nonproducing Reserves and Proved
Undeveloped Reserves for the Oil and Gas Properties of the Borrower and its
Subsidiaries.  In connection with each Reserve Report, the Borrower shall
provide the Administrative Agent and the Lenders with (i) monthly lease
operating statements (including production volumes, volumes sold, sales revenues
and price per volume, ad valorem, severance and production taxes and lease
operating expenses) for the 12-month period ending on the effective date of the
Reserve Report and for all full calendar months ending after such effective date
through the date the Reserve Report is delivered to the Administrative Agent and
the Lenders, covering all Proved Developed Producing Reserves of the Borrower,
and (ii) a statement identifying any Proved Developed Producing Reserves that
are not included in the Reserve Report.
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(b)            With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Lenders a certificate from a
Responsible Officer, in substantially the form of Exhibit H attached hereto,
certifying that: (i) the data contained in the Reserve Report and any other
information delivered in connection therewith is true and correct, (ii) the
Borrower and its Subsidiaries own good and defensible title to the Hydrocarbon
Interests in the Oil and Gas Properties evaluated in such Reserve Report and
such Properties are free of all Liens except for Liens permitted by Section
9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis
there are no gas imbalances, take or pay or other prepayments in excess of the
volume specified in Section 7.18 with respect to its Oil and Gas Properties
evaluated in such Reserve Report which would require the Borrower or any
Subsidiary to deliver Hydrocarbons either generally or produced from such Oil
and Gas Properties at some future time without then or thereafter receiving full
payment therefor, (iv) none of the Oil and Gas Properties have been sold since
the date of the last Borrowing Base determination except as set forth on an
exhibit to the certificate, which certificate shall list all of its Oil and Gas
Properties sold and in such detail as reasonably required by the Administrative
Agent, (v) attached to the certificate is a list of all marketing agreements
entered into subsequent to the later of the Effective Date or the most recently
delivered Reserve Report which the Borrower could reasonably be expected to have
been obligated to list on Schedule 7.19 had such agreement been in effect on the
Effective Date and (vi) attached thereto is a schedule of the proved Oil and Gas
Properties of the Borrower and its Subsidiaries evaluated by such Reserve Report
that are Mortgaged Properties and demonstrating the percentage of the Borrowing
Base that the value (by NPV) of such Mortgaged Properties represent in
compliance with Section 8.12(b).
 
Section 8.13                          Title Information.
 
(a)            On or before the delivery to the Administrative Agent and the
Lenders of each Reserve Report required by Section 8.12(a), the Borrower will
deliver title information in form and substance reasonably acceptable to the
Administrative Agent covering enough of the Oil and Gas Properties evaluated by
such Reserve Report that were not included in the immediately preceding Reserve
Report, so that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, reasonably
satisfactory title information on at least 80% (by NPV) of the total Proved
Reserves attributable to the Oil and Gas Properties evaluated in such Reserve
Report, with such 80% first being satisfied from Proved Developed Producing
Reserves, next from Proved Developed Nonproducing Reserves and thereafter from
Proved Undeveloped Reserves.
 
(b)            If the Borrower has provided title information for additional
Properties under Section 8.13(a), the Borrower shall, within forty‑five (45)
days of notice from the Administrative Agent that title defects or exceptions
exist with respect to such additional Properties, either (i) cure any such title
defects or exceptions (including defects or exceptions as to priority) which are
not permitted by Section 9.03 raised by such information, (ii) substitute
acceptable Mortgaged Properties with no title defects or exceptions except for
Excepted Liens (other than Excepted Liens described in clauses (e), (g) and (h)
of such definition) having an equivalent value or (iii) deliver title
information in form and substance acceptable to the Administrative Agent so that
the Administrative Agent shall have received, together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 80% (by NPV) of the Oil and Gas Properties evaluated by such Reserve
Report.
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(c)            If the Borrower is unable to cure any title defect requested by
the Administrative Agent or the Lenders to be cured within the 45‑day period or
the Borrower does not comply with the requirements to provide acceptable title
information covering 80% (by NPV) of the Oil and Gas Properties evaluated in the
most recent Reserve Report, such default shall not be a Default, but instead the
Administrative Agent and/or the Lenders shall have the right to exercise the
following remedy in their sole discretion from time to time, and any failure to
so exercise this remedy at any time shall not be a waiver as to future exercise
of the remedy by the Administrative Agent or the Lenders.  To the extent that
the Administrative Agent or the Lenders are not satisfied with title to any
Mortgaged Property after the 45‑day period has elapsed, such unacceptable
Mortgaged Property shall not count towards the 80% requirement, and the
Administrative Agent may send a notice to the Borrower and the Lenders that the
then outstanding Borrowing Base shall be reduced by an amount as determined by
the Lenders to cause the Borrower to be in compliance with the requirement to
provide acceptable title information on 80% (by NPV) of the Oil and Gas
Properties evaluated in the most recent Reserve Report.  This new Borrowing Base
shall become effective immediately after receipt of such notice.
 
 
Section 8.14          Additional Collateral; Additional Guarantors.
 
(a)            In connection with each redetermination of the Borrowing Base,
the Borrower shall review the Reserve Report and the list of current Mortgaged
Properties (as contemplated by Section 8.12(b)(vi)) to ascertain whether the
Mortgaged Properties represent at least 80% (by NPV) of the Oil and Gas
Properties evaluated in the most recently completed Reserve Report, with such
80% first being satisfied from Proved Developed Producing, next from Proved
Developed Nonproducing Reserves and thereafter from Proved Undeveloped
Reserves.  In the event that the Mortgaged Properties do not satisfy such 80%
(by NPV), then the Borrower shall, and shall cause each Subsidiary to, grant,
within forty‑five (45) days of delivery of the certificate required under
Section 8.12(b), to the Administrative Agent as security for the Indebtedness a
first‑priority Lien interest (provided that Excepted Liens of the type described
in clauses (a) to (d) and (f) of the definition thereof may exist, but subject
to the provisos at the end of such definition) on additional Oil and Gas
Properties not already subject to a Lien of the Security Instruments such that
after giving effect thereto, the Borrowing Base Properties will satisfy such 80%
(by NPV).  All such Liens will be created and perfected by and in accordance
with the provisions of deeds of trust, security agreements and financing
statements or other Security Instruments, all in form and substance reasonably
satisfactory to the Administrative Agent and in sufficient executed (and
acknowledged where necessary or appropriate) counterparts for recording
purposes.
 

(b)            In the event that the Borrower or any of its Subsidiary forms or
acquires any Subsidiary, the Borrower or such Subsidiary shall promptly cause
such new Subsidiary to guarantee the Indebtedness pursuant to the Guaranty
Agreement.  In connection with any such guaranty, the Borrower or such
Subsidiary shall, or shall cause such new Subsidiary to, (i) execute and deliver
a supplement to the Guaranty Agreement executed by such new Subsidiary, (ii)
pledge all of the Equity Interests of such new Subsidiary (including, without
limitation, delivery of original stock certificates evidencing the Equity
Interests of such Subsidiary, together with an appropriate undated stock powers
for each certificate duly executed in blank by the registered owner thereof) and
(iii) execute and deliver such other additional closing documents, certificates
and legal opinions as shall reasonably be requested by the Administrative Agent.
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Section 8.15          ERISA Compliance.  The Borrower will promptly furnish and
will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent promptly after the filing thereof with the United States
Secretary of Labor, the Internal Revenue Service of the PBGC, copies of each
annual and other report with respect to each Plan or any trust created
thereunder, and immediately upon becoming aware of the occurrence of any
“prohibited transaction” as described in section 406 of ERISA or in section 4975
of the Code, in connection with any Plan or any trust created thereunder, a
written notice signed by the President or the principal Financial Officer, the
Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature
thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is
taking or proposes to take with respect thereto, and, when known, any action
taken or proposed by the Internal Revenue Service, the Department of Labor or
the PBGC with respect thereto.
 
Section 8.16         Marketing Activities.  The Borrower will not, and will not
permit any Subsidiary to, engage in marketing activities for any Hydrocarbons or
enter into any contracts related thereto other than (a) contracts for the sale
of Hydrocarbons scheduled or reasonably estimated to be produced from its proved
Oil and Gas Properties during the period of such contract, (b) contracts for the
sale of Hydrocarbons scheduled or reasonably estimated to be produced from
proved Oil and Gas Properties of third parties during the period of such
contract associated with the Oil and Gas Properties of the Borrower or any
Subsidiary that the Borrower or any Subsidiary has the right to market pursuant
to joint operating agreements, unitization agreements or other similar contracts
that are usual and customary in the oil and gas business and (c) other contracts
for the purchase and/or sale of Hydrocarbons of third parties (i) which have
generally offsetting provisions (i.e. corresponding pricing mechanics, delivery
dates and points and volumes) such that no “position” is taken and (ii) for
which appropriate credit support has been taken to alleviate the material credit
risks of the counterparty thereto.
 
Section 8.17         Hedging Agreements.  Subject to Section 9.18, during the
term of this Agreement, Borrower shall maintain Hedging Agreements that satisfy
the following requirements: (i) the Hedging Agreements shall be implemented
pursuant to a hedging strategy  satisfactory to the Administrative Agent, (ii)
the Hedging Agreements shall be with an Approved Counterparty, and (iii)  the
Hedging Agreements shall, in the aggregate, cover at least forty-five percent
(45%) of estimated Hydrocarbons to be produced during a rolling 24-month period
from the Proved Developed Producing Reserves reflected in the most recent
Reserve Report.  Notwithstanding the foregoing, the Lenders and the
Administrative Agent acknowledge that the Borrower does not maintain any Hedging
Agreement as of the Effective Date and shall not be required to satisfy in full
the requirements of this Section 8.17 until the expiration of the 120th day
after the Effective Date; provided, however, that (i) within 30 days of the
Effective Date the Borrower shall maintain Hedging Agreements coveting at least
fifteen percent (15%) of estimated Hydrocarbons to be produced during a rolling
24-month period from the Proved Developed Producing Reserves reflected in the
Initial Reserve Report, and (ii) 60 days of the Effective Date the Borrower
shall maintain Hedging Agreements coveting at least thirty percent (30%) of
estimated Hydrocarbons to be produced during a rolling 24-month period from the
Proved Developed Producing Reserves reflected in the Initial Reserve Report.
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Section 8.18         Operating Accounts.  The Borrower will, and will cause each
Subsidiary to, maintain all of its bank accounts with Administrative Agent.  The
Borrower and each Subsidiary will cause all of its receipts to be paid directly
into one or more operating or other accounts maintained with the Adminstrative
Agent by the payors thereof, including by instructing the first purchasers of
production or the operators, as applicable, of the Borrower’s and each
Subsidiary’s Properties to pay the proceeds of the sales of production from any
and all of the Borrower’s and each Subsidiary’s Properties into such account and
by agreeing with any and all counterparties to any Hedging Agreement with the
Borrower or its Subsidiaries that any proceeds due the Borrower from such
Hedging Agreement shall be deposited in such account.
 

ARTICLE IX  
Negative Covenants
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:
Section 9.01          Financial Covenants.
 
(a)            Total Funded Debt to EBITDAX. The Borrower will not, at any time,
permit its ratio of Total Funded Debt as of such time to EBITDAX to be greater
than or equal to 3.5 to 1.0, determined at the fiscal year ending August 31,
2012, and each fiscal quarter thereafter.
 
(b)            Current Ratio.  The Borrower will not permit, as of the last day
of any fiscal quarter, its ratio of (i) current assets (excluding current assets
resulting from requirements of ASC Topic 815) plus unused availability under the
total Commitments (but only to the extent that the conditions to borrowing are
able to be met at such time) to (ii) current liabilities (excluding the current
portion of the sum of each Lender’s Commitment and current liabilities resulting
from the requirements of ASC Topic 815), determined at the end of fiscal year
ending August 31, 2012, and each quarter thereafter, to be less than 1.0 to 1.0.
 
(c)            Ratio of EBITDAX to Interest and Fees.  The Borrower will not
permit, as of the last day of any fiscal quarter, its ratio of EBITDAX divided
by 4 to the sum of interest expense for such fiscal quarter, to be less than or
equal to 3.5 to 1.0, determined at the end of the fiscal year ending August 31,
2012, and each quarter thereafter.
 
(d)            Ratio of Total Funded Debt to Total Capitalization.  The Borrower
will not permit, as of the last day of any fiscal quarter, its ratio of its
Total Funded Debt as of such time to its Total Capitalization as of such time to
be greater than or equal to 0.35 to 1.0.
 
Section 9.02           Debt.  The Borrower will not, and will not permit any
Subsidiary to, incur, create, assume or suffer to exist any Debt, except:
 
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(a)            the Notes or other Indebtedness arising under the Loan Documents
or any guaranty of or suretyship arrangement for the Notes or other Indebtedness
arising under the Loan Documents;
 
(b)            endorsements of negotiable instruments for collection in the
ordinary course of business;
 
(c)            other unsecured Debt not to exceed $200,000 in the aggregate any
one time outstanding; and
 
(d)            Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of, or provision for
the abandonment and remediation of, the Oil and Gas Properties.
 
Section 9.03          Liens.  The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any of its
Property (now owned or hereafter acquired), except:
 
(a)            Liens securing the payment of any Indebtedness; and
 
(b)            Excepted Liens.
 
Section 9.04           Dividends and Distributions.  The Borrower will not, and
will not permit any Subsidiary to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, return any capital to its to its
shareholders or make any distribution of its Property to its Equity Interest
holders.
 
Section 9.05           Investments, Loans and Advances.  The Borrower will not,
and will not permit any Subsidiary to, make or permit to remain outstanding any
Investments in or to any Person, except that the foregoing restriction shall not
apply to:
 
(a)            accounts receivable arising in the ordinary course of business;
 
(b)            direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of acquisition thereof;
 
(c)            commercial paper maturing within one year from the date of
acquisition thereof rated in the highest grade by S&P or Moody’s;
 
(d)            deposit accounts or deposits maturing within one year from the
date of creation thereof with, including certificates of deposit issued by, any
Lender or any other Person at any office located in the United States which is
organized under the laws of the United States or any state thereof, has capital,
surplus and undivided profits aggregating at least $100,000,000 (as of the date
of such bank or trust company’s most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set forth from
time to time, by S&P or Moody’s, respectively;
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(e)            deposits in money market funds investing exclusively in
Investments described in Section 9.05(b), Section 9.05(c) or Section 9.05(d);
 
(f)            investments in direct ownership interests in additional Oil and
Gas Properties and gas gathering systems related thereto or related to farm‑out,
farm‑in, joint operating, joint venture or area of mutual interest agreements,
gathering systems, pipelines or other similar arrangements which are usual and
customary in the oil and gas exploration and production business located within
the onshore continental boundaries of the United States of America;

(g)            investments in direct ownership interests in, or, subject to
Section 9.15, to acquire new Subsidiaries that own, additional Oil and Gas
Properties and all other assets related to the business permitted under Section
9.06;
 
(h)            investments made by any Guarantor in or to the Borrower or any
other Guarantor;
 
(i)            entry into operating agreements, working interests, royalty
interests, mineral leases, processing agreements, farm-out agreements, contracts
for the sale, transportation or exchange of oil and natural gas, unitization
agreements, pooling arrangements, area of mutual interest agreements, production
sharing agreements or other similar or customary agreements, transactions,
properties, interests or arrangements, and Investments and expenditures in
connection therewith or pursuant thereto, in each case made or entered into in
the ordinary course of the oil and gas business, excluding, however, Investments
in other Persons; provided, however, that none of the foregoing shall involve
the incurrence of any Debt not permitted by Section 9.02; and
 
(j)            other Investments not to exceed $200,000 in the aggregate at any
time.
 
Section 9.06         Nature of Business.  The Borrower will not allow any
material change to be made in the character of its business as an independent
oil and gas exploration and production company.  From and after the date hereof,
the Borrower and its Subsidiaries will not acquire or make any other expenditure
(whether such expenditure is capital, operating or otherwise) in or related to,
any Oil and Gas Properties not located within the onshore continental boundaries
of the United States.
 
Section 9.07         Limitation on Leases.  The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist any
obligation for the payment of rent or hire of Property of any kind whatsoever
(real or personal but excluding leases of Hydrocarbon Interests), under leases
or lease agreements which would cause the aggregate amount of all payments made
by the Borrower and the Subsidiaries pursuant to all such leases or lease
agreements, including any residual payments at the end of any lease, to exceed
$100,000 in any period of twelve consecutive calendar months during the life of
such leases.
 
Section 9.08         Proceeds of Notes.  The Borrower will not, and will not
permit any Subsidiary to, use the proceeds of the Notes for any purpose other
than those permitted by Section 7.21.  Neither the Borrower nor any Person
acting on behalf of the Borrower has taken or will take any action which might
cause any of the Loan Documents to violate Regulations T, U or X or any other
regulation of the Board or to violate section 7(a) of the Securities Exchange
Act of 1934 or any rule or regulation thereunder, in each case as now in effect
or as the same may hereinafter be in effect.  If requested by the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
U‑1 or such other form referred to in Regulation U, Regulation T or Regulation X
of the Board, as the case may be.
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Section 9.09       ERISA Compliance.  The Borrower will not, and will not permit
any Subsidiary to, at any time:
 
(a)            engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrower, a Subsidiary or any ERISA
Affiliate could be subjected to either a civil penalty assessed pursuant to
subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed by
Chapter 43 of Subtitle D of the Code if such penalty or liability could
reasonably be expected to result in a Material Adverse Effect.
 
(b)            Fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower, a Subsidairy or any
ERISA Affiliate is required to pay as contributions thereto if such failure
could reasonably be expected to result in a Material Adverse Effect.
 
(c)            contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to
(i) any employee welfare benefit plan, as defined in section 3(1) of ERISA,
including any such plan maintained to provide benefits to former employees of
such entities, that may not be terminated by such entities in their sole
discretion at any time without any material liability, or (ii) any employee
pension benefit plan, as defined in section 3(2) of ERISA, that is subject to
Title IV of ERISA, section 302 of ERISA or section 412 of the Code.
 
Section 9.10         Mergers, Etc.  The Borrower will not, and will not permit
any Subsidiary to, merge into or with or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or sell, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its Property to any other Person
(whether now owned or hereafter acquired), or liquidate or dissolve; provided
that any Subsidiary may participate in a consolidation with (i) the Borrower so
long as the Borrower shall be the continuing or surviving entity or (ii) any
other Subsidiary (provided that if one of such Subsidiaries is a wholly-owned
Subsidiary, then the surviving Person shall be a wholly-owned Subsidiary).
 
Section 9.11       Sale of Properties.  The Borrower will not, and will not
permit any Subsidiary to, sell, assign, farm‑out, convey or otherwise transfer
(including through the sale of a production payment or overriding royalty
interest) any of its Oil and Gas Properties except for (a) the sale of
Hydrocarbons in the ordinary course of business; (b) farmouts or similar
arrangements related to undeveloped acreage and assignments in connection with
such farmouts or similar arrangements; provided that any farmouts or similar
arrangements that relate to Oil and Gas Property included in the most recently
delivered Reserve Report shall require the
 
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approval of the Administrative Agent if such farmouts or similar arrangements
over any rolling 12-month period relate to Oil and Gas Properties that have an
NPV in excess of five percent (5%) of the Borrowing Base then in effect, but
such consent shall only be required for those farmouts or similar arrangements
in excess of such amount; (c) the sale or transfer of equipment that is no
longer necessary for the business of the Borrower or any Subsidiary or that is
replaced by equipment of at least comparable value and use; (d) the sale or
other disposition (including Casualty Events and any indirect sale of properties
by the sale of a Subsidiary) of any Oil and Gas Property or any interest
therein; provided that (i) 100% of the consideration received in respect of such
sale or other disposition shall be cash, (ii) the consideration received in
respect of such sale or other disposition shall be equal to or greater than the
fair market value of the Oil and Gas Property, interest therein subject to such
sale or other disposition (as reasonably determined by the board of directors of
the Borrower and, if requested by the Administrative Agent, the Borrower shall
deliver a certificate of a Responsible Officer of the Borrower certifying to
that effect), (iii) if such Oil and Gas Property was included in the most
recently delivered Reserve Report and has a fair market value in excess of
$200,000, individually or in the aggregate, the Borrowing Base shall
automatically be reduced pursuant to Section 2.07(f)(ii), by an amount equal to
the value, if any, assigned such Oil and Gas Property in the most recently
delivered Reserve Report and (iv) if any such sale or other disposition is of a
Subsidiary owning Oil and Gas Properties, such sale or other disposition shall
include all the Equity Interests of such Subsidiary; (e) the disposition of Oil
and Gas Properties in exchange for fair consideration in the form of either (i)
other Oil and Gas Properties of a similar use or purpose or (ii) an operator’s
commitment to drill an oil or natural gas well; provided that in the case of
each of subclauses (i) and (ii) above, the consideration received is of
equivalent or greater fair market value as the properties being disposed of (as
reasonably determined by the board of directors of the Borrower) and, to the
extent applicable, the Borrower has delivered title information and mortgages
covering the Oil and Gas Properties received by the Borrower as may be required
pursuant to Section 8.13 and Section 8.14; and sales and other dispositions of
Properties not regulated by Section 9.11(a) to Section 9.11(e) having a fair
market value not to exceed five percent (5%) of the Borrowing Base then in
effect during any twelve (12) month period.  If following any Redetermination
Date (and prior to the next Redetermination Date), the Borrower and its
Subsidiaries, in the aggregate, directly or indirectly sells (whether through
one or more transactions) Oil and Gas Properties having a borrowing base value
equal to or in excess of ten percent (10%) of the aggregate borrowing base value
of all Oil and Gas Properties of the Borrower and its Subsidiaries, as
determined by the Administrative Agent based upon the most recent Reserve
Report, the Required Lenders shall have the right to request an additional
Borrowing Base determination in accordance with Section 2.07(b).  The
Administrative Agent shall reasonably cooperate with Borrower, at Borrower’s
cost and expense, to promptly provide a release of lien for any Oil and Gas
Property that is being transferred or conveyed by the Borrower or its
Subsidiaries in accordance with this Section 9.11, provided that Borrower
provides the Administrative Agent with any documents or certificates reasonably
requested by the Administrative Agent to establish compliance with this Section
9.11.
 
Section 9.12                          Environmental Matters.  The Borrower will
not, and will not permit any Subsidiary to, cause or permit any of its
Properties to be in violation of, or do anything or permit anything to be done
which will subject any such Properties to a Release or threatened Release of
Hazardous Materials, exposure to any Hazardous Materials, or to any Remedial
Work under any Environmental Laws, assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and circumstances, if
any, pertaining to such Property where such violations, Release or threatened
Release, exposure, or Remedial work could reasonably be expected to have a
Material Adverse Effect.
 
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Section 9.13                          Material Agreements.  The Borrower will
not, and will not permit any Subsidiary to, enter into or amend or otherwise
modify any Material Agreement or any other contract or agreement that involves
an individual commitment from such Person of more than $200,000 in the aggregate
in any twelve (12) month period, except for contracts for the acquisition and/or
development of Oil and Gas Properties.
 
Section 9.14                          Transactions with Affiliates.  The
Borrower will not, and will not permit any Subsidiary to, enter into any
transaction, including any purchase, sale, lease or exchange of Property or the
rendering of any service or the making of any loan, with any Affiliate (other
than a Guarantor) or shareholder of the Borrower unless such transactions are
otherwise permitted under this Agreement and are upon terms no less favorable to
it than it would obtain in a comparable arm’s length transaction with an
independent third party.
 
Section 9.15                          Subsidiaries.  The Borrower shall not, and
will not permit any Subsidiary to, create or acquire any Subsidiary without the
prior written consent of the Administrative Agent, which consent shall not to be
unreasonably withheld; provided that any such consent shall be conditioned on
such amendments and conditions precedents as the Administrative Agent and the
Required Lenders shall reasonably require, including, without limitation, that
the Borrower, contemporaneously with the formation or acquisition of such
Subsidiary, (a) cause such new Subsidiary to become a Guarantor to guarantee the
Indebtedness and deliver to the Administrative Agent (x) an executed supplement
or assumption agreement to the Guaranty Agreement in form and substance
reasonably acceptable to the Administrative Agent, and (y) an executed
supplement or assumption agreement to the Security Agreement, (b) pledge all of
the Equity Interests of such new Subsidiary (including, without limitation,
delivery of original stock certificates evidencing the Equity Interests of such
new Subsidiary, together with an appropriate undated stock powers for each
certificate duly executed in blank by the registered owner thereof) and (c)
execute and deliver, or cause to be delivered, such other additional closing
documents, certificates, tribal consents and legal opinions as shall be
requested by the Administrative Agent.
 
Section 9.16                          Negative Pledge Agreements.  The Borrower
will not, and will not permit any Subsidiary to, create, incur, assume or suffer
to exist any contract, agreement or understanding (other than this Agreement,
the Security Instruments, or Capital Leases creating Liens permitted by Section
9.03) which in any way prohibits or restricts the granting, conveying, creation
or imposition of any Lien on any of its Properties in favor of the
Administrative Agent and the Lenders or which requires the consent of or notice
to other Persons in connection therewith.
 

Section 9.17                          Gas Imbalances, Take‑or‑Pay or Other
Prepayments.  The Borrower will not, and will not permit any Subsidiary to,
allow gas imbalances, take‑or‑pay or other prepayments with respect to the Oil
and Gas Properties of the Borrower or any of its Subsidiaries that would require
the Borrower or a Subsidiary to deliver Hydrocarbons at some future time without
then or thereafter receiving full payment therefor to exceed two percent (2%) of
the Borrower’s Proved Reserves of natural gas (on an mcf equivalent basis) in
the aggregate.
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Section 9.18         Hedging Agreements.     The Borrower shall neither assign,
terminate, unwind nor sell any Hedging Agreements listed on Schedule 7.20. The
Borrower shall not enter into Hedging Agreements in respect of commodities other
than Hydrocarbons.  In the case of Hydrocarbons, the Borrower shall not enter
into Hedging Agreements if the effect thereof would be to cause the notional
volumes of all Hedging Agreements and additional fixed price physical off take
contracts, in the aggregate, to exceed (i) 85% of the projected production from
the Borrower’s Proved Developed Producing Reserves reflected in the most
recently completed Reserve Report for any month continuing through and including
the date that is twelve (12) months following the effective date of each such
Hedging Agreement, (ii) 70% of the projected production from the Borrower’s
Proved Developed Producing Reserves for any month beginning at the expiration of
the period in clause (i) and continuing through and including the date that is
twelve (12) months following such date, (iii) 60% of the projected production
from the Borrower’s Proved Developed Producing Reserves for any month beginning
at the expiration of the period in clause (ii) and continuing through and
including the date that is twelve (12) months following such date and (iv) 50%
of the projected production from the Borrower’s Proved Developed Producing
Reserves for any month beginning at the expiration of the period clause (iii)
and continuing through and including the date that is twelve (12) months
following such date (it being understood that any put contracts entered into for
non speculative purposes shall not count against the above limitation).  The
Borrower shall not enter into Hedging Agreements converting interest rates.  The
Borrower shall not post any collateral to secure Hedging Agreements, except as
contemplated by the Loan Documents in the case of a Secured Hedging
Counterparty.
 
Section 9.19          Sale and Leasebacks.  The Borrower will not, and will not
permit any Subsidiary, to enter into any arrangement, directly or indirectly,
with any Person whereby the Borrower or any Subsidiary shall sell or transfer
any of its Property, whether now owned or hereafter acquired, and whereby
Borrower shall then or thereafter rent or lease as lessee such Property or any
part thereof or other Property which Borrower or any Subsidiary intends to use
for substantially the same purpose or purposes as the Property sold or
transferred.
 
Section 9.20          Amendments to Organizational Documents.  Without the prior
written consent of the Lenders, the Borrower will not amend, or permit to be
amended, its Organizational Documents or waive any right or obligation of any
Person thereunder except to the extent such amendment or waiver could not
reasonably be expected to adversely affect the rights and benefits of the
Administrative Agent, the Lenders and/or other secured parties under this
Agreement or any other Loan Document.
 
ARTICLE X  
Events of Default; Remedies
Section 10.01          Events of Default.  One or more of the following events
shall constitute an “Event of Default”:
 
(a)            the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof, by acceleration or otherwise;
 
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(b)            the Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in Section 10.01(a))
payable under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of five (5)
Business Days;
 
(c)            any representation or warranty made or deemed made by or on
behalf of the Borrower in or in connection with any Loan Document or any
amendment or modification of any Loan Document or waiver under such Loan
Document or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with any Loan Document or any amendment
or modification thereof or waiver thereunder, shall prove to have been incorrect
in any material respect when made or deemed made;
 
(d)            the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in the Loan Documents;
 
(e)            the Borrower shall fail to make any payment (whether of principal
or interest and regardless of amount) in respect of any Material Debt, beyond
any period of grace provided with respect thereto;
 
(f)            any event or condition occurs that results in any Material Debt
becoming due prior to its scheduled maturity or that enables or permits the
holder or holders of any Material Debt or any trustee or agent on its or their
behalf to cause any Material Debt to become due (after taking into account any
applicable period of grace with respect thereto), or to require the Redemption
thereof or any offer to Redeem to be made in respect thereof, prior to its
scheduled maturity or an event or condition requires the Borrower to make an
offer in respect thereof;
 
(g)            an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or its debts, or of a substantial part of its assets,
under any  Federal, state or foreign bankruptcy, insolvency, receivership or
similar law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for forty‑five (45) days or an
order or decree approving or ordering any of the foregoing shall be entered;
 
(h)            the Borrower shall (i) voluntarily commence any proceeding or
file any petition seeking liquidation, reorganization or other relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in Section 10.01(g), (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
the Borrower for a substantial part of its assets, (iv) file an answer admitting
the material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors or (vi) take any
action for the purpose of effecting any of the foregoing;
 
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(i)            the Borrower shall become unable, admit in writing its inability
or fail generally to pay its debts as they become due;
 
(j)            (i) one or more judgments for the payment of money in an
aggregate amount in excess of $200,000 (to the extent not covered by independent
third party insurance provided by insurers acceptable to the Administrative
Agent as to which the insurer does not dispute coverage and is not subject to an
insolvency proceeding) or (ii) any one or more non‑monetary judgments that have,
or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, shall be rendered against the Borrower, any Subsidiary
or any combination thereof and, in either such case, the same shall remain
undischarged for a period of forty‑five (45) consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets of the Borrower to
enforce any such judgment;
 
(k)            the Borrower or an ERISA Affiliate is not in compliance with all
material respects with ERISA and, where applicable, the Code regarding each
Plan, except to the extent the failure to do so could not reasonably be expected
to result in a Material Adverse Effect;
 
(l)            the Loan Documents after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full force
and effect and valid, binding and enforceable in accordance with their terms
against the Borrower or shall be repudiated by any of them, or cease to create a
valid and perfected Lien of the priority required thereby on any of the
collateral purported to be covered thereby, except to the extent permitted by
the terms of this Agreement, or the Borrower or its Affiliates shall so state in
writing;
 
(m)            a Change in Control shall occur;
 
(n)            a failure to cure a Borrowing Base Deficiency as outlined in
Section 3.04(c)(i) or (ii); and
 
(o)            an “Event of Default”, “Termination Event” or “Additional
Termination Event” (other than an “Event of Default”, “Termination Event” or
“Additional Termination Event” associated with a breach thereof by a Lender)
shall occur under any Hedging Agreement between the Borrower and any Lender or
Affiliate of any Lender (in each case after giving effect to any applicable
grace periods).
 
Section 10.02         Remedies.
 
(a)            In the case of an Event of Default other than one described in
Section 10.01(g), Section 10.01(h) or Section 10.01(i), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent may,
and at the request of the Lenders, shall, by notice to the Borrower, take either
or both of the following actions, at the same or different times:  (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Notes and the Loans then outstanding to be due and payable in
whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower and the
Guarantors accrued hereunder and under the Notes and the other Loan Documents
(including the payment of cash collateral to secure the LC Exposure as provided
in Section 2.08(i)), shall become due and payable immediately, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby waived by the
Borrower; and in case of an Event of Default described in Section 10.01(g),
Section 10.01(h) or Section 10.01(i), the Commitments shall automatically
terminate and such Notes and the principal of such Loans then outstanding,
together with accrued interest thereon and all fees and the other obligations of
the Borrower and the Guarantors accrued hereunder and under such Notes and the
other Loan Documents (including the payment of cash collateral to secure the LC
Exposure as provided in Section 2.08(i)), shall automatically become due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower and each Guarantor.
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(b)            In the case of the occurrence of an Event of Default, the
Administrative Agent and the Lenders will have all other rights and remedies
available at law and equity.
 
(c)            All proceeds realized from the liquidation or other disposition
of collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied:
 
(i) first, to payment or reimbursement of that portion of the Indebtedness
constituting fees, expenses and indemnities payable to the Administrative Agent
in its capacity as such;
 
(ii) second, pro rata to payment or reimbursement of that portion of the
Indebtedness constituting fees, expenses and indemnities payable to the Lenders;
 
(iii) third, pro rata to payment of accrued interest on the Loans;
 
(iv) fourth, pro rata to payment of all other Indebtedness;
 
(v) fifth, to serve as cash collateral to be held by the Administrative Agent to
secure LC Exposure; and
 
(vi) sixth, any excess, after all of the Indebtedness shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.
 
Section 10.03    Limitation on Rights and Waivers.  All rights, powers and
remedies herein conferred shall be exercisable by Administrative Agent and any
other Secured Party only to the extent not prohibited by applicable law; and all
waivers and relinquishments of rights and similar matters shall only be
effective to the extent such waivers or relinquishments are not prohibited by
applicable law.
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ARTICLE XI  
The Administrative Agent
Section 11.01       Appointment; Powers.  Each of the Lenders and each Issuing
Bank hereby irrevocably (subject to Section 11.06) appoints the Administrative
Agent as its agent and authorizes the Administrative Agent to take such actions
on its behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms hereof and the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto.
 
Section 11.02      Duties and Obligations of Administrative Agent.  The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents.  Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing (the use of the term “agent” herein and in the other Loan
Documents with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative
Agent shall have no duty to take any discretionary action or exercise any
discretionary powers, except as provided in Section 11.03, and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity.  The Administrative Agent shall be deemed not to have knowledge of
any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, (v) the satisfaction of any condition set forth in Article VI or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent or as to those conditions precedent
expressly required to be to the Administrative Agent’s satisfaction, (vi) the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrower or any other obligor or guarantor,
or (vii) any failure by the Borrower or any other Person (other than itself) to
perform any of its obligations hereunder or under any other Loan Document or the
performance or observance of any covenants, agreements or other terms or
conditions set forth herein or therein.  For purposes of determining compliance
with the conditions specified in Article VI, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received
written notice from such Lender prior to the proposed closing date specifying
its objection thereto.
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Section 11.03       Action by Administrative Agent.  The Administrative Agent
shall have no duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise in writing as directed by the Lenders and in all cases
the Administrative Agent shall be fully justified in failing or refusing to act
hereunder or under any other Loan Documents unless it shall (a) receive written
instructions from the Lenders, as applicable, (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02) specifying the action to be taken and (b) be
indemnified to its satisfaction by the Lenders against any and all liability and
expenses which may be incurred by it by reason of taking or continuing to take
any such action.  The instructions as aforesaid and any action taken or failure
to act pursuant thereto by the Administrative Agent shall be binding on all of
the Lenders.  If a Default has occurred and is continuing, then the
Administrative Agent shall take such action with respect to such Default as
shall be directed by the requisite Lenders in the written instructions (with
indemnities) described in this Section 11.03, provided that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders.  In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law.  The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at the
request of the Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 12.02), and
otherwise the Administrative Agent shall not be liable for any action taken or
not taken by it hereunder or under any other Loan Document or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except
for its own gross negligence or willful misconduct.
 
Section 11.04        Reliance by Administrative Agent.  The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing believed by it to be genuine and to have been signed or sent by
the proper Person.  The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and each of the
Borrower, the Issuing Banks and the Lenders hereby waive the right to dispute
the Administrative Agent’s record of such statement, except in the case of gross
negligence or willful misconduct by the Administrative Agent.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.  The Administrative Agent
may deem and treat the payee of any Note as the holder thereof for all purposes
hereof unless and until a written notice of the assignment or transfer thereof
permitted hereunder shall have been filed with the Administrative Agent.
 
Section 11.05     Subagents.  The Administrative Agent may perform any and all
its duties and exercise its rights and powers by or through any one or more
sub‑agents appointed by the Administrative Agent.  The Administrative Agent and
any such sub‑agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties.  The exculpatory provisions
of the preceding Sections of this Article XI shall apply to any such sub‑agent
and to the Related Parties of the Administrative Agent and any such sub‑agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.
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Section 11.06        Resignation or Removal of Administrative Agent.  Subject to
the appointment and acceptance of a successor Administrative Agent as provided
in this Section 11.06, the Administrative Agent may resign at any time by
notifying the the Lenders and the Borrower, and the Administrative Agent may be
removed at any time with or without cause by the Lenders.  Upon any such
resignation or removal, the Lenders shall have the right, in consultation with
the Borrower (provided no Event of Default then exist), to appoint a successor. 
If no successor shall have been so appointed by the Lenders and shall have
accepted such appointment within thirty (30) days after the retiring
Administrative Agent gives notice of its resignation or removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Issuing Banks and Lenders, appoint a successor Administrative Agent.  Upon
the acceptance of its appointment as Administrative Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder.  The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor.  After the
Administrative Agent’s resignation hereunder, the provisions of this Article XI
and Section 12.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub‑agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
 
Section 11.07       Administrative Agent as Lender.  Each Person serving as an
Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an Administrative Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Borrower or any Subsidiary or other Affiliate thereof as if it were not an
Administrative Agent hereunder.
 
Section 11.08        No Reliance.  Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party.  Each Lender also acknowledges that
it will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document, any
related agreement or any document furnished hereunder or thereunder.  The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower or any of its Subsidiaries of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrower or its
Subsidiaries.  Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of the Borrower (or any of its Affiliates) which
may come into the possession of such Agent or any of its Affiliates.  In this
regard, each Lender acknowledges that Faegre Baker Daniels is acting in this
transaction as counsel to the Administrative Agent only, except to the extent
otherwise expressly stated in any legal opinion or any Loan Document.  Each
other party hereto will consult with its own legal counsel to the extent that it
deems necessary in connection with the Loan Documents and the matters
contemplated therein.
 
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Section 11.09        Administrative Agent May File Proofs of Claim.  In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:
 
(a)            to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans and all other Indebtedness
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
 
(b)            to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 12.03.
Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Indebtedness or the rights of any Lender or to authorize the Administrative
Agent to vote in respect of the claim of any Lender in any such proceeding.
Section 11.10     Authority of Administrative Agent to Release Collateral and
Liens.  Each Lender and each Issuing Bank hereby authorizes the Administrative
Agent to release any collateral that is permitted to be sold or released
pursuant to the terms of the Loan Documents.  Each Lender and each Issuing Bank
hereby authorizes the Administrative Agent to execute and deliver to the
Borrower, at the Borrower’s sole cost and expense, any and all releases of
Liens, termination statements, assignments or other documents reasonably
requested by the Borrower in connection with any sale or other disposition of
Property to the extent such sale or other disposition is permitted by the terms
of Section 9.11 or is otherwise authorized by the terms of the Loan Documents.
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ARTICLE XII  
Miscellaneous
Section 12.01        Notices.
 
(a)            Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to Section 12.01(b)), all
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by facsimile transmission, as follows:
 
(i) if to the Borrower, to it at: Synergy Resources Corporation 20203 Highway 60
Platteville, CO 80651, Attention: Edward Holloway, CEO and Director (facsimile
number 970-737-1073;
 
(ii) if to the Administrative Agent, to it at: Community Banks of Colorado, 3780
West 10th Street, Greeley, Colorado 80634, Attention: Sarah Burchett, Vice
President (facsimile number 855-621-4025); and
 
(iii) if to any other Lender, to it at its address (or facsimile number) set
forth on its signature page to this Agreement or, if applicable, any Assignment
and Assumption.
 
(b)            Notices sent by hand or overnight courier service, or mailed by
certified or registered mail, shall be deemed to have been given when received. 
Notices sent by facsimile shall be deemed to have been given when sent (except
that, if not sent during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next business day
for the recipient).  Notices delivered through electronic communications, to the
extent provided in Section 12.01(c), shall be effective as provided in Section
12.01(c).
 
(c)            Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to Article II, Article III, Article IV and Article V
unless otherwise agreed by the Administrative Agent and the applicable Lender. 
The Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications.
 
(d)            Any party hereto may change its address or facsimile transmission
number for notices and other communications hereunder by notice to the other
parties hereto.  All notices and other communications given to any party hereto
in accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.
 
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Section 12.02     Waivers; Amendments.
 
(a)            No failure on the part of the Administrative Agent, any Issuing
Bank or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege, or any abandonment or
discontinuance of steps to enforce such right, power or privilege, under any of
the Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under any of the Loan
Documents preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.  The rights and remedies of the Administrative
Agent, the Issuing Banks and the Lenders hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have.  No waiver of any provision of this Agreement or any
other Loan Document or consent to any departure by the Borrower therefrom shall
in any event be effective unless the same shall be permitted by Section
12.02(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.  Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent, any Issuing Bank or any Lender may have had notice or
knowledge of such Default at the time.
 
(b)        Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Lenders or by the Borrower and the Administrative Agent with the consent
of the Lenders; provided that no such agreement shall (i) increase the
Commitment or the Maximum Credit Amount of any Lender without the written
consent of such Lender, (ii) increase the Borrowing Base without the written
consent of each Lender, decrease or maintain the Borrowing Base without the
written consent of each Lender (other than any Defaulting Lender), or modify
Section 2.07 in any manner without the consent of each Lender (other than any
Defaulting Lender); provided that a Scheduled Redetermination may be postponed
by the Lenders, (iii) reduce the principal amount of any Loan or LC Disbursement
or reduce the rate of interest thereon, or reduce any fees payable hereunder, or
reduce any other Indebtedness hereunder or under any other Loan Document,
without the written consent of each Lender affected thereby, (iv) postpone the
scheduled date of payment or prepayment of the principal amount of any Loan or
LC Disbursement, or any interest thereon, or any fees payable hereunder, or any
other Indebtedness hereunder or under any other Loan Document, or reduce the
amount of, waive or excuse any such payment, or postpone or extend the
Termination Date without the written consent of each Lender affected thereby,
(v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, (vi) waive or amend Section 3.04(c), Section 6.01, Section 8.14,
Section 10.02(c) or Section 12.14, without the written consent of each Lender
(other than any Defaulting Lender), or (vii) change any of the provisions of
this Section 12.02(b) or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
under any other Loan Documents or make any determination or grant any consent
hereunder or any other Loan Documents, without the written consent of each
Lender (other than any Defaulting Lender); provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or any Issuing Bank hereunder or under any other Loan
Document without the prior written consent of the Administrative Agent or such
Issuing Bank, as the case may be.  Notwithstanding the foregoing, any supplement
to Schedule 7.24 (Material Agreements) shall be effective simply by delivering
to the Administrative Agent a supplemental schedule clearly marked as such and,
upon receipt, the Administrative Agent will promptly deliver a copy thereof to
the Lenders.   
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Section 12.03      Expenses, Indemnity; Damage Waiver.
 
(a)            The Borrower shall pay (i) all reasonable out‑of‑pocket expenses
incurred by the Lenders, including the reasonable fees, charges and
disbursements of counsel and other outside consultants for the Administrative
Agent, the reasonable travel, photocopy, mailing, courier, telephone and other
similar expenses, and the cost of environmental audits and surveys and
appraisals, in connection with the credit facilities provided for herein, the
investigation, preparation, negotiation, execution, delivery and administration
(both before and after the execution hereof and including advice of counsel to
the Administrative Agent as to the rights and duties of the Administrative Agent
and the Lenders with respect thereto) of this Agreement and the other Loan
Documents and any amendments, modifications or waivers of or consents related to
the provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all costs, expenses, Taxes,
assessments and other charges incurred by the Administrative Agent or any Lender
in connection with any filing, registration, recording or perfection of any
security interest contemplated by this Agreement or any Security Instrument or
any other document referred to therein, (iii) all reasonable out‑of‑pocket
expenses incurred by the Administrative Agent and any Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder, (iv) all reasonable out‑of‑pocket expenses
incurred by any Administrative Agent, any Issuing Bank or any Lender, including
the fees, charges and disbursements of any counsel for the Administrative Agent,
any Issuing Bank or any Lender, in connection with the enforcement or protection
of its rights in connection with this Agreement or any other Loan Document,
including its rights under this Section 12.03, or in connection with the Loans
made or Letters of Credit issued hereunder, including all such out‑of‑pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans or Letters of Credit.
 
(b)            THE BORROWER AND THE GUARANTORS SHALL INDEMNIFY THE
ADMINISTRATIVE AGENT, EACH ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY
OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”)
AGAINST, AND DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES,
CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE
FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY
OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A
RESULT OF (i) THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER
LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER  OR THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE
TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF
 
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ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF
THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN
CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE
PROCEEDS THEREFROM, INCLUDING (A) ANY REFUSAL BY ANY ISSUING BANK TO HONOR A
DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT ISSUED BY SUCH ISSUING BANK IF THE
DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH
THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY
LETTER OF CREDIT NOTWITHSTANDING THE NON‑COMPLIANCE, NON‑DELIVERY OR OTHER
IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v)
ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF
THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii)
ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS
RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES OR
OPERATIONS, INCLUDING THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED
RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL,
OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS MATERIALS ON OR AT ANY OF THEIR
PROPERTIES, (ix) THE BREACH OR NON‑COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY
WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE
PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDARY OF ANY OF THEIR PROPERTIES OR
PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY
PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE,
USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE,
TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND
GAS WASTES, SOLID WASTES OR HAZARDOUS MATERIALS ON OR AT ANY OF THE PROPERTIES
OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED
PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR
OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL
LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF IT SUBSIDIARIES, OR
(xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH
THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION,
INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A
PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER
WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION, INCLUDING ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT
(SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT
LIABILITY IMPOSED WITHOUT FAULT
 
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ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT,
AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS,
DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.
 
(c)            To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent or any Issuing Bank under Section
12.03(a) or (b), each Lender severally agrees to pay to the Administrative Agent
or such Issuing Bank, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Administrative Agent or such
Issuing Bank in its capacity as such.
 
(d)            To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit
or the use of the proceeds thereof.
 
(e)            All amounts due under this Section 12.03 shall be payable
promptly after written demand therefor.
 
Section 12.04   Successors and Assigns.
 
(a)            The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of any Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04.  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
any Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Banks and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
 
(b)            (i) Subject to the conditions set forth in Section 12.04(b)(ii),
any Lender may assign to one or more assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:
 
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(A)   the Borrower, provided that no consent of the Borrower shall be required
if such assignment is to a Lender, an Affiliate of a Lender or, if an Event of
Default has occurred and is continuing, is to any other assignee; and
 
(B)   the Administrative Agent and Issuing Bank, provided that no consent of the
Administrative Agent or Issuing Bank shall be required for an assignment to an
assignee that is a Lender immediately prior to giving effect to such assignment.
 
(ii)   Assignments shall be subject to the following additional conditions:
 
(A)   except in the case of an assignment to a Lender or an Affiliate of a
Lender or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower, the Administrative Agent and the Issuing Banks otherwise consent,
provided that no such consent of the Borrower shall be required if an Event of
Default has occurred and is continuing;
 
(B)   each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;
 
(C)   the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
fee of $3,500; and
 
(D)   the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent any information reasonably requested by the Administrative
Agent in connection with its duties hereunder.
 
(iii)   Subject to Section 12.04(b)(iv) and the acceptance thereof, from and
after the effective date specified in each Assignment and Assumption the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Assumption, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Assumption, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03 and
Section 12.03).  Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this Section 12.04 shall be
treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section
12.04(c).

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(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at its office a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses of
the Lenders, and the Maximum Credit Amount of, and principal amount of the Loans
and LC Disbursements owing to, each Lender pursuant to the terms hereof from
time to time (the “Register”).  The entries in the Register shall be conclusive,
and the Borrower, the Administrative Agent, each Issuing Bank and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Borrower, any Issuing Bank and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.  In connection with any
changes to the Register, if necessary, the Administrative Agent will reflect the
revisions on Annex I and forward a copy of such revised Annex I to the Borrower,
each Issuing Bank and each Lender.
 
(v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s providing any information
reasonably requested by the Administrative Agent in connection with its duties
hereunder, the processing and recordation fee referred to in Section 12.04(b)
and any written consent to such assignment required by this Section 12.04(b),
the Administrative Agent shall accept such Assignment and Assumption and record
the information contained therein in the Register.  No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this Section 12.04(b).
 
(c)          (i) Any Lender may, without the consent of the Borrower, or the
Administrative Agent or any Issuing Bank, sell participations to one or more
banks or other entities (a “Participant”) in all or a portion of such Lender’s
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrower, the Administrative Agent, the Issuing
Banks and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement.  Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the proviso to Section
12.02 that affects such Participant.  In addition such agreement must provide
that the Participant be bound by the provisions of Section 12.03.  Subject to
Section 12.04(c)(ii), the Borrower agrees that each Participant shall be
entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 to the
same extent as if it were a Lender and had acquired its interest by assignment
pursuant to Section 12.04.  To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 12.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 4.01(c) as
though it were a Lender.  Each Lender that sells a participation shall, acting
solely for this purpose as an agent of the Borrower, maintain a register on
which it enters the name and address of each Participant and the principal
amounts (and stated interest) of each Participant’s interest in the Loans or
other obligations under the Loan Documents (the “Participant Register”);
provided that no Lender shall have any obligation to disclose all or any portion
of the Participant Register (including the identity of any Participant or any
information relating to a Participant's interest in any commitments, loans,
letters of credit or its other obligations under any Loan Document) to any
Person except to the extent that such disclosure is necessary to establish that
such commitment, loan, letter of credit or other obligation is in registered
form under Section 5f.103-1(c) of the United States Treasury Regulations.  The
entries in the Participant Register shall be conclusive absent manifest error,
and such Lender shall treat each Person whose name is recorded in the
Participant Register as the owner of such participation for all purposes of this
Agreement notwithstanding any notice to the contrary.  For the avoidance of
doubt, the Administrative Agent (in its capacity as Administrative Agent) shall
have no responsibility for maintaining a Participant Register.
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(ii) A Participant shall not be entitled to receive any greater payment under
Section 5.01 or Section 5.03 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower’s
prior written consent.
 
(d)            Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement, including to a trustee
or other pledgee, to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section
12.04(d) shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto.
 
(e)            Notwithstanding any other provisions of this Section 12.04, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted if such transfer, assignment
or grant would require the Borrower and the Guarantors to file a registration
statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any
state, or to meet the requirements of any exemption to such registration or
qualification requirements.
 
(f)            Notwithstanding any other provisions of this Section 12.04, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted if such transfer, assignment
or grant would be to an Affiliate of the Borrower.
 
Section 12.05        Survival; Revival; Reinstatement.
 
(a)            All covenants, agreements, representations and warranties made by
the Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, any Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated.  The provisions of Section 5.01, Section 5.02, Section 5.03 and
Section 12.03 and Article XI shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Letters of Credit
and the Commitments or the termination of this Agreement, any other Loan
Document or any provision hereof or thereof.
 
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(b)            To the extent that any payments on the Indebtedness or proceeds
of any collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect.  In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.
 
Section 12.06        Counterparts; Integration; Effectiveness.
 
(a)            This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.
 
(b)            This Agreement and the other Loan Documents constitute the entire
contract among the parties relating to the subject matter hereof and thereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof and thereof.  THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND
THERETO 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.
 
(c)            Except as provided in Section 6.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement or any other Loan Document by
facsimile transmission or electronic transmission shall be effective as delivery
of a manually executed counterpart thereof.
 
Section 12.07    Severability.  Any provision of this Agreement or any other
Loan Document held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof, and the remaining
provisions hereof and thereof shall remain in full force and effect and shall be
liberally construed to carry out the provisions and intent hereof and thereof;
provided, that if any one or more of the provisions contained in this Agreement
or any other Loan Document shall be determined or held to be invalid or
unenforceable because such provision is overly broad as to duration, geographic
scope, activity, subject or otherwise, such provision shall be deemed amended
(and any court or other tribunal is hereby authorized to reform this Agreement
accordingly) by limiting and reducing it to the minimum extent necessary to make
such provision valid and enforceable; provided further, that the invalidity of a
particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
 
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Section 12.08       Right of Setoff.  If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind, including obligations under Hedging Agreements) at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower or any
Subsidiary against any of and all the obligations of the Borrower or any
Subsidiary owed to such Lender now or hereafter existing under this Agreement or
any other Loan Document, irrespective of whether or not such Lender shall have
made any demand under this Agreement or any other Loan Document and although
such obligations may be unmatured.  The rights of each Lender under this Section
12.08 are in addition to other rights and remedies (including other rights of
setoff) which such Lender or its Affiliates may have.
 
Section 12.09      Governing Law; Jurisdiction; Consent to Service of Process.
 
(a)            THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO EXCEPT TO THE EXTENT THAT
UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE,
RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH
LENDER IS LOCATED.
 
(b)            ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF COLORADO LOCATED IN THE COUNTY OF
DENVER OR THE COLORADO DISTRICT COURT FOR THE UNITED STATES OF AMERICA, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF
AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS NON‑EXCLUSIVE AND DOES NOT
PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT
OTHERWISE HAVING JURISDICTION.
 
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(c)            EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE
ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED
PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL
AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.
 
(d)            EACH PARTY HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE, AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.
 
Section 12.10     Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
 
Section 12.11     Confidentiality.  Each of the Administrative Agent, the
Issuing Banks and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to potential investors, rating agencies, and secured parties,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (c) to the extent requested by any regulatory authority, (d) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (e) to any other party to this
 
 
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Agreement or any other Loan Document, (f) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (g) subject to an agreement
containing provisions substantially the same as those of this Section 12.11, to
(i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any Hedging
Agreement relating to the Borrower and its obligations, (h) with the consent of
the Borrower or (i) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section 12.11 or (ii)
becomes available to the Administrative Agent, any Issuing Bank or any Lender on
a non‑confidential basis from a source other than the Borrower.  For the
purposes of this Section 12.11, “Information” means all information received
from the Borrower relating to the Borrower and its business, other than any such
information that is available to the Administrative Agent, any Issuing Bank or
any Lender on a non‑confidential basis prior to disclosure by the Borrower;
provided that, in the case of information received from the Borrower after the
date hereof, such information is clearly identified at the time of delivery as
confidential.  Any Person required to maintain the confidentiality of
Information as provided in this Section 12.11 shall be considered to have
complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information (assuming such Person’s
degree of care in maintaining the confidentiality of its own confidential
information is reasonable).
 
Section 12.12    Interest Rate Limitation.  It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it. 
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Colorado or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows:  (a) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (b) in the event that the maturity of the Notes is accelerated by
reason of an election of the holder thereof resulting from any Event of Default
under this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to any Lender may never include more than the maximum amount allowed
by such applicable law, and excess interest, if any, provided for in this
Agreement or otherwise shall be canceled automatically by such Lender as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Indebtedness (or, to the
extent that the principal amount of the Indebtedness shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower).  All sums
paid or agreed to be paid to any Lender for the use, forbearance or detention of
sums due hereunder shall, to the extent permitted by law applicable to such
Lender, be amortized, prorated, allocated and spread throughout the stated term
of the Loans evidenced by the Notes until payment in full so that the rate or
amount of interest on account of any Loans hereunder does not exceed the maximum
amount allowed by such applicable law.  If at any time and from time to time (i)
the amount of interest payable to any Lender on any date shall be computed at
the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12
and (ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable
to such Lender, then, to the extent permitted by applicable law, the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.12.
 
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Section 12.13         Exculpation Provisions.  EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
“CONSPICUOUS.”
 
Section 12.14     Collateral Matters; Hedging Agreements.  The benefit of the
Security Instruments and of the provisions of this Agreement relating to any
collateral securing the Indebtedness shall also extend to and be available to
any Secured Hedging Agreement on a pro rata basis in respect of any obligations
of the Borrower.
 
Section 12.15     No Third Party Beneficiaries.  This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans and the Issuing Banks
to issue, amend, renew or extend Letters of Credit hereunder are solely for the
benefit of the Borrower, and no other Person (including any Subsidiary of the
Borrower, any obligor, contractor, subcontractor, supplier or materialsman)
shall have any rights, claims, remedies or privileges hereunder or under any
other Loan Document (except to the extent it is a party thereto) against the
Administrative Agent, any Issuing Bank or any Lender for any reason whatsoever. 
There are no third party beneficiaries other than Secured Hedging
Counterparties.
 
Section 12.16      USA Patriot Act Notice.  Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107‑56 (signed into law October 26, 2001)) (the “Patriot Act”), it is
required to obtain, verify and record information that identifies the Borrower,
which information includes the name and address of the Borrower and other
information that will allow such Lender to identify the Borrower in accordance
with the Patriot Act.
 
Section 12.17       Existing Credit Agreement.  This Agreement amends and
restates the Existing Credit Agreement in its entirety.  On the date of the
initial funding of Loans hereunder, all amounts outstanding under the Existing
Credit Agreement shall be paid in full with the proceeds of such Loans and the
“Commitments” (as defined in the Existing Credit Agreement) thereunder shall be
terminated.  Each Lender that was a party to the Existing Credit Agreement
hereby agrees to return to the Borrower, with reasonable promptness, any note
delivered by the Borrower to such Lender in connection with the Existing Credit
Agreement upon receipt of its new Note, if any, delivered pursuant to this
Agreement.
 
 

 
[SIGNATURE PAGES FOLLOW]
 
 
 

 
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The parties hereto have caused this Agreement to be duly executed as of the day
and year first above written.

BORROWER: SYNERGY RESOURCES CORPORATION

By: /s/ Edward Holloway
Name:  Edward Holloway
Title:  Chief Executive Officer

 
 
 
Signature Page to Amended and Restated Credit Agreement

--------------------------------------------------------------------------------

 
 
 
 

ADMINISTRATIVE AGENT: 
COMMUNITY BANKS OF COLORADO,
 as Administrative Agent

By: /s/ Sarah Burchett
Name:  Sarah Burchett
Title:  Vice President

 
 
 

Signature Page to Amended and Restated Credit Agreement

 

--------------------------------------------------------------------------------

 
 

 
 

LENDERS:
COMMUNITY BANKS OF COLORADO,
 as a Lender

By: /s/ Sarah Burchett
Name:  Sarah Burchett
Title:  Vice President

 
 
 

Signature Page to Amended and Restated Credit Agreement

--------------------------------------------------------------------------------

 
 
COBIZ BANK, A COLORADO CORPORATION, DBA COLORADO BUSINESS BANK,
as a Lender

By: /s/ Dougls K. Derks_
Name:  Douglas K. Derks
Title:  Senior Vice President
Address:
Colorado Business Bank
Attn: Douglas Derks/Diane Bowen
15710 W. Colfax Ave.
Golden, CO 80401

 
 
 

Signature Page to Amended and Restated Credit Agreement

--------------------------------------------------------------------------------

 
 
 
 
AMEGY BANK NATIONAL ASSOCIATION,
as a Lender

By: /s/ Kevin Donaldson 
Name:  Kevin Donaldson
Title:  Senior Vice President
Address:
Amegy Bank National Association
4400 Post Oak Parkway
Houston, Texas 77027

 
Signature Page to Amended and Restated Credit Agreement

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ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS
Aggregate Maximum Credit Amounts

Name of Lender
Applicable
Percentage
Maximum Credit Amount
Amount of Commitment on the Effective Date
Community Banks of Colorado
46.8085%
$70,212,750
$22,000,000
CoBiz Bank, a Colorado corporation, dba Colorado Business Bank
21.2766%
$31,914,900
$ 10,000,000
Amegy Bank National Association
31.9149%
$47,872,350
$15,000,000
TOTAL
100.0000%
$150,000,000
$47,000,000

 
 
 
Annex I – 1

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EXHIBIT A
FORM OF NOTE
$[           ]
[      ], 201[      ]

FOR VALUE RECEIVED, Synergy Resources Corporation, a Colorado corporation (the
“Borrower”), hereby promises to pay to [          ] (the “Lender”), or its
assigns, at the principal office of  Community Banks of Colorado, a division of
NBH Bank (the “Administrative Agent”), at [_____], the principal sum of
[_______________] dollars ($[____________]) (or such lesser amount as shall
equal the aggregate unpaid principal amount of the Loans made by the Lender to
the Borrower under the Credit Agreement, as hereinafter defined), in lawful
money of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such office, in
like money and funds, for the period commencing on the date of such Loan until
such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The date, amount, Type, interest rate, Interest Period and maturity of each Loan
made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be endorsed by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender.  Failure to make any such notation or to attach a schedule shall
not affect any Lender’s or the Borrower’s rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of this Note.
This Note is one of the Notes referred to in the Amended and Restated Credit
Agreement dated as of November 28, 2012 among the Borrower, the Administrative
Agent, and the other lenders signatory thereto (including the Lender), and
evidences Loans made by the Lender thereunder (such Credit Agreement as the same
may be amended, supplemented or restated from time to time, the “Credit
Agreement”).  Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
This Note (a) is issued pursuant to, and is subject to the terms and conditions
set forth in, the Credit Agreement and is entitled to the benefits provided for
in the Credit Agreement and the other Loan Documents, and (b) is secured by and
entitled to the benefits of certain Security Instruments (as identified and
defined in the Credit Agreement).  The Credit Agreement provides for the
acceleration of the maturity of this Note upon the occurrence of certain events,
for prepayments of Loans upon the terms and conditions specified therein and
other provisions relevant to this Note.
If this Note is placed in the hands of an attorney for collection after default,
or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, the Borrower agrees to pay
reasonable attorneys’ fees and collection costs to the holder hereof in addition
to the principal and interest payable hereunder.
The Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
 
A-1

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In no event shall the interest payable under this Note, whether before or after
maturity, exceed the maximum amount of interest which, under applicable law, may
be contracted for, charged, or received on this Note, and this Note is expressly
made subject to the provisions of the Credit Agreement which more fully set out
the limitations on how interest accrues hereon.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF COLORADO.
SYNERGY RESOURCES CORPORATION

By:     _______________________________________________              
Name:
Title:

A-2

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EXHIBIT B
FORM OF BORROWING REQUEST
[                   ], 201[   ]
Synergy Resources Corporation, a Colorado corporation (the “Borrower”), pursuant
to Section 2.03 of the Amended and Restated Credit Agreement dated as of
November 28, 2012 (together with all amendments, restatements, supplements or
other modifications thereto, the “Credit Agreement”) among the Borrower,
Community Banks of Colorado, a division of NBH Bank, N.A., as Administrative
Agent and the other lenders (the “Lenders”) which are or become parties thereto
(unless otherwise defined herein, each capitalized term used herein is defined
in the Credit Agreement), hereby requests a Borrowing as follows:
(i)            Aggregate amount of the requested Borrowing is $[____________];
(ii)            Date of such Borrowing is [________________], 201[__];
(iii)            Requested Borrowing is to be [an ABR Borrowing] [a Eurodollar
Borrowing];
(iv)            In the case of a Eurodollar Borrowing, the initial Interest
Period applicable thereto is [______________];
(v)            Amount of Borrowing Base in effect on the date hereof (or
Aggregate Maximum Credit Amounts, if such amount is less than the Borrowing Base
in effect on the date hereof) is $[_______________];
(vi)            Total Revolving Credit Exposures on the date hereof (i.e.,
outstanding principal amount of Loans and total LC Exposure) is
$[_____________]; and
(vii)            Pro forma total Revolving Credit Exposures (giving effect to
the requested Borrowing) is $[________________]; and
(viii)            Location and number of the Borrower’s account to which funds
are to be disbursed, which shall comply with the requirements of Section 2.05 of
the Credit Agreement, is as follows:
[________________________ ]
[________________________ ]
[________________________ ]
[________________________ ]
[________________________ ] 

(ix)            The Borrower hereby warrants and represents to Administrative
Agent and the Lenders that the following statements are true and correct as of
the date of this Borrowing Request:
a.            Each of the documents previously delivered to Administrative Agent
pursuant to Section 6.01 and Section 6.02 of the Credit Agreement, as
applicable, are in full force and effect and have not been terminated, amended
or modified except in accordance with the Credit Agreement;
B-1

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b.            The representations and warranties of the Borrower set forth in
the Credit Agreement and in the other Loan Documents are true and correct in all
material respects, except to the extent any such representations and warranties
are expressly limited to an earlier date, in which case, on and as of the date
of the requested Borrowing, such representations and warranties shall continue
to be true and correct in all material respects as of such specified earlier
date;
c.            Except as set forth in Exhibit A, attached hereto, there is and,
after giving effect to the requested Borrowing, there will be no Default or any
event which with notice or the passage of time would become an Event of Default
under the Credit Agreement or any of the other Loan Documents;
d.            At the time of and immediately after giving effect to this
Borrowing, no Material Adverse Effect shall have occurred;
e.            To the knowledge of the Borrower, the making of this Borrowing
would not conflict with, or cause Administrative Agent or any Lender to violate
or exceed, any applicable Governmental Requirement, and no change in law shall
have occurred;
f.            No litigation shall be pending or threatened, which does or, seeks
to, enjoin, prohibit or restrain, the making or repayment of any Borrowing or
any participations therein or the consummation of the transactions contemplated
by the Credit Agreement or any other Loan Document; and
g.            The amount of the Borrowing requested exceeds [minimum amount of
one hundred thousand dollars ($1,000,000)] except to the extent a lesser amount
remains available under the Credit Agreement.
The undersigned certifies that he/she is the [            ] of the Borrower, and
that as such he/she is authorized to execute this certificate on behalf of the
Borrower.  The undersigned further certifies, represents and warrants in such
capacity and on behalf of the Borrower that the Borrower is entitled to receive
the requested Borrowing under the terms and conditions of the Credit Agreement.
SYNERGY RESOURCES CORPORATION     

By: _______________________________
Name:
Title:
By:  _______________________________  
Name:
Title:
B-2

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EXHIBIT C
FORM OF INTEREST ELECTION REQUEST
[                ], 201[   ]
Synergy Resources Corporation, a Colorado corporation (the “Borrower”), pursuant
to Section 2.04 of the Amended and Restated Credit Agreement dated as of
November 28, 2012 (together with all amendments, restatements, supplements or
other modifications thereto, the “Credit Agreement”) among the Borrower, 
Community Banks of Colorado, a division of NBH Bank, N.A., as Administrative
Agent and the lenders referenced therein (the “Lenders”) (unless otherwise
defined herein, each capitalized term used herein is defined in the Credit
Agreement), hereby makes an Interest Election Request as follows:
(i)            The Borrowing to which this Interest Election Request applies,
and if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing (in
which case the information specified pursuant to (iii) and (iv) below shall be
specified for each resulting Borrowing) is [____________];
(ii)            The effective date of the election made pursuant to this
Interest Election Request is [____________], 201[__];[and]
(iii)            The resulting Borrowing is to be [an ABR Borrowing] [a
Eurodollar Borrowing][; and]
[(iv)            [If the resulting Borrowing is a Eurodollar Borrowing] The
Interest Period applicable to the resulting Borrowing after giving effect to
such election is [___________]].
The undersigned certifies that he/she is the [_____________] of the Borrower,
and that as such he/she is authorized to execute this certificate on behalf of
the Borrower.  The undersigned further certifies, represents and warrants in
such capacity and on behalf of the Borrower that the Borrower is entitled to
receive the requested continuation or conversion under the terms and conditions
of the Credit Agreement.
SYNERGY RESOURCES CORPORATION

By:  _______________________________________________                          
Name:
Title:
C-1

--------------------------------------------------------------------------------

 
 

EXHIBIT D
FORM OF
COMPLIANCE CERTIFICATE
The undersigned officer executing this certificate on behalf of Synergy
Resources Corporation, a Colorado corporation (the “Borrower”), certifies that
he/she is the [                  ] of the Borrower and that as such he/she is
authorized to execute this certificate.  Reference is made to that certain
Amended and Restated Credit Agreement dated as of November 28, 2012 (together
with all amendments, restatements, supplements or other modifications thereto
being the “Credit Agreement”) among the Borrower, Community Banks of Colorado,
as Administrative Agent, and the lenders referenced therein (the “Lenders”). 
Terms used but not defined herein shall have the meanings given them in the
Credit Agreement and all section references herein refer to sections of the
Credit Agreement. This certificate is being delivered pursuant to Section
8.01(c) of the Credit Agreement. The Borrower hereby certifies that:
(a)            The representations and warranties of the Borrower contained in
Article VII of the Credit Agreement and in the Loan Documents and otherwise made
in writing by or on behalf of the Borrower pursuant to the Credit Agreement and
the Loan Documents were true and correct when made, and are repeated at and as
of the time of delivery hereof and are true and correct in all material respects
at and as of the time of delivery hereof, except to the extent such
representations and warranties are expressly limited to an earlier date or the
Lenders have expressly consented in writing to the contrary.
(b)            The Borrower has performed and complied with all agreements and
conditions contained in the Credit Agreement and in the Loan Documents required
to be performed or complied with by it prior to or at the time of delivery
hereof [or specify default and describe].
(c)            Since the date of the Credit Agreement, no change has occurred,
either in any case or in the aggregate, in the condition, financial or
otherwise, of the Borrower which could reasonably be expected to have a Material
Adverse Effect [or specify event].
(d)            There exists no Default or Event of Default [or specify Default
and describe].
(e)            Attached hereto are the detailed computations necessary to
determine whether the Borrower is in compliance with Section 9.01 and Section
8.14(a) as of the end of the [fiscal quarter][fiscal year] ending
[____________].
EXECUTED AND DELIVERED this [______] day of [_______________].
SYNERGY RESOURCES CORPORATION

By:     __________________________________________________     
Name:
Title:            Chief Financial Officer

D-1

--------------------------------------------------------------------------------

 
 

EXHIBIT E
SECURITY INSTRUMENTS

1.
Amended and Restated Pledge and Security Agreement, dated November 28, 2012,
executed by Synergy Resources Corporation and Community Banks of Colorado, as
Administrative Agent.

 
2.
Amended and Restated Deed of Trust, Mortgage, Fixture Filing, Assignment of
As-Extracted Collateral, Security Agreement and Financing Statement dated
November 28, 2012, from Synergy Resources Corporation to the Public Trustee of
Weld County, Colorado, the Public Trustee of Boulder County, Colorado and
Community Banks of Colorado, as Administrative Agent.

 
3.
UCC-1 Financing Statement filed by Community Banks of Colorado, as
Administrative Agent.

 
4.
Amendment to UCC-1 filed with the Colorado Secretary of State on December 1,
2011, at reception number 20112043646.

 
5.
Amendment to UCC-1 filed with the Colorado Secretary of State on December 1,
2011, reception number 20112043647.

E-1

--------------------------------------------------------------------------------

 
 

EXHIBIT F
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”).  Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached
hereto are hereby agreed to and incorporated herein by reference and made a part
of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit and guarantees included in
such facilities) and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”).  Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

1. Assignor:______________________________

2. Assignee:______________________________
[and is an Affiliate/Approved Fund of [identify Lender]]

3. Borrower:______________________________

4. Administrative Agent:Community Banks of Colorado, as the Administrative Agent
under the Credit Agreement

5. Credit Agreement:The Amended and Restated Credit Agreement dated as of
November 28, 2012 among Synergy Resources Corporation, the Lenders parties
thereto, Community Banks of Colorado, as Administrative Agent, and the lenders
referenced therein.

 

--------------------------------------------------------------------------------

6. Assigned Interest:

Commitment Assigned
Aggregate Amount of Commitment/Loans for all Lenders
Amount of Commitment/Loans Assigned
Percentage Assigned of Commitment/Loans2
 
 
  $
  $
%
 
  $
  $
%
 
  $
  $
%

Effective Date:  _____________ ___, 201__ [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR

[NAME OF ASSIGNOR]

By:            ______________________________
Name:
Title:
ASSIGNEE

[NAME OF ASSIGNEE]

By:            ______________________________
Name:
Title:
Address of Assignee:

____________________________________
____________________________________
____________________________________
 

--------------------------------------------------------------------------------

2 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.
F-1

--------------------------------------------------------------------------------

 
Consented to and Accepted:

Community Banks of Colorado,
    as Administrative Agent

By:  _________________________________________________              
Name:
Title:
 Consented to:

Synergy Resources Corporation

By:  
_________________________________________________                                        
Name:
Title:
 
F-2

--------------------------------------------------------------------------------

 

ANNEX 1
Synergy Resources Corporation Amended and Restated Credit Agreement
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1.            Representations and Warranties.
1.1            Assignor.  The Assignor (a) represents and warrants that (i) it
is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien, encumbrance or other adverse claim and
(iii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect
to (i) any statements, warranties or representations made in or in connection
with the Amended and Restated Credit Agreement or any other Loan Document, (ii)
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Borrower, any of its Affiliates or any other Person obligated
in respect of any Loan Document or (iv) the performance or observance by the
Borrower, any of its Affiliates or any other Person of any of their respective
obligations under any Loan Document.
1.2.            Assignee.  The Assignee (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
satisfies the requirements, if any, specified in the Credit Agreement that are
required to be satisfied by it in order to acquire the Assigned Interest and
become a Lender, (iii) from and after the Effective Date, it shall be bound by
the provisions of the Credit Agreement as a Lender thereunder and, to the extent
of the Assigned Interest, shall have the obligations of a Lender thereunder,
(iv) it has received a copy of the Credit Agreement, together with copies of the
most recent financial statements delivered pursuant to Section 8.01 thereof, as
applicable, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on the Administrative Agent or any other Lender, and (v) if it is a Foreign
Lender, attached to the Assignment and Assumption is any documentation required
to be delivered by it pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.
2.            Payments.  From and after the Effective Date, the Administrative
Agent shall make all payments in respect of the Assigned Interest (including
payments of principal, interest, fees and other amounts) to the Assignor for
amounts which have accrued to but excluding the Effective Date and to the
Assignee for amounts which have accrued from and after the Effective Date.
 
F-3

--------------------------------------------------------------------------------

3.            General Provisions.  This Assignment and Assumption shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.  This Assignment and Assumption may be
executed in any number of counterparts, which together shall constitute one
instrument.  Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by facsimile transmission shall be effective as
delivery of a manually executed counterpart of this Assignment and Assumption. 
This Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of Colorado.
 

 
F-4

--------------------------------------------------------------------------------

EXHIBIT G
FORM OF HEDGING AGREEMENTS CERTIFICATE
The undersigned officer executing this certificate on behalf of Synergy
Resources Corporation, a Colorado corporation (the “Borrower”), certifies that
he/she is the Chief Financial Officer of the Borrower, and that as such he/she
is authorized to execute this certificate.  Reference is made to that certain
Amended and Restated Credit Agreement dated as of November 28, 2012 (together
with all amendments, restatements, supplements or other modifications thereto
being the “Credit Agreement”) among the Borrower, Community Banks of Colorado,
as Administrative Agent, and the lenders referenced therein (the “Lenders”). 
Terms used but not defined herein shall have the meanings given them in the
Credit Agreement and all section references herein refer to sections of the
Credit Agreement. This certificate is being delivered pursuant to Section
8.01(e) of the Credit Agreement. The Borrower hereby certifies that set forth on
Schedule 1 attached hereto is a true and complete list of all Hedging Agreements
of the Borrower, including the type, term, effective date, termination date,
notional amounts or volumes and any other material terms for each such Hedging
Agreement.
EXECUTED AND DELIVERED this [__] day of ___________, 201[_].
SYNERGY RESOURCES CORPORATION

By:   ___________________________________________________       
Name:
Title:              Chief Financial Officer

G-1

--------------------------------------------------------------------------------

 

Schedule 1
Hedging Agreements Certificate

 
Type
Term
Effective Date
Termination Date
Notional Amount or Volumes
 
Comments/Other
1.
 
 
 
 
 
 
2.
 
 
 
 
 
 
3.
 
 
 
 
 
 
4.
 
 
 
 
 
 
5.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

 

G-2

--------------------------------------------------------------------------------

 

EXHIBIT H
FORM OF RESERVE REPORT CERTIFICATE
The undersigned officer executing this certificate on behalf of Synergy
Resources Corporation, a Colorado corporation (the “Borrower”), certifies that
he/she is the [                  ] of the Borrower, and that as such he/she is
authorized to execute this certificate.  Reference is made to that certain
Amended and Restated Credit Agreement dated as of November 28, 2012 (together
with all amendments, restatements, supplements or other modifications thereto
being the “Credit Agreement”) among the Borrower,  Colorado Community Banks, a
division of NBH Bank, N.A., as Administrative Agent, and the lenders referenced
therein (the “Lenders”).  Terms used but not defined herein shall have the
meanings given them in the Credit Agreement and all section references herein
refer to sections of the Credit Agreement. This certificate is being delivered
pursuant to Section 8.12(b) of the Credit Agreement. The Borrower hereby
certifies that:
(a)            The Borrower did not provide any statements or conclusions in the
preparation of the [Initial]3  Reserve Report which were based upon or include
misleading information or failed to take into account material information
regarding the matters reported therein, it being understood that projections
concerning volumes attributable to the Oil and Gas Properties and production and
cost estimates contained in the [Initial] Reserve Report are necessarily based
upon professional opinions, estimates and projections and that the Borrower does
not warrant that such opinions, estimates and projections will ultimately prove
to have been accurate.
(b)            The Borrower owns good and defensible title to the Hydrocarbon
Interests in the Oil and Gas Properties evaluated in the Reserve Report
delivered herewith and such Properties are free of all Liens except for Liens
permitted by Section 9.03 of the Credit Agreement.
[(c)            The Oil and Gas Properties to be mortgaged on the date hereof in
connection with the Credit Agreement comply with the requirements of Section
8.12(b).]2
[(c)            Except as set forth on Schedule 1 attached hereto, on a net
basis there are no gas imbalances, take or pay or other prepayments in excess of
the volume specified in Section 7.18.
(d)            Except as set forth on Schedule 1 attached hereto, no Oil and Gas
Properties have been sold since the date of the last Borrowing Base
determination.
(e)            Set forth on Schedule 1 attached hereto is a list of all
marketing agreements effective on the date hereof.
(f)            Attached hereto is as Exhibit A is a list of the Oil and Gas
Properties of the Borrower evaluated in the Reserve Report delivered herewith
that are Mortgaged Properties which demonstrates compliance with Section
8.14(a)]

--------------------------------------------------------------------------------

1 Use bracketed language for certificate delivered on Effective Date only.
2 Use this subsection (c) for certificate delivered on Effective Date only and
delete for subsequent delivery of this and use subsections (c) to (f).
H-1

--------------------------------------------------------------------------------

EXECUTED AND DELIVERED this [__] day of ___________, 201[_].
SYNERGY RESOURCES CORPORATION

By:     ________________________________________________    
Name: 
______________________________________________                                                                                 
Title:      ______________________________________________

H-2

--------------------------------------------------------------------------------

Schedule 1
Reserve Report Certificate

Gas Imbalances

Oil and Gas Properties Sold

Marketing Agreements

H-3

--------------------------------------------------------------------------------

Exhibit A
Reserve Report Certificate

List of Mortgaged Properties
Reserve Report Effective Date:
 
 
 
 
 
 
 
 
 
 
 
Date Prepared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
PROPERTY DESCRIPTION
STATUS
RES RPT NPV10
TITLE
COMMENTS
Per Review
Per Reserve Report
Per Mortgage
Date Added
Date Removed
Other
State
County
Location
Field
Lease
Well No.
Res Rpt
Currently
WI
NI
WI
NI
WI
NI
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

H-1

--------------------------------------------------------------------------------

EXHIBIT I
LIST OF UNMORTGAGED PROPERTIES
Reserve Report Effective Date:
 
 
 
 
 
 
 
 
Date Prepared:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
PROPERTY DESCRIPTION
STATUS
OWNERSHIP
COMMENTS
PDP/PDNP/PUD
If PDP, Avg Daily Rate
Per Review
State
County
Location
Field
Lease
Well No.
WI
NI
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

I-1

--------------------------------------------------------------------------------

 

SCHEDULE 7.05
LITIGATION
None.
 
 
 

 

Section 7.05 -1

--------------------------------------------------------------------------------

 

SCHEDULE 7.18
GAS IMBALANCES
None.
 
 
 

 
Section 7.18 -1

--------------------------------------------------------------------------------

 

SCHEDULE 7.19
MARKETING CONTRACTS
None.

 
 
 

Section 7.19 -1

--------------------------------------------------------------------------------

 

SCHEDULE 7.20
HEDGING AGREEMENTS
None.
 
 
 

Section 7.20 -1

--------------------------------------------------------------------------------

 

SCHEDULE 7.24
MATERIAL AGREEMENTS
1.            Purchase and Sale Agreement between Orr Energy, LLC, a Colorado
limited liability company, as seller and Synergy Energy Resources, a Colorado
corporation, as purchaser, dated October 23, 2012.
 
 
 

 

Section 7.24 -1

--------------------------------------------------------------------------------

 

SCHEDULE 7.28
EXISTING ACCOUNTS PAYABLE

See Attached.

 
 
 
 
 
 
 
 
 
 
 
 
Section 7.28 -1
 

--------------------------------------------------------------------------------

 
 

FIRST AMENDMENT TO CREDIT AGREEMENT

This First Amendment to Credit Agreement (this “Amendment”) is made and entered
into effective as of February 12, 2013 (the “Effective Date”), by and between
Synergy Resources Corporation, a Colorado corporation (“Borrower”), each of the
Lenders party to the Credit Agreement (as defined below) (“Lenders”), and
Community Banks of Colorado, a division of NBH Bank, N.A., as administrative
agent for the Lenders (in such capacity, together with its successors in such
capacity, the “Administrative Agent”), and is as follows:

Preliminary Statements

A.            Lenders, the Administrative Agent and Borrower are parties to a
Credit Agreement dated as of November 28, 2012 (the “Credit Agreement”). 
Capitalized terms which are used, but not defined, in this Amendment will have
the meanings given to them in the Credit Agreement.

B.            The parties desire to make certain amendments to the Credit
Agreement, all as more particularly set forth herein.

Statement of Amendment

In consideration of the mutual covenants and agreements set forth in this
Amendment, and for other good and valuable consideration, Lenders, the
Administrative Agent and Borrower hereby agree as follows:

1.            Amendments to Credit Agreement.  Subject to the terms and
provisions of this Amendment, the Credit Agreement is hereby amended as follows:
 
(a)            The number set forth in clause (ii) of the definition of “LC
Commitment” in Section 1.01 of the Credit Agreement is hereby amended to be
“$15,000,000.”
 
(b)            Section 2.04(e) of the Credit Agreement (including the heading
thereto) is hereby amended and restated in its entirety as follows:
 
“(e)            Effect of Events of Default on Interest Election. 
Notwithstanding any contrary provision hereof, if an Event of Default has
occurred and is continuing:  (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing (and any Interest Election Request that
requests the conversion of any Borrowing to, or continuation of any Borrowing
as, a Eurodollar Borrowing shall be ineffective) and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.”
2.            Reaffirmation of Security.  Borrower, Lenders and the
Administrative Agent hereby expressly intend that this Amendment shall not in
any manner (a) constitute the refinancing, refunding, payment or extinguishment
of the Obligations evidenced by the existing Loan Documents; (b) be deemed to
evidence a novation of the outstanding balance of the Obligations; or (c)
replace, impair, or extinguish the creation, attachment, perfection or priority
of the Liens on the Borrowing Base Properties.  Borrower ratifies and reaffirms
any and all grants of Liens to Lenders and the Administrative Agent on the
Borrowing Base Properties as security for the Obligations, and Borrower
acknowledges and confirms that the grants of the Liens to Lenders and the
Administrative Agent on the Borrowing Base Properties: (i) represent continuing
Liens on all of the Borrowing Base Properties, (ii) secure all of the
Obligations, and (iii) represent valid, first and best Liens on all of the
Borrowing Base Properties except to the extent of any Permitted Liens.
 
1

--------------------------------------------------------------------------------

3.            Representations.  In connection with this Amendment, Borrower
hereby represents and warrants to Lenders and the Administrative Agent as
follows:
 
(a)            Power and Authority.  Borrower has full power and authority to
enter into, and to perform its obligations under this Amendment, and the
execution and delivery of, and the performance of its obligations under and
arising out of, this Amendment have been duly authorized by all necessary
corporate action.
 
(b)            Legal, Valid and Binding Obligation.  This Amendment constitutes
the legal, valid and binding obligation of Borrower enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally.
 
(c)            Continued Representations and Warranties.  After giving effect to
the amendments contained in this Amendment, Borrower’s representations and
warranties contained in the Loan Documents are complete and correct as of the
date of this Amendment with the same effect as though these representations and
warranties had been made again on and as of the date of this Amendment, subject
to those changes as are not prohibited by, or do not constitute Events of
Default under, the Credit Agreement.
 
(d)            No Events of Default.  No Event of Default has occurred and is
continuing.
 
4.            Continuing Effect of Credit Agreement; Reaffirmation of Loan
Documents.  Except as expressly amended hereby, all of the provisions of the
Credit Agreement are ratified and confirmed and remain in full force and
effect.  The existing Loan Documents, except as amended by this Amendment, shall
remain in full force and effect, and each of them is hereby ratified and
confirmed by Borrower, Lenders and the Administrative Agent.
 
5.            One Agreement; References; Fax Signature.  The Credit Agreement,
as amended by this Amendment, will be construed as one agreement.  All
references in any of the Loan Documents to the Credit Agreement will be deemed
to be references to the Credit Agreement as amended by this Amendment.  This
Amendment may be signed by facsimile signatures or other electronic delivery of
an image file reflecting the execution hereof, and if so signed, (i) may be
relied on by each party as if the document were a manually signed original and
(ii) will be binding on each party for all purposes.
 
2

--------------------------------------------------------------------------------

6.            Captions.  The headings to the Sections of this Amendment have
been inserted for convenience of reference only and shall in no way modify or
restrict any provisions hereof or be used to construe any such provisions.
 
7.            Counterparts.  This Amendment may be executed in multiple
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
 
8.            Entire Agreement.  This Amendment sets forth the entire agreement
of the parties with respect to the subject matter of this Amendment and
supersedes all previous understandings, written or oral, in respect of this
Amendment.  At no time shall the prior or subsequent course of conduct by
Borrower, Lenders or the Administrative Agent directly or indirectly limit,
impair or otherwise adversely affect any of the parties’ rights or remedies in
connection with this Amendment or any of the documents, instruments and
agreements executed in connection herewith, as Lenders, the Administrative Agent
and Borrower agree that this Amendment shall only be amended by written
instruments executed by Lenders, the Administrative Agent and Borrower.  Except
to the extent that the Loan Documents are expressly amended by this Amendment,
if there is any conflict, ambiguity, or inconsistency, in the Administrative
Agent’s judgment, between the terms of this Amendment and any of the other Loan
Documents, then the applicable terms and provisions, in the Administrative
Agent’s judgment, providing Lenders and the Administrative Agent with greater
rights, remedies, powers, privileges, or benefits will control.
 
9.            Governing Law; Severability.  This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Colorado
(without regard to its conflicts of law principles). If any term of this
Amendment is found invalid under Colorado law or laws of mandatory application
by a court of competent jurisdiction, the invalid term will be considered
excluded from this Amendment and will not invalidate the remaining terms of this
Amendment.
 
10.            WAIVER OF JURY TRIAL. BORROWER, LENDERS AND THE ADMINISTRATIVE
AGENT EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR
PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[Signature Page Follows]
3

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Borrower, Lenders and the Administrative Agent have executed
this Amendment by their duly authorized officers on the Effective Date.

BORROWER:

SYNERGY RESOURCES CORPORATION

By: /s/ Edward
Holloway                                                                                    
      Edward Holloway, Chief Executive Officer

ADMINISTRATIVE AGENT:

COMMUNITY BANKS OF COLORADO

By: /s/ Sarah
Burchett                                                                                                  
      Sarah Burchett, Vice President

LENDERS:

COMMUNITY BANKS OF COLORADO

By: /s/ Sarah
Burchett                                                                                                  
      Sarah Burchett, Vice President

COBIZ BANK, A COLORADO CORPORATION
DBA COLORADO BUSINESS BANK

By: /s/ Douglas K.
Derks                                                                                    
      Douglas K. Derks, Senior Vice President

AMEGY NATIONAL BANK ASSOCIATION

By: /s/ Kevin
Donaldson                                                                                    
     Kevin Donaldson, Senior Vice President

4

--------------------------------------------------------------------------------

 

SECOND AMENDMENT TO CREDIT AGREEMENT

This Second Amendment to Credit Agreement (this “Amendment”) is made and entered
into effective as of June [●], 2013 (the “Effective Date”), by and between
Synergy Resources Corporation, a Colorado corporation (“Borrower”), each of the
Lenders party to the Credit Agreement (as defined below) (“Lenders”), Texas
Capital Bank, N.A. (“Texas Capital”) and Community Banks of Colorado, a division
of NBH Bank, N.A., individually, as Issuing Bank and as administrative agent for
the Lenders (in such capacity, together with its successors in such capacity,
the “Administrative Agent”), and is as follows:

Preliminary Statements

A.            Lenders, the Administrative Agent and Borrower are parties to an
Amended and Restated Credit Agreement dated as of November 28, 2012, as amended
by that First Amendment dated as of February ___, 2013 (as amended, the “Credit
Agreement”).  Capitalized terms which are used, but not defined, in this
Amendment will have the meanings given to them in the Credit Agreement.

B.            Borrower has requested that Lenders and the Administrative Agent
make certain amendments to the Credit Agreement, all as more particularly set
forth herein.

C.            Lenders and the Administrative Agent are willing to consent to
such requests and so amend the Credit Agreement to reflect such modifications,
all on the terms of this Amendment.
 
Statement of Amendment

In consideration of the mutual covenants and agreements set forth in this
Amendment, and for other good and valuable consideration, Lenders, the
Administrative Agent, Texas Capital and Borrower hereby agree as follows:

1.          Amendments to Credit Agreement.  Subject to the terms and provisions
of this Amendment, the Credit Agreement is hereby amended as follows:

(a)            Section 1.01 of the Credit Agreement is hereby amended by the
addition of the following new definitions, in their proper alphabetical order,
to provide in their respective entireties as follows:

“Interest Expense” means, as to any period of determination, all accrued
interest for such period, whether or not for GAAP purposes such interest is
expensed for such period or capitalized by the Borrower.

(b)            The following definitions in Section 1.01 of the Credit Agreement
are hereby amended in their entireties by substituting the following in their
respective places:

“LC Commitment” means $5,000,000.

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(c)            Section 9.01(c) of the Credit Agreement is hereby amended and
restated in its entirety as follows:

Ratio of EBITDAX to Interest and Fees.  The Borrower will not permit, as of the
last day of any fiscal quarter, its ratio of EBITDAX divided by 4 to the sum of
Interest Expense for such quarter, to be less than or equal to 3.5 to 1.0,
determined as of the fiscal quarter ending August 31, 2012 and each quarter
thereafter.

(d)            Section 9.01(d) of the Credit Agreement is hereby amended and
restated in its entirety as follows:

Ratio of Total Funded Debt to Total Capitalization.  The Borrower will not
permit, as of the last day of any fiscal quarter, its ratio of Total Funded Debt
as of such time to its Total Capitalization as of such time to be greater than
or equal to 0.50.

(e)            Section 12.02(b) o the Credit Agreement is hereby amended and
restated in its entirety as follows:

Neither this Agreement nor any provision hereof nor any Security Instrument nor
any provision thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Borrower and the Lenders
or by the Borrower and the Administrative Agent with the consent of the Lenders;
provided that no such agreement shall (i) increase the Commitment or the Maximum
Credit Amount of any Lender without the written consent of such Lender, (ii)
increase the Borrowing Base without the written consent of each Lender, (iii)
decrease or maintain the Borrowing Base without the written consent of the
Required Lenders (other than any Defaulting Lender), or modify Section 2.07 in
any manner without the consent of each Lender (other than any Defaulting
Lender); provided that a Scheduled Redetermination may be postponed by the
Lenders, (iv) reduce the principal amount of any Loan or LC Disbursement or
reduce the rate of interest thereon, or reduce any fees payable hereunder, or
reduce any other Indebtedness hereunder or under any other Loan Document,
without the written consent of each Lender affected thereby, (v) postpone the
scheduled date of payment or prepayment of the principal amount of any Loan or
LC Disbursement, or any interest thereon, or any fees payable hereunder, or any
other Indebtedness hereunder or under any other Loan Document, or reduce the
amount of, waive or excuse any such payment, or postpone or extend the
Termination Date without the written consent of each Lender affected thereby,
(vi) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, (vii) waive or amend Section 3.04(c), Section 6.01, Section 8.14,
Section 10.02(c) or Section 12.14, without the written consent of each Lender
(other than any Defaulting Lender), or (viii) change any of the provisions of
this Section 12.02(b) or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
under any other Loan Documents or make any determination or grant any consent
hereunder or any other Loan Documents, without the written consent of each
Lender (other than any Defaulting Lender); provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or any Issuing Bank hereunder or under any other Loan
Document without the prior written consent of the Administrative Agent or such
Issuing Bank, as the case may be. Notwithstanding the foregoing, any supplement
to Schedule 7.24 (Material Agreements) shall be effective simply by delivering
to the Administrative Agent a supplemental schedule clearly marked as such and,
upon receipt, the Administrative Agent will promptly deliver a copy thereof to
the Lenders.

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(f)            Annex I to the Credit Agreement is hereby amended and restated in
its entirety to conform to Annex I attached hereto.  The adjustment to each
Lender’s Applicable Percentage as set forth on Annex I attached hereto shall be
effective as of the Increase Date (defined below) and each Lender’s Applicable
Percentage prior to the Increase Date shall be as set forth in Annex I to the
Credit Agreement.

2.            Eligible Lenders.  The parties to this Amendment agree that Texas
Capital is an Eligible Lender.  Texas Capital hereby agrees that upon the
execution of this Amendment, it shall become a party to the Credit Agreement and
shall be fully bound by, and subject to, all of the covenants, terms and
conditions of the Credit Agreement as though an original party thereto.  From
and after the date hereof, all references in the Credit Agreement and in all
other Loan Documents to the “Lenders” shall be deemed to include Texas Capital.

3.            Conditions Precedent.  This Amendment will not become effective
until the date on which each of the following conditions is satisfied.

(a)            The Borrower shall execute and deliver to the Administrative
Agent the Promissory Notes attached hereto as Exhibit A (the “Amendment
Notes”).  These Amendment Notes, to the extent that they are for the benefit of
Lenders other than Texas Capital, are issued in substitution for and replacement
of, but not repayment of, those certain Promissory Notes issued by the Borrower
in favor of those Lenders in connection with the Credit Agreement.  The
Amendment Notes shall constitute a “Note” as defined and described in the Credit
Agreement.  From and after the date hereof, all references in the Credit
Agreement and in all other Loan Documents to the “Notes” shall be deemed to be
references to the Amendment Notes.

4.            Borrowing Base.  In connection with the first Scheduled
Redetermination contemplated by Section 2.07 of the Credit Agreement, the
Administrative Agent, the Lenders and the Borrower have agreed that the
Borrowing Base shall be increased to $75,000,000, which Borrowing Base
adjustment shall be effective as of the latter of [●], 2013, or the satisfaction
of the conditions set forth in Section 3 (the “Increase Date”).

5.            Reaffirmation of Security.  Borrower, Lenders and the
Administrative Agent hereby expressly intend that this Amendment shall not in
any manner (a) constitute the refinancing, refunding, payment or extinguishment
of the Obligations evidenced by the existing Loan Documents; (b) be deemed to
evidence a novation of the outstanding balance of the Obligations; or (c)
replace, impair, or extinguish the creation, attachment, perfection or priority
of the Liens on the Borrowing Base Properties.  Borrower ratifies and reaffirms
any and all grants of Liens to Lenders and the Administrative Agent on the
Borrowing Base Properties as security for the Obligations, and Borrower
acknowledges and confirms that the grants of the Liens to Lenders and the
Administrative Agent on the Borrowing Base Properties: (i) represent continuing
Liens on all of the Borrowing Base Properties, (ii) secure all of the
Obligations, and (iii) represent valid, first and best Liens on all of the
Borrowing Base Properties except to the extent of any Permitted Liens.

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6.            Representations.  To induce Lenders and the Administrative Agent
to accept this Amendment, Borrower hereby represents and warrants to Lenders and
the Administrative Agent as follows:

(a)            Power and Authority.  Borrower has full power and authority to
enter into, and to perform its obligations under, this Amendment, and the
execution and delivery of, and the performance of its obligations under and
arising out of, this Amendment have been duly authorized by all necessary
corporate action.

(b)            Legal, Valid and Binding Obligation.  This Amendment constitutes
the legal, valid and binding obligation of Borrower enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally.

(c)            Continued Representations and Warranties.  After giving effect to
the amendments contained in this Amendment, Borrower’s representations and
warranties contained in the Loan Documents are complete and correct as of the
date of this Amendment with the same effect as though these representations and
warranties had been made again on and as of the date of this Amendment, subject
to those changes as are not prohibited by, or do not constitute Events of
Default under, the Credit Agreement.

(d)            No Events of Default.  No Event of Default has occurred and is
continuing.

7.            Fees, Costs and Expenses.  As a condition of this Amendment,
Borrower will (i) in connection with the execution and delivery of this
Amendment, pay to the Administrative Agent (A) for the account of Texas Capital,
a commitment fee of $85,000, (B) for the account of Community Banks of Colorado,
a threshold commitment fee of $11,250, (C) for the account of Amegy Bank
National Association, a threshold commitment fee of $30,000, and (D) for the
account of the Administrative Agent, an Administrative Fee of $9,753,
representing a prorated annual fee of $20,000, and (ii) reimburse the
Administrative Agent’s for all out of pocket expenses (including reasonable
attorneys’ fees) incurred in connection with this Amendment.

8.            Release.  Borrower, on its behalf and, as applicable, on behalf of
Borrower’s officers, directors, shareholders, Affiliates, Subsidiaries,
successors and assigns (collectively, the “Releasing Parties”), hereby
represents and warrants that such Releasing Parties have no claims,
counterclaims, setoffs, actions or causes of action, damages or liabilities of
any kind or nature whatsoever, whether in law or in equity, in contract or in
tort, whether now accrued or hereafter maturing (collectively, “Claims”) against
Lenders or the Administrative Agent, their direct or indirect Affiliates, or any
of the foregoing’s respective directors, officers, employees, attorneys and
legal representatives, or the heirs, administrators, successors or assigns of
any of them (collectively, “Lender Parties”) to the extent that any such Claim
directly or indirectly arises out of, is based upon or is in any manner
connected with, any Prior Related Event.  Borrower, on its behalf and, as
applicable, on behalf of the other Releasing Parties, voluntarily releases and
forever discharges all Lender Parties from any and all Claims, whether known or
unknown, to the extent that any such Claim directly or indirectly arises out of,
is based upon or is in any manner connected with any Prior Related Event. 
“Prior Related Event” means any transaction, event, circumstance, action,
failure to act, occurrence of any type or sort, whether known or unknown, which
occurred, existed, was taken, was permitted or begun in accordance with,
pursuant to or by virtue of: (a) any of the terms of any Loan Document or this
Amendment, (b) any actions, transactions, matters or circumstances related
hereto or to any Loan Document, (c) the conduct of the relationship between any
Lender Party and Borrower and its Subsidiaries, or (d) any other actions or
inactions by any Lender Party, in each case on or prior to the Effective Date.
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9.            Continuing Effect of Credit Agreement; Reaffirmation of Loan
Documents.  Except as expressly amended hereby, all of the provisions of the
Credit Agreement are ratified and confirmed and remain in full force and
effect.  The existing Loan Documents, except as amended by this Amendment, shall
remain in full force and effect, and each of them is hereby ratified and
confirmed by Borrower, Lenders and the Administrative Agent.

10.            One Agreement; References; Fax Signature.  The Credit Agreement,
as amended by this Amendment, will be construed as one agreement.  All
references in any of the Loan Documents to the Credit Agreement will be deemed
to be references to the Credit Agreement as amended by this Amendment.  This
Amendment may be signed by facsimile signatures or other electronic delivery of
an image file reflecting the execution hereof, and if so signed, (a) may be
relied on by each party as if the document were a manually signed original and
(b) will be binding on each party for all purposes.

11.            Captions.  The headings to the Sections of this Amendment have
been inserted for convenience of reference only and shall in no way modify or
restrict any provisions hereof or be used to construe any such provisions.

12.            Counterparts.  This Amendment may be executed in multiple
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.

13.            Entire Agreement.  This Amendment sets forth the entire agreement
of the parties with respect to the subject matter of this Amendment and
supersedes all previous understandings, written or oral, in respect of this
Amendment.  At no time shall the prior or subsequent course of conduct by
Borrower, Lenders or the Administrative Agent directly or indirectly limit,
impair or otherwise adversely affect any of the parties’ rights or remedies in
connection with this Amendment or any of the documents, instruments and
agreements executed in connection herewith, as Lenders, the Administrative Agent
and Borrower agree that this Amendment shall only be amended by written
instruments executed by Lenders, the Administrative Agent and Borrower.  Except
to the extent that the Loan Documents are expressly amended by this Amendment,
if there is any conflict, ambiguity, or inconsistency, in the Administrative
Agent’s judgment, between the terms of this Amendment and any of the other Loan
Documents, then the applicable terms and provisions, in the Administrative
Agent’s judgment, providing Lenders and the Administrative Agent with greater
rights, remedies, powers, privileges, or benefits will control.

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14.            Governing Law; Severability.  This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Colorado
(without regard to its conflicts of law principles). If any term of this
Amendment is found invalid under Colorado law or laws of mandatory application
by a court of competent jurisdiction, the invalid term will be considered
excluded from this Amendment and will not invalidate the remaining terms of this
Amendment.

15.            WAIVER OF JURY TRIAL. BORROWER, LENDERS AND THE ADMINISTRATIVE
AGENT EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR
PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[signature page follows]
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The parties have caused this Amendment to be duly executed and delivered as of
the day and year first above written.

BORROWER: SYNERGY RESOURCES CORPORATION

By:/s/ Edward Holloway
Name:Edward Holloway
Title:Chief Executive Officer

ADMINISTRATIVE AGENT:
COMMUNITY BANKS OF COLORADO,
as Administrative Agent

By:  /s/ Sarah Burchett
Name:  Sarah Burchett
Title:  Vice President

LENDERS: 

COMMUNITY BANKS OF COLORADO,
as a Lender

By:  /s/ Sarah Burchett
Name:  Sarah Burchett
Title:  Vice President
 
COBIZ BANK, A COLORADO CORPORATION, DBA COLORADO BUSINESS BANK,
as a Lender

By:  /s/ Douglas K. Derks
Name:  Douglas K. Derks
Title:  Senior Vice President

[Signature Page to Second Amendment to Credit Agreement]
 
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AMEGY BANK NATIONAL ASSOCIATION,
as a Lender

By:            /s/ Kevin Donaldson
Name:            Kevin Donaldson
Title:            Senior Vice President

TEXAS CAPITAL BANK, N.A.
as a Lender

By:     /s/ Kelly Graham          
Name:   Kelly Graham
Title:    Vice President

 
 
[Signature Page to Second Amendment to Credit Agreement]

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ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS
Aggregate Maximum Credit Amounts
Name of Lender
Applicable
Percentage
Maximum Credit Amount
Amount of Commitment on the Effective Date
Community Banks of Colorado
33.333333333%
$ 50,000,000
$ 25,000,000
CoBiz Bank, a Colorado corporation, dba Colorado Business Bank
13.333333333%
$ 20,000,000
$ 10,000,000
Amegy Bank National Association
30.666666667%
$ 46,000,000
$ 23,000,000
Texas Capital Bank
22.666666667%
$ 34,000,000
$ 17,000,000
TOTAL
100.000000000%
$ 150,000,000
$ 75,000,000

 
 

 
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EXHIBIT A

[see attached]

 

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THIRD AMENDMENT TO CREDIT AGREEMENT

This Third Amendment to Credit Agreement (this “Amendment”) is made and entered
into effective as of December 20, 2013 (the “Effective Date”), by and between
Synergy Resources Corporation, a Colorado corporation (the “Borrower”), each of
the Lenders party to the Credit Agreement (as defined below) (“Lenders”),
SunTrust Bank (“SunTrust”), KeyBank National Association (“Key Bank”), and
Community Banks of Colorado, a division of NBH Bank, N.A., individually, as
Issuing Bank and as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the “Administrative Agent”), and
is as follows:

Preliminary Statements

A.            Lenders, the Administrative Agent and the Borrower are parties to
an Amended and Restated Credit Agreement dated as of November 28, 2012, as
amended by that First Amendment dated as of February 12, 2013 (the “First
Amendment”) and that Second Amendment (the “Second Amendment”) dated as of June
28, 2013 (as amended, the “Credit Agreement”).  Capitalized terms which are
used, but not defined, in this Amendment will have the meanings given to them in
the Credit Agreement.

B.            The Borrower has requested that Lenders and the Administrative
Agent make certain amendments to the Credit Agreement, all as more particularly
set forth herein.

C.            Lenders and the Administrative Agent are willing to consent to
such requests and so amend the Credit Agreement to reflect such modifications,
all on the terms of this Amendment.

Statement of Amendment

In consideration of the mutual covenants and agreements set forth in this
Amendment, and for other good and valuable consideration, Lenders, the
Administrative Agent, SunTrust, Key Bank and the Borrower hereby agree as
follows:

1.          Amendments to Credit Agreement.  Subject to the terms and provisions
of this Amendment, the Credit Agreement is hereby amended as follows:

(a)            Section 1.01 of the Credit Agreement is hereby amended to add
thereto in alphabetical order the following definitions which shall read in full
as follows:

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute, and any
regulations promulgated thereunder.
“Excluded Swap Obligations” means, with respect to any Guarantor, any Swap
Obligation if, and to the extent that, all or a portion of the guarantee of such
Guarantor of, or the grant by such Guarantor of a security interest to secure,
such Swap Obligation (or any guarantee thereof) is or becomes illegal under the
Commodity Exchange Act or any rule, regulation or order of the Commodity Futures
Trading Commission (or the application or official interpretation of any
thereof) by virtue of such Guarantor’s failure for any reason to constitute an
“eligible contract participant” as defined in the Commodity Exchange Act and the
regulations thereunder at the time the guarantee of such Guarantor or the grant
of such security interest becomes effective with respect to such Swap
Obligation.  If a Swap Obligation arises under a master agreement governing more
than one swap, such exclusion shall apply only to the portion of such Swap
Obligation that is attributable to swaps for which such guarantee or security
interest is or becomes illegal.
 
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“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each
Guarantor that (a) has total assets exceeding $10,000,000 at the time any
guaranty of obligations under such Swap Obligation or grant of the relevant
security interest becomes effective or (b) otherwise constitutes an “eligible
contract participant” under the Commodity Exchange Act and can cause another
Person to qualify as an “eligible contract participant” at such time by entering
into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or
perform under any agreement, contract or transaction that constitutes a “swap”
within the meaning of section 1a(47) of the Commodity Exchange Act.
(b)            The following definitions in Section 1.01 of the Credit Agreement
are hereby amended and restated in their entirety as follows:

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender, or
(b) any other Person whose (y) credit rating assigned by Moody’s or S&P (or
their equivalent) to its unsecured long-term indebtedness is not lower than Baa3
or BBB-, respectively, or (z) obligations under any Hedging Agreement with the
Borrower are guaranteed by an entity whose credit rating assigned by Moody’s or
S&P (or their equivalent) to its unsecured long-term indebtedness is not lower
than Baa3 or BBB-, respectively.

“Excepted Liens” means:  (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties each of which
is in respect of obligations that are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) contractual Liens which arise
in the ordinary course of
 
 
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business under operating agreements, joint venture agreements, oil and gas
partnership agreements, oil and gas leases, farm‑out agreements, division
orders, contracts for the sale, transportation or exchange of oil and natural
gas, unitization and pooling declarations and agreements, area of mutual
interest agreements, royalty agreements, overriding royalty agreements,
marketing agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Subsidiary or materially impair the
value of such Property subject thereto; (e) Liens arising solely by virtue of
any statutory or common law provision relating to banker’s liens, rights of
set‑off or similar rights and remedies and burdening only deposit accounts or
other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by
the Borrower or any of its Subsidiaries to provide collateral to the depository
institution; (f) easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, and Liens related
to surface leases and surface operations, that do not secure any monetary
obligations and which in the aggregate do not materially impair the use of such
Property for the purposes of which such Property is held by the Borrower or any
Subsidiary or materially impair the value of such Property subject thereto; (g)
Liens on cash or securities pledged to secure performance of tenders, surety and
appeal bonds, government contracts, performance and return of money bonds, bids,
trade contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business; (h)
judgment and attachment Liens not giving rise to an Event of Default; and (i)
Liens arising from the debt associated with Secured Hedging Agreement, provided
that any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall not have expired and no
action to enforce such Lien has been commenced; provided, further that Liens
described in clauses (a) through (e) shall remain “Excepted Liens” only for so
long as no action to enforce such Lien has been commenced and no intention to
subordinate the first priority Lien granted in favor of the Administrative Agent
and the Lenders is to be hereby implied or expressed by the permitted existence
of such Excepted Liens.
 
“Fee Letter” means that that letter agreement dated October 11, 2012, by and
between the Borrower and the Administrative Agent, related to, among other
things, the payment of certain fees by the Borrower, as amended by that letter
agreement dated as of December 20, 2013, by and between the Borrower and the
Administrative Agent.
 

 
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“Indebtedness” means any and all amounts owing or to be owing by the Borrower or
any Guarantor (whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising):  (a) to the Administrative Agent, any Issuing Bank, any
Lender or any Affiliate of a Lender, or any Secured Hedging Counterparty under
any Loan Document; and (b) all renewals, extensions and/or rearrangements of any
of the above; provided that solely with respect to any Guarantor that is not an
“eligible contract participant” under the Commodity Exchange Act, Excluded Swap
Obligations of such Guarantor shall in any event be excluded from “Indebtedness”
owing by such Guarantor.

“Required Lenders” means Lenders holding, in the aggregate, at least sixty-six
and two-thirds percent (66 2/3%) of the outstanding Revolving Credit Exposure,
unless there is no outstanding Revolving Credit Exposure at such time, and in
such case, then Lenders holding, in the aggregate, at least sixty-six and
two-thirds percent (66 2/3%) of the existing Commitments at such time; provided,
however, that under if any one Lender holds 66 2/3% of the outstanding Revolving
Credit Exposure or of the existing Commitments, as applicable, then the Required
Lenders shall mean such Lender and at least one other Lender.

(c)            Section 2.06(c) of the Credit Agreement is hereby amended by
increasing the amount in clause (ii) from $150,000,000 to $300,000,000.

(d)            Clause (i) of Section 2.07(f) of the Credit Agreement is hereby
amended and restated in its entirety as follows:

“(i)            If the Borrower or any Subsidiary novates, sells, assigns,
unwinds, terminates, restructures, modifies, amends or otherwise affects
(“Unwinds”) any Borrowing Base Hedging Agreement, the Borrower shall promptly
provide the Administrative Agent with written notice of such Unwind and the
Borrowing Base then in effect shall automatically be reduced by an amount equal
to the mark-to-market value (as determined by the Administrative Agent) of such
Borrowing Base Hedging Agreement as of the date of such Unwind, if any,
resulting from such event (which right shall be in addition to the
Administrative Agent’s right to request Interim Redetermination between each
Scheduled Redetermination).”

(e)            Clause (b) of Section 5.01 of the Credit Agreement is hereby
amended and restated in its entirety as follows:

“(b)            Capital Requirements.  If any Change in Law regarding capital or
liquidity requirements has the effect of reducing the rate of return on a
Lender’s or Issuing Bank’s capital or on the capital of such Lender’s or Issuing
Bank’s holding company, if any, as a consequence of this Agreement or the Loans
made by, or participations in Letters of Credit held by, such Lender, or the
Letters of Credit issued by any Issuing Bank, to a level below that which such
Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s or Issuing Bank’s policies and the policies of such Lender’s or Issuing
Bank’s holding company with respect to capital adequacy), then from time to time
the Borrower will pay to such Lender or Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or Issuing Bank or
such Lender’s or Issuing Bank’s holding company for any such reduction
suffered.”

4

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(f)            A new Section 8.19 of the Credit Agreement shall be added to
Article VIII of the Credit Agreement in appropriate numerical order to read in
full as follows:

“Section 8.19 Commodity Exchange Act Keepwell Provisions.  The Borrower hereby
guarantees the payment and performance of all Indebtedness of each Guarantor and
absolutely, unconditionally and irrevocably undertakes to provide such funds or
other support as may be needed from time to time by each Guarantor in order for
such Guarantor to honor its obligations under its respective guaranty agreement
including obligations with respect to Swap Obligations (provided, however, that
the Borrower shall only be liable under this Section 8.19 for the maximum amount
of such liability that can be hereby incurred without rendering its obligations
under this Section 8.19, or otherwise under this Agreement or any Loan Document,
as it relates to such other Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer, and not for any greater amount). 
The obligations of the Borrower under this Section 8.19 shall remain in full
force and effect until all Indebtedness is paid in full to the Lenders, the
Administrative Agent and all other Secured Parties, and all of the Lenders’
Commitments are terminated.  The Borrower intends that this Section 8.19
constitute, and this Section 8.19 shall be deemed to constitute, a “keepwell,
support, or other agreement” for the benefit of each other Guarantor for all
purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.”

(g)            Section 9.18 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
“Section 9.18  Hedging Agreements.

(a)            The Borrower shall neither assign, terminate, unwind nor sell any
Hedging Agreements listed on Schedule 7.20.  The Borrower shall not enter into
Hedging Agreements in respect of commodities other than Hydrocarbons.  In the
case of Hydrocarbons, the Borrower shall not enter into Hedging Agreements if
the effect thereof would be to cause the notional volumes of all Hedging
Agreements and additional fixed‑price physical off‑take contracts, in the
aggregate, to exceed (i) 85% of the projected production from the Borrower’s
Proved Developed Producing Reserves reflected in the most recently completed
Reserve Report for any month continuing through and including the date that is
twelve (12) months following the effective date of each such Hedging Agreement,
(ii) 70% of the projected production from the Borrower’s Proved Developed
Producing Reserves for any month beginning at the expiration of the period in
clause (i) and continuing through and including the date that is twelve (12)
months following such date, (iii) 60% of the projected production from the
Borrower’s Proved Developed Producing Reserves for any month beginning at the
expiration of the period in clause (ii) and continuing through and including the
date that is twelve (12) months following such date and (iv) 50% of the
projected production from the Borrower’s Proved Developed Producing Reserves for
any month beginning at the expiration of the period clause (iii) and continuing
through and including the date that is twelve (12) months following such date
(it being understood that any put contracts entered into for non speculative
purposes shall not count against the above limitation).  The Borrower shall not
enter into Hedging Agreements converting interest rates.  The Borrower shall not
post any collateral to secure Hedging Agreements, except as contemplated by the
Loan Documents in the case of a Secured Hedging Counterparty.

5

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(b)            In addition to the Hedging Agreements permitted under Section
9.18(a), if after the date of the latest Reserve Report the Borrower converts
any of its Oil and Gas Properties (through drilling operations or otherwise)
from Proved Developed Nonproducing Reserves or Proved Undeveloped Reserves (in
each case, as shown in the latest Reserve Report) to Proved Developed Producing
Reserves (such converted reserves being referred to herein as “Additional Proved
Producing Reserves”), the Borrower may, but shall not be obligated to, provide
the Administrative Agent with the Borrower’s good faith estimated production
forecast (which forecast shall be prepared showing monthly production numbers, a
“Production Forecast”) for the Additional Proved Producing Reserves.  If the
Borrower provides a Production Forecast to the Administrative Agent, the
Borrower shall also provide the Administrative Agent with any other information
requested by the Administrative Agent with respect to such Additional Proved
Producing Reserves.  Unless the Administrative Agent notifies the Borrower in
writing within five Business Days of its receipt of a Production Forecast that
the Administrative Agent is rejecting the Borrower’s treatment of such reserves
as Additional Proved Producing Reserves or is otherwise modifying the Borrower’s
production estimates set forth in the Production Forecast, the Borrower shall be
permitted to enter into Hedging Agreements for up to 70% of the projected
production from such Additional Proved Producing Reserves, but only with respect
to that production that is forecasted in the Production Forecast to occur during
the 12 month period beginning with the first month after the expiration of such
5-day period.  The Additional Proved Producing Reserves shall be included in the
next Reserve Report prepared in accordance with Section 8.12 and, at such time,
the Borrower shall be subject to the limitations on Hedging Agreements
contemplated by Section 9.18 with respect to such Additional Proved Producing
Reserves.

(c)            The limitations on Hedging Agreements set forth in this Section
9.18 shall be calculated based upon barrels of oil or cubic feet of natural gas,
as the case may be, as set forth in the relevant Reserve Report (in the case of
Section 9.18(a)) or the Production Forecast (in the case of Section 9.18(b)) and
shall not be based on barrel of oil equivalent (or BOE) computations.”

6

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(h)            Clause (c) of Section 10.02 of the Credit Agreement is hereby
amended by inserting the following language immediately following clause (c),
which shall read in its entirety as follows:

“Notwithstanding the foregoing, amounts received from the Borrower or any
Guarantor that is not an “eligible contract participant” under the Commodity
Exchange Act shall not be applied to any Excluded Swap Obligations (it being
understood, that in the event that any amount is applied to Indebtedness other
than Excluded Swap Obligations as a result of this this clause, the
Administrative Agent shall make such adjustments as it determines are
appropriate to distributions pursuant to clause fourth above from amounts
received from “eligible contract participants” under the Commodity Exchange Act
to ensure, as nearly as possible, that the proportional aggregate recoveries
with respect to Indebtedness described in clause fourth above by the holders of
any Excluded Swap Obligations are the same as the proportional aggregate
recoveries with respect to other Indebtedness pursuant to clause fourth above).”

(i)            Clause (b) of Section 12.02 of the Credit Agreement is hereby
amended and restated in its entirety as follows:

“(b)            Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Lenders or by the Borrower and the Administrative Agent with the consent
of the Lenders; provided that no such agreement shall (i) increase the
Commitment or the Maximum Credit Amount of any Lender without the written
consent of such Lender, (ii) increase the Borrowing Base without the written
consent of each Lender, decrease or maintain the Borrowing Base without the
written consent of each Lender (other than any Defaulting Lender), or modify
Section 2.07 in any manner without the consent of each Lender (other than any
Defaulting Lender); provided that a Scheduled Redetermination may be postponed
by the Lenders, (iii) reduce the principal amount of any Loan or LC Disbursement
or reduce the rate of interest thereon, or reduce any fees payable hereunder, or
reduce any other Indebtedness hereunder or under any other Loan Document,
without the written consent of each Lender affected thereby, (iv) postpone the
scheduled date of payment or prepayment of the principal amount of any Loan or
LC Disbursement, or any interest thereon, or any fees payable hereunder, or any
other Indebtedness hereunder or under any other Loan Document, or reduce the
amount of, waive or excuse any such payment, or postpone or extend the
Termination Date without the written consent of each Lender affected thereby,
(v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, (vi) waive or amend Section 3.04(c), Section 6.01, Section 8.14,
Section 10.02(c) or Section 12.14, without the written consent of each Lender
(other than any Defaulting Lender),(vii) release any Guarantor from its
obligations under any guaranty agreement that relates to the Indebtedness,
without the written consent of each Lender (other than any Defaulting Lender),
(viii) release the Liens contemplated by any Security Instrument on all or
substantially all of the collateral covered thereby (other than a release of
Liens related to Oil and Gas Properties transferred in accordance with Section
9.11),
 
 
7

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without the written consent of each Lender (other than any Defaulting Lender) or
(ix) change any of the provisions of this Section 12.02(b) or any other
provision hereof specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or  under any other Loan Documents
or make any determination or grant any consent hereunder or any other Loan
Documents, without the written consent of each Lender (other than any Defaulting
Lender); provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent or any Issuing
Bank hereunder or under any other Loan Document without the prior written
consent of the Administrative Agent or such Issuing Bank, as the case may be. 
Notwithstanding the foregoing, any supplement to Schedule 7.24 (Material
Agreements) shall be effective simply by delivering to the Administrative Agent
a supplemental schedule clearly marked as such and, upon receipt, the
Administrative Agent will promptly deliver a copy thereof to the Lenders.

(j)            Annex I to the Credit Agreement is hereby amended and restated in
its entirety to conform to Annex I attached hereto.  The adjustment to each
Lender’s Applicable Percentage as set forth on Annex I attached hereto shall be
effective as of the Increase Date (defined below) and each Lender’s Applicable
Percentage prior to the Increase Date shall be as set forth in Annex I to the
Credit Agreement.

2.            Eligible Lenders.  The parties to this Amendment agree that
SunTrust and Key Bank are Eligible Lenders.  Each of SunTrust and Key Bank
hereby agrees that upon the execution of this Amendment, it shall become a party
to the Credit Agreement and shall be fully bound by, and subject to, all of the
covenants, terms and conditions of the Credit Agreement as though an original
party thereto.  From and after the date hereof, all references in the Credit
Agreement and in all other Loan Documents to the “Lenders” shall be deemed to
include SunTrust and Key Bank.

3.            Adjustments.  On the Effective Date, the Borrower shall, in
coordination with the Administrative Agent, repay the outstanding Loans of
certain Lenders, and incur additional Loans from certain other Lenders, in each
case to the extent necessary so that all of the Lenders participate in the
Borrowings ratably on the basis of their respective Commitments (after giving
effect to any adjustments contemplated by Section 1(j) hereof).

4.            Borrowing Base.  In connection with the second Scheduled
Redetermination contemplated by Section 2.07 of the Credit Agreement, the
Administrative Agent, the Lenders and the Borrower have agreed that the
Borrowing Base shall be increased to $90,000,000, which Borrowing Base
adjustment shall be effective as of the later of December 20, 2013, or the
satisfaction of the conditions set forth in Section 7 hereof (the “Increase
Date”).

5.            Reaffirmation of Security.  The Borrower, Lenders and the
Administrative Agent hereby expressly intend that this Amendment shall not in
any manner (a) constitute the refinancing, refunding, payment or extinguishment
of the Indebtedness evidenced by the existing Loan Documents; (b) be deemed to
evidence a novation of the outstanding balance of the Indebtedness; or (c)
replace, impair, or extinguish the creation, attachment, perfection or priority
of the Liens on the Borrowing Base Properties.  The Borrower ratifies and
reaffirms any and all grants of Liens to Lenders and the Administrative Agent on
the Borrowing Base Properties as security for the Indebtedness, and the Borrower
acknowledges and confirms that the grants of the Liens to Lenders and the
Administrative Agent on the Borrowing Base Properties: (i) represent continuing
Liens on all of the Borrowing Base Properties, (ii) secure all of the
Indebtedness, and (iii) represent valid, first and best Liens on all of the
Borrowing Base Properties except to the extent of any Permitted Liens
 
8

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6.            Collateral Agent.  The Borrower, Lenders and the Administrative
Agent hereby expressly authorize Community Banks of Colorado to serve as
collateral agent (the “Collateral Agent”) under any of the Security Instruments
for the ratable benefits of Lenders, the Administrative Agent, any Secured
Hedging Counterparties and the Collateral Agent and agree that any Lien granted
to the Collateral Agent by the Borrower or any Guarantor to secure the
Indebtedness shall be held by the Collateral Agent for the ratable benefit of
Lenders, the Administrative Agent, any Secured Hedging Counterparties and the
Collateral Agent.  Community Banks of Colorado is further authorized to cause
any Liens granted to it under the Security Instruments in its capacity as
Administrative Agent to be transferred and conveyed to it in its capacity as
Collateral Agent.

7.            Conditions Precedent.  This Amendment will not become effective
until the date on which each of the following conditions is satisfied:

(a)            The Borrower shall have executed and delivered to the
Administrative Agent the Promissory Notes attached hereto as Exhibit A (the
“Amendment Notes”).  These Amendment Notes, to the extent that they are for the
benefit of Lenders other than SunTrust and Key Bank, are issued in substitution
for and replacement of, but not repayment of (i) those certain Amended and
Restated Promissory Notes, dated as of June 28, 2013, issued by the Borrower in
favor of those Lenders in connection with the Second Amendment, and (ii) that
Promissory Note, dated as of June 28, 2013, issued by the Borrower in favor of
Texas Capital Bank, N.A. in connection with the Second Amendment.  The Amendment
Notes shall constitute a “Note” as defined and described in the Credit
Agreement.  From and after the date hereof, all references in the Credit
Agreement and in all other Loan Documents to the “Notes” shall be deemed to be
references to the Amendment Notes.
 
(b)            The Administrative Agent shall have received counterparts of this
Amendment from the Borrower and each of the Lenders.
 
(c)            The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the effective date of this Amendment.
 
(d)            The Administrative Agent shall have received title information
satisfactory to it on at least 80% (by NPV) of the total Proved Reserves
attributable to the Oil and Gas Properties evaluated in such Reserve Report,
with such 80% first being satisfied from Proved Developed Producing Reserves,
next from Proved Developed Nonproducing Reserves and thereafter from Proved
Undeveloped Reserves.
 
(e)            The Administrative Agent shall have received information and
evidence satisfactory to it that the Mortgaged Properties represent at least 80%
(by NPV) of the Oil and Gas Properties evaluated in the most recently completed
Reserve Report, with such 80% first being satisfied from Proved Developed
Producing, next from Proved Developed Nonproducing Reserves and thereafter from
Proved Undeveloped Reserves.
 
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(f)            No Default or Event of Default shall have occurred that is
continuing.
 
(g)            The Administrative Agent shall have received such other documents
as the Administrative Agent or counsel to the Administrative Agent may
reasonably request.
 
The Administrative Agent shall notify the Borrower and the Lenders of the
effectiveness of this Amendment, and such notice shall be conclusive and
binding.

8.            Representations.  To induce Lenders and the Administrative Agent
to accept this Amendment, the Borrower hereby represents and warrants to Lenders
and the Administrative Agent as follows:

(a)            Power and Authority.  The Borrower has full power and authority
to enter into, and to perform its obligations under, this Amendment, and the
execution and delivery of, and the performance of its obligations under and
arising out of, this Amendment have been duly authorized by all necessary
corporate action.

(b)            Legal, Valid and Binding Obligation.  This Amendment constitutes
the legal, valid and binding obligation of the Borrower enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally.

(c)            Continued Representations and Warranties.  After giving effect to
the amendments contained in this Amendment, the Borrower’s representations and
warranties contained in the Loan Documents are complete and correct as of the
date of this Amendment with the same effect as though these representations and
warranties had been made again on and as of the date of this Amendment, subject
to those changes as are not prohibited by, or do not constitute Events of
Default under, the Credit Agreement.

(d)            No Defenses.  The Borrower has no defenses to payment,
counterclaims, or right of set-off with respect to any Indebtedness existing as
of the Effective Date.

(e)            No Events of Default.  No Event of Default has occurred and is
continuing.

(f)            Material Adverse Effect. The Borrower hereby affirms that no
Material Adverse Effect has occurred

9.            First Amendment.  The parties acknowledge and agree that the First
Amendment was dated as of February 12, 2013 and that such date shall be the
Effective Date (as such term is used in the First Amendment) for all purposes
related to the First Amendment.
 

 
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10.            Fees, Costs and Expenses.  As a condition of this Amendment, the
Borrower will (i) in connection with the execution and delivery of this
Amendment, pay to the Administrative Agent (A) for the account of SunTrust, a
commitment fee of $37,500, (B) for the account of Key Bank, a commitment fee of
$37,500, and (C) for the account of the Administrative Agent, an Administrative
Fee of $19,644.26, and (ii) reimburse the Administrative Agent’s for all out of
pocket expenses (including reasonable attorneys’ fees) incurred in connection
with this Amendment.

11.            Release.  The Borrower, on its behalf and, as applicable, on
behalf of the Borrower’s officers, directors, shareholders, Affiliates,
Subsidiaries, successors and assigns (collectively, the “Releasing Parties”),
hereby represents and warrants that such Releasing Parties have no claims,
counterclaims, setoffs, actions or causes of action, damages or liabilities of
any kind or nature whatsoever, whether in law or in equity, in contract or in
tort, whether now accrued or hereafter maturing (collectively, “Claims”) against
Lenders or the Administrative Agent, their direct or indirect Affiliates, or any
of the foregoing’s respective directors, officers, employees, attorneys and
legal representatives, or the heirs, administrators, successors or assigns of
any of them (collectively, “Lender Parties”) to the extent that any such Claim
directly or indirectly arises out of, is based upon or is in any manner
connected with, any Prior Related Event.  The Borrower, on its behalf and, as
applicable, on behalf of the other Releasing Parties, voluntarily releases and
forever discharges all Lender Parties from any and all Claims, whether known or
unknown, to the extent that any such Claim directly or indirectly arises out of,
is based upon or is in any manner connected with any Prior Related Event. 
“Prior Related Event” means any transaction, event, circumstance, action,
failure to act, occurrence of any type or sort, whether known or unknown, which
occurred, existed, was taken, was permitted or begun in accordance with,
pursuant to or by virtue of: (a) any of the terms of any Loan Document or this
Amendment, (b) any actions, transactions, matters or circumstances related
hereto or to any Loan Document, (c) the conduct of the relationship between any
Lender Party and the Borrower and its Subsidiaries, or (d) any other actions or
inactions by any Lender Party, in each case on or prior to the Effective Date.

12.            Continuing Effect of Credit Agreement; Reaffirmation of Loan
Documents.  The provisions of the Credit Agreement (as amended by this
Amendment) shall remain in full force and effect in accordance with its terms
following the effectiveness of this Amendment.  Except as expressly amended
hereby, all of the provisions of the Credit Agreement are ratified and
confirmed.  The existing Loan Documents, except as amended by this Amendment,
shall remain in full force and effect, and each of them is hereby ratified and
confirmed by the Borrower, Lenders and the Administrative Agent.

13.            One Agreement; References; Fax Signature.  The Credit Agreement,
as amended by this Amendment, will be construed as one agreement.  Each
reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”,
“herein”, or words of like import shall mean and be a reference to the Credit
Agreement as amended hereby, and each reference to the Credit Agreement in any
Loan Document or any other document, instrument or agreement executed and/or
delivered in connection with the Credit Agreement shall mean and be a reference
to the Credit Agreement as amended hereby.  This Amendment may be signed by
facsimile signatures or other electronic delivery of an image file reflecting
the execution hereof, and if so signed, (a) may be relied on by each party as if
the document were a manually signed original and (b) will be binding on each
party for all purposes.

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14.            No Implied Consent or Waiver.  This Amendment shall not be
construed as consent to the departure from, or a waiver of the terms and
conditions of, the Credit Agreement except as expressly set forth herein.

15.            Captions.  The headings to the Sections of this Amendment have
been inserted for convenience of reference only and shall in no way modify or
restrict any provisions hereof or be used to construe any such provisions.

16.            Counterparts.  This Amendment may be executed in multiple
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.

17.            Entire Agreement.  This Amendment sets forth the entire agreement
of the parties with respect to the subject matter of this Amendment and
supersedes all previous understandings, written or oral, in respect of this
Amendment.  At no time shall the prior or subsequent course of conduct by the
Borrower, Lenders or the Administrative Agent directly or indirectly limit,
impair or otherwise adversely affect any of the parties’ rights or remedies in
connection with this Amendment or any of the documents, instruments and
agreements executed in connection herewith, as Lenders, the Administrative Agent
and the Borrower agree that this Amendment shall only be amended by written
instruments executed by Lenders, the Administrative Agent and the Borrower. 
Except to the extent that the Loan Documents are expressly amended by this
Amendment, if there is any conflict, ambiguity, or inconsistency, in the
Administrative Agent’s judgment, between the terms of this Amendment and any of
the other Loan Documents, then the applicable terms and provisions, in the
Administrative Agent’s judgment, providing Lenders and the Administrative Agent
with greater rights, remedies, powers, privileges, or benefits will control.

18.            Governing Law; Severability.  This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Colorado
(without regard to its conflicts of law principles). If any term of this
Amendment is found invalid under Colorado law or laws of mandatory application
by a court of competent jurisdiction, the invalid term will be considered
excluded from this Amendment and will not invalidate the remaining terms of this
Amendment.

19.            WAIVER OF JURY TRIAL. THE BORROWER, LENDERS AND THE
ADMINISTRATIVE AGENT EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM,
SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[signature page follows]
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The parties have caused this Amendment to be duly executed and delivered as of
the day and year first above written.
 

BORROWER: SYNERGY RESOURCES CORPORATION

By: /s/ Frank Jennings
Name: Frank Jennings
Title: Chief Financial Officer

ADMINISTRATIVE AGENT:
COMMUNITY BANKS OF COLORADO,
as Administrative Agent

By:  /s/ Sarah Burchett
Name:  Sarah Burchett
Title:  Vice President

LENDERS: 

COMMUNITY BANKS OF COLORADO,
as a Lender

By:  /s/ Sarah Burchett
Name:  Sarah Burchett
Title:  Vice President
 
COBIZ BANK, A COLORADO CORPORATION, DBA COLORADO BUSINESS BANK,
as a Lender

By:  /s/ Douglas K. Derks
Name:  Douglas K. Derks
Title:  Senior Vice President

[Signature Page to Third Amendment to Credit Agreement]
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AMEGY BANK NATIONAL ASSOCIATION,
as a Lender

By:            /s/ Kevin Donaldson
Name:            Kevin Donaldson
Title:            Senior Vice President

TEXAS CAPITAL BANK, N.A.,
as a Lender

By: /s/ W. David McCarver IV        
Name:  W. David McCarver IV
Title:  Senior Vice President

SUNTRUST BANK,
as a Lender

By:            /s/ Scott Mackey
Name:            Scott Mackey
Title:            Director

KEYBANK NATIONAL ASSOCIATION,
as a Lender

By:            /s/ Paul J. Pace
Name:            Paul J. Pace
Title:            Senior Vice President
 
[Signature Page to Third Amendment to Credit Agreement]

 
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ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS
Aggregate Maximum Credit Amounts
Name of Lender
Applicable
Percentage
Maximum Credit Amount
Amount of Commitment on the Effective Date
Community Banks of Colorado
27.7777777778%
$ 83,333,333.33
$ 25,000,000.00
Amegy Bank National Association
25.5555555556%
$ 76,666,666.67
$ 23,000,000.00
Texas Capital Bank, N.A.
18.8888888889%
$ 56,666,666.67
$ 17,000,000.00
CoBiz Bank, a Colorado corporation, dba Colorado Business Bank
11.1111111111%
$ 33,333,333.33
$ 10,000,000.00
SunTrust Bank, Inc.
8.3333333334%
$ 25,000,000.00
$ 7,500,000.00
Key Bank National Association
8.3333333334%
$ 25,000,000.00
$ 7,500,000.00
TOTAL
100.0000000000%
$ 300,000,000.00
$ 90,000,000.00

 
 
 

 
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EXHIBIT A

[see attached]

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FOURTH AMENDMENT TO CREDIT AGREEMENT

This Fourth Amendment to Credit Agreement (this “Amendment”) is made and entered
into effective as of June 3, 2014 (the “Effective Date”), by and between Synergy
Resources Corporation, a Colorado corporation (the “Borrower”), each of the
Lenders party to the Credit Agreement (as defined below) (“Lenders”), and
Community Banks of Colorado, a division of NBH Bank, N.A., individually, as
Issuing Bank and as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the “Administrative Agent”), and
is as follows:

Preliminary Statements

A.            Lenders, the Administrative Agent and the Borrower are parties to
an Amended and Restated Credit Agreement dated as of November 28, 2012, as
amended by that First Amendment dated as of February 12, 2013 (the “First
Amendment”), that Second Amendment (the “Second Amendment”) dated as of June 28,
2013 (as amended, the “Credit Agreement”) and that Third Amendment (the “Third
Amendment”) dated as of December 20, 2013.  Capitalized terms which are used,
but not defined, in this Amendment will have the meanings given to them in the
Credit Agreement.

B.            The Borrower has requested that Lenders and the Administrative
Agent make certain amendments to the Credit Agreement, all as more particularly
set forth herein.

C.            Lenders and the Administrative Agent are willing to consent to
such requests and so amend the Credit Agreement to reflect such modifications,
all on the terms of this Amendment.

Statement of Amendment

In consideration of the mutual covenants and agreements set forth in this
Amendment, and for other good and valuable consideration, Lenders, the
Administrative Agent, SunTrust, Key Bank and the Borrower hereby agree as
follows:

1.          Amendments to Credit Agreement.  Subject to the terms and provisions
of this Amendment, the Credit Agreement is hereby amended as follows:

(a)            The following definitions in Section 1.01 of the Credit Agreement
are hereby amended and restated in their entirety as follows:

“Applicable Margin” means, for any day, the rate per annum set forth in the
Utilization Grid below based upon the Type of Loan or Borrowing and the
Borrowing Base Utilization Percentage then in effect, subject to a minimum
interest rate floor of 2.5% per annum:
 
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Borrowing Base Utilization
Libor
Margin
Abr
Margin
≥ 90%
275 bps
150 bps
≥ 75% and < 90%
250 bps
125 bps
≥ 50% and < 75%
225 bps
100 bps
≥ 25% and < 50%
200 bps
75 bps
< 25%
175 bps
50 bps
 
 
 

“Termination Date” means the earlier to occur of (i) May 29, 2019 or (ii) the
date that the Aggregate Maximum Credit Amount is sooner terminated pursuant to
Section 2.06 or Section 10.02.”

(b)            The first sentence of Section 3.05(e) of the Credit Agreement is
hereby amended and restated in its entirety as follows:

“The Borrower agrees to pay to the Administrative Agent for the account of each
Lender an unused commitment fee equal to (i) if the Borrowing Base Utilization
Percentage is less than 50%, 0.375% per annum and (ii) if the Borrowing Base
Utilization Percentage is equal to or greater than 50%, 0.50% per annum, in each
case calculated on the average daily amount of the unused Commitment of such
lender during the period from and including the date of this Agreement to but
excluding the later of the date of termination of the Commitments.”

(c)            Clause (ii) of Section 8.01(n) of the Credit Agreement is hereby
amended and restated in its entirety as follows:

“(ii)            on a quarterly basis by the 45th day after the end of each
fiscal quarter of the Borrower, an updated report setting forth the forecasted
Capital Expenditure budget for the Borrower and its Subsidiaries for the
remainder of the Borrower’s fiscal year; provided, however, that in the case of
the report delivered during the fourth quarter of each fiscal year, such report
shall set forth the forecasted Capital Expenditure budget for the Borrower and
its Subsidiaries for the following fiscal year; and”

(d)            Section 9.01(a) of the Credit Agreement is hereby amended and
restated in its entirety as follows:

“(a)            Total Funded Debt to EBITDAX. The Borrower will not, at any
time, permit its ratio of Total Funded Debt as of such time to EBITDAX to be
greater than or equal to 4.0 to 1.0, determined at the fiscal year ending August
31, 2012, and each fiscal quarter thereafter.”

(e)            Section 9.01(c) and Section 9.01(d) of the Credit Agreement are
hereby deleted and removed from the Credit Agreement.
 
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(f)            Annex I to the Credit Agreement is hereby amended and restated in
its entirety to conform to Annex I attached hereto.  The adjustment to each
Lender’s Applicable Percentage as set forth on Annex I attached hereto shall be
effective as of the Increase Date (defined below) and each Lender’s Applicable
Percentage prior to the Increase Date shall be as set forth in Annex I to the
Credit Agreement.

2.            Adjustments.  On the Effective Date, Texas Capital Bank, N.A. will
be paid off and will no longer be a Lender under the Credit Agreement.  The
Borrower shall, in coordination with the Administrative Agent, repay the
outstanding Loans of Texas Capital Bank, N.A., and incur additional Loans from
the Lenders, in each case to the extent necessary so that Texas Capital Bank,
N.A. is paid in full with respect to its Loans and all of the Lenders
participate in the Borrowings ratably on the basis of their respective
Commitments (after giving effect to any adjustments contemplated by Section 1(j)
hereof).

3.            Borrowing Base.  In connection with the third Scheduled
Redetermination contemplated by Section 2.07 of the Credit Agreement, the
Administrative Agent, the Lenders and the Borrower have agreed that the
Borrowing Base shall be increased to $110,000,000, which Borrowing Base
adjustment shall be effective as of the later of June 3, 2014, or the
satisfaction of the conditions set forth in Section 7 hereof (the “Increase
Date”).

4.            Reaffirmation of Security.  The Borrower, Lenders and the
Administrative Agent hereby expressly intend that this Amendment shall not in
any manner (a) constitute the refinancing, refunding, payment or extinguishment
of the Indebtedness evidenced by the existing Loan Documents; (b) be deemed to
evidence a novation of the outstanding balance of the Indebtedness; or (c)
replace, impair, or extinguish the creation, attachment, perfection or priority
of the Liens on the Borrowing Base Properties.  The Borrower ratifies and
reaffirms any and all grants of Liens to Lenders and the Administrative Agent on
the Borrowing Base Properties as security for the Indebtedness, and the Borrower
acknowledges and confirms that the grants of the Liens to Lenders and the
Administrative Agent on the Borrowing Base Properties: (i) represent continuing
Liens on all of the Borrowing Base Properties, (ii) secure all of the
Indebtedness, and (iii) represent valid, first and best Liens on all of the
Borrowing Base Properties except to the extent of any Permitted Liens

5.            Conditions Precedent.  This Amendment will not become effective
until the date on which each of the following conditions is satisfied:

(a)            The Borrower shall have executed and delivered to the
Administrative Agent the Promissory Notes attached hereto as Exhibit A (the
“Amendment Notes”).  These Amendment Notes are issued in substitution for and
replacement of, but not repayment of (i) those certain Promissory Notes, dated
as of December 20, 2013, issued by the Borrower in favor of the Lenders in
connection with the Third Amendment.  The Amendment Notes shall constitute a
“Note” as defined and described in the Credit Agreement.  From and after the
date hereof, all references in the Credit Agreement and in all other Loan
Documents to the “Notes” shall be deemed to be references to the Amendment
Notes.
 
(b)            The Administrative Agent shall have received counterparts of this
Amendment from the Borrower and each of the Lenders.
 
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(c)            The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the effective date of this Amendment.
 
(d)            The Administrative Agent shall have received title information
satisfactory to it on at least 80% (by NPV) of the total Proved Reserves
attributable to the Oil and Gas Properties evaluated in such Reserve Report,
with such 80% first being satisfied from Proved Developed Producing Reserves,
next from Proved Developed Nonproducing Reserves and thereafter from Proved
Undeveloped Reserves.
 
(e)            The Administrative Agent shall have received information and
evidence satisfactory to it that the Mortgaged Properties represent at least 80%
(by NPV) of the Oil and Gas Properties evaluated in the most recently completed
Reserve Report, with such 80% first being satisfied from Proved Developed
Producing, next from Proved Developed Nonproducing Reserves and thereafter from
Proved Undeveloped Reserves.
 
(f)            No Default or Event of Default shall have occurred that is
continuing.
 
(g)            The Administrative Agent shall have received such other documents
as the Administrative Agent or counsel to the Administrative Agent may
reasonably request.
 
The Administrative Agent shall notify the Borrower and the Lenders of the
effectiveness of this Amendment, and such notice shall be conclusive and
binding.

6.            Representations.  To induce Lenders and the Administrative Agent
to accept this Amendment, the Borrower hereby represents and warrants to Lenders
and the Administrative Agent as follows:

(a)            Power and Authority.  The Borrower has full power and authority
to enter into, and to perform its obligations under, this Amendment, and the
execution and delivery of, and the performance of its obligations under and
arising out of, this Amendment have been duly authorized by all necessary
corporate action.

(b)            Legal, Valid and Binding Obligation.  This Amendment constitutes
the legal, valid and binding obligation of the Borrower enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally.

(c)            Continued Representations and Warranties.  After giving effect to
the amendments contained in this Amendment, the Borrower’s representations and
warranties contained in the Loan Documents are complete and correct as of the
date of this Amendment with the same effect as though these representations and
warranties had been made again on and as of the date of this Amendment, subject
to those changes as are not prohibited by, or do not constitute Events of
Default under, the Credit Agreement.

(d)            No Defenses.  The Borrower has no defenses to payment,
counterclaims, or right of set-off with respect to any Indebtedness existing as
of the Effective Date.

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(e)            No Events of Default.  No Event of Default has occurred and is
continuing.

(f)            Material Adverse Effect. The Borrower hereby affirms that no
Material Adverse Effect has occurred

7.            Fees, Costs and Expenses.  As a condition of this Amendment, the
Borrower will (i) in connection with the execution and delivery of this
Amendment, pay to the Administrative Agent for the account of each Lender (A) a
fee equal 0.25% of the such Lender’s Commitment as in effect prior to this
Amendment, and(B) a fee equal 0.375% of the increase in such Lender’s Commitment
as a result of this Amendment, and (ii) reimburse the Administrative Agent’s for
all out of pocket expenses (including reasonable attorneys’ fees) incurred in
connection with this Amendment.

8.            Release.  The Borrower, on its behalf and, as applicable, on
behalf of the Borrower’s officers, directors, shareholders, Affiliates,
Subsidiaries, successors and assigns (collectively, the “Releasing Parties”),
hereby represents and warrants that such Releasing Parties have no claims,
counterclaims, setoffs, actions or causes of action, damages or liabilities of
any kind or nature whatsoever, whether in law or in equity, in contract or in
tort, whether now accrued or hereafter maturing (collectively, “Claims”) against
Lenders or the Administrative Agent, their direct or indirect Affiliates, or any
of the foregoing’s respective directors, officers, employees, attorneys and
legal representatives, or the heirs, administrators, successors or assigns of
any of them (collectively, “Lender Parties”) to the extent that any such Claim
directly or indirectly arises out of, is based upon or is in any manner
connected with, any Prior Related Event.  The Borrower, on its behalf and, as
applicable, on behalf of the other Releasing Parties, voluntarily releases and
forever discharges all Lender Parties from any and all Claims, whether known or
unknown, to the extent that any such Claim directly or indirectly arises out of,
is based upon or is in any manner connected with any Prior Related Event. 
“Prior Related Event” means any transaction, event, circumstance, action,
failure to act, occurrence of any type or sort, whether known or unknown, which
occurred, existed, was taken, was permitted or begun in accordance with,
pursuant to or by virtue of: (a) any of the terms of any Loan Document or this
Amendment, (b) any actions, transactions, matters or circumstances related
hereto or to any Loan Document, (c) the conduct of the relationship between any
Lender Party and the Borrower and its Subsidiaries, or (d) any other actions or
inactions by any Lender Party, in each case on or prior to the Effective Date.

9.            Continuing Effect of Credit Agreement; Reaffirmation of Loan
Documents.  The provisions of the Credit Agreement (as amended by this
Amendment) shall remain in full force and effect in accordance with its terms
following the effectiveness of this Amendment.  Except as expressly amended
hereby, all of the provisions of the Credit Agreement are ratified and
confirmed.  The existing Loan Documents, except as amended by this Amendment,
shall remain in full force and effect, and each of them is hereby ratified and
confirmed by the Borrower, Lenders and the Administrative Agent.

10.            One Agreement; References; Fax Signature.  The Credit Agreement,
as amended by this Amendment, will be construed as one agreement.  Each
reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”,
“herein”, or words of like import shall mean and be a reference to the Credit
Agreement as amended hereby, and each reference to the Credit Agreement in any
Loan Document or any other document, instrument or agreement executed and/or
delivered in connection with the Credit Agreement shall mean and be a reference
to the Credit Agreement as amended hereby.  This Amendment may be signed by
facsimile signatures or other electronic delivery of an image file reflecting
the execution hereof, and if so signed, (a) may be relied on by each party as if
the document were a manually signed original and (b) will be binding on each
party for all purposes.

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11.            No Implied Consent or Waiver.  This Amendment shall not be
construed as consent to the departure from, or a waiver of the terms and
conditions of, the Credit Agreement except as expressly set forth herein.

12.            Captions.  The headings to the Sections of this Amendment have
been inserted for convenience of reference only and shall in no way modify or
restrict any provisions hereof or be used to construe any such provisions.

13.            Counterparts.  This Amendment may be executed in multiple
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.

14.            Entire Agreement.  This Amendment sets forth the entire agreement
of the parties with respect to the subject matter of this Amendment and
supersedes all previous understandings, written or oral, in respect of this
Amendment.  At no time shall the prior or subsequent course of conduct by the
Borrower, Lenders or the Administrative Agent directly or indirectly limit,
impair or otherwise adversely affect any of the parties’ rights or remedies in
connection with this Amendment or any of the documents, instruments and
agreements executed in connection herewith, as Lenders, the Administrative Agent
and the Borrower agree that this Amendment shall only be amended by written
instruments executed by Lenders, the Administrative Agent and the Borrower. 
Except to the extent that the Loan Documents are expressly amended by this
Amendment, if there is any conflict, ambiguity, or inconsistency, in the
Administrative Agent’s judgment, between the terms of this Amendment and any of
the other Loan Documents, then the applicable terms and provisions, in the
Administrative Agent’s judgment, providing Lenders and the Administrative Agent
with greater rights, remedies, powers, privileges, or benefits will control.

15.            Governing Law; Severability.  This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Colorado
(without regard to its conflicts of law principles). If any term of this
Amendment is found invalid under Colorado law or laws of mandatory application
by a court of competent jurisdiction, the invalid term will be considered
excluded from this Amendment and will not invalidate the remaining terms of this
Amendment.

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16.            WAIVER OF JURY TRIAL. THE BORROWER, LENDERS AND THE
ADMINISTRATIVE AGENT EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM,
SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[signature page follows]
 
 
 
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The parties have caused this Amendment to be duly executed and delivered as of
the day and year first above written.
 
 

BORROWER: SYNERGY RESOURCES CORPORATION

By: /s/ Frank Jennings
Name: Frank Jennings
Title: Chief Financial Officer

ADMINISTRATIVE AGENT:
COMMUNITY BANKS OF COLORADO,
as Administrative Agent

By:  /s/ Sarah Burchett
Name:  Sarah Burchett
Title:  Vice President

LENDERS: 

COMMUNITY BANKS OF COLORADO,
as a Lender

By:  /s/ Sarah Burchett
Name:  Sarah Burchett
Title:  Vice President
 
COBIZ BANK, A COLORADO CORPORATION, DBA COLORADO BUSINESS BANK,
as a Lender

By:  /s/ Douglas K. Derks
Name:  Douglas K. Derks
Title:  Senior Vice President

 
[Signature Page to Fourth Amendment to Credit Agreement]
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AMEGY BANK NATIONAL ASSOCIATION,
as a Lender

By:            /s/ Kevin Donaldson
Name:            Kevin Donaldson
Title:            Senior Vice President

SUNTRUST BANK,
as a Lender

By:            /s/ Chulley Bogle
Name:            Chulley Bogle
Title:            Vice President

KEYBANK NATIONAL ASSOCIATION,
as a Lender

By:            /s/ George E. McKean
Name:            George E. McKean
Title:            Senior Vice President
 
[Signature Page to Fourth Amendment to Credit Agreement]

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ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS
Aggregate Maximum Credit Amounts
Name of Lender
Applicable
Percentage
Maximum Credit Amount
Amount of Commitment on the Effective Date
Community Banks of Colorado
26.36363636%
$79,090,909.09
$29,000,000.00
Amegy Bank National Association
23.63636364%
$70,909,090.91
$26,000,000.00
CoBiz Bank, a Colorado corporation, dba Colorado Business Bank
9.09090909%
$27,272,727.27
$10,000,000.00
SunTrust Bank
20.45454545%
$61,363,636.36
$22,500,000.00
Key Bank National Association
20.45454545%
$61,363,636.36
$22,500,000.00
TOTAL
100.0000000000%
$ 300,000,000.00
$ 110,000,000.00

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