Document:

Exhibit 10.2

 

EIGHTH AMENDMENT TO
 AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS EIGHTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (hereinafter called this “Amendment”) is dated as of May 3, 2016, but effective as of the Amendment Effective Date (as defined below), by and among Synergy Resources Corporation (the “Borrower”), each Lender (defined below) signatory hereto and SunTrust Bank, as Administrative Agent for the Lenders (in such capacity, together with its successors in such capacity “Administrative Agent”) and as an Issuing Bank.

 

W I T N E S S E T H:

 

WHEREAS, the Borrower, Administrative Agent and the lenders from time to time party thereto (the “Lenders”) are parties to that certain Amended and Restated Credit Agreement dated as of November 28, 2012, as amended by the following:  that certain First Amendment to Credit Agreement dated as of February 12, 2013, Second Amendment to Credit Agreement dated as of June 28, 2013, Third Amendment to Credit Agreement dated as of December 20, 2013, Fourth Amendment to Credit Agreement dated as of June 3, 2014, Fifth Amendment to Amended and Restated Credit Agreement dated as of December 15, 2014, Sixth Amendment to Amended and Restated Credit Agreement dated as of June 2, 2015 and Seventh Amendment to Amended and Restated Credit Agreement dated as of January 28, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), whereby upon the terms and conditions therein stated the Lenders have agreed to make certain loans to the Borrower;

 

WHEREAS, the Borrower has requested that Administrative Agent and the Lenders, as applicable, amend the Credit Agreement as set forth below; and

 

WHEREAS, subject to the terms and conditions hereof, Administrative Agent and the Lenders, as applicable, are willing to agree to the amendments to the Credit Agreement as set forth herein.

 

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, the parties to this Amendment hereby agree as follows:

 

SECTION 1.        Definitions.  Unless otherwise defined in this Amendment, each capitalized term used herein but not otherwise defined herein has the meaning given such term in the Credit Agreement.  The interpretive provisions set forth in Sections 1.02, 1.03 and 1.04 of the Credit Agreement shall apply to this Amendment.

 

SECTION 2.        Amendments to Credit Agreement.  Effective on the Amendment Effective Date, the Credit Agreement is hereby amended as follows:

 

(a)           Section 1.01 (Certain Defined Terms) is amended by adding the following new definitions in proper alphabetical order:

 

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

 

“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

“EEA Financial Institution” means (a) any institution established in any EEA Member

 

 

Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

“Eighth Amendment” means that certain Eighth Amendment to Amended and Restated Credit Agreement dated as of May 3, 2016, among the Borrower, Administrative Agent and the Lenders party thereto.

 

“Eighth Amendment Effective Date” means the “Amendment Effective Date” as defined in the Eighth Amendment.

 

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

 

“Senior Notes” means unsecured notes issued by the Borrower on or after the Eighth Amendment Effective Date; provided that, the agreements and instruments governing such Debt shall not contain (a) any affirmative or negative covenant (including financial covenants) that is materially more restrictive than those set forth in this Agreement; provided that the inclusion of any covenant that is customary with respect to such type of Debt and that is not found in this Agreement shall not be deemed to be more restrictive for purposes of this clause (a), (b) any restriction on the ability of the Borrower or any of the Guarantors to amend, modify, restate or otherwise supplement this Agreement or the other Loan Documents, (c) any restrictions on the ability of any Subsidiary of the Borrower to guarantee the Indebtedness (as such Indebtedness may be amended, modified, supplemented or restated from time to time), (d) any restrictions on the ability of the Borrower or any Subsidiary of the Borrower to pledge Property as collateral security for the Indebtedness (as such Indebtedness may be amended, modified, supplemented or restated from time to time), (e) a scheduled maturity date that is earlier than 180 days after the Termination Date (as in effect on the date of issuance of such Senior Notes), (f) any amortization or other mandatory principal payments by way of a sinking fund or similar arrangement other than at the scheduled maturity thereof (except for any offer to redeem such Debt required as a result of asset sales or the occurrence of a “Change in Control” under and as defined in any indenture, loan agreement or other agreement or instrument evidencing such Debt (or a substantially similar term used therein)), or (g) any Lien securing such Debt.

 

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

(b)           The definition of “Defaulting Lender” in Section 1.01 (Certain Defined Terms) is amended by adding the following clause immediately after clause (f): “or (g) become the subject of a Bail-in Action.”.

 

(c)           Section 2.07(f) is amended by inserting the following as clause (iii):

 

“(iii)        Effective immediately upon Borrower’s issuance of Senior Notes, (1) the Borrower shall provide the Administrative Agent with written notice of such issuance and (2) the Borrowing Base shall automatically reduce by an amount equal to 25% of the stated principal amount of such Senior Notes (for purposes of this section if any such Senior Notes are issued at a

 

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discount or otherwise sold for less than “par”, the reduction shall be calculated based upon the stated principal amount without reference to such discount) which reduction shall not constitute a Scheduled Redetermination or an Interim Redetermination; provided, that the Borrowing Base reduction provided for in Section 2.07(f)(iii)(2) shall not apply (x) until the aggregate principal amount of Senior Notes issued by the Borrower exceeds $100,000,000 and then only to the extent such aggregate principal amount exceeds $100,000,000 and (y) to any portion of the proceeds of such Senior Notes used to refinance existing Debt under Senior Notes.”

 

(d)           Section 3.04(c)(ii) is amended by inserting “Section 2.07(f)(iii) or” immediately before “Section 9.11”.

 

(e)           Section 7.24 is amended by replacing the last sentence thereof with the following:

 

“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 or as otherwise permitted by Section 9.13.”

 

(f)            Section 9.02(c) is amended by:

 

(i)        inserting the following as clause (c):

 

“(c)         Debt under Senior Notes and guaranties given by any Subsidiary that is a guarantor hereunder with respect thereto; provided that (i) on the date such Senior Notes are issued and immediately after giving effect to such issuance, the Borrower is in compliance on a pro forma basis with Section 9.01 of this Agreement and (ii) on the date such Senior Notes are issued (y) the Borrowing Base is reduced as required by Section 2.07(f)(iii) and (z) the Borrower has made any prepayments required by Section 3.04(c)(ii);”

 

(ii)       renumbering clause (c) thereof as clause (d) and inserting the words “not otherwise permitted in Section 9.02(c),” immediately following the words “not to exceed $200,000”; and

 

(iii)      renumbering clause (d) thereof as clause (e).

 

(g)           Section 9.13 is amended by replacing the existing language with the following:

 

“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 (a) contracts for the acquisition and/or development of Oil and Gas Properties and (b) amendments and modifications to agreements and instruments governing Debt pursuant to Senior Notes, provided that such agreements and instruments continue to meet the requirements of the defined term “Senior Notes” after giving effect to such amendments or modifications.

 

(h)           Article IX is amended by inserting the following as a new Section 9.21:

 

“Section 9.21        Senior Notes.  The Borrower will not, and will not permit any Subsidiary to, make any payments on account of principal (whether by redemption, purchase, retirement,

 

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defeasance, set-off or otherwise), interest, premium or fees in respect of any Senior Notes prior to the scheduled maturity or due date, as applicable, thereof, except in connection with any refinancing of Debt under Senior Notes using the proceeds of Senior Notes issued pursuant to this Agreement, and except for any offer to redeem any Senior Notes required as a result of asset sales or the occurrence of a “Change in Control” under and as defined in any indenture, loan agreement or other agreement or instrument evidencing such Senior Notes (or a substantially similar term used therein).”

 

(i)            Article XII is amended by inserting the following as a new Section 12.19:

 

“Section 12.19     Acknowledgement and Consent to Bail-In of EEA Financial Institutions.  Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(i)            the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

 

(ii)           the effects of any Bail-In Action on any such liability, including, if applicable:

 

(A)    a reduction in full or in part or cancellation of any such liability;

 

(B)        a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(C)        the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.”

 

SECTION 3.        Conditions of Effectiveness. This Amendment shall become effective as of the date the following conditions precedent have been satisfied (the “Amendment Effective Date”):

 

(a)           The Administrative Agent shall have received a counterpart of this Amendment which shall have been executed by the Administrative Agent, the Issuing Bank, the Lenders and the Borrower (which may be by telecopy or PDF transmission).

 

(b)           The Administrative Agent shall have received evidence that Borrower has received aggregate cash proceeds in an amount not less than $200,000,000 from the sale or issuance of its Equity Interests.

 

(c)           Payment by the Borrower of the fees and expenses of the Administrative Agent’s counsel pursuant to Section 12.03(a) of the Credit Agreement, including fees and expenses in connection with the preparation, negotiation and closing of this Amendment, to the extent invoiced at least three Business Days prior to the date hereof.

 

(d)           All representations and warranties set forth in each of the Loan Documents (including this Amendment) shall be true and correct in all material respects (other than those representations and

 

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warranties that are expressly qualified by a Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects).

 

SECTION 4.        Representations and Warranties.  The Borrower represents and warrants to Administrative Agent and the Lenders, with full knowledge that such Persons are relying on the following representations and warranties in executing this Amendment, as follows:

 

(a)           It has the organizational power and authority to execute, deliver and perform this Amendment, and all necessary organizational action on the part of it requisite for the due execution, delivery and performance of this Amendment has been duly and effectively taken.

 

(b)           The Credit Agreement, as amended by this Amendment, the Loan Documents and each and every other document executed and delivered to the Administrative Agent and the Lenders in connection with this Amendment to which it is a party constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

 

(c)           This Amendment does not and will not violate any provisions of any of the Organizational Documents of the Borrower.

 

(d)           No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Borrower of this Amendment.

 

(e)           On the date hereof, after giving effect to this Amendment, (i) since December 31, 2015, no Material Adverse Effect has occurred, (ii) no Default or Event of Default has occurred and is continuing, and (iii) all representations and warranties set forth in each of the Loan Documents are true and correct in all material respects (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality, in which case such representations and warranties are true and correct in all respects).

 

SECTION 5.        Post-Closing Deliverables.  On the date that is 60 days after the Borrower’s initial issuance of Senior Notes (a) the Borrower shall deliver to the Administrative Agent a list of all Oil and Gas Properties of the Borrower and its Subsidiaries acquired on or after the date of such issuance and (b) the Borrower and its Subsidiaries shall deliver such mortgages, deeds of trust, security agreements, financing statements and other security documents as may be requested by the Administrative Agent and in form and substance satisfactory to the Administrative Agent to cause the Indebtedness to be secured by first and prior liens on such Oil and Gas Properties.

 

SECTION 6.        Miscellaneous.

 

(a)           Reference to the Credit Agreement.  Upon the effectiveness hereof, on and after the date hereof, 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.

 

(b)           Extent of Amendments; Ratification.  Except as otherwise expressly provided herein, the Credit Agreement and the other Loan Documents are not amended, waived, modified or affected by this Amendment and all of the terms and conditions of the Credit Agreement and the other Loan Documents are, and remain, in full force and effect in accordance with their respective terms.  The Borrower hereby ratifies and confirms that, after giving effect to this Amendment, (i) except as expressly amended hereby, all of the terms, conditions, covenants, representations, warranties and all other provisions of the Credit Agreement remain in full force and effect, (ii) each of the other Loan Documents

 

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are and remain in full  force and effect in accordance with their respective terms, and (iii) the collateral and the Liens on the collateral securing the Indebtedness are unimpaired by this Amendment and remain in full force and effect.

 

(c)           Loan Documents.  The Loan Documents, as such may be amended in accordance herewith, are and remain legal, valid and binding obligations of the parties thereto, enforceable in accordance with their respective terms.  This Amendment is a Loan Document.

 

(d)           Claims.  As additional consideration to the execution, delivery, and performance of this Amendment by the parties hereto and to induce Administrative Agent and the Lenders to enter into this Amendment, the Borrower represents and warrants that, as of the date hereof, it does not know of any defenses, counterclaims or rights of setoff to the payment of any Indebtedness of the Borrower to Administrative Agent, Issuing Bank or any Lender.

 

(e)           Execution and Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.  Delivery of an executed counterpart of this Amendment by facsimile or pdf shall be equally as effective as delivery of a manually executed counterpart.

 

(f)            Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of New York and applicable federal laws of the United States of America.

 

(g)           Headings.  Section headings in this Amendment are included herein for convenience and reference only and shall not constitute a part of this Amendment for any other purpose.

 

SECTION 7.        NO ORAL AGREEMENTS.  THE RIGHTS AND OBLIGATIONS OF EACH OF THE PARTIES TO THE LOAN DOCUMENTS SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN SUCH PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS.  THIS AMENDMENT AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE BORROWER, ADMINISTRATIVE AGENT, ISSUING BANK AND/OR LENDERS REPRESENT THE FINAL AGREEMENT BETWEEN SUCH PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY SUCH PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH PARTIES.

 

SECTION 8.        No Waiver.  The Borrower hereby agrees that no Event of Default and no Default has been waived or remedied by the execution of this Amendment by the Administrative Agent or any Lender.  Nothing contained in this Amendment nor any past indulgence by the Administrative Agent, Issuing Bank or any Lender, nor any other action or inaction on behalf of the Administrative Agent, Issuing Bank or any Lender, (a) shall constitute or be deemed to constitute a waiver of any Defaults or Events of Default which may exist under the Credit Agreement or the other Loan Documents, or (b) shall constitute or be deemed to constitute an election of remedies by the Administrative Agent, Issuing Bank or any Lender, or a waiver of any of the rights or remedies of the Administrative Agent, Issuing Bank or any Lender provided in the Credit Agreement, the other Loan Documents, or otherwise afforded at law or in equity.

 

Signatures Pages Follow

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

 

	
BORROWER:
    	
SYNERGY   RESOURCES CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ James P. Henderson
    
	
 
    	
 
    	
James P. Henderson
    
	
 
    	
 
    	
Executive Vice President Finance and Chief Financial Officer
    

 

Signature Page to Eighth Amendment

 

 

	
 
    	
SUNTRUST BANK,
    
	
 
    	
as Administrative Agent and as an   Issuing Bank and a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Yann Pirio
    
	
 
    	
Name: Yann Pirio
    
	
 
    	
Title: Managing Director
    

 

Signature Page to Eighth Amendment

 

 

	
 
    	
COMMUNITY BANKS OF COLORADO,
    
	
 
    	
as an Issuing Bank and as a   Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Sarah   E. Burchett
    
	
 
    	
Name: Sarah E. Burchett
    
	
 
    	
Title: Managing Director
    

 

Signature Page to Eighth Amendment

 

 

	
 
    	
KEYBANK NATIONAL ASSOCIATION,
    
	
 
    	
as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ George   E. McKean
    
	
 
    	
Name: George E. McKean
    
	
 
    	
Title: Senior Vice President
    

 

Signature Page to Eighth Amendment

 

 

	
 
    	
AMEGY BANK NATIONAL ASSOCIATION,
    
	
 
    	
as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Ronnie   Causey
    
	
 
    	
Name: Ronnie Causey
    
	
 
    	
Title: Vice President
    

 

Signature Page to Eighth Amendment

 

 

	
 
    	
JPMORGAN CHASE BANK, NATIONAL   ASSOCIATION,
    
	
 
    	
as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Darren   Vanek
    
	
 
    	
Name: Darren Vanek
    
	
 
    	
Title: Executive Director
    

 

Signature Page to Eighth Amendment

 

 

	
 
    	
CREDIT AGRICOLE CORPORATE AND INVESTMENT   BANK,
    
	
 
    	
as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Mark Roche
    
	
 
    	
Name: Mark Roche
    
	
 
    	
Title: Managing Director
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Willis
    
	
 
    	
Name: Michael Willis
    
	
 
    	
Title: Managing Director
    

 

Signature Page to Eighth Amendment

 

 

	
 
    	
DEUTSCHE BANK AG NEW YORK   BRANCH,
    
	
 
    	
as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Dusan Lazarov
    
	
 
    	
Name: Dusan Lazarov
    
	
 
    	
Title: Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Marcus M. Tarkington
    
	
 
    	
Name: Marcus M. Tarkington
    
	
 
    	
Title: Director
    

 

Signature Page to Eighth Amendment

 

 

	
 
    	
IBERIABANK,
    
	
 
    	
as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Tyler S. Thoem
    
	
 
    	
Name: Tyler S. Thoem
    
	
 
    	
Title: Senior Vice President
    

 

Signature Page to Eighth AmendmentExhibit 10.3

 

May 3, 2016

 

Synergy Resources Corporation

1625 Broadway, Suite 300

Denver, CO 80202

 

Attention:  James P. Henderson

Executive Vice President Finance and Chief Financial Officer

 

Re:                             Commitment Letter

$80,000,000 Senior Unsecured Notes

 

Ladies and Gentlemen:

 

Synergy Resources Corporation (“you”, “Synergy” or the “Company”) has advised MTP Energy Master Fund Ltd. (“Lender 1”) and GSO Capital Partners LP, signing on behalf of one or more funds managed, advised or sub-advised by GSO Capital Partners LP (“Lender 2” and, together with Lender 1, the “Commitment Lenders” or “we”) that the Company will acquire certain oil and gas assets (the “Assets”) from Noble Energy, Inc., NBL Energy Royalties, Inc. and Noble Energy Wyco, LLC (collectively, “Seller”) pursuant to a Purchase and Sale Agreement  (the “Purchase Agreement”) dated May 2, 2016 (the “Acquisition”).  Capitalized terms used in this letter but not defined herein shall have the meanings given to them in the Summary of Terms and Conditions attached hereto as Annex I (the “Term Sheet”).

 

A.                                    Commitment

 

In connection with the foregoing, Lender 1 is pleased to severally commit to provide fifty percent (50%) of and Lender 2 is pleased to severally commit to provide fifty percent (50%) of the $80.0 million principal amount of the Senior Unsecured Notes due 2021 (the “Notes”) described in the Term Sheet (referred to in this letter as each such Commitment Lender’s “Commitment”), subject to the terms and conditions set forth in this letter (including Section C) and the Term Sheet (collectively, this “Commitment Letter”).  The commitments and other agreements of each Commitment Lender in this Commitment Letter are several and not joint.  No Commitment Lender is responsible for the performance of the obligations of any other Commitment Lender, and the failure of a Commitment Lender to perform its obligations hereunder will not prejudice the rights of any other Commitment Lender hereunder.  The purchase of the Notes contemplated by this Commitment Letter shall be referred to herein as the “Financing”.

 

B.                                    Exclusivity

 

From the date hereof until the earliest of (a) the mutual agreement of the parties hereto not to pursue the Financing; (b) the termination of the Loan Documents (as defined below) in accordance with the terms thereof; (c) the initial closing date of the Acquisition and the Financing and other related transactions (the “Transaction”); and (d) the Termination Date (as defined below) (or such later date as the Company and the Commitment Lenders shall have mutually agreed to extend the commitment hereunder), unless the Company first obtains the approval of the Commitment Lenders, the Company:

 

(i)                                     shall not, and shall cause its affiliates, agents, representatives, counsel, consultants and advisors and any other person acting on its or their behalf not to, directly or indirectly solicit, participate in any negotiations or discussions with or provide or afford access to information to any third party with respect to, or otherwise effect, facilitate, encourage or accept any offers for the funding of

 

 

the Financing or any alternative debt financing arrangements in connection with the Acquisition (other than the Equity Issuance (as defined below)); and

 

(ii)                                  shall terminate or have terminated prior to the date hereof any written agreement or arrangement related to the foregoing to which the Company or its affiliates are parties, as well as any activities and discussions related to the foregoing as may be continuing on the date hereof with any party other than the Commitment Lenders and their respective representatives.

 

The Company agrees and acknowledges that, in conjunction with the initial closing of the Acquisition and subject to the terms and conditions set forth in this Commitment Letter, and subject to the negotiation and execution of Loan Documents in a form consistent with the Term Sheet and the completion of the Equity Issuance (as each of those terms is defined below), the Company will sell and issue the Notes to the Commitment Lenders. It is understood and agreed by each of the parties hereto that money damages would not be a sufficient remedy for the Company’s breach of its obligation to sell and issue the Notes to the Commitment Lenders pursuant to this Commitment Letter and that the Commitment Lenders shall be entitled to specific performance and injunctive or other equitable relief as a remedy for such breach and the Commitment Lenders shall be entitled to seek such relief or remedy even if this Commitment Letter has been terminated; provided, however, that if the Purchase Agreement is terminated, subject to the following paragraph, the Commitment Lenders’ sole remedy with respect to such termination shall be receipt of the fees and other amounts contemplated by that certain letter dated as of the date hereof among the parties hereto (the “Fee Letter”).  The foregoing is in addition to, and not as a limitation on, the Commitment Lenders’ respective rights and remedies in connection with this Commitment Letter.

 

In addition to the restrictions set forth above, if on or prior to the date that is 6 months after the date of this Commitment Letter, the Company or any of its affiliates acquires any material portion of the Seller’s assets (any such transaction, an “Alternative Transaction”) and, in connection with the consummation of the Alternative Transaction, another institution proposes to provide debt financing (including but not limited to senior secured loans, mezzanine or high yield debt) or similar financing (notwithstanding a willingness on the part of a Commitment Lender to provide such financing at the time of such Alternate Transaction), the Company shall provide such Commitment Lender reasonable opportunity to provide a percentage of such financing equal to the respective commitment percentages set forth in this Commitment Letter (even if such Commitment Lender is not willing to provide such amount of such financing) on substantially the same terms so proposed prior to the consummation of such Alternative Transaction, and shall enter with such Commitment Lender in an agreement similar to this Commitment Letter for such alternative financing to the extent such Commitment Lender has agreed to provide such financing.  In enforcing its rights hereunder for any breach of this Commitment Letter, the parties acknowledge that the Commitment Lenders will be entitled to any form of equitable relief including, without limitation, injunctive relief, without posting of any bond or other security as well as the right to pursue any and all other rights and remedies (and recover any and all damages) available at law or in equity.  Notwithstanding any term or provision hereof to the contrary, all of the rights of the Commitment Lenders under this paragraph shall remain in full force and effect notwithstanding the termination of this Commitment Letter or the Commitment Lenders’ commitments and agreements hereunder.  It is understood and agreed by each of the parties hereto that money damages would not be a sufficient remedy for the Company’s breach of its obligations under this paragraph and that the Commitment Lenders shall be entitled to specific performance and injunctive or other equitable relief as a remedy for such breach.

 

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C.                                    Conditions Precedent

 

The undertakings and Commitments of the Commitment Lenders under this Commitment Letter are subject to the conditions set forth below, it being understood that there are no conditions (implied or otherwise) to the funding of the Commitments hereunder (including compliance with the terms of the Commitment Letter and the Loan Documents) other than those conditions set forth below that are expressly stated to be conditions to the purchase of the Notes (and upon satisfaction or waiver by the Commitment Lenders of such conditions, the issuance of the Notes shall occur):

 

1.                                      Negotiation and execution of a customary and mutually satisfactory definitive purchase agreement, indenture and/or customary note or similar loan documents (collectively, the “Loan Documents,” and the date of execution of the Loan Documents, the “Closing Date”) in a form consistent with the Term Sheet, it being understood and agreed that (i) subject to the Certain Funds Provision, the representations and warranties provided by the Company in the definitive purchase agreement with respect to the Notes shall be (A) the representations made by the Seller under the Purchase Agreement and (B) otherwise, consistent with those provided in the Underwriting Agreement between the Company and Credit Suisse Securities (USA) LLC dated April 11, 2016, with modifications reasonably necessary to reflect that the Financing constitutes a private placement of debt instruments rather than an registered equity offering; (ii) the Loan Documents shall contain customary provisions relating to the reimbursement of expenses for the Commitment Lenders in the event that the Company shall request the Commitment Lenders to execute or agree to any future amendment or similar modification to the Loan Documents or the Commitment Lenders are enforcing their rights and remedies under the Loan Documents (it being understood, for the avoidance of doubt, that such reimbursement shall not cover any transfer, assignments or other similar matters by the Commitment Lenders in respect of the Notes); and (iii) each of the Commitment Lenders and the Company shall negotiate in good faith with respect to the Loan Documents (it being understood that the substantive terms of such Loan Documents will be based on precedent described on Schedule A attached hereto, with such modifications as are necessary to reflect the terms set forth in the Term Sheet; provided that, other than as set forth in the Term Sheet, any “baskets” set forth in the Loan Documents shall be mutually agreed upon by the Commitment Lenders and the Company).

 

2.                                      Receipt of the following documentation relating to the Company which shall be reasonably satisfactory to the Commitment Lenders:  organizational documents, evidence of borrowing authority, customary officer’s certificates, customary legal opinions, evidence of insurance (but not endorsements), and solvency certificates with respect to the Company (after giving effect to the Acquisition and the associated transactions).

 

3.                                      Payment of all fees and expenses due to the Commitment Lenders under the Fee Letter.

 

4.                                      No default or event of default under the Company’s Existing Credit Agreement shall exist, and any necessary amendments or consents relating to the Existing Credit Agreement to effect the transactions contemplated by the Purchase Agreement and this Commitment Letter shall be in effect on or prior to the Closing Date.

 

5.                                      The Commitment Lenders will have received a true and correct fully-executed copy of the Purchase Agreement, including all exhibits and schedules thereto.  No provision of such agreement shall have been waived, amended, supplemented or otherwise modified in any respect by the Company in a manner materially adverse to the Commitment Lenders, without the approval of the Commitment Lenders (such approval not to be unreasonably withheld, delayed or conditioned), it being understood that any modification to the definition of Material Adverse Effect contained in the Purchase Agreement shall be deemed to be materially adverse to the

 

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Commitment Lenders. The first closing of the Acquisition shall have been (or substantially concurrently with the closing and issuance of the Notes shall be) consummated in accordance with applicable law and on the terms described in the Purchase Agreement without giving effect to any waiver, modification or consent thereunder that is materially adverse to the interests of the Commitment Lenders, unless approved by the Commitment Lenders (such approval not to be unreasonably withheld, delayed or conditioned), it being understood that any modification to the definition of Material Adverse Effect contained in the Purchase Agreement shall be deemed to be materially adverse to the Commitment Lenders, and each Commitment Lender shall be in its reasonable judgment satisfied that all conditions precedent under the Purchase Agreement have been satisfied.

 

6.                                      (a) Since May 2, 2016, there shall not have occurred any event that has had or would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect (as defined in the Purchase Agreement) and (b) since December 31, 2015, there shall not have been any material adverse change, nor any development or event involving a prospective material adverse change, in or affecting the business, properties, management, condition (financial or otherwise), stockholders’ equity, results of operations or prospects of the Company (and its subsidiaries, if any).

 

7.                                      No Governmental Authority (as defined in the Purchase Agreement) shall have enacted, issued, promulgated, or deemed applicable any Law (as defined in the Purchase Agreement), or issued or granted any final and non-appealable Order (as defined in the Purchase Agreement), that is in effect and that has the effect of permanently enjoining, making illegal, or otherwise prohibiting or preventing the consummation of the Acquisition or the Financing, no Governmental Authority shall have threatened in writing to enact, issue, promulgate, make applicable, or grant any such Law or Order, and all approvals of Governmental Authorities required under the Purchase Agreement to complete the initial closing of the Acquisition shall have been received.

 

8.                                      (a) In order to fund the Acquisition, the Company shall have received at least $250 million in gross proceeds from the sale of equity or equity-linked securities (other than any convertible debt securities) in one or more public or private offerings, which, if not in the form of common equity, will be on terms and conditions reasonably satisfactory to the Commitment Lenders (the “Equity Issuance”), with such proceeds being received prior to the purchase and sale of the Notes (it being understood, for the avoidance of doubt, that the proceeds of the equity issuance by the Company in April 2016 shall not be included for purposes of determining satisfaction of this condition) and (b) the Company shall not have more than $10 million of outstanding indebtedness under the Existing Credit Agreement and any other indebtedness for borrowed money that is secured by a lien (such debt, “Secured Debt”).

 

9.                                      The Company shall have represented to the Commitment Lenders on the Closing Date that the Company shall have no indebtedness for borrowed money other than (i) up to $10 million of indebtedness for borrowed money (whether or not such debt is Secured Debt, including debt under the Existing Credit Agreement), and (ii) the Notes; and any existing liens relating to the assets to be acquired pursuant to the Purchase Agreement shall have been terminated or released.

 

10.                               The Company shall have represented to the Commitment Lenders in writing on or prior to the Closing Date that the borrowing base under the Existing Credit Agreement in effect immediately following closing of the Acquisition is at least $125 million.

 

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11.                               The Commitment Lenders shall have received, at least five business days prior to the Closing Date, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the PATRIOT Act.

 

12.                               There shall be no default or event of default under the Loan Documents, and, subject to the Certain Funds Provision, all representations and warranties contained in the Loan Documents shall be true and correct.

 

13.                               The Company shall be in compliance with its obligations under clause D below.

 

Notwithstanding anything in this Commitment Letter, the Loan Documents or any other letter agreement or other undertaking concerning the financing of the Transaction to the contrary, (i) the only representations and warranties the accuracy of which shall be a condition to the consummation of the Financing shall be (A) such of the representations and warranties made by the Seller in the Purchase Agreement as are material to the interests of the Commitment Lenders, but only to the extent you have the right, pursuant to the Purchase Agreement, to terminate your obligations under the Purchase Agreement or decline to consummate the Acquisition as a result of a breach of any such representations and warranties (the “Specified Purchase Agreement Representations”) and (B) the Specified Representations (as defined below), and (ii) the terms of the Loan Documents and the Closing Deliverables shall be in a form such that they do not impair the funding for and issuance of the Notes on the Closing Date if the conditions expressly set forth above in this Section C are satisfied or waived by the Commitment Lenders.  For purposes hereof, “Specified Representations” means the representations and warranties of the Company set forth in the Loan Documents relating to corporate or other company existence; due organization, the power and authority (as to execution, delivery and performance of the applicable Loan Documents) of the Company; delivery and enforceability and binding effect of the Loan Documents; the due authorization, execution and delivery of the applicable Loan Documents; solvency; no conflicts of Loan Documents with charter or other organizational documents and material laws; receipt of all governmental consents required in connection with the first closing of the Acquisition; Federal Reserve margin regulations; Investment Company Act; Patriot Act; OFAC and Anti-Corruption Laws; and the Information contained in Section D below.  This paragraph shall be referred to herein as the “Certain Funds Provision”.

 

D.                                    Information Requirements

 

The Company represents and warrants (with respect to Information relating to Seller or its assets, to the best of the Company’s knowledge after reasonable inquiry) to, and covenants with, the Commitment Lenders that all written information that has been or will be made available to the Commitment Lenders by the Company or any of its representatives in connection with the Transaction, including reports filed by the Company with the U.S. Securities and Exchange Commission (the “Information”) is, and in the case of Information made available after the date hereof, will be, complete and correct in all material respects and does not, and in the case of Information made available after the date hereof, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.  The Company agrees to supplement the Information from time to time so that the representation and warranty contained in this paragraph remains correct.  In issuing the Commitments and undertakings hereunder, the Commitment Lenders are relying on the accuracy of the Information without independent verification thereof.

 

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E.                                    Fees; Indemnification

 

1.                                      Fees.  The Company shall pay (or cause to be paid) to each Commitment Lender the fees and expenses set forth in the Fee Letter.

 

2.                                      Indemnification.  The Company agrees to indemnify and hold harmless each Commitment Lender, its affiliates and its directors, officers, employees, agents, representatives, legal counsel, and consultants (each, an “Indemnified Person”) against, and to reimburse each Indemnified Person upon its demand for, any losses, claims, damages, liabilities or other expenses (“Losses”) incurred by such Indemnified Person or asserted against such Indemnified Person by any third party, arising out of or in connection with this Commitment Letter, the Fee Letter, the use of the proceeds from the sale of the Notes, the Transaction or any related transaction, or any claim, litigation, investigation or proceeding relating to any of the foregoing, and to reimburse each Indemnified Person upon demand for any legal or other expenses incurred in connection with investigating or defending any of the foregoing, whether or not such Indemnified Person is a party to any such proceeding; provided that the Company shall not be liable pursuant to this indemnity for any Losses to the extent that a court having competent jurisdiction shall have determined by a final judgment (not subject to further appeal) that such Loss resulted from the gross negligence or willful misconduct of such Indemnified Person.  The Company shall not, without the prior written consent of the affected Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which such Indemnified Person is a party and indemnity has been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such indemnity and does not include a statement as to, or an admission of, fault, culpability, or a failure to act by or on behalf of such Indemnified Person.  No Indemnified Person shall be responsible or liable for any special, indirect, punitive, exemplary or consequential damages that may be alleged as a result of this Commitment Letter, the Fee Letter, the use of proceeds, the Transaction or any related transaction.  No Indemnified Person shall be liable for any indirect or consequential damages in connection with its activities related to the Financing.

 

F.                                     Miscellaneous

 

1.                                      Termination.  All commitments and obligations of the Commitment Lenders under this Commitment Letter will terminate on the earliest of (a) 11:59 p.m. Denver, Colorado time on June 30, 2016, (b) the closing of the Acquisition without the use of the Financing, and (c) the valid termination of the Purchase Agreement, unless in each case, the Loan Documents shall have been executed and delivered and the Notes Issued, with such earliest date referred to as the “Termination Date”.  Notwithstanding any term or provision hereof to the contrary, all of the rights and obligations of any Commitment Lender and the Company hereunder and under the Fee Letter in respect of governing law, submission to jurisdiction, indemnification, confidentiality, exclusivity, payment of fees and other amounts, and expense reimbursement shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or the Fee Letter or such Commitment Lender’s Commitments and agreements hereunder or under the Fee Letter.

 

2.                                      No Third-Party Beneficiaries.  This Commitment Letter and the Fee Letter are solely for the benefit of the Company, the Commitment Lenders and the Indemnified Persons; no provision hereof or of the Fee Letter shall be deemed to confer rights on any other person or entity.

 

3.                                      No Assignment; Amendment.  This Commitment Letter and the Fee Letter may not be assigned by the Company to any other person or entity (and any attempted assignment shall be null and void), but all of the obligations of the Company hereunder and under the Fee Letter shall be binding upon the successors and assigns of the Company.  Notwithstanding the foregoing, any and all obligations of, and services to be provided by, a Commitment Lender hereunder (including, without limitation, its

 

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Commitment) may be performed and any and all rights of such Commitment Lender hereunder may be exercised by or through any of its affiliates or branches having the ability to perform such Commitment Lender’s obligations hereunder.  This Commitment Letter and the Fee Letter may be not be amended or modified except in writing executed by each of the parties hereto.

 

4.                                      Use of Name and Information.  The Company agrees that any references to a Commitment Lender or any of its affiliates made in connection with the Financing are subject to the prior approval of such Commitment Lender, which approval shall not be unreasonably withheld, conditioned or delayed; provided that this provision shall not apply to any filings required to be made by the Company with the U.S. Securities and Exchange Commission or pursuant to security exchange rules and regulations.

 

5.                                      Governing Law.  This Commitment Letter and the Fee Letter will be governed by and construed in accordance with the laws of the state of New York without regard to the principles of conflicts of laws thereof.  THE COMPANY AND EACH COMMITMENT LENDER IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATED TO THIS COMMITMENT LETTER, THE FEE LETTER, THE LOAN DOCUMENTS, THE USE OF PROCEEDS THEREOF OR ANY OF THE TRANSACTIONS OR THE ACTIONS OF ANY COMMITMENT LENDER IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.  THE COMPANY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND APPELLATE COURTS THEREOF FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER, THE FEE LETTER, THE LOAN DOCUMENTS, THE USE OF PROCEEDS THEREOF, THE TRANSACTIONS AND THE OTHER TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT.  THE COMPANY AND EACH COMMITMENT LENDER IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. A FINAL JUDGMENT IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT MAY BE ENFORCED IN ANY OTHER COURTS TO WHOSE JURISDICTION THE COMPANY OR A COMMITMENT LENDER ARE OR MAY BE SUBJECT, BY SUIT UPON JUDGMENT. SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT ON THE COMPANY MAY BE MADE BY REGISTERED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS APPEARING AT THE BEGINNING OF THIS LETTER FOR ANY SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT PURSUANT TO THIS COMMITMENT LETTER.

 

6.                                      Survival.  The obligations of the Company under the expense reimbursement, indemnification, confidentiality, governing law, submission to jurisdiction, jury trial waiver, no fiduciary duty, and survival provisions of this Commitment Letter and the Fee Letter shall survive the expiration and termination of this Commitment Letter and any expiration or termination of the commitment and undertakings of the Commitment Lenders hereunder regardless of whether the Loan Documents are executed, delivered and closed.

 

7.                                      Confidentiality.  Subject to the last sentence of this Section 7, the Company agrees that it will not disclose, directly or indirectly, this Commitment Letter, the Fee Letter, the Term Sheet, the other

 

7

 

exhibits and attachments hereto or the contents of each thereof, or the activities of the Commitment Lenders pursuant hereto or thereto, to any person or entity, except (a) to your officers, directors, agents, employees, attorneys, accountants, advisors, controlling persons or equity holders who are informed of the confidential nature thereof, on a confidential and need-to-know basis, (b) if the Commitment Lenders consent in writing (such consent not to be unreasonably withheld or delayed) to such proposed disclosure or (c) pursuant to the order of any court or administrative agency in any pending legal, judicial or administrative proceeding, or otherwise as required by applicable law or compulsory legal process or to the extent requested or required by governmental and/or regulatory authorities, in each case based on the reasonable advice of your legal counsel (in which case the Company agrees, to the extent practicable and not prohibited by applicable law, rule or regulation to inform the Commitment Lenders promptly thereof prior to disclosure); provided that the Company may disclose this Commitment Letter and the contents hereof, including the Term Sheet attached hereto (but not the Fee Letter and any information contained therein) (i) if portions thereof have been redacted in a manner reasonably agreed by us (including the portions thereof addressing fees payable to the Commitment Lenders), to the Seller, its subsidiaries and its and their respective officers, directors, agents, employees, attorneys, accountants, controlling persons or advisors, on a confidential and need-to-know basis and (ii) in the Company’s Current Report on Form 8-K, its press release announcing the Acquisition and its prospectus supplement for the Equity Issuance and other related marketing materials therefor.  In the event that the Notes are issued, the Company’s obligations under this paragraph shall terminate automatically and, to the extent covered thereby, be superseded by the confidentiality provisions in the Loan Documents upon the initial funding thereunder to the extent such provisions are binding on the Company.  Otherwise, the confidentiality provisions set forth in this paragraph shall survive the termination of this Commitment Letter and expire and shall be of no further effect commencing on the date that is 18 months following the date hereof.

 

We will use all non-public information provided to us by or on behalf of you hereunder or in connection with the Transactions solely for the purpose of performing the obligations which are the subject of this Commitment Letter and negotiating, evaluating and contemplating the transactions contemplated hereby and shall treat confidentially all such information and shall not publish, disclose or otherwise divulge, such information; provided that nothing herein shall prevent us  from disclosing any such information (a) pursuant to the order of any court or administrative agency or in any pending legal, judicial or administrative proceeding, or otherwise as required by applicable law, rule or regulation, or compulsory legal process based on the reasonable advice of counsel (in which case we agree (except with respect to any audit or examination conducted by bank accountants or any governmental or bank regulatory authority exercising examination or regulatory authority), to the extent practicable and not prohibited by applicable law, rule or regulation, to inform you promptly thereof prior to disclosure), (b) upon the request or demand of any regulatory authority having jurisdiction over us (in which case we agree (except with respect to any audit or examination conducted by bank accountants or any governmental or bank regulatory authority exercising examination or regulatory authority), to the extent practicable and not prohibited by applicable law, rule or regulation, to inform you promptly thereof prior to disclosure), (c) to the extent that such information becomes publicly available other than by reason of improper disclosure by us or any related parties thereto (including the persons referred to in clause (f) below) in violation of any confidentiality obligations owing to the Company or any of your subsidiaries or affiliates or related parties, (d) to the extent that such information is or was received by us from a third party that is not, to our knowledge, subject to contractual or fiduciary confidentiality obligations owing to you, the Company or any of your or their respective affiliates or related parties, (e) to the extent that such information was already in our possession prior to the date hereof, or is independently developed us without the use of any confidential information and without violating the terms of this Commitment Letter, (f) to our affiliates and to its and their respective directors, officers, employees, legal counsel, independent auditors, professionals and other experts or agents who need to know such information in connection with the Transactions and who otherwise are informed of the confidential nature of such information and who are subject to customary confidentiality obligations of professional practice or who

 

8

 

agree in writing to be bound by the terms of this paragraph (or language substantially similar to this paragraph) (with a Commitment Lender, to the extent within its control, responsible for such person’s compliance with this paragraph), (g) for the purposes of establishing a “due diligence” defense or (h) to potential or prospective funding sources, participants or assignees and to any direct or indirect contractual counterparty to any swap or derivative transaction relating to the Company or any of its subsidiaries, in each case who agree to be bound by the terms of this paragraph (or language substantially similar to this paragraph); provided that (i) the disclosure of any such information to any purchasers of the Notes, participants, assignees, hedge providers or funding sources or prospective purchasers of the Notes shall be made subject to the acknowledgment and acceptance by such purchaser of the Notes, funding source, participant, assignee, hedge provider or prospective purchaser of the Notes that such information is being disseminated on a confidential basis (on substantially the terms set forth in this paragraph or as is otherwise reasonably acceptable to you and the Commitment Lenders). In the event that the Notes are issued, the Commitment Lenders’ obligations under this paragraph shall terminate automatically and, to the extent covered thereby, be superseded by the confidentiality provisions in the Loan Documents upon the initial funding thereunder to the extent such provisions are binding on the Commitment Lenders. Otherwise, the confidentiality provisions set forth in this paragraph shall survive the termination of this Commitment Letter and expire and shall be of no further effect commencing on the date that is 18 months following the date hereof.

 

Notwithstanding anything to the contrary provided elsewhere herein, none of the provisions of this Commitment Letter shall in any way limit the activities of any affiliate of a Commitment Lender in its respective businesses distinct from the business of such Commitment Lender, provided that the non-public information referenced in the foregoing paragraph is not made available to representatives of such affiliate, if any, of such Commitment Lender who is not involved in the business of such Commitment Lender. Should such information be made available to a representative of such affiliate of such Commitment Lender who is not involved in the business of such Commitment Lender, such representative and affiliate shall be bound by the confidentiality provisions of this Commitment Letter in accordance with its terms.

 

8.                                      No Fiduciary Duty.  The Company acknowledges and agrees that (i) the commitment pursuant to this Commitment Letter is an arm’s-length commercial transaction between the Company, on the one hand, and the Commitment Lenders, on the other, and you are capable of evaluating and understanding, and do understand and accept, the terms, risks and conditions of the transactions contemplated by this Commitment Letter; (ii) in connection with the transactions contemplated hereby and the process leading to such transactions, each Commitment Lender is and has been acting solely as a principal and is not the agent or fiduciary of the Company or its affiliates, stockholders, creditors, employees or any other party, (iii) no Commitment Lender has assumed an advisory responsibility or fiduciary duty in favor of the Company with respect to the transactions contemplated hereby or the process leading thereto and the Commitment Lenders have no obligation to the Company except those expressly set forth in this Commitment Letter, (iv) the Commitment Lenders and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and its affiliates, and the Commitment Lenders have no obligation to disclose any of such interests by virtue of any fiduciary or advisory relationship as a consequence of this Commitment Letter; and (v) the Commitment Lenders have not provided any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.  The Company waives and releases, to the fullest extent permitted by law, any claims that it may have against any Commitment Lender with respect to any breach or alleged breach of fiduciary duty as a consequence of this Commitment Letter.  You acknowledge that the Commitment Lenders and their respective affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests.  Neither we nor any of our

 

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respective affiliates will use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or our other relationships with you in connection with the performance by us of services for other companies, and we will not furnish any such information to other companies.  You also acknowledge that neither we nor any of our affiliates has any obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained by us from other companies.

 

9.                                      Counterparts.  This Commitment Letter and the Fee Letter may be executed in multiple counterparts, and by different parties hereto in any number of separate counterparts, all of which taken together shall constitute one original.  Delivery of an executed counterpart of a signature page to this Commitment Letter or the Fee Letter by telecopier or by electronic transmission (in pdf form) shall be as effective as delivery of a manually executed counterpart hereof.

 

10.                               Entire Agreement.  This Commitment Letter, together with the Term Sheet and the Fee Letter, supersedes all prior understandings, whether written or oral, among the parties hereto with respect to the Financing and sets forth the entire understanding of the parties hereto with respect thereto.

 

11.                               Patriot Act.  Each Commitment Lender hereby notifies the Company that pursuant to the requirements of the USA Patriot Improvement and Reauthorization Act of 2005, Title III of Pub. L. 109-177 (signed into law March 9, 2006) (the “Patriot Act”), it and its affiliates are required to obtain, verify and record information that identifies the Company, which information includes the name, address, tax identification number and other information regarding the Company that will allow such Commitment Lender to identify the Company and Guarantors in accordance with the Patriot Act.  This notice is given in accordance with the requirements of the Patriot Act and is effective for such Commitment Lender and its affiliates.

 

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We look forward to working with you on this important transaction.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MTP ENERGY MASTER FUND LTD.
    
	
 
    	
 
    
	
 
    	
By: MTP Energy Management   LLC
    
	
 
    	
Its: Investment Advisor
    
	
 
    	
By: Magnetar Financial   LLC
    
	
 
    	
Its: Sole Member
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Paul Smith
    
	
 
    	
 
    	
Name: Paul Smith
    
	
 
    	
 
    	
Title: Chief Legal   Officer
    
	
 
    	
 
    
	
 
    	
GSO CAPITAL PARTNERS LP,   signing on behalf of one or more funds managed, advised or sub-advised by GSO   Capital Partners LP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Marisa J. Beeney
    
	
 
    	
 
    	
Name: Marisa J. Beeney
    
	
 
    	
 
    	
Title: Authorized   Signatory
    
	
 
    	
 
    
	
 
    	
 
    
	
ACCEPTED AND AGREED
    	
 
    
	
this 3rd day of May,   2016:
    	
 
    
	
 
    	
 
    
	
SYNERGY RESOURCES CORPORATION
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ James P. Henderson
    	
 
    
	
 
    	
James P. Henderson
    	
 
    
	
 
    	
Executive Vice   President Finance and Chief Financial Officer
    	
 
    

 

Signature Page to Commitment Letter

 

 

Annex I - Summary of Principal Terms and Conditions

 

See attached.

 

 

Senior Unsecured Notes due 2021

 

Summary of Terms and Conditions

 

This Summary of Terms and Conditions (this “Term Sheet”) is only a summary of the definitive agreements, the negotiation and execution of which shall be consummated in accordance with this Term Sheet and the Commitment Letter to which this Term Sheet is attached.  Capitalized terms used in this Term Sheet but not defined herein shall have the meanings given to them in the Commitment Letter to which this Term Sheet is attached.

 

General

 

	
Issuer:
    	
 
    	
Synergy Resources Corporation (the “Issuer”).
    
	
 
    	
 
    	
 
    
	
Initial Purchasers:
    	
 
    	
The Commitment Lenders named within the Commitment Letter
    
	
 
    	
 
    	
 
    
	
Future Guarantors:
    	
 
    	
All subsidiaries of the Issuer that guarantee the RBL (as   defined below) or any of the Issuer’s or any such subsidiary’s other debt in   excess of $15 million, will also guarantee the Notes.
    
	
 
    	
 
    	
 
    
	
Placement Agent:
    	
 
    	
Credit Suisse Securities (USA) LLC to act as placement agent in   the placement of Notes to investors, and will not purchase the Notes for its   own account.
    
	
 
    	
 
    	
 
    
	
Issuance:
    	
 
    	
Pursuant to the private placement exemption from U.S. securities   laws provided by Rule 4(a)(2) of the U.S. Securities Act of 1933.
    
	
 
    	
 
    	
 
    
	
Amount:
    	
 
    	
$80 million (the “Notes”)
    
	
 
    	
 
    	
 
    
	
Maturity:
    	
 
    	
5 years from date of issue.
    
	
 
    	
 
    	
 
    
	
Ranking:
    	
 
    	
Senior unsecured obligations of the Issuer and any Future   Guarantors.
    
	
 
    	
 
    	
 
    
	
Interest Rate:
    	
 
    	
9.00% (cash interest to be paid on a semi-annual basis)

 

Interest on overdue principal shall accrue at the otherwise   applicable rate plus 2%, and interest on other overdue amounts shall accrue   at the rate applicable to principal of the Notes plus 2%
    
	
 
    	
 
    	
 
    
	
OID or Commitment Fee:
    	
 
    	
As set forth in the Fee Letter
    
	
 
    	
 
    	
 
    
	
Use of Proceeds:
    	
 
    	
Acquisition of assets pursuant to the Purchase Agreement,   payment of fees and expenses relating to the Transactions and general   corporate purposes
    
	
 
    	
 
    	
 
    
	
Amortization:
    	
 
    	
None
    

 

 

	
Registration Rights:
    	
 
    	
None, unless the Issuer grants registration rights to a holder   of the Issuer’s debt securities while the Notes remain outstanding, in which   case the Issuer will use its reasonable best efforts to register the Notes   and have the registration statement with respect to the Notes declared or   made automatically effective within 3 months from the date the Issuer granted   registration rights to such other holder; provided that from and after the   date that is 12 months after issuance, the Issuer shall have no such   obligation if (i) the Notes are freely tradable by non-affiliates under   Rule 144 and (ii) to the extent requested by holders of the Notes,   (A) the restrictive legend has been or is removed from the Notes (other   than those Notes held by affiliates), and (B) the Notes are or become   not associated with a restricted CUSIP (other than those Notes held by affiliates).
    
	
 
    	
 
    	
 
    
	
DTC eligible:
    	
 
    	
Issuer to use reasonable best efforts to deliver the Notes via   the book-entry facilities of DTC at closing
    
	
 
    	
 
    	
 
    
	
Redemption and Repurchase
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Optional Redemption:
    	
 
    	
Make-Whole Premium redemption:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
·             Prior   to the 2.5-year anniversary of the date of issue, the Notes may be redeemed   by the Issuer, in whole or in part, subject to a customary “Make-Whole   Premium” discounted at T+50bps.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Step down redemption:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
·             Between   the 2.5-year anniversary of the date of issue and the 3.5-year anniversary of   the date of issue, the Notes may be redeemed, in whole or in part, at a price   equal to par plus 50% of the interest rate applicable to the Notes.

·             Between   the 3.5-year anniversary of the date of issue and the 4.5-year anniversary of   the date of issue, the Notes may be redeemed, in whole or in part, at a price   equal to par plus 25% of the interest rate applicable to the Notes.

·             After   the 4.5-year anniversary of the date of issue, the redemption price will step   down to par

·             All   such redemptions shall include accrued but unpaid interest on the Notes.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Equity Claw-Back redemption:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
·             Prior   to the 2.5-year anniversary of the date of issue, up to 35% of the Notes may   be redeemed at a price equal to par plus the interest rate applicable to the   Notes, using the net cash proceeds of an equity offering, provided that at   least 65% of the Notes originally issued remain outstanding.
    

 

 

	
Change of Control Repurchase:
    	
 
    	
Upon a Change of Control, the Issuer must make an offer to   purchase the Notes at a price equal to 101%.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
A Change of Control includes (i) direct sale of all or   substantially all assets, (ii) adoption of a plan of liquidation or   dissolution, (iii) a transaction whereby a person or group acquires more   than 50% of the voting power of the Issuer, or (iv) the day upon which   the majority of the board are not continuing directors.
    
	
 
    	
 
    	
 
    
	
Asset Sales:
    	
 
    	
Issuer will not consummate an Asset Sale unless consideration is   at least 75% cash or cash equivalents, including assumption of liabilities or   costs and expenses of an oil and gas property, publicly traded securities and   other obligations received from the transferee and converted to cash w/in 180   days, or receipt of assets or a business in the oil and gas industry. The   aggregate amount of all forms of consideration other than cash and cash   equivalents received for all Asset Sales since the Closing Date shall not   exceed the greater of $20 million or 3% ACNTA.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Issuer will apply net proceeds from an Asset Sale once in excess   of $20 million (within 365 days after receipt of net proceeds, as may be   extended by 180 days from commitment to use proceeds) to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
·             Repay   secured debt;

·             Permanently   repay unsecured debt on a pro rata basis with the Notes;

·             Acquire   (all or substantially all) assets or stock of a company principally engaged   in oil & gas business; or

·             Make   capex or acquire assets useful in the oil & gas business.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Carve-outs from the Asset Sale procedures to include:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
·             De   minimis transactions that involve assets with a fair market value of less   than $20 million (measured at the time of the relevant sale or other   disposition) in the aggregate in any calendar year

·             Other   customary carve-outs, including (i) Asset Swaps, (ii) sale or   disposition of oil & gas or other mineral products in the ordinary   course of business, and (iii) customary farm-out of oil & gas   properties.
    
	
 
    	
 
    	
 
    
	
Covenants
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Suspension upon Investment Grade Rating:
    	
 
    	
Certain restrictive covenants to be suspended for any period   where Notes obtain an investment grade rating by both Moody’s and S&P.
    

 

 

	
Rating on Notes:
    	
 
    	
Issuer will use reasonable best efforts to obtain ratings of the   Notes from S&P and Moody’s by December 31, 2016 and Issuer will use   commercially reasonable efforts to maintain such rating from S&P and   Moody’s.
    
	
 
    	
 
    	
 
    
	
Restricted Payments:
    	
 
    	
Issuer and restricted subsidiaries may not pay dividends,   distributions or any other restricted payments to equity holders, repurchase   equity interests, repurchase, redeem or make non- scheduled payments on any   subordinated debt, make any investment other than Permitted Investments (to   be defined in a mutually agreeable manner), unless it has capacity under the   Builder Basket to make such a payment.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
The “Builder Basket” shall mean the sum, without duplication,   of:

 

·             (i) 50%   of Consolidated Net Income (to be defined in a manner mutually agreeable)   (100% of net loss) from start of fiscal quarter preceding date of issue to   the end of the most recently ended fiscal quarter,

·             (ii) 100%   of cash proceeds received from the issue or sale of equity interest of the   Issuer,

·             (iii) 100%   of the reduction in indebtedness (other than subordinated indebtedness) from   the contractual conversion or exchange of convertible or exchangeable debt   for capital stock,

·             (iv) proceeds   from the sale or repayment of restricted Investments and

·             (v) the   fair market value of investments in subsidiaries redesignated as Restricted   Subsidiaries to the extent initially constituting a restricted investment.

 

As a condition to use of the Builder Basket for any purpose, the   Issuer must be able to incur $1 of additional debt under the 2.25:1.00 Fixed   Charge Coverage Ratio noted below.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Permitted Restricted Payment carve-outs for the following (among   other customary payments):
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
·             Repurchase   of management or employee equity interests up to $10 million in any fiscal   year with unused amounts permitted to be carried forward to subsequent fiscal   years, not to exceed $7.5 million for any fiscal year

·             General   Restricted Payment basket of greater of (A) $25 million, and   (B) 4.0% ACNTA
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Permitted Investment carve-outs for the following (among   customary investments):
    

 

 

	
 
    	
 
    	
·             Loans   to employees up to $1.0 million

·             Investments,   other than in unrestricted subsidiaries, entered into in the ordinary course   of business and customary in the oil and gas business (“Permitted Business   Investments”)

·             General   Permitted Investment Basket of greater of (A) $30 million, and   (B) 2.5% ACNTA
    
	
 
    	
 
    	
 
    
	
Indebtedness:
    	
 
    	
Issuer and Future Guarantors may incur debt if Fixed Charge Coverage   Ratio (to be defined in a mutually agreeable manner) in excess of 2.25:1.00   (“Fixed Charge Coverage Ratio Test”).
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Permitted debt carve-outs for the following (among other   customary incurrences):

 

·             Basket   for indebtedness under an RBL equal to the greater of (A) $225 million   and (B) 35.0% of ACNTA (calculatedper the Modified ACNTA pricing   definition below); provided that, in the case of both (A) and   (B) above, the cost of debt pursuant to this clause shall not exceed LIBOR   + 550 bps (with the cost of debt to be calculated to include fees and OID and   LIBOR not to exceed the lesser of 1.0% and the then prevailing LIBOR) (the   “RBL Basket”)

 

As used herein, “RBL” shall mean   one or more traditional corporate banking borrowing base revolvers for oil   and gas secured loan transactions in a single tranche (i.e. not permitted to   tranche into first out and second out first lien loans), including customary   mechanisms for periodic determination thereof that are provided by one or   more commercial banks that routinely provide revolving credit facilities   providing for revolving credit loans and/or letters of credit on a secured or   unsecured basis on customary market terms for similar facilities

 

·             Existing   Debt, other than debt incurred under the Credit Facility Basket

·             Hedging   Obligations incurred in the ordinary course of business to mitigate risk and   not for speculative purposes

·             Capital   Lease/Purchase Money basket of greater of (A) $25 million, and   (B) 4.0% ACNTA

·             Acquired   / Acquisition Debt basket (provided, that pro forma for the   acquisition, Issuer can incur $1 of additional debt under the Fixed   Charge Coverage Ratio Test or the acquisition improves the Fixed Charge   Coverage Ratio can be incurred to finance acquisition or assume target’s debt)   (“Acquired/Acquisition Debt Basket”)

·             General   Debt basket of greater of (A) $30 million, and (B)
    

 

 

	
 
    	
 
    	
4.0% ACNTA
    
	
 
    	
 
    	
 
    
	
Liens:
    	
 
    	
Issuer and restricted subsidiaries may not incur any liens   unless the Notes are equally and ratably secured, or secured on a senior   basis, in the case of liens securing subordinated indebtedness.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Permitted lien carve-outs for the following (among other   customary incurrences):
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
·             Liens   securing debt incurred under the RBL Basket (liens securing the RBL may not   be reclassified to any other lien basket)

·             Liens   to secure Acquired Debt (provided that such liens do not spread to any assets   other than the assets securing such debt immediately prior to such   acquisition)

·             Liens   securing Capital Lease/Purchase Money debt basket (limited to the assets   purchased, improved or constructed with the proceeds of debt incurred under   the Capital Lease/Purchase Money debt basket)

·             Liens   securing hedging obligations incurred in the ordinary course of business to   mitigate risk and not for speculative purposes

·             Liens   arising under customary oil and gas agreements but not to secure indebtedness

·             General   Lien basket of (A) $30 million, and (B) 4.0% ACNTA, which cannot be   used for second or junior lien debt for borrowed money
    
	
 
    	
 
    	
 
    
	
Production Payments:
    	
 
    	
The Issuer and restricted subsidiaries are not permitted to   engage in any production payment, royalties, ORRI, NPIs and similar   transactions.
    
	
 
    	
 
    	
 
    
	
Other Covenants:
    	
 
    	
Customary other covenants, including restrictions on:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
·             Dividend   Stoppers

·             Sale   and Leaseback transactions

·             Transactions   with Affiliates

·             Mergers   and sale of substantially all assets (unless, among other customary   conditions, the acquisition improves the Fixed Charge Coverage Ratio, and   successor entity assumes obligations under Notes)

·             Business   Activities

·             Selective   Payments for Consent to amend terms of Notes
    
	
 
    	
 
    	
 
    
	
Reports:
    	
 
    	
Issuer must provide Note holders with the following information:
    

 

 

	
 
    	
 
    	
·             all   quarterly and annual reports that would be required to be filed with the SEC   on Forms 10-Q and 10-K if Synergy were required to file such reports; and

·             all   current reports of Synergy that would be required to be filed with the SEC on   Form 8-K if Synergy were required to file such reports (typically 4   business days)
    
	
 
    	
 
    	
 
    
	
Events of Default
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Customary events of default, including:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
·             nonpayment   of principal when due

·             nonpayment   of interest, fees or other amounts within 30 days of when due

·             violation   of covenants not cured within 60 days of notice of default by at least 25% of   holders of Notes

·             cross-acceleration   of debt in excess of $20 million

·             judgment   in excess of $20 million

·             certain   bankruptcy events.

 

Upon the occurrence of an event of default, noteholders holding   25% or more of the outstanding principal amount of the Notes may accelerate   all outstanding amounts under the Notes
    
	
 
    	
 
    	
 
    
	
Other
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Definition of ACNTA:
    	
 
    	
Customary definition, to be keyed off discounted future net   revenues of Proved Reserves as calculated based on the Modified ACNTA   pricing, discounted at 10% and prepared under an independent reserve   engineer’s report following Issuer’s most recent fiscal year end.

 

Contribution from Proved Reserves from undeveloped locations to   constitute no more than 35% of the discounted net revenues of Proved Reserves   as referenced above
    
	
 
    	
 
    	
 
    
	
Modified ACNTA pricing:
    	
 
    	
At the date of determination, the five-year strip price for   crude oil (WTI Cushing), for natural gas liquids (Mont Belvieu) and natural   gas (Henry Hub), with such price held flat for each subsequent year, quoted   on the NYMEX (or its successor) as of the calculation date
    
	
 
    	
 
    	
 
    
	
Amendments:
    	
 
    	
Amendments to the Loan Documents will generally require consent   of holders holding at least a majority in principal amount of the Notes,   subject to certain customary exceptions which shall require the consent of   each affected holder, including reductions in principal, delay or forgiveness   of required payments, reduction in the rate of interest and release of   guarantees from significant subsidiaries.
    

 

 

	
Governing Law and Forum:
    	
 
    	
State of New York

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