EXHIBIT 10.16
Greeley, Colorado
Loan # 9051266
AMENDMENT # 2 TO LOAN AGREEMENT
THIS AMENDMENT # 2 TO LOAN AGREEMENT (this "Amendment") is made as
of this 18 day of October, 2012 by SYNERGY RESOURCES CORPORATION, a Colorado
company (the "Borrower"), having an office at 00000 Xxxxxxx 00, Xxxxxxxxxxx,
Xxxxxxxx, 00000-0000, and, COMMUNITY BANKS OF COLORADO, a division of NBH Bank,
N.A. (the "Lender"), as successor in interest to BANK OF CHOICE, a division of
BANK MIDWEST, N.A. ("BOC"), having an office at 0000 X. 00xx Xxxxxx, Xxxxxxx,
Xxxxxxxx, 00000.
W I T N E S S E T H
WHEREAS, reference is made to (a) the Loan Agreement dated as of
November 30, 2011 (as amended by that certain Amendment #1 to Loan Agreement
dated as of April 23, 2012, the "Current Loan Agreement", and as amended by this
Amendment and as may be otherwise amended, supplemented or modified and in
effect from time to time, the "Loan Agreement") among the Borrower, and the
Lender; (b) the Secured Promissory Note dated as of November 30, 2011 (as
amended by that certain Amendment and Allonge to Secured Promissory Note dated
as of April 23, 2012, the "Current Note", and as amended by that certain Second
Amendment and Allonge to Secured Promissory Note dated as of the date hereof,
and as may be otherwise amended, supplemented or modified and in effect from
time to time, the "Note") among the Borrower and the Lender and (c) the Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of
November 30, 2011 and recorded December 1, 2011 at Reception #3809198 of the
Weld County, Colorado Clerk and Recorder records, and at Reception #03187188 of
the Boulder County, Colorado Clerk and Recorder records (as amended by that
certain Amendment to Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of April 23, 2012 and recorded April 23, 2012 at
Reception #3840877 of the Weld County, Colorado Clerk and Recorder records, and
at Reception #03218361 of the Boulder County, Colorado Clerk and Recorder
records, the "Current Deed of Trust", and as amended by that certain Second
Amendment to Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of the date hereof, the "Deed of Trust"); and
WHEREAS, the Lender and the Borrower have agreed to amend the
Current Loan Agreement to provide for, among other things, an increase in the
Commitment Limit to an aggregate amount up to, but not to exceed $30,000,000 for
the period commencing on the date hereof, and ending November 30, 2014, as set
forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree that the Current
Loan Agreement shall be hereby amended and modified as follows:
Section 1. Defined Terms. Each capitalized term used herein and not
otherwise defined herein shall have the meaning assigned thereto in the Loan
Agreement, as amended by this Amendment, or if not defined therein, in the Deed
of Trust. Each reference in the Loan Agreement to "this Loan Agreement" or "this
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Agreement" shall be deemed to be a reference to the Loan Agreement, as amended
by this Amendment.
Section 2. Modification. The Current Loan Agreement is hereby
amended as follows:
(a) The definition of "Commitment Limit" shall be amended and restated to read
as follows: "$30,000,000, as adjusted pursuant to the terms of Section 2.7,
Section 2.9 and Section 2.12 of this Agreement";
(b) A new definition of "Elected Rate" shall be added as follows:
"Elected Rate" shall mean, for any resulting tranche of borrowing, a rate
equal to either (a) the Selected LIBOR plus 2.50% for all principal
balance outstanding up to and including 35% of the Commitment Limit, (b)
the Selected LIBOR plus 2.75% for all principal balance outstanding above
35% of the Commitment Limit and up to and including 70% of the Commitment
Limit; (c) the Selected LIBOR plus 3% for all principal balance
outstanding above 70% of the Commitment Limit; or (d) the Prime Rate. For
all amounts outstanding prior to the Amendment #2 to Loan Agreement dated
on or about October 18, 2012, the Elected Rate shall be the Prime Rate.
(c) The definition of "Interest Rate" shall be amended and restated to read as
follows:
"Interest Rate" means, for any amounts outstanding, the greater of (i)
two and three-quarters percent (2.75%) and (ii) the Elected Rate, but in
each case not in excess of the Highest Lawful Rate.
(d) A new definition of "Selected LIBOR" shall be added as follows:
"Selected LIBOR" means, either (a) the 30-day London Interbank Offered
Rate, (b) the 60-day London Interbank Offered Rate or (c) the 90-day
London Interbank Offered Rate as selected by the Borrower in an Interest
Election Request delivered to the Lender.
(e) A new definition of the "Threshold Borrowing Base Fee" shall be added as
follows:
"Threshold Borrowing Base Fee" means, with respect to any increase in the
Commitment Limit, an amount equal to 0.25% of such increase in the
Commitment Limit over the then-existing Commitment Limit.
(f) A new definition of the "Borrowing Base Redetermination Fee" shall be
added as follows:
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"Borrowing Base Redetermination Fee" means the positive difference, if
any, of $10,000 less any Threshold Borrowing Base Fee due as a result of
an increase in the Commitment Limit resulting from a Redetermination
Request delivered to the Lender by the Borrower pursuant to the terms of
Section 2.12.
(g) All references to the "Note" shall mean the Note, as amended by that
certain Second Amendment and Allonge to Secured Promissory Note dated as
of the date hereof;
(h) All references to "$20,000,000" in Section 2.7 of the Current Loan
Agreement shall be deleted and replaced with "$30,000,000".
(i) Section 2.10 shall be amended and restated in its entirety to read as
follows:
"2.10 Unused Availability Fee. In addition to interest and all other
amounts due and payable pursuant to the terms of this Agreement and the
Note, Borrower agrees to pay to Lender an unused facility fee on the
unused portion of the Commitment Limit (the "unused portion" being the
amount by which the Commitment Limit exceeds the outstanding principal
balance of the Note) from the Effective Date through the Maturity Date, at
the rate of (a) 0.25% per annum for any amount of such excess up to and
including 70% of the then effective Commitment Limit or (b) 0.375% per
annum for such amounts in excess of 70% of the then effective Commitment
Limit, in each case accrued daily and payable for each three (3) calendar
month period (each calendar quarter), in arrears fifteen (15) days after
the last day of each calendar quarter. The amount of the unused facility
fee shall be calculated each day during the period for which the fee is
due using an assumed 360 day year.
(j) Section 2.7 of the Current Loan Agreement shall be deleted in its entirety
and replaced with the following:
"2.7 Adjustment of Commitment Limit or Collateral. Lender shall engage a
third-party consultant, at the sole cost and expense of Borrower, to
review (a) the Annual Reserve Report delivered to Lender pursuant to
Section 6.1(c) of this Agreement and (b) the Mid-Year Reserve Report
delivered to Lender Pursuant to Section 6.1(g) of this Agreement, which
review shall include preparation of a price-deck established by Lender at
the lesser of 65% of Base Case NPV9 Asset Value or 80% Downside Case NPV8
Asset Value for the purpose of establishing a new Borrowing Base. If
Lender delivers to Borrower written notification that, in Lender's sole
discretion, the new Borrowing Base does not provide sufficient collateral
to support Advances up to the Commitment Limit, then the Commitment Limit
shall be immediately reduced to such an amount as is supported by the
adjusted Borrowing Base. Provided, however, that, in the event the
Borrowing Base is reduced pursuant to this Section 2.7, Borrower may
pledge additional assets as Collateral to Lender as may be necessary, in
Lender's sole discretion, to support an increase in the reduced Commitment
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Limit back to the previously agreed Commitment Limit, and the Commitment
Limit shall be so adjusted following documentation of such pledge of
additional assets as Collateral, such documentation to be determined in
the reasonable discretion of Lender. Provided, further that, if the
Commitment Limit has been reduced pursuant to this Section 2.7 or pursuant
to Section 2.9 and in subsequent years the Annual Reserve Report or the
Mid-Year Reserve Report displays a Borrowing Base that would support a
Commitment Limit greater than the then-existing Commitment Limit, then the
Commitment Limit shall be increased to an amount (not to exceed the
maximum borrowing permissible under the Note) that, in Lender's reasonable
discretion, would be supported by the information regarding the Collateral
contained in such Annual Reserve Report."
(k) A new Section 2.12 shall be added to the Current Loan Agreement that reads
as follows:
"2.12 Commitment Limit Redetermination Requests. No more than one time in
each of the Borrower's fiscal year, the Borrower may send a written
request to the Lender to request an increase in the Commitment Limit (a
"Redetermination Request"). Each Redetermination Request shall include the
amount of the requested increase in the Commitment Limit, reasonable
detail regarding the need for such increase in the Commitment Limit and
information regarding the Borrowing Base necessary to support the
requested increased Commitment Limit. Upon receipt of a Redetermination
Request, the Lender shall negotiate with Borrower in good faith regarding
the terms and conditions of such increase, provided, however, that it
shall be in the Lender's sole and absolute discretion whether to increase
the Commitment Limit pursuant to any Redetermination Request. Upon
resolution of the requested increase in the Commitment Limit pursuant to a
Redetermination Request, the Borrower shall pay to the Lender an amount
equal to the Borrowing Base Redetermination Fee, if any."
(l) A new Section 2.2(c) shall be added to the Current Loan Agreement that reads
as follows:
"(c) Each Request for an Advance delivered to the Lender pursuant to
Section 2.2(a) above shall include a notification to the Lender if the
Borrower intends all or any portion of the Advance to be subject to a
Selected LIBOR specifically indicating which Selected LIBOR will apply.
Each such interest rate election shall be irrevocable and shall specify
(i) the Advances to which such interest rate election applies and, if
different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Advance,
and (ii) the effective date of the election made pursuant to such interest
rate election. Notwithstanding the foregoing, the Borrower acknowledges
and agrees that no more than three separate tranches of Advances may be
outstanding under any Selected LIBOR. If there are more than three
separate tranches of LIBOR Advances outstanding when a Request for Advance
is delivered or if no interest rate election is included in a Request for
Advance, all Advances made pursuant to such Request for and Advance shall
be made at the Prime Rate."
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(m) The following definitions shall be added to Section 8.1 of the Current Loan
Agreement:
"EBITDAX" means during the period of determination, the amount of
earnings before deduction of Interest Expense and income taxes,
depreciation, amortization expense, accretion expense, exploration
expenditures and costs, FAS 133 non-cash income and expense, and
other non-cash gains and losses such as those originated through
asset sales.
"Accrued Facility Interest Expense and Fees" means during the period
of determination, all accrued interest expense, fees and other
amounts payable by Borrower to Lender pursuant to this Agreement or
any related documents.
(n) A new Section 8.6 shall be added to the Current Loan Agreement that reads as
follows:
"8.6 EBITDAX to Expenses/Fees Ratio. Borrower shall maintain a ratio
of (a) EBITDAX to (b) Accrued Facility Interest Expense and Fees of
no less than 3.50, calculated at the end of each fiscal quarter.
It is the intent of this Amendment that the obligations of the Borrower under
the Loan Agreement as amended hereby shall be entitled to the benefits and
collateral security under the Deed of Trust as fully as if such obligations had
been incurred under the Current Loan Agreement as originally in effect.
Section 3. Third Party Costs and Expenses. All reasonable third
party costs and expenses of Lender related to or arising from the increase of
the Commitment Limit and the amendment to the Loan Documents, including, without
limitation, any and all legal fees, valuations, reviews, surveys, reports,
filings and recordation fees, shall be the sole responsibility of Borrower, and
shall be payable to Lender upon demand, and if not so paid, shall become part of
the Obligation (as defined in the Current Loan Agreement) and shall bear
interest at the Default Rate beginning on the date demand for payment is made by
Lender until the date paid by Borrower.
Section 4. Threshold Borrowing Base Fee. Notwithstanding anything
herein to the contrary, the Borrower shall not be obligated to pay to the Lender
a Threshold Borrowing Base Fee with respect to the increase of the Commitment
Limit from $20,000,000 to $30,000,000 pursuant to this Amendment and related
documents.
Section 5. Representations and Warranties. The Borrower hereby
represents and warrants that the representations and warranties made by it in
the Current Loan Agreement are true and complete on and as of the date hereof as
if made on and as of the date hereof.
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Section 6. Covenants. The Borrower hereby covenants and agrees to
perform each and every duty and obligation of the Borrower contained in the Loan
Agreement as amended by this Amendment.
Section 7. Effectiveness. This Amendment shall be effective as of
the day and year first written above upon its execution and delivery by the
Borrower. Except as herein provided, the Current Loan Agreement shall remain
unchanged and in full force and effect.
Section 8. Counterparts. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which shall constitute one instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Amendment #2 has been duly executed by the
parties hereto as of the day and year first above written.
BORROWER:
SYNERGY RESOURCES CORPORATON, a Colorado
corporation
By: /s/ Xxxxxxx X. Xxxxx, Xx. __
----------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
Title: Vice President, Secretary and
Treasurer
AGREED TO AND ACCEPTED:
COMMUNITY BANKS OF COLORADO, a division of NBH Bank, N.A., as Lender
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
