EXHIBIT 10.6.1
Form of Convertible Note used in Company's
Private Offering of Convertible Notes
and Series C Warrants
8% SECURED NOTE
Platteville, CO 80651
December 31, 2009
FOR VALUE RECEIVED, Synergy Resources Corporation, a Colorado corporation,
and its successors and assigns, (the "Company") promises to pay to the order
of_______________ (the "Holder") or, the principal sum of One Hundred Thousand
Dollars ($100,000) in lawful money of the United States of America, together
with interest on so much of the principal balance thereof as is from time to
time outstanding at the rate hereinafter provided, and payable as hereinafter
provided.
This Note is one of a series of Notes, designated the 8% Convertible Notes
(individually referred to herein as a "Note," the series of notes is referred to
herein collectively as the "Notes"), aggregating up to $18,000,000 issued by the
Company. All the Notes shall rank pari passu in respect to payment of principal
and interest and upon any dissolution, liquidation or winding-up of the Company.
Any action permitted by this Note that is taken by one holder will be deemed to
have been taken by all holders in proportion to the Principal Amount of each
Holder's Note as compared to the total Principal Amount of the Notes then
outstanding.
1. Interest Rate. The unpaid balance of this Note shall bear interest at
the rate of eight percent (8%) per annum, simple interest. Interest shall be
calculated on a 365-day year and the actual number of days in each month.
2. Payment/Maturity Date. Interest on the Note shall be paid quarterly, on
the last day of March, June, September and December in each year, beginning
March 31, 2010, and continuing until the Note is finally paid. The total
outstanding principal balance hereof, together with accrued and unpaid interest,
shall be paid on December 31, 2012. Interest must be paid in cash.
3. Conversion.
(a) The Holder shall have the option to convert all or any part of the
principal amount of this Note, together with all accrued interest thereon
in accordance with the provisions of and upon satisfaction of the
conditions contained in this Note, into fully paid and non-assessable
shares of the Company's common stock as is determined by dividing that
portion of the outstanding principal balance and accrued interest under
this Note as of such date that the Holder elects to convert by the
Conversion Price. The initial Conversion Price is $1.60.
(b) No fractional shares of common stock shall be issued upon
conversion of this Note, and in lieu thereof the number of shares of common
stock to be issued upon each conversion shall be rounded up to the nearest
whole number of shares of common stock. (c) The Holder's conversion right
set forth in this Section may be exercised at any time and from time to
time but prior to payment in full of the principal and accrued interest on
this Note.
(d) The Holder may exercise the right to convert all or any portion of
this Note only by delivery of a properly completed conversion notice on a
Business Day to the Company's principal executive offices. Such conversion
shall be deemed to have been made immediately prior to the close of
business on the Business Day of such delivery of the conversion notice (the
"Conversion Date"), and the Holder shall be treated for all purposes as the
record holder of the shares of common stock into which this Note is
converted as of such date. For purposes of this Note, a Business Day is any
day the Federal Reserve Bank is open.
(e) As promptly as practicable after the Conversion Date, the Company
at its expense shall issue and deliver to the Holder of this Note a stock
certificate or certificates representing the number of shares of common
stock into which this Note has been converted.
(f) Upon the full conversion of this Note the Company shall be forever
released from all of its obligations and liabilities under this Note.
(g) Holder acknowledges that the shares of common stock issuable upon
conversion of this note are "restricted securities," as such term is
defined under the Securities Act. Xxxxxx agrees that Xxxxxx will not
attempt to pledge, transfer, convey or otherwise dispose of such shares
except in a transaction that is the subject of either: (i) an effective
registration statement under the Securities Act and any applicable state
securities laws; or (ii) an opinion of counsel rendered by legal counsel
satisfactory to the Company, which opinion of counsel shall be satisfactory
to the Company, to the effect that such registration is not required. The
Company may rely on such an opinion of Xxxxxx's counsel in making such
determination. Holder consents to the placement of a legend on the shares
of common stock issuable upon the exercise of this Note stating that the
shares represented by the certificate have not been registered under the
Securities Act and setting forth or referring to the restrictions on
transferability and sale thereof.
(h) Except for Exempt Issuances, if the Company sells any additional
shares of common stock, or any securities convertible into common stock, at
a price below the then applicable Conversion Price, the Conversion Price
will be lowered to the price at which the shares were sold or the lowest
price at which the securities are convertible, as the case may be. The
Conversion Price will also be proportionately adjusted in the event of any
stock splits.
2
(i) The term Exempt Issuance means the sale or issuance of:
i. shares of common stock or options to officers or directors of
the Company, not to exceed 1,000,000 shares or options per year for
any single officer or director (not to exceed 5,000,000 shares or
options per year total), pursuant to any stock or option plan duly
adopted by the directors of the Company;
ii. shares of common stock or options to employees or independent
consultants of the Company, not to exceed 5,000,000 shares or options
per year, pursuant to any stock or option plan duly adopted by the
directors of the Company;
iii. shares in connection with an acquisition of oil and gas
properties, the acquisition of an unaffiliated company, joint venture
or similar strategic transaction where the primary purpose is not to
raise cash;
iv. securities upon the conversion of the Notes or the exercise
of options or warrants issued and outstanding on November 15, 2009,
provided that the securities have not been amended to increase the
number of such securities or to decrease the exercise, exchange or
conversion prices of the securities.
(j) If the common stock to be issued on conversion of this Note shall
be changed into any other class or classes of stock, whether by capital
reorganization, reclassification, or otherwise, the holder of this Note
shall, upon its conversion be entitled to receive, in lieu of the common
stock which the Holder would have become entitled to receive but for such
change, a number of shares of such other class or classes of stock that
would have been subject to receipt by the Holder if it had exercised its
rights of conversion immediately before such changes.
(k) If at any time there shall be a capital reorganization of the
Company's common stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this
Section 3) or merger of the Company into another corporation, or the sale
of the Company's properties and assets as, or substantially as, an entirety
to any other person, then, as a part of such reorganization, merger or
sale, lawful provision shall be made so that the Holder of this Note will
be entitled to receive the number of shares of stock or other securities or
property from the successor corporation resulting from such merger to which
the Holder would have been entitled as a result of such capital
reorganization, merger or sale if this Note had been converted immediately
before such capital reorganization, merger or sale.
(l) The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, recapitalization, transfer of
assets, merger, dissolution, or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be observed
3
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section and in the
taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holder of this Note against
impairment.
(m) Upon the occurrence of each adjustment or readjustment pursuant to
any provision hereof, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to the Holder of this Note a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based.
4. Reservation of Shares. At all times while this Note shall be convertible
into shares of common stock, the Company shall reserve and keep available out of
its authorized but unissued shares of common stock solely for the purpose of
effecting the conversion of this Note such number of its shares of such common
stock as shall from time to time be sufficient to effect the conversion of this
Note in full. In the event that the number of authorized but unissued shares of
such common stock shall not be sufficient to effect the conversion of the entire
outstanding principal amount of this Note, then in addition to such other
remedies as shall be available to the Holder, the Company shall take such
corporate action as may be necessary to increase its authorized but unissued
shares of such common stock to such number of shares as shall be sufficient for
such purpose.
5. Prepayment. The Company may prepay the Notes without penalty at any time
after ____________. Nothwithstanding the above, the Company may repay the Note,
without penalty upon ten days written notice to the Holder if, during any twenty
trading days within a period of thirty consecutive trading days, the closing
price of the Company's common stock is $3.25 or greater and the Company's common
stock has an average trading volume of 200,000 shares or more per day.
6. Default Interest and Attorney Fees. Upon declaration of a default
hereunder, the balance of the principal remaining unpaid, interest accrued
thereon, and all other costs, and fees shall be immediately due and payable. In
the event of default, the Company agrees to pay all costs of collection
including reasonable attorney's fees.
7. Security. This Note is secured by the Company's interests in any xxxxx
drilled or completed with the proceeds from the sale of this Note.
8. Default. At the option of Holder, the unpaid principal balance of this
Note and all accrued interest thereon shall become immediately due, payable, and
collectible, without notice or demand, upon the occurrence at any time of any of
the following events, each of which shall be deemed to be an event of default
hereunder.
(a) The Company fails to make any payment of interest or principal on
the date on which such payment becomes due and payable under this Note;
(b) The Company breaches any representation, warranty or covenant or
defaults in the timely performance of any other obligation in its
agreements with the Note holders and the breach or default continues
4
uncured for a period of five Business Days after the date on which notice
of the breach or default is first given to the Company, or ten trading days
after the Company becomes, or should have become aware of such breach or
default;
(c) The Company files for protection from its creditors under the
federal bankruptcy code or a third party files an involuntary bankruptcy
petition against the Company;
(d) The Company's common stock is not listed on the OTC Bulletin Board
or other public trading market, or;
(e) The Company fails for any reason to deliver a certificate within
five Business Days after delivery of the certificate is required pursuant
to any agreement with the Holder.
Upon the occurrence of any event which might, upon notice or the passage of time
constitute an Event of Default, the Company shall notify the Holder of the Note
and the Holders of all other Notes of the occurrence of the event of default
within ten (10) days.
9. Representations, Warranties and Covenants of the Company. The Company
represents, warrants and covenants with the Holder as follows:
(a) Authorization; Enforceability. All action on the part of the
Company, necessary for the authorization, execution and delivery of this
Note and the performance of all obligations of the Company hereunder has
been taken, and this Note constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
(b) Governmental Consents. No consent, approval, qualification, order
or authorization of, or filing with, any local, state or federal
governmental authority is required on the part of the Company in connection
with the Company's valid execution, delivery or performance of this Note.
(c) No Violation. The execution, delivery and performance by the
Company of this Note and the consummation of the obligations contemplated
hereby will not result in a violation in any material respect of its
Articles of Incorporation or By-Laws, or of any provision of any mortgage,
agreement, instrument or contract to which it is a party or by which it is
bound or, to the best of its knowledge, of any federal or state judgment,
order, writ, decree, statute, rule or regulation applicable to the Company
or be in material conflict with or constitute, with or without the passage
of time or giving of notice, either a material default under any such
provision or an event that results in the creation of any material lien,
5
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to the Company, its business
or operations, or any of its assets.
(d) Covenants. So long as any Note is outstanding the Company will not
pay any dividends or other distributions to the holders of any shares of
its preferred stock or common stock unless all payments have been made to
the Holders on a current basis.
10. Assignment of Note. This Note may not be assigned by Company. The Note
may be assigned by Holder with the express written consent of the Company.
11. Loss of Note. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and in case of loss, theft or destruction of indemnification in form and
substance acceptable to the Company in its reasonable discretion, and upon
surrender and cancellation of this Note, if mutilated, the Company shall execute
and deliver a new Note of like tenor and date.
12. Non-Waiver. No delay or omission on the part of Holder in exercising
any rights or remedy hereunder shall operate as a waiver of such right or remedy
or of any other right or remedy under this Note. A waiver on any one or more
occasion shall not be construed as a bar to or waiver of any such right and/or
remedy on any future occasion.
13. Maximum Interest. In no event whatsoever shall the amount paid, or
agreed to be paid, to Holder for the use, forbearance, or retention of the money
to be loaned hereunder ("Interest") exceed the maximum amount permissible under
applicable law. If the performance or fulfillment of any provision hereof, or
any agreement between Company and Holder shall result in Interest exceeding the
limit for Interest prescribed by law, then the amount of such Interest shall be
reduced to such limit. If, from any circumstance whatsoever, Holder should
receive as Interest an amount which would exceed the highest lawful rate, the
amount which would be excessive Interest shall be applied to the reduction of
the principal balance owing hereunder (or, at the option of Holder, be paid over
to Company) and not to the payment of Interest.
14. Purpose of Loan. Company certifies that the loan evidenced by this Note
is obtained for business or commercial purposes and that the proceeds thereof
will not be used primarily for personal, family, household or agricultural
purposes.
15. Waiver of Presentment. Company and the endorsers, sureties, guarantors
and all persons who may become liable for all or any part of this obligation
shall be jointly and severally liable for such obligation and hereby jointly and
severally waive presentment and demand for payment, notice of dishonor, protest
and notice of protest, and any and all lack of diligence or delays in collection
or enforcement hereof. Said parties consent to any modification or extension of
time (whether one or more) of payment hereof, the release of all or any part of
the security for the payment hereof, and the release of any party liable for
payment of this obligation. Any modification, extension, or release may be
without notice to any such party and shall not discharge said party's liability
hereunder. 16. Governing Law. As an additional consideration for the extension
of credit, Company and each endorser, surety, guarantor, and any other person
who may become liable for all or any part of this obligation understand and
agree that the loan evidenced by this Note is made in the State of Colorado and
the provisions hereof will be construed in accordance with the laws of the State
of Colorado.
6
17. Arbitration. Any controversy or claim arising out of, or relating to
this Note, or the making, performance, or interpretation thereof, shall be
settled by arbitration in Denver, Colorado in accordance with the rules of the
American Arbitration Association then existing, and judgment on the arbitration
award may be entered in any court having jurisdiction over the subject matter of
the controversy.
18. Binding Effect. The term "Company" as used herein shall include the
original Company of this Note and any party who may subsequently become liable
for the payment hereof as an assumer with the consent of the Holder, provided
that Holder may, at its option, consider the original Company of this Note alone
as Company unless Xxxxxx has consented in writing to the substitution of another
party as Company.
19. Relationship of Parties. Nothing herein contained shall create or be
deemed or construed to create a joint venture or partnership between Company and
Holder, Xxxxxx is acting hereunder as a lender only.
20. Severability. Invalidation of any of the provisions of this Note or of
any paragraph, sentence, clause, phrase, or word herein, or the application
thereof in any given circumstance, shall not affect the validity of the
remainder of this Note.
21. Amendment. This Note may not be amended, modified, or changed, except
only by an instrument in writing signed by both of the parties.
22. Time of the Essence. Time is of the essence for the performance of each
and every obligation of Company hereunder.
23. Notices. All notices, consents, approvals, requests, demands and other
communications which are required or may be given hereunder shall be in writing
and shall be duly given if personally delivered, sent by overnight courier or
posted by U.S. registered or certified mail, return receipt requested, postage
prepaid and addressed to the other parties at the addresses set forth below.
If to the Company:
Synergy Resources Corporation
00000 Xxxxxxx 00
Xxxxxxxxxxx, XX 00000
ATTN: Xx Xxxxxxxx, President and Principal Executive Officer
7
If to the Holder, at the address as shown on the register maintained by the
Company for such purpose.
The Company or the Holder may change their address for purposes of this
Section by giving to the other addressee notice of such new address in
conformance with this Section. If the Company receives any notice pursuant to
this Note or any other Note of this series, it must, not later than five
business days thereafter, dispatch a copy of such notice to the Holder of this
Note and to each other Holder of any Note as reflected in the current Note
Register.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
_____________ ___, 20__.
Synergy Resources Corporation
By:
-----------------------------------------
Xx Xxxxxxxx, President and Principal
Executive Officer
8
