EXHIBIT 10.4
AGREEMENT REGARDING
CONFLICTING INTEREST TRANSACTIONS
The parties agree as follows:
1. Any transaction between Synergy Resources Corporation (the "Company") and
o Xx Xxxxxxxx
o Xxxxxxx X. Xxxxx, Xx.
o Petroleum Management, LLC
o Petroleum Exploration and Management, LLC o HS Land & Cattle, LLC o or
any affiliates of the above
(each of the foregoing a "Member" and collectively the "Petromanagement
Group") must be approved by a majority of the Company's disinterested directors.
If the Company has only one disinterested director at the time any approval is
required, then the approval of the sole disinterested director will be required.
2. In the event any Member of the Petromanagement Group is presented with
or becomes aware of a Potential Transaction which the Member believes would be
of interest to the Company, the Member will deliver to the Company a notice
which will:
(i) Offer the Company the right to participate in the Potential
Transaction upon the terms described in the Notice.
(ii) Identify the persons or entities involved with the Potential
Transaction,
(iii) Disclose the interest the Member has in any property in proximity to
the property involved in the Potential Transaction, if the Member would benefit
from the Potential Transaction.
(iv) The percentage, not to exceed 25% without the consent of the Company,
which the Member elects to participate in the Potential Transaction and the
terms of such participation if different from those offered to the Company.
(v) The interest the Member has in any entity (drilling contractor,
engineering firm, operator, supplier etc.) which may be involved in the
Potential Transaction.
(vi) The interest the Member has or may receive (separate and apart from
that in (iv) above) in any property involved in the Potential Transaction.
For the purposes of this Agreement:
"Member" includes any affiliate of the Member.
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"Affiliate" means any person or entity controlling or controlled by the
Member or any entity in which the Member owns or controls in excess of 25% of
the entity's equity or voting interests or both.
A "Potential Transaction" means the opportunity to acquire an interest in
an oil or gas lease or well or to pay all or part of the costs of drilling one
or more oil or gas xxxxx. A Potential Transaction does not include a right to
acquire an interest in an oil or gas lease or to participate in the drilling of
an oil or gas well which any Member had as of the date of this Agreement or any
right later acquired by any Member which resulted from any contract to which any
Member was a party as of the date of this Agreement.
3. To accept the offer to participate in the Potential Transaction, the
Company must deliver a written notice to the Member within five days of the date
the notice of the Potential Transaction (with all information required by
Section 2) is presented to the Company. In its notice the Company must agree to
participate in the Potential Transaction on the terms offered and provide
reasonable evidence to the Member of the Company's ability to pay its share of
the cost of the Potential Transaction.
4. If the Company does not provide the notice described in Section 3 the
Member may participate in the Potential Transaction, but only upon terms and
conditions that are not more favorable to the Member than those offered to the
Company. If the Member does not enter into the Potential Transaction, the
provisions of Section 2 will apply to the Potential Transaction if it is again
available to the Member on more favorable terms than those previously available.
5. This Agreement will expire as to Xx Xxxxxxxx, and to any person who is
an affiliate of Xx. Xxxxxxxx only, when Xx. Xxxxxxxx is no longer an officer or
director of the Company. This Agreement will expire as to Xxxxxxx X. Xxxxx, Xx.,
and to any person who is an affiliate of Xx. Xxxxx only, when Xx. Xxxxx is no
longer an officer or director of the Company. This Agreement will expire as to
all other Members when neither Xx. Xxxxxxxx nor Xx. Xxxxx are officers or
directors of the Company. Any Member may participate freely in any transaction
which is not subject to this Agreement. Any transaction not subject to this
Agreement will not be considered a conflict of interest.
Following Xx Xxxxxxxx'x termination of employment and as a director, any
actions taken by Xx. Xxxxxxxx involving the oil and gas industry will not be
deemed a conflict of interest, or other violation of this agreement, even if Xx.
Xxxxxxxx is a shareholder, so long as Xx. Xxxxxxxx does not use any trade
secrets or confidential information, as defined in Xx. Xxxxxxxx'x Employment
Agreement, of the Company in order to engage in such activity.
Following Xxxxxxx X. Xxxxx, Xx.'s termination of employment and as a
director, any actions taken by Xx. Xxxxx involving the oil and gas industry will
not be deemed a conflict of interest, or other violation of this agreement, even
if Xx. Xxxxx is a shareholder, so long as Xx. Xxxxx does not use any trade
secrets or confidential information, as defined in Xx. Xxxxx'x Employment
Agreement, of the Company in order to engage in such activity.
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6. Any dispute in any manner relating to this agreement will be settled by
binding arbitration in Denver, Colorado in accordance with the Commercial
Arbitration Rules of the American Arbitration Association.
AGREED AND ACCEPTED:
SYNERGY RESOURCES CORPORATION
By: /s/ Xx Xxxxxxxx
------------------------------
President
/s/ Xx Xxxxxxxx
------------------------------
Xx Xxxxxxxx
/s/ Xxxxxxx X. Xxxxx, Xx.
----------------------------------
Xxxxxxx X. Xxxxx, Xx.
Petroleum Management, LLC
By: /s/ Xxxxxxx X. Xxxxx, Xx.
------------------------------
Authorized Officer
Petroleum Exploration and Management, LLC
By: /s/ Xx Xxxxxxxx
------------------------------
Authorized Officer
HS Land & Cattle, LLC
By: /s/ Xxxxxxx X. Xxxxx, Xx.
------------------------------
Authorized Officer
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