U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File Number 0-14731
HALLADOR PETROLEUM COMPANY
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1014610
(State of incorporation) (IRS Employer Identification No.)
1660 Lincoln Street, Suite 2700, Denver, Colorado 80264
(Address of principal executive offices)
303-839-5504 FAX: 303-832-3013
(Issuer's telephone numbers)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
Shares outstanding as of August 13, 1998: 7,093,150
1
<PAGE>
PART I. FINANCIAL INFORMATION
HALLADOR PETROLEUM COMPANY
Consolidated Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997*
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,978 $ 6,047
Available-for-sale securities 631 1,800
Accounts receivable-
Oil and gas sales 397 331
Well operations 293 336
------- -------
Total current assets 6,299 8,514
------- -------
Oil and gas properties
(successful efforts), at cost:
Unproved properties 627 378
Proved properties 18,683 18,366
Less - accumulated depreciation
depletion, amortization and
impairment (13,281) (13,039)
------- -------
6,029 5,705
------- -------
Other assets 290 266
------- -------
$ 12,618 $ 14,485
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Brokerage account $ 115 $
Accounts payable and accrued liabilities 253 360
Oil and gas sales payable 199 211
Debt to TCW 3,382 2,492
------- -------
Total current liabilities 3,949 3,063
------- -------
Debt to TCW 2,831
-------
Deferred bonus plan 212 205
------- -------
Other 105 105
------- -------
Minority interest 4,961 4,926
------- -------
Stockholders' equity:
Net unrealized loss on available-for-
sale securities (45)
Preferred stock, $.10 par value;
10,000,000 shares authorized;
no shares issued
Common stock, $.01 par value;
100,000,000 shares authorized;
7,093,150 shares issued 71 71
Additional paid-in capital 18,061 18,061
Accumulated deficit (14,696) (14,777)
------- -------
3,391 3,355
------- -------
$ 12,618 $ 14,485
======= =======
</TABLE>
*Derived from the Form 10-KSB.
See accompanying notes.
2
<PAGE>
HALLADOR PETROLEUM COMPANY
Consolidated Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
1998 1997 1998 1997
------- ------- ------- -------
(restated) (restated)
<S> <C> <C> <C> <C>
Revenue:
Oil $1,383 $2,029 $ 710 $ 950
Gas 321 167 222 74
NGLs 170 221 85 91
Interest and other 197 86 88 43
Gain on sale of prospects 343 7 23
----- ----- ----- -----
2,414 2,510 1,128 1,158
----- ----- ----- -----
Costs and expenses:
Lease operating 1,395 1,282 715 652
Depreciation, depletion
and amortization 242 211 142 109
General and
administrative 330 203 190 96
Impaired leasehold costs 14 14
Geological and geophysical 102 525 29 130
Dry hole 324 324
Interest 229 254 109 125
----- ----- ----- -----
2,298 2,813 1,185 1,450
----- ----- ----- -----
Income (loss) before
minority interest 116 (303) (57) (292)
Minority interest (35) 17
----- ----- ----- -----
Net income (loss) $ 81 $ (303) $ (40) $ (292)
===== ===== ===== =====
Net income (loss)
per share $ .01 $ (.04) $ * $ (.04)
===== ===== ===== =====
Weighted average shares
outstanding 7,093 7,093 7,093 7,093
===== ===== ===== =====
</TABLE>
_____________________
* Less than one cent.
See accompanying notes.
3
<PAGE>
HALLADOR PETROLEUM COMPANY
Consolidated Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
1998 1997
(restated)
<S> <C> <C>
Net cash provided by operating activities $ 524 $ 51
------ ------
Cash flows provided by (used in)
investing activities:
Short-term investments 1,135 400
Additions to properties (878) (976)
Other assets (24)
------ ------
Net cash used in (provided by)
investing activities 233 (576)
------ ------
Cash flows from financing activities:
Brokerage account 115
Repayments of debt (1,941) (472)
------ ------
Cash flows from financing activities:
Net cash used in financing activities (1,826) (472)
------ ------
Net decrease in cash and cash equivalents (1,069) (997)
Cash and cash equivalents, beginning of period 6,047 2,898
------ ------
Cash and cash equivalents, end of period $ 4,978 $ 1,901
====== ======
</TABLE>
See accompanying notes.
<PAGE>
HALLADOR PETROLEUM COMPANY
Notes to Financial Statements
1. The interim financial data is unaudited; however, in the opinion
of management,the interim data includes all adjustments, consisting only
of normal recurring adjustments necessary for a fair statement of the
results for the interim periods. The financial statements included
herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principals have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included
herein are adequate to make the information presented not misleading.
The organization and business of the Company, accounting policies
followed by the Company and other information are contained in the
notes to the Company's financial statements filed as part of the
Company's 1997 Form 10-KSB. This quarterly report should be read
in conjunction with such annual report.
2. During the fourth quarter of 1997, the Company changed from the full
cost method to the successful efforts method of accounting for its oil
and operations.
3. Comprehensive income for the six-month period ended June 30, 1998 is
approximately $50,000 and the loss for the three-month period ended
June 30, 1998 is approximately $72,000. Per share amounts are not
meaningful.
4
<PAGE>
HALLADOR PETROLEUM COMPANY
Management's Discussion and Analysis or Plan of Operation
RESULTS OF OPERATIONS
YEAR-TO-DATE COMPARISON
- -----------------------
The table below provides sales data and average prices for the period.
<TABLE>
<CAPTION>
1998 1997
Sales Volume Average Price Sales Volume Average Price
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Oil - barrels 116,753 $11.85 106,396 $19.07
Gas - mcf 153,848 2.09 65,800 2.54
NGLs- barrels 14,512 11.71 15,196 14.54
</TABLE>
Significantly lower oil prices caused the reduction in oil revenues. Gas
production more than doubled due to the two new gas wells in the Merlin
prospect, see below. The increase in oil production is attributable
primarily to TCW relinquishing its 18% net profits interest in the South
Cuyama field pursuant to the debt restructuring, see below.
South Cuyama field oil and gas prices at August 12, 1998, were $11/bbl and
$1.90/mcf. Gas prices in the Merlin prospect are currently $2.10/mcf.
QUARTER-TO-DATE COMPARISON
- --------------------------
The table below provides sales data and average prices for the second
quarters.
<TABLE>
<CAPTION>
1998 1997
Sales Volume Average Price Sales Volume Average Price
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Oil - barrels 63,244 $11.22 54,761 $17.35
Gas - mcf 109,898 2.02 35,487 2.08
NGLs- barrels 7,994 10.58 7,807 11.65
</TABLE>
The explanations above for the year-to-date comparisons also apply to the
quarter-to-date comparisons.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash, short-term investments, and cash to be provided from operations are
expected to enable the Company to meet its obligations as they come due
and fund current planned activities.
5
<PAGE>
THE FOLLOWING DISCUSSION UPDATES THE MD&A CONTAINED IN ITEM 6 OF THE 1997
FORM 10-KSB AND SHOULD BE READ IN CONJUNCTION THEREWITH.
PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY
THE MERLIN PROSPECT OF THE SAC BASIN - NORTHERN CALIFORNIA
----------------------------------------------------------
On May 10, 1998 the Otto Loshe #1-22 was spud. The well was completed
at 5,500' and on June 5 was placed on production. The well is currently
producing 1.8 mmcfpd. This was the fifth and final well of this
particular area of the prospect. A test of a shallower sand yielded gas
at a rate of 6.5 mmcfpd and will be produced at a later date.
The initial Merlin prospect gas find, the #1-15 Henning, continues to
produce at a rate of 2.3 mmcfpd. The Company anticipates combined gross
sales of 5 mmcfpd from both wells. The Company has a 30% WI (24% NRI) in
this prospect.
An exploratory well is scheduled for a new area of the prospect in
mid-September. Furthermore, a second exploratory well is scheduled for
late 1998 or early 1999. If either of these two exploratory wells prove
successful, more development wells could be drilled in 1999.
BIG HORN BASIN - WYOMING
------------------------
In January 1998, the Company sold a half interest in four of the nine
prospects it is developing for $597,000 to MCNIC Oil and Gas Corporation,
a large public utility headquartered in Detroit, Michigan resulting in a
gain of $320,000. Seismic operations are underway at four prospect areas
where the Company has working interests ranging from 50% to 100%. The
Company intends to spend $50,000 in seismic cost ($25,000 net to the
Company), and depending on the results, plans to drill a horizontal well
when oil prices improve. The Company will be the operator and the well is
estimated to cost $500,000 ($250,000 net to the Company).
In late April, the joint venture with Blackstone Energy was terminated;
the Company continues to remain active in the area.
SOUTH TEXAS
-----------
On May 4, 1998, the Company entered into a joint venture with Indexgeo &
Associates of Houston, Texas to acquire seismic options in Colorado County,
Texas (75 miles west of Houston). The budget for the seismic options to
Hallador's 90% JV interest is $100,000. It is the intent of the JV to turn
the options to a third party to shoot 3-D seismic. 3-D seismic has been
successful in this area in identifying economic drilling locations in the
Yegua and Wilcox formations. To date, the Company has entered into options
to lease approximately 4,000 acres.
On June 13, 1998 the Indexgeo New Henderson Gas Unit #1 was spud. This
well is located in Lavaca County, which adjoins Colorado County, Texas.
The well was completed at 3,800' and on August 5 was placed on production.
6
<PAGE>
The well is currently producing 400 mcfpd. The Company has a 15% WI
(11.25% NRI) in this well. The Company's cost was approximately $70,000.
No further drilling is planned for this area.
PARADOX BASIN
-------------
During June, approximately 6,000 acres were leased in the Paradox Basin,
Utah (within 25 miles of the Four Corners) within the Rapids Prospect
area. Geologic and geophysical studies are underway in support of a
future 3-D seismic survey. The Company plans to invest $200,000 in this
area.
SOUTH CUYAMA FIELD
LOW OIL PRICES
--------------
Due to low oil prices the Company implemented many cost reduction measures.
These included the shut-in of marginal wells and the reduction in the
utilization of service rigs. These factors helped the Company achieve very
low operating costs, but also resulted in lower production for the second
quarter. Approximately 150 bopd in marginal production have been shut-in.
Based on current South Cuyama field oil prices of $11.00, the field is at a
cash breakeven point.
CATALYTIC CONVERTER INVESTMENT
------------------------------
On April 21, 1998, Hallador paid $20,000 for a six-month option to acquire
a 5% ownership position in Catalytic Solutions, Inc. (Catalytic) located
in Oxnard, California (a Los Angeles suburb). The Company must decide on
or before October 19, 1998, whether to invest $300,000 for its 5%
ownership.
Catalytic is a private company founded in January 1996 to exploit the
capabilities of a unique family of metal-oxide materials developed by the
company's co-founder, Dr. Steve Golden. The company is developing a new
generation of catalytic materials that are not based on precious metals such
as platinum, palladium, and rhodium. The worldwide market for catalytic
materials is $6 billion annually, and Catalytic believes their product cost
will be a fraction of the cost of competing technologies.
These catalytic converters are currently being tested in the South Cuyama
field. Initial results are encouraging.
TCW DEBT
- --------
The South Cuyama field, the Company's principal asset, is pledged to TCW.
On April 9, 1998, the debt was restructured. In return for (i) a cash
payment of $1.8 million on May 1, 1998, (ii) monthly payments of $92,000
beginning June 1, 1998, (iii) a balloon payment approximating $3 million
due on June 1, 1999, and (iv) an increase in the interest rate from 9% to
12% TCW agreed to relinquish its 18% net profits interest in the field
effective April 1, 1998.
7
<PAGE>
AVAILABLE-FOR-SALE SECURITIES
- -----------------------------
During the second quarter, the Company decided to make several investments
in certain publicly traded drilling companies. Management is of the opinion
that these particular stocks are trading at a value significantly less than
their fair value. As of June 30, 1998 the Company held 15,000 shares of
R&B Falcon Drilling (FLC-NYSE) and 15,000 of Rowan Companies (RDC-NYSE) at
a cost of $676,000. At June 30, these stocks have a value of $631,000.
Management continued this strategy, and as of August 13, the Company owns
26,000 shares of R&B Falcon Corporation, 26,000 shares of Rowan Companies,
16,000 of ENSCO International, Inc. (ESV-NYSE), and 10,000 shares of Pool
Energy Services (PESC-NASDAQ), all at a cost of $1,408,000. Based on
August 13 closing prices, these stocks have a value of $984,000.
Management intends to hold these stocks through the fall of 1999.
THE YEAR 2000-Y2K
- -----------------
During 1997, the Company installed a new accounting system that is year
2000 compliant. The Company is investigating the computer system used
in the operations of the Field to determine what revisions are required in
order for the software to be year 2000 compliant. Such costs are not
expected to be material. The Company does not anticipate any Y2K problems
with any of its significant customers or suppliers.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
None of the new accounting pronouncements that have been issued will affect
the Company's future financial reporting.
1998 OUTLOOK
- ------------
If the low oil price environment continues, the Company anticipates a loss
for the year. Pursuant to FAS 121, Impairment of Long-lived Assets,
management periodically assesses the recoverability of the Company's
investment in oil and gas properties. Management believes that the low oil
price environment will not continue in the near term and that the Company
will ultimately recover its investment in the South Cuyama field.
Accordingly, no write-down is expected during 1998.
8
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Reconveyance of Overriding Royalty Interests
10.2 Secured Promissory Note - $1,055,854 - April 23, 1998
10.3 Secured Promissory Note - $1,330,376 - April 23, 1998
10.4 Secured Promissory Note - $122,500 - April 23, 1998
10.5 Secured Promissory Note - $767,894 - April 23, 1998
10.6 Secured Promissory Note - $612,395 - April 23, 1998
10.7 Second Amendment to Amended Deed of Trust, Mortgage,
Security Agreement, Financing Statement, Personal
Property including hydrocarbons, Assignment of
Production and Fixture Filing
27 Financial Data Schedule; EDGAR filing only
(b) No reports on Form 8-K were filed during the quarter.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HALLADOR PETROLEUM COMPANY
Date: August 14, 1998 By: /s/ Victor P. Stabio
Victor P. Stabio
Chief Executive Officer
and Chief Financial
Officer
Signing on behalf of the
registrant and as
principal financial
officer.
9
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000788965
<NAME> HALLADOR PETROLEUM COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,978
<SECURITIES> 631
<RECEIVABLES> 690
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,299
<PP&E> 18,683
<DEPRECIATION> 13,281
<TOTAL-ASSETS> 12,618
<CURRENT-LIABILITIES> 3,949
<BONDS> 3,382
0
0
<COMMON> 71
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,618
<SALES> 1,874
<TOTAL-REVENUES> 2,414
<CGS> 0
<TOTAL-COSTS> 2,298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 229
<INCOME-PRETAX> 81
<INCOME-TAX> 0
<INCOME-CONTINUING> 81
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains certain restated summary financial information for the
six-month period ended June 30, 1997.
</LEGEND>
<CIK> 0000788965
<NAME> HALLADOR PETROLEUM COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 2,510
<CGS> 0
<TOTAL-COSTS> 2,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 254
<INCOME-PRETAX> (303)
<INCOME-TAX> 0
<INCOME-CONTINUING> (303)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (303)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, California 90017
Attn: David A. Lamb, Esq.
RECONVEYANCE OF OVERRIDING ROYALTY INTERESTS
Pursuant to that certain Conveyance of Overriding Royalty Interests dated
as of May 25, 1990 and recorded on May 25, 1990 as Instrument No. 90-035584 in
the Official Records of Santa Barbara County, California, as amended by that
certain Adjustment, Amendment and Restatement of Conveyance of Overriding
Royalty dated as of April 10, 1992 and recorded on April 10, 1992 as Instrument
No. 92-026154 in the Official Records of Santa Barbara County, California and
that certain First Supplement to Adjustment, Amendment and Restatement of
Conveyance of Overriding Royalty dated as of June 25, 1992 and recorded on
November 18, 1992 as Instrument No. 92-092380 in the Official Records of Santa
Barbara County, California (as amended, the "Conveyance"), SANTA BARBARA
PARTNERS, an Oklahoma general partnership ("SB Partners"), conveyed to
TCW DR III ROYALTY PARTNERSHIP, a California Limited Partnership
("DR III"), a Net Profits ORR Interest (as defined in the Conveyance) in the
Subject Interests (as defined in the Conveyance).
NOW, THEREFORE, DR III, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, does hereby, without
representation or warranty, reconvey, reassign, transfer, set over and deliver
the Net Profits ORR Interest, effective as of 7:00 a.m. Los Angeles time, May 1
1998, to SB Partners and does hereby terminate all rights under the Conveyance
with respect to periods after the effective date hereof.
EXECUTED on April 23, 1998, but effective as of 7:00 a.m. Los Angeles
time, May 1, 1998.
TCW DR III ROYALTY PARTNERSHIP,
a California Limited Partnership
By: TCW Royalty Company III,
a California corporation,
its Managing General Partner
By: /S/ARUTHUR R. CARLSON
Arthur R. Carlson
Vice President
SECURED PROMISSORY NOTE
$1,055,854.24 April 23, 1998
1. Principal.
For value received, SANTA BARBARA PARTNERS, an Oklahoma general
partnership ("Borrower"), HALLADOR PETROLEUM, LLP, a Colorado limited
liability partnership, HALLADOR PETROLEUM COMPANY, a Colorado corporation,
HALLADOR PRODUCTION COMPANY, a Colorado corporation, and TRIO PETROLEUM,
INC., a California corporation (collectively, "Maker"), jointly and
severally promise to pay to the order of TRUST COMPANY OF THE WEST, as
Ancillary Trustee under the Ancillary Trust Agreement dated as of October
16, 1989 between US West, Inc., Boston Safe Deposit and Trust Company of
the West ("Holder"), the principal sum of One Million Fifty- Five Thousand
Eight Hundred Fifty-Four and Twenty-Four/Hundredths Dollars
($1,055,854.24) together with accrued interest from the date of
disbursement on the unpaid principal until paid in full at the rates and
times as set forth herein. This Secured Promissory Note (the "Note") is
issued in connection with that certain Term Loan Agreement dated as of May
25, 1990 by and among Borrower, Trust Company of the West, a California
trust company, in the capacities set forth therein ("TCW"), and The TCW
Commingled Debt and Royalty Fund IIIB, a California Limited Partnership
(as heretofore or hereafter amended, modified or supplemented, from time
to time, the "Term Loan Agreement") and replaces the Amended Secured
Promissory Note dated as of May 25, 1990 executed by Borrower, as Maker,
in favor of Holder. As used herein, the term "Holder" shall mean Holder
and any subsequent holder of this Note, whichever is applicable from time
to time. Capitalized terms used herein without definition shall have the
meanings set forth in the Term Loan Agreement.
2. Maturity Date.
(a) The unpaid principal balance hereof, together with all
unpaid interest accrued thereon, and all other amounts payable by Maker
under the terms of the Loan Documents shall be due and payable on June 1,
1999 (the "Maturity Date") unless sooner paid or as otherwise provided
herein or in the Term Loan Agreement.
(b) If the Maturity Date should fall on a day other than a
Business Day, payment of the outstanding principal and all other amounts
due under the terms hereof shall be made on the immediately preceding
Business Day and such reduction of time shall be included in computing any
interest in respect of such payment.
3. Prepayment.
Upon not less than thirty (30) Business Days' prior notice in
writing to Holder, Maker may, on any Monthly Payment Date (as defined
below) prior to the Maturity Date, prepay all or, in an amount not less
than $100,000 in the aggregate for all of the Secured Promissory Notes of
even date herewith executed by Maker, any part of the outstanding
principal balance of this Note together with all interest accrued on the
principal amount of such prepayment to the date thereof without premium or
penalty.
4. Interest Rate; Calculation.
(a) Interest shall accrue from the date hereof until the
Maturity Date on the unpaid principal amount at the rate of nine percent
(9%) per annum. Any principal or interest payments not paid when due,
whether on the Maturity Date or any Monthly Payment Date, by notice of
prepayment, by acceleration or otherwise, shall bear interest at the rate
of the lesser of sixteen percent (16%) per annum or the maximum rate
permitted by law.
(b) Interest shall be computed on the basis of a 360-day
year and on the actual number of days elapsed in any quarter with respect
to periods of less than one Calendar Quarter.
5. Payment of Principal and Interest.
On the final Business Day of each calendar month (the "Monthly
Payment Date"), commencing on May 29, 1998, Maker shall make a payment to
Holder in the amount of Twenty-Eight Thousand Thirty and No/Hundredth
Dollars ($28,030.00) ("Monthly Payment"). Each such Monthly Payment shall
be applied, first, to the amount of all accrued and unpaid interest due
hereunder, and second, to the payment of principal.
6. No Deductions.
All payments of principal and interest on this Note shall be
made without deduction of any present and future taxes, levies, imposts,
deductions, charges or withholdings, which amounts shall be paid by Maker.
Maker will pay the amounts necessary, such that the gross amount of the
principal and interest received by Holder is not less than that required
by this Note. All stamp and documentary taxes shall be paid by Maker.
If, notwithstanding the foregoing to the contrary, Holder pays such taxes,
Maker will reimburse Holder for the amount paid. Maker will furnish
Holder official tax receipts or other evidence of payment of all taxes.
7. Manner of Payment.
All payments of principal and interest hereunder shall be made
to Holder in immediately available funds at Sanwa Bank California, ABA
Routing No. 122003516, Trust Operations Center, 1977 Saturn Street,
Monterey Park, California 91754 (for credit to the account of Trust
Company of the West, Account No. 40012007, as Agent, Attention: TCW Wire
Transfer Center) or at such other place and in such other manner as shall
be designated by Holder in writing in accordance with the Term Loan
Agreement. Payments shall be deemed received by Holder on the date of
transfer if received by such payee bank or other designee of Holder duly
appointed in accordance with the Term Loan Agreement, at or before 11:30
a.m. Los Angeles time on the date of transfer. Payments received after
that time shall be deemed received by the following Business Day. All
payments received by Agent on behalf of Holder shall be applied in the
manner set forth in Section 5 above.
8. Security.
This Note is one of Maker's Secured Promissory Notes issued in
connection with and entitled to the benefits under the Term Loan Agreement
to which reference is hereby made for a complete statement of the terms
and conditions under which the Loan evidenced hereby was made. This Note
is secured by and entitled to the benefits of certain security agreements,
deeds of trust, mortgages, financing statements and other documents
delivered pursuant to and referred to in the Term Loan Agreement,
including, without limitation, the following: that certain Deed of Trust,
Mortgage, Security Agreement (Personal Property Including Hydrocarbons),
Assignment of Production and Fixture Filing dated as of May 1, 1990,
executed by Borrower, as Trustor, to Ronald E. Robison, as Trustee, for
the benefit of Holder and other entities described therein, and recorded
May 25, 1990 as Instrument No. 90-035585 in the Official Records of Santa
Barbara County, California, as amended, creating a lien on, and security
interest in, certain real and personal property described therein and the
production and sales of proceeds therefrom or attributable thereto and
that certain Security Agreement executed by Borrower encumbering certain
personal property of Borrower described therein.
9. Remedies.
Upon the occurrence of a Default, as defined in the Term Loan
Agreement, the entire outstanding balance of the principal amount hereof
shall immediately become due and payable in the manner, upon the
conditions and with the effect provided in the Term Loan Agreement, and,
in addition, Holder may, pursuant to the Loan Agreement, exercise all
other rights and remedies available to it hereunder or under any or all of
the Loan Documents. No delay or omission on the part of Holder hereof in
exercising any right under this Note or under any of the Loan Documents
shall operate as a waiver of such right.
10. Waiver.
Maker hereby waives diligence, presentment, protest and demand,
notice of protest, dishonor and nonpayment of this Note and expressly
agrees that, without in any way affecting the liability of Maker
hereunder, Holder may extend the Maturity Date, the Monthly Payment Dates,
and any other maturity date or the time for payment of any installment due
hereunder, accept additional security, release any party liable hereunder
and release any security now or hereafter securing this Note. Maker
further waives, to the full extent permitted by law, the right to plead
any and all statutes of limitations as a defense to any demand on this
Note, or on any deed of trust, security agreement, lease assignment,
guaranty or other agreement now or hereafter securing this Note.
11. Attorneys' Fees.
If this Note is not paid when due or if any Default (as defined
in the Term Loan Agreement) occurs, Maker promises to pay all costs of
enforcement and collection, including, but not limited to, Holder's
reasonable attorneys' fees and costs, whether or not any action or
proceeding is brought to enforce the provisions hereof.
12. Severability.
Every provision of this Note is intended to be severable. In
the event any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable.
13. Limitation of Liability.
Except as specifically set forth to the contrary in the Loan
Agreement, this Note or other Loan Documents, (a) TCW and the Holders
shall not seek, or be entitled to, nor shall any Partner be liable for,
any judgment for a deficiency or other money judgment against Trio
Petroleum, Inc. ("Trio"), in connection with any action to foreclose any
Mortgage, or any action brought under the Loan Agreement, the Notes, the
Mortgage, the Security Agreement, or any other Security Documents or any
other Loan Document; and (b) in the event any suit is brought on any Loan
Document or concerning the Obligations as a part of judicial proceedings
to foreclose any Mortgage, any judgment obtained in such suit shall by its
terms constitute a lien on, and shall be enforced only against Maker
(excluding Trio), any property of Maker (excluding Trio), the Oil and Gas
Interests, any other property conveyed or secured by the Mortgages
(together with the income therefrom, any funds held by the Agent or the
Holders pursuant to this Agreement, insurance and condemnation proceeds
and escrow and security deposits) and any other Property of Maker
(excluding Trio) serving as Collateral for the Loans, and not against any
assets or property of Trio or its respective officers, directors,
shareholders or partners or any or them; provided, however, that Trio
shall be fully and personally liable for (i) any breach of any covenant,
representation, agreement or condition contained in Sections 3.1 and 6.12
of the Loan Agreement relating to Environmental Law Requirements which
occurs during the period, if any, that Trio or Trio's Affiliate acts as
operator of the Oil and Gas Interests or other Collateral or otherwise
directly engages in the operation, management or development of the Oil
and Gas Interests or other Collateral, (ii) any fraud or material
misrepresentation made by Trio if Trio knew or, with the exercise of due
diligence, should have known of its falseness, (iii) any willful
misapplication of any insurance proceeds, or condemnation awards, or of
any production proceeds (including without limitation, ORR Interest
proceeds), Net Cash Flow or other amounts by such Partner(s), which
amounts were required by the Loan Agreement, the Notes, the Mortgages or
the ORRI Conveyances to be paid or applied in a specified manner with
respect to the Oil and Gas Interests or other Collateral, or (iv) any
distributions or other payments made to, by or with the approval of Trio
in violation of Section 4.1 of the Loan Agreement. Nothing contained in
this Section 13 shall be deemed to limit the liability of Maker (other
than Trio) with respect to its Obligations or constitute a release or
impairment of the Obligations, or the Liens of the Mortgages and other
Security Documents on the Oil and Gas Interests and other Collateral, or
shall preclude TCW or the Agent from obtaining or enforcing any judgment
against Maker or from foreclosing the Mortgages in case of any Default, or
preclude TCW, Agent or any Holder from enforcing any of the other rights
of TCW, Agent or any Holder under the Loan Agreement, or from enforcing
any of the rights of TCW, the Agent, or any Holder against any Person
other than Trio at any time liable (under any guaranty, bond, policy of
insurance or otherwise) for the payment of the Obligations or for the
performance and observance of any of the covenants, agreements and
conditions contained in this Agreement, the Notes, the Mortgages or the
other Loan Documents.
14. Interest Rate Limitation.
It is the intent of Maker and Holder in the execution of this
Note and all other instruments securing this Note that the loan evidenced
hereby comply with the restrictions of applicable usury law from time to
time. In furtherance thereof, Maker and Holder stipulate and agree that
none of the terms and provisions contained herein or in any of the Loan
Documents shall ever be construed to create a contract to pay, for the
use, forbearance or detention of money, interest in excess of the maximum
amount of interest permitted to be charged by applicable law from time to
time in effect. Neither Maker nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of this
Note or any Obligation shall ever be liable for unearned interest thereon
or shall ever be required to pay interest thereon in excess of the maximum
amount that may be lawfully charged under applicable law from time to time
in effect, and the provisions of this section shall control over all other
provisions herein or in any of the Loan Documents which may be in conflict
or apparent conflict herewith. TCW and Holders expressly disavow any
intention to charge or collect excessive unearned interest or finance
charges in the event the maturity of this Note or any Obligation is
accelerated. If (a) the maturity of this Note or of any Obligation is
accelerated for any reason or (b) TCW or any other Holder of any or all of
the Notes or the Obligations shall otherwise collect moneys which are
determined to constitute interest which would otherwise increase the
interest on any or all of the Notes or the Obligations to an amount in
excess of that permitted to be charged by applicable law then in effect,
then all such sums determined to constitute interest in excess of such
legal limit shall, without penalty, be promptly applied to reduce the then
outstanding principal of this Note or, at TCW's or such Holder's option,
promptly returned to Maker or the other payor thereof upon such
determination. In determining whether or not the interest paid or
payable, under any specific circumstance, exceeds the maximum amount
permitted under applicable law, TCW, Holders and Maker (and any other
payors thereof) shall, to the greatest extent permitted under applicable
law, (i) characterize any nonprincipal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof and (iii) amortize, prorate, allocate and spread the
total amount of interest throughout the entire contemplated term of the
instruments evidencing the Obligations in accordance with the amounts
outstanding from time to time thereunder and the maximum legal rate of
interest from time to time in effect under applicable law in order to
lawfully charge the maximum amount of interest permitted under applicable
law.
15. Joint and Several Liability.
Subject to Section 13 above, if the Maker consists of more than
one person or entity, the obligations of Maker under this Note shall be
joint and several between and among such persons and entities, such that
each such person or entity shall be fully responsible for the Maker's full
performance of its obligations hereunder.
16. Number and Gender.
In this Note the singular shall include the plural and the
masculine shall include the feminine and neuter gender, and vice versa, if
the context so requires.
17. Headings.
Headings at the beginning of each numbered Paragraph of this
Note are intended solely for convenience and are not to be deemed or
construed to be a part of this Note.
18. CHOICE OF LAW.
THIS NOTE SHALL BE DEEMED A CONTRACT AND INSTRUMENT MADE UNDER
THE LAWS OF THE STATE OF CALIFORNIA AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA AND
THE LAWS OF THE UNITED STATES OF AMERICA.
19. Amendment.
The terms of this Note are subject to amendment only in the
manner provided in the Term Loan Agreement.
20. Conflicts.
Notwithstanding anything to the contrary contained here within,
if any of the express terms and conditions of this Note conflict with the
express terms and conditions contained within the Term Loan Agreement, the
Term Loan Agreement shall control.
IN WITNESS WHEREOF, Maker has caused its duly authorized
representative to execute this Note as of the date first above written.
SANTA BARBARA PARTNERS,
an Oklahoma general partnership
By: HALLADOR PRODUCTION COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
By: TRIO PETROLEUM, INC.
a California corporation,
its General Partner
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PETROLEUM, LLP,
a Colorado limited liability
partnership
By: HALLADOR PETROLEUM COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
TRIO PETROLEUM, INC.,
a California corporation
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PRODUCTION COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
HALLADOR PETROLEUM COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
This Note has not been registered under the Securities Act of 1933, as
amended, or registered or qualified under any state securities laws. This
Note has been acquired for investment and may not be sold, transferred,
pledged or hypothecated unless the proposed transaction does not require
registration or qualification under federal or state securities laws.
SECURED PROMISSORY NOTE
$1,330,376.30 April 23, 1998
1. Principal.
For value received, SANTA BARBARA PARTNERS, an Oklahoma
general partnership ("Borrower"), HALLADOR PETROLEUM, LLP, a Colorado
limited liability partnership, HALLADOR PETROLEUM COMPANY, a Colorado
corporation, HALLADOR PRODUCTION COMPANY, a Colorado corporation, and TRIO
PETROLEUM, INC., a California corporation (collectively, "Maker"), jointly
and severally promise to pay to the order of TRUST COMPANY OF THE WEST, as
Trustee of The TCW Commingled Debt and Royalty Fund IIIA established
pursuant to Declaration of Trust dated as of October 15, 1989 ("Holder"),
the principal sum of One Million Three Hundred Thirty Thousand Three
Hundred Seventy-Six and Thirty/Hundredths Dollars ($1,330,376.30) together
with accrued interest from the date of disbursement on the unpaid
principal until paid in full at the rates and times as set forth herein.
This Secured Promissory Note (the "Note") is issued in connection with
that certain Term Loan Agreement dated as of May 25, 1990 by and among
Borrower, Trust Company of the West, a California trust company, in the
capacities set forth therein ("TCW"), and The TCW Commingled Debt and
Royalty Fund IIIB, a California Limited Partnership (as heretofore or
hereafter amended, modified or supplemented, from time to time, the "Term
Loan Agreement") and replaces the Amended Secured Promissory Note dated as
of May 25, 1990 executed by Borrower, as Maker, in favor of Holder. As
used herein, the term "Holder" shall mean Holder and any subsequent holder
of this Note, whichever is applicable from time to time. Capitalized
terms used herein without definition shall have the meanings set forth in
the Term Loan Agreement.
2. Maturity Date.
(a) The unpaid principal balance hereof, together with all
unpaid interest accrued thereon, and all other amounts payable by Maker
under the terms of the Loan Documents shall be due and payable on June 1,
1999 (the "Maturity Date") unless sooner paid or as otherwise provided
herein or in the Term Loan Agreement.
(b) If the Maturity Date should fall on a day other than a
Business Day, payment of the outstanding principal and all other amounts
due under the terms hereof shall be made on the immediately preceding
Business Day and such reduction of time shall be included in computing
any interest in respect of such payment.
3. Prepayment.
Upon not less than thirty (30) Business Days' prior notice
in writing to Holder, Maker may, on any Monthly Payment Date (as defined
below) prior to the Maturity Date, prepay all or, in an amount not less
than $100,000 in the aggregate for all of the Secured Promissory Notes of
even date herewith executed by Maker, any part of the outstanding principal
balance of this Note together with all interest accrued on the principal
amount of such prepayment to the date thereof without premium or penalty.
4. Interest Rate; Calculation.
(a) Interest shall accrue from the date hereof until the
Maturity Date on the unpaid principal amount at the rate of nine percent
(9%) per annum. Any principal or interest payments not paid when due,
whether on the Maturity Date or any Monthly Payment Date, by notice of
prepayment, by acceleration or otherwise, shall bear interest at the rate
of the lesser of sixteen percent (16%) per annum or the maximum rate
permitted by law.
(b) Interest shall be computed on the basis of a 360-day
year and on the actual number of days elapsed in any quarter with respect
to periods of less than one Calendar Quarter.
5. Payment of Principal and Interest.
On the final Business Day of each calendar month (the
"Monthly Payment Date"), commencing on May 29, 1998, Maker shall make a
payment to Holder in the amount of Thirty-Five Thousand Three Hundred
Twenty and No/Hundredth Dollars ($35,320.00) ("Monthly Payment"). Each
such Monthly Payment shall be applied, first, to the amount of all accrued
and unpaid interest due hereunder, and second, to the payment of
principal.
6. No Deductions.
All payments of principal and interest on this Note shall be
made without deduction of any present and future taxes, levies, imposts,
deductions, charges or withholdings, which amounts shall be paid by Maker.
Maker will pay the amounts necessary, such that the gross amount of the
principal and interest received by Holder is not less than that required
by this Note. All stamp and documentary taxes shall be paid by Maker.
If, notwithstanding the foregoing to the contrary, Holder pays such taxes,
Maker will reimburse Holder for the amount paid. Maker will furnish
Holder official tax receipts or other evidence of payment of all taxes.
7. Manner of Payment.
All payments of principal and interest hereunder shall be
made to Holder in immediately available funds at Sanwa Bank California,
ABA Routing No. 122003516, Trust Operations Center, 1977 Saturn Street,
Monterey Park, California 91754 (for credit to the account of Trust Company
of the West, Account No. 40012007, as Agent, Attention: TCW Wire Transfer
Center) or at such other place and in such other manner as shall be
designated by Holder in writing in accordance with the Term Loan Agreement.
Payments shall be deemed received by Holder on the date of transfer if
received by such payee bank or other designee of Holder duly appointed in
accordance with the Term Loan Agreement, at or before 11:30 a.m. Los Angeles
time on the date of transfer. Payments received after that time shall be
deemed received by the following Business Day. All payments received by Agent
on behalf of Holder shall be applied in the manner set forth in Section 5
above.
8. Security.
This Note is one of Maker's Secured Promissory Notes issued
in connection with and entitled to the benefits under the Term Loan
Agreement to which reference is hereby made for a complete statement of
the terms and conditions under which the Loan evidenced hereby was made.
This Note is secured by and entitled to the benefits of certain security
agreements, deeds of trust, mortgages, financing statements and other
documents delivered pursuant to and referred to in the Term Loan
Agreement, including, without limitation, the following: that certain
Deed of Trust, Mortgage, Security Agreement (Personal Property Including
Hydrocarbons), Assignment of Production and Fixture Filing dated as of
May 1, 1990, executed by Borrower, as Trustor, to Ronald E. Robison, as
Trustee, for the benefit of Holder and other entities described therein,
and recorded May 25, 1990 as Instrument No. 90-035585 in the Official
Records of Santa Barbara County, California, as amended, creating a lien
on, and security interest in, certain real and personal property described
therein and the production and sales of proceeds therefrom or attributable
thereto and that certain Security Agreement executed by Borrower
encumbering certain personal property of Borrower described therein.
9. Remedies.
Upon the occurrence of a Default, as defined in the Term
Loan Agreement, the entire outstanding balance of the principal amount
hereof shall immediately become due and payable in the manner, upon the
conditions and with the effect provided in the Term Loan Agreement, and,
in addition, Holder may, pursuant to the Loan Agreement, exercise all
other rights and remedies available to it hereunder or under any or all of
the Loan Documents. No delay or omission on the part of Holder hereof in
exercising any right under this Note or under any of the Loan Documents
shall operate as a waiver of such right.
10. Waiver.
Maker hereby waives diligence, presentment, protest and
demand, notice of protest, dishonor and nonpayment of this Note and
expressly agrees that, without in any way affecting the liability of Maker
hereunder, Holder may extend the Maturity Date, the Monthly Payment Dates,
and any other maturity date or the time for payment of any installment due
hereunder, accept additional security, release any party liable hereunder
and release any security now or hereafter securing this Note. Maker
further waives, to the full extent permitted by law, the right to plead
any and all statutes of limitations as a defense to any demand on this
Note, or on any deed of trust, security agreement, lease assignment,
guaranty or other agreement now or hereafter securing this Note.
11. Attorneys' Fees.
If this Note is not paid when due or if any Default (as
defined in the Term Loan Agreement) occurs, Maker promises to pay all
costs of enforcement and collection, including, but not limited to,
Holder's reasonable attorneys' fees and costs, whether or not any action
or proceeding is brought to enforce the provisions hereof.
12. Severability.
Every provision of this Note is intended to be severable.
In the event any term or provision hereof is declared by a court of
competent jurisdiction to be illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the balance of the terms
and provisions hereof, which terms and provisions shall remain binding and
enforceable.
13. Limitation of Liability.
Except as specifically set forth to the contrary in the
Loan Agreement, this Note or other Loan Documents, (a) TCW and the Holders
shall not seek, or be entitled to, nor shall any Partner be liable for,
any judgment for a deficiency or other money judgment against Trio
Petroleum, Inc. ("Trio"), in connection with any action to foreclose any
Mortgage, or any action brought under the Loan Agreement, the Notes, the
Mortgage, the Security Agreement, or any other Security Documents or any
other Loan Document; and (b) in the event any suit is brought on any Loan
Document or concerning the Obligations as a part of judicial proceedings
to foreclose any Mortgage, any judgment obtained in such suit shall by its
terms constitute a lien on, and shall be enforced only against Maker
(excluding Trio), any property of Maker (excluding Trio), the Oil and Gas
Interests, any other property conveyed or secured by the Mortgages
(together with the income therefrom, any funds held by the Agent or the
Holders pursuant to this Agreement, insurance and condemnation proceeds
and escrow and security deposits) and any other Property of Maker
(excluding Trio) serving as Collateral for the Loans, and not against any
assets or property of Trio or its respective officers, directors,
shareholders or partners or any or them; provided, however, that Trio
shall be fully and personally liable for (i) any breach of any covenant,
representation, agreement or condition contained in Sections 3.1 and 6.12
of the Loan Agreement relating to Environmental Law Requirements which
occurs during the period, if any, that Trio or Trio's Affiliate acts as
operator of the Oil and Gas Interests or other Collateral or otherwise
directly engages in the operation, management or development of the Oil
and Gas Interests or other Collateral, (ii) any fraud or material
misrepresentation made by Trio if Trio knew or, with the exercise of due
diligence, should have known of its falseness, (iii) any willful
misapplication of any insurance proceeds, or condemnation awards, or of
any production proceeds (including without limitation, ORR Interest
proceeds), Net Cash Flow or other amounts by such Partner(s), which
amounts were required by the Loan Agreement, the Notes, the Mortgages or
the ORRI Conveyances to be paid or applied in a specified manner with
respect to the Oil and Gas Interests or other Collateral, or (iv) any
distributions or other payments made to, by or with the approval of Trio
in violation of Section 4.1 of the Loan Agreement. Nothing contained in
this Section 13 shall be deemed to limit the liability of Maker (other
than Trio) with respect to its Obligations or constitute a release or
impairment of the Obligations, or the Liens of the Mortgages and other
Security Documents on the Oil and Gas Interests and other Collateral, or
shall preclude TCW or the Agent from obtaining or enforcing any judgment
against Maker or from foreclosing the Mortgages in case of any Default, or
preclude TCW, Agent or any Holder from enforcing any of the other rights
of TCW, Agent or any Holder under the Loan Agreement, or from enforcing
any of the rights of TCW, the Agent, or any Holder against any Person
other than Trio at any time liable (under any guaranty, bond, policy of
insurance or otherwise) for the payment of the Obligations or for the
performance and observance of any of the covenants, agreements and
conditions contained in this Agreement, the Notes, the Mortgages or the
other Loan Documents.
14. Interest Rate Limitation.
It is the intent of Maker and Holder in the execution of
this Note and all other instruments securing this Note that the loan
evidenced hereby comply with the restrictions of applicable usury law from
time to time. In furtherance thereof, Maker and Holder stipulate and
agree that none of the terms and provisions contained herein or in any of
the Loan Documents shall ever be construed to create a contract to pay,
for the use, forbearance or detention of money, interest in excess of the
maximum amount of interest permitted to be charged by applicable law from
time to time in effect. Neither Maker nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for
payment of this Note or any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in
excess of the maximum amount that may be lawfully charged under applicable
law from time to time in effect, and the provisions of this section shall
control over all other provisions herein or in any of the Loan Documents
which may be in conflict or apparent conflict herewith. TCW and Holders
expressly disavow any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of this Note or any
Obligation is accelerated. If (a) the maturity of this Note or of any
Obligation is accelerated for any reason or (b) TCW or any other Holder of
any or all of the Notes or the Obligations shall otherwise collect moneys
which are determined to constitute interest which would otherwise increase
the interest on any or all of the Notes or the Obligations to an amount in
excess of that permitted to be charged by applicable law then in effect,
then all such sums determined to constitute interest in excess of such
legal limit shall, without penalty, be promptly applied to reduce the then
outstanding principal of this Note or, at TCW's or such Holder's option,
promptly returned to Maker or the other payor thereof upon such
determination. In determining whether or not the interest paid or
payable, under any specific circumstance, exceeds the maximum amount
permitted under applicable law, TCW, Holders and Maker (and any other
payors thereof) shall, to the greatest extent permitted under applicable
law, (i) characterize any nonprincipal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof and (iii) amortize, prorate, allocate and spread the
total amount of interest throughout the entire contemplated term of the
instruments evidencing the Obligations in accordance with the amounts
outstanding from time to time thereunder and the maximum legal rate of
interest from time to time in effect under applicable law in order to
lawfully charge the maximum amount of interest permitted under applicable
law.
15. Joint and Several Liability.
Subject to Section 13 above, if the Maker consists of
more than one person or entity, the obligations of Maker under this Note
shall be joint and several between and among such persons and entities,
such that each such person or entity shall be fully responsible for the
Maker's full performance of its obligations hereunder.
16. Number and Gender.
In this Note the singular shall include the plural and
the masculine shall include the feminine and neuter gender, and vice
versa, if the context so requires.
17. Headings.
Headings at the beginning of each numbered Paragraph of
this Note are intended solely for convenience and are not to be deemed or
construed to be a part of this
Note.
18. CHOICE OF LAW.
THIS NOTE SHALL BE DEEMED A CONTRACT AND INSTRUMENT MADE
UNDER THE LAWS OF THE STATE OF CALIFORNIA AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
CALIFORNIA AND THE LAWS OF THE UNITED STATES OF AMERICA.
19. Amendment.
The terms of this Note are subject to amendment only in
the manner provided in the Term Loan Agreement.
20. Conflicts.
Notwithstanding anything to the contrary contained here
within, if any of the express terms and conditions of this Note conflict
with the express terms and conditions contained within the Term Loan
Agreement, the Term Loan Agreement shall control.
IN WITNESS WHEREOF, Maker has caused its duly authorized
representative to execute this Note as of the date first above written.
SANTA BARBARA PARTNERS,
an Oklahoma general partnership
By: HALLADOR PRODUCTION COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
By: TRIO PETROLEUM, INC.
a California corporation,
its General Partner
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PETROLEUM, LLP,
a Colorado limited liability
partnership
By: HALLADOR PETROLEUM COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
TRIO PETROLEUM, INC.,
a California corporation
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PRODUCTION COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
HALLADOR PETROLEUM COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
This Note has not been registered under the Securities Act of 1933, as
amended, or registered or qualified under any state securities laws. This
Note has been acquired for investment and may not be sold, transferred,
pledged or hypothecated unless the proposed transaction does not require
registration or qualification under federal or state securities laws.
SECURED PROMISSORY NOTE
$122,500.00 April 23, 1998
1. Principal.
For value received, SANTA BARBARA PARTNERS, an Oklahoma general
partnership ("Borrower"), HALLADOR PETROLEUM, LLP, a Colorado limited
liability partnership, HALLADOR PETROLEUM COMPANY, a Colorado corporation,
HALLADOR PRODUCTION COMPANY, a Colorado corporation, and TRIO PETROLEUM,
INC., a California corporation (collectively, "Maker"), jointly and
severally promise to pay to the order of TCW DR III ROYALTY PARTNERSHIP, a
California limited partnership ("Holder"), the principal sum of One
Hundred Twenty-Two Thousand Five Hundred and No/Hundredths Dollars
($122,500.00) at the times as set forth herein. This Secured Promissory
Note (the "Note") is issued in connection with that certain Term Loan
Agreement dated as of May 25, 1990 by and among Borrower, Trust Company of
the West, a California trust company, in the capacities set forth therein
("TCW"), and The TCW Commingled Debt and Royalty Fund IIIB, a California
Limited Partnership (as heretofore or hereafter amended, modified or
supplemented, from time to time, the "Term Loan Agreement") and in
connection with the execution by Holder of the Reconveyance of Overriding
Royalty Interest of even date herewith. As used herein, the term "Holder"
shall mean Holder and any subsequent holder of this Note, whichever is
applicable from time to time. Capitalized terms used herein without
definition shall have the meanings set forth in the Term Loan Agreement.
2. Maturity Date.
(a) The unpaid principal balance hereof and all other amounts
payable by Maker under the terms of the Loan Documents shall be due and
payable on June 1, 1999 (the "Maturity Date") unless sooner paid or as
otherwise provided herein or in the Term Loan Agreement.
(b) If the Maturity Date should fall on a day other than a
Business Day, payment of the outstanding principal and all other amounts
due under the terms hereof shall be made on the immediately preceding
Business Day.
3. Prepayment.
Upon not less than thirty (30) Business Days' prior notice in
writing to Holder, Maker may prepay all or, in an amount not less than
$25,000, any part of the outstanding principal balance of this Note
without premium or penalty.
4. Interest Rate; Calculation.
(a) Any principal amount not paid when due, whether on the
Maturity Date, by notice of prepayment, by acceleration or otherwise,
shall bear interest at the rate of the lesser of sixteen percent (16%) per
annum or the maximum rate permitted by law.
(b) Interest shall be computed on the basis of a 360-day year
and on the actual number of days elapsed in any quarter with respect to
periods of less than one Calendar Quarter.
5. No Deductions.
All payments of principal on this Note shall be made without
deduction of any present and future taxes, levies, imposts, deductions,
charges or withholdings, which amounts shall be paid by Maker. Maker will
pay the amounts necessary, such that the gross amount of the principal
received by Holder is not less than that required by this Note. All stamp
and documentary taxes shall be paid by Maker. If, notwithstanding the
foregoing to the contrary, Holder pays such taxes, Maker will reimburse
Holder for the amount paid. Maker will furnish Holder official tax
receipts or other evidence of payment of all taxes.
6. Manner of Payment.
All payments of principal hereunder shall be made to Holder in
immediately available funds at Sanwa Bank California, ABA Routing No.
122003516, Trust Operations Center, 1977 Saturn Street, Monterey Park,
California 91754 (for credit to the account of Trust Company of the West,
Account No. 40012007, as Agent, Attention: TCW Wire Transfer Center) or at
such other place and in such other manner as shall be designated by Holder
in writing in accordance with the Term Loan Agreement. Payments shall be
deemed received by Holder on the date of transfer if received by such
payee bank or other designee of Holder duly appointed in accordance with
the Term Loan Agreement, at or before 11:30 a.m. Los Angeles time on the
date of transfer. Payments received after that time shall be deemed
received by the following Business Day.
7. Security.
This Note is one of Maker's Secured Promissory Notes issued in
connection with and entitled to the benefits under the Term Loan Agreement
to which reference is hereby made for a complete statement of the terms
and conditions under which the Loan evidenced hereby was made. This Note
is secured by and entitled to the benefits of certain security agreements,
deeds of trust, mortgages, financing statements and other documents
delivered pursuant to and referred to in the Term Loan Agreement,
including, without limitation, the following: that certain Deed of Trust,
Mortgage, Security Agreement (Personal Property Including Hydrocarbons),
Assignment of Production and Fixture Filing dated as of May 1, 1990,
executed by Borrower, as Trustor, to Ronald E. Robison, as Trustee, for
the benefit of Holder and other entities described therein, and recorded
May 25, 1990 as Instrument No. 90-035585 in the Official Records of Santa
Barbara County, California, as amended, creating a lien on, and security
interest in, certain real and personal property described therein and the
production and sales of proceeds therefrom or attributable thereto and
that certain Security Agreement executed by Borrower encumbering certain
personal property of Borrower described therein.
8. Remedies.
Upon the occurrence of a Default, as defined in the Term Loan
Agreement, the entire outstanding balance of the principal amount hereof
shall immediately become due and payable in the manner, upon the
conditions and with the effect provided in the Term Loan Agreement, and,
in addition, Holder may, pursuant to the Loan Agreement, exercise all
other rights and remedies available to it hereunder or under any or all of
the Loan Documents. No delay or omission on the part of Holder hereof in
exercising any right under this Note or under any of the Loan Documents
shall operate as a waiver of such right.
9. Waiver.
Maker hereby waives diligence, presentment, protest and demand,
notice of protest, dishonor and nonpayment of this Note and expressly
agrees that, without in any way affecting the liability of Maker
hereunder, Holder may extend the Maturity Date, the Monthly Payment Dates,
and any other maturity date or the time for payment of any installment due
hereunder, accept additional security, release any party liable hereunder
and release any security now or hereafter securing this Note. Maker
further waives, to the full extent permitted by law, the right to plead
any and all statutes of limitations as a defense to any demand on this
Note, or on any deed of trust, security agreement, lease assignment,
guaranty or other agreement now or hereafter securing this Note.
10. Attorneys' Fees.
If this Note is not paid when due or if any Default (as defined
in the Term Loan Agreement) occurs, Maker promises to pay all costs of
enforcement and collection, including, but not limited to, Holder's
reasonable attorneys' fees and costs, whether or not any action or
proceeding is brought to enforce the provisions hereof.
11. Severability.
Every provision of this Note is intended to be severable. In
the event any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable.
12. Limitation of Liability.
Except as specifically set forth to the contrary in the Loan
Agreement, this Note or other Loan Documents, (a) TCW and the Holders
shall not seek, or be entitled to, nor shall any Partner be liable for,
any judgment for a deficiency or other money judgment against Trio
Petroleum, Inc. ("Trio"), in connection with any action to foreclose any
Mortgage, or any action brought under the Loan Agreement, the Notes, the
Mortgage, the Security Agreement, or any other Security Documents or any
other Loan Document; and (b) in the event any suit is brought on any Loan
Document or concerning the Obligations as a part of judicial proceedings
to foreclose any Mortgage, any judgment obtained in such suit shall by its
terms constitute a lien on, and shall be enforced only against Maker
(excluding Trio), any property of Maker (excluding Trio), the Oil and Gas
Interests, any other property conveyed or secured by the Mortgages
(together with the income therefrom, any funds held by the Agent or the
Holders pursuant to this Agreement, insurance and condemnation proceeds
and escrow and security deposits) and any other Property of Maker
(excluding Trio) serving as Collateral for the Loans, and not against any
assets or property of Trio or its respective officers, directors,
shareholders or partners or any or them; provided, however, that Trio
shall be fully and personally liable for (i) any breach of any covenant,
representation, agreement or condition contained in Sections 3.1 and 6.12
of the Loan Agreement relating to Environmental Law Requirements which
occurs during the period, if any, that Trio or Trio's Affiliate acts as
operator of the Oil and Gas Interests or other Collateral or otherwise
directly engages in the operation, management or development of the Oil
and Gas Interests or other Collateral, (ii) any fraud or material
misrepresentation made by Trio if Trio knew or, with the exercise of due
diligence, should have known of its falseness, (iii) any willful
misapplication of any insurance proceeds, or condemnation awards, or of
any production proceeds (including without limitation, ORR Interest
proceeds), Net Cash Flow or other amounts by such Partner(s), which
amounts were required by the Loan Agreement, the Notes, the Mortgages or
the ORRI Conveyances to be paid or applied in a specified manner with
respect to the Oil and Gas Interests or other Collateral, or (iv) any
distributions or other payments made to, by or with the approval of Trio
in violation of Section 4.1 of the Loan Agreement. Nothing contained in
this Section 13 shall be deemed to limit the liability of Maker (other
than Trio) with respect to its Obligations or constitute a release or
impairment of the Obligations, or the Liens of the Mortgages and other
Security Documents on the Oil and Gas Interests and other Collateral, or
shall preclude TCW or the Agent from obtaining or enforcing any judgment
against Maker or from foreclosing the Mortgages in case of any Default, or
preclude TCW, Agent or any Holder from enforcing any of the other rights
of TCW, Agent or any Holder under the Loan Agreement, or from enforcing
any of the rights of TCW, the Agent, or any Holder against any Person
other than Trio at any time liable (under any guaranty, bond, policy of
insurance or otherwise) for the payment of the Obligations or for the
performance and observance of any of the covenants, agreements and
conditions contained in this Agreement, the Notes,
the Mortgages or the other Loan Documents.
13. Joint and Several Liability.
Subject to Section 12 above, if the Maker consists of more than
one person or entity, the obligations of Maker under this Note shall be
joint and several between and among such persons and entities, such that
each such person or entity shall be fully responsible for the Maker's full
performance of its obligations hereunder.
14. Number and Gender.
In this Note the singular shall include the plural and the
masculine shall include the feminine and neuter gender, and vice versa, if
the context so requires.
15. Headings.
Headings at the beginning of each numbered Paragraph of this
Note are intended solely for convenience and are not to be deemed or
construed to be a part of this Note.
16. CHOICE OF LAW.
THIS NOTE SHALL BE DEEMED A CONTRACT AND INSTRUMENT MADE UNDER
THE LAWS OF THE STATE OF CALIFORNIA AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA
AND THE LAWS OF THE UNITED STATES OF AMERICA.
17. Amendment.
The terms of this Note are subject to amendment only in the
manner provided in the Term Loan Agreement.
18. Conflicts.
Notwithstanding anything to the contrary contained here within,
if any of the express terms and conditions of this Note conflict with the
express terms and conditions contained within the Term Loan
Agreement, the Term Loan Agreement shall control.
IN WITNESS WHEREOF, Maker has caused its duly authorized
representative to execute this Note as of the date first above written.
SANTA BARBARA PARTNERS,
an Oklahoma general partnership
By: HALLADOR PRODUCTION COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
By: TRIO PETROLEUM, INC.
a California corporation,
its General Partner
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PETROLEUM, LLP,
a Colorado limited liability
partnership
By: HALLADOR PETROLEUM COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
TRIO PETROLEUM, INC.,
a California corporation
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PRODUCTION COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
HALLADOR PETROLEUM COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
This Note has not been registered under the Securities Act of 1933,
as amended, or registered or qualified under any state securities
laws. This Note has been acquired for investment and may not be
sold, transferred, pledged or hypothecated unless the proposed
transaction does not require registration or qualification under
federal or state securities laws.
SECURED PROMISSORY NOTE
$767,893.99 April 23, 1998
1. Principal.
For value received, SANTA BARBARA PARTNERS, an Oklahoma
general partnership ("Borrower"), HALLADOR PETROLEUM, LLP, a Colorado
limited liability partnership, HALLADOR PETROLEUM COMPANY, a Colorado
corporation, HALLADOR PRODUCTION COMPANY, a Colorado corporation, and TRIO
PETROLEUM, INC., a California corporation (collectively, "Maker"), jointly
and severally promise to pay to the order of THE TCW COMMINGLED DEBT AND
ROYALTY FUND IIIB, a California Limited Partnership ("Holder"), the
principal sum of Seven Hundred Sixty-Seven Thousand Eight Hundred
Ninety-Three and Ninety-Nine/Hundredths Dollars ($767,893.99) together
with accrued interest from the date of disbursement on the unpaid
principal until paid in full at the rates and times as set forth herein.
This Secured Promissory Note (the "Note") is issued in connection with
that certain Term Loan Agreement dated as of May 25, 1990 by and among
Borrower, Trust Company of the West, a California trust company, in the
capacities set forth therein ("TCW"), and The TCW Commingled Debt and
Royalty Fund IIIB, a California Limited Partnership (as heretofore or
hereafter amended, modified or supplemented, from time to time, the "Term
Loan Agreement") and replaces the Amended Secured Promissory Note dated as
of May 25, 1990 executed by Borrower, as Maker, in favor of Holder. As
used herein, the term "Holder" shall mean Holder and any subsequent holder
of this Note, whichever is applicable from time to time. Capitalized
terms used herein without definition shall have the meanings set forth in
the Term Loan Agreement.
2. Maturity Date.
(a) The unpaid principal balance hereof, together with all
unpaid interest accrued thereon, and all other amounts payable by Maker
under the terms of the Loan Documents shall be due and payable on June 1,
1999 (the "Maturity Date") unless sooner paid or as otherwise provided
herein or in the Term Loan Agreement.
(b) If the Maturity Date should fall on a day other than a
Business Day, payment of the outstanding principal and all other amounts
due under the terms hereof shall be made on the immediately preceding
Business Day and such reduction of time shall be included in computing any
interest in respect of such payment.
3. Prepayment.
Upon not less than thirty (30) Business Days' prior notice in
writing to Holder, Maker may, on any Monthly Payment Date (as defined
below) prior to the Maturity Date, prepay all or, in an amount not less
than $100,000 in the aggregate for all of the Secured Promissory Notes of
even date herewith executed by Maker, any part of the outstanding
principal balance of this Note together with all interest accrued on the
principal amount of such prepayment to the date thereof without premium or
penalty.
4. Interest Rate; Calculation.
(a) Interest shall accrue from the date hereof until the
Maturity Date on the unpaid principal amount at the rate of nine percent
(9%) per annum. Any principal or interest payments not paid when due,
whether on the Maturity Date or any Monthly Payment Date, by notice of
prepayment, by acceleration or otherwise, shall bear interest at the rate
of the lesser of sixteen percent (16%) per annum or the maximum rate
permitted by law.
(b) Interest shall be computed on the basis of a 360-day year
and on the actual number of days elapsed in any quarter with respect to
periods of less than one Calendar Quarter.
5. Payment of Principal and Interest.
On the final Business Day of each calendar month (the "Monthly
Payment Date"), commencing on May 29, 1998, Maker shall make a payment to
Holder in the amount of Twenty Thousand Three Hundred Ninety and
No/Hundredth Dollars ($20,390.00) ("Monthly Payment"). Each such Monthly
Payment shall be applied, first, to the amount of all accrued and unpaid
interest due hereunder, and second, to the payment of principal.
6. No Deductions.
All payments of principal and interest on this Note shall be
made without deduction of any present and future taxes, levies, imposts,
deductions, charges or withholdings, which amounts shall be paid by Maker.
Maker will pay the amounts necessary, such that the gross amount of the
principal and interest received by Holder is not less than that required
by this Note. All stamp and documentary taxes shall be paid by Maker.
If, notwithstanding the foregoing to the contrary, Holder pays such taxes,
Maker will reimburse Holder for the amount paid. Maker will furnish
Holder official tax receipts or other evidence of payment of all taxes.
7. Manner of Payment.
All payments of principal and interest hereunder shall be made
to Holder in immediately available funds at Sanwa Bank California, ABA
Routing No. 122003516, Trust Operations Center, 1977 Saturn Street,
Monterey Park, California 91754 (for credit to the account of Trust
Company of the West, Account No. 40012007, as Agent, Attention: TCW Wire
Transfer Center) or at such other place and in such other manner as shall
be designated by Holder in writing in accordance with the Term Loan
Agreement. Payments shall be deemed received by Holder on the date of
transfer if received by such payee bank or other designee of Holder duly
appointed in accordance with the Term Loan Agreement, at or before 11:30
a.m. Los Angeles time on the date of transfer. Payments received after
that time shall be deemed received by the following Business Day. All
payments received by Agent on behalf of Holder shall be applied in the
manner set forth in Section 5 above.
8. Security.
This Note is one of Maker's Secured Promissory Notes issued in
connection with and entitled to the benefits under the Term Loan Agreement
to which reference is hereby made for a complete statement of the terms
and conditions under which the Loan evidenced hereby was made. This Note
is secured by and entitled to the benefits of certain security agreements,
deeds of trust, mortgages, financing statements and other documents
delivered pursuant to and referred to in the Term Loan Agreement,
including, without limitation, the following: that certain Deed of Trust,
Mortgage, Security Agreement (Personal Property Including Hydrocarbons),
Assignment of Production and Fixture Filing dated as of May 1, 1990,
executed by Borrower, as Trustor, to Ronald E. Robison, as Trustee, for
the benefit of Holder and other entities described therein, and recorded
May 25, 1990 as Instrument No. 90-035585 in the Official Records of Santa
Barbara County, California, as amended, creating a lien on, and security
interest in, certain real and personal property described therein and the
production and sales of proceeds therefrom or attributable thereto and
that certain Security Agreement executed by Borrower encumbering certain
personal property of Borrower described therein.
9. Remedies.
Upon the occurrence of a Default, as defined in the Term Loan
Agreement, the entire outstanding balance of the principal amount hereof
shall immediately become due and payable in the manner, upon the
conditions and with the effect provided in the Term Loan Agreement, and,
in addition, Holder may, pursuant to the Loan Agreement, exercise all
other rights and remedies available to it hereunder or under any or all of
the Loan Documents. No delay or omission on the part of Holder hereof in
exercising any right under this Note or under any of the Loan Documents
shall operate as a waiver of such right.
10. Waiver.
Maker hereby waives diligence, presentment, protest and
demand, notice of protest, dishonor and nonpayment of this Note and
expressly agrees that, without in any way affecting the liability of Maker
hereunder, Holder may extend the Maturity Date, the Monthly Payment Dates,
and any other maturity date or the time for payment of any installment due
hereunder, accept additional security, release any party liable hereunder
and release any security now or hereafter securing this Note. Maker
further waives, to the full extent permitted by law, the right to plead
any and all statutes of limitations as a defense to any demand on this
Note, or on any deed of trust, security agreement, lease assignment,
guaranty or other agreement now or hereafter securing this Note.
11. Attorneys' Fees.
If this Note is not paid when due or if any Default (as
defined in the Term Loan Agreement) occurs, Maker promises to pay all
costs of enforcement and collection, including, but not limited to,
Holder's reasonable attorneys' fees and costs, whether or not any action
or proceeding is brought to enforce the provisions hereof.
13. Severability.
Every provision of this Note is intended to be severable.
In the event any term or provision hereof is declared by a court of
competent jurisdiction to be illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the balance of the terms
and provisions hereof, which terms and provisions shall remain binding and
enforceable.
13. Limitation of Liability.
Except as specifically set forth to the contrary in the Loan
Agreement, this Note or other Loan Documents, (a) TCW and the Holders
shall not seek, or be entitled to, nor shall any Partner be liable for,
any judgment for a deficiency or other money judgment against Trio
Petroleum, Inc. ("Trio"), in connection with any action to foreclose any
Mortgage, or any action brought under the Loan Agreement, the Notes, the
Mortgage, the Security Agreement, or any other Security Documents or any
other Loan Document; and (b) in the event any suit is brought on any Loan
Document or concerning the Obligations as a part of judicial proceedings
to foreclose any Mortgage, any judgment obtained in such suit shall by its
terms constitute a lien on, and shall be enforced only against Maker
(excluding Trio), any property of Maker (excluding Trio), the Oil and Gas
Interests, any other property conveyed or secured by the Mortgages
(together with the income therefrom, any funds held by the Agent or the
Holders pursuant to this Agreement, insurance and condemnation proceeds
and escrow and security deposits) and any other Property of Maker
(excluding Trio) serving as Collateral for the Loans, and not against any
assets or property of Trio or its respective officers, directors,
shareholders or partners or any or them; provided, however, that Trio
shall be fully and personally liable for (i) any breach of any covenant,
representation, agreement or condition contained in Sections 3.1 and 6.12
of the Loan Agreement relating to Environmental Law Requirements which
occurs during the period, if any, that Trio or Trio's Affiliate acts as
operator of the Oil and Gas Interests or other Collateral or otherwise
directly engages in the operation, management or development of the Oil
and Gas Interests or other Collateral, (ii) any fraud or material
misrepresentation made by Trio if Trio knew or, with the exercise of due
diligence, should have known of its falseness, (iii) any willful
misapplication of any insurance proceeds, or condemnation awards, or of
any production proceeds (including without limitation, ORR Interest
proceeds), Net Cash Flow or other amounts by such Partner(s), which
amounts were required by the Loan Agreement, the Notes, the Mortgages or
the ORRI Conveyances to be paid or applied in a specified manner
with respect to the Oil and Gas Interests or other Collateral, or (iv) any
distributions or other payments made to, by or with the approval of Trio
in violation of Section 4.1 of the Loan Agreement. Nothing contained in
this Section 13 shall be deemed to limit the liability of Maker (other
than Trio) with respect to its Obligations or constitute a release or
impairment of the Obligations, or the Liens of the Mortgages and other
Security Documents on the Oil and Gas Interests and other Collateral, or
shall preclude TCW or the Agent from obtaining or enforcing any judgment
against Maker or from foreclosing the Mortgages in case of any Default, or
preclude TCW, Agent or any Holder from enforcing any of the other rights
of TCW, Agent or any Holder under the Loan Agreement, or from enforcing
any of the rights of TCW, the Agent, or any Holder against any Person
other than Trio at any time liable (under any guaranty, bond, policy of
insurance or otherwise) for the payment of the Obligations or for the
performance and observance of any of the covenants, agreements and
conditions contained in this Agreement, the Notes, the Mortgages or the
other Loan Documents.
14. Interest Rate Limitation.
It is the intent of Maker and Holder in the execution of this
Note and all other instruments securing this Note that the loan evidenced
hereby comply with the restrictions of applicable usury law from time to
time. In furtherance thereof, Maker and Holder stipulate and agree that
none of the terms and provisions contained herein or in any of the Loan
Documents shall ever be construed to create a contract to pay, for the
use, forbearance or detention of money, interest in excess of the maximum
amount of interest permitted to be charged by applicable law from time to
time in effect. Neither Maker nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of this
Note or any Obligation shall ever be liable for unearned interest thereon
or shall ever be required to pay interest thereon in excess of the maximum
amount that may be lawfully charged under applicable law from time to time
in effect, and the provisions of this section shall control over all other
provisions herein or in any of the Loan Documents which may be in conflict
or apparent conflict herewith. TCW and Holders expressly disavow any
intention to charge or collect excessive unearned interest or finance
charges in the event the maturity of this Note or any Obligation is
accelerated. If (a) the maturity of this Note or of any Obligation is
accelerated for any reason or (b) TCW or any other Holder of any or all of
the Notes or the Obligations shall otherwise collect moneys which are
determined to constitute interest which would otherwise increase the
interest on any or all of the Notes or the Obligations to an amount in
excess of that permitted to be charged by applicable law then in effect,
then all such sums determined to constitute interest in excess of such
legal limit shall, without penalty, be promptly applied to reduce the then
outstanding principal of this Note or, at TCW's or such Holder's option,
promptly returned to Maker or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable,
under any specific circumstance, exceeds the maximum amount permitted
under applicable law, TCW, Holders and Maker (and any other payors
thereof) shall, to the greatest extent permitted under applicable law, (i)
characterize any nonprincipal payment as an expense, fee or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects
thereof and (iii) amortize, prorate, allocate and spread the total amount
of interest throughout the entire contemplated term of the instruments
evidencing the Obligations in accordance with the amounts outstanding from
time to time thereunder and the maximum legal rate of interest from time
to time in effect under applicable law in order to lawfully charge the
maximum amount of interest permitted under applicable law.
15. Joint and Several Liability.
Subject to Section 13 above, if the Maker consists of more
than one person or entity, the obligations of Maker under this Note shall
be joint and several between and among such persons and entities, such
that each such person or entity shall be fully responsible for the Maker's
full performance of its obligations hereunder.
16. Number and Gender.
In this Note the singular shall include the plural and the
masculine shall include the feminine and neuter gender, and vice versa, if
the context so requires.
17. Headings.
Headings at the beginning of each numbered Paragraph of this
Note are intended solely for convenience and are not to be deemed or
construed to be a part of this Note.
18. CHOICE OF LAW.
THIS NOTE SHALL BE DEEMED A CONTRACT AND INSTRUMENT MADE
UNDER THE LAWS OF THE STATE OF CALIFORNIA AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
CALIFORNIA AND THE LAWS OF THE UNITED STATES OF AMERICA.
19. Amendment.
The terms of this Note are subject to amendment only in the
manner provided in the Term Loan Agreement.
20. Conflicts.
Notwithstanding anything to the contrary contained here within,
if any of the express terms and conditions of this Note conflict with the
express terms and conditions contained within the Term Loan Agreement, the
Term Loan Agreement shall control.
IN WITNESS WHEREOF, Maker has caused its duly authorized
representative to execute this Note as of the date first above written.
SANTA BARBARA PARTNERS,
an Oklahoma general partnership
By: HALLADOR PRODUCTION COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
By: TRIO PETROLEUM, INC.
a California corporation,
its General Partner
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PETROLEUM, LLP,
a Colorado limited liability
partnership
By: HALLADOR PETROLEUM COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
TRIO PETROLEUM, INC.,
a California corporation
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PRODUCTION COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
HALLADOR PETROLEUM COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
This Note has not been registered under the Securities Act of 1933, as
amended, or registered or qualified under any state securities laws. This
Note has been acquired for investment and may not be sold, transferred,
pledged or hypothecated unless the proposed transaction does not require
registration or qualification under federal or state securities laws.
SECURED PROMISSORY NOTE
$612,395.47 April 23, 1998
1. Principal.
For value received, SANTA BARBARA PARTNERS, an Oklahoma general
partnership ("Borrower"), HALLADOR PETROLEUM, LLP, a Colorado limited
liability partnership, HALLADOR PETROLEUM COMPANY, a Colorado corporation,
HALLADOR PRODUCTION COMPANY, a Colorado corporation, and TRIO PETROLEUM,
INC., a California corporation (collectively, "Maker"), jointly and
severally promise to pay to the order of BANKERS TRUST COMPANY, a New York
corporation, as Trustee under a Trust Agreement dated as of January 1,
1956, with GTE Service Corporation and others and amended and restated
effective March 1, 1981 ("Holder"), the principal sum of Six Hundred
Twelve Thousand Three Hundred Ninety-Five and Forty-Seven/Hundredths
Dollars ($612,395.47) together with accrued interest from the date of
disbursement on the unpaid principal until paid in full at the rates and
times as set forth herein. This Secured Promissory Note (the "Note") is
issued in connection with that certain Term Loan Agreement dated as of May
25, 1990 by and among Borrower, Trust Company of the West, a California
trust company, in the capacities set forth therein ("TCW"), and The TCW
Commingled Debt and Royalty Fund IIIB, a California Limited Partnership
(as heretofore or hereafter amended, modified or supplemented, from time
to time, the "Term Loan Agreement") and replaces the Amended Secured
Promissory Note dated as of May 25, 1990 executed by Borrower, as Maker,
in favor of Holder. As used herein, the term "Holder" shall mean Holder
and any subsequent holder of this Note, whichever is applicable from time.
Capitalized terms used herein without definition shall have the meanings
set forth in the Term Loan Agreement.
2. Maturity Date.
(a) The unpaid principal balance hereof, together with all
unpaid interest accrued thereon, and all other amounts payable by Maker
under the terms of the Loan Documents shall be due and payable on June 1,
1999 (the "Maturity Date") unless sooner paid or as otherwise provided
herein or in the Term Loan Agreement.
(b) If the Maturity Date should fall on a day other than a
Business Day, payment of the outstanding principal and all other amounts
due under the terms hereof shall be made on the immediately preceding
Business Day and such reduction of time shall be included in computing any
interest in respect of such payment.
3. Prepayment.
Upon not less than thirty (30) Business Days' prior notice in
writing to Holder, Maker may, on any Monthly Payment Date (as defined
below) prior to the Maturity Date, prepay all or, in an amount not less
than $100,000 in the aggregate for all of the Secured Promissory Notes of
even date herewith executed by Maker, any part of the outstanding
principal balance of this Note together with all interest accrued on the
principal amount of such prepayment to the date thereof without premium or
penalty.
4. Interest Rate; Calculation.
(a) Interest shall accrue from the date hereof until the
Maturity Date on the unpaid principal amount at the rate of nine percent
(9%) per annum. Any principal or interest payments not paid when due,
whether on the Maturity Date or any Monthly Payment Date, by notice of
prepayment, by acceleration or otherwise, shall bear interest at the rate
of the lesser of sixteen percent (16%) per annum or the maximum rate
permitted by law.
(b) Interest shall be computed on the basis of a 360-day year
and on the actual number of days elapsed in any quarter with respect to
periods of less than one Calendar Quarter.
5. Payment of Principal and Interest.
On the final Business Day of each calendar month (the "Monthly
Payment Date"), commencing on May 29, 1998, Maker shall make a payment to
Holder in the amount of Sixteen Thousand Two Hundred Sixty and
No/Hundredth Dollars ($16,260.00) ("Monthly Payment"). Each such Monthly
Payment shall be applied, first, to the amount of all accrued and unpaid
interest due hereunder, and second, to the payment of principal.
6. No Deductions.
All payments of principal and interest on this Note shall be
made without deduction of any present and future taxes, levies, imposts,
deductions, charges or withholdings, which amounts shall be paid by Maker.
Maker will pay the amounts necessary, such that the gross amount of the
principal and interest received by Holder is not less than that required
by this Note. All stamp and documentary taxes shall be paid by Maker.
If, notwithstanding the foregoing to the contrary, Holder pays such taxes,
Maker will reimburse Holder for the amount paid. Maker will furnish
Holder official tax receipts or other evidence of payment of all taxes.
7. Manner of Payment.
All payments of principal and interest hereunder shall be made
to Holder in immediately available funds at Sanwa Bank California, ABA
Routing No. 122003516, Trust Operations Center, 1977 Saturn Street,
Monterey Park, California 91754 (for credit to the account of Trust
Company of the West, Account No. 40012007, as Agent, Attention: TCW Wire
Transfer Center) or at such other place and in such other manner as shall
be designated by Holder in writing in accordance with the Term Loan
Agreement. Payments shall be deemed received by Holder on the date of
transfer if received by such payee bank or other designee of Holder duly
appointed in accordance with the Term Loan Agreement, at or before 11:30
a.m. Los Angeles time on the date of transfer. Payments received after
that time shall be deemed received by the following Business Day. All
payments received by Agent on behalf of Holder shall be applied in the
manner set forth in Section 5 above.
8. Security.
This Note is one of Maker's Secured Promissory Notes issued in
connection with and entitled to the benefits under the Term Loan Agreement
to which reference is hereby made for a complete statement of the terms
and conditions under which the Loan evidenced hereby was made. This Note
is secured by and entitled to the benefits of certain security agreements,
deeds of trust, mortgages, financing statements and other documents
delivered pursuant to and referred to in the Term Loan Agreement,
including, without limitation, the following: that certain Deed of Trust,
Mortgage, Security Agreement (Personal Property Including Hydrocarbons),
Assignment of Production and Fixture Filing dated as of May 1, 1990,
executed by Borrower, as Trustor, to Ronald E. Robison, as Trustee, for
the benefit of Holder and other entities described therein, and recorded
May 25, 1990 as Instrument No. 90-035585 in the Official Records of Santa
Barbara County, California, as amended, creating a lien on, and security
interest in, certain real and personal property described therein and the
production and sales of proceeds therefrom or attributable thereto and
that certain Security Agreement executed by Borrower encumbering certain
personal property of Borrower described therein.
9. Remedies.
Upon the occurrence of a Default, as defined in the Term Loan
Agreement, the entire outstanding balance of the principal amount hereof
shall immediately become due and payable in the manner, upon the
conditions and with the effect provided in the Term Loan Agreement, and,
in addition, Holder may, pursuant to the Loan Agreement, exercise all
other rights and remedies available to it hereunder or under any or all of
the Loan Documents. No delay or omission on the part of Holder hereof in
exercising any right under this Note or under any of the Loan Documents
shall operate as a waiver of such right.
10. Waiver.
Maker hereby waives diligence, presentment, protest and demand,
notice of protest, dishonor and nonpayment of this Note and expressly
agrees that, without in any way affecting the liability of Maker
hereunder, Holder may extend the Maturity Date, the Monthly Payment Dates,
and any other maturity date or the time for payment of any installment due
hereunder, accept additional security, release any party liable hereunder
and release any security now or hereafter securing this Note. Maker
further waives, to the full extent permitted by law, the right to plead
any and all statutes of limitations as a defense to any demand on this
Note, or on any deed of trust, security agreement, lease assignment,
guaranty or other agreement now or hereafter securing this Note.
11. Attorneys' Fees.
If this Note is not paid when due or if any Default (as defined
in the Term Loan Agreement) occurs, Maker promises to pay all costs of
enforcement and collection, including, but not limited to, Holder's
reasonable attorneys' fees and costs, whether or not any action or
proceeding is brought to enforce the provisions hereof.
12. Severability.
Every provision of this Note is intended to be severable. In
the event any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable.
13. Limitation of Liability.
Except as specifically set forth to the contrary in the Loan
Agreement, this Note or other Loan Documents, (a) TCW and the Holders
shall not seek, or be entitled to, nor shall any Partner be liable for,
any judgment for a deficiency or other money judgment against Trio
Petroleum, Inc. ("Trio"), in connection with any action to foreclose any
Mortgage, or any action brought under the Loan Agreement, the Notes, the
Mortgage, the Security Agreement, or any other Security Documents or any
other Loan Document; and (b) in the event any suit is brought on any Loan
Document or concerning the Obligations as a part of judicial proceedings
to foreclose any Mortgage, any judgment obtained in such suit shall by its
terms constitute a lien on, and shall be enforced only against Maker
(excluding Trio), any property of Maker (excluding Trio), the Oil and Gas
Interests, any other property conveyed or secured by the Mortgages
(together with the income therefrom, any funds held by the Agent or the
Holders pursuant to this Agreement, insurance and condemnation proceeds
and escrow and security deposits) and any other Property of Maker
(excluding Trio) serving as Collateral for the Loans, and not against any
assets or property of Trio or its respective officers, directors,
shareholders or partners or any or them; provided, however, that Trio
shall be fully and personally liable for (i) any breach of any covenant,
representation, agreement or condition contained in Sections 3.1 and 6.12
of the Loan Agreement relating to Environmental Law Requirements which
occurs during the period, if any, that Trio or Trio's Affiliate acts as
operator of the Oil and Gas Interests or other Collateral or otherwise
directly engages in the operation, management or development of the Oil
and Gas Interests or other Collateral, (ii) any fraud or material
misrepresentation made by Trio if Trio knew or, with the exercise of due
diligence, should have known of its falseness, (iii) any willful
misapplication of any insurance proceeds, or condemnation awards, or of
any production proceeds (including without limitation, ORR Interest
proceeds), Net Cash Flow or other amounts by such Partner(s), which
amounts were required by the Loan Agreement, the Notes, the Mortgages or
the ORRI Conveyances to be paid or applied in a specified manner with
respect to the Oil and Gas Interests or other Collateral, or (iv) any
distributions or other payments made to, by or with the approval of Trio
in violation of Section 4.1 of the Loan Agreement. Nothing contained in
this Section 13 shall be deemed to limit the liability of Maker (other
than Trio) with respect to its Obligations or constitute a release or
impairment of the Obligations, or the Liens of the Mortgages and other
Security Documents on the Oil and Gas Interests and other Collateral, or
shall preclude TCW or the Agent from obtaining or enforcing any judgment
against Maker or from foreclosing the Mortgages in case of any Default, or
preclude TCW, Agent or any Holder from enforcing any of the other rights
of TCW, Agent or any Holder under the Loan Agreement, or from enforcing
any of the rights of TCW, the Agent, or any Holder against any Person
other than Trio at any time liable (under any guaranty, bond, policy of
insurance or otherwise) for the payment of the Obligations or for the
performance and observance of any of the covenants, agreements and
conditions contained in this Agreement, the Notes, the Mortgages or the
other Loan Documents.
14. Interest Rate Limitation.
It is the intent of Maker and Holder in the execution of this
Note and all other instruments securing this Note that the loan evidenced
hereby comply with the restrictions of applicable usury law from time to
time. In furtherance thereof, Maker and Holder stipulate and agree that
none of the terms and provisions contained herein or in any of the Loan
Documents shall ever be construed to create a contract to pay, for the
use, forbearance or detention of money, interest in excess of the maximum
amount of interest permitted to be charged by applicable law from time to
time in effect. Neither Maker nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of this
Note or any Obligation shall ever be liable for unearned interest thereon
or shall ever be required to pay interest thereon in excess of the maximum
amount that may be lawfully charged under applicable law from time to time
in effect, and the provisions of this section shall control over all other
provisions herein or in any of the Loan Documents which may be in conflict
or apparent conflict herewith. TCW and Holders expressly disavow any
intention to charge or collect excessive unearned interest or finance
charges in the event the maturity of this Note or any Obligation is
accelerated. If (a) the maturity of this Note or of any Obligation is
accelerated for any reason or (b) TCW or any other Holder of any or all of
the Notes or the Obligations shall otherwise collect moneys which are
determined to constitute interest which would otherwise increase the
interest on any or all of the Notes or the Obligations to an amount in
excess of that permitted to be charged by applicable law then in effect,
then all such sums determined to constitute interest in excess of such
legal limit shall, without penalty, be promptly applied to reduce the then
outstanding principal of this Note or, at TCW's or such Holder's option,
promptly returned to Maker or the other payor thereof upon such
determination. In determining whether or not the interest paid or
payable, under any specific circumstance, exceeds the maximum amount
permitted under applicable law, TCW, Holders and Maker (and any other
payors thereof) shall, to the greatest extent permitted under applicable
law, (i) characterize any nonprincipal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof and (iii) amortize, prorate, allocate and spread the
total amount of interest throughout the entire contemplated term of the
instruments evidencing the Obligations in accordance with the amounts
outstanding from time to time thereunder and the maximum legal rate of
interest from time to time in effect under applicable law in order to
lawfully charge the maximum amount of interest permitted under applicable
law.
15. Joint and Several Liability.
Subject to Section 13 above, if the Maker consists of more than
one person or entity, the obligations of Maker under this Note shall be
joint and several between and among such persons and entities, such that
each such person or entity shall be fully responsible for the Maker's full
performance of its obligations hereunder.
16. Number and Gender.
In this Note the singular shall include the plural and the
masculine shall include the feminine and neuter gender, and vice versa, if
the context so requires.
17. Headings.
Headings at the beginning of each numbered Paragraph of this
Note are intended solely for convenience and are not to be deemed or
construed to be a part of this Note.
18. CHOICE OF LAW.
THIS NOTE SHALL BE DEEMED A CONTRACT AND INSTRUMENT MADE UNDER
THE LAWS OF THE STATE OF CALIFORNIA AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA AND
THE LAWS OF THE UNITED STATES OF AMERICA.
19. Amendment.
The terms of this Note are subject to amendment only in the
manner provided in the Term Loan Agreement.
20. Conflicts.
Notwithstanding anything to the contrary contained here within,
if any of the express terms and conditions of this Note conflict with the
express terms and conditions contained within the Term Loan Agreement, the
Term Loan Agreement shall control.
IN WITNESS WHEREOF, Maker has caused its duly authorized
representative to execute this Note as of the date first above written.
SANTA BARBARA PARTNERS,
an Oklahoma general partnership
By: HALLADOR PRODUCTION COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
By: TRIO PETROLEUM, INC.
a California corporation,
its General Partner
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PETROLEUM, LLP,
a Colorado limited liability
partnership
By: HALLADOR PETROLEUM COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
TRIO PETROLEUM, INC.,
a California corporation
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PRODUCTION COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
HALLADOR PETROLEUM COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
This Note has not been registered under the Securities Act of 1933,
as amended, or registered or qualified under any state securities
laws. This Note has been acquired for investment and may not be
sold, transferred, pledged or hypothecated unless the proposed
transaction does not require registration or qualification under
federal or state securities laws.
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angles, California 90017
Attention: David A. Lamb, Esq.
SECOND AMENDMENT TO AMENDED DEED OF TRUST, MORTGAGE, SECURITY
AGREEMENT, FINANCING STATEMENT, PERSONAL PROPERTY INCLUDING
HYDROCARBONS, ASSIGNMENT OF PRODUCTION AND FIXTURE FILING
THIS SECOND AMENDMENT TO AMENDED DEED OF TRUST, MORTGAGE,
SECURITY AGREEMENT, FINANCING STATEMENT (PERSONAL PROPERTY INCLUDING
HYDROCARBONS), ASSIGNMENT OF PRODUCTION AND FIXTURE FILING
(this "Second Amendment") is made on May 1, 1998 by Santa Barbara Partners, an
Oklahoma general partnership ("Trustor"), with an address of c/o Hallador
Production Company, 1660 Lincoln Street, Suite 2700, Denver, Colorado 80264
to RONALD E. ROBISON, an individual whose address is c/o Trust Company
of the West, 865 South Figueroa Street, Suite 1800, Los Angeles, California
90017, as Trustee ("Trustee") for the benefit of (i) TRUST COMPANY OF THE WEST,
a California trust company, as collateral agent for the equal and ratable
benefit of and on behalf of the Lenders named in the Amended Deed
of Trust (as defined below) ("Agent") with an address at 865 South Figueroa
Street, Suite 1800, Los Angeles, California 90017, Attention: Arthur R.
Carlson, and (ii) any other agent designated by the Lenders pursuant to
Section 8.13 of the Amended Deed of Trust or its successor as collateral agent
for the Lenders hereunder (Agent and any other such collateral agent appointed
by the Lenders pursuant to Section 8.13, in such capacity, or such successor,
are collectively referred to herein as "Secured Party"; Agent and Secured
Party shall be collectively referred to herein as "Beneficiary").
WHEREAS, Trustor executed and delivered to Beneficiary that certain
Deed of Trust, Mortgage, Security Agreement (Personal Property Including
Hydrocarbons), Assignment of Production and Fixture Filing dated as of May 25,
1990, but effective on May 1, 1990 (the "Deed of Trust"), and recorded on May
25, 1990 as Instrument No. 90-035585 in the Official Records of Santa Barbara
County, California to secure certain obligations created under that certain Term
Loan Agreement dated as of May 25, 1990 between Trustor, Trust Company of the
West, in the capacities described therein, and The TCW Commingled Debt and
Royalty Fund IIIB, a California Limited Partnership (the "Loan Agreement");
WHEREAS, in connection with certain amendments to the Loan Agreement,
the Deed of Trust was amended by that certain First Amendment to and Partial
Release of Deed of Trust, Mortgage, Security Agreement (Personal Property
Including Hydrocarbons), Assignment of Production and Fixture Filing dated April
10, 1992 between Trustor, Agent and Secured Party (the "First Amendment to Deed
of Trust") and recorded on April 10, 1992 as Instrument No. 92-026155 in the
Official Records of Santa Barbara County, California (the Deed of Trust as
amended by the First Amendment to Deed of Trust shall be referred to herein as
the "Amended Deed of Trust"). Capitalized terms appearing herein without
definition shall have the meanings set forth in the Amended Deed of Trust;
WHEREAS, pursuant to a First Supplement to Amended Deed of Trust,
Mortgage, Security Agreement, Financing Statement (Personal Property Including
Hydrocarbons), Assignment of Production and Fixture Filing dated as of June 25,
1992 ("First Supplement") and recorded November 18, 1992 as Instrument No.
92-092379 in the Official Records of Santa Barbara County, California, the
Amended Deed of Trust was amended to add certain additional oil, gas and mineral
properties;
WHEREAS, the Holders of those certain Amended Secured Promissory Notes
dated May 25, 1990 and executed by Trustor, as Maker (as amended, the "Amended
Notes"), pursuant to the Loan Agreement have agreed to cancel the Amended Notes
in exchange for certain Secured Promissory Notes dated as of the date hereof
and executed by those parties set forth below;
NOW THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, Trustor and Beneficiary hereby agree to amend the
Amended Deed of Trust, as amended by the First Supplement, as follows:
1. Amended Obligations. Section 1.01(A) of the Deed of Trust
entitled "Obligations" is hereby deleted and shall be replaced with the
following:
"A. Payment of all indebtedness and liabilities and the performance
of each and every obligation, covenant and agreement of every kind and
character now existing or hereafter arising to any or all of the Lenders
(including, without limitation, those Lenders listed below) pursuant to the
Term Loan Agreement as modified by the First Amendment to Term Loan Agreement
dated as of May 25, 1990, and Other Loan Documents, dated as of August 1, 1990,
between Trustor and TCW, the Agreement Regarding Term Loan Agreement dated
as of October 1, 1991 between Trustor, Hallador Production Company
("Production"), Trio Petroleum, Inc. ("Trio"), and TCW, and the Second
Amendment to Term Loan Agreement dated April 10, 1992, between Trustor,
TCW and TCW DR III ROYALTY PARTNERSHIP, a California Limited Partnership
("DR III"), those certain Secured Promissory Notes dated as of April 23,
1998, in the aggregate original principal amount of Three Million Seven Hundred
Sixty-Six Thousand Five Hundred Twenty and No/Hundredths Dollars ($3,766,520.00)
made jointly and severally by Trustor, Hallador Petroleum Company ("Company"),
Hallador Petroleum LLP ("LLP"), Production and Trio in favor of the first four
Payees listed below, that certain Secured Promissory Note dated as of April 23,
1998, in the original principal amount of One Hundred Twenty-Two Thousand Five
Hundred and No/Hundredths Dollars ($122,500.00) made jointly and severally by
Company, LLP, Production, and Trio in favor of DR III, and the other Loan
Documents, as well as any amendments, extensions, replacements and renewals
thereof, together with the payment of all sums advanced by or on behalf of
Trustee or Secured Party to protect the Collateral with interest on such
advanced sums at the rate of the lesser of sixteen percent (16%) or the maximum
rate permitted by law:
Face Amounts
Payee of Notes
TRUST COMPANY OF THE WEST, as Trustee $1,330,376.30
of the TCW Commingled Debt and
Royalty Fund IIIA established
pursuant to Declaration of Trust
dated as of October 15, 1989
THE TCW COMMINGLED DEBT AND ROYALTY $ 767,893.99
FUND IIIB, a California Limited
Partnership
BANKERS TRUST COMPANY, a New York $ 612,395.47
corporation, as Trustee under a Trust
Agreement dated as of January 1, 1956,
with GTE Service Corporation and
others, and amended and restated
effective March 1, 1981
TRUST COMPANY OF THE WEST, as $1,055,854.24
ancillary trustee under the
Ancillary Trust Agreement dated as
of October 16, 1989 between
U S West, Inc., Boston Safe
Deposit and Trust Company and Trust
Company of the West.
TCW DR III ROYALTY PARTNERSHIP, $ 122,500.00
a California Limited Partnership
2. Counterparts. This Second Amendment may be executed in any number
of multiple counterparts, each of which shall be deemed to be an original
instrument, but all of which shall together constitute but one instrument.
3. Ratification. The Amended Deed of Trust, as supplemented by the
First Supplement and amended by this Second Amendment, is hereby ratified,
confirmed and approved in its entirety and shall continue in full force
and effect uninterrupted and unabated.
IN WITNESS WHEREOF, Trustor has executed this Second Amendment on the
date first written above.
TRUSTOR: SANTA BARBARA PARTNERS,
an Oklahoma general partnership
By: HALLADOR PRODUCTION COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
By: TRIO PETROLEUM, INC.
a California corporation,
its General Partner
By: /S/CHARLES C. HORACE
Charles C. Horace
President
AGENT: TRUST COMPANY OF THE WEST, a
California trust company, as
collateral agent for the equal and
ratable benefit of the Lender
By: /S/ARTHUR R. CARLSON
Arthur R. Carlson
Managing Director
By: /S/THOMAS F. MEHLBERG
Thomas F. Mehlberg
Managing Director
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
State of California)
)
County of Kern )
On April 22, 1998, before me, Marcia K. Lundy, Notary Public
personally appeared Charles C. Horace
XX personally known to me - OR - ____proved to me on the basis of satisfactory
evidence to be the person(s) whose name
is/are subscribed to the within
instrument and acknowledged to me
that he/she/they executed the same in
his/her/their Authorized capacity, and
that by his/her/their signature on the
instrument the person(s) executed
the instrument.
/S/MARCIA K. LUNDY
Signature of Notary
*******OPTIONAL SECTION*******
CAPACITY CLAIMED BY SIGNER
Though statute does not require the Notary to fill in the data below, doing so
may prove invaluable to persons relying on the document.
____ Individual
____ Corporate Officer(s)
XXX President
Title(s)
____ Partner(s) ____ Limited
____ General
____ Attorney-In-Fact
____ Trustee(s)
____ Guardian/Conservator
____ Other: ____________________
___________________________
___________________________
SIGNER IS REPRESENTING:
Name of Persons(s) or Entity(ies)
Trio Petroleum, Inc.
________________________________
******** OPTIONAL SECTION********
THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED AT RIGHT:
_____________________________________
Though the data requested here is not required by law, it could prevent
fraudulent reattachment of this form.
TITLE OR TYPE OF DOCUMENT ____________________________________________
NUMBER OF PAGES __________ DATE OF DOCUMENT _________________________
SIGNER(S) OTHER THAN NAMED ABOVE _____________________________________
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
State of California )
)
County of Los Angeles)
On April 23, 1998, before me, Phil Abejar, Notary Public
personally appeared Arthur R. Carlson, Managing Director and Thomas F. Mehlberg
Managing Director of Trust Company of the West.
XX personally known to me - OR - ____proved to me on the basis of satisfactory
evidence to be the person(s) whose name
is/are subscribed to the within
instrument and acknowledged to me that
he/she/they executed the same in
his/her/their Authorized capacity, and
that by his/her/their signature on the
instrument the person(s) executed the
instrument.
WITNESS my hand and official seal.
/S/PHIL ABEJAR
Signature of Notary
*******OPTIONAL SECTION*******
CAPACITY CLAIMED BY SIGNER
Though statute does not require the Notary to fill in the data below, doing
so may prove invaluable to persons relying on the document.
____ Individual
____ Corporate Officer(s)
__________________
Title(s)
____ Partner(s) ____ Limited
____ General
____ Attorney-In-Fact
____ Trustee(s)
____ Guardian/Conservator
____ Other: ____________________
___________________________
___________________________
SIGNER IS REPRESENTING:
Name of Persons(s) or Entity(ies)
Trio Petroleum, Inc.
________________________________
******** OPTIONAL SECTION********
THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED AT RIGHT:
_____________________________________
Though the data requested here is not required by law, it could prevent
fraudulent reattachment of this form.
TITLE OR TYPE OF DOCUMENT ____________________________________________
NUMBER OF PAGES __________ DATE OF DOCUMENT _________________________
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
State of California )
)
County of Los Angeles)
On April 23, 1998, before me, Phil Abejar, Notary Public
personally appeared Victor P. Stabio, President of Hallador Production Company
__ personally known to me - OR - xxx_proved to me on the basis of satisfactory
evidence to be the person(s) whose name
is/are subscribed to the within instrument
and acknowledged to me that he/she/they
executed the same in his/her/their
Authorized capacity, and that by
his/her/their signature on the
instrument the person(s) executed
the instrument.
WITNESS my hand and official seal.
/S/PHIL ABEJAR
Signature of Notary
*******OPTIONAL SECTION*******
CAPACITY CLAIMED BY SIGNER
Though statute does not require the Notary to fill in the data below, doing so
may prove invaluable to persons relying on the document.
____ Individual
____ Corporate Officer(s)
_____________________
Title(s)
____ Partner(s) ____ Limited
____ General
____ Attorney-In-Fact
____ Trustee(s)
____ Guardian/Conservator
____ Other: ____________________
___________________________
___________________________
SIGNER IS REPRESENTING:
Name of Persons(s) or Entity(ies)
Trio Petroleum, Inc.
________________________________
******** OPTIONAL SECTION********
THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED AT RIGHT:
_____________________________________
Though the data requested here is not required by law, it could prevent
fraudulent reattachment of this form.
TITLE OR TYPE OF DOCUMENT ____________________________________________
NUMBER OF PAGES __________ DATE OF DOCUMENT _________________________
