UNITED STATES
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 March 31, 2000
[ ] 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 May 10, 2000: 7,093,150
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999*
--------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,006 $ 1,957
AFE cash calls 151
Accounts receivable-
Oil and gas sales 636 600
Well operations 151 230
------ ------
Total current assets 2,944 2,787
------ ------
Oil and gas properties (successful efforts), at cost:
Unproved properties 239 236
Proved properties 21,148 21,114
Less - accumulated depreciation
depletion, amortization and impairment (14,480) (14,247)
------ ------
6,907 7,103
------ ------
Oil and gas operator bonds 228 228
Investment in Catalytic Solutions 72 62
Other assets 132 132
------ ------
$10,283 $10,312
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 419 $ 1,036
Oil and gas sales payable 139 74
------ ------
Total current liabilities 558 1,110
------ ------
Bank debt 1,231 1,231
------ ------
Key employee bonus plan 247 234
------ ------
Minority interest 4,916 4,763
------ ------
Stockholders' equity:
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 (14,801) (15,158)
------ ------
3,331 2,974
------ ------
$10,283 $10,312
====== ======
- ------------------------------
*Derived from the Form 10-KSB.
</TABLE>
See accompanying note.
Consolidated Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
--------- --------
<S> <C> <C>
Revenue:
Oil $1,629 $ 441
Gas 226 95
NGLs 93 44
Interest and other 24 30
Non-recurring water disposal fee, net 208
Gain on stock sales 75
----- -----
1,972 893
----- -----
Costs and expenses:
Lease operating 897 523
General and administrative 242 150
Exploration cost 62 92
Interest 28 54
Depreciation, depletion and amortization 233 91
----- -----
1,462 910
----- -----
Income (loss) before minority interest 510 (17)
Minority interest (153) 5
Net income (loss) $ 357 $ (12)
===== =====
Net income (loss) per share $ .05 (1)
=====
Weighted average shares outstanding 7,093 7,093
===== =====
(1) Less than $.01.
</TABLE>
See accompanying note.
Consolidated Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
------ ------
<S> <C> <C>
Net cash provided by operating activities $ 774 $ 176
----- -----
Cash flows from investing activities:
AFE prepayments (124)
Marketable securities 236
Properties (715) (105)
Prospect sales 201
Other (10)
----- -----
Net cash provided by (used in) investing activities (725) 208
----- -----
Cash flows from financing activities:
Repayments of debt (1,846)
Brokerage account (110)
Other (65)
----- -----
Net cash used in financing activities (2,021)
----- -----
Net increase (decrease) in cash and cash equivalents 49 (1,637)
Cash and cash equivalents, beginning of period 1,957 3,073
----- -----
Cash and cash equivalents, end of period $2,006 $1,436
===== =====
</TABLE>
See accompanying note.
Note to Financial Statements
1. The interim financial data is unaudited; however, in our opinion, it
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 pursuant to the
SEC's rules and regulations. Certain information and footnote disclosures
normally included in GAAP financial statements have been condensed or
omitted pursuant to the SEC's rules and regulations.
Our organization and business, the accounting policies we follow and other
information are contained in the notes to our financial statements filed as
part of our 1999 Form 10-KSB. This quarterly report should be read in
conjunction with such annual report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
YEAR-TO-DATE COMPARISON
- -----------------------
The table below provides sales data (in thousands) and average prices for the
period.
<TABLE>
<CAPTION>
2000 1999
Sales Volume Average Price Sales Volume Average Price
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Oil - barrels
South Cuyama field 61 $26.60 44 $9.93
Other .5 9.72
Gas - mcf
South Cuyama field 10 2.70 5 1.83
Other 89 2.24 45 1.91
NGLs - barrels
South Cuyama field 3.6 20.56 3.7 10.54
Other 1.2 15.83 1 5.00
</TABLE>
Significantly higher oil prices and production caused the increase in oil
revenue. Gas revenue increased primarily because of higher production from the
new wells in Northern California and South Texas.
During first quarter 1999, oil prices were so low that we kept operating
expenses to a bare minimum. During first quarter 2000, oil prices nearly
tripled, and consequently, we substantially increased the SC Field's activity
which resulted in higher LOE.
The increase in G&A is due primarily to bonuses and the addition of one extra
person.
The increase in DD&A is due to an increase of $2 million in costs being
amortized, because of the new wells that were drilled during the last 12 months
and a downward revision in reserve estimates.
The SC Field's oil price on May 10, 2000 was $26.00/bbl. Gas prices in the
Merlin prospect are currently $2.80/mcf, South Texas is $3.00, and SC Field is
$2.60.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and cash to be provided from operations are expected to enable us to meet
our obligations as they become due during the next several years.
THE FOLLOWING DISCUSSION UPDATES THE MD&A CONTAINED IN ITEM 6 OF THE 1999
FORM 10-KSB AND THE TWO DISCUSSIONS SHOULD BE READ TOGETHER.
PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY
- ---------------------------------------------
South Cuyama Field
------------------
At December 31, 1999, our pre-tax PV10 for the SC Field was $20 million based
on year-end oil prices of $23.45 per barrel. Based on May 10, 2000 higher
prices of $26.00, and in spite of upward revisions to future operating costs,
we now estimate the PV-10 to continue to be $20 million.
Davis Prospect
--------------
This prospect which is approximately 20 miles south of the Merlin prospect
was brought to us by Equity Oil Company, the operator of the Merlin prospect.
Before May 31, 2000, we plan to participate in the drilling of two exploratory
gas wells. We have a 28% WI (23% NRI). The AFE to drill and complete each
well is about $500,000 to the 100%. Our investment would be about $300,000.
We estimate our dry hole risk to be 50/50.
South Texas
-----------
Before May 31, 2000, we plan to participate in the drilling of an exploratory
gas well. AFE to the 100% is $300,000 (about $60,000 net to us).
San Juan Basin
--------------
Three development gas wells were drilled in early April 2000. The results are
very encouraging and we hope to double the gas production from this field.
We receive about $10,000 in monthly gas revenue from this field and are hoping
these three wells will increase the monthly gas revenue to $20,000.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule; EDGAR filing only
10.1 - Credit Agreement dated as of March 10, 1999, by and among Santa
Barbara Partners and Hallador Petroleum, LLP and U.S. Bank
National Association.
10.2 - Amendment to Credit Agreement
(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: May 10, 2000 By: /S/Victor P. Stabio
Chief Executive Officer and
Chief Financial Officer
Signing on behalf of the registrant
and as principal financial officer.
EXHIBIT 10.1
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 10, 1999, is by and among SANTA
BARBARA PARTNERS, an Oklahoma general partnership ("SBP''), and HALILADOR
PETROLEUM, LLP, a Colorado limited partnership ("Hallador"), and U.S. BANK
NATIONAL ASSOCIATION, a national banking association ("USB"). SBP and Hallador
are herein collectively called "Borrowers."
RECITAL
Borrowers and USB wish to enter into this Credit Agreement in order to
provide for the terms upon which USB will make advances to Borrowers and issue
letters of credit upon the request of Borrowers and by which such advances and
letters of credit will be governed and repaid.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Advance" means an oil and Gas Advance or a Securities Advance.
"Affiliate" means each Person that directly or indirectly (through one or
more intermediaries or otherwise) controls, is controlled by, or is under
common control with, any Borrower; provided that, for the purposes of this
definition, a Person shall be deemed to control another entity if the
controlling Person possesses, directly or indirectly, the power to direct or
control the direction of the management and policies of such entity, whether
through the ownership of stock or other interests therein, by contract or
otherwise, and shall include without limitation any controlling shareholder or
owner thereof.
"Agreement" means this Credit Agreement.
"Borrowers" means SBP and Hallador.
"Borrowing Base (oil and Gas)" means, at any time prior to the Maturity
Date, the aggregate loan value of all Borrowing Base Properties, as determined
by USB in its sole and absolute discretion, using such assumptions as to
pricing, discount factors, discount rates, expenses and other factors as USB
customarily uses as to borrowing-base oil and gas loans at the time such
determination is made; provided that the Borrowing Base (Oil and Gas) for the
Borrowing Base Period from the date of this Agreement shall be $3,000,000,
unless Borrowers and USB hereafter mutually agree upon a different amount or
unless the Borrowing Base (Oil and Gas) is redetermined pursuant to Section
2.10 below prior to such date.
"Borrowing Base Notice" means a written notice sent to Borrowers by USB
notifying Borrowers of the Borrowing Base (Oil and Gas) determined by USB for
the upcoming Borrowing Base Period.
"Borrowing Base Period" means: (a) with respect to the Oil and Gas
Facility: (1) the time period from the date of this Agreement through September
30, 1999; and (2) thereafter, each six-month (or, with respect to the last such
period prior to the Maturity Date, five-month) period beginning on May 1 or
November 1 of each year until the Maturity Date; and (b) with respect to the
Securities Facility: (1) the time period from the date of this Agreement
through March 31, 1999; and (2) thereafter, each calendar month until the
Maturity Date.
"Borrowing Base Properties" means any and all interests of Borrowers, or
either of them, whether now owned or hereafter acquired, in any and all oil and
gas wells, leases and other related rights and assets to which USB now or
hereafter gives value in determining the Borrowing Base (Oil and Gas).
"Borrowing Base (Securities)" means, at any time prior to the Maturity
Date, the aggregate loan value of all Pledged Securities, determined in
accordance with the formula set forth below; provided that, unless Borrowers
and USB hereafter mutually agree upon a different amount, the Borrowing Base
(Securities) for the Borrowing Base Period from the date of this Agreement
through March 31, 1999 shall be an amount determined using the procedures set
forth in Section 2.10(b) below. The Borrowing Base (Securities) shall be the
um of: (a) 90 percent of the face amount of all Pledged Securities which are
money-market funds; plus (b) 90 percent of the face amount of all Pledged
Securities which are government securities having a maturity of less than five
years; plus (c)80 percent of the face amount of all Pledged Securities which are
investment-grade commercial paper; plus (d) 90 percent of the face amount of all
Pledged Securities which are investment-grade municipal bonds; provided that, to
the extent that lending against any of the foregoing is now or hereafter
restricted pursuant to Regulation U promulgat4d by the Board of Governors of the
Federal Reserve System or any other law, rule or regulation, the loan value
thereof shall be taken into account only to the extent permitted under said
Regulation U or other law, rule or regulation.
"Business Day" means: (a) with respect to the making, prepaying, repaying
or issuance of, or otherwise relating to, any LIBOR Tranche, any day which is
not a Saturday, a Sunday or a legal holiday on which commercial banks are
authorized or required to be closed in Denver, Colorado and which is also a day
on which dealings are carried on in the London interbank eurocurrency market,
and (b) for all other purposes hereof, any day which is not a Saturday, a
Sunday or a legal holiday on which commercial banks are unauthorized or required
to be closed in Denver, Colorado.
"Collateral" means all tangible or intangible real or personal property
which, under the terms of any Security Document, is or is purported to be
covered thereby or subject thereto.
"Commitment Amount (Oil and Gas)" means, at any time, the least of: (a)
$3,500,000 minus the Commitment Amount (Securities) at that time, (b) the
Borrowing Base (Oil and Gas) at that time, or (c) such lesser amount as may be
elected by Borrowers in accordance with the provisions of Section 2.10 below.
"Commitment Amount (Securities)" means, at any time, the lesser of: (a)
$3,500,000, or (b) the Borrowing Base (Securities) at that time.
"Debt" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether primary or secondary, direct or indirect,
absolute or contingent.
"Default" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notice and/or the passage of time,
constitute an Event of Default.
"Distribution" means any distribution payable in cash or property to any
owner of any Borrower, or any purchase, redemption or retirement of, or other
payment with respect to, any ownership interest in any Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any employee pension benefit plan subject to Title IV of
ERISA maintained by any Obligated Person or any Affiliate thereof with respect
to which any Obligated Person has a fixed or contingent liability.
"Event of Default" has the meaning given such term in Section 7.1 below.
"Fiscal Ouarter" means a three-month period ending on the last day of
March, June, September or December of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"Funded Debt Ratio" means, at any time, the ratio of: (a) any and all
indebtedness for borrowed money of HPC or any Borrower at that time, including
any and all outstanding principal and any unpaid interest to the extent such
interest is due and payable at that time, and including any amounts outstanding
under this Agreement or under any other arrangement for borrowing by HPC or any
Borrower; to (b) the Tangible Assets of HPC at that time.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Securities and Exchange Commission or the
Financial Accounting Standards Board, as applicable (or any generally
recognized successor to either of the foregoing) and which, in the case of HPC
or any Borrower: (a) are applied for all periods in a consistent manner, and (b)
are consistently applied for all periods after the date hereof so as to
properly reflect the financial condition, and the results of operations and
changes in financial position, of HPC or Borrowers.
"HPC" means Hallador Petroleum Company, a Colorado corporation.
"Initial Engineering Report" means the engineering report or reports
covering the Borrowing Base Properties, prepared by or on behalf of Borrowers,
a true and correct copy of which has been furnished by Borrowers to USB.
"Initial Financial Statements" means the annual financial statements of
each Borrower dated as of December 31, 1997, and the quarterly financial
statements of each Borrower dated as of March 31, 1998, June 30, 1998 and
September 30, 1998, copies of which Initial Financial Statements have
heretofore been delivered by Borrowers to USB.
"Interest Rate Election" means an election delivered by Borrowers to USB
from time to time in the form of Exhibit D attached hereto and made a part
hereof.
"Letter of Credit" means a standby letter of credit issued by USB pursuant
to Article II below.
"LIBOR (Adjusted)" means, with respect to each LIBOR Tranche and the
related LIBOR Interest Period, the rate of interest per annum determined
pursuant to the following formula:
LIBOR (Unadjusted)
-------------------------------
LIBOR (Adjusted) = 1.00 - LIBOR Reserve Percentage
"LIBOR Interest Period" means, with respect to each LIBOR Tranche, a
period of one, two, three or six months, as specified in the Interest Rate
Election submitted by Borrowers pursuant to Section 2.4(b) below with respect
thereto, beginning on and including the date specified in such Interest Rate
Election (which must be a Business Day) and ending on (but not including, for
the purpose of computing the number of days in the LIBOR Interest Period) the
date which corresponds numerically to such beginning or six months thereafter
(or if such month has no numerically corresponding date, on the last Business
Day of such month); provided that each LIBOR Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day unless such next succeeding Business Day is the first
Business Day of a calendar month, in which case such LIBOR Interest Period
shall end on the Business Day next preceding such numerically corresponding
day. No LIBOR Interest Period may be elected which would end after the
Maturity Date.
"LIBOR Reserve Percentage" means, with respect to any LIBOR Interest
Period, the reserve percentage (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the Board of Governors of the Federal Reserve
System and then applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as currently defined in Regulation D of the Board
of Governors of the Federal Reserve System, having a term approximately equal or
comparable to such LIBOR Interest Period.
"LIBOR Tranchell means a portion of the Loan outstanding for a specific
LIBOR Interest Period and bearing interest at a fixed rate based upon LIBOR
(Adjusted).
"LIBOR (Unadjusted)" means, with respect to each LIBOR Tranche and the
related LIBOR Interest Period, the rate of interest per annum determined by
USB, in accordance with its customary practices, to be representative of the
rates at which deposits of U.S. dollars are being offered in the London
interbank eurocurrency market for delivery on the first day of such LIBOR
Interest Period in an amount equal or comparable to the amount of such LIBOR
Tranche and for a period of time equal or comparable to the length of such LIBOR
Interest Period. LIBOR (Unadjusted), as determined by USB with respect to a
particular LIBOR Tranche, shall be fixed at such rate for the duration of the
associated LIBOR Interest Period. If USB is unable so to determine LIBOR
(Unadjusted) for any LIBOR Tranche, or if the associated LIBOR (Adjusted) would
exceed the maximum rate of interest, if any then permitted to be charged on the
applicable Note under applicable law, Borrowers shall be deemed to have elected
to have included in the Referenced Rate Portion the portion of the Loan that
would otherwise have been included in such LIBOR Tranche.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows him to have such Debt satisfied out
of such property or assets prior to the general creditors of any owner thereof,
including without limitation any lien, mortgage, security interest, pledge,
deposit, production payment, rights of a vendor under any title retention or
conditional sale agreement or lease substantially equivalent thereto, or any
other charge or encumbrance for security purposes, whether arising by law or
agreement or otherwise,but excluding any right of offset which arises without
agreement in the ordinary course of business.
"Loan" has the meaning given such term in Section 2.1 below.
"Loan Documents" means this Agreement, the Security Documents, the Notes,
applications for Letters of Credit, Advance requests and all other agreements,
certificates, legal opinions and other documents, instruments and writings
heretofore or hereafter delivered in connection herewith or therewith.
"Maturity Date" means March 31, 2002; provided that, upon the request of
Borrowers, USB may, in its sole discretion, extend such time period at any time
and from time to time to a date not later than March 31, 2006 by giving written
notice of such extension to Borrowers, but nothing contained in this Agreement,
the Notes or any other Loan Document shall be deemed to commit or require USB
to grant any such extension.
"Notes" means the oil and Gas Note and the Securities Note.
"Obligated Person" means any Borrower or any other Person now or hereafter
liable for repayment of the Loan.
"Obligations" means all Debt from time to time owing by Borrowers to USB
under or pursuant to any of the Loan Documents. "Obligation" means any part of
the Obligations.
"Oil and Gas Advance" means an advance of funds by USB under the oil and
Gas Facility to or for the account of Borrowers pursuant to Section 2.2 below.
"Oil and Gas Facility" has the meaning given such term in Section 2.1
below.
"Oil and Gas Interests" means any and all oil or gas properties, gas
gathering systems, and other related personal property and interests now or
hereafter owned by any Borrower.
"Oil and Gas Note" means a Promissory Note in the form of Exhibit A-1
attached hereto and made a part hereof, duly executed and delivered by
Borrowers.
"Payment Date" means the first Business Day of each calendar month,
commencing April 1, 1999, and the Maturity Date.
"Person" means an individual, corporation, partnership, association, joint-
stock company, trust or trustee thereof, estate or executor thereof, limited
liability company, unincorporated organization or joint venture, court or
governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"Pledged Securities" means any securities to which USB has agreed to give
value in determining the Borrowing Base (Securities) and in which a valid,
enforceable and perfected first security interest has been granted to USB to
secure the Obligations pursuant to Security Documents satisfactory in form and
substance to USB.
"Prohibited Lien" means any Lien not expressly allowed under Section 6.2
(b) below.
"Reference Rate" means the fluctuating interest rate per annum announced
from time to time by USB as its "reference rate," which may not be the lowest
interest rate charged by USB.
"Reference Rate Portion" means the portion of the Loan bearing interest
based upon the Reference Rate.
"Securities Advance" means an advance of funds by USB under the Securities
Facility to or for the account of Borrowers pursuant to Section 2.3 below.
"Securities Facility" has the meaning given such term in Section 2.1 below.
"Securities Note" means a Promissory Note in the form of Exhibit A-2
attached hereto and made a part hereof, duly executed and delivered by
Borrowers.
"Security Documents" means all security agreements, deeds of trust,
mortgages, chattel mortgages, pledges, guaranties, financing statements,
continuation statements, extension agreements and other agreements or
instruments now, heretofore, or hereafter delivered by any or all of the
Obligated Persons to USB in connection with this Agreement
or any transaction contemplated hereby or thereby, to secure or guaranty the
payment of any part of the Obligations or the performance of any other duties
and obligations of any or all of the Obligated Persons under the Loan
Documents, whenever made or delivered.
"Subordinated Debt" means any indebtedness or other obligations of any
Borrower, to the extent that the rights of the holders thereof to enforce the
indebtedness and other obligations of any Borrower thereunder have been
subordinated to the rights of USB hereunder or in connection herewith by
subordination agreements executed by the holders of the Subordinated Debt and
satisfactory in form and substance to USB.
"Tangible Assets" means, at any time, the book value of HPC's assets at
that time, excluding goodwill and any and all other intangible assets of HPC at
that time, all determined in accordance with GAAP.
"Taxes" has the meaning given such term in Section 3.7 below.
"Year 2000 Problem" has the meaning given such term in Section 5.1(p)
below.
Section 1.2. Incorporation of Exhibits. All Exhibits attached to this
Agreement are a part hereof for all purposes.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, the terms defined in
this Agreement which refer to a particular agreement, instrument or document
also refer to and include all renewals, extensions and modifications of such
agreement, instrument or document, provided that nothing contained in this
section shall be construed to authorize any such renewal, extension or
modification.
Section 1.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded
in construing the language contained in such subdivisions.
Section 1.5. Calculations and Determinations. All interest accruing
under the Loan Documents shall be calculated on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 360 days.
Unless otherwise expressly provided herein or unless USB otherwise consents,
all financial statements and reports furnished to USB hereunder shall be
prepared and all financial computations and determinations pursuant hereto shall
be made in accordance with GAAP or in a manner otherwise satisfactory to USB.
ARTICLE II
The Loan
Section 2.1. The Loan. Subject to the other terms and conditions of this
Agreement, USB agrees to make oil and Gas Advances and Securities Advances to
Borrowers, and to issue Letters of Credit at the request of Borrowers, all as
described herein. The Oil and Gas Advances, Securities Advances and Letters of
Credit shall be herein collectively referred to as the "Loan". That portion of
the Loan arising from the making of oil and Gas Advances and the issuance of
Letters of Credit shall be herein referred to as the "Securities Facility."
Borrowers hereby expressly request and irrevocably authorize USB to make the
loan.
Section 2.2. Oil and Gas Facility. (a) Subject to the other terms and
conditions of this Agreement, USB agrees to make Oil and Gas Advances to
Borrowers from time to time requested upon notice to USB from Borrowers no
later than noon, Denver time, on the Business Day prior to the date of any such
Oil and Gas Advance and to issue Letters of Credit from time to time requested
upon written notice to USB from Borrowers no later than five days prior to the
date of issuance of each such Letter of Credit.
(b) USB shall not have any obligation to: (1) make an Oil and Gas
Advance on or after the Maturity Date, (2) issue or renew a Letter of Credit
which does not expire prior to the Maturity Date, (3) issue a LIBOR Tranche
as to which the LIBOR Interest Period does not expire prior to the Maturity
Date, (4) issue a LIBOR Tranche at any time when three or more prior LIBOR
Tranches remain outstanding, (5) make an oil and Gas Advance in an amount
less than $25,000, (6) issue a LIBOR Tranche in an amount less than $25,000,
or (7) make an oil and Gas Advance or issue a Letter of Credit if, after the
making of such Advance or the issuance of such Letter of Credit, the aggregate
amount of all oil and Gas Advances outstanding hereunder plus the face amount
of all Letters of Credit outstanding hereunder would exceed the Commitment
Amount (oil and Gas).
(c) Each payment by USB under a Letter of Credit shall be deemed to
be an Oil and Gas Advance, shall bear interest from the date of such payment by
USB under the Letter of Credit until the date of repayment, shall be entitled
to all benefits of the Security Documents and shall be subject to all terms
of this Agreement and any and all other applicable Loan Documents.
Section 2.3. Securities Facility. (a) Subject to the other terms and
conditions of this Agreement, USB agrees to make Securities Advances to
Borrowers from time to time requested upon notice to USB from Borrowers no
later than noon, Denver time, on the Business Day prior to the date of any
such securities Advance. Each request by Borrowers for a Securities Advance
shall be in the form of Exhibit B attached hereto and made a part hereof.
Any request by borrowers for a Securities Advance shall be deemed a
certification by Borrowers that the conditions precedent contained in
Article IV below have been satisfied as of the time of such request.
(b) USB shall not have any obligation to: (1) make a Securities
Advance on or after the Maturity Date, (2) issue a LIBOR Tranche as to which
the LIBOR Interest Period does not expire prior to the Maturity Date, (3)
issue a LIBOR Tranche at any time when three or more prior LIBOR Tranches remain
outstanding, (4) make a Securities Advance in an amount less than $25,000, (5)
issue a LIBOR Tranche in an amount less than $25,000, or (6) make a Securities
Advance if, after the making of such Advance, the aggregate amount of all
Securities Advances outstanding hereunder would exceed the Commitment Amount
(Securities).
Section 2.4. The Notes; Interest. (a) Borrower's obligation to repay
the Oil and Gas Facility, with interest thereon, shall be evidenced by the
oil and Gas Note. Borrower's obligation to repay the Securities Facility,
with interest thereon, shall be evidenced by the Securities Note. In the
event any provision contained in either Note conflicts with a provision
contained in this Agreement, the provisions of this Agreement shall control.
(b) At any time and from time to time hereafter, if Borrowers desire
to include in a LIBOR Tranche all or any portion of the Loan which would not
otherwise be included in a LIBOR Tranche, Borrowers shall deliver an Interest
Rate Election to USB not later than noon, Denver time, at least one Business
Day prior to the first day of the requested LIBOR Interest Period, specifying
the dollar amount they desire to have included in the LIBOR Tranche, the first
day of the LIBOR Interest Period, the duration of the LIBOR interest Period and
whether the LIBOR Tranche is to be included in the Oil and Gas Facility or the
Securities Facility. Not later than one Business Day prior to the first day of
the requested LIBOR Interest Period, USB shall provide to Borrowers a quote of
LIBOR (Adjusted) for the dollar amount and time period requested by Borrowers.
Not later than one Business Day prior to the first day of the requested LIBOR
Interest Period, Borrowers shall give notice to USB of whether Borrowers elect
to include the requested portion of the Loan in the requested LIBOR Tranche;
provided that any failure by Borrowers to give notice as set forth herein shall
be deemed an election to include the requested portion of the Loan in the
requested LIBOR Tranche. If borrowers elect to include the LIBOR Tranche, the
LIBOR Tranche shall become effective for the requested dollar amount and the
applicable LIBOR Interest Period at the rate quoted by USB. Any portion of the
Loan which is not included in a LIBOR Tranche shall be included in the
Reference Rate Portion.
(c)(1) Except as otherwise provided in (3) below, interest on each LIBOR
Tranche shall accrue at a fixed annual rate equal to: (A) with respect to each
LIBOR Tranche included in the Oil and Gas Facility, LIBOR (Adjusted) with
respect to such LIBOR Tranche plus 1.75 percentage points per annum, and (B)
with respect to each LIBOR Tranche included in the Securities Facility, LIBOR
(Adjusted) with respect to such LIBOR Tranche plus 1.5 percentage points per
annum. (2) Except as otherwise provided in (3) below, interest on the Reference
Rate Portion shall accrue at a fluctuating annual rate equal to the Reference
Rare. (3) From and after the occurrence, and during the continuance, of any
Event of Default hereunder (including without limitation any failure by
Borrowers to pay the entire outstanding principal balance of the Loan, together
with all accrued interest, fees and other amounts payable in connection
therewith on or before the Maturity Date), interest on the Loan shall accrue,
from the date of occurrence of the Event of Default until the date the Event of
Default is cured, at a fluctuating annual rate equal to the Reference Rate plus
five percentage points per annum.
(d) Interest accrued on the Reference Rate Portion shall be due and
payable on each Payment Date. Interest accrued on each LIBOR Tranche shall be
due and payable on the last day of the LIBOR Interest Period for such LIBOR
Tranche (and, as to any LIBOR Tranche having a LIBOR Interest Period of six
months, on the ninetieth day of such LIBOR Interest Period). All accrued and
unpaid interest shall be due and payable not later than the Maturity Date.
Section 2.5. Mandatory Principal Payments. (a) If for any reason the
aggregate outstanding principal balance of all Oil and Gas Advances plus the
aggregate face amount of all outstanding Letters of Credit shall exceed the
Commitment Amount (Oil and Gas), Borrowers shall, not later than 10 days after
written notice thereof from USB: (1) pay the excess to USB in a lump sum; or (2)
commence (and thereafter continue) an amortization schedule under which
Borrowers repay the Loan in an amount at least equal to the excess in six
monthly principal installments on the first Business Day of each calendar
month, which amounts shall be in addition to the monthly interest payments
and any other principal payments otherwise due, such that the entire excess is
paid within six months; or (3) execute and deliver to USB additional mortgages,
supplements to mortgages or other instruments satisfactory in form and substance
satisfactory to USB, by which Borrowers mortgage, pledge, or hypothecate to USB
or create a security interest in for the benefit of USB, sufficient additional
Oil and Gas Interests to indue USB to make a re-determination of the Borrowing
Base (Oil and Gas) such that the Commitment Amount (Oil and Gas) is increased
to an amount no less than the aggregate face amount of all outstanding Letters
of Credit.
(b) If for any reason the aggregate outstanding principal balance of all
Securities Advances shall exceed the Commitment Amount (Securities), Borrowers
shall, not later than 10 days after written notice thereof from USB: (1) pay
the excess to USB in a lump sum; or (2) pledge, grant a security in and deliver
to USB additional Pledged Securities sufficient to induce USB to make a re-
determination of the Borrowing Base (Securities) such that the Commitment
Amount (Securities) is increased to an amount no
(c) The outstanding principal balance of the Oil and Gas Facility,
together with all unpaid fees and expenses in connection therewith, shall be
due and payable not later than the Maturity Date. The outstanding principal
balance of the securities Facility, together with all unpaid fees and expenses
in connection therewith, shall be due and payable on the Maturity Date.
Section 2.6. Voluntary Prepayments. Borrowers shall have the right to
prepay the Loan at any time, in whole or in part, without penalty or premium
(except as otherwise described in Section 3.5 below).
Section 2.7. Termination of Agreement. Borrowers shall have the right at
any time and from time to time, upon not less than three Business Days' prior
written notice to USB, to terminate this Agreement. Upon any termination of
this Agreement, Borrowers shall, at the time of such termination, prepay the
Notes in full. Any such prepayment shall be without penalty or premium (except
as otherwise described in Section 3.5 below).
Section 2.8. Payments to USB. Borrowers will pay to USB each payment
which Borrowers owe under the Loan Documents not later than noon, Denver time,
on the due date, in lawful money of the United States of America and in
immediately available funds. Any payment received after such time will be
deemed to have been made on the next following Business Day. Should any such
payment become due and payable on a day other than a Business Day, the maturity
of such payment shall be extended to the next succeed
Section 2.9. Use of Proceeds. In no event shall any of the Loan proceeds
be used directly or indirectly for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" (as such term
is defined in Regulation U promulgated by the Board of Governors of the Federal
Reserve System) or to extend credit to others directly or indirectly for the
purpose of purchasing or carrying any such margin stock. Borrowers represent
and warrant to USB that neither Borrower
Section 2.10. Borrowing Base Procedures. (a) The Borrowing Base (Oil and
Gas) will be re-determined by USB, based upon the information submitted by
Borrowers pursuant to Section 6.1 below and upon such other information and
data as USB deems relevant, semi-annually effective as of May 1 and November 1
of each year, and at such other times as USB may determine. USB shall advise
Borrowers of each re-determination of the Borrowing Base (Oil and Gas) by USB
by providing to Borrowers a Borrowing Base Notic
(b) The Borrowing Base (Securities) will be calculated by Borrowers
monthly, and, not later than five days prior to the end of each calendar month,
Borrowers will give notice to USB, showing full details as to how such
calculation was made and of the amount of the Borrowing Base (Securities) so
calculated; provided that, if, as to any calendar month, the calculation of the
Borrowing Base (Securities) has not changed from the prior calendar month,
Borrowers shall not be required to give such notice to
ARTICLE III
Security; Fees; LIBOR Provisions; Taxes; Increased Capital
Section 3.1. The Security. The Obligations will be secured by the
Security Documents and any additional Security Documents hereafter delivered by
or on behalf of Borrowers and accepted by USB.
Section 3.2. Perfection and Protection of Security Interests and Liens.
Borrowers will from time to time deliver to USB any amendments, financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by Borrowers,
in form and substance reasonably satisfactory to USB, which USB may request for
the purpose of perfecting, confirming or protecting USB's Liens and other
rights in the Collateral.
Section 3.3. Bank Accounts and Offset. To secure the repayment of the
Obligations, each Borrower hereby grants to USB a security interest, a lien,
and a right of offset, each of which shall be upon and against: (a) any and all
moneys, securities or other property (and the proceeds therefrom) of such
Borrower now or hereafter held or received by or in transit to USB from or for
the account of such Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, (b) any and all
Section 3.4. Fees. (a) Borrowers shall pay to USB, within 30 days after
the end of each calendar quarter, commencing with the calendar quarter ending
March 31, 1999 and ending on the Maturity Date, a commitment fee in an amount
equal to: (1) one-quarter of one percent per annum, times (2) the excess of the
Commitment Amount (Oil and Gas) over the sum of the aggregate outstanding
principal balance of all oil and Gas Advances plus the face amount of all
outstanding Letters of Credit, computed on a daily
(b) Borrowers shall pay to USB, within 30 days after the end of each
calendar quarter, commencing with the calendar quarter ending March 31, 1999
and ending on the Maturity Date, a commitment fee in an amount equal to: (1)
one-quarter of one percent per annum, times (2) the excess of the Commitment
Amount (Securities) over the sum of the aggregate outstanding principal balance
of all Securities Advances, computed on a daily basis for such calendar quarter.
(c) Borrowers shall pay to USB with respect to each Letter of Credit a
fee in an amount equal to USB's standard internal issuance fee, as in effect at
the time of issuance or renewal of any Letter of Credit, plus the greater of:
(1) $300.00 per annum for the term of such Letter of Credit, or (2) one and
one-half percent per annum times the face amount of such Letter of Credit,
which fee shall be due and payable at the time of issuance (and again at the
time of any renewal) of such Letter of Credit.
(d) Borrowers shall pay to USB upon the closing of this Agreement a
facility fee in the amount of $3,500.
Section 3.5. Special LIBOR Provisions. (a) If USB shall reasonably
determine (which determination shall, upon notice thereof to Borrowers, be
conclusive and binding on Borrowers and USB) that the introduction of or any
change in or in the interpretation of any law makes it unlawful, or any central
bank or other governmental authority having jurisdiction asserts that it is
unlawful, for USB to fund, continue or maintain any LIBOR Tranche, the
obligation of USB to fund, continue or maintain any such LIBOR
(b) If USB shall reasonably determine that:
(1) U.S. Dollar deposits in the relevant amount and for the relevant
LIBOR Interest Period are not available to USB in its relevant market; or
(2) By reason of circumstances affecting USB's relevant market,
adequate means do not exist for ascertaining the interest rate applicable
hereunder to LIBOR Tranches; then, upon notice from USB to Borrowers, the
obligation of USB to include any portion of the Loan in a LIBOR Tranche shall
forthwith be suspended until USB shall notify Borrowers that the circumstances
causing such suspension no longer exist.
(c) Borrowers agree to reimburse USB for any increase in the cost to USB
of, or any reduction in the amount of any sum receivable by USB in respect of,
funding, continuing or maintaining (or of its obligation to fund, continue or
maintain) any LIBOR Tranche; provided that the foregoing shall not apply to
increases resulting from general increases in interest rates or general
increases in USB's administrative expenses or overhead costs. USB shall
promptly notify Borrowers in writing of the occurrence of any such event, such
notice to state, in reasonable detail, the reasons therefor and the additional
amount required fully to compensate USB for such increased cost or reduced amo
(d) In the event USB shall incur any loss or expense (including any loss
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by USB to fund, continue or maintain any portion of the
principal amount of any LIBOR Tranche) as a result of:
(1) Any conversion, repayment or prepayment (whether voluntary or
mandatory) of the principal amount of any LIBOR Tranche on a date other than
the scheduled last day of the LIBOR Interest Period applicable thereto;
(2) Any requested LIBOR Tranche not being funded as a LIBOR Tranche
in accordance with the provisions of this Agreement or the Interest Rate
Election therefor; or
(3) Any LIBOR Tranche not being continued as a LIBOR Tranche in
accordance with the provisions of this Agreement or the Interest Rate Election
therefor; then, upon the written notice of USB to Borrowers, Borrowers shall,
within fifteen days of receipt thereof, pay USB such amount as will (in the
reasonable determination of USB) reimburse USB for such loss or expense. Such
written notice (which shall include calculations in reasonable detail) shall,
in the absence of clear error, be conclusive and
Section 3.6. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank,
regulator or other governmental authority affects or would affect the
amount of capital required or expected to be maintained by USB or any Person
controlling USB, and USB reasonably determines that the rate or return on
maintaining (or of its obligation to fund, continue or maintain) any LIBOR
Tranche; provided that the foregoing shall not apply to increases resulting
from general increases in interest rates or general increases in USB's
administrative expenses or overhead costs. USB shall promptly notify
Borrowers in writing of the occurrence of any such event, such notice to
state, in reasonable detail, the reasons therefor and the additional amount
required fully to compensate USB for such increased cost or reduced amo
In the event USB shall incur any loss or expense (including any loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by USB to fund, continue or maintain any portion of the
principal amount of any LIBOR Tranche) as a result of:
(1) Any conversion, repayment or prepayment (whether voluntary or
mandatory) of the principal amount of any LIBOR Tranche on a
date other than the scheduled last day of the LIBOR Interest
Period applicable thereto;
(2) Any requested LIBOR Tranche not being funded as a LIBOR
Tranche in accordance with the provisions of this Agreement or
the Interest Rate Election therefor; or
(3) Any LIBOR Tranche not being continued as a LIBOR Tranche in
accordance with the provisions of this Agreement or the
Interest Rate Election therefor; then, upon the written notice
of USB to Borrowers, Borrowers shall, within fifteen days of
receipt thereof, pay USB such amount as will (in the reasonable
determination of USB) reimburse USB for such loss or expense.
Such written notice (which shall include calculations in
reasonable detail) shall, in the absence of clear error, be
conclusive and
Section 3.7. Taxes. All payments by Borrowers of principal of, and
interest on, the Loan and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise,stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by USB's net
income or receipts (such non-excluded items being called "Taxes").
(a) Pay directly to the relevant authority the full amount required to be
so withheld or deducted;
(b) Promptly forward to USB an official receipt or other documentation
satisfactory to USB evidencing such payment to such authority; and
(c) Pay USB such additional amount or amounts as may be necessary to
ensure that the net amount actually received by USB will equal the full amount
USB would have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against USB with respect to any
payment received by USB hereunder, USB may pay such Taxes and Borrowers will
promptly pay such additional amounts (including any penalties, interest or
expenses) as may be necessary in order that the net amount received by USB
after the payment of such Taxes (including any Taxes on such additional amount)
shall equal the amount USB would have received had not such Taxes been asserted.
If Borrowers fail to pay any Taxes when due to the appropriate taxing
authority or fail to remit to USB the required receipts or other required
documentary evidence, then Borrowers shall indemnify, save and hold harmless
USB from and against any incremental Taxes, interest or penalties that may
become payable by USB as a result of any such failure.
Section 3.8. Obligations Absolute. The obligation of Borrowers to repay
any amount drawn on USB pursuant to the terms of a Letter of Credit shall be
absolute, unconditional and irrevocable, and shall be preformed strictly in
accordance with the terms of this Agreement, under all circumstances
whatsoever, including without limitation the following circumstances.
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under all circumstances whatsoever, including without limitation
the following circumstances:
(a) The existence of any claim, set-off, defense or other right which
Borrowers may have at any time against any beneficiary of a Letter of Credit
(or any Person for whom any such beneficiary may be acting) or any other Person,
whether in connection with this Agreement, the transactions contemplated hereby
or any unrelated transactions;
(b) Any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect whatsoever;
or
(c) Payment by USB under any Letter of Credit against presentation of a
draft or certificate which does not comply in all material respects with the
terms of such Letter of Credit.
Payment by any Borrower of a reimbursement obligation in connection with a
Letter of Credit issued pursuant to this Agreement shall not be deemed a waiver
of any rights of Borrowers against USB under Section 3.10(d) below.
Section 3.9. Indemnification. Each Borrower hereby indemnities and holds
harmless USB from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever which USB may incur (or which may be claimed
against USB by any Person) by reason of or in connection with the execution and
delivery or transfer of or payment or failure to pay under any Letter of
Credit; provided, however, that Borrowers shall not be required to indemnify
USB for any claims, damages, losses, liabilities,
Section 3.10. Liability of USB. Borrowers assume all risks of the acts or
omissions of any beneficiary or permitted transferee of any Letter of Credit
with respect to its use of such Letter of Credit. Neither USB nor any of its
employees, officers or directors shall be liable or responsible for:
(a) The use which may be made of any Letter of Credit or for any acts
or omissions of any beneficiary or transferee thereof in
connection therewith;
(b) A compliance certificate of each Borrower in which such persons
certify to the satisfaction of the conditions set out in
subsections (a), (b), and (c) of Section 4.2 below.
(c) The Security Documents.
(d) Such legal opinions, title opinions, supplemental title
opinions, UCC searches and other title information concerning
Borrowers' authority to enter into the Loan Documents, the
enforceability of the Loan Documents and title to the Borrowing
Base Properties or any portions thereof as may be satisfactory
to USB.
(e) The fee payable by Borrowers pursuant to Section 3.4(d) above.
(f) Any and all other Loan Documents.
Section 4.2. Additional Conditions Precedent. USB shall have no obligation
to make any Advance or to issue any Letter of Credit unless the following
conditions precedent have been satisfied:
(a) All representations and warranties made by any Obligated Person
in any Loan Document shall be true on and as of the date of the
Advance or the date of issuance of the Letter of Credit as if
such representations and warranties had been made as of the date
hereof.
(b) No Default shall exist as of the date of the Advance or the date
of issuance of the Letter of Credit.
(c) Each Obligated Person shall have performed and complied with all
agreements and conditions herein required to be performed or
complied with by it on or prior to the date of the Advance or
the date of issuance of the Letter of Credit.
(d) The making of the Advance or the issuance of the Letter of
Credit shall not be prohibited by any law or any regulation or
order of any court or governmental agency or authority and shall
not subject USB to any penalty or other onerous condition under
or pursuant to any such law, regulation or order.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1. Borrowers' Representations and Warranties. To induce USB
to enter into this Agreement and to make the Loan, each Borrower represents
and warrants to USB (which representations and warranties shall survive the
delivery of the Notes and shall be deemed to be continuing representations
and warranties until repayment in full of the Notes) that:
(a) No Default. Neither Borrower is in default in any material
respect in the performance of any of the covenants and agreements
contained herein. No event has occurred and is continuing which
constitutes a Default.
(b) Organization and Good Standing. SBP is a general partnership
duly organized, validly existing and in good standing under the
laws of the State of Oklahoma, having all powers required to
carry on its business and enter into and carry out the
transactions contemplated hereby. Hallador is a limited
partnership duly organized, validly existing and in good standing
under the laws of the State of Colorado, having all powers
required to carry on its business and enter into and carry out
the transactions contemplated hereby. Each Borrower is duly
qualified, in good standing, and authorized to do business in all
jurisdictions wherein the character of the properties owned or
held by it or the nature of the business transacted by it makes
such qualification necessary.
(c) Authorization. Each Borrower has duly taken all action necessary
to authorize the execution and delivery by it of the Loan
Documents and to authorize the consummation of the transactions
contemplated. Thereby and the performance of its obligations
thereunder.
(d) No Conflicts or Consents. The execution and delivery by the
various Obligated Persons of the Loan Documents to which each is
a party, the performance by each of its obligations under such
Loan Documents, and the consummation of the transactions
contemplated by the various Loan Documents, do not and will not
(1) conflict with any provision of (A) any domestic or foreign
law, statute, rule or regulation, (B) the contemplated hereby
contains any untrue statement of a material fact or omits to
state any material fact known to either Borrower necessary to
make the statements contained herein or therein not misleading in
any material respect as of the date made or deemed made. At the
date of this Agreement, neither Borrower is aware of any material
fact that has not been disclosed to USB in writing which could
materially and adversely affect either Borrower's properties,
businesses, prospects or condition (financial or otherwise). To
the best of each Borrower's knowledge, the Initial Engineering
Report is based upon complete and accurate factual information in
all material respects, it being understood that the Initial
Engineering Report is necessarily based upon professional
opinions, estimates and projections and that Borrowers do not
warrant that such opinions, estimates and projections will
ultimately prove to have been accurate.
(i) Litigation. Except as disclosed in the Initial Financial
Statements: (1) there are no actions, suits or legal, equitable,
arbitrative or administrative proceedings pending, or to the
knowledge of either Borrower threatened, against any Obligated
Person before any federal, state, municipal or other court,
department, commission, body, board, bureau, agency, or
instrumentality, domestic or foreign, which do or may materially
and adversely affect any Obligated Person, any Affiliate
controlled by either Borrower, any Obligated Person's ownership
or use of any of its assets or properties, its business or
financial condition or prospects, or the right or ability of any
Obligated Person to enter into the Loan Documents or perform its
obligations thereunder and (2) there are no outstanding
judgments, injunctions, writs, rulings or orders by any such
governmental entity against any Obligated Person which have or
may have any such effect.
(j) Title to Properties. To the best of each Borrower's knowledge
and subject to typical oil industry operating agreements and
product purchase contracts, each Borrower has good and
defensible title to the Borrowing Base Properties, free and
clear of all liens, encumbrances and defects of title, except
for covenants, restrictions, rights, easements, liens,
encumbrances and minor irregularities enjoys peaceful
and all material leases all such leases are no material default
in title which do not materially interfere with the occupation,
use and enjoyment of such Borrowing Base Properties in the
normal course of business as presently conducted or materially
impair the value thereof for such business. Each Borrower
undisturbed possession under under which it operates, and valid
and subsisting, with existing thereunder.
(k) Place of Business. The chief executive office and principal
place of business of each Borrower are located at the address
of Borrowers set out in Section 8.3 below.
(l) Taxes. All tax returns required to be filed by either Borrower
in any jurisdiction prior to the date hereof have been filed;
all taxes, assessments, fees and other governmental charges
upon either Borrower or upon any of its properties, income or
franchises, which are due and payable have been paid, or
adequate reserves have been provided for payment thereof.
(m) Use of Proceeds. Neither Borrower is engaged principally, or
as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U or X of the
Board of Governors of the Federal Reserve System), and no part
of the proceeds of the Loan will be used to purchase or carry
any such margin stock or to extend credit to any Person for the
purpose of purchasing or carrying any such margin stock.
Neither Borrower nor any Person acting on either Borrower's
behalf has taken or will take any action which might cause this
Agreement or the Notes or the application of the proceeds of
the Loan to violate either of said Regulations U or X or any
other regulation of the Board of Governors of the Federal
Reserve System or to violate the Securities Exchange Act of
1934, in each case as now in effect or as the same may
hereafter be in effect.
(n) Investment Company Act Not Applicable. Neither Borrower is an
"investment company" or a person "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended.
(o) Public Utility Holding Company Act Not Applicable. Neither
Borrower is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company," or
of a "subsidiary company" of a "holding company" as such terms
are defined in the Public Utility Holding Company Act of 1935,
as amended.
(p) Year 2000 Compliance. Each Borrower has reviewed and assessed
its business operations and computer systems and applications to
address the "Year 2000 Problem" (that is, that computer
applications and equipment used by such Borrower, directly or
indirectly through third parties, may be unable to properly
perform datesensitive functions before, during and after January
1, 2000). Each Borrower reasonably believes that the Year 2000
Problem will not result in a material adverse change in its
business condition (financial or otherwise), operations,
properties or prospects or ability to repay the Loan. Each
Borrower agrees that this representation will be true and
correct on and shall be deemed made by each Borrower on each
date that any Borrower requests any Advance under this Agreement
or delivers any information to USB.
Section 5.2. Representations by USB. USB hereby represents that it
will acquire the Notes for its own account in the ordinary course of its
commercial banking business; however, the disposition of USB's property
shall at all times be and remain within its control and this section does
not prohibit USB's sale of any Note or of any participation in any Note to
any bank, financial institution or similar purchaser.
ARTICLE VI
COVENANTS OF BORROWERS
Section 6.1. Affirmative Covenants. Each Borrower warrants,
covenants and agrees that until the full and final payment of the
Obligations and the termination of this Agreement, unless USB has
previously agreed otherwise in writing:
(a) Payment and Performance. Borrowers will pay all amounts due
under the Loan Documents in accordance with the terms thereof
and will in all material respects observe, perform and comply
with every covenant, term and condition express or implied in
the Loan Documents.
(b) Books, Financial Statements and Records. Each Borrower and HPC
will at all times maintain full and accurate books of account
and records, will maintain a standard system of accounting and
will furnish the following statements and reports to USB at
Borrowers' expense:
(1) As soon as available, and in any event within 120 days after
the end of each Fiscal Year, complete audited financial
statements of HPC (and, if so requested by USB, of any or all
Borrowers), prepared in reasonable detail in accordance with
GAAP (or in a manner otherwise satisfactory to USB), by
an independent certified public accountant acceptable to USB.
These financial statements shall contain at least a balance
sheet as of the end of such Fiscal Year and a statement of
earnings and cash flow, setting forth in comparative form the
corresponding figures for the preceding Fiscal Year;
(2) As soon as available and in any event within 60 days after
the end of each Fiscal Quarter (except the last Fiscal
Quarter of each Fiscal Year), complete financial statements
of HPC (and, if so requested by USB, of any or all Borrowers)
for such Fiscal Quarter and for the then-current Fiscal
Year, prepared in reasonable detail in accordance with GAAP
(or in a manner otherwise satisfactory to USB);
(3) At the time of submission of the financial statements
described in (1) and (2) above, a report signed by an officer
of HPC: (A) attesting to the authenticity of such financial
statements, (B) stating that he has read this Agreement and
the Security Documents, (C) stating that after reviewing the
financial statements described above he has concluded that
there did not exist any condition or event as of the date of
such financial statements or at the time of his report which
constituted an Event of Default or a Default, or, if he did
conclude that such condition or event existed, specifying the
nature and period of existence of any such condition or
event, and (D) showing the calculation of, and HPC's and
Borrowers' compliance with, all of the financial covenants
contained herein;
(4) As soon as available and in any event within 30 days after
filing, copies of HPC's and each Borrower's federal income
tax forms;
(5) By March 31 of each year, an engineering report and economic
evaluation prepared by one or more petroleum engineers chosen
by Borrowers and acceptable to USB, covering all oil and gas
properties and interests included in the Borrowing Base
Properties. This engineering report shall be in form
and substance satisfactory to USB and shall contain
information and analysis comparable in scope to that
contained in the Initial Engineering Report;
(6) As soon as available, and in any event within 60 days after
the end of each Fiscal Quarter, commencing with the Fiscal
Quarter ending March 31, 1999, a report describing, for each
calendar month during such Fiscal Quarter, the gross volume
of production and sales attributable to production (and the
prices at which such sales were made and the revenues derived
from such sales) for each such calendar month from the
Borrowing Base Properties, and describing the related ad
valorem, severance and production taxes and lease operating
expenses attributable thereto and incurred for each such
calendar month; and
(7) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements
sent by HPC to its stockholders and all registration
statements, periodic reports and other statements and
schedules filed by HPC with any securities exchange, the
Securities and Exchange Commission or any similar
governmental authority.
(c) Other Information and Inspections. Each obligated Person will
furnish to USB any information which USB may from time to time request
concerning any covenant, provision or condition of the Loan documents or any
matter in connection with the Obligated Persons' businesses and operations.
Each Obligated Person will permit representatives appointed by USB, including
independent accountants, agents, attorneys, appraisers and any other persons, to
visit and inspect, at their sole risk, any of such Obligated Person's property,
including its books of account, other books and records, and any facilities
or other business assets, and to make extra copies therefrom and photocopies
and photographs thereof, and to write down and record any information such
representatives obtain, and each Obligated Person shall permit USB or its
representatives to investigate and verify the accuracy of the information
furnished to USB in connection with the Loan Documents and to discuss all such
matters with its officers, employees and representatives.
(d) Notice of Material Events. Borrowers will promptly notify USB:
(1) of any material adverse change in the financial condition of any
obligated Person or of either Borrower, (2) of the occurrence of any
Default, (3) of the acceleration of the maturity of any Debt owed by any
Obligated Person or of any default by any Obligated Person under any
indenture, mortgage, agreement, contract or other instrument to which any
of them is a party or by which any of them or any of their properties is
bound, (4) of any uninsured claim of $100,000 or more asserted against any
obligated Person or any of its properties, (5) of the filing of any suit
or proceeding against any Obligated Person (or the occurrence of any
material development in any such suit or proceeding) in which an adverse
decision could have a material adverse effect upon any Obligated Person's
financial condition, business or operations (or could result in a judgment
not covered by insurance of $100,000 or more against any Obligated
Person), (6) of the merger or consolidation of any Borrower with any other
business entity, and (7) of the sale, transfer, lease, exchange or
disposal by either Borrower of any material assets or properties or any
assets or properties with a value in excess of $25,000, except sales of
already-severed hydrocarbons and other products in the ordinary course of
such Borrower's business. Upon the occurrence of any of the foregoing,
the Obligated Persons will take all necessary or appropriate steps to
remedy promptly any such material adverse change, Default, or default, to
protect against any such adverse claim, to defend any such suit or
proceeding, and to resolve all controversies on account of any of the
foregoing. Each Borrower will also notify USB in writing at least twenty
Business Days prior to the date that such Borrower changes its name or the
location of its chief executive office or principal place of business or
the place where it keeps its books and records concerning the Collateral,
furnishing with such notice any necessary financing statement amendments
or requesting USB and its counsel to prepare the same.
(e) Maintenance of Existence and Qualifications. Each Borrower will
maintain and preserve its existence and its rights and franchises in full
force and effect and will qualify to do business in all states or
jurisdictions where required by applicable law, except where the failure
so to qualify will not have any material adverse effect on such Borrower.
(f) Maintenance of Properties. Each Borrower will in all material
respects maintain, preserve, protect and keep all property used or useful
in the conduct of its business in accordance with the standards of a
reasonable and prudent operator.
(g) Payment of Trade Debt, Taxes, etc. Each Obligated Person will
(1) timely file all required tax returns; (2) timely pay all taxes,
assessments, and other governmental charges or levies imposed upon it or
upon its income, profits or property; (3) pay all Debt owed by it on
ordinary trade terms to vendors, suppliers and other Persons providing
goods and services used by it in the ordinary course of its business; and
(4) maintain appropriate accruals and reserves for all of the foregoing
Debt in accordance with its present system of accounting. Each Obligated
Person will pay and discharge in all material respects, when due, all
other Debt, taxes or assessments now or hereafter owed by it. Each
Obligated Person may, however, delay paying or discharging any such Debt
so long as it is in good faith contesting the validity thereof by
appropriate proceedings and has set aside on its books adequate reserves
therefor.
(h) Insurance. Each Borrower will maintain with financially sound
and reputable insurance companies, insurance with respect to its business,
operations and properties in at least such amounts and against at least
such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or a similar business.
(i) Payment of Expenses. Borrowers will promptly (and in any event
within 30 days after any invoice or other statement or notice) pay all
reasonable costs and expenses incurred by or on behalf of USB (including
attorneys' fees) in connection with: (1) the preparation, execution and
delivery of the Loan Documents (including without limitation any and all
future amendments or supplements thereto or restatements thereof), and any
and all consents, waivers or other documents or instruments relating
thereto, (2) the filing, recording, refiling and re-recording of any
Security Documents and any other documents or instruments or further
assurances required to be filed or recorded or refiled or re-recorded by
the terms of any Loan Document, (3) the examination of Borrowers' title to
the Collateral, and (4) the enforcement, after the occurrence of a Default
or an Event of Default, of the Loan Documents.
(j) Performance on Borrower's Behalf. If any Obligated Person fails
to pay any taxes, insurance premiums or other amounts it is required to
pay under any Loan Document, USB may pay the same. Borrowers shall
immediately reimburse USB for any such payments and each amount paid shall
constitute a part of the Obligations, shall be secured by the Security
Documents and shall bear interest at the rate described in Section
2.4(c)(3) above, from the date such amount is paid by USB until the date
such amount is repaid to USB.
(k) Compliance with Agreements and Law. Each Borrower will perform
all material obligations it is required to perform under the terms of each
indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a
party or by which it or any of its properties is bound in such a way that
they result in no material adverse effect upon the Borrowing Base
Properties, the Pledged Securities or such Borrower's ability to perform
its obligations under this Agreement. Each Borrower will in all material
respects conduct its business and affairs in compliance with all laws,
regulations, and orders applicable thereto (including those relating to
pollution and other environmental matters).
(l) Certifications of Compliance. Each Obligated Person will
furnish to USB at such Obligated Person's or Borrowers' expense all
certifications which USB from time to time reasonably requests, as to the
accuracy and validity of or compliance with all representations,
warranties and covenants made by any Obligated Person in the Loan
Documents, the satisfaction of all conditions contained therein, and all
other matters pertaining thereto.
(m) Additional Security Documents. Promptly after a request
therefor by USB at any time and from time to time, each Borrower will
execute and deliver to USB such additional Security Documents and/or
amendments to existing Security Documents as USB may deem necessary or
appropriate in order to grant to USB a perfected lien on and security
interest in any or all oil and/or gas interests owned by such Borrower.
(n) Year 2000 Problem. Each Borrower is in the process of
implementing a plan to remediate the effects of any and all material Year
2000 Problems and will complete implementation of such plan and testing
thereof by September 30, 1999. Each Borrower will promptly deliver to USB
such information as USB may request at any time and from time to time as
to such Borrower's compliance with any and all covenants and
representations contained in this Agreement relating to the Year 2000
Problem.
Section 6.2. Negative Covenants. Each Borrower warrants, covenants
and agrees that until the full and final payment of the Obligations and
the termination of this Agreement, unless USB has previously agreed
otherwise in writing:
(a) Funded Debt Ratio. Borrowers will not permit the Funded Debt
Ratio to be greater than 50 percent as of the end of any Fiscal Quarter.
(b) Limitation on Liens. None of Borrowers, HPC or any
consolidated Affiliate of HPC will create, assume or permit to exist any
mortgage, deed of trust, pledge, encumbrance, lien or charge of any kind
(including any security interest in or vendor's lien on property purchased
under conditional sales or other title retention agreements and including
any lease intended as security or in the nature of a title retention
agreement) upon any of its respective properties or assets, whether now
owned or hereafter acquired except:
(1) Liens at any time existing in favor of USB;
(2) statutory Liens for taxes, statutory or contractual
mechanics' and materialmen's Liens incurred in the ordinary
course of business, and other similar Liens incurred in the
ordinary course of business, provided such Liens secure
only Debt which is not delinquent or which
is being contested as provided in Section 6.1(g) above; and
(3) purchase-money security interests granted by either Borrower,
HPC or any consolidated Affiliate of HPC on office equipment,
vehicles and other personal property acquired by any such
entity in the ordinary course of business; provided that the
aggregate amount secured by all such security interests
outstanding at any one time shall not exceed $25,000.
(c) Additional Debt. None of Borrowers, HPC or any consolidated
Affiliate of HPC will create, incur, assume or permit to exist Debt except:
(1) the Loan, (2) trade debt owed to suppliers, pumpers, mechanics,
materialmen and others furnishing goods or services to any such entity in
the ordinary course of such entity's business, (3) Debt disclosed in the
Initial Financial Statements, and (4) Debt of the types permitted to be
secured by the security interests described in Section 6.2(b)(3) above;
provided that the amount of such Debt does not exceed the limits set
forth in said Section.
(d) Limitation on Sales of Property. None of Borrowers, HPC or any
consolidated Affiliate of HPC will sell, transfer, lease, exchange, alienate
or dispose of any of the assets of any such entity except as follows (and the
following exceptions shall be subject to any limitations contained in the
Security Documents):
(1) equipment which is worthless or obsolete, which is replaced by
equipment of equal suitability and value or which is salvaged from
wells which have been plugged and abandoned by or on behalf of any
such entity;
(2) inventory (including oil and gas sold as produced) which is sold in
the ordinary course of business;
(3) personal property located on oil and gas properties operated by third
parties, the sale of which personal property cannot be prevented by
any such entity; and
(4) any sale or sales of one or more oil and/or gas properties (other than
the Borrowing Base Properties) having an aggregate value of less than
$1,000,000 during any Fiscal Year.
(e) Limitation on Credit Extensions. None of Borrowers, HPC or
any consolidated Affiliate of HPC will extend credit, make
advances or make loans other than: (1) normal and prudent
extensions of credit to customers buying goods and services
in the ordinary course of business, which extensions shall
not be for longer periods than those extended by similar
businesses operated in a normal and prudent manner, and (2)
an advance in the amount of $269,220 for the benefit of
Trio Petroleum Inc.
(f) Fiscal Year. None of Borrowers, HPC or any consolidated
Affiliate of HPC will change its fiscal year.
(g) Amendment of Contracts. None of Borrowers, HPC or any
consolidated Affiliate of HPC will amend or permit any
amendment to any contract which could reasonably be foreseen
to release, qualify, limit, make contingent or otherwise
detrimentally affect, in any material way, the rights and
benefits of USB under or acquired pursuant to any of the
Security Documents.
(h) Limitation on Guaranties. None of Borrowers, HPC or any
consolidated Affiliate of HPC will assume, guaranty, endorse
or be or become secondarily liable for any Debt which is the
primary obligation of any other Person.
(i) ERISA. None of Borrowers, HPC or any consolidated Affiliate
of HPC will incur any obligations governed by ERISA.
(j) Distributions. Neither Borrower will make any Distributions,
except that (unless a Default has occurred and is continuing
or unless any such Distribution would cause any Borrower to
be in violation of any of the covenants contained in this
Agreement or any of the other Loan Documents), for any Fiscal
Year of any Borrower, at the times when taxes (or estimated
taxes) are due and payable by the owners of such Borrower
(up to and including April 15 of the succeeding calendar year),
such Borrower may make Distributions in an aggregate amount
not greater than the product of: (1) the highest tax rate
payable on ordinary taxable income under the tax laws of the
United States and the State of Colorado, times (2) the taxable
income of such Borrower for such Fiscal Year, to the extent
that such taxable income is required to be included in the
taxable income of the owners of such Borrower (or, if such
taxable income is not known at such time, the then-current
estimate of such taxable income; provided that when the
actual taxable income of such Borrower is determined for any
Fiscal Year, an Event of Default shall be deemed to have
occurred unless the owners of such Borrower repay to such
Borrower any excess distributions made by reason of their
being based upon the estimated taxable income of such
Borrower for such Fiscal Year).
(k) Reorganizations; Combinations. None of Borrowers, HPC or any
consolidated Affiliate of HPC will change its name or the
nature of its business, reorganize, liquidate, dissolve or
enter into any merger, joint venture, partnership or other
combination.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Borrowers fail to pay any Obligation when due and payable,
whether at a date for the payment of a fixed installment or
contingent or other payment to USB or as a result of
acceleration or otherwise; or
(b) Any "default" or "event of default" occurs under any Loan
Document which defines either term; or
(c) Any Obligated Person fails to duly observe, perform or comply
with any covenant, agreement, condition or provision of any
Loan Document; or
(d) Any representation or warranty previously, presently or here-
after made in writing by or on behalf of any Obligated Person
in connection with any Loan Document shall prove to have been
false or incorrect in any material respect on any date on or
as of which made; or
(e) Any Obligated Person:
(1) suffers the entry against it of a judgment, decree or order for relief
by a court of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar
law of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it which remains undismissed for a period of 60 days;
or
(2) suffers the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for a substantial part of its
assets or for any part of the Borrowing Base Properties or the Pledged
Securities in a proceeding brought against or initiated by it, and such
appointment is neither made ineffective nor discharged within 30 days
after the making thereof, or such appointment is consented to, requested
by, or acquiesced to by it; or
(3) commences a voluntary case under any applicable bankruptcy, insolvency or
similar law now or hereafter in effect, including the federal Bankruptcy
Code, as from time to time amended; or applies for or consents to the entry
of an order for relief in an involuntary case under any such law or to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of any
substantial part of its assets or any part of the Borrowing Base Properties
or the Pledged Securities; or makes a general assignment for the benefit of
creditors; or fails generally to pay (or admits in writing its inability to
pay) its debts as such debts become due; or takes action in furtherance of
any of the foregoing; or
(4) suffers the entry against it of a final judgment for the payment of money
in excess of $100,000 (not covered by insurance), unless the same is
discharged within 30 days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within such period and
a stay of execution pending such appeal is obtained; or
(5) suffers the entry of an order issued by any court or tribunal taking,
seizing or apprehending all or any substantial part of its property or any
part of the Borrowing Base Properties or the Pledged Securities and
bringing the same into the custody of such Court or tribunal, and such order
is not stayed or released within thirty days after the entry thereof; or
(f) Any default, including the expiration of any applicable period of
grace, occurs with respect to any other indebtedness owed by
either Borrower to any Person.
Upon the occurrence of an Event of Default described in subsection (e)(1),
(e)(2) or (e)(3) of this section, all of the obligations shall thereupon be
immediately due and payable, without presentment, demand, protest, notice of
protest, declaration or notice of acceleration or intention to accelerate,
or any other notice or declaration of any kind, all of which are hereby
expressly waived by Borrowers. During the continuance of any other Event of
Default, USB at any time and from time to time (unless all Events of Default
have theretofore been remedied) may declare any or all of the obligations
immediately due and payable, and all such Obligations shall thereupon be
immediately due and payable.
Section 7.2. Remedies. If any Default or Event of Default shall occur
and be continuing, the obligation of USB to make Advances under this Agree-
ment shall terminate immediately. If any Event of Default shall occur, USB
may protect and enforce its rights under the Loan Documents by any appropri-
ate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document, and USB may enforce
the payment of any Obligations due or enforce any other legal or equitable
right. All rights, remedies and powers conferred upon USB under the Loan
Documents shall be deemed cumulative and not exclusive of any other rights,
remedies or powers available under the Loan Documents or at law or in equity.
Section 7.3. Indemnity. Borrowers hereby agree to indemnify, defend and
hold harmless USB and its agents, affiliates, officers, directors, and
employees from and against any and all claims, losses, demands, actions,
causes of action, and liabilities whatsoever (including without limitation
reasonable attorney's fees and expenses, and costs and expenses reasonably
incurred in investigating, preparing or defending against any litigation or
claim, action, suit, proceeding or demand of any kind or character) arising
out of or resulting from: (a) the Loan Documents (including without limita-
tion the enforcement thereof), except to the extent such claims, losses, and
liabilities are proximately caused by a USB's gross negligence or willful
misconduct, (b) the contamination of any of the Borrowing Base Properties
by any hazardous substance or environmental pollutant, or (c) the violation
of any federal, state or local environmental statute, rule, regulation or
ordinance, including without limitation violation of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended from time
to time, or of the Resource conservation and Recovery Act, as amended from
time to time.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Waiver and Amendment. No failure or delay by USB in
exercising any right, power or remedy which it may have under any of the
Loan Documents shall operate as a waiver thereof or of any other right,
power or remedy, nor shall any single or partial exercise by USB of any
such right, power or remedy preclude any other or further exercise thereof
or of any other right, power or remedy. No waiver of any provision of any
Loan Document and no consent to any departure therefrom shall ever be
effective unless it is in writing and signed by USB, and then such waiver or
consent shall be effective only in the specific instances and for the
purposes for which given and to the extent specified in such writing. No
notice to or demand on any obligated Person shall in any case of itself
entitle any Obligated Person to any other or further notice or demand in
similar or other circumstances. This Agreement and the other Loan Documents
set forth the entire understanding between the parties hereto, and no
modification or amendment of or supplement to this Agreement or the other
Loan Documents shall be valid or effective unless the same is in writing and
signed by the party against whom it is sought to be enforced.
Section 8.2. Survival of Agreements; Cumulative Nature. All of the
Obligated Persons, various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery
of this Agreement and the other Loan Documents and the performance hereof
and thereof, including without limitation the making or granting of the
Loan and the delivery of the Notes and the other Loan Documents, and shall
further survive until all of the Obligations are paid in full to USB and all
of USB's obligations to Borrowers are terminated. All statements and
agreements contained in any certificate or other instrument delivered to
USB under any Loan Document shall be deemed representations and warranties
by Borrowers to USB and/or agreements and covenants of Borrowers under this
Agreement. The representations, warranties, and covenants made by the
Obligated Persons in the Loan Documents, and the rights, powers, and
privileges granted to USB in the Loan Documents, are cumulative, and no
Loan Document shall be construed in the context of another to diminish,
nullify, or otherwise reduce the benefit to USB of any such representation,
warranty, covenant, right, power or privilege. In particular and without
limitation, no exception set out in this Agreement to any representation,
warranty or covenant herein contained shall apply to any similar represent-
ation, warranty or covenant contained in any other Loan Document, and each
such similar representation, warranty or covenant shall be subject only to
those exceptions which are expressly made applicable to it by the terms of
the various Loan Documents.
Section 8.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be
in writing and, unless otherwise specifically provided in such Loan Document,
shall be deemed sufficiently given or furnished if delivered by personal
delivery, by expedited delivery service with proof of delivery, or by
registered or certified United States mail, return receipt requested,
postage prepaid, at the addresses specified below (unless changed by
similar notice in writing given by the particular Person whose address is to
be changed). Any such notice or communication shall be deemed to have been
given upon receipt:
Borrowers' address: 1660 Lincoln Street
Suite 2700
Denver, Colorado 80264
Attention: Victor P. Stabio
USB's address: 918 Seventeenth Street
Denver, Colorado 80202
Attention: Monte E. Deckerd
Section 8.4. Joint and Several Liability; Parties in Interest. All
obligations of Borrowers hereunder shall be the joint and several, and not
merely joint, obligations of each Borrower. All grants, covenants and
agreements contained in the Loan Documents shall bind and inure to the
benefit of the parties thereto and their respective successors and assigns;
provided, however, that no Obligated Person may assign or transfer any of
its rights or delegate any of its duties or obligations under any Loan
Document without the prior consent of USB.
Section 8.5. Governing Law. The Loan Documents shall be deemed
contracts and instruments made under the laws of the State of Colorado and
shall be construed and enforced in accordance with and governed by the laws
of the State of Colorado and the laws of the United States of America,
except (a) to the extent that the law of another jurisdiction is expressly
elected in a Loan Document, and (b) with respect to specific Liens, or the
perfection thereof, evidenced by Security Documents covering real or
personal property which by the laws applicable thereto are required to be
construed under the laws of another jurisdiction. Each Borrower hereby
irrevocably submits itself to the non-exclusive jurisdiction of the state
and federal courts of the State of Colorado.
Section 8.6. Limitation on Interest. USB and the Obligated Persons
intend to contract in strict compliance with applicable usury law from time
to time in effect. In furtherance thereof such persons stipulate and agree
that none of the terms and provisions contained in 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
Section 8.7. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms
and provisions of the Loan Documents shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
Section 8.8. Counterparts. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute
one and the same Agreement.
Section 8.9. Conflicts. To the extent of any irreconcilable conflicts
between the provisions of this Agreement and the provisions of any of the
Loan Documents, the provisions of this Agreement shall prevail.
Section 8.10. Arbitration. Subject to the provisions of the next
paragraph below, USB and Borrowers agree to submit to binding arbitration any
and all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys and other agents)
relating to the Loan and its negotiation, execution, collateralization,
administration, repayment, modification, extension or collection. Such
arbitration shall proceed in Denver, Colorado, shall be governed by Colo
limitation the provisions of CRS 13-21-102(5)) and shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA"). Any award entered in an arbitration, whether on
motions or at a hearing, with or without testimony from witnesses, shall be
made by a written opinion stating the reasons for the award made. The
decision of any arbitration pursuant to this Agreement shall be made based on
Colorado law without reference to any choice of law rules. Jud may be entered
in any court having jurisdiction.
Nothing in the preceding paragraph, nor the exercise of any right to
arbitrate thereunder, shall limit the right of any party hereto: (a) to
foreclose against any real or personal property collateral by the exercise
of the power of sale under a deed of trust, mortgage, or other security
agreement or instrument or applicable law; (b) to exercise self-help remedies
such as setoff or repossession; or (c) to obtain provisional or ancillary
remedies such as replevin, injunctive relief, attachment or appoint or
ancillary remedies, or exercise of self-help remedies shall not constitute a
waiver of the right or obligation of any party to submit any claim or dispute
to arbitration, including those claims or disputes arising from exercise of
any judicial relief, or pursuit of provisional or ancillary remedies or
exercise of self-help remedies.
Arbitration hereunder shall be before a three-person panel of neutral
arbitrators, consisting of one person from each of the following categories:
(1) an attorney who has practiced in the area of commercial law for at least
10 years or a retired judge at the Colorado or United States District Court
or an appellate court level: (2) a person with at least 10 years experience
in commercial lending: and (3) a person with at least 10 years experience in
the petroleum industry. The AAA shall submit a list of persons meeting the
criteria outlined above for each category of arbitratory, and the parties
shall select one person from each category in the manner established by the
AAA.
Section 8.11. Entire Agreement. This Agreement, the Notes, the Security
Documents and the other Loan Documents from time to time executed in
connection herewith state the entire agreement between the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
SANTA BARBARA PARTNERS
By: Hallador Production Company,
General Partner
By: /s/Victor P. Stabio,
President
HALLADOR PETROLEUM, LLP
By: Hallador Petroleum Company,,
General Partner
By: /s/Victor P. Stabio,
President
U.S. BANK NATIONAL ASSOCIATION
By: /s/Monte E. Deckerd
Vice President
EXHIBIT A-1
PROMISSORY NOTE
$3,500,000 March 10, 1999
Denver, Colorado
FOR VALUE RECEIVED, SANTA BARBARA PARTNERS, an Oklahoma general
partnership, and HALLADOR PETROLEUM, LLP, a Colorado limited partnership
(collectively "Borrower"), promise to pay to the order of U.S. BANK NATIONAL
ASSOCIATION ("Payee"), the principal sum of $3,500,000 (or so much thereof as
may be borrowed hereunder), together with interest on the outstanding unpaid
balance of such principal amount at the rates provided below.
This Note is the "Oil and Gas Note" issued pursuant to, and is subject
to the terms and provisions of, the Credit Agreement dated as of March 10,
1999, between Borrower and Payee, as now in effect or as the same may here-
after be amended, restated, extended, renewed or otherwise modified (the
"Credit Agreement"). Except as otherwise defined herein, terms defined in
the Credit Agreement shall have the same meanings when used herein.
The outstanding principal amount of this Note shall be due and payable
as provided in the Credit Agreement. Any then unpaid principal balance of
this Note shall be due and payable on March 31, 2006 (unless due and payable
sooner pursuant to the terms of the Credit Agreement) and shall bear interest
at the applicable rate described in the Credit Agreement.
Interest shall accrue daily on the unpaid principal balance of this
Note, shall be due and payable as provided in the Credit Agreement, and shall
be calculated on the basis of a 360day year, and the actual number of days
elapsed.
All payments of principal and interest hereon shall be made at Payee's
offices at 918 Seventeenth Street, Denver, Colorado 80202 (or at such other
place as Payee shall have designated to Borrower in writing) on the date due
in immediately available funds and without set-off or counterclaim or deduct-
ion of any kind. All payments received hereunder shall be applied first to
costs of collection, second to accrued interest as of the date of payment and
third to the outstanding principal balance of this Note.
Notwithstanding anything to the contrary contained in this Note, from
and after the expiration of any applicable period of grace provided for in
the Credit Agreement, overdue principal, and (to the extent permitted under
applicable law) overdue A-1-1 interest, whether caused by acceleration of
maturity or otherwise, shall bear interest at a fluctuating rate, adjustable
the day of any change in such rate, equal to five percentage points above the
Reference Rate, until paid, and shall be due and payable monthly or, at the
option of the holder hereof, on demand.
This Note is secured by, and the holder of this Note is entitled to the
benefits of, the documents described in the Credit Agreement (the "Security
Documents"). Reference is made to the Security Documents for a description
of the property covered thereby and the rights, remedies and obligations of
the holder hereof in respect thereto.
Subject to the expiration of any applicable period of grace provided for
in the Credit Agreement, in the event of (a) any default in any payment of the
principal of or interest on this Note when due and payable, or (b) any other
Event of Default (as defined in the Credit Agreement), then the whole
principal sum of this Note plus accrued interest and all other obligations of
Borrower to holder, direct or indirect, absolute or contingent, now existing
or hereafter arising, shall, at the option of Payee, be exercised by Payee.
If Borrower fails to pay any amount due under this Note and Payee has to
take any action to collect the amount due or to exercise its rights under the
Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the indebtedness or to
foreclose the Security Documents or to enforce Payee's rights under the
Security Documents, then Borrower agrees to pay on demand all r
Borrower waives presentment, notice of dishonor and protest, and assents
to any extension of time with respect to any payment due under this Note, to
any substitution or release of collateral and to the addition or release of
any party, except as provided in the Credit Agreement. No waiver of any
payment or other right under this Note shall operate as a waiver of any other
payment or right.
A-1-2
If any provision in this Note shall be held invalid, illegal or
unenforceable in any jurisdiction, the validity, legality or enforceability
of any defective provisions shall not be in any way affected or impaired in
any other jurisdiction.
No delay or failure of the holder of this Note in the exercise of any
right or remedy provided for hereunder shall be deemed a waiver of such right
by the holder hereof, and no exercise of any right or remedy shall be deemed
a waiver of any other right or remedy that the holder may have.
All notices given hereunder shall be given as provided in the Credit
Agreement.
At the option of the holder hereof, an action may be brought to enforce
this Note in the District Court in and for the City and County of Denver,
State of Colorado, in the United States District Court for the District of
Colorado or in any other court in which venue and jurisdiction are proper.
Borrower and all signers or endorsers hereof consent to venue and
jurisdiction in the District Court in and for the City and County of Denver,
State of Colorado and in the United States District Court for the D
This Note is to be governed by and construed according to the laws of the
State of Colorado.
SANTA BARBARA PARTNERS
By: Hallador Production Company,
General Partner
By:/s/Victor P. Stabio,
President
HALLADOR PETROLEUM, LLP
By: Hallador Petroleum Company,
General Partner
By:/s/Victor P. Stabio
President
A-1-3
EXHIBIT A-2
PROMISSORY NOTE
$3,500,000 March 10, 1999
Denver, Colorado
FOR VALUE RECEIVED, SANTA BARBARA PARTNERS, an Oklahoma general partner-
ship, and HALLADOR PETROLEUM, LLP, a Colorado limited partnership
(collectively "Borrower"), promise to pay to the order of U.S. BANK NATIONAL
ASSOCIATION ("Payee"), the principal sum of $3,500,000 (or so much thereof as
may be borrowed hereunder), together with interest on the outstanding unpaid
balance of such principal amount at the rates provided below.
This Note is the "Securities Note" issued pursuant to, and is subject to
the terms and provisions of, the Credit Agreement dated as of March 10, 1999,
between Borrower and Payee, as now in effect or as the same may hereafter be
amended, restated, extended, renewed or otherwise modified (the "Credit
Agreement"). Except as otherwise defined herein, terms defined in the Credit
Agreement shall have the same meanings when used herein.
The outstanding principal amount of this Note shall be due and payable
as provided in the Credit Agreement. Any thenunpaid principal balance of
this Note shall be due and payable on March 31, 2006 (unless due and payable
sooner pursuant to the terms of the Credit Agreement) and shall bear interest
at the applicable rate described in the Credit Agreement.
Interest shall accrue daily on the unpaid principal balance of this Note,
shall be due and payable as provided in the Credit Agreement, and shall be
calculated on the basis of a 360day year, and the actual number of days
elapsed.
All payments of principal and interest hereon shall be made at Payee's
offices at 918 Seventeenth Street, Denver, Colorado 80202 (or at such other
place as Payee shall have designated to Borrower in writing) on the date due
in immediately available funds and without set-off or counterclaim or
deduction of any kind. All payments received hereunder shall be applied
first to costs of collection, second to accrued interest as of the date of
payment and third to the outstanding principal balance of this Note.
Notwithstanding anything to the contrary contained in this Note, from and
after the expiration of any applicable period of grace provided for in the
Credit Agreement, overdue principal, and (to the extent permitted under
applicable law) overdue
A-2-1
interest, whether caused by acceleration of maturity or otherwise, shall bear
interest at a fluctuating rate, adjustable the day of any change in such rate,
equal to five percentage points above the Reference Rate, until paid, and shall
be due and payable monthly or, at the option of the holder hereof, on demand.
This Note is secured by, and the holder of this Note is entitled to the
benefits of, the documents described in the Credit Agreement (the "Security
Documents"). Reference is made to the Security Documents for a description
of the property covered thereby and the rights, remedies and obligations of
the holder hereof in respect thereto.
Subject to the expiration of any applicable period of grace provided for
in the Credit Agreement, in the event of (a) any default in any payment of
the principal of or interest on this Note when due and payable, or (b) any
other Event of Default (as defined in the Credit Agreement), then the whole
principal sum of this Note plus accrued interest and all other obligations
of Borrower to holder, direct or indirect, absolute or contingent, now
existing or hereafter arising, shall, at the option of Payee,
If Borrower fails to pay any amount due under this Note and Payee has to
take any action to collect the amount due or to exercise its rights under the
Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the indebtedness or to
foreclose the Security Documents or to enforce Payee's rights under the
Security Documents, then Borrower agrees to pay on demand all r
Borrower waives presentment, notice of dishonor and protest, and assents
to any extension of time with respect to any payment due under this Note, to
any substitution or release of collateral and to the addition or release of
any party, except as provided in the Credit Agreement. No waiver of any
payment or other right under this Note shall operate as a waiver of any other
payment or right.
If any provision in this Note shall be held invalid, illegal or
unenforceable in any jurisdiction, the validity, legality or enforceability
of any defective provisions shall not be in any way affected or impaired in
any other jurisdiction.
No delay or failure of the holder of this Note in the exercise of any
right or remedy provided for hereunder shall be deemed a waiver of such right
by the holder hereof, and no exercise of any right or remedy shall be deemed
a waiver of any other right or remedy that the holder may have.
All notices given hereunder shall be given as provided in the Credit
Agreement.
At the option of the holder hereof, an action may be brought to enforce
this Note in the District Court in and for the City and County of Denver,
State of Colorado, in the United States District Court for the District of
Colorado or in any other court in which venue and jurisdiction are proper.
Borrower and all signers or endorsers hereof consent to venue and jurisdiction
in the District Court in and for the City and County of Denver, State of
Colorado and in the United States District Court for the
This Note is to be governed by and construed according to the laws of the
State of Colorado.
SANTA BARBARA PARTNERS
By: Hallador Production Company,
General Partner
By:/s/Victor P. Stabio,
President
HALLADOR PETROLEUM, LLP
By: Hallador Petroleum Company,
General Partner
By:/s/Victor P. Stabio,
President
EXHIBIT B
ADVANCE REOUEST
, 199_
U.S. Bank National Association
918 Seventeenth Street, Suite 300
Denver, Colorado 80202
Attention: Monte E. Deckerd
Gentlemen:
1. This Advance Request is delivered to you pursuant to Article II
of the Credit Agreement dated as of March 10, 1999 (the "Credit Agreement"),
among Santa Barbara Partners, Hallador Petroleum, LLP and U.S. Bank National
Association. Except as otherwise defined herein, terms defined in the Credit
Agreement shall have the same meanings when used herein.
2. Borrowers hereby request an Advance as follows:
(a) Type of Advance (Oil and Gas or Securities):
(b) Proposed Date of Advance:
(c) Amount of Advance:
3. Borrowers hereby represent and warrant that as of the date
hereof and as of the date of the Advance requested hereunder, all statements
contained in Section 4.2 of the Credit Agreement are and will be true and
correct in all material respects.
4. Borrowers agree that if, at any time prior to the date of the
Advance requested by Borrowers hereunder, any representation or warranty of
Borrowers contained herein is not true and correct as of such time, Borrowers
will immediately so notify USB. Except to the extent of any such notification
by Borrowers, the acceptance by Borrowers of any Advance requested hereunder
shall be deemed a re-certification by Borrowers as of the date of such
Advance of the representations and warranties made by B
SANTA BARBARA PARTNERS
By: Hallador Production Company,
General Partner
By:/s/Victor P. Stabio
President
HALLADOR PETROLEUM, LLP
By: Hallador Petroleum Company,
General Partner
By: /s/Victor P. Stabio
President
B-2
EXHIBIT C
REQUEST FOR ISSUANCE OF LETTER OF CREDIT
, 199_
U.S. Bank National Association
918 Seventeenth Street, Suite 300
Denver, Colorado 80202
Attention: Monte E. Deckerd
Gentlemen:
1. This Request for Issuance of Letter of Credit is delivered to
you pursuant to Article II of the Credit Agreement dated as of March 10, 1999
(the "Credit Agreement"), among Santa Barbara Partners, Hallador Petroleum,
LLP and U.S. Bank National Association. Except as otherwise defined herein,
terms defined in the Credit Agreement shall have the same meanings when used
herein.
2. Borrowers hereby request that USB issue a Letter of Credit as
follows:
(a) Name of Beneficiary:
(b) Proposed Issuance Date:
(c) Expiration Date:
(d) Face Amount:
(e) Payment Instructions (if any):
3. Borrowers hereby represent and warrant that as of the date
hereof and as of the date of issuance of the Letter of Credit requested
hereunder, all statements contained in Section 4.2 of the Credit Agreement
are and will be true and correct in all material respects.
4. Borrowers agree that if, at any time prior to the date of
issuance of the Letter of Credit requested by Borrowers hereunder, any
representation or warranty of Borrowers contained herein is not true and
correct as of such time, Borrowers will immediately so notify USB. Except
to the extent of any such notification by Borrowers, the acceptance by
Borrowers of any Letter of Credit requested hereunder shall be deemed a
recertification by Borrowers as of the date of such Advance of the
representat
SANTA BARBARA PARTNERS
By: Hallador Production Company,
General Partner
By:/s/Victor P. Stabio
President
EXHIBIT C
REOUEST FOR ISSUANCE OF LETTER OF CREDIT
, 199_
U.S. Bank National Association
918 Seventeenth Street, Suite 300
Denver, Colorado 80202
Attention: Monte E. Deckerd
Gentlemen:
1. This Request for Issuance of Letter of Credit is delivered to
you pursuant to Article II of the Credit Agreement dated as of March 10, 1999
(the "Credit Agreement"), among Santa Barbara Partners, Hallador Petroleum,
LLP and U.S. Bank National Association. Except as otherwise defined herein,
terms defined in the Credit Agreement shall have the same meanings when used
herein.
2. Borrowers hereby request that USB issue a Letter of Credit as
follows:
(a) Name of Beneficiary:
(b) Proposed Issuance Date:
(c) Expiration Date:
(d) Face Amount:
(e) Payment Instructions (if any):
3. Borrowers hereby represent and warrant that as of the date
hereof and as of the date of issuance of the Letter of Credit requested
hereunder, all statements contained in Section 4.2 of the Credit Agreement
are and will be true and correct in all material respects.
4. Borrowers agree that if, at any time prior to the date of
issuance of the Letter of Credit requested by Borrowers hereunder, any
representation or warranty of Borrowers contained herein is not true and
correct as of such time, Borrowers will immediately so notify USB. Except to
the extent of any such notification by Borrowers, the acceptance by Borrowers
of any Letter of Credit requested hereunder shall be deemed a recertification
by Borrowers as of the date of such Advance of the representat
SANTA BARBARA PARTNERS
By: Hallador Production Company,
General Partner
By:/s/Victor P. Stabio
President
HALLADOR PETROLEUM, LLP
By: Hallador Petroleum Company,
General Partner
By:/s/Victor P. Stabio
President
EXHIBIT D
INTEREST RATE ELECTION
, 199_
U.S. Bank National Association
918 Seventeenth Street, Suite 300
Denver, Colorado 80202
Attention: Monte E. Deckerd
Gentlemen:
1. This Interest Rate Election is delivered to you pursuant to
Section 2.4(b) of the Credit Agreement dated as of March 10, 1999 (the
"Credit Agreement"), among Santa Barbara Partners, Hallador Petroleum, LLP
and U.S. Bank National Association. Except as otherwise defined herein,
terms defined in the Credit Agreement shall have the same meanings when used
herein.
2. Borrowers hereby elect a LIBOR Tranche as follows:
(a) Amount of LIBOR Tranche:
(b) Beginning Date of LIBOR Interest Period:
(c) Length of LIBOR Interest Period (Months):
(d) Oil and Gas Facility or Securities Facility:
3. Borrowers hereby represent and warrant that as of the date
hereof and as of the requested beginning date of the LIBOR Interest Period,
all statements contained in Section 4.2 of the Credit Agreement are and will
be true and correct in all material respects.
4. Borrowers agree that if, at any time prior to the beginning
date of the LIBOR Interest Period requested by Borrowers hereunder, any
representation or warranty of Borrowers contained herein is not true and
correct as of such time, Borrowers will immediately so notify USB. Except
to the extent of any such notification by Borrowers, the beginning of any
LIBOR Interest Period as to any LIBOR Tranche requested hereunder shall be
deemed a re-certification by Borrowers as of such date of the represe
SANTA BARBARA PARTNERS
By: Hallador Production Company,
General Partner
By:/s/Victor P. Stabio
President
HALLADOR PETROLEUM, LLP
By: Hallador Petroleum Company,
General Partner
By:/s/Victor P. Stabio
President
Exhibit 10.2
FIRST AMENDMENT OF CREDIT AGREEMENT
THIS FIRST AMENDMENT OF CREDIT AGREEMENT (this "Amendment"), dated as of
April 25, 2000, is by and among SANTA BARBARA PARTNERS, an Oklahoma general
partnership ("SBP"), and HALLADOR PETROLEUM, LLP, a Colorado limited
partnership ("Hallador"), and U.S. BANK NATIONAL ASSOCIATION, a national banking
association (herein called "USB"). SBP and Hallador are herein collectively
called "Borrowers."
RECITALS
A. Borrowers and USB entered into a Credit Agreement dated as of
March 10, 1999 (the "Credit Agreement"), in order to set forth the terms upon
which USB would make available to Borrowers an oil-and-gas-based credit
facility for making advances and issuing letters of credit upon the request of
Borrowers and a securities-based credit facility for making advances upon the
request of Borrowers. The Credit Agreement provides for the terms by which
such credit facilities are to be governed and repaid. Capitalized terms used
herein but not refined herein shall have the same meanings as set forth in the
Credit Agreement.
B. Borrowers and USB have agreed that the maximum principal amount
of the "Oil and Gas Facility" (as defined in the Credit Agreement) should be
increased, that the "Securities Facility" (as defined in the Credit Agreement)
should be cancelled and that a minimum liquidity covenant should be added to
the Credit Agreement.
AMENDMENT
NOW, THEREFORE, in consideration of $10.00 and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Credit Agreement. The Credit Agreement shall be, and hereby
is, amended as follows, effective as of the date hereof:
(a) The definition of "Borrowing Base (Oil and Gas)" in
Section 1.1 on page 2 of the Credit Agreement shall be deleted and the
following shall be substituted therefor:
"Borrowing Base (Oil and Gas)" means, at any time prior to the
Maturity Date, the aggregate loan value of all Borrowing Base Properties, as
determined by USB in its sole and absolute discretion, using such assumptions
as to pricing, discount factors, discount rates, expenses and other factors as
USB customarily uses as to borrowing-base oil and gas loans at the time such
determination is made; provided that the Borrowing Base (Oil and Gas) for the
time period from April 25, 2000 through the date that the October 31, 2000
redetermination of the Borrowing Base (Oil and Gas) becomes effective shall be
$3,900,000, unless Borrowers and USB hereafter mutually agree upon a different
amount or unless the Borrowing Base (Oil and Gas) is redetermined pursuant to
Section 2.10 below prior to such date.
(b) The "Borrowing Base (Securities)" shall be set at zero
for all times on or after April 25, 2000.
(c) The definition of "Commitment Amount (Oil and Gas)" in
Section 1.1 on page 3 of the Credit Agreement shall be deleted and the
following shall be substituted therefor:
"Commitment Amount (Oil and Gas)" means, at any time,
the least of: (a) $3,900,000, (b) the Borrowing Base (Oil and Gas) at that
time, or (c) such lesser amount as may be elected by Borrowers in accordance
with the provisions of Section 2.10 below.
(d) The definition of "Commitment Amount (Securities)" in
Section 1.1 on page 3 of the Credit Agreement shall be deleted and the
following shall be substituted therefor:
"Commitment Amount (Securities)" means, at any time, $0.
(e) Section 2.10(b) on page 14 of the Credit Agreement shall be
deleted and the following shall be substituted therefor:
(b) No calculations of the Borrowing Base (Securities)
shall be required after April 25, 2000.
(f) Section 6.2(a) on page 32 of the Credit Agreement shall be
deleted and the following shall be substituted therefor:
(a) Financial Covenants. (1) Borrowers will not permit
the Funded Debt Ratio to be greater than 50 percent as of the end of any Fiscal
Quarter.
(2) Borrowers will at all times maintain unencumbered
cash and unencumbered marketable securities having an aggregate fair value of
not less $1,000,000.
2. Loan Documents. All references in any document to the Credit
Agreement shall be deemed to refer to the Credit Agreement, as amended pursuant
to this Amendment.
3. Representations and Warranties. Borrowers hereby certify to USB
that, as of the date of this Amendment, all of Borrowers' representations and
warranties contained in the Credit Agreement are true, accurate and complete in
all material respects, no Default has occurred and no event has occurred which,
with the giving of notice, the lapse of time, or both, would constitute a
Default.
4. Continuation of the Credit Agreement. Except as specified in
this Amendment, the provisions of the Credit Agreement shall remain in full
force and effect, and if there is a conflict between the terms of this
Amendment and those of the Credit Agreement or any other document executed
and delivered in connection therewith, the terms of this Amendment shall
control.
5. Expenses. Borrowers shall pay all reasonable expenses incurred
in connection with the transactions contemplated by this Amendment, including
without limitation all reasonable fees and expenses of USB's attorney and all
costs incurred in filing and recording any applicable Security Documents.
6. Miscellaneous. This Amendment shall be governed by and
construed under the laws of the State of Colorado and shall be binding upon and
inure to the benefit of the parties hereto and their successors and assigns.
This Amendment may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.
EXECUTED as of the date first above written.
SANTA BARBARA PARTNERS
By: Hallador Production Company,
General Partner
By: /S/Victor P. Stabio
Victor P. Stabio,
President
HALLADOR PETROLEUM, LLP
By: Hallador Petroleum Company,
General Partner
By: /S/Victor P. Stabio
Victor P. Stabio,
President
U.S. BANK NATIONAL ASSOCIATION
By: /s/Monte E. Deckerd
Monte E. Deckerd,
Vice President
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 2006
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2994
<PP&E> 21148
<DEPRECIATION> 14480
<TOTAL-ASSETS> 10823
<CURRENT-LIABILITIES> 558
<BONDS> 1231
0
0
<COMMON> 71
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10283
<SALES> 0
<TOTAL-REVENUES> 1972
<CGS> 0
<TOTAL-COSTS> 1462
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 357
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