SECURED PROMISSORY NOTE
$122,500.00 April 23, 1998
1. Principal.
For value received, SANTA BARBARA PARTNERS, an Oklahoma general
partnership ("Borrower"), HALLADOR PETROLEUM, LLP, a Colorado limited
liability partnership, HALLADOR PETROLEUM COMPANY, a Colorado corporation,
HALLADOR PRODUCTION COMPANY, a Colorado corporation, and TRIO PETROLEUM,
INC., a California corporation (collectively, "Maker"), jointly and
severally promise to pay to the order of TCW DR III ROYALTY PARTNERSHIP, a
California limited partnership ("Holder"), the principal sum of One
Hundred Twenty-Two Thousand Five Hundred and No/Hundredths Dollars
($122,500.00) at the times as set forth herein. This Secured Promissory
Note (the "Note") is issued in connection with that certain Term Loan
Agreement dated as of May 25, 1990 by and among Borrower, Trust Company of
the West, a California trust company, in the capacities set forth therein
("TCW"), and The TCW Commingled Debt and Royalty Fund IIIB, a California
Limited Partnership (as heretofore or hereafter amended, modified or
supplemented, from time to time, the "Term Loan Agreement") and in
connection with the execution by Holder of the Reconveyance of Overriding
Royalty Interest of even date herewith. As used herein, the term "Holder"
shall mean Holder and any subsequent holder of this Note, whichever is
applicable from time to time. Capitalized terms used herein without
definition shall have the meanings set forth in the Term Loan Agreement.
2. Maturity Date.
(a) The unpaid principal balance hereof and all other amounts
payable by Maker under the terms of the Loan Documents shall be due and
payable on June 1, 1999 (the "Maturity Date") unless sooner paid or as
otherwise provided herein or in the Term Loan Agreement.
(b) If the Maturity Date should fall on a day other than a
Business Day, payment of the outstanding principal and all other amounts
due under the terms hereof shall be made on the immediately preceding
Business Day.
3. Prepayment.
Upon not less than thirty (30) Business Days' prior notice in
writing to Holder, Maker may prepay all or, in an amount not less than
$25,000, any part of the outstanding principal balance of this Note
without premium or penalty.
4. Interest Rate; Calculation.
(a) Any principal amount not paid when due, whether on the
Maturity Date, by notice of prepayment, by acceleration or otherwise,
shall bear interest at the rate of the lesser of sixteen percent (16%) per
annum or the maximum rate permitted by law.
(b) Interest shall be computed on the basis of a 360-day year
and on the actual number of days elapsed in any quarter with respect to
periods of less than one Calendar Quarter.
5. No Deductions.
All payments of principal on this Note shall be made without
deduction of any present and future taxes, levies, imposts, deductions,
charges or withholdings, which amounts shall be paid by Maker. Maker will
pay the amounts necessary, such that the gross amount of the principal
received by Holder is not less than that required by this Note. All stamp
and documentary taxes shall be paid by Maker. If, notwithstanding the
foregoing to the contrary, Holder pays such taxes, Maker will reimburse
Holder for the amount paid. Maker will furnish Holder official tax
receipts or other evidence of payment of all taxes.
6. Manner of Payment.
All payments of principal hereunder shall be made to Holder in
immediately available funds at Sanwa Bank California, ABA Routing No.
122003516, Trust Operations Center, 1977 Saturn Street, Monterey Park,
California 91754 (for credit to the account of Trust Company of the West,
Account No. 40012007, as Agent, Attention: TCW Wire Transfer Center) or at
such other place and in such other manner as shall be designated by Holder
in writing in accordance with the Term Loan Agreement. Payments shall be
deemed received by Holder on the date of transfer if received by such
payee bank or other designee of Holder duly appointed in accordance with
the Term Loan Agreement, at or before 11:30 a.m. Los Angeles time on the
date of transfer. Payments received after that time shall be deemed
received by the following Business Day.
7. Security.
This Note is one of Maker's Secured Promissory Notes issued in
connection with and entitled to the benefits under the Term Loan Agreement
to which reference is hereby made for a complete statement of the terms
and conditions under which the Loan evidenced hereby was made. This Note
is secured by and entitled to the benefits of certain security agreements,
deeds of trust, mortgages, financing statements and other documents
delivered pursuant to and referred to in the Term Loan Agreement,
including, without limitation, the following: that certain Deed of Trust,
Mortgage, Security Agreement (Personal Property Including Hydrocarbons),
Assignment of Production and Fixture Filing dated as of May 1, 1990,
executed by Borrower, as Trustor, to Ronald E. Robison, as Trustee, for
the benefit of Holder and other entities described therein, and recorded
May 25, 1990 as Instrument No. 90-035585 in the Official Records of Santa
Barbara County, California, as amended, creating a lien on, and security
interest in, certain real and personal property described therein and the
production and sales of proceeds therefrom or attributable thereto and
that certain Security Agreement executed by Borrower encumbering certain
personal property of Borrower described therein.
8. Remedies.
Upon the occurrence of a Default, as defined in the Term Loan
Agreement, the entire outstanding balance of the principal amount hereof
shall immediately become due and payable in the manner, upon the
conditions and with the effect provided in the Term Loan Agreement, and,
in addition, Holder may, pursuant to the Loan Agreement, exercise all
other rights and remedies available to it hereunder or under any or all of
the Loan Documents. No delay or omission on the part of Holder hereof in
exercising any right under this Note or under any of the Loan Documents
shall operate as a waiver of such right.
9. Waiver.
Maker hereby waives diligence, presentment, protest and demand,
notice of protest, dishonor and nonpayment of this Note and expressly
agrees that, without in any way affecting the liability of Maker
hereunder, Holder may extend the Maturity Date, the Monthly Payment Dates,
and any other maturity date or the time for payment of any installment due
hereunder, accept additional security, release any party liable hereunder
and release any security now or hereafter securing this Note. Maker
further waives, to the full extent permitted by law, the right to plead
any and all statutes of limitations as a defense to any demand on this
Note, or on any deed of trust, security agreement, lease assignment,
guaranty or other agreement now or hereafter securing this Note.
10. Attorneys' Fees.
If this Note is not paid when due or if any Default (as defined
in the Term Loan Agreement) occurs, Maker promises to pay all costs of
enforcement and collection, including, but not limited to, Holder's
reasonable attorneys' fees and costs, whether or not any action or
proceeding is brought to enforce the provisions hereof.
11. Severability.
Every provision of this Note is intended to be severable. In
the event any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable.
12. Limitation of Liability.
Except as specifically set forth to the contrary in the Loan
Agreement, this Note or other Loan Documents, (a) TCW and the Holders
shall not seek, or be entitled to, nor shall any Partner be liable for,
any judgment for a deficiency or other money judgment against Trio
Petroleum, Inc. ("Trio"), in connection with any action to foreclose any
Mortgage, or any action brought under the Loan Agreement, the Notes, the
Mortgage, the Security Agreement, or any other Security Documents or any
other Loan Document; and (b) in the event any suit is brought on any Loan
Document or concerning the Obligations as a part of judicial proceedings
to foreclose any Mortgage, any judgment obtained in such suit shall by its
terms constitute a lien on, and shall be enforced only against Maker
(excluding Trio), any property of Maker (excluding Trio), the Oil and Gas
Interests, any other property conveyed or secured by the Mortgages
(together with the income therefrom, any funds held by the Agent or the
Holders pursuant to this Agreement, insurance and condemnation proceeds
and escrow and security deposits) and any other Property of Maker
(excluding Trio) serving as Collateral for the Loans, and not against any
assets or property of Trio or its respective officers, directors,
shareholders or partners or any or them; provided, however, that Trio
shall be fully and personally liable for (i) any breach of any covenant,
representation, agreement or condition contained in Sections 3.1 and 6.12
of the Loan Agreement relating to Environmental Law Requirements which
occurs during the period, if any, that Trio or Trio's Affiliate acts as
operator of the Oil and Gas Interests or other Collateral or otherwise
directly engages in the operation, management or development of the Oil
and Gas Interests or other Collateral, (ii) any fraud or material
misrepresentation made by Trio if Trio knew or, with the exercise of due
diligence, should have known of its falseness, (iii) any willful
misapplication of any insurance proceeds, or condemnation awards, or of
any production proceeds (including without limitation, ORR Interest
proceeds), Net Cash Flow or other amounts by such Partner(s), which
amounts were required by the Loan Agreement, the Notes, the Mortgages or
the ORRI Conveyances to be paid or applied in a specified manner with
respect to the Oil and Gas Interests or other Collateral, or (iv) any
distributions or other payments made to, by or with the approval of Trio
in violation of Section 4.1 of the Loan Agreement. Nothing contained in
this Section 13 shall be deemed to limit the liability of Maker (other
than Trio) with respect to its Obligations or constitute a release or
impairment of the Obligations, or the Liens of the Mortgages and other
Security Documents on the Oil and Gas Interests and other Collateral, or
shall preclude TCW or the Agent from obtaining or enforcing any judgment
against Maker or from foreclosing the Mortgages in case of any Default, or
preclude TCW, Agent or any Holder from enforcing any of the other rights
of TCW, Agent or any Holder under the Loan Agreement, or from enforcing
any of the rights of TCW, the Agent, or any Holder against any Person
other than Trio at any time liable (under any guaranty, bond, policy of
insurance or otherwise) for the payment of the Obligations or for the
performance and observance of any of the covenants, agreements and
conditions contained in this Agreement, the Notes,
the Mortgages or the other Loan Documents.
13. Joint and Several Liability.
Subject to Section 12 above, if the Maker consists of more than
one person or entity, the obligations of Maker under this Note shall be
joint and several between and among such persons and entities, such that
each such person or entity shall be fully responsible for the Maker's full
performance of its obligations hereunder.
14. Number and Gender.
In this Note the singular shall include the plural and the
masculine shall include the feminine and neuter gender, and vice versa, if
the context so requires.
15. Headings.
Headings at the beginning of each numbered Paragraph of this
Note are intended solely for convenience and are not to be deemed or
construed to be a part of this Note.
16. CHOICE OF LAW.
THIS NOTE SHALL BE DEEMED A CONTRACT AND INSTRUMENT MADE UNDER
THE LAWS OF THE STATE OF CALIFORNIA AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA
AND THE LAWS OF THE UNITED STATES OF AMERICA.
17. Amendment.
The terms of this Note are subject to amendment only in the
manner provided in the Term Loan Agreement.
18. Conflicts.
Notwithstanding anything to the contrary contained here within,
if any of the express terms and conditions of this Note conflict with the
express terms and conditions contained within the Term Loan
Agreement, the Term Loan Agreement shall control.
IN WITNESS WHEREOF, Maker has caused its duly authorized
representative to execute this Note as of the date first above written.
SANTA BARBARA PARTNERS,
an Oklahoma general partnership
By: HALLADOR PRODUCTION COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
By: TRIO PETROLEUM, INC.
a California corporation,
its General Partner
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PETROLEUM, LLP,
a Colorado limited liability
partnership
By: HALLADOR PETROLEUM COMPANY,
a Colorado corporation,
its General Partner
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
TRIO PETROLEUM, INC.,
a California corporation
By:/S/CHARLES C. HORACE
Charles C. Horace
President
HALLADOR PRODUCTION COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
HALLADOR PETROLEUM COMPANY,
a Colorado corporation
By:/S/VICTOR P. STABIO
Victor P. Stabio
President
This Note has not been registered under the Securities Act of 1933,
as amended, or registered or qualified under any state securities
laws. This Note has been acquired for investment and may not be
sold, transferred, pledged or hypothecated unless the proposed
transaction does not require registration or qualification under
federal or state securities laws.