Contract
This
instrument and the rights and obligations evidenced hereby are subordinate
in
the manner and to the extent set forth in that certain Debt Subordination
Agreement (the “Subordination
Agreement”)
dated as of June 1, 2006, between Sunrise Coal, LLC and Old National Bank to
the
Senior Debt (as defined therein), as the same may be amended from time to time,
as more particularly described in the Subordination Agreement, and each holder
of this instrument, by its acceptance hereof, shall be bound by the provisions
of the Subordination Agreement.
PROMISSORY
NOTE
$5,000,000.00 Denver,
Colorado
June
1,
2006
FOR
VALUE
RECEIVED, SUNRISE COAL, LLC, an Indiana limited liability company (the
“Borrower”), hereby unconditionally promises to pay ON DEMAND to the order of
HALLADOR PETROLEUM COMPANY, a Colorado corporation (“Lender”),
at
0000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, or at such other
address as the holder of this Promissory Note (this “Note”)
may
specify in writing, in lawful money of the United States of America and in
immediately available funds, the principal amount of up to FIVE MILLION DOLLARS
AND NO/00 ($5,000,000.00) (the “Maximum
Principal Amount”),
or,
if less, the then outstanding aggregate principal amount of all advances as
set
forth on Schedule A attached hereto and updated from time to time by Borrower
and Lender, and to pay interest on the unpaid principal amount hereof from
time
to time at a rate of eight percent (8%) per annum (the “Base
Rate”),
no
later than five days after the date on which Lender demands payment of this
Note, or the date which is five years after the date of this Note (as first
set
forth above) if no such demand is made before such date (the “Maturity
Date”)
if not
sooner paid.
WHEREAS,
Borrower must have funds immediately available in order to continue its
development of the Carlisle coal mine (collectively, the “Project”)
located near Terre Haute, Indiana.
WHEREAS,
Borrower and Lender have entered into a letter of intent with respect to a
proposed investment by Lender in Borrower (the “Letter
of Intent”)
and
Lender therefore desires that Borrower continue the development of the
Project.
Section
1. Advances.
Borrower may request advances under this Note from time to time, in
form
and substance acceptable to Lender
in
Lender’s
sole
and absolute discretion;
provided,
however,
the
total principal amount outstanding at any time under this Note shall not exceed
the Maximum Principal Amount. Notwithstanding any provision to the contrary
herein, each advance requested by Borrower under this Note may be approved
or
rejected by Lender in Lender’s sole and absolute discretion. If at any time the
aggregate principal amount outstanding under this Note exceeds the Maximum
Principal Amount, Borrower agrees to immediately repay to Lender such excess
amount, plus all accrued but unpaid interest thereon. Borrower may request
advances under this Note no more often than twice each calendar month. Lender
shall fund each approved advance under this Note within five Business Days
following receipt of such request and all supporting instruments and documents
which Lender may require. Subject to the terms and conditions in this Note,
Borrower may borrow and repay, but not reborrow under this Note.
Section
2. Payment
of Principal and Interest.
Interest shall accrue at the Base Rate on the outstanding principal balance
of
this Note from the date such principal amount is disbursed to Borrower until
the
outstanding principal balance of this Note is paid in full. Borrower shall
pay
such interest and the unpaid principal balance of this Note on the Maturity
Date.
Notwithstanding anything to the contrary herein, Lender
shall not demand payment of this Note any earlier than the date that is at
least
twelve months after the date hereof; provided that notwithstanding the foregoing
Lender may accelerate this Note at any time in accordance with the provisions
of
Section 10 hereof.
(a) Payment
on Next Succeeding Business Day.
If the
payment date falls on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall
in
such case be included in the computation of the payment of interest. For
purposes of this Note, “Business
Day”
means
a
day of the year on which banks are not required or authorized to close in
Denver, Colorado or New York, New York.
(b) Maturity
Date.
On the
Maturity Date, Borrower shall pay and perform in full all Obligations then
outstanding. Borrower shall make payment under this Note not later than 11:00
A.M. (New York City time) on
the
Maturity Date in
U.S.
dollars to Lender by wire transfer of same day funds to an account specified
by
Lender. All sums paid by Borrower in connection with this Note shall be applied
first to accrued but unpaid interest, and next to principal remaining to be
paid
under this Note, and then to any other Obligations of Borrower hereunder;
provided, however, that Lender may at its option refuse to accept any prepayment
not otherwise permitted under this Note.
(c) Obligations.
For
purposes of this Note, the “Obligations”
are
Borrower’s obligation to pay principal, interest, charges, guarantees,
indemnities and other amounts payable under this Note, and in the event of
any
proceeding for the collection or enforcement of the Obligations, after an Event
of Default shall have occurred and be continuing, the expenses of any exercise
by Lender of its rights under this Note, together with attorney’s fees and court
costs.
Section
3. Prepayment.
(a) Optional
Prepayments.
Borrower may, upon at least three days’ notice to Lender, stating the proposed
date and aggregate principal amount of the prepayment, prepay the outstanding
principal amount of this Note in whole or in part, together with accrued
interest to the date of such prepayment on the principal amount so prepaid;
provided,
however,
that
each partial prepayment shall be in an outstanding principal amount not less
than $100,000 or an integral multiple of $50,000 in excess thereof (or, if
the
outstanding principal amount of this Note is less, such outstanding principal
amount).
(b) Mandatory
Prepayments.
Prepayments of this Note shall be mandatory immediately upon any sale or other
disposition of all or substantially all of the direct or indirect assets of
Borrower in one or a series of transactions, whether by sale, lease, transfer,
loss, damage, destruction, condemnation or otherwise, Borrower shall prepay
the
Obligations under this Note in an amount equal to such proceeds, together with
all accrued and unpaid interest on the principal amount being prepaid through
the date of prepayment.
Section
4. Failure
to Comply.
If
Borrower fails to comply with any of its obligations set forth in Article 2
of
the Letter of Intent, which Letter of Intent Borrower acknowledges is a material
consideration for Lender’s participation in this Note, or any documents or
agreements entered into in connection therewith, Borrower shall immediately
prepay all of the principal amount then outstanding under this Note, together
with all accrued and unpaid interest on such principal amount and any other
Obligations of Borrower due under this Note.
Section
5. Default
Interest.
If all
or any portion of the principal amount of this Note or any interest thereon
is
not paid on or prior to the date such amounts are due, such overdue amounts
shall thereafter bear interest at the Base Rate plus five percent (5%) per
annum. If this Note is not paid when due, Borrower further promises to pay
all
costs of collection, foreclosure fees, and reasonable attorneys' fees incurred
by the holder, whether or not suit is filed hereon, together with the fees,
costs and expenses as provided in this Note.
Section
6. Limitation
of Interest Rate.
The
interest rate on this Note is expressly limited so that in no contingency
whatsoever, whether by reason of acceleration of the maturity of this Note
or
otherwise, shall the interest contracted for or charged or received by any
Lender exceed the maximum amount permissible under applicable law. If, from
any
circumstance whatsoever, interest would otherwise be payable to Lender in excess
of the maximum lawful amount, the interest payable to Lender shall be reduced
to
the maximum amount permitted under applicable law, and the amount of interest
for any subsequent period, to the extent less than that permitted by applicable
law, shall to that extent be increased by the amount of such
reduction.
Section
7. Taxes.
Any and
all payments by Borrower under this Note shall be made free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all interest, penalties and other
liabilities with respect thereto, excluding, in the case of Lender, taxes
imposed on its net income, and franchise taxes imposed on it, by the United
States (other than United States withholding taxes) or the jurisdiction under
the laws of which Lender is organized or any political subdivision or taxing
authority thereof or therein (all such non-excluded taxes, levies, imposts,
deductions, charges, and withholdings and interest, penalties and other
liabilities being hereinafter referred to as “Taxes”).
If
Borrower shall be required by law to deduct or withhold any Taxes from or in
respect of any sum payable under this Note, then (i) the sum payable shall
be increased as may be necessary so that after making all required deductions
and withholdings of Taxes (including deductions and withholdings of Taxes
applicable to additional sums payable under this Section 6), Lender
receives an amount equal to the sum it would have received had no such
deductions or withholdings of Taxes been made, (ii) Borrower shall make
such deductions and withholdings, and (iii) Borrower shall pay the full
amount deducted or withheld to the relevant taxation authority or other
authority in accordance with applicable law.
Without
prejudice to the survival of any other agreement of Borrower hereunder, the
agreements and obligations of Borrower contained in this Section 6 shall survive
the payment in full of any and all amounts due under this Note.
Section
8. Representations,
Warranties and Covenants of Borrower.
Borrower
represents and warrants that the following statements are true, correct and
complete:
(a) Borrower
(i) is a limited liability company duly organized and validly existing
under the laws of the State of Indiana, (ii) is duly qualified and in good
standing in each other jurisdiction in which it owns or leases property or
in
which the conduct of its business requires it to so qualify or be licensed,
and
(iii) has all requisite power and authority to own or lease and operate its
properties and to conduct
its business as presently conducted and to execute and deliver, and to perform
its obligations under, this Note.
(b) This
Note
has been duly executed and delivered by Borrower and is the legal, valid and
binding obligation of Borrower, enforceable against Borrower in accordance
with
its terms.
Section
9. Covenants.
So long
as any Obligations under this Note shall remain outstanding, Borrower
shall:
(a) use
the
proceeds of this Note solely for working capital and for third-party costs
and
expenses related to the development and construction of the Project, including
the purchase of materials, equipment and services physically incorporated into
the Project, and for costs and expenses related to the closing of the Howesville
coal mine as approved in advance by Lender in its sole and absolute discretion;
(b) comply
with all applicable laws, rules, regulations and orders, including all
applicable laws regarding the protection and safety of the environment and
Borrower’s employees, applicable to Borrower’s operations and properties
noncompliance with which could have a material adverse effect on Borrower,
its
financial condition or its operations; and shall obtain and do all things
necessary to renew, extend and continue in effect all permits, licenses and
approvals necessary to operate its business in compliance with all applicable
laws;
(c) at
any
reasonable time and from time to time, upon reasonable prior notice, permit
Lender or any agents or representatives thereof to examine its records and
books, and visit its properties, including, but not limited to, the Project
sites, and to discuss its affairs, finances and accounts with any of Lender’s
managers, officers or directors and with its independent certified public
accountants;
(d) keep
proper books of record and account, in which full and correct entries shall
be
made of all financial transactions and the assets and businesses of Borrower
in
accordance with generally accepted accounting principles;
(e) pay
when
due all taxes, assessments and governmental charges and levies upon it or its
income, profits or property as well as all other material liabilities, except
those which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been set aside;
(f) give
Lender immediate notice of the receipt by Borrower of any notice of default
under any document, instrument or agreement evidencing Borrower’s indebtedness
for borrowed money to which Borrower is a party or by which it or its properties
are bound or affected, including, without limitation, the Credit Agreement
dated
as of April 19, 2006 by and between Borrower and Old National Bank (together
with all documents and instruments executed in connection therewith, the
“Senior
Credit Documents”),
together with a copy of such notice;
(g) not
engage in any business other than the ownership and operation of coal reserves
and coal mines and related businesses;
(h) not,
except as contemplated under the Letter of Intent, merge into or consolidate
with any other entity, acquire any other entity, allow any other entity to
merge
into it, materially change its form of organization or its business, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or sell, transfer, assign, discount, lease or otherwise dispose
of
any of its business assets except for in the ordinary course of business;
(i) not,
except as contemplated in the Senior Credit Documents, create, incur, assume
or
suffer to exist any indebtedness, nor
create
or suffer to exist any liens, charges or other encumbrances of any kind on
its
assets; and
(j) not
modify, amend, supplement, terminate, replace or waive any rights under any
material agreement relating to the Project without Lender’s prior written
consent, which consent shall not be unreasonably withheld.
Section
10. Events
of Default.
Upon
the occurrence and continuance of any one or more of the following (each an
“Event
of Default”),
all
amounts then remaining unpaid on this Note may become, or may be declared to
be,
immediately due and payable as provided herein:
(a) Borrower
fails
to pay
when due any principal, interest or other Obligations when the same becomes
due
and payable hereunder, and such failure continues for a period of three (3)
days
following the date upon which any such payment was due.
(b) Borrower
breaches any covenant or any other term or condition of this Note in any
material respect and, in each such case, such breach, if subject to cure,
continues for a period of five (5) days after the occurrence
thereof.
(c) Any
representation or warranty made by Borrower herein shall be false or misleading
in any material respect on the date that such representation or warranty was
made or deemed made.
(d) Borrower
shall generally not pay its debts as such debt becomes due, or shall admit
in
writing its inability to pay debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against Borrower seeking to adjudicate it as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in
the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding (including, without limitation, the entry of an order
for
relief against, or the appointment of a receiver, trustee, custodian or other
similar official for, Borrower) shall occur, or the action to authorize any
of
the actions set forth above in this Section 9 (d).
(e) Any
money
judgment, writ or similar final process shall be entered or filed against
Borrower or any of its real or personal property or other assets for more than
$50,000, and shall remain unvacated, unbonded or unstayed for a period of thirty
(30) days.
(f) Borrower’s
failure to perform or comply in all material respects with its obligations
under
Article 2 of the Letter of Intent or any related agreement with
Lender.
(g) The
occurrence of a change in the controlling ownership of Borrower.
(h) The
occurrence of a default or event of default (which has not been cured during
any
applicable cure or grace period) under any document, instrument or agreement
evidencing Borrower’s indebtedness for borrowed money, including, without
limitation, the Senior Credit Documents.
Section
11. Remedies.
At any
time an Event of Default exists or has occurred and is continuing, Lender shall
have all rights and remedies provided in this Note and under applicable law,
all
of which rights and remedies may be exercised without notice to or consent
by
Borrower, except as such notice or consent is expressly provided for hereunder
or required by applicable law. All rights, remedies and powers granted to Lender
hereunder or under applicable law are cumulative, not exclusive and enforceable,
in Lender’s discretion, alternatively, successively, or concurrently on any one
or more occasions, and shall include, without limitation, the right to apply
to
a court of equity for an injunction to restrain a breach or threatened breach
by
Borrower of this Note. To the maximum extent permitted by law, Lender may,
at
any time or times, proceed directly against Borrower to collect the Obligations
owing by Borrower to Lender.
Without
limiting the foregoing, at any time an Event of Default exists or has occurred
and is continuing, Lender may, in its discretion and without limitation,
accelerate the payment of all Obligations owing by Borrower to Lender and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of
any
Event of Default described in Section 9 (d), all Obligations owing by Borrower
to Lender shall automatically become immediately due and payable).
Section
12. Miscellaneous.
(a) Lender
is
hereby authorized to record the date and amount of each payment or prepayment
of
the principal amount of this Note or any interest thereon on the schedules
annexed hereto and constituting a part hereof, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded,
provided that the failure to make any such recordation (or any error therein)
shall not limit or otherwise affect the obligations of Borrower under this
Note.
(b) Nothing
in this Note shall be construed to compel or require Borrower or Lender to
reach
a binding agreement on the transactions contemplated by the Letter of Intent
or
in any other respect. This Note does not create and is not intended to create
a
binding and enforceable agreement between Borrower and Lender with respect
to
such transactions or any potential business consolidation or other transaction,
and may not be relied upon by Borrower or Lender as the basis for a contract
by
estoppel or otherwise. A binding commitment with respect to the transactions
contemplated by the Letter of Intent or any other transactions contemplated
between Borrower and Lender can only result from the execution and delivery
of
definitive documents related to such transactions.
(c) All
notices and other communications required or permitted to be given or made
under
this Note shall be in writing and shall be given or made by mail (certified
or
registered, return receipt requested), by overnight courier, via facsimile
or by
personal delivery at the address specified below or at such other address as
shall be designated in a notice in writing:
If
to
Lender:
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Facsimile:
303.832.3013
If
to
Borrower:
Sunrise
Coal, LLC
0000
Xxxxx Xxxx 00
Xxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx
Xxxxxxxx
Facsimile: 812.894.3665
(d) Any
waiver of any rights under this Note is neither valid nor effective unless
made
in writing and signed by the holder of this Note. No delay or omission on the
part of the holder of this Note in exercising any right shall operate as a
waiver thereof or of any other right. A waiver by the holder of this Note upon
any one occasion shall not be construed as a bar or waiver of any right or
remedy on any future occasion. Should any one or more of the provisions of
this
Note be determined illegal or unenforceable, all other provisions shall
nevertheless remain effective. This Note cannot be changed, modified, amended,
or terminated except in writing and signed by Lender and Borrower.
(e) This
Note
is made for the benefit of, and shall be enforceable by, Lender and its
successors and assigns.
(f) All
parties now and hereafter liable with respect to this Note, whether maker,
principal, surety, guarantor, endorser or otherwise, hereby waive presentment,
demand, protest and all other notices of any kind.
(g) This
Note
shall be governed by, and construed and enforced in accordance with, the laws
of
the State of Colorado, without reference to the principles of conflicts of
laws
thereof.
(h) THE
UNDERSIGNED HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY COLORADO STATE COURT OR
FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN DENVER, COLORADO,
AND
ANY APPELLATE COURT THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF
ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COLORADO STATE
COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE UNDERSIGNED
HEREBY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL
BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT
OR
IN ANY OTHER MANNER PROVIDED BY LAW. THE UNDERSIGNED, TO THE EXTENT IT MAY
LEGALLY DO SO, HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF
ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND
THAT
THE HOLDER OF THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION 11 (h) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
UNDERSIGNED TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
IN
WITNESS WHEREOF,
the
undersigned has executed this Note as of the date first above
written.
BORROWER:
SUNRISE
COAL, LLC
an
Indiana limited liability company
By: /S/XXXXX
X. XXXXXXXX
Xxxxx
X. Xxxxxxxx
Managing
Member and
Attorney-in-Fact
|
SCHEDULE
A
ADVANCES
AND REPAYMENTS OF AMOUNTS OUTSTANDING UNDER THE NOTE
Date
of Advance
|
Amount
of Advance
|
Date
of Repayment
|
Amount
of Repayment
|
Remaining
Balance of Under Line of Credit
|
Notation
Made By
|