FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-52
HONDO OIL & GAS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 95-1998768
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
410 East College Blvd, Roswell, New Mexico 88201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 625-8700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
The registrant has one class of common stock outstanding. As of August 9,
1994, 13,006,892 shares of registrant's $1 par value common stock were
outstanding.
1
HONDO OIL & GAS COMPANY
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE NINE MONTHS ENDED JUNE 30, 1994
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1 Financial Statements
Consolidated Balance Sheets as of
June 30, 1994 and September 30,1993 3
Consolidated Statements of Operations for
the three months ended June 30, 1994 and 1993 4
Consolidated Statements of Operations for
the nine months ended June 30, 1994 and 1993 5
Consolidated Statements of Cash Flows for
the nine months ended June 30, 1994 and 1993 6
Notes to Consolidated Financial Statements 8
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II - OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K 17
SIGNATURES 17
2
PART I
Item 1 FINANCIAL STATEMENTS
HONDO OIL & GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Information)
June 30, September 30,
1994 1993
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $838 $601
Accounts receivable 1,043 4,266
Inventory 137 770
Prepaid expenses and other 146 165
------------- -------------
Total current assets 2,164 5,802
Properties, net 13,863 15,910
Net assets of discontinued
operations (Note 2) 6,779 7,750
Other assets 1,120 680
------------- -------------
$23,926 $30,142
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $406 $1,871
Current portion of long-term debt 220 210
Accrued expenses and other 267 1,992
------------- -------------
Total current liabilities 893 4,073
Long-term debt, including $77,755 and $74,505,
respectively, payable to a related party 81,880 78,828
Deferred taxes (Note 5) 561 561
Other liabilities, including $1,174 in fiscal
1994 payable to a related party (Note 3) 4,186 2,495
------------- -------------
87,520 85,957
Shareholders' equity (deficit):
Common stock, $1 par value, 30,000,000
shares authorized; shares issued and
outstanding: 13,006,892 13,007 13,007
Additional paid-in capital 43,807 43,807
Accumulated deficit (120,408) (112,629)
------------- -------------
(63,594) (55,815)
------------- -------------
$23,926 $30,142
============= =============
The accompanying notes are an integral part of these financial statements.
3
HONDO OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Share and Per Share Data)
For the three months ended
June 30,
-----------------------------
1994 1993
------------- -------------
REVENUES
Sales and operating revenue $12 $91
Overhead reimbursement and other income 16 176
------------- -------------
28 267
------------- -------------
COSTS AND EXPENSES
Operating costs 77 218
Depreciation, depletion, and amortization 38 90
General and administrative 545 1,119
Costs of exploration and exploratory
dry holes -- 966
Interest on indebtedness including $1,174
and $849, respectively, to a related party 1,174 850
Loss on sale of assets 5 7
------------- -------------
1,839 3,250
------------- -------------
Loss from continuing operations
before income taxes (1,811) (2,983)
Income tax expense (Note 5) -- --
------------- -------------
Loss from continuing operations (1,811) (2,983)
Loss from discontinued operations (Note 2) (1,400) (2,800)
------------- -------------
Net Loss ($3,211) ($5,783)
============= =============
Loss per share:
Continuing operations ($0.14) ($0.23)
Discontinued operations (0.11) (0.22)
------------- -------------
Loss per share ($0.25) ($0.45)
============= =============
Weighted average common and common
equivalent shares outstanding 13,006,892 13,006,996
The accompanying notes are an integral part of these financial statements.
4
HONDO OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Share and Per Share Data)
For the nine months ended
June 30,
-----------------------------
1994 1993
------------- -------------
REVENUES
Sales and operating revenue $367 $112
Gain on sale of assets -- 170
Overhead reimbursement and other income 343 708
------------- -------------
710 990
------------- -------------
COSTS AND EXPENSES
Operating costs 516 281
Depreciation, depletion, and amortization 182 278
General and administrative 1,725 3,651
Costs of exploration and exploratory
dry holes 2 1,012
Interest on indebtedness including $3,424 and
$2,476, respectively, to a related party 3,424 2,487
Loss on sale of assets 1,240 --
------------- -------------
7,089 7,709
------------- -------------
Loss from continuing operations
before income taxes (6,379) (6,719)
Income tax expense (Note 5) -- --
------------- -------------
Loss from continuing operations (6,379) (6,719)
Loss from discontinued operations (Note 2) (1,400) (4,000)
------------- -------------
Net Loss ($7,779) ($10,719)
============= =============
Loss per share:
Continuing operations ($0.49) ($0.52)
Discontinued operations (0.11) (0.31)
------------- -------------
Loss per share ($0.60) ($0.83)
============= =============
Weighted average common and common
equivalent shares outstanding 13,006,892 13,006,980
The accompanying notes are an integral part of these financial statements.
5
<TABLE>
<CAPTION>
HONDO OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
For the nine months ended
June 30,
-----------------------------
1994 1993
------------- -------------
</CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Pretax loss from continuing operations ($6,379) ($6,719)
Adjustments to reconcile pretax loss from continuing
operations to net cash used by continuing operations:
Depreciation, depletion and amortization 182 278
(Gain) loss on sale of assets 1,240 (170)
Costs of exploratory dry holes -- 1,051
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 1,731 894
Inventory 633 (928)
Prepaid expenses and other 19 (230)
Other assets 72 (206)
Increase (decrease) in:
Accounts payable (1,465) (1,726)
Accrued expenses and other (755) (3,594)
Other liabilities 3,941 4,811
------------- -------------
Net cash used by continuing operations (781) (6,539)
------------- -------------
Pretax loss from discontinued operations (1,400) (4,000)
Adjustments to reconcile pretax loss from discontinued
operations to net cash used by discontinued operations:
Depreciation and amortization 3 2,206
Gain on sale of assets (6) (436)
Provision for losses, net of utilization 999 (3,716)
Decrease in operating assets -- 6,564
Decrease in operating liabilities -- (9,636)
------------- -------------
Net cash used by discontinued operations (404) (9,018)
------------- -------------
Net cash used by operating activities (1,185) (15,557)
------------- -------------
</TABLE>
(Continued)
6
<TABLE>
<CAPTION>
HONDO OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)
(In Thousands)
For the nine months ended
June 30,
-----------------------------
1994 1993
------------- -------------
</CAPTION>
<S> <C> <C>
Cash flows from investing activities:
Proceeds from sale of assets 1,467 3,201
Capital expenditures (857) (11,763)
------------- -------------
Net cash provided (used) by investing activities 610 (8,562)
------------- -------------
Cash flows from financing activities:
Proceeds from long-term borrowings 1,000 3,600
Principal payments on long-term debt (188) (227)
------------- -------------
Net cash provided by financing activities 812 3,373
------------- -------------
Net increase (decrease) in cash and cash equivalents
from all operations 237 (20,746)
Less net decrease in cash and cash equivalents from
discontinued operations -- (829)
------------- -------------
Net increase (decrease) in cash and cash equivalents
from continuing operations 237 (19,917)
Cash and cash equivalents at the beginning of the period 601 20,475
------------- -------------
Cash and cash equivalents at the end of the period $838 $558
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
HONDO OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
(All Dollar Amounts in Thousands)
1) Summary of Significant Accounting Policies
------------------------------------------
(a) Basis of Consolidation and Presentation
---------------------------------------
The consolidated financial statements of Hondo Oil & Gas Company
(hereinafter referred to as "Hondo Oil" or "the Company") include the
accounts of all subsidiaries, all of which are wholly-owned. All
significant intercompany transactions have been eliminated. The Hondo
Company (hereinafter referred to as "Hondo") owns 78% of Hondo Oil's
common stock.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. There has not been any
change in the Company's significant accounting policies except for
implementation of Statement of Financial Account Standards ("SFAS") No.
109, "Accounting for Income Taxes", as further described in Note 5.
There have not been any significant developments or changes in
contingent liabilities and commitments except as described in Note 6.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. The results for these interim periods are not
necessarily indicative of results for the entire year. These statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K for the fiscal year ended
September 30, 1993.
(b) Earnings Per Share
------------------
Net income (loss) per share amounts have been computed using the
weighted average number of common shares and dilutive common equivalent
shares outstanding. Fully diluted per share amounts are not presented
as the effect of the exercise of stock options is not significant.
(c) Inventory
---------
Inventory, which consists entirely of lease and well equipment in
Colombia, is valued at the lower of cost or net realizable value.
8
HONDO OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
(All Dollar Amounts in Thousands)
2) Discontinued Operations
-----------------------
Effective March 31 and September 4, 1991, respectively, the Company
adopted plans of disposal for its refining and marketing and real estate
segments. In October 1992, the Fletcher refinery was placed in a cold
shut-down and subsequently the facility was used to terminal crude oil
and petroleum products for third parties. On September 15, 1993, the
Company executed an agreement for the sale of its Fletcher refinery and
its asphalt terminal in Hilo, Hawaii. These assets represent the
material portion of the Company's refining and marketing segment. The
transaction closed on October 1, 1993 at which time $992 of the net
accrued proceeds of $1,992 were received. Additional net proceeds of
$129 have been received subsequently and further proceeds will be
received when certain components of the refinery equipment are sold by
the buyer.
Operating income (losses) of discontinued operations for the quarters
ended June 30, 1994 and 1993 were ($155) and $105, respectively.
Corresponding amounts for the nine months ended June 30, 1994 and 1993
were ($401) and ($8,490), respectively, and were charged against loss
provisions established in earlier periods. The Company recorded loss
provisions for discontinued operations of $1,400 and $4,000 for the nine
months ended June 30, 1994 and 1993, respectively. The $1,400 charge
recorded in the current quarter pertains to the real estate assets and
arises as a result of local market conditions, current sale
negotiations, and the timing of possible sales.
Interest expense included in the losses from discontinued operations
pertains only to debt directly attributable to the discontinued
segments. The operating losses from discontinued operations for the
quarters ended June 30, 1994 and 1993 include interest expense of $71
and $701, respectively. Corresponding amounts for the nine months ended
June 30, 1994 and 1993 were $213 and $2,108, respectively. Total
interest expense allocated to discontinued operations, both expensed and
capitalized, includes $835 and $2,496 attributable to Lonrho Plc for the
quarter and nine months ended June 30, 1993, respectively.
A summary of the segments' net assets is as follows:
June 30, September 30,
1994 1993
------------- -------------
Refining and Marketing:
Properties, net $ -- $100
Loss provisions, net -- (100)
------------- -------------
Refining and marketing net assets -- --
Real estate 6,779 7,750
------------- -------------
Net assets $6,779 $7,750
============= =============
9
HONDO OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
(All Dollar Amounts in Thousands)
3) Other Liabilities
-----------------
In accordance with the terms of the Company's debts to Lonrho Plc,
accrued interest is either added to the outstanding principal or paid by
issuance of the Company's common stock on the interest due date, at the
option of Lonrho Plc. Accrued interest of $2,250 for the six-month
period ended March 31, 1994 was added to the outstanding principal
balances on April 1, 1994.
During the quarter ended March 31, 1994, the Company entered into an
agreement with the City of Long Beach which provides, among other
things, that payment of amounts due to the City of Long Beach arising
from the Company's interest in the Long Beach Unit, Wilmington Oil
Field, California (THUMS), including $542 classified as a current
liability at September 30, 1993, will be deferred. Accordingly, all
liabilities to the City of Long Beach are now classified as long-term.
Other liabilities consist of the following:
June 30, September 30,
1994 1993
------------- -------------
Interest payable to Lonrho Plc $1,174 $ --
City of Long Beach 1,637 1,332
Other 1,375 1,163
------------- -------------
$4,186 $2,495
============= =============
4) Cash Flow Information
---------------------
Cash interest expense paid for the nine months ended June 30, 1994 and
1993 was $223 and $4,010, respectively.
5) Income Taxes
------------
As required by the provisions of SFAS No. 109, the Company changed its
method of accounting for income taxes from the provisions of SFAS No.
96, "Accounting For Income Taxes", to the provisions of SFAS No. 109,
"Accounting For Income Taxes", effective October 1, 1993. The change in
accounting method had no material effect on the Company's financial
position, results of operations, or components of income tax expense for
the current or previous fiscal years. Accordingly, no cumulative effect
of a change in accounting principle has been recognized and the footnote
disclosures required by SFAS No. 109 have been omitted.
10
HONDO OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
(All Dollar Amounts in Thousands)
5) Income Taxes (continued)
------------------------
Under Statement 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on reversals of differences between financial reporting
and tax bases of assets and liabilities and are measured using the
enacted effective tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the adoption of Statement
109, income tax expense was determined using the liability method
prescribed by Statement 96, which has been superseded by Statement 109.
Among other changes, Statement 109 changes the recognition and
measurement criteria for deferred tax assets included in Statement 96.
The Company provides for income taxes based on estimated annual
effective rates. The Company records current income tax expense to
the extent that federal, state or alternative minimum tax is projected
to be owed. Deferred income taxes are recorded to the extent that tax
net operating losses are not available to offset future reversals of
temporary differences.
6) Contingencies
-------------
In the agreement for the sale of the Fletcher refinery, the Company
indemnified the buyer for certain federal and state excise taxes arising
from periods prior to the sale. Fletcher Oil and Refining Company
("Fletcher") recently notified the Company that an audit for California
Motor Vehicle Fuels Tax is underway and a preliminary review by present
Fletcher employees indicates that a significant liability may exist. The
Company has retained a consultant to evaluate the possible contingent
liability. The consultant's initial review has indicated that a
liability may exist, but that the data is incomplete and an accurate
determination cannot presently be reached. Management believes that it
is reasonably possible a liability of up to $900 may exist. As of June
30, 1994, no amounts have been accrued for this contingency.
11
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL DISCUSSION
------------------
Continuing Operations
The Company's principal asset is its interest in the Opon
Association Contract (the "Opon Contract") in Colombia. Hondo
Magdalena Oil & Gas Limited ("Hondo Magdalena"), a wholly-owned
subsidiary, entered into a Farmout Agreement dated August 9, 1993
under which Amoco Colombia Petroleum Company ("Amoco Colombia") will
earn a participating interest in Hondo Magdalena's Opon Contract in
the Middle Magdalena Valley of Colombia. Under the terms of the
Farmout Agreement, Amoco Colombia was assigned a 50% interest in the
Opon Contract by Hondo Magdalena. Hondo Magdalena retained a 30%
interest. To earn the interest assigned, Amoco Colombia paid $3.0
million in cash and is paying Hondo Magdalena's costs related to the
fifth-year obligations under the Opon Contract, the Opon No. 3 well,
a well to the La Paz formation. Amoco Colombia also has an option
to conduct further seismic evaluation of the contract area at its
expense. After drilling of the Opon No. 3, Amoco Colombia may (i)
withdraw and relinquish all its interest to Hondo Magdalena or, (ii)
pay Hondo Magdalena an additional $5.0 million and all but $2.0
million of Hondo Magdalena's costs related to the sixth-year
obligations under the Opon Contract, another La Paz formation well,
or (iii) relinquish 5% of its interest to Hondo Magdalena and pay
all of Hondo Magdalena's costs related to the sixth-year obligations
under the Opon Contract. Amoco Colombia and Hondo Magdalena have
agreed that Amoco Colombia will make its election among the three
preceding options on or before by September 30, 1994. Amoco
Colombia will again have the option to withdraw and relinquish its
interests after the drilling of the sixth-year obligation well. As
previously reported, Amoco Colombia has recently obtained an
extension for commencement of the drilling of the sixth-year
obligation well under the Opon Contract from July 15, 1994 to July
13, 1995.
The Opon No. 3 well reached its total depth of 12,710 feet in June
1994. Procedures preparatory to testing of the well began on July
15, 1994. These activities were suspended shortly thereafter for
mechanical reasons. Amoco Colombia is awaiting delivery of
additional surface equipment necessary to flow test the well.
Testing is expected to take two to four weeks and is necessary to
determine if commercial quantities of hydrocarbons are present in
the well.
Because of losses in prior years and decreases in shareholders'
equity, the Company does not fully meet all of the guidelines of the
American Stock Exchange for continued listing of its shares.
Management is taking steps to improve the Company's ability to meet
the Exchange's guidelines and preserve the listing. Management
believes that the Exchange will defer any decision on the listing
until after results of the Opon No. 3 well are known. However, no
assurances can be given that the Company's shares will remain listed
on the Exchange in the future.
12
In 1965, the Company (then Pauley Petroleum Inc.) acquired a
nonoperating contractor's interest in the Long Beach Unit,
Wilmington Oil Field, California ("THUMS"). The principal economic
benefit of the interest was the right to receive approximately 4,000
barrels per day of THUMS crude oil that the Company used in
conjunction with the Fletcher refinery. Following the sale of the
refinery in October 1993, the Company's interest in the Unit, which
had been marginally profitable at best, became a potentially severe
cash drain due to a decline in crude oil prices.
On February 2, 1994 the Company entered into an agreement with the
City of Long Beach whereby the Company and the City of Long Beach
released each other from their respective rights and obligations
under the THUMS contracts, effective January 1, 1994. The agreement
also provides that amounts due the City of Long Beach of
approximately $1.6 million will be paid on or before January 1,
1997, or prior to that date, if the Company has free available cash
flow from the Opon No. 3 well or any other assets. The amount due
is not subject to interest charges.
Effective May 1, 1994, The Anderson Company, a wholly-owned
subsidiary, sold the Company's office building and certain furniture
and equipment in Roswell, New Mexico, for $0.7 million in cash and
deferred payments. A loss of $0.9 million resulted, largely due to
real estate market conditions in Roswell. The sale will further
reduce the Company's expenses. The Company will continue to occupy
a portion of the building under a lease with the buyer.
Discontinued Operations
The Company has listed its 11 acre Via Verde Bluffs property in the
City of San Dimas and its 105 acre Valley Gateway property in the
City of Santa Clarita with real estate brokers. The Company has
entered into preliminary discussions with potential buyers for both
properties and has recently executed a letter of intent pertaining
to the Via Verde Bluffs property. No agreements have been reached
on the sale of either property at this time and no assurances can be
given that these negotiations or the letter of intent will lead to a
contract for sale.
In the agreement for the sale of the Fletcher refinery, the Company
indemnified the buyer for certain federal and state excise taxes
arising from periods prior to the sale. As further described in
Note 6 to the financial statements, management believes it is
reasonably possible a liability for certain state taxes of up to
$0.9 million may exist. As of June 30, 1994, no amounts have been
accrued for this contingency.
13
RESULTS OF OPERATIONS
---------------------
Due to the sale of substantially all of the Company's domestic oil
and gas properties in June 1992 and continuing reductions in the
Company's business activities, the results of continuing operations
are not comparable and may not be indicative of the Company's future
operating results. Operating revenues, gain (loss) on sale of
assets, overhead reimbursement and other income, operating costs,
and costs of exploration are primarily comprised of non-recurring
transactions in both periods.
Quarters Ended June 30, 1994 and 1993
Continuing operations reported losses of $1.8 million, or 14 cents
per share, for the quarter ended June 30, 1994 and $3.0 million, or
23 cents per share, for the comparable period last year.
The decrease in general and administrative expense of $0.6 million
between the quarters arises primarily from reductions in the number
of employees, offices, and aircraft. Costs of exploration and
exploratory dry holes includes a charge of $1.0 million for the
quarter ended June 30, 1993 arising from the write-off the Lilia No.
9, a shallow oil well in the Opon project. No comparable expenses
have been incurred in the current period.
Total interest expense in the current quarter of $1.2 million is
less than total interest expense of $1.7 million for the quarter
ended June 30, 1993. The net decrease of $0.5 million arises from
lower interest rates in the current quarter, offset by an increase
in outstanding debt of $11.7 million between the quarters. The
amounts reported in the consolidated statements of operations
increased by $0.3 million because $0.8 million of interest expense
for the quarter ended June 30, 1993 was allocated to discontinued
operations.
Operating income (losses) of discontinued operations, which are
charged against previously established loss provisions, amounted to
($0.2) million and $0.1 million for the quarters ended June 30, 1994
and 1993, respectively. The amounts are not comparable due to the
sale of substantially all of the Company's discontinued refining and
marketing segment in September 1993. The Company recorded
discontinued loss provisions of $1.4 million and $2.8 million for
the respective quarters. The current quarter's provision pertains
to the Company's real estate operations and arises as a result of
local market conditions, current sale negotiations, and the timing
of possible sales.
Nine Months Ended June 30, 1994 and 1993
Continuing operations reported losses of $6.4 million, or 49 cents
per share, for the nine months ended June 30, 1994 and $6.7 million,
or 52 cents per share, for the comparable period last year.
14
Loss on sale of assets includes a loss of $0.9 million recorded for
the period ended March 31, 1994, as described above. Operating
expenses for the nine months ended June 30, 1994 arise primarily
from provisions for obsolete pipe inventories in Colombia. The
decrease in general and administrative expense of $1.9 million
between the nine month periods arises primarily from reductions in
the number of employees, offices, and aircraft. Costs of
exploration and exploratory dry holes includes a charge of $1.0
million for the quarter ended June 30, 1993 arising from the write-
off the Lilia No. 9, a shallow oil well in the Opon project. No
comparable expenses have been incurred in the current period.
Total interest expense for the nine months ended June 30, 1994 of
$3.4 million is less than total interest expense for the year-
earlier period of $5.0 million. The net decrease of $1.6 million
between the periods arises from lower interest rates, offset by an
increase in outstanding debt of $11.7 million. The amounts reported
in the consolidated statements of operations increased by $0.9
million because $2.5 million of interest expense for the nine months
ended June 30, 1993 was allocated to discontinued operations.
Operating losses of discontinued operations, which are charged
against previously established loss provisions, amounted to $0.4
million and $8.5 million for the nine months ended June 30, 1994 and
1993, respectively. The amounts are not comparable due to the sale
of substantially all of the Company's discontinued refining and
marketing segment in September 1993. Discontinued loss provisions
of $1.4 million and $4.0 million were recorded for the respective
nine-month periods. The 1994 provision pertains to the Company's
real estate operations and arises as a result of local market
conditions, current sale negotiations, and the timing of possible
sales.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
During the nine months ended June 30, 1994, cash inflows of $1.5
million and $1.0 million arose from the sale of assets and
borrowings from Lonrho Plc under existing loan agreements,
respectively. The Company utilized cash of $0.8 million and $0.4
million to finance continuing and discontinued operations,
respectively, and made scheduled debt repayments of $0.2 million.
In addition, the Company expended $0.7 million and $0.2 million on
capital projects for continuing operations and discontinued real
estate operations, respectively. Overall, cash balances for the
nine-month period increased by $0.2 million to $0.8 million.
In December 1993, the Company reached an agreement with Lonrho Plc
for the restructuring of the terms of all of the Company's debt to
Lonrho Plc. The agreement was effective as of September 30, 1993,
and provided for all accrued interest on the respective loans at
that date to be added to principal. The interest rate for each loan
was reduced to 6%, and interest is now payable semi-annually. The
Company may offer payment of future interest in shares of its common
stock, and Lonrho may either accept such payment in kind or add the
amount of the interest then payable to principal. Lonrho Plc
selected the latter option for interest due April 1, 1994. This
restructuring substantially decreases the Company's debt service.
The ability to pay interest in kind or capitalize interest will
allow the Company to service its debt while cash resources are
scarce.
15
The Farmout Agreement with Amoco Colombia is expected to provide
funds for the Company's capital expenditure obligations under the
Opon Contract in the near term. While Amoco Colombia is committed
to drilling the fifth-year obligation well, it has the option to
withdraw from the Opon Contract on or before September 30, 1994. If
Amoco Colombia elects to withdraw, the Company does not presently
have sufficient funds available to meet the sixth-year obligation, a
well which must be commenced prior to July 13, 1995.
The Company's existing cash balances are projected to be sufficient
to finance the Company's business activities during fiscal 1994.
Cash flow projections for fiscal 1995 assume receipt of $5.0 million
from Amoco Colombia under the Farmout Agreement. Failure to receive
this payment would materially and adversely affect the Company's
liquidity in fiscal 1995. The Company has curtailed all non-
essential capital and other expenditures in order to conserve cash.
The Company's management believes that the Opon project has
significant potential to be developed in conjunction with Colombia's
planned natural gas transmission network and that the Company's
future revenues will be derived from this source. Successful
results from the Opon No. 3 well and, possibly, the sixth-year
obligation well, are essential to the Company's ability to obtain
additional financing for the development of the Opon project.
Obtaining additional sources of funds is vital to the Company's
long-term ability to successfully develop the Opon project. The
Company's cash resources in the near future may be limited to cash
on hand and the net proceeds of sales of certain assets. Cash from
operations are not expected to be a source of funds until the Opon
project begins commercial production. Unless and until success is
achieved at Opon, substantial doubt will exist as to the Company's
ability to continue as a going concern. There can be no assurance
that the Opon project will be successfully developed or that
alternative sources of funds will become available in the future.
16
PART II
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulations S-K are
incorporated by reference. Refer to Exhibit Index on Page
18.
(b) One report on Form 8-K was filed during the quarter ended
June 30, 1994.
1) Form 8-K filed June 30, 1994 reported an extension under
the Opon Association Contract granted by Ecopetrol under
caption of Item 5 - Other Events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HONDO OIL & GAS COMPANY
(Registrant)
Date August 9, 1994 /s/ Stanton J. Urquhart
-------------- -----------------------
Stanton J. Urquhart
Vice President and
Controller
The above officer of the registrant has signed this report as its
duly authorized representative and as its chief accounting
officer.
17
Exhibit Index
Exhibit
Number Subject
__________ __________________________________
10.1 Purchase and Sale Agreement among
(1) The Anderson Company and Hondo
Oil & Gas Company and (2) WBJ
Investments, excluding exhibits
27 Financial Data Schedules
18
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (the "AGREEMENT") is made and entered
into this 14th day of April, 1994, by, between and among: (1) THE ANDERSON
COMPANY, a New Mexico Corporation and wholly-owned subsidiary of Hondo Oil &
Gas Company, a Delaware Corporation ("ANDERSON") and HONDO OIL & GAS COMPANY a
Delaware Corporation ("HONDO"), whose addresses are 410 East College Boulevard,
Roswell, New Mexico 88201; and (2) WBJ INVESTMENTS, a New Mexico General
Partnership ("WBJ"), whose address is P.O. Box 1836, Roswell, New Mexico
88202-1836. The entities named above may be referred herein individually as a
"PARTY" and collectively as the "PARTIES". In addition, ANDERSON may be
referred to herein as the "SELLER", and WBJ may be referred to herein as the
"BUYER".
RECITALS
WHEREAS, SELLER is the owner of certain land and buildings located at 410
East College Boulevard, Roswell, New Mexico.
WHEREAS, SELLER and HONDO have agreed to sell, convey, transfer, assign
and deliver to the BUYER, and the BUYER has agreed to purchase and accept, as
hereinafter provided, the land, buildings, improvements, furniture, equipment
and furnishings referred to above and more particularly described herein, all
subject to the terms, limitations and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements and undertakings contained herein, and upon the terms, conditions
and provisions set forth below, the PARTIES agree as follows:
I.
DEFINITIONS
For purposes of this AGREEMENT, the following defined terms shall have the
meanings set forth in this AGREEMENT:
A. "AGREEMENT" means this PURCHASE AND SALE AGREEMENT.
B. "ANDERSON" means THE ANDERSON COMPANY, a New Mexico Corporation and
wholly-owned subsidiary of Hondo Oil & Gas Company, a Delaware
Corporation.
C. "BUYER" means WBJ INVESTMENTS, a New Mexico General Partnership.
D. "CLOSING" means the actions to be carried out on the CLOSING DATE as
provided herein.
E. "CLOSING DATE" means the date and time set for CLOSING as provided
herein.
F. "EFFECTIVE DATE" means May 1, 1994 at 12:01 a.m., Mountain Daylight
Savings Time, the date on and time at which all transactions
contemplated hereby shall be deemed to have occurred.
G. "HONDO" means HONDO OIL & GAS COMPANY, a Delaware Corporation.
1
H. "LAND" and "REAL PROPERTY" mean that certain tract of land that is
located at 410 East College Boulevard in Roswell, New Mexico which is
the subject matter of this AGREEMENT together with and including all
buildings, facilities, improvements, appurtenances and fixtures
located thereon, attached thereto or used in connection therewith;
which land and buildings are owned by ANDERSON and more particularly
described in and shown on EXHIBIT "A" attached hereto and
incorporated herein by this specific reference.
I. "Lease" means the lease arrangement and agreement more particularly
described elsewhere between ANDERSON and WBJ, including the form of
lease agreement between ANDERSON and WBJ attached hereto as EXHIBIT
"H" and incorporated herein for all purposes by this specific
reference.
J. "PARTY" and "PARTIES" mean ANDERSON, HONDO and WBJ, individually or
collectively.
K. "Person" means any person, firm, partnership, trust, corporation or
other entity.
L. "PERSONAL PROPERTY" and "FURNITURE AND EQUIPMENT" mean all furniture,
fixtures, equipment, inventory, articles, implements, physical
resources, assets and miscellaneous personal property associated
therewith that are listed and described in EXHIBIT "B" attached
hereto and incorporated herein for all purposes by this specific
reference.
M. "SELLER" means THE ANDERSON COMPANY, a New Mexico Corporation and
wholly-owned subsidiary of Hondo Oil & Gas Company, a Delaware
Corporation.
N. "WBJ" means WBJ INVESTMENTS, a New Mexico General Partnership, the
Buyer.
2
II.
TERMS OF TRANSACTION
The PARTIES have previously agreed that the terms of the transactions
contemplated by this AGREEMENT will be the terms which govern the purchase and
sale of the REAL PROPERTY and PERSONAL PROPERTY between the PARTIES, payment of
the Purchase Price for the same and all other agreements between the PARTIES
with respect thereto and in connection therewith. The specific terms of such
transaction are more specifically set forth herein; however, the following is a
summary of the same:
A. The SELLER agrees to and shall transfer and convey to the BUYER all
right, title and interest in and to the REAL PROPERTY, free and clear
of all liens and encumbrances, in return for a portion of the
Purchase Price provided for herein.
B. ANDERSON agrees to and shall transfer and convey to the BUYER all
right, title and interest in and to the PERSONAL PROPERTY, free and
clear of all liens and encumbrances, in return for a portion of the
Purchase Price provided for herein.
C. The BUYER agrees to pay the Purchase Price for the REAL PROPERTY and
PERSONAL PROPERTY in the amount of $658,000.00 and in the manner
provided for herein, with a deduction for or offset against the
Purchase Price in the amount of $108,000.00 in return for the renewal
option contained in the Lease Agreement to be executed by the
PARTIES, as provided for below and elsewhere herein.
D. The PARTIES agree to allocate the net Purchase Price of $550,000.00
to the REAL PROPERTY, PERSONAL PROPERTY, improvements and buildings
in the manner provided for herein.
E. The PARTIES agree to enter into and execute a Lease Agreement which
contains terms more specifically described herein or attached hereto
and generally provides that ANDERSON will lease from WBJ a portion of
the main building situated on the REAL PROPERTY, as well as other
buildings for the lease payment obligations contained therein and a
renewal option in the amount of $108,000.00; which renewal option sum
shall be offset against and reduce the $658,000.00 Purchase Price
down to a net Purchase Price of $550,000.00 payable as more
particularly provided for herein.
F. The PARTIES specifically agree that: (1) ANDERSON and HONDO shall be
entitled to retain and use the physical address of the REAL PROPERTY,
being "410 East College Boulevard, Roswell, New Mexico 88201", as
their physical, business and mailing address; (2) WBJ will not use
said address for business, legal or mailing purposes; and (3) at such
time as WBJ occupies the REAL PROPERTY it will secure all requisite
local, municipal or city approvals in order to use a different
physical address for the REAL PROPERTY, including but not limited to:
400 East College Boulevard, 402 East College Boulevard or 412 East
College Boulevard.
G. The PARTIES acknowledge and agree that a portion of one of the
buildings located on the west side of the REAL PROPERTY is located on
land owned by the Atchison, Topeka and Santa Fe Railway Company
("SANTA FE"). In addition, the PARTIES acknowledge and agree that
3
said building is subject to and governed by an unrecorded lease
agreement between SANTA FE, as Lessor, and ANDERSON, as Lessee and
successor in interest to the original Lessee. The terms of said
Lease are contained in that certain Lease of Land Contract No. 86761
dated August 9, 1943 between SANTA FE, Lessor, and Valley Refining
Company, a New Mexico Corporation, the original Lessee and
predecessor in interest to ANDERSON, covering land more particularly
described in Exhibit "A" attached thereto. ANDERSON agrees to and
shall execute an assignment and transfer of said original Lease
Agreement to and in favor of WBJ, and any and all other instruments,
documents or agreements required by SANTA FE in order to give effect
to said Assignment and otherwise reflect that WBJ is the successor in
interest to and the Assignee of ANDERSON. The PARTIES also agree
that the unrecorded lease for the building located on the west side
of the REAL PROPERTY on land owned by the SANTA FE is and shall be a
permissible encumbrance on the REAL PROPERTY, all as more
particularly described herein.
H. The PARTIES agree that WBJ shall not sell or transfer ownership of
any portion of the REAL PROPERTY or buildings located thereon to a
third party without first obtaining the prior written consent of
ANDERSON until such time as ANDERSON is paid in full; which shall not
unreasonably be withheld and which is more particularly described
herein.
I. At the closing, as more particularly described herein, the PARTIES
agree to execute any and all documents, instruments or agreements
required by this AGREEMENT, including but not limited to, deeds,
bills of sale, promissory notes, mortgages, leases and any other
instruments specifically described herein, required hereby or
referred to herein.
J. Until the CLOSING, the SELLER agrees to and shall maintain its
existing fire and extended coverage insurance at the present levels
on all buildings, fixtures and improvements located on the REAL
PROPERTY, at its sole cost and expense, and for the benefit of the
PARTIES as their interest may appear pursuant to the terms of this
AGREEMENT.
K. The PARTIES agree that their rights and obligations in and under this
AGREEMENT and all transactions contemplated hereby may be transferred
and assigned as specifically provided for herein only, but not
otherwise.
III.
CONDITION OF REAL PROPERTY AND PERSONAL PROPERTY
By accepting the REAL PROPERTY and PERSONAL PROPERTY, the BUYER
acknowledges that it has inspected the REAL PROPERTY and PERSONAL PROPERTY and
is fully acquainted with the condition thereof. The BUYER accepts the REAL
PROPERTY and PERSONAL PROPERTY in their present condition and acknowledges that
SELLER and HONDO have made no warranties or representations of any kind or
type, either express or implied, with respect to the condition thereof, except
as expressly set forth herein.
4
IV.
TRANSFER OF REAL PROPERTY AND PERSONAL PROPERTY
The PARTIES acknowledge and agree that as of the date of execution of this
AGREEMENT, ANDERSON is the true and lawful owner of the REAL PROPERTY free and
clear of all liens and encumbrances, unless otherwise provided for herein; and
as of CLOSING, ANDERSON will be the true and lawful owner of the PERSONAL
PROPERTY which is the subject of this Agreement. ANDERSON (as the SELLER)
agrees to and shall execute a Bill of Sale, Transfer and Assignment and a
General Warranty Deed conveying all of the SELLER'S right, title and interest
in and to the PERSONAL PROPERTY and REAL PROPERTY to and in favor of the BUYER
free and clear of all liens and encumbrances, except those specifically
authorized hereby; which Bill of Sale, Transfer and Assignment and General
Warranty Deed shall be in forms substantially similar to EXHIBITS "C" and "D"
attached hereto and incorporated herein for all purposes by this specific
reference. In addition, ANDERSON agrees to and shall execute an assignment of
that certain Lease of Land Contract No. 86761 originally dated August 9, 1943
between the Atchison, Topeka and Santa Fe Railway Company, as Lessor, and
ANDERSON, as Lessee, to and in favor of the BUYER which Lease Agreement is more
particularly described and discussed in Paragraph G. of Section II and Section
VII hereof. Said Assignment, together with a description or plat of the land
covered by said Lease, shall be in a form substantially similar to EXHIBIT "E"
attached hereto and incorporated herein for all purposes by this specific
reference. In return for the transfer by the SELLER of the REAL PROPERTY and
PERSONAL PROPERTY, the BUYER agrees to pay the Purchase Price in the manner
provided for herein, and execute a: (1) Secured Promissory Note establishing
the payment terms for the same; and (2) Mortgage as collateral for and in order
to secure the BUYER'S payment obligations under the Secured Promissory Note.
The Secured Promissory Note and Mortgage shall be in forms substantially
similar to EXHIBITS "F" and "G" attached hereto and incorporated herein for all
purposes by this specific reference. Lastly, SELLER and BUYER agree to and
shall execute a Lease Agreement whereby the SELLER leases from the BUYER a
certain portion of the land and buildings described in EXHIBIT "A" for a
monthly lease payment of $2,175.00, plus gross receipts tax, over the term
stated therein. The Lease Agreement will also contain a renewal option in the
amount of $108,000.00 which shall be an offset against and reduction in the
Purchase Price payable hereunder; which lease agreement is more particularly
referred to and described hereinafter.
V.
PURCHASE PRICE
As payment for the transfer of the REAL PROPERTY and PERSONAL PROPERTY by
the SELLER, the BUYER agrees to and shall pay the SELLER the sum of $658,000.00
upon the following terms and conditions:
A. As Earnest Money, the amount of $10,000.00 shall be paid in
verifiable funds by the BUYER to the SELLER on or before the date of
execution of this AGREEMENT. At the CLOSING, the Earnest Money shall
be credited against and reduce the $658,000.00 Purchase Price down to
$648,000.00.
5
B. As a down payment, the amount of $50,000.00 shall be paid at the
CLOSING of this AGREEMENT by delivering such amount to the SELLER.
The down payment shall be credited against and reduce the then
existing $648,000.00 Purchase Price to $598,000.00.
C. $490,000.00 of the Purchase Price shall be paid by the BUYER to the
SELLER over a period of seven (7) years in monthly installments of
$4,098.56 each on the first day of each month beginning on June 1,
1994, together with interest thereon at the rate of eight percent
(8%) simple interest per year for a period of eighty-four (84)
months, at which time the then existing principal balance will be due
and payable in full and in the form of a balloon payment on June 1,
2001. The deferred portion of the Purchase Price shall be
represented by a Secured Promissory Note, together with an
Amortization Schedule attached thereto, in the form substantially
similar to EXHIBIT "F" attached hereto and incorporated herein for
all purposes by this specific reference. There shall be no penalty
for prepayment of the Promissory Note in full or in part.
D. The Promissory Note referred to above shall be secured by a Mortgage
upon the REAL PROPERTY in the form substantially similar to EXHIBIT
"G" attached hereto and incorporated herein for all purposes by this
specific reference.
E. The balance or remainder of the Purchase Price of $108,000.00 shall
be considered paid by BUYER'S granting certain Lease renewal options
to SELLER in the Lease more particularly described herein. Said
Lease shall be evidenced by a Lease Agreement executed by the SELLER
and the BUYER which provides that ANDERSON, as Lessee, agrees to and
shall lease from WBJ, the Lessor, approximately 30% of the "Main
Building" and the "Lab Building" located on the southeast corner of
the REAL PROPERTY as shown on the attached EXHIBIT "A" for a period
of one year, at an aggregate monthly rental rate of $2,175.00, plus
applicable gross receipts taxes; together with renewal options valued
at the additional sum of $108,000.00 that will be credited against
the Purchase Price. In addition, the Lease Agreement shall cover up
to eight (8) out of ten (10) separate compartments (or 80%) contained
in two (2) certain metal storage buildings located on the southeast
side of the REAL PROPERTY at no additional rent for a period of time
not to exceed two (2) years after the initial date of said Lease. At
the end of said two (2) year time period, ANDERSON agrees to and
shall reduce the total amount of storage space occupied by it from 8
out of the 10 compartments down to 4 out of the 10 compartments (or
40%) of the area contained in the two (2) metal storage buildings
referred to above. In the event WBJ pays the PROMISSORY NOTE in full
within said two (2) year period, ANDERSON shall have the option to:
(1) relinquish all 4 of said storage compartments, or (2) continue to
occupy said 4 storage compartments by paying to WBJ the fair market
value rental thereof. The PARTIES agree that the terms, conditions
and provisions of the Lease Agreement shall be in a form
substantially similar to EXHIBIT "H" attached hereto and incorporated
herein for all purposes by this specific reference. The Lease
Agreement shall generally provide that: (1) the initial monthly
rental rate to be paid by SELLER to WBJ pursuant to the terms thereof
will be $2,175.00 per month, plus applicable gross receipts taxes;
(2) SELLER shall have a renewal option valued at $108,000.00 which it
shall pay to BUYER in the form of a credit against and reduction in
6
the Purchase Price payable by the BUYER for the REAL PROPERTY, and
which renewal option shall authorize the SELLER to renew the Lease
Agreement from year to year for a period of nine (9) additional years
after the expiration of the first one (1) year term thereof; (3) the
renewal option shall be paid for by the SELLER in the form of a
credit against the Purchase Price in addition to the monthly rental
rate to be paid by the SELLER to WBJ pursuant to the terms of the
Lease Agreement; (4) if said Lease is terminated or cancelled for any
reason prior to full and complete exercise of the renewal option
described above, WBJ shall not be obligated to refund any portion of
the renewal option price of $108,000.00; and (5) the value of the
unused renewal option shall constitute an agreed upon liquidated
damages amount for the premature breach or termination of said Lease.
In addition, the Lease Agreement shall contain such other terms,
conditions and provisions as may be mutually agreed upon by the
PARTIES, including: options to purchase personal property, furniture,
fixtures and contents and the removal of the same, or any other terms
the PARTIES deem necessary, required or advisable to comply with the
terms of this AGREEMENT and fully effectuate the intent hereof.
F. The PARTIES specifically acknowledge and agree that the full amount
of the $658,000.00 Purchase Price shall be allocated to certain
portions of the REAL PROPERTY and PERSONAL PROPERTY, including
various improvements located thereon. The PARTIES specifically agree
that a separate schedule or exhibit shall not be necessary in order
to effectuate such allocation; and that by their execution of this
AGREEMENT they specifically acknowledge and agree that the
allocations set forth below are and shall be valid and binding for
tax, legal, accounting and business purposes. The allocation of the
$658,000.00 Purchase Price is and shall be as follows:
1. REAL PROPERTY, being the land
located at 410 East College
Boulevard, Roswell, New Mexico
and more particularly described
in EXHIBIT "A" attached hereto. $ 67,500.00
(Value - $47,500.00);
Asphalt Parking Lot covering
42,705 square feet of said land
(Value - $15,000.00); and Chain Link
Fence surrounding the property
(Value - $5,000.00).
2. PERSONAL PROPERTY, being all
furniture, fixtures, equipment,
(including telephone equipment),
and other items of personal
property described in EXHIBIT "B"
attached hereto $146,000.00
3. Main Building, consisting of
approximately 17,859 square feet,
located on the Northern portion
of the property $280,000.00
7
4. Two Metal Storage buildings
consisting of approximately
2,400 square feet each
located on the southeast side
of the property $12,000.00
5. Lab Building, consisting of
approximately 1,246 square feet,
located on the Southeast portion
of the property $ 34,500.00
6. Tinnie building and storage,
consisting of approximately
3,415 square feet, located on the
West portion of the property $10,000.00
7. Lease renewal options
more particularly
described above $108,000.00
Total $658,000.00
VI.
MORTGAGE
The BUYER and SELLER acknowledge that the BUYER is buying the REAL
PROPERTY and PERSONAL PROPERTY of the SELLER on a long term basis as evidenced
by the Promissory Note attached hereto as EXHIBIT "F". Therefore, the BUYER
agrees to execute a Mortgage covering the REAL PROPERTY in a form substantially
similar to EXHIBIT "G" attached hereto; which shall be effective as of the
EFFECTIVE DATE, as more particularly described hereafter. The BUYER and SELLER
acknowledge that the Mortgage shall serve as security for the payment
obligations of the BUYER to and in favor of the SELLER, under and pursuant to
the Promissory Note.
VII.
RAILROAD LEASE, LIENS, ENCUMBRANCES AND TAXES
A. The PARTIES acknowledge and agree that a portion of one of the
buildings located on the west side of the REAL PROPERTY is located on land
owned by SANTA FE and is subject to and governed by an unrecorded lease
agreement between SANTA FE, as Lessor, and ANDERSON, as Lessee and successor in
interest to the original Lessee. The terms of said Lease are contained in that
certain Lease of Land Contract No. 86761 dated August 9, 1943 between SANTA FE,
Lessor, and Valley Refining Company, a New Mexico Corporation, the original
Lessee and predecessor in interest to ANDERSON, covering land more particularly
described in Exhibit "A" thereto. ANDERSON agrees to and shall execute an
assignment and transfer of said original Lease Agreement to and in favor of
WBJ, and any and all other instruments, documents or agreements required by
SANTA FE in order to give effect to said Assignment and otherwise reflect that
WBJ is the successor in interest to and the Assignee of ANDERSON. The SELLER
agrees to and shall transfer and assign all of its right, title and interest in
and to such Lease Agreement to the BUYER at the CLOSING pursuant to an
Assignment of Lease Agreement in a form substantially similar to EXHIBIT "E"
8
attached hereto. To the best of their knowledge and belief, the SELLER and
HONDO represent that the original Lease Agreement and all subsequent
assignments and transfers of the same have not been recorded in Chaves County,
New Mexico. The PARTIES specifically acknowledge and agree that the unrecorded
lease shall not constitute an encumbrance, encroachment or title defect with
respect to ownership by the SELLER of the REAL PROPERTY and does not impair the
value thereof, nor the SELLER'S ability to close all transactions contemplated
by this AGREEMENT. In addition, the PARTIES specifically acknowledge and agree
that the lease from SANTA FE shall constitute a "Permissible Encumbrance" under
the terms of this AGREEMENT, and is specifically authorized and permitted
pursuant to the terms hereof. In that regard, all representations, warranties
and covenants contained herein that are made by the SELLER or ANDERSON to and
in favor of the BUYER with respect to liens and encumbrances that may burden
the REAL PROPERTY shall be read, construed and interpreted to mean that the
Lease Agreement with SANTA FE is not a lien or encumbrance on the REAL
PROPERTY, or in the alternative is specifically authorized hereby. If SANTA FE
terminates the Lease and requires the demolition of the Tinnie Building on or
before seven (7) years from the EFFECTIVE DATE of this AGREEMENT, SELLER agrees
to pay WBJ the amount of the demolition costs, not to exceed the sum of
$35,000.00. HONDO agrees to and hereby does guarantee the obligation of SELLER
under the preceding sentence.
B. The SELLER represents and warrants to the BUYER that, unless
otherwise authorized hereby, there are no liens, encumbrances, debts,
liabilities or obligations covering, burdening or encumbering the REAL PROPERTY
of the SELLER to be transferred to the BUYER pursuant to this AGREEMENT.
SELLER represents and warrants to the BUYER that there are no liens,
encumbrances, debts, liabilities or obligations covering, burdening or
encumbering the PERSONAL PROPERTY owned by SELLER that is to be transferred to
the BUYER pursuant to the terms hereof. In addition, the SELLER represents and
warrants to the BUYER that the SELLER has not performed, caused to be performed
or hired any third party to perform any labor or work upon the REAL PROPERTY,
including all improvements, buildings and structures situated thereon or
attached thereto, within the past 180 days; or if the same has been performed,
then all charges and amounts incurred in connection therewith will be paid in
full and discharged on and as of the CLOSING DATE. Lastly, the SELLER
represents and warrants that on and as of the CLOSING DATE, no person or entity
who may have performed labor, supplied materials or rendered services in
connection with improving or maintaining the REAL PROPERTY, including all
buildings, improvements and structures situated thereon, has the right to claim
a lien on the REAL PROPERTY pursuant to the New Mexico Mechanics and
Materialmen's Lien Act or any other provisions or laws of the State of New
Mexico.
C. The SELLER represents and warrants to the BUYER that, on and as of
the CLOSING DATE, all real property taxes assessed by the Chaves County
Treasurer against the REAL PROPERTY and all ad-valorem taxes assessed against
the PERSONAL PROPERTY have been paid in full for 1993 and all prior years, and
do not constitute a lien against the same. Subject to the proration of
property and ad-valorem taxes provided for elsewhere herein, the SELLER agrees
to and shall assume complete responsibility for, pay and discharge any and all
of said taxes of any kind or type described above that are or may in the future
be assessed against or on or with respect to any of the same.
9
VIII.
TITLE AND TITLE DEFECTS
A. Within five (5) business days after the execution of this AGREEMENT
by the PARTIES, the SELLER agrees to and shall deliver or cause to be delivered
to the BUYER a commitment for title insurance issued by a reputable title
insurer showing marketable and merchantable title in fee simple to the REAL
PROPERTY to be held and owned by the SELLER. Such commitment for title
insurance shall reflect that there are no liens or encumbrances burdening the
REAL PROPERTY, or any improvements, buildings or appurtenances located thereon
or attached thereto, except for any easements, rights-of-way or other matters
previously existing of record in Chaves County, New Mexico and that do not
materially impair the value of the REAL PROPERTY or its current and intended
use.
B. The BUYER shall have five (5) days after receipt of the commitment
for title insurance within which to examine title to the REAL PROPERTY,
including all improvements, buildings and fixtures attached thereto and located
thereon. In the event the BUYER'S title examination reveals any bona fide
defects in the title which render the same not fully merchantable or
marketable, other than the Lease Agreement with SANTA FE, easements, rights-of-
way or other matters that do not materially impair the value of the same
(including prior conveyances or reservations of minerals), then any bona fide
exceptions or objections to the SELLER'S title appearing in such commitment or
examination shall be delivered to the SELLER by the BUYER within seven (7) days
after BUYER'S receipt of the title commitment. After the date of delivery of
such objections or exceptions, the SELLER shall have a reasonable length of
time, not to exceed seven (7) days, within which to cure such title defects or
exceptions and furnish evidence of the same to the title insurer in order to
permit the title insurer to issue an amended commitment deleting such
exceptions or objections, all at SELLER'S sole cost and expense. Such title
policy shall be in an amount of not less than $658,000.00 and shall cover the
REAL PROPERTY and all improvements, buildings and structures located thereon,
attached thereto or associated therewith.
C. In the event SELLER fails to cure any such title defects or
objections on or before the CLOSING, the BUYER shall have the following
options, rights and remedies, which shall be exclusive:
1. The BUYER may declare this AGREEMENT terminated and of no
further force and effect and shall not be obligated to purchase
the REAL PROPERTY or PERSONAL PROPERTY or pay any portion of the
Purchase Price for the same; at which time the BUYER shall be
entitled to receive and the SELLER shall pay or return to the
BUYER the Earnest Money without interest; or
2. BUYER may close the transactions contemplated by this AGREEMENT
subject to such title defects and accept the same as permissible
encumbrances.
10
IX.
CLOSING, CLOSING DATE AND EFFECTIVE DATE
A. The CLOSING shall take place at a mutually acceptable geographical
location on or before May 1, 1994 at 1:00 p.m., Mountain Daylight Savings Time
(the "CLOSING DATE"). The CLOSING DATE and place of CLOSING may be postponed
or changed by mutual written agreement of the PARTIES.
B. The EFFECTIVE DATE of all transactions contemplated by this AGREEMENT
and all exhibits, documents, agreements, contracts, assignments and other
instruments that shall be executed by the PARTIES in connection with the
CLOSING shall be the 1st day of May, 1994 at 12:01 a.m., Mountain Daylight
Savings Time.
C. Prior to the CLOSING DATE, SELLER and the BUYER have conducted and
performed an inventory of all of the PERSONAL PROPERTY that is to be purchased
pursuant to the terms hereof. The BUYER and SELLER specifically acknowledge
and agree that those specific items of furniture, equipment (including
telephone equipment), and furnishings that are comprised within the definition
of PERSONAL PROPERTY more particularly set forth herein are specifically marked
in EXHIBIT "B" and are being purchased by the BUYER pursuant to the terms
hereof. However, other items of PERSONAL PROPERTY that are not being sold or
purchased pursuant hereto are the subject of a purchase option that will be
contained in the Lease Agreement to be executed by the PARTIES that is more
particularly referred to and described herein.
D. At the CLOSING, SELLER shall convey the REAL PROPERTY, including all
fixtures, improvements and buildings located thereon or attached thereto, to
BUYER by a General Warranty Deed in a form substantially similar to EXHIBIT "D"
attached hereto, free and clear of all liens and encumbrances whatsoever,
unless otherwise authorized hereby; however, said Deed shall be subject to the
terms, conditions and provisions of this AGREEMENT. In addition, said Deed
shall be specifically subject to and incorporate by reference the terms,
conditions and provisions of the Mortgage to be executed by the BUYER to and in
favor of the SELLER. SELLER shall, at its sole cost and expense, also deliver
to the BUYER at the CLOSING:
1. An owners' policy of title insurance (ALTA Extended Coverage
Form or its equivalent) in a form acceptable to BUYER'S counsel
issued by a title insurer acceptable to BUYER, and showing title
vested in the name of BUYER subject only to the title exceptions
described in said title insurance policy that have previously
been agreed upon by the PARTIES; and
2. A certificate in a form acceptable to counsel for BUYER issued
by the title insurer to the effect that, based on a search of
the records of Chaves County and of the Secretary of State of
New Mexico, there are no liens or other encumbrances on the REAL
PROPERTY and PERSONAL PROPERTY, other than the Mortgage and
Security Agreement authorized hereby, both of which shall be
considered permissible encumbrances. Such certificate shall be
delivered on or before the CLOSING and prior to disbursement of
any portion of the Purchase Price to SELLER.
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E. At CLOSING, the SELLER shall transfer the PERSONAL PROPERTY to the
BUYER by the Bill of Sale, Transfer and Assignment in a form substantially
similar to EXHIBIT "C" attached hereto and such other good and sufficient
instruments of sale, conveyance, transfer and assignment consistent with the
terms of this AGREEMENT; duly executed and acknowledged by the SELLER and in
form and substance as shall be required, in the reasonable opinion of BUYER'S
counsel, to vest in BUYER good and indefeasible title thereto, free and clear
of all security interests, liens, claims, encumbrances and other burdens
whatsoever. To the extent deemed necessary or desirable by BUYER'S counsel,
such instruments shall be filed or recorded with the appropriate public
officials as a part of the CLOSING.
F. At the CLOSING, the SELLER agrees to and shall transfer and assign
all of its right, title and interest in and to that certain Lease of Land
originally dated August 9, 1943 and known as Contract No. 86761 between SANTA
FE, as Lessor, and the SELLER, as Lessee, covering a portion of the land owned
by SANTA FE on which the Tinnie Building is located; being adjacent to the west
and southwest portions of the REAL PROPERTY. Said Transfer and Assignment
shall be in a form substantially similar to EXHIBIT "E" attached hereto. In
addition, the SELLER agrees to and shall execute any and all other instruments,
documents and agreements that may be required by SANTA FE in order to
effectuate the intent of such Transfer and Assignment and otherwise reflect the
BUYER as the substituted Lessee under the original Lease of Land referred to
above.
G. At the CLOSING, the BUYER shall pay the sum of $658,000.00 as the
Purchase Price for the REAL PROPERTY and PERSONAL PROPERTY by: (1) crediting
the Earnest Money in the amount of $10,000.00 against the Purchase Price; (2)
making a down payment of $50,000.00; (3) executing a Promissory Note in the
amount of $490,000.00, as more particularly described and referred to herein;
and (4) executing the Lease Agreement more particularly described and referred
to herein which contains a Lease Renewal Option in the amount of $108,000.00 as
a credit against the remaining balance of the Purchase Price. In addition, the
BUYER agrees to and shall execute the Mortgage more particularly described
herein. The BUYER agrees to and shall pay any and all other additional costs
incurred by it in connection herewith.
H. At the CLOSING, ANDERSON, HONDO and WBJ agree to and shall execute
and deliver among themselves all documents, agreements and original forms of
exhibits required by or attached to this AGREEMENT or contemplated hereby, as
well as any and all other instruments, documents or agreements deemed
necessary or advisable to fully effectuate the intent of this AGREEMENT and the
transactions contemplated hereby.
I. At the CLOSING, the PARTIES agree to and shall prorate all REAL
PROPERTY taxes, ad-valorem taxes and utility charges on and as of the EFFECTIVE
DATE. With regard to the proration of taxes, the PARTIES agree to and shall
use the last available Chaves County Tax Assessor's Statement in the event a
tax bill or tax statement for the year 1994 is not available.
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X.
POSSESSION AND RESPONSIBILITY
After the date of execution of this AGREEMENT and prior to the CLOSING
DATE, the PARTIES agree that the SELLER and HONDO shall relocate their offices
and business activities into that portion of the Main Building and the Lab
Building that will be covered by and subject to the Lease Agreement to be
executed by the PARTIES, and that WBJ shall be entitled to move in and begin
occupying the REAL PROPERTY to the extent of the balance of the REAL PROPERTY
and buildings that are not subject to said Lease Agreement. The PARTIES agree
to cooperate, coordinate and consult with each other in connection with the
relocation and moving activities referred to above. On the CLOSING DATE, the
SELLER shall surrender and deliver, and the BUYER shall be entitled to
possession of the REAL PROPERTY and PERSONAL PROPERTY; at which time the BUYER
agrees to and shall assume full and complete responsibility for the same in
accordance with the terms, conditions and provisions of this AGREEMENT and the
Lease Agreement to be executed by the PARTIES that is referred to elsewhere
herein.
XI.
UTILITIES, TAXES AND OTHER CHARGES
SELLER represents and warrants to the BUYER that all charges for
utilities, including but not limited to: gas, electricity, water, telephone
and sewage associated with or payable on or with respect to the REAL PROPERTY
and personal property, out of which SELLER has operated its business and used
the same, have been or will be paid in full and discharged for all periods of
time prior to the CLOSING DATE. All license fees and occupation taxes
applicable to the business activities conducted by SELLER and HONDO and all
taxes on any other personal property owned by SELLER and HONDO not subject to
this AGREEMENT have been paid in full and discharged, and no person has the
right to impose or claim a lien on the REAL PROPERTY or PERSONAL PROPERTY that
is the subject matter hereof.
XII.
RISK OF LOSS
Prior to the EFFECTIVE DATE, the risk of loss or damage to the REAL
PROPERTY and PERSONAL PROPERTY shall be upon the SELLER and HONDO,
respectively, unless the loss or damage results from the negligence or
intentional acts of the BUYER or its agents or employees. Any loss or damage
which is not covered by insurance shall be the sole responsibility of SELLER
and HONDO, unless the same is caused by the negligence or intentional acts of
the BUYER or its agents and employees. On and after the EFFECTIVE DATE, the
risk of loss or damage to the REAL PROPERTY and PERSONAL PROPERTY shall be
assumed by and upon the BUYER. The BUYER agrees to and shall indemnify and
hold the SELLER and HONDO harmless from any and all loss or damage to the REAL
PROPERTY and PERSONAL PROPERTY on and after the EFFECTIVE DATE, subject to the
Lease Agreement to be executed by the PARTIES that is referred to elsewhere
herein.
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XIII.
INDEMNIFICATION/LIABILITIES
The BUYER agrees that the SELLER and HONDO shall not be responsible for
any debts and liabilities incurred by the BUYER prior to or after the EFFECTIVE
DATE hereof. In the event any claim is made by any person against the SELLER
or HONDO as a result of, or arising out of the BUYER'S ownership of the REAL
PROPERTY and PERSONAL PROPERTY subsequent to the EFFECTIVE DATE and subject to
the Lease Agreement to be executed by the PARTIES that is referred to elsewhere
herein, then the BUYER shall defend the SELLER against that claim and hold the
SELLER harmless from any and all loss, liability and expense reasonably
incurred in connection therewith, including attorneys' fees.
The SELLER and HONDO agree that the BUYER shall not be responsible for any
debts and liabilities incurred by the SELLER and HONDO prior to and after the
EFFECTIVE DATE. In the event any claim is made, prior to or after the
EFFECTIVE DATE, by any person against the BUYER as a result of or arising out
of the SELLER'S ownership of the REAL PROPERTY or HONDO'S ownership of the
PERSONAL PROPERTY, the SELLER and HONDO shall defend the BUYER against that
claim and hold the BUYER harmless from any and all loss, liability and expense
reasonably incurred in connection therewith, including attorneys' fees.
XIV.
ENVIRONMENTAL MATTERS
A. The SELLER agrees to and shall indemnify and hold the BUYER harmless
from and against any and all liability directly or indirectly rising out of the
use, generation, storage or disposal of Hazardous Materials by the SELLER and
associated with its business activities conducted on or with respect to the
REAL PROPERTY; and including, without limitation, all foreseeable and
enforceable consequential damages, the cost of any required and necessary
repair, response cost, clean-up or detoxification costs, and preparation of any
closure or other required plans associated with the SELLER'S business
activities, whether such action is required or necessary prior to or following
the transfer of the REAL PROPERTY, to the full extent that such action is
attributable directly or indirectly to the presence or use, generation,
storage, release, threatened release or disposal of Hazardous Materials on the
REAL PROPERTY by the SELLER in the course of its business activities. The
SELLER'S obligations pursuant to the foregoing indemnification clause shall
survive the CLOSING. The term Hazardous Materials as used above, shall
include, but not be limited to: flammable explosives, asbestos, radioactive
materials, hazardous wastes, toxic substances and related injurious materials,
whether injurious by themselves alone or in combination with other materials.
Hazardous Materials shall also include, but not be limited to substances
defined as "Hazardous Substances", "Hazardous Material" or "Toxic Substances"
in the: (1) Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), 42 U.S.C. Section 9601, et seq.; (2)
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; (3)
Resource Conservation Recovery Act ("RCRA"), 42 U.S.C. Section 6901, et seq.;
(4) any applicable New Mexico statutes; and (5) any rules or regulations
adopted and publications promulgated pursuant to the above described federal
and state laws, as well as any other laws associated therewith or related
thereto. Such indemnification shall cover and include, but not be limited to
any state or federal investigation, proceeding, administrative action or
lawsuit now existing or that may hereafter arise in the future with respect to
14
any or all business activities conducted on the REAL PROPERTY by the SELLER.
B. HONDO agrees to and shall indemnify and hold the BUYER harmless from
and against any and all liability directly or indirectly rising out of the use,
generation, storage or disposal of Hazardous Materials by HONDO and associated
with its business activities conducted on or with respect to the REAL PROPERTY;
and including, without limitation, all foreseeable and enforceable
consequential damages, the cost of any required and necessary repair, response
cost, clean-up or detoxification costs, and preparation of any closure or other
required plans associated with HONDO'S business activities, whether such action
is required or necessary prior to or following the transfer of the REAL
PROPERTY, to the full extent that such action is attributable directly or
indirectly to the presence or use, generation, storage, release, threatened
release or disposal of Hazardous Materials on the REAL PROPERTY by HONDO in the
course of its business activities. HONDO'S obligations pursuant to the
foregoing indemnification clause shall survive the CLOSING. The term Hazardous
Materials as used above, shall include, but not be limited to: flammable
explosives, asbestos, radioactive materials, hazardous wastes, toxic substances
and related injurious materials, whether injurious by themselves alone or in
combination with other materials. Hazardous Materials shall also include, but
not be limited to substances defined as "Hazardous Substances", "Hazardous
Material" or "Toxic Substances" in the: (1) Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), 42
U.S.C. Section 9601, et seq.; (2) Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq.; (3) Resource Conservation Recovery Act ("RCRA"),
42 U.S.C. Section 6901, et seq.; (4) any applicable New Mexico statutes; and
(5) any rules or regulations adopted and publications promulgated pursuant to
the above described federal and state laws, as well as any other laws
associated therewith or related thereto. Such indemnification shall cover and
include, but not be limited to any state or federal investigation, proceeding,
administrative action or lawsuit now existing or that may hereafter arise in
the future with respect to any or all business activities conducted on the REAL
PROPERTY by HONDO.
XV.
RESTRICTIONS ON SALE OF REAL PROPERTY
After the CLOSING of all transactions contemplated by this AGREEMENT, WBJ
agrees that it will not sell any portion of the REAL PROPERTY acquired pursuant
to the terms hereof without first securing the express written consent of
ANDERSON; which written consent shall not be unreasonably withheld by ANDERSON.
At the time WBJ requests ANDERSON'S written consent, it will furnish ANDERSON
with full information concerning the proposed sale which shall include the name
and address of the prospective purchaser (who must be willing, ready and able
to purchase), the Purchase Price, and all of the other terms of the proposed
sale. ANDERSON agrees to review such information and furnish its written
consent or denial thereof to WBJ within ten (10) days after its receipt of all
such information. The PARTIES specifically agree that if WBJ intends to sell
all of the REAL PROPERTY in any such sale, then WBJ shall not be required to
secure ANDERSON'S written consent to such sale so long as the net proceeds
derived from such sale are sufficient to pay in full the balance of the Secured
Promissory Note payable by WBJ pursuant to the terms hereof. In the event of
any partial sale or transfer of a portion of the REAL PROPERTY by WBJ, all
proceeds of such sale, less the closing costs and expenses, shall be paid to
ANDERSON and shall be applied first to the balloon payment due under the terms
15
of the Secured Promissory Note and then to the last maturing installments of
the same in reverse order. After the application of such proceeds as set forth
above, the monthly payment shall remain unchanged and the PARTIES agree to and
shall prepare a new amortization schedule to reflect the revised amounts of
principal and interest comprising the monthly payment based on the then
existing principal balance of the same. The PARTIES specifically acknowledge
and agree that at such time as the total amount due under the Secured
Promissory Note is or has been paid in full, then the specific written consent
requirements with respect to partial sales set forth herein shall terminate and
be of no further force and effect, and any subsequent sales of all of any
portion of the REAL PROPERTY may be accomplished by WBJ without the necessity
of securing the prior written consent of ANDERSON.
XVI.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
The SELLER and HONDO hereby represent, warrant and covenant to the BUYER,
which representations, warranties and covenants shall survive the CLOSING, as
follows:
A. Power and Authority. The SELLER and HONDO have full power and
authority to enter into, execute and perform this AGREEMENT; to make
any representation, warranty, covenant or agreement contained herein;
to perform every act and execute and deliver any and all documents,
instruments or agreements necessary or appropriate to consummate the
transactions contemplated by this AGREEMENT.
B. Organization. SELLER is a duly organized and validly existing
corporation under the laws of New Mexico, and HONDO is a duly
organized and validly existing corporation under the laws of
Delaware; both with full corporate power to enter into this AGREEMENT
and carry out the terms, conditions and provisions hereof.
C. Ownership of Property. The SELLER has good, merchantable and
marketable title to the REAL PROPERTY and at CLOSING, will have good,
merchantable and marketable title to the PERSONAL PROPERTY, free and
clear of all liens and encumbrances, subject only to the unrecorded
Lease Agreement with SANTA FE more particularly described herein,
easements, restrictions and rights-of-way of record, prior mineral
conveyances or reservations, zoning ordinances and taxes and
assessments for the year 1994; the PERSONAL PROPERTY is now and will
be on the EFFECTIVE DATE in good and merchantable working condition,
subject only to reasonable wear and tear; and the SELLER is duly
authorized to sell, transfer and assign all of the same to the BUYER.
D. Preservation of Value. Prior to the CLOSING and CLOSING DATE, the
SELLER and HONDO will cause the operation of their business
activities to be conducted in such manner as to preserve the value of
the REAL PROPERTY and PERSONAL PROPERTY which is the subject matter
of this AGREEMENT, and to assure that the representations and warran-
ties set forth herein will be true and correct.
E. Litigation. To the best knowledge and belief of the SELLER and
HONDO, there is no litigation, proceeding or governmental investiga-
tion pending or, threatened in any court, arbitration board, adminis-
trative agency or tribunal against or relating to the SELLER or HONDO
16
that would prevent or impede the consummation of this AGREEMENT by
the SELLER and HONDO. The SELLER and HONDO do not know of and have
no reasonable ground to know of any basis for any such litigation,
proceeding or investigation, and the execution and performance of
this AGREEMENT by them will not result in a default by them with
respect to any judgment, order, writ, injunction, decree, rule or
regulation of any applicable court or administrative agency.
F. Liabilities. With respect to the transactions contemplated by this
AGREEMENT, and on and as of the CLOSING DATE, all liabilities, trade
creditors' bills, suppliers' bills, advertising fees, vendors'
charges and license fees have been paid or provided for and will be
paid and provided for by the SELLER and HONDO, and there is no threat
by any person, including governmental body, to impose a lien upon the
REAL PROPERTY and PERSONAL PROPERTY owned by the SELLER or HONDO, or
any portion thereof, for any purpose.
G. Condemnation. To the best knowledge and belief of the SELLER, there
is no pending, contemplated or threatened condemnation of the REAL
PROPERTY owned by the SELLER or any portion thereof for any purpose.
H. Insurance. The SELLER and HONDO have had in effect and have kept in
full force and will keep in effect prior to the CLOSING DATE of this
AGREEMENT adequate insurance policies covering the REAL PROPERTY and
PERSONAL PROPERTY issued by financially responsible insurers at no
less than existing levels of coverage.
I. Liens and Encumbrances. Except to the extent authorized hereby or
referred to herein and on and as of the CLOSING DATE, there will be
no liens, encumbrances, mortgages, deeds of trust or security inter-
ests in and to, or affecting title to the REAL PROPERTY and PERSONAL
PROPERTY, and no person will have a right to claim a lien upon the
same.
J. Leases, Contracts and Other Agreements. With the exception of
existing lease agreements between related entities, the SELLER and
HONDO have incurred no liability, made no contract or agreement, nor
entered into any written or oral arrangements whatsoever which would
impose or result in any obligations upon the BUYER as a result of or
at the CLOSING of this AGREEMENT. The SELLER and HONDO have not
entered into any agreement or agreements, either written or oral,
under which they are or could be obligated to sell or transfer all or
any portion of the REAL PROPERTY and PERSONAL PROPERTY, or rights
under this AGREEMENT, and agree not to enter into or negotiate any
such agreement or agreements.
K. Taxes. Subject to the proration provisions contained elsewhere
herein, all property taxes assessed against the REAL PROPERTY
including all improvements, fixtures and buildings located thereon,
and all ad-valorem taxes assessed against the PERSONAL PROPERTY, as
well as any and all other state and federal taxes of any kind or
nature relating to the operation and use of the same by the SELLER
and HONDO have been paid or provided for, and the SELLER and HONDO
will make sure the same will be paid and provided for as of the
CLOSING DATE of this AGREEMENT, and to the best knowledge and belief
of the SELLER and HONDO, no legal, governmental or administrative
action is pending or threatened with regard to any such taxes or
assessments.
17
L. Corporate Action. The SELLER and HONDO have caused or will cause a
duly and properly convened meetings of their Shareholders and/or
Directors to be held on or before the CLOSING DATE for the purposes
of authorizing and approving the transactions contemplated by this
AGREEMENT and enabling the SELLER and HONDO to enter into, execute
and perform the same. Evidence of such meetings shall be in a form
substantially similar to EXHIBIT "J" attached hereto and incorporated
herein for all purposes by this specific reference or such other
form(s) as may be agreed upon by the PARTIES.
M. Conforming Use. The SELLER has used the REAL PROPERTY and HONDO has
used the PERSONAL PROPERTY for the purposes for which they
incorporated and organized, and for which such property was intended,
and have abided by, conformed to and caused all others to abide by
and conform to all laws, ordinances, orders, rules, regulations and
statutes of national, state, municipal or county governmental
authority that are now existing or may hereinafter be enacted and
that are controlling or in manner affecting the use and operation by
the SELLER of the REAL PROPERTY and the PERSONAL PROPERTY.
N. Title. At the CLOSING, the BUYER will be vested absolutely with all
of the SELLER'S right, title and interest in and to the REAL PROPERTY
and PERSONAL PROPERTY.
O. Continuation of Representations. The representations, warranties and
covenants of the SELLER and HONDO shall be in full force and effect
as of the EFFECTIVE DATE, and shall survive the CLOSING hereof for a
period of two (2) years thereafter, exclusive of the representations
in Section XIV hereof.
P. Indemnification. The SELLER and HONDO agree to and shall indemnify
and hold the BUYER harmless from any loss, liability or expense,
including attorneys' fees, arising out of the breach of any
representation, covenant or warranty made by them hereunder.
XVII.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER
The BUYER hereby represents, warrants and covenants to the SELLER and
HONDO, which representations, warranties and covenants shall survive the
CLOSING, as follows:
A. Power and Authority. The BUYER has full power and authority to enter
into, execute and perform this AGREEMENT; to make any representation,
warranty, covenant or agreement contained herein; to perform every
act and execute and deliver any and all documents, instruments or
agreements necessary or appropriate to consummate the transactions
contemplated by this AGREEMENT.
B. Organization. The BUYER is a duly organized and validly existing
General Partnership under the laws of the State of New Mexico with
full power to enter into this AGREEMENT and carry out the terms,
conditions and provisions hereof.
18
C. Litigation. To the best knowledge and belief of the investigation
pending or threatened in any court, arbitration board, administrative
agency or tribunal against or relating to the BUYER that would
prevent or impede the consummation of this AGREEMENT by the BUYER.
The BUYER does not know of and has no reasonable ground to know of
any basis for any such litigation, proceeding or investigation and
the execution and performance of this AGREEMENT by it will not result
in the default by it with respect to any judgment, order, writ,
injunction, decree, rule or regulation of any applicable court or ad-
ministrative agency.
D. Leases, Contracts and Other Agreements. The BUYER has incurred no
liability, made no contract or agreement, nor entered into any
written or oral arrangement whatsoever which would impose or result
in any obligations upon the SELLER and HONDO as a result of the
execution of this AGREEMENT. The BUYER has not entered into any
agreement or agreements, either written or oral, under which it is or
could be obligated to sell or transfer all or any portion of the REAL
PROPERTY and PERSONAL PROPERTY and it agrees not to enter into or
negotiate any such agreement or agreements, unless otherwise
authorized hereby.
E. Insurance. The BUYER will keep in effect after the EFFECTIVE DATE of
this AGREEMENT adequate insurance policies covering the REAL PROPERTY
and PERSONAL PROPERTY issued by a financially responsible insurer at
levels of coverage commensurate with its interest in the same.
F. Continuation of Representations. The representations, warranties and
covenants of the BUYER shall be in full force and effect as of the
EFFECTIVE DATE, and shall survive the CLOSING hereof for a period of
two (2) years thereafter.
G. Indemnification. The BUYER agrees to and shall indemnify and hold
the SELLER and HONDO harmless from any loss, liability or expense,
including attorneys' fees, arising out of the breach of any
representation, covenant or warranty made by them hereunder.
XVIII.
USE AND OPERATION OF REAL AND PERSONAL PROPERTY
PRIOR TO THE EFFECTIVE DATE AND CLOSING
The SELLER and HONDO represent and warrant that as of the CLOSING, the
REAL PROPERTY and PERSONAL PROPERTY have been used and operated by the SELLER
and HONDO and will be used and operated as follows:
A. Property. The REAL PROPERTY and PERSONAL PROPERTY have been and will
be kept and maintained in good operating condition and repair, with
the exception of reasonable wear, tear and obsolescence.
B. Governmental Reports. The SELLER and HONDO have filed and will duly
and timely file all reports required to be filed with governmental
authorities, and have and will duly observe and conform to all laws,
rules, regulations, ordinances, codes, orders, licenses and permits
relating to or affecting in any material way the REAL PROPERTY and
PERSONAL PROPERTY that are the subject matter of this AGREEMENT.
19
C. Liens/Security Interests. Unless otherwise authorized hereby, the
SELLER and HONDO have not entered into, created, assumed or allowed
to exist any security agreement, lien, encumbrance, mortgage, deed of
trust, pledge, conditional sale or other title retention agreement,
easement, covenant, restriction or other burden upon the REAL
PROPERTY and PERSONAL PROPERTY which are the subject of this
AGREEMENT.
D. Sales/Transfers. The SELLER and HONDO have not sold, leased, aban-
doned, assigned, transferred, licensed or otherwise disposed of all
or any portion of the REAL PROPERTY and PERSONAL PROPERTY, respec-
tively, which are the subject matter of this AGREEMENT.
E. Contracts/Agreements. The SELLER and HONDO have not entered into,
assumed, amended, changed or modified any contract, agreement,
arrangement, lease, license, commitment, instrument or obligation
materially relating to or affecting in any way the REAL PROPERTY and
PERSONAL PROPERTY, or the SELLER'S or HONDO'S interests therein,
which are the subject matter of this AGREEMENT.
F. Defaults. The SELLER and HONDO have not defaulted under, or become
in breach of any term or provision of, or suffered or permitted to
exist any condition or event which, after notice or lapse of time or
both, would constitute a breach of or default under, any of the
SELLER'S or HONDO'S agreements which would give any other party
thereto the right to terminate the same, claim damages thereunder or
impose a lien upon all or any portion of the REAL PROPERTY and
PERSONAL PROPERTY, which is the subject matter of this AGREEMENT.
G. Representations. The SELLER and HONDO, in good faith and using their
best judgment, will not and have not committed any act or suffered
any act to be done or condition to exist, which could result in:
1. An inaccuracy of any representation or breach of any warranty of
the SELLER or HONDO under this AGREEMENT; or
2. Any failure of the SELLER or HONDO to duly perform or observe
any term, condition, provision, covenant or agreement set forth
or provided for in this AGREEMENT.
XIX.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER
All obligations of the BUYER under this AGREEMENT are subject to the
fulfillment, prior to or at the CLOSING, of each of the following conditions,
any of which may be waived by the BUYER:
A. Accuracy of Covenants. Each and every covenant, representation and
warranty of the SELLER and HONDO under this AGREEMENT shall be true
and accurate as of the date when made, shall be deemed to be made
again at and as of the time of the CLOSING, and as of the EFFECTIVE
DATE shall then be true and accurate in all respects and shall
survive the CLOSING.
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B. Performance of Covenants. The SELLER and HONDO have performed and
complied with, in all respects, each and every covenant, agreement
and condition required by this AGREEMENT to be performed or complied
with prior to or at the CLOSING and as of the EFFECTIVE DATE and will
continue to perform and comply with the same thereafter.
C. Corporate Organization. The SELLER and HONDO are duly organized,
validly existing corporations that are in good standing under the
laws of New Mexico and Delaware, respectively.
D. Power and Authority. The SELLER and HONDO have full power and
authority to enter into this AGREEMENT and to carry out the transac-
tions contemplated hereby.
E. Corporate Action. The execution and delivery by the SELLER and HONDO
of this AGREEMENT and the consummation of the transactions contem-
plated hereby have been duly and validly authorized by all necessary
corporate actions of the SELLER.
F. Binding Effect. This AGREEMENT is legally binding upon the SELLER
and HONDO and is enforceable in accordance with its terms, subject
only to the usual exceptions thereto relating to bankruptcy and
equitable principles.
G. Statutory Requirements. All statutory and other legal requirements
for the valid consummation of the transactions contemplated by this
AGREEMENT (including, but not limited to, compliance with any laws
protecting creditors of the SELLER and HONDO) shall have been ful-
filled, and any and all necessary regulatory approvals, licenses and
permits shall have been obtained.
H. Litigation. There shall not be any actual or threatened litigation
to restrain or invalidate the transactions contemplated by this
AGREEMENT. No proceedings shall have been instituted or been threat-
ened against the SELLER and HONDO for the protection of creditors or
otherwise for the relief of the SELLER or HONDO.
XX.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
All obligations of the SELLER and HONDO under this AGREEMENT are subject
to the fulfillment, prior to or at the CLOSING, of each of the following
conditions, any of which may be waived by the SELLER or HONDO:
A. Accuracy of Covenants. Each and every covenant,
representation and warranty of the BUYER under this AGREEMENT shall
be true and accurate as of the date when made, shall be deemed to be
made again at and as of the time of the CLOSING, and as of the
EFFECTIVE DATE shall then be true and accurate in all respects and
shall survive the CLOSING.
B. Performance of Covenants. The BUYER has performed and complied with,
in all respects, each and every covenant, agreement and condition re-
quired by this AGREEMENT to be performed or complied with prior to or
at the CLOSING and as of the EFFECTIVE DATE.
21
C. Power and Authority. The BUYER has full power and authority to enter
into this AGREEMENT and to carry out the transactions contemplated
hereby.
D. Binding Effect. This AGREEMENT is legally binding upon the BUYER and
is enforceable in accordance with its terms, subject only to the
usual exceptions thereto relating to bankruptcy and equitable princi-
ples.
E. Litigation. There shall not be any actual or threatened litigation
to restrain or invalidate the transactions contemplated by this
AGREEMENT. No proceedings shall have been instituted or been threat-
ened against the BUYER for the protection of creditors or otherwise
for the relief of the BUYER as debtors.
XXI.
DEFAULT
Each of the following events shall constitute a default or breach of this
AGREEMENT by the SELLER and HONDO:
A. If the SELLER fails to cure any reasonable title defect or objection
within the time periods provided for in Section VIII herein in order
to enable the title insurer to issue a title policy at the CLOSING,
as more particularly provided for herein;
B. If the SELLER or HONDO fails to close and consummate the transactions
contemplated by this AGREEMENT on or before the CLOSING DATE, in
accordance with this AGREEMENT and perform in accordance herewith as
well as with any and all documents executed in connection herewith or
required hereby.
C. If the SELLER or HONDO fails to perform or comply with any of the
terms, conditions, provisions, representations, warranties or cove-
nants of this AGREEMENT and if such non-performance continues for a
period of thirty (30) days after written notice thereof is given by
the BUYER to and received by the SELLER or HONDO.
D. If the SELLER sells, vacates or abandons the REAL PROPERTY and
PERSONAL PROPERTY, respectively, unless the same is accomplished as
provided herein.
E. If the SELLER or HONDO, or any of its successors or assignees, while
in possession of the REAL PROPERTY and PERSONAL PROPERTY files a
petition in bankruptcy or insolvency, or for reorganization under any
bankruptcy act, or shall voluntarily take advantage of any such act
by answer or otherwise, or shall make an assignment for the benefit
of creditors.
F. If involuntary proceedings under any bankruptcy law or insolvency
act, or to foreclose or repossess the REAL PROPERTY and PERSONAL
PROPERTY are instituted against the SELLER or HONDO or if a receiver
or trustee is appointed over all or substantially all of the property
of the SELLER or HONDO, including the REAL PROPERTY and PERSONAL
22
PROPERTY, and if such proceedings are not dismissed or the
receivership or trusteeship vacated within thirty (30) days after the
institution or appointment of the same.
Each of the followings events shall constitute a default or breach of this
AGREEMENT by the BUYER:
A. If the BUYER fails to close and consummate the transactions
contemplated by this AGREEMENT on or before the CLOSING DATE, in
accordance with this AGREEMENT and perform in accordance herewith as
well as with any and all documents executed in connection herewith or
required hereby.
B. If the BUYER fails to perform or comply with any of the terms,
conditions, provisions, representations, warran-ties or covenants of
this AGREEMENT and if such non-performance continues for a period of
thirty (30) days after written notice thereof is given by the SELLER
to and received by the BUYER.
C. If the BUYER, or any of its successors or assignees, while in
possession of the BUYERS'S business assets, files a petition in
bankruptcy or insolvency, or for reorganization under any bankruptcy
act, or shall voluntarily take advantage of any such act by answer or
otherwise, or shall make an assignment for the benefit of creditors;
D. If involuntary proceedings under any bankruptcy law or insolvency
act, or to foreclose or repossess the REAL PROPERTY and PERSONAL
PROPERTY are instituted against the BUYER or if a receiver or trustee
is appointed over all or substantially all of the property of the
BUYER, including the REAL PROPERTY and PERSONAL PROPERTY, and if such
proceedings are not dismissed or the receivership or trusteeship
vacated within thirty (30) days after the institution or appointment
of the same.
XXII.
REMEDIES UPON DEFAULT
In the event the SELLER or HONDO defaults under the terms of this
AGREEMENT or any agreements executed in connection herewith or required hereby,
the SELLER or HONDO shall have the applicable time periods set forth in the
preceding Sections of this AGREEMENT after receipt of written notice given by
the BUYER to cure such default. If the default is not cured within such ap-
plicable time period. The BUYER shall then have the following rights and
remedies:
A. If the SELLER fails to cure any title defect or objection within the
time period provided for herein, then the BUYER shall have the rights
and remedies more particularly set forth in Section VIII hereof,
which shall be BUYER'S exclusive remedy. If the default by SELLER is
other than a failure to cure any title defect or objection (as
provided in Section VIII), then the BUYER shall have the rights and
remedies set forth in paragraphs B through F below.
23
B. The BUYER may sue to collect any and all sums which may accrue to it
by virtue of the provisions of this AGREEMENT and/or for any and all
damage that may accrue by virtue of the breach of this AGREEMENT.
C. The BUYER may sue to restrain by injunction any violation or
threatened violation of the covenants, conditions or provisions of
this AGREEMENT.
D. The BUYER may sue for specific performance or to seek strict
compliance with the terms, conditions, provisions, covenants,
agreements and warranties of this AGREEMENT.
E. The remedies of the BUYER in paragraphs B through D above, shall be
cumulative and not exclusive of any other remedy hereunder or to
which the BUYER may be lawfully entitled. The failure of the BUYER
to insist upon strict performance of any of the covenants of this
AGREEMENT or to exercise any option herein contained shall not be
construed as a waiver or relinquishment in the future of such or any
other covenant, option or other action of the BUYER (except a waiver
expressed in writing signed by the BUYER) or be deemed a waiver of
such default.
F. The SELLER and HONDO hereby agree to pay and discharge all reasonable
costs, attorneys' fees and expenses that shall be made or incurred by
the BUYER in enforcing any covenant or agreement of this AGREEMENT.
In the event the BUYER defaults under any of the terms, conditions and
provisions of this AGREEMENT, the BUYER shall have the applicable time period
after receipt of written notice given by the SELLER or HONDO to the BUYER to
cure such default. If the default is not cured within such applicable time
period, then the SELLER and HONDO shall have the following rights and remedies:
A. If the BUYER fails to close and consummate the transactions
contemplated by this AGREEMENT, the SELLER may terminate this
AGREEMENT, declare the same null and void, shall no longer be liable
or responsible for performance hereunder and shall be entitled to
retain the Earnest Money in the amount of $10,000.00 as agreed upon
liquidated damages.
B. The SELLER or HONDO may sue to collect any and all sums which may
accrue to it by virtue of the provisions of this AGREEMENT and/or for
any and all damage that may accrue by virtue of the breach of this
AGREEMENT.
C. The SELLER or HONDO may sue to restrain by injunction any violation
or threatened violation of the covenants, conditions or provisions of
this AGREEMENT.
D. The SELLER may foreclose its Mortgage or sue for specific performance
or to seek strict compliance with the terms, conditions, provisions,
covenants, agreements and warranties of this AGREEMENT.
E. The remedies of the SELLER and HONDO hereunder shall be cumulative
and not exclusive of any other remedy hereunder or to which the
SELLER or HONDO may be lawfully entitled. The failure of the SELLER
or HONDO to insist upon strict performance of any of the covenants of
this AGREEMENT or to exercise any option herein contained shall not
be construed as a waiver or relinquishment in the future of such or
24
any other covenant, option or other action of the SELLER or HONDO
(except a waiver expressed in writing signed by the SELLER or HONDO)
or be deemed a waiver of such default.
F. The BUYER hereby agrees to pay and discharge all reasonable costs,
attorneys' fees and expenses that shall be made or incurred by the
SELLER and HONDO in enforcing any covenant or agreement of this
AGREEMENT.
XXIII.
DISCLOSURE, ACCESS AND INFORMATION
The PARTIES hereto will disclose to each other and provide to each other
copies of all leases, contracts, commitments and records constituting a
material item concerning the REAL PROPERTY and PERSONAL PROPERTY which is the
subject property of this AGREEMENT and which should be disclosed prior to CLOS-
ING. In addition, the PARTIES hereto agree to disclose to each other during
the term of this AGREEMENT, within ten (10) days after receipt of written
notice requesting the same, any material information or records pertaining to
the transactions contemplated by this AGREEMENT, not including the specific
business activities conducted by any of the PARTIES after the date of CLOSING.
XXIV.
BROKER'S FEES AND COMMISSIONS
The PARTIES covenant and represent to each other that none of them has
employed any broker, realtor or commissioned agent incident to the transaction
contemplated by this AGREEMENT, and shall hold the other harmless and indemnify
the other with respect to the representations and covenants contained herein.
XXV.
ASSIGNABILITY
This AGREEMENT, including any amendments hereof, the Exhibits attached
hereto, and any instruments, agreements or documents required hereby, may not
be transferred, assigned or conveyed, in whole or in part, by any PARTY hereto
without first obtaining the written consent of the other PARTIES, unless
provided for herein or in any of the Exhibits attached hereto.
25
XXVI.
NOTICES
Any and all notices required or permitted to be given by the PARTIES to
any other party pursuant to this AGREEMENT shall be in writing and shall be
delivered to the other party by personal delivery, telefax, regular mail or by
sending the same by United States mail, certified or registered, return receipt
request, with postage thereon prepaid to the PARTIES at the addresses listed
below. Any party hereto may from time to time designate a new mailing address
by written notice to the other party of the same in accordance with the
foregoing provisions. All notices shall be deemed to have been delivered upon
actual receipt as evidenced by return receipt or other delivery receipt.
HONDO: HONDO OIL & GAS COMPANY
THE ANDERSON COMPANY
410 East College Boulevard
Roswell, NM 88201
WBJ: WBJ INVESTMENTS
P.O. Box 1836
Roswell, NM 88202-1836
XXVII.
ADDITIONAL INSTRUMENTS
All PARTIES hereto agree to execute any and all additional instruments,
documents and agreements deemed necessary or advisable to fully effectuate
their intent and the purposes of this AGREEMENT.
XXVIII.
GOVERNING LAW
This AGREEMENT and any other additional agreements, documents and
instruments entered into and executed by the PARTIES shall be governed by and
construed in accordance with the laws of the State of New Mexico.
XXIX.
TIME OF THE ESSENCE
Time shall be of the essence in the performance by the PARTIES of all the
terms, conditions and provisions of this AGREEMENT.
XXX.
WAIVERS
One or more waivers of any covenant, term, condition or provision of this
AGREEMENT shall not be construed as a waiver of a subsequent breach of the same
covenant, term, condition or provision. The consent or approval by any one of
26
the PARTIES to or of any act by the other party requiring such consent or
approval shall not be deemed to waive or render unnecessary the consent to or
approval of any subsequent or similar act.
XXXI.
PRONOUNS
All pronouns used in this AGREEMENT shall include the masculine, feminine
and neuter genders, and shall include the singular and plural, and the context
of this AGREEMENT shall be read accordingly, if so required.
XXXII.
HEADINGS/CAPTIONS
Any title, caption or heading contained in this AGREEMENT is used for
convenience only, shall not be deemed to be a part of the context of this
AGREEMENT, and shall not explain, modify or interpret any of the terms,
conditions or provisions contained herein.
XXXIII.
SEVERABILITY
In the event any provision of this AGREEMENT shall be deemed to be
invalid, the same shall not affect, in any respect, the validity of the
remainder of this AGREEMENT.
XXXIV.
AMENDMENTS
This AGREEMENT shall not be deemed or construed to be modified, amended,
superseded, canceled, altered or waived, in whole or in part, except by written
instrument or amendment signed by the PARTIES hereto.
XXXV.
ENTIRE AGREEMENT
This AGREEMENT constitutes the entire agreement among and between the
PARTIES hereto and supersedes all prior oral and written agreements made by
them, which oral and written agreements shall be deemed null and void and of no
further force and effect.
XXXVI.
COUNTERPARTS
This AGREEMENT may be executed in multiple counterparts by each PARTY
hereto and each counterpart shall be identical and deemed to be an original for
27
all purposes, and all counterparts shall together shall constitute one (1) and
the same original document. The BUYER is hereby authorized to assemble the
separate counterparts into one (1) document.
XXXVII.
BINDING EFFECT
The terms, conditions and provisions of this AGREEMENT, and all amendments
thereto, if any, shall be binding upon and inure to the benefit of the PARTIES
and their respective heirs, successors, administrators, personal representa-
tives, executors and assigns.
IN WITNESS WHEREOF, the PARTIES have executed this AGREEMENT this 14th day
of April, 1994.
SELLER:
THE ANDERSON COMPANY, a New HONDO OIL & GAS COMPANY, a
Mexico Corporation and wholly- Delaware Corporation
owned subsidiary of Hondo Oil
& Gas Company, a Delaware Corp-
oration
By: /s/ I.P. Brownlow By: /s/ I.P. Brownlow
____________________ ____________________
I. P. BROWNLOW, Vice I. P. BROWNLOW, Vice
President President
BUYER:
WBJ INVESTMENTS, a New Mexico General Part-
nership
By: /s/ Walter G. Barr
_______________________
WALTER G. BARR, General
Partner
By: /s/ Bruce D. Ritter
________________________
BRUCE D. RITTER, General
Partner
By: /s/ John W. Stebbins
_________________________
JOHN W. STEBBINS, General
Partner
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Hondo Oil & Gas
Company's Form 10-Q for the period identified
below. This information is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> JUN-30-1994
<CASH> 838
<SECURITIES> 0
<RECEIVABLES> 1,043
<ALLOWANCES> 0
<INVENTORY> 137
<CURRENT-ASSETS> 2,164
<PP&E> 13,863
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,926
<CURRENT-LIABILITIES> 893
<BONDS> 81,880
<COMMON> 13,007
0
0
<OTHER-SE> (76,601)
<TOTAL-LIABILITY-AND-EQUITY> 23,926
<SALES> 367
<TOTAL-REVENUES> 710
<CGS> 0
<TOTAL-COSTS> 516
<OTHER-EXPENSES> 3,149
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,424
<INCOME-PRETAX> (6,379)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,379)
<DISCONTINUED> (1,400)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,779)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
