SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. 7)
HONDO OIL & GAS COMPANY
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(Name of Issuer)
Common Stock, $1 par value
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(Title of class of securities)
438138-10-9
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(CUSIP Number)
Richard A. Rubin, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
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(Person Authorized to Receive Notices and Communications)
March 10, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
[ ]
Page 1 of 83 Pages
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CUSIP No. 438138-10-9 Page 2 of 83 Pages
Response to Question 1: Lonrho Plc
Response to Question 2: (a)
Response to Question 3: SEC USE ONLY
Response to Question 4: BK, OO
Response to Question 5: N/A
Response to Question 6: England
Response to Question 7: 0
Response to Question 8: 10,343,686 (shared with subsidiaries)
Response to Question 9: 0
Response to Question 10: 10,343,686 (shared with subsidiaries)
Response to Question 11: 10,343,686 (includes all shares owned by
all group members)
Response to Question 12: N/A
Response to Question 13: 70.4%
Response to Question 14: HC;CO
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CUSIP No. 438138-10-9 Page 3 of 83 Pages
Response to Question 1: London Australian & General Property
Company Limited
Response to Question 2: (a)
Response to Question 3: SEC USE ONLY
Response to Question 4: AF
Response to Question 5: N/A
Response to Question 6: England
Response to Question 7: 1,692,486 (includes 909,090 shares
subject to a right to
convert certain debt)
Response to Question 8: 8,651,200 (shared with subsidiary)
Response to Question 9: 1,692,486 (includes 909,090 shares
subject to a right to
convert certain debt)
Response to Question 10: 8,651,200 (shared with subsidiary)
Response to Question 11: 10,343,686 (includes all shares owned
by all group members)
Response to Question 12: X
Response to Question 13: 70.4%
Response to Question 14: HC; CO
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CUSIP No. 438138-10-9 Page 4 of 83 Pages
Response to Question 1: The Hondo Company
Response to Question 2: (a)
Response to Question 3: SEC USE ONLY
Response to Question 4: OO
Response to Question 5: N/A
Response to Question 6: New Mexico
Response to Question 7: 8,651,200
Response to Question 8: 0
Response to Question 9: 8,651,200
Response to Question 10: 0
Response to Question 11: 8,651,200 (may be deemed to beneficially
own all 10,343,686 shares
owned by group)
Response to Question 12: X (excludes 1,692,486 shares
deemed beneficially owned by
other group members)
Response to Question 13: 62.7% (group's percentage is 70.4%)
Response to Question 14: HC; CO
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CUSIP No. 438138-10-9 Page 5 of 83 Pages
INTRODUCTION
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This statement is being filed jointly by Lonrho Plc, London
Australian & General Property Company Limited and The Hondo Company
(collectively, the "Reporting Persons") with respect to their beneficial
ownership of shares of Common Stock of Hondo Oil & Gas Company.
Prior to October 7, 1994, Lonrho Plc, Lonrho, Inc. and The Hondo
Company filed a joint statement (and amendments thereto) on Schedule 13D with
Mr. Robert O. Anderson. Lonrho Plc and Lonrho, Inc. subsequently determined to
report separately from, in lieu of filing jointly with, The Hondo Company and
Mr. Anderson. Accordingly, Lonrho Plc and Lonrho, Inc. filed, together with
Scottsdale Princess, Inc. (at the time an indirect wholly-owned subsidiary of
Lonrho, Plc and which, at the time, held an option to acquire shares of The
Hondo Company), a Schedule 13D on October 7, 1994 (the "Original Schedule 13D").
Since the Original Schedule 13D, The Hondo Company, Thamesedge
Ltd.("Thamesedge") and London Australian & General Property Company were added
as Reporting Persons. Scottsdale Princess, Inc. ("Scottsdale Princess")
subsequently transferred its interest in The Hondo Company and ceased being a
Reporting Person. Also, all of the shares of the Issuer's Common Stock and all
of the debt of the Issuer (including debt convertible into the Issuer's Common
Stock) owned by Thamesedge, another indirect wholly-owned subsidiary of Lonrho
Plc, was transferred to London Australian & General Property Company, also an
indirect wholly-owned subsidiary of Lonrho Plc. Accordingly, Thamesedge also
ceased being a Reporting Person and London Australian & General Property Company
Limited became a Reporting Person. Since the filing of Amendment No. 6, Lonrho,
Inc. has been merged with and into The Hondo Company. Accordingly, Lonrho, Inc.
is no longer a Reporting Person. The Original Schedule 13D, as heretofore
amended, is referred to collectively as the "Schedule 13D". This Amendment No. 7
further amends the Schedule 13D.
All information contained in the Schedule 13D, as amended hereby,
concerning Messrs. Robert O. Anderson, W. Phelps Anderson and Robert B. Anderson
is to the best knowledge and belief of the Reporting Persons.
All terms used, but not defined, in this Amendment No. 7 are as
defined in the Schedule 13D as heretofore amended.
Item 2. Identity and Background.
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This statement is being filed by (a) Lonrho Plc, a corporation
organized under the laws of England, the principal business office of which is
located at Four Grosvenor Place, London, SW1X 7DL, England; (b) London
Australian & General Property Company Limited, a corporation organized under the
laws of England, the principal business office of which is located at Four
Grosvenor Place, London SW1X 7DL ("LAGP"); and (c) The Hondo Company, a New
Mexico corporation, the
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CUSIP No. 438138-10-9 Page 6 of 83 Pages
principal business office of which is located at 410 East College Boulevard,
Roswell, New Mexico 88201 ("Hondo Company"). Lonrho Plc, LAGP and Hondo Company
are referred to herein collectively as the "Reporting Persons."
Lonrho Plc is a public company registered in England and listed on
the London and Johannesburg stock exchanges. Lonrho Plc and its subsidiaries are
engaged in a variety of activities, including mining, agriculture, motor vehicle
and agricultural equipment distribution, manufacturing and the ownership and
management of property and hotels.
LAGP, an indirect wholly-owned subsidiary of Lonrho Plc, is an
investment holding company.
Hondo Company, a wholly-owned subsidiary of LAGP, is a holding
company for the shares of the Issuer.
As a result of their common control relationship, the Reporting
Persons, may be deemed to be a "group" under Rule 13d-5(b)(1) promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act").
The name, business address, present principal occupation or
employment, and the name, principal business and address of any corporation or
other organization in which such employment is conducted, of each executive
officer and director of the Reporting Persons are set forth in Appendix A
hereto, and incorporated herein by reference.
During the last five years, none of the Reporting Persons nor, to
the best knowledge of the Reporting Persons, any person named in Appendix A
hereto has been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or has been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
To the best knowledge and belief of the Reporting Persons, the
citizenship of each person named in Appendix A is set forth in Appendix A
hereto, and is incorporated herein by reference.
Item 3. Source and Amount of Funds or Other Consideration.
Paragraph (a)(vii) of Item 3 to the Schedule 13D is amended to read
as follows:
On December 13, 1996, in consideration for providing the
Issuer with $13.5 million of additional borrowing
capacity under a Revolving Credit Agreement originally
entered into in June 1996 (the "Revolving Credit
Agreement") and maturity extensions related to
indebtedness
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CUSIP No. 438138-10-9 Page 7 of 83 Pages
owed by the Issuer to Thamesedge, the Issuer granted to
Thamesedge the right to convert $13.5 million of the
Issuer's Senior Notes originally issued to Thamesedge in
1988 into shares of the Issuer's Common Stock at a
conversion price of $12.375 per share (an aggregate of
1,090,909 shares). This right, which was approved by the
Issuer's stockholders at their 1997 annual meeting,
expired unexercised on January 1, 1998. On July 2, 1997,
in consideration for providing the Issuer with an
additional $7.0 million of borrowing capacity under the
Revolving Credit Agreement and further maturity
extensions related to indebtedness owed by the Issuer to
Thamesedge, the Issuer granted Thamesedge the right to
convert up to $7.0 million of the Senior Notes at any
time prior to the maturity thereof at a conversion price
of $7.70 per share (an aggregate of 909,090 shares),
subject to approval by the Issuer's stockholders. This
right was approved by the Issuer's stockholders at their
1998 annual meeting held on March 10, 1998. The Senior
Notes and conversion rights described herein were
transferred from Thamesedge to LAGP on August 29, 1997.
See paragraph (b)(i) of Item 6.
Item 4. Purpose of Transaction.
----------------------
Item 4 of the Schedule 13D is amended to read as follows:
The purpose of the acquisition of the shares of Common Stock by
Hondo Company in October 1987 was to acquire control of the Issuer, through
Hondo Company, under an arrangement which effectively provided control of the
Issuer by Lonrho Plc through a subsidiary, on the one hand, and the Anderson
Family, on the other hand. The other purchases of the Issuer's Common Stock
reflected in Item 3 increased the Reporting Persons' investment and interest in
the Issuer's Common Stock. The purpose of the Revised Settlement Agreement, as
amended, discussed in paragraph (c) of Item 6 was to, among other things, vest
control of Hondo Company solely in the Reporting Persons and provide a mechanism
by which the interest of the Anderson Family in Hondo Company could become a
direct interest in a portion of the Issuer's Common Stock held by Hondo Company
.
Lonrho Plc has announced that it intends to restructure its
operations, which may entail the divestiture of certain assets. Accordingly,
Lonrho Plc reserves the right to divest itself of all or part of its investment
in any of the Issuer's direct or indirect controlling stockholders or cause its
subsidiaries to divest themselves of all or part of their investment in the
Issuer. In this regard, on October 9, 1997, Lonrho Plc retained Morgan Stanley &
Co. Incorporated to assess and implement strategic alternatives with respect to
the Reporting Person's investment in the Issuer. Such strategic alternatives
could include, without limitation, a possible recapitalization of the Issuer or
a sale or
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CUSIP No. 438138-10-9 Page 8 of 83 Pages
business combination involving the Issuer or the Reporting Persons' equity
interest in the Issuer (including the sale or assumption of the Issuer's debt
obligations to the Reporting Persons). (See Item 6).
Except therefor and except as noted below, no Reporting Person has
any present plans or proposals which relate to or would result in: (a) the
acquisition of additional securities of the Issuer (although the Reporting
Persons retain the right, which they may exercise at any time or from time to
time, in their discretion, to acquire directly shares of Common Stock, including
as a result of the potential conversion by LAGP of certain indebtedness owed to
it by the Issuer and the potential acquisition by LAGP of shares of Common Stock
from the Issuer in payment of interest on certain obligations of the Issuer to
LAGP, each as described in paragraph (b) of Item 6) or the disposition of
securities of the Issuer (except as discussed in the preceding paragraph and
except that (i) Hondo Company, as owner, and LAGP, as pledgee, reserve the right
to sell shares covered by a registration statement filed under the Securities
Act by the Issuer with respect to 3,609,200 shares of the Issuer's Common Stock;
(ii) LAGP reserves the right to sell shares covered by other registration
statements filed under the Securities Act by the Issuer with respect to shares
of the Issuer's Common Stock issued by the Issuer to Thamesedge (and transferred
by Thamesedge to LAGP) or LAGP in payment of interest on certain indebtedness at
the time owed them by the Issuer; and (iii) all shares owned by the Reporting
Persons could also be sold pursuant to Rule 144 under the Securities Act or
another exemption from the registration provisions of the Securities Act), (b)
an extraordinary corporate transaction, such as a merger, reorganization or
liquidation of the Issuer, (c) a sale or transfer of a material amount of assets
of the Issuer or any of its subsidiaries (although LAGP reserves the right to
enforce the rights under certain mortgages and a security interest held by it in
the shares of the Issuer's subsidiary, Hondo Magdalena Oil & Gas Limited,
securing certain loans made to the Issuer discussed in paragraph (b) of Item 6),
(d) any change in the present board of directors or management of the Issuer,
including any plans or proposals to change the number or term of directors or to
fill any existing vacancies on the board, (e) any material change in the present
capitalization or dividend policy of the Issuer, (f) any other material change
in the Issuer's business or corporate structure, (g) any changes in the Issuer's
charter, by-laws or instruments corresponding thereto or other actions which may
impede the acquisition of control of the Issuer by any person, (h) causing a
class of securities of the Issuer to be delisted from a national securities
exchange or cease to be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association, (i) causing a class of
equity securities of the Issuer to become eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934
or (j) any action similar to any of those enumerated above.
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CUSIP No. 438138-10-9 Page 9 of 83 Pages
Item 5. Interest in Securities of the Issuer.
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Item 5 of the Schedule 13D is amended to read as follows:
Because of their ownership structure, the Reporting Persons may be
deemed a group within the meaning of Rule 13d-5 under the Exchange Act, and each
of the Reporting Persons may be deemed to be the beneficial owner, within the
meaning of Rule 13d-3 under the Exchange Act, of an aggregate of 10,343,686
shares of Common Stock of the Issuer (assuming the conversion by LAGP of
$7,000,000 of the indebtedness owed to LAGP by the Issuer which is, as discussed
in paragraph (b)(i) of Item 6, convertible into 909,090 shares of the Issuer's
Common Stock), representing (based on the 13,788,424 shares of Common Stock
which were issued and outstanding on March 15, 1998 and assuming the conversion
by LAGP of such $7,000,000 of the indebtedness), approximately 70.3% of the
shares of the Issuer's Common Stock that would have been outstanding on March
15, 1998.
Hondo Company is the owner of 8,651,200 (62.7%) of the Issuer's
outstanding Common Stock and, therefore, may be deemed to have sole voting and
dispositive power over such shares
LAGP is the owner of 783,396 of the Issuer's outstanding Common
Stock. LAGP also has the right, as discussed in paragraph (b)(i) of Item 6, to
convert $7,000,000 of the indebtedness owed to it by the Issuer into 909,090
shares of Common Stock. By virtue of its ownership of Hondo Company as a
wholly-owned subsidiary, LAGP may also be deemed to have shared voting and
dispositive power over the 8,651,200 shares of the Issuer's outstanding Common
Stock owned by Hondo Company. Accordingly, LAGP may be deemed to be the
beneficial owner of an aggregate of 10,343,686 shares of the Issuer's Common
Stock, which (based on 13,788,424 shares of Common Stock issued and outstanding
on March 15, 1998 and assuming the conversion by LAGP of such $7,000,000 of
indebtedness) would constitute approximately 70.4% of the shares of the Issuer's
Common Stock that would have been outstanding on March 15, 1998.
Lonrho Plc, by virtue of its ownership of LAGP and Hondo Company as
indirect wholly-owned subsidiaries, may be deemed to have shared voting and
dispositive power over all 10,343,686 (70.4%) of the Issuer's outstanding Common
Stock which may be deemed beneficially owned by LAGP and Hondo Company.
See Item 3 for information concerning the Reporting Person's
transactions in the Issuer's Common Stock, which is incorporated herein by
reference.
Item 6. Contracts, Arrangements, Understandings or Relationships
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with Respect to Securities of the Issuer.
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Paragraph (b) of Item 6 of the Schedule 13D is amended to read as
follows:
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CUSIP No. 438138-10-9 Page 10 of 83 Pages
(b) The Issuer has, at times, incurred indebtedness to Lonrho Plc,
Thamesedge and LAGP. On March 29, 1996, all of the Issuer's indebtedness to
Lonrho Plc was assigned to Thamesedge and on August 29, 1997 all of the Issuer's
indebtedness to Thamesedge was assigned to LAGP. Accordingly, all such
indebtedness is now owed to LAGP. The following summary of such indebtedness is
qualified in its entirety to the instruments related thereto which are filed as
Exhibits to this Schedule 13D.
(i) On November 30, 1988, Thamesedge purchased a
$75,000,000 13.5% Senior Note, originally due in 1998, from the Issuer in a
private placement pursuant to a Note Purchase Agreement. As noted below, the
interest rate applicable to this debt is presently 6% per annum. The entire
Senior Note is secured by a mortgage on certain real estate owned by the Issuer.
In December 1995, Thamesedge agreed to extend the mandatory redemption dates of
the Note to November 1, 1997 and November 1, 1998, with one half of the
aggregate principal amount outstanding on November 1, 1997 due on each such
date, plus accrued interest. On December 13, 1996, the Issuer and Thamesedge
agreed, among other things, that (i) the aggregate principal amount of the Note,
plus accrued interest, was to be payable on January 1, 1998, and (ii) subject to
approval by the Issuer's stockholders (which was obtained on March 12, 1997),
Thamesedge would have the option to convert $13,500,000 of the principal amount
of the Note into shares of Common Stock of the Issuer at a conversion price of
$12.375 per share (110% of the closing price of the Issuer's Common Stock on the
American Stock Exchange on December 11, 1996) until January 1, 1998. This
conversion right expired unexercised. On July 2, 1997, the Issuer and Thamesedge
agreed, among other things, that, subject to approval by the Issuer's
stockholders at their next annual meeting (which approval was obtained on March
10, 1998), Thamesedge would have the option to convert $7,000,000 of the
principal amount of the Note into shares of Common Stock of the Issuer at a
conversion price of $7.70 per share (110% of the closing price of the Issuer's
Common Stock on the American Stock Exchange on July 1, 1997), subject to
adjustment in the event of stock dividends, splits, combinations and the like.
On December 18, 1997, the Issuer and LAGP agreed to amend, and subsequently
entered into an amendment to, the Note Purchase Agreement under which the Senior
Note is issued and issued an Amended and Restated Senior Note to, among other
things, extend the mandatory redemption date so that the entire Senior Note is
now due January 15, 1999, subject to potential acceleration if, among other
things, events of default contained in indebtedness of the Issuer occurs and to
reflect prior agreements concerning interest rates, the method of payment of
interest and the Senior Note holder's conversion rights. At December 31, 1997,
the outstanding principal amount due on this Note was $39,733,394 (including, as
discussed below, accrued interest through October 1, 1997 which was added to
principal).
(ii) During calendar year 1991, Lonrho Plc loaned the
Issuer an aggregate of $32,000,000 (the "1991 Loans"). At the time the loans
were made the interest rate on such loans was similar to that applicable to the
Issuer's former working capital loan with a bank for its refining and marketing
operations. On October 18, 1994, the Issuer paid Lonrho Plc $5,000,000 to repay
a portion of the loans made in calendar 1991. At the same time, Lonrho Plc
provided a $5,000,000
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CUSIP No. 438138-10-9 Page 11 of 83 Pages
loan facility to the Issuer, upon similar terms as these loans (the"1994
Facility"). As noted below, the interest rate applicable to these loans is
presently 6% per annum. In December 1995, Lonrho Plc agreed to extend the
maturity date of these loans to October 1, 1997. On December 13, 1996, the
Issuer and Thamesedge agreed that the principal amount of these loans was to be
payable on January 1, 1998. On December 18, 1997, the Issuer and LAGP agreed to,
and subsequently entered into, a Consolidated, Amended and Restated Promissory
Note with respect to the 1991 Loans (the "1991 Note") and an Amended and
Restated Promissory Note with respect to the 1994 Facility (the "1994 Note") to,
among other things, extend the due date of the principal amount of these loans
so that they are due on January 15, 1999, subject to potential acceleration if,
among other things, events of default contained in indebtedness of the Issuer
occurs and to reflect prior agreements concerning interest rates and the method
of interest payment At December 31, 1997, the outstanding principal amount due
on these loans was approximately $34,137,049 (including, as discussed below,
accrued interest through October 1, 1997 which was added to principal).
(iii) On April 30, 1993, Lonrho Plc loaned to a
subsidiary of the Issuer an additional $3,000,000 and, as security, the Issuer's
subsidiary granted to Lonrho Plc a Deed of Trust on certain real property. On
June 25, 1993, Lonrho Plc loaned the Issuer an additional $4,000,000 and, as
security, the Issuer and another subsidiary of the Issuer granted to Lonrho Plc
a Deed of Trust on certain other real property. As noted below, the interest
rate applicable to these loans is presently 6% per annum. In December 1995,
Lonrho Plc agreed to extend the maturity of each note so that each became
payable on the earlier of (i) the sale of the property securing the respective
note or (ii) in ten semi-annual installments commencing on October 1, 1997. On
December 13, 1996, Thamesedge, the Issuer and such subsidiaries agreed with the
borrowers that the payment of the installments of principal amount of these
loans would begin on January 1, 1998. On December 18, 1997, the Issuer and such
subsidiaries agreed to, and subsequently entered into, Amended and Restated
Promissory Notes in respect of both loans to, among other things, provide that
the installment payments under each Note would begin January 15, 1999, subject
to potential acceleration if, among other things, events of default contained in
indebtedness of the Issuer occurs and to reflect prior agreements concerning
interest rates and the method of interest payment At December 31, 1997, the
outstanding principal amounts due on these loans were approximately $3,585,681
and $4,672,858, respectively (including, as discussed below, accrued interest
through October 1, 1997 which was added to principal).
(iv) Thamesedge and the Issuer entered into a Revolving
Credit Agreement dated as of June 28, 1996, under which the Issuer was entitled
to borrow up to $13.5 million from Thamesedge until June 30, 1997. Loans under
the Revolving Credit Agreement bear interest at the rate of 13% per annum. On
December 13, 1996, the Issuer and Thamesedge agreed to extend the maturity date
of indebtedness under the Revolving Credit Agreement to January 1, 1998. On July
2, 1997, the Issuer and Thamesedge agreed to amend and restate the Revolving
Credit Agreement. Under the Amended and Restated Revolving Credit Agreement
dated as of July 2, 1997, Thamesedge agreed to increase the Issuer's borrowing
capacity thereunder by $7.0 million, making the total amount available under the
facility $20.5 million until January 1, 1999, when,, subject to potential
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CUSIP No. 438138-10-9 Page 12 of 83 Pages
acceleration if events of default occur, all outstanding loans were to become
due and payable. On December 18, 1997, the Issuer and LAGP agreed to further
increase the Issuer's borrowing capacity thereunder to $27.5 million (and an
additional $7.5 million which may be used only to fund any interest added to
principal in the manner discussed below) until January 1, 1999, when all
outstanding loans thereunder become due and payable. The Amended and Restated
Revolving Credit Agreement also provides for potential mandatory prepayments
from "free cash flow", as defined. At December 31, 1997, the outstanding
principal amount under this facility was approximately $18,866,027 (including,
as discussed below, accrued interest through October 1, 1997 which was added to
principal).
On December 18, 1992, Lonrho Plc and Thamesedge agreed to defer
interest and certain principal payments on loans then outstanding. As
consideration for the deferral of interest and principal payments, on December
18, 1992, the Issuer granted Lonrho Plc a 5% share of the Issuer's net profits,
as defined, under the Opon Association Contract pursuant to which a wholly-owned
subsidiary of the Issuer is participating in the exploration and development of
oil and gas in the Middle Magdalena Basin, about 125 miles north of Bogota,
Columbia. Following the final payment of the foregoing indebtedness, Lonrho
Plc's share of such net profits will be decreased by one-half. Lonrho Plc may
transfer to LAGP its rights in and to such share of the Issuer's net profit.
On December 18, 1993, Lonrho Plc and Thamesedge agreed to add
accrued interest at September 30, 1993 to principal and reduce the interest rate
on each of the loans described in (i) - (iii) above to 6% per annum effective
September 30, 1993 and defer principal payments on the loans. Lonrho Plc,
Thamesedge and the Issuer also agreed that, if the Issuer does not have
sufficient cash resources to pay interest on any of the foregoing indebtedness
when due (the Amended and Restated Revolving Credit Agreement contains a similar
provision), then the Issuer may offer to pay such interest in shares of its
Common Stock valued at their market price on the day the interest is due.
Thereupon LAGP may either accept such offer or add the amount of interest then
due to the remaining outstanding principal balance of the applicable obligation.
See Item 3 for information concerning shares of the Issuer's Common Stock that
have been issued to Lonrho Plc and Thamesedge (and transferred from Thamesedge
to LAGP) pursuant to this arrangement.
As part of the agreement entered into on December 13, 1996 described
above among Thamesedge, the Issuer and certain subsidiaries of the Issuer, the
Issuer granted to Thamesedge (in addition to any other security described
above), as security for all of the loans described above (other than the $13.5
million of indebtedness described in (i) above which was convertible into Common
Stock), a security interest in all of the shares of the Issuer's subsidiary,
Hondo Magdalena Oil & Gas Limited. A formal Security Interest Agreement to
document this pledge was entered into on May 13, 1997 and was, based on the
parties' December 18, 1997 agreement, amended by a First Amendment dated March
18, 1998 to, among other things, delete the $13.5 million exclusion. This
security interest has been assigned to LAGP.
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CUSIP No. 438138-10-9 Page 13 of 83 Pages
Item 7. Material to be filed as Exhibits.
--------------------------------
Item 7 of the Schedule 13D is amended to read as follows:
1 o Agreement, dated March 23, 1998 between the Reporting Persons
with respect to their joint filing of this statement.
2(a) Power of Attorney dated October 6, 1994 executed by Lonrho Plc in
favor of John F. Price and Rudolph H. Funke with respect to the
execution of the Schedule 13D, including all amendments thereto.
2(b)* Power of Attorney dated January 8, 1996 executed by Thamesedge
Ltd. in favor of John F. Price and Rudolph H. Funke with respect
to the execution of the Schedule 13D, including all amendments
thereto.
2(c)+ Power of Attorney dated October 15, 1997 executed by London
Australian & General Property Company Limited in favor of John F.
Price and Rudolph H. Funke with respect to the execution of the
Schedule 13D, including all amendments thereto.
3 Assignment Agreement dated as of October 3, 1994 between Union
Bank and Lonrho Plc.
4 Second Amended and Restated Revolving Credit Agreement between
The Hondo Company and Union Bank, including as exhibits thereto
the forms of the Note, the Pledge Agreement and the Guarantees of
Lonrho Plc and Robert O. Anderson.
5 Shareholders' Agreement dated October 17, 1986 by and among
Robert O. Anderson, Robert B. Anderson, W. Phelps Anderson,
Lonrho, Inc. and The Hondo Company (then known as The Diamond A
Cattle Company).
6 Option Agreement dated as of July 6, 1993 between Robert O.
Anderson and Scottsdale Princess, Inc.
7 Net Profits Share Agreement dated December 18, 1992, among the
Company, Lonrho Plc and Thamesedge, Ltd.
8(a) Letter Agreement dated December 17, 1993 by and among the Issuer,
Via Verde Development Company, Newhall Refining Co., Inc., Lonrho
Plc and Thamesedge, Ltd.
8(b)o Letter Agreement dated as of December 18, 1997 between the Issuer
and LAGP modifying Letter Agreement dated December 17, 1993.
9+ Settlement Agreement dated August 23, 1995 between the Reporting
Persons (other than Thamesedge Ltd. and Hondo Company) and the
Anderson Family.
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CUSIP No. 438138-10-9 Page 14 of 83 Pages
10* Revised Settlement Agreement dated December 20, 1995 between the
Reporting Persons (other than Thamesedge) and the Anderson
Family.
11* First Amendment dated January 5, 1996 to the Revised Settlement
Agreement between the Reporting Persons (other than Thamesedge),
Scottsdale Princess, Inc. and the Anderson Family.
12x Second Amendment dated May 14, 1996 to the Revised Settlement
Agreement between the Reporting Persons (other than Thamesedge),
Scottsdale Princess, Inc. and the Anderson Family.
13+ Third Amendment dated August 28, 1997 to Revised Settlement
Agreement between Lonrho Plc, Lonrho, Inc. and the Anderson
Family
14 Letter Agreement dated December 13, 1996 by and among Thamesedge,
the Issuer, Via Verde Development Company and Newhall Refining
Co., Inc. (incorporated by reference to Exhibit 10.15 to the
Issuer's Annual Report on Form 10-K for the year ended September
30, 1996, File No. 1-8979).
15 Letter Agreement dated December 18, 1997 by and among Thamesedge,
the Issuer, Via Verde Development Company and Newhall Refining
Co., Inc. (incorporated by reference to Exhibit 10.17 to the
Issuer's Annual Report on Form 10-K for the year ended September
30, 1997, File No. 1-8979).
16(a)(1) Amended and Restated Revolving Credit Agreement dated as of July
2, 1997 by and between the Issuer and Thamesedge (incorporated by
reference to Exhibit 10.2 to the Issuer's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997, File No. 1-8979).
16(a)(2)o First Amendment dated as of December 18, 1997 to Amended and
Restated Revolving Credit Agreement between the Issuer and LAGP,
including forms of Promissory Note issued thereunder and First
Guaranty Amendment from Hondo Magdalena.
16(b)(1) Guaranty dated as of July 2, 1997 of Hondo Magdalena Oil & Gas
Limited ("Hondo Magdalena") to Thamesedge guaranteeing the
obligations of the Issuer under the Amended and Restated
Revolving Credit Agreement (incorporated by reference to Exhibit
10.4 to the Issuer's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, File No. 1-8979).
16(b)(2)o First Guaranty Amendment dated as of December 18, 1997 of Hondo
Magdalena to LAGP.
17(a) Security Interest Agreement dated May 13, 1997 by and between the
Company, Thamesedge Ltd., Folio Trust Company Limited and Folio
Nominees Limited (incorporated by reference to Exhibit 10.1 to
the Issuer's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, File No. 1-8979).
17(b)o First Amendment dated March 18, 1998 to Security Interest
Agreement by and between the Issuer, LAGP, Folio Trust Company
Limited and Folio Nominees Limited.
<PAGE>
CUSIP No. 438138-10-9 Page 15 of 83 Pages
18(a)(1) Note Purchase Agreement and Letter Amendment dated November 28,
1988 between the Issuer and Thamesedge (incorporated by reference
to Exhibit 10.2 to the Issuer's Annual Report on Form 10-K for
the fiscal year ended September 30, 1992, File No. 1-8979).
18(a)(2)o Amendment to Note Purchase Agreement dated as of December 18,
1997 between the Issuer and LAGP.
18(b)o Amended and Restated 6% Senior Note due January 15, 1999 from the
Issuer to LAGP
19 o Consolidated, Amended and Restated Promissory Note dated as of
December 18, 1997 from the Issuer to LAGP.
20(a)o Amended and Restated Promissory Note dated as of December 18,
1997 from Via Verde Development Company, a wholly-owned
subsidiary of the Issuer, to LAGP.
20(b)(1) Guaranty dated April 30, 1993 from the Issuer to Lonrho Plc
(incorporated by reference to Exhibit 19.1 to the Issuer's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1993, File No. 1-8979).
20(b)(2)o First Guaranty Amendment dated as of December 18, 1997 from the
Issuer to LAGP.
21 o Amended and Restated Promissory Note dated as of December 18,
1997 from the Issuer to LAGP.
- ---------------------
+ Filed with Amendment No. 1 to the Schedule 13D.
* Filed with Amendment No. 2 to the Schedule 13D.
x Filed with Amendment No. 3 to the Schedule 13D.
+ Filed with Amendment No. 6 to the Schedule 13D.
o Filed herewith.
All exhibits (other than those filed herewith, filed with an amendment to
this Report or incorporated by reference) were filed with the original
Schedule 13D.
<PAGE>
CUSIP No. 438138-10-9 Page 16 of 83 Pages
SIGNATURES
After reasonable inquiry and to the best of the knowledge and belief
of the undersigned, the undersigned certify that the information set forth in
this Statement is true, complete and correct.
Dated: March 24, 1998
Lonrho Plc
By: /s/ John F. Price
-----------------------------
John F. Price
Under Power of Attorney
dated October 6, 1994
London Australian & General Property
Company Limited
By: /s/ John F. Price
-----------------------------
John F. Price
Under Power of Attorney
dated October 15, 1997
The Hondo Company
By: /s/ John F. Price
-----------------------------
John F. Price, President
<PAGE>
CUSIP No. 438138-10-9 Page 17 of 83 Pages
APPENDIX A
----------
I. Lonrho Plc
Set forth below are the name, present principal occupation or
employment, business address and citizenship of each director and executive
officer of Lonrho Plc.
NAME AND PRINCIPAL
POSITION HELD OCCUPATION
WITH LONRHO PLC OR EMPLOYMENT BUSINESS ADDRESS CITIZENSHIP
--------------- ------------- ---------------- -----------
Sir John Craven Director of Four Grosvenor Place United Kingdom
Non-Executive Companies London SW1X 7DL,
Chairman England
S.E. Jonah Director Four Grosvenor Place Ghana
Director Lonrho Plc and London, SW1X 7DL,
Ashanti Goldfields England
Company Limited
N.J. Morrell Director Four Grosvenor Place United Kingdom
Chief Executive/Director Lonrho Plc London, SW1X 7DL,
England
R.E. Whitten Director Four Grosvenor Place United Kingdom
Finance Director Lonrho Plc London, SW1X 7DL,
England
Terence Wilkinson Director Four Grosvenor Place South Africa
Director Lonrho Plc London, SW1X 7DL,
England
M.J. Pearce Company Secretary Four Grosvenor Place United Kingdom
Company Secretary Lonrho Plc London, SW1X 7DL,
England
Sir John Leahy, Director Four Grosvenor Place United Kingdom
K.C.M.G. Lonrho Plc London, SW1X 7DL,
Non-Executive England
Independent Director
<PAGE>
CUSIP No. 438138-10-9 Page 18 of 83 Pages
NAME AND PRINCIPAL
POSITION HELD OCCUPATION
WITH LONRHO PLC OR EMPLOYMENT BUSINESS ADDRESS CITIZENSHIP
--------------- ------------- ---------------- -----------
Peter Harper Director of Four Grosvenor Place United Kingdom
Non-Executive Companies London, SW1X 7DL,
Independent Director England
J R B Phillimore Business Four Grosvenor Place United Kingdom
Non-Executive Adviser London, SW1X 7DL,
Independent Director England
Stephen Walls Chairman Four Grosvenor Place United Kingdom
Non-Executive Albert Fisher London, SW1X 7DL,
Independent Director Group Plc England
Sir Alastair Morton Honorary Chairman Four Grosvenor Place United Kingdom
Non-Executive of Eurotunnel London, SW1X 7DL,
Independent Director Non-Executive England
Director:
National Power PLC
BrockBank Group
Advisor to:
Group Executive Board
of ABB Daimler-Benz
Transportation
Vice Chancellor:
University of Cambridge
<PAGE>
CUSIP No. 438138-10-9 Page 19 of 83 Pages
II. London Australian & General Property Company Limited
----------------------------------------------------
Set forth below are the names, present principal occupation or
employment, business address and citizenship of each director and executive
officer of London Australian & General Property Company Limited.
NAME AND PRINCIPAL
POSITION HELD OCCUPATION
WITH LAGP OR EMPLOYMENT BUSINESS ADDRESS CITIZENSHIP
- --------- ------------- ---------------- -----------
N.J. Morrell Director Four Grosvenor Place United Kingdom
Director Lonrho Plc London, SW1X 7DL,
England
R.E. Whitten Director Four Grosvenor Place United Kingdom
Director Lonrho Plc London, SW1X 7DL,
England
<PAGE>
CUSIP No. 438138-10-9 Page 20 of 83 Pages
III. Hondo Company
Set forth below are the names, present principal occupation or
employment, business address and citizenship of each director and executive
officer of Hondo Company.
NAME AND PRINCIPAL
POSITION HELD OCCUPATION
WITH HONDO COMPANY OR EMPLOYMENT BUSINESS ADDRESS CITIZENSHIP
- ------------------ ------------- ---------------- -----------
John F. Price President 805 Third Avenue United States
President and Princess Hotels New York, New York
Director 10022
Richard W. Reese Vice President 410 East College Blvd.United States
Vice President Hondo Company Roswell, New Mexico
S.H. Cavin Counsel 410 East College Blvd.United States
Secretary Hondo Company Roswell, New Mexico
R.E. Whitten Director Four Grosvenor Place United Kingdom
Director Lonrho Plc London, SW1X 7DL,
England
N.J. Morrell Director Four Grosvenor Place United Kingdom
Director Lonrho Plc. London, SW1X 7DL
England
<PAGE>
CUSIP No. 438138-10-9 Page 21 of 83 Pages
EXHIBIT 1
---------
The undersigned agree that the statement on Schedule 13D to which
this Agreement is attached is filed on behalf of each of them.
Dated: March 24, 1998
Lonrho Plc
By: /s/ John F. Price
--------------------------
John F. Price
Under Power of Attorney
dated October 6, 1994
London Australian & General
Property Company Limited
By: /s/ John F. Price
--------------------------
John F. Price
Under Power of Attorney
dated October 15, 1997
The Hondo Company.
By: /s/ John F. Price
--------------------------
John F. Price, President
Hondo Oil & Gas Company
10375 Richmond Avenue
Houston, Texas 77042
As of December 18, 1997
London Australian & General Property Company Limited
4 Grosvenor Place
London, England SW1X 7Dl
Dear Sirs:
This Agreement is entered into by and among Hondo Oil & Gas Company,
a Delaware corporation ("Hondo"), Via Verde Development Company, a California
corporation, Newhall Refining Co., Inc., a Delaware corporation, and London
Australian & General Property Company Limited, a United Kingdom corporation
("LAGP"), with reference to:
(a) Note Purchase Agreement dated November 28, 1988, between
Pauley Petroleum Inc. (now Hondo) and Thamesedge, Ltd. ("Thamesedge"), as
amended (the "Thamesedge Note Purchase Agreement"), and Note dated November 30,
1988, for $75,000,000 from Pauley Petroleum Inc. to Thamesedge (the "Thamesedge
Note"); and
(b) Amended and Restated Letter Agreement dated December 20,
1991, between Hondo and Lonrho Plc ("Lonrho"), as amended (the "Lonrho Loan
Agreement"), and Notes dated September 1, 1991, for $10,000,000, dated November
1, 1991, for $9,000,000, and dated December 20, 1991, for $13,000,000, from
Hondo to Lonrho Plc (the "Lonrho Notes").
On December 17, 1993, Hondo and Thamesedge and Lonrho, predecessors
in interest to LAGP, entered into a Letter Agreement with respect to the
Thamesedge Note Purchase Agreement, the Thamesedge Note, the Lonrho Loan
Agreement and the Lonrho Notes. Pursuant to Section 7 of that Letter Agreement,
Thamesedge and Lonrho agreed that the Thamesedge Note and Lonrho Notes would be
subordinated in right of payment to the prior payment in full of certain
obligations of Hondo.
<PAGE>
London Australian & General Property
Company Limited - 2 -
This letter will serve to confirm that Section 7 of said Letter
Agreement was inadvertently included in said Letter Agreement and in
consideration for the extension of certain credit and the extension of the
maturity of obligations of the undersigned to LAGP, Section 7 is hereby
terminated.
Very truly yours,
HONDO OIL & GAS COMPANY
By: /s/ John J. Hoey
------------------------------
John J. Hoey, President
VIA VERDE DEVELOPMENT COMPANY
By: /s/ John J. Hoey
------------------------------
John J. Hoey, President
NEWHALL REFINING CO., INC.
By: /s/ John J. Hoey
------------------------------
John J. Hoey, President
Confirmed and accepted as of the date first above written:
LONDON AUSTRALIAN & GENERAL PROPERTY COMPANY LIMITED
By: /s/ R. E. Whiiten
------------------------------
R. E. Whitten, Director
FIRST AMENDMENT
TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Introduction
------------
This FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT (this "Amendment"), is dated as of December 18, 1997 and is entered
into by and between HONDO OIL & GAS COMPANY, a Delaware corporation (the
"Borrower"), and LONDON AUSTRALIAN & GENERAL PROPERTY COMPANY LIMITED, a United
Kingdom corporation (the "Lender"), as assignee of Thamesedge, Ltd.
Recitals
--------
The Borrower and the Lender (as assignee of Thamesedge Ltd.) are
parties to a Revolving Credit Agreement dated as of June 28, 1996, as same has
been amended and restated pursuant to an Amended and Restated Revolving Credit
Agreement dated as of July 2, 1997 (the "Existing Loan Agreement"), pursuant to
which there has been established a $20,500,000 revolving credit facility in
favor of the Borrower. Capitalized terms used and not otherwise defined or
amended in this Amendment shall have the meanings respectively assigned to them
in the Existing Loan Agreement.
The Borrower has requested that the Lender increase the Lender's
Commitment to $27,500,000 and $7,500,000 to cover potential interest that may be
added to principal pursuant to Section 2.05 of the Existing Loan Agreement. The
Lender is willing to so increase the Commitment based on the Borrower's
representation that, by October 1, 1998, the Lender shall have received a report
that Borrower's proved reserves will have increased to a minimum of 65,475,554
mcf and the Borrower's agreement that if its proved reserves fail to reach such
level, an Event of Default will occur.
The Borrower has requested that the Lender enter into this Amendment
in order to reflect the foregoing and certain other amendments to the Existing
Loan Agreement, and the Lender has agreed to do so, all upon the terms and
provisions and subject to the conditions hereinafter set forth.
Agreement
---------
In consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
Section 1. Amendment to Existing Loan Agreement. The Existing Loan
Agreement is hereby amended as of the date first written above as follows:
(A) The definition of the terms "Agreement" , "this Agreement" and
"Lender" in the introductory paragraph are hereby amended to read as follows:
<PAGE>
"Agreement" and "this Agreement" shall mean the Amended
and Restated Revolving Credit Agreement, together with all schedules
and exhibits thereto, as amended by the First Loan Amendment, and as
the same may be supplemented, modified, amended or restated from time
to time.
"Lender" shall mean London Australian & General Property
Company Limited, a United Kingdom corporation.
(B) In Section 1.01 of the Existing Loan Agreement, the definitions
of "Credit Documents" , "Guaranty" and "Note" are hereby deleted in their
entirety, and the following new definitions are hereby inserted in their
respective places:
"Credit Documents" means the Agreement, the Note, the
Guaranty and the Security Agreement.
"Guaranty" shall mean the Guaranty from the Guarantor to
the Original Lender dated as of July 2, 1997, as assigned by the
Original Lender to the Lender, as amended by the First Guaranty
Amendment and as the same may be supplemented, modified, amended or
restated from time to time.
"Note" shall mean the Amended and Restated Promissory Note
of the Borrower substantially in the form of Exhibit A to the First
Loan Amendment.
(C) In Section 1.01 of the Existing Loan Agreement, the following new
definitions of "First Guaranty Amendment", "First Loan Amendment", "First
Security Agreement Amendment", "Interest Advance", "Original Lender" and
"Security Agreement" are hereby inserted in their respective proper alphabetical
positions without the deletion or modification of any other material:
"First Guaranty Amendment" shall mean the First Amendment
dated as of December 18, 1997 to the Guaranty in substantially the
form of Exhibit B to the First Loan Amendment.
"First Loan Amendment" shall mean the First Amendment
dated as of December 18, 1997 to Amended and Restated Revolving
Credit Agreement between the Borrower and the Lender.
"First Security Agreement Amendment" shall mean the First
Amendment dated December 18, 1997 to the Security Agreement in
substantially the form of Exhibit C to the First Loan Amendment.
"Interest Advances" has the meaning set forth in Section
2.01.
"Original Lender" shall mean Thamesedge Ltd.
"Security Agreement" shall mean the Security Interest
Agreement dated May 13, 1997 between the Original Lender (and
assigned to Lender), the Borrower, Folio Trust Company Limited, a
Jersey company, and Folio Nominees Limited, a British Virgin Islands
company, as
-2-
<PAGE>
mended by the First Security Agreement Amendment and as the same may
be supplemented, modified, amended or restated from time to time.
(D) Section 2.01 of the Existing Loan Agreement is hereby deleted in
its entirety, and the following new section is hereby inserted in its place:
"SECTION 2.01 The Advances. The Lender agrees, on and
subject to the terms and conditions hereinafter set forth and
provided no Event of Default has occurred and is continuing, to make
advances (the "Advances") to the Borrower from time to time during
the period from the date hereof until the Termination Date in an
aggregate amount not to exceed at any time outstanding $35,000,000,
as such amount is reduced from time to time pursuant to Section 2.03
(the "Commitment"); provided, however, that $7,500,000 of the
Commitment may only be used to fund interest added to principal of
the note pursuant to Section 2.05 (the "Interest Advances"). Each
Advance shall be in an amount not less than $100,000. Within the
limits of the Commitment, the Borrower may borrow, prepay pursuant to
Section 2.04(a) and reborrow under this Section 2.01."
(E) Section 2.02 of the Existing Loan Agreement is hereby deleted in
its entirety, and the following new section is hereby inserted in its place:
"SECTION 2.02 Making the Advances. Each Advance (other
than an Interest Advance which shall be made by book entry) shall be
made on at least three Business Days notice from the Borrower to the
Lender specifying the date and amount thereof. Not later than 10:00
a.m., London time, on the date of such Advance and upon fulfillment
of the applicable conditions set forth in Article III, the Lender
will make such Advance available to the Borrower in immediately
available funds at such account and location as Borrower may
designate in writing."
(F) Section 2.03 of the Existing Loan Agreement is hereby deleted in
its entirety, and the following new section is hereby inserted in its place:
"SECTION 2.03 Optional and Mandatory Reductions of
Commitment. Without any notice to the Borrower or any other action by
an Person, the Commitment shall be automatically and permanently
reduced (i) by an amount equal to the aggregate principal amount of
the Advances repaid (or due but not repaid) pursuant to Section
2.04(c); and (ii) in accordance with Section 6.01."
(G) At the conclusion of Section 6.01(g) of the Existing Loan
Agreement, the following is hereby inserted:
"; and"
(H) In Section 6.01 of the Existing Loan Agreement, the following new
subsection (h) is hereby inserted at the end thereof without deletion or (except
as provided in clause (E) above) modification of any other material:
-3-
<PAGE>
"(h) the Borrower shall have failed to furnish to Lender, by October
1, 1998, a proved gas reserve report of Netherland, Sewell &
Associates that shows that a minimum of 13,000,000 mcf (25%) of
proved gas reserve exists, which are subject to the Opon Association
Contract in which Hondo Magdalena then participates, above the proved
gas reserve of 52,475,554 mcf at September 30, 1997."
(I) In Section 7.02 of the Existing Loan Agreement, the address of
the Lender is amended by deleting the present address and inserting the
following:
"if to the Lender, to it at London Australian & General Property
Company Limited, 4 Grosvenor Place, London, SW1X 7DL, England,
telephone 011-44-171-201-600, telecopier 011-44-171-201-6100,
Attention Robin Whitten with a copy to Rudolph H. Funke, Esq. at 805
Third Avenue, 18th Floor, New York, NY 10022, telephone 212-715-7001,
telecopy 212-838-8141;"
(J) Exhibit A to the Existing Loan Agreement is hereby deleted in its
entirety, and Exhibit A to this Amendment is hereby inserted in its place.
Section 2. Acknowledgment of Outstanding Loans. The Borrower hereby
acknowledges, certifies and agrees that: (a) pursuant to the Existing Loan
Agreement, the Lender has made loans to the Borrower that are outstanding as of
the date of this Amendment in the aggregate principal amount of $18,866,026.56
(including interest of $1,166,026.56 that has been added to principal in
accordance with Section 2.05 of the Agreement); and (b) the obligations of the
Borrower to repay those loans (with interest) to the Lender and to perform or
otherwise satisfy its other obligations, as well as the security interests in
the Collateral (as defined in the Security Agreement) granted by the Borrower to
the Lender in the Security Agreement and the obligations of the Guarantor in the
Guaranty: (i) each remain and shall continue in full force and effect, both
before and after giving effect to this Amendment, (ii) are not subject to any
defense, counterclaim, setoff, right of recoupment, abatement, reduction or
other claim or determination, and (iii) are and shall continue to be governed by
the terms and provisions of the Existing Loan Agreement and other Credit
Documents as supplemented, modified and amended by this Amendment.
Section 3. Bringdown of Representations, Etc. As of the date of this
Amendment, both before and after giving effect to the terms and provisions of
this Amendment, and both prior to and after giving effect to any requested
Advance: (a) the representations and warranties of the Borrower set forth in the
Existing Loan Agreement and in the Security Agreement and of the Guarantor set
forth in the Guaranty are true and correct in all material respects with the
same effect as though those representations and warranties had been made on and
as of the date hereof; (b) no Event of Default or Default has occurred and is
continuing; (c) the Board of Directors of the Borrower has duly authorized the
execution and delivery by the Borrower of the Existing Loan Agreement, the First
Loan Amendment and the First Security Agreement Amendment by the Borrower; (d)
the Board of Directors of the Guarantor and the Borrower, as sole shareholder of
the Guarantor (with authorization by the Board of Directors of the Borrower),
has authorized the execution and delivery by the Guarantor of the Guaranty and
the First Guaranty Amendment; and (e) there are no actions, suits or proceedings
pending or, to the best knowledge of the undersigned, threatened or contemplated
by any person for the liquidation, dissolution or bankruptcy of the Borrower or
the Guarantor or otherwise threatening their respective
-4-
<PAGE>
existences or challenging or calling into question the power or authority of the
Borrower or the Guarantor to execute or deliver any Credit Document to which it
is or will be a party or to perform any of its obligations thereunder.
Section 4. Counterparts. This Amendment may be signed in two or more
counterpart copies of the entire document or of signature pages to the document,
each of which may be executed by one or more of the parties hereto, but all of
which, when taken together, shall constitute a single agreement binding upon all
of the parties hereto.
Section 5. Governing Law, Etc. Sections 7.06 ("Binding Effect";
Governing Law") and 7.09 ("Jurisdiction") of the Existing Loan Agreement are
incorporated herein by reference and shall pertain separately to this First Loan
Amendment as well as the Existing Loan Agreement and the Agreement.
Section 6. Agreement to Continue as Amended. The Existing Loan
Agreement, as supplemented, modified and amended by this Amendment, and the
other Credit Documents, as amended pursuant to the amendments and/or
restatements thereto being entered into contemporaneously herewith, shall remain
and continue in full force and effect after the date hereof.
Section 7. Entire Agreement. This Amendment contains the entire
agreement of the parties and supersedes all other representations, warranties,
agreements and understandings, oral or otherwise, among the parties with respect
to the matters contained in this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered by their respective officers thereunto duly
authorized. as of the date first above written.
HONDO OIL &GAS COMPANY
By: /s/ John J. Hoey
--------------------------
John J. Hoey
President
LONDON AUSTRALIAN & GENERAL
PROPERTY COMPANY LIMITED
By: /s/ R. E. Whitten
--------------------------
R. E. Whitten
Director
-5-
<PAGE>
EXHIBIT A
AMENDED AND RESTATED PROMISSORY NOTE
As of December 18, 1997 $35,000,000
FOR VALUE RECEIVED, the undersigned, HONDO OIL & GAS COMPANY, a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
LONDON AUSTRALIAN & GENERAL PROPERTY COMPANY LIMITED, a United Kingdom
corporation (the "Lender"), on January 1, 1999 the principal sum of $35,000,000
or, if less than $35,000,000, the aggregate unpaid principal amount of all
Advances (as defined below) made by the Lender to the Borrower pursuant to the
Agreement (as defined below), together with all accrued but unpaid interest and
all interest added to the principal of this Note (as such has been and may be
supplemented, modified, amended or restated from time to time, "this Note").
The Borrower promises to pay interest on the unpaid principal amount
of each Advance from the date of such Advance until such principal amount is
paid in full, at the rate per annum equal at all times to 13% (or the maximum
interest rate permitted by law, whichever is less) on each October 1 and April 1
until maturity; provided, however, that any amount of principal on Advances that
are not paid when due (whether at stated maturity, by acceleration or otherwise)
shall bear interest from the date on which such amount is due until such amount
is paid in full, payable on demand, at a rate per annum equal at all time to 18%
(or the maximum interest rate permitted by law, whichever is less).
As used herein, "Business Day" means any day of the year on which
banks are not required or authorized to close in London or Houston, Texas. All
computations of interest shall be made by the Lender on the basis of a year of
360 days and the actual number of days occurring in the period from which such
interest is payable. Whenever any payment hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of interest.
Both principal and interest are payable not later than 12:00 noon
London time on the day when due in lawful money of the United States of America
to the Lender at such account and place as Lender shall designate in immediately
available funds. Each Advance made by the Lender to the Borrower pursuant to the
Agreement, and all payments made on account of principal thereof, may, but need
not be recorded by the Lender on its books and records on the grid attached
hereto and such books and records shall be conclusive as to the existence and
amounts thereof absent manifest error. Failure to make any such entry or
endorsement shall not effect the actual principal amount outstanding or the
enforceability of this Note.
This Amended and Restated Note (i) has been issued by Borrower to
renew, extend, amend, restate and replace the Note dated July 2, 1997 issued by
Borrower in the principal amount of $20,500,000 (the "Prior Note"), (ii) is the
"Note" referred to in, and is entitled to the benefits of, the Amended and
Restated Revolving Credit Agreement between the Borrower and the Lender dated as
of July 2, 1997 (as same has been and may be supplemented, modified, amended or
restated from time to time, the "Agreement"), (iii) evidences all indebtedness
and other amounts outstanding from time to
<PAGE>
time under the Agreement and (iv) although issued in substitution for and
restatement of the Prior Note, this Note shall not be deemed to have been issued
in payment, satisfaction, cancellation or novation of the Prior Note. The
Agreement, among other things: (1) provides for the making of advances (the
"Advances") by the Lender to the Borrower and (2) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments an account of principal hereof prior to the maturity
hereof upon the terms and conditions specified therein.
This Note is a renewal and replacement of that certain other note in
the amount of $20,500,000 from Borrower to Lender dated as of July 2, 1997
which, in turn, replaced a note in the amount of $13,500,000 from Borrower to
Lender dated June 28, 1996.
This Note is guaranteed by the Amended and Restated Guaranty of Hondo
Magdalena Oil & Gas Limited dated July 2, 1997 (as the same has been and may be
supplemented, modified, amended or restated from time to time, the "Guaranty").
Payment of this note is secured pursuant to the Security Agreement
dated May 13, 1997 between the Lender, the Borrower, Folio Trust Company
Limited, a Jersey company, and Folio Nominees Limited, a British Virgin Islands
company (as the same has been and may be supplemented, modified, amended or
restated from time to time, the "Security Agreement").
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York (other than those that would defer to the
substantive laws of another jurisdiction). Without in any way limiting the
preceding choice of law, the parties intend (among other things) to thereby
avail themselves of the benefit of Section 5-1401 of the General Obligations Law
of the State of New York.
The Borrower hereby irrevocably submits to the jurisdiction of any
New York State or United States Federal court sitting in New York City over any
action or proceeding arising out of or relating to this Note or the Agreement,
and hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State or Federal court.
The Borrower irrevocably consents to the service of any and all process in any
such action or proceeding by sending copies of such process to it at its address
and in the manner determined under Section 7.02 of the Agreement. The Borrower
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. The Borrower further waives any objections
to venue in such State and any objection to an action or proceeding in such
State on the basis of forum non conveniens. The Borrower further agrees that any
action or proceeding brought by it against the Lender shall be brought only in
New York State or United States Federal court sitting in New York County, New
York. The Borrower and the Lender waive any right it may have to jury trial.
Nothing herein shall affect the right of the Lender to serve legal
process in any other manner permitted by law or affect the right of the Lender
to bring any action or proceeding against the Borrower or any of its properties
in the courts of any other jurisdictions.
To the extent that the Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether from
service or notice, attachment prior to judgment,
-2-
<PAGE>
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, the Borrower hereby irrevocable waives such immunity in respect
of its obligations under the Credit this Note, the Agreement and the Guaranty.
HONDO OIL & GAS COMPANY
By:
--------------------------
John J. Hoey
President
-3-
<PAGE>
SCHEDULE TO NOTE
AMOUNT OF PRINCIPAL PRINCIPAL NOTATION
DATE ADVANCE PAID OUTSTANDING MADE BY
---- ------- ---- ----------- -------
12/18/97 Carryover from - $18,866,026.56
Prior Note
-4-
<PAGE>
EXHIBIT B
FIRST GUARANTY AMENDMENT
As of December 18, 1997
Hondo Magdalena Oil & Gas Limited
c/o Hondo Oil & Gas Company
10375 Richmond Avenue, Suite 900
Houston, Texas 77042
Re: Guaranty
--------
Gentlemen:
As you know, London Australian & General Property Company Limited is in
the process of amending its existing Amended and Restated Revolving Credit
Agreement, dated as of July 2, 1997 (as currently in effect, the "Existing Loan
Agreement"), with Hondo Oil & Gas Company (the "Borrower"), which you guarantied
pursuant to your Guaranty executed and delivered as of July 2, 1997 (as
currently in effect, the "Existing Guaranty") in our favor (as assignee of
Thamesedge Ltd., the "Original Lender"). Under the proposed amendment, among
other things (a) the Commitment and, accordingly, the principal amount subject
to the Guaranty, is being increased to $35,000,000 (including $7,500,000 that
may represent interest added to principal), (b) an Event of Default is being
added to the Existing Loan Agreement to the effect that it shall be an Event of
Default if the Borrower shall have failed to furnish to Lender, by October 1,
1998, a proved gas reserve report of Netherland, Sewell & Associates that shows
that a minimum of 13,000,000 mcf (25%) of proved gas reserve exists, which are
subject to the Opon Association Contract in which Hondo Magdalena then
participates, above the proved gas reserve of 52,475,554 mcf at September 30,
1997 and (c) the definition of the term "Credit Documents" is being amended to
include that certain Security Agreement dated May 13, 1997, as amended as of the
date hereof (as same may be supplemented, modified, amended or restated from
time to time).
We understand that you have reviewed a copy of the final version of the
proposed First Amendment to the Existing Loan Agreement, including, without
limitation, the proposed Amended and Restated Promissory Note relating thereto
and the Security Agreement (collectively, the "Loan Agreement Amendments").
Capitalized terms used but not defined in this letter are used as they are
defined in the Existing Guaranty. For all purposes, "Guaranty" means the
Existing Guaranty, as modified by this letter, and as the same may be further
supplemented, modified, amended and restated from time to time in the manner
provided therein.
Please execute this letter to acknowledge your agreement to the Loan
Agreement Amendments and that your guarantee and other obligations under the
Guaranty remain and continue in full force and effect both before and after
giving effect to the Loan Agreement Amendments and related documentation
(including, without limitation, the matters set forth in this letter). Our
request to you
<PAGE>
-2-
Hondo Magdalena Oil & Gas Limited As of December 18, 1997
in this instance does not obligate us to notify you or seek your consent in the
future as to any amendment or other matter where (pursuant to your Guaranty, or
otherwise) such notice or consent is not required.
Your signature, where indicated below, also will constitute your
acknowledgment of and agreement to the following modifications to the Existing
Guaranty (without limiting the prior paragraph of this letter):
i. London Australian & General Property Company Limited has
become the "Lender" for purposes of the Existing Loan
Agreement, as amended by the Loan Agreement Amendments,
the Guaranty and the other Credit Documents;
ii. The Guaranty now covers, among other things, all amounts
borrowed and to be borrowed (and interest thereon) under
the Existing Loan Agreement, as amended by the Loan
Agreement Amendments;
iii. You represent and warrant that your representations and
warranties set forth in the Existing Guaranty are true and
correct in all material respects on and as of the date of
this letter, after giving effect hereto, with the same
effect as though those representations and warranties had
been made on and as of the date hereof; and
iv. Section 7 of the Existing Guaranty is amended to read as
follows:
"SECTION 7. Consent to Jurisdiction; Waiver of Immunities.
(a) Guarantor hereby irrevocably submits to the
jurisdiction of any New York or federal court sitting in New York in
any action or proceeding arising out of or relating to this Guaranty,
and the Guarantor hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in
such New York or federal court. The Guarantor hereby irrevocably
waives, to the fullest extent they may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or
proceeding. The Guarantor hereby irrevocably appoints John J. Hoey
(the "Process Agent"), with an office on the date hereof at Hondo Oil
& Gas Company, 10375 Richmond Avenue, Suite 900, Houston, TX 77042,
telephone (713) 954-4600, telecopier (713) 954-4601, as its agent to
receive, on behalf of the Guarantor and its property, service of
copies of the summons and complaint and any other process that may be
served in any such action or proceeding. Such service may be made by
mailing or delivering a copy of such process to the Guarantor in care
of the Process Agent at the Process Agent's address above, and the
Guarantor hereby irrevocably authorizes and directs the Process Agent
to accept such service on its behalf. As an alternative method of
service, Guarantor also irrevocably consents to the service of any
and all process in any such action or proceeding by the mailing of
copies of such process to Guarantor at its address specified in
Section 11. Guarantor agrees that a final judgment in
<PAGE>
-3-
Hondo Magdalena Oil & Gas Limited As of December 18, 1997
any such action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(b) Nothing in this Section shall affect the right of the
Lender to serve legal process in any other manner permitted by law or
affect the right of the Lender to bring any action or proceeding
against Guarantor or its property in the courts of any other
jurisdictions.
(c) To the extent that Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise)
with respect to Guarantor or its property, Guarantor hereby
irrevocably waives such immunity in respect of its obligations under
this Guaranty."
v. Notices, requests and demands to the Lender, as set forth
in Section 11 of the Existing Guaranty, shall be in
writing and shall be effective when delivered to the
Lender at London Australia & General Property Company,
Four Grosvenor Place, London, SW1X 7DL, England, telephone
011-44-171-201-6000, telecopier 011-44-171-201-6100,
Attention: R. E. Whitten, with a copy to Rudolph H. Funke,
Esq. at 805 Third Avenue, 18th Floor, New York, NY 10022,
telephone 212-715-7001, telecopier 212-838-8141.
vi. This Guaranty shall be governed by the laws of the State
of New York (other than those that would defer to the
substantive laws of another jurisdiction). Without in any
way limiting the preceding choice of law, the parties
intend (among other things) to thereby avail themselves of
the benefit of Section 5-1401 of the General Obligations
Law of the State of New York.
Your signature, where indicated below, also will constitute your
acknowledgment of and agreement and certification that: (a) pursuant to the
Existing Loan Agreement, the Lender has made Advances (as defined) to the
Borrower that are outstanding as of the date of this letter in the aggregate
principal amount of $18,866,026.56 (including $1,166,026.56 of interest added to
principal); (b) the obligations of the Borrower to repay all Advances (including
those to be made pursuant to the Loan Agreement Amendments) with interest, to
the Lender and to perform or otherwise satisfy all other obligations, as well as
the security interests in the Collateral (as defined in the Security Agreement)
granted by the Borrower to the Lender, (i) each remain and shall continue in
full force and effect, both before and after giving effect to the transactions
contemplated by this letter, (ii) are not subject to any defense, counterclaim,
setoff, right of recoupment, abatement, reduction or other claim or
determination, and (iii) are and shall continue to be governed by the terms and
provisions of the Existing Loan Agreement and other Credit Documents, as amended
by the Loan Agreement Amendments and as same may be supplemented, modified,
amended or restated in the future; (e) your absolute, unconditional and
irrevocable guarantee to the Lender of the full and punctual payment and
satisfaction of the foregoing and any and all other obligations the Borrower (i)
remains and shall continue in full force and effect, both before and after
giving effect to the transactions contemplated by this letter, (ii) is not
subject to any defense, counterclaim, setoff, right of recoupment, abatement,
reduction or other
<PAGE>
-4-
Hondo Magdalena Oil & Gas Limited As of December 18, 1997
claim or determination, and (iii) is and shall continue to be governed by the
terms and provisions of the Existing Guaranty and other Credit Documents as
supplemented, modified and amended.
Very truly yours,
LONDON AUSTRALIAN & GENERAL
PROPERTY COMPANY LIMITED
By: ___________________________
ACKNOWLEDGED AND AGREED:
HONDO MAGDALENA OIL & GAS LIMITED
__________________________________
FIRST GUARANTY AMENDMENT
As of December 18, 1997
Hondo Magdalena Oil & Gas Limited
c/o Hondo Oil & Gas Company
10375 Richmond Avenue, Suite 900
Houston, Texas 77042
Re: Guaranty
--------
Gentlemen:
As you know, London Australian & General Property Company Limited is in
the process of amending its existing Amended and Restated Revolving Credit
Agreement, dated as of July 2, 1997 (as currently in effect, the "Existing Loan
Agreement"), with Hondo Oil & Gas Company (the "Borrower"), which you guarantied
pursuant to your Guaranty executed and delivered as of July 2, 1997 (as
currently in effect, the "Existing Guaranty") in our favor (as assignee of
Thamesedge Ltd., the "Original Lender"). Under the proposed amendment, among
other things (a) the Commitment and, accordingly, the principal amount subject
to the Guaranty, is being increased to $35,000,000 (including $7,500,000 that
may represent interest added to principal), (b) an Event of Default is being
added to the Existing Loan Agreement to the effect that it shall be an Event of
Default if the Borrower shall have failed to furnish to Lender, by October 1,
1998, a proved gas reserve report of Netherland, Sewell & Associates that shows
that a minimum of 13,000,000 mcf (25%) of proved gas reserve exists, which are
subject to the Opon Association Contract in which Hondo Magdalena then
participates, above the proved gas reserve of 52,475,554 mcf at September 30,
1997 and (c) the definition of the term "Credit Documents" is being amended to
include that certain Security Agreement dated May 13, 1997, as amended as of the
date hereof (as same may be supplemented, modified, amended or restated from
time to time).
We understand that you have reviewed a copy of the final version of the
proposed First Amendment to the Existing Loan Agreement, including, without
limitation, the proposed Amended and Restated Promissory Note relating thereto
and the Security Agreement (collectively, the "Loan Agreement Amendments").
Capitalized terms used but not defined in this letter are used as they are
defined in the Existing Guaranty. For all purposes, "Guaranty" means the
Existing Guaranty, as modified by this letter, and as the same may be further
supplemented, modified, amended and restated from time to time in the manner
provided therein.
Please execute this letter to acknowledge your agreement to the Loan
Agreement Amendments and that your guarantee and other obligations under the
Guaranty remain and continue in full force and effect both before and after
giving effect to the Loan Agreement Amendments and related documentation
(including, without limitation, the matters set forth in this letter). Our
request to you in this instance does not obligate us to notify you or seek your
consent in the future as to any
<PAGE>
amendment or other matter where (pursuant to your Guaranty, or otherwise) such
notice or consent is not required.
Your signature, where indicated below, also will constitute your
acknowledgment of and agreement to the following modifications to the Existing
Guaranty (without limiting the prior paragraph of this letter):
i. London Australian & General Property Company Limited has
become the "Lender" for purposes of the Existing Loan
Agreement, as amended by the Loan Agreement Amendments,
the Guaranty and the other Credit Documents;
ii. The Guaranty now covers, among other things, all amounts
borrowed and to be borrowed (and interest thereon) under
the Existing Loan Agreement, as amended by the Loan
Agreement Amendments;
iii. You represent and warrant that your representations and
warranties set forth in the Existing Guaranty are true and
correct in all material respects on and as of the date of
this letter, after giving effect hereto, with the same
effect as though those representations and warranties had
been made on and as of the date hereof; and
iv. Section 7 of the Existing Guaranty is amended to read as
follows:
"SECTION 7. Consent to Jurisdiction; Waiver of Immunities.
(a) Guarantor hereby irrevocably submits to the
jurisdiction of any New York or federal court sitting in New York in
any action or proceeding arising out of or relating to this Guaranty,
and the Guarantor hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in
such New York or federal court. The Guarantor hereby irrevocably
waives, to the fullest extent they may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or
proceeding. The Guarantor hereby irrevocably appoints John J. Hoey
(the "Process Agent"), with an office on the date hereof at Hondo Oil
& Gas Company, 10375 Richmond Avenue, Suite 900, Houston, TX 77042,
telephone (713) 954-4600, telecopier (713) 954-4601, as its agent to
receive, on behalf of the Guarantor and its property, service of
copies of the summons and complaint and any other process that may be
served in any such action or proceeding. Such service may be made by
mailing or delivering a copy of such process to the Guarantor in care
of the Process Agent at the Process Agent's address above, and the
Guarantor hereby irrevocably authorizes and directs the Process Agent
to accept such service on its behalf. As an alternative method of
service, Guarantor also irrevocably consents to the service of any
and all process in any such action or proceeding by the mailing of
copies of such process to Guarantor at its address specified in
Section 11. Guarantor agrees that a final judgment in any such action
or proceeding
-2-
<PAGE>
shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section shall affect the right of the
Lender to serve legal process in any other manner permitted by law or
affect the right of the Lender to bring any action or proceeding
against Guarantor or its property in the courts of any other
jurisdictions.
(c) To the extent that Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise)
with respect to Guarantor or its property, Guarantor hereby
irrevocably waives such immunity in respect of its obligations under
this Guaranty."
v. Notices, requests and demands to the Lender, as set forth
in Section 11 of the Existing Guaranty, shall be in
writing and shall be effective when delivered to the
Lender at London Australia & General Property Company,
Four Grosvenor Place, London, SW1X 7DL, England, telephone
011-44-171-201-6000, telecopier 011-44-171-201-6100,
Attention: R. E. Whitten, with a copy to Rudolph H. Funke,
Esq. at 805 Third Avenue, 18th Floor, New York, NY 10022,
telephone 212-715-7001, telecopier 212-838-8141.
vi. This Guaranty shall be governed by the laws of the State
of New York (other than those that would defer to the
substantive laws of another jurisdiction). Without in any
way limiting the preceding choice of law, the parties
intend (among other things) to thereby avail themselves of
the benefit of Section 5-1401 of the General Obligations
Law of the State of New York.
Your signature, where indicated below, also will constitute your
acknowledgment of and agreement and certification that: (a) pursuant to the
Existing Loan Agreement, the Lender has made Advances (as defined) to the
Borrower that are outstanding as of the date of this letter in the aggregate
principal amount of $18,866,026.56 (including $1,166,026.56 of interest added to
principal); (b) the obligations of the Borrower to repay all Advances (including
those to be made pursuant to the Loan Agreement Amendments) with interest, to
the Lender and to perform or otherwise satisfy all other obligations, as well as
the security interests in the Collateral (as defined in the Security Agreement)
granted by the Borrower to the Lender, (i) each remain and shall continue in
full force and effect, both before and after giving effect to the transactions
contemplated by this letter, (ii) are not subject to any defense, counterclaim,
setoff, right of recoupment, abatement, reduction or other claim or
determination, and (iii) are and shall continue to be governed by the terms and
provisions of the Existing Loan Agreement and other Credit Documents, as amended
by the Loan Agreement Amendments and as same may be supplemented, modified,
amended or restated in the future; (e) your absolute, unconditional and
irrevocable guarantee to the Lender of the full and punctual payment and
satisfaction of the foregoing and any and all other obligations the Borrower
-3-
<PAGE>
(i) remains and shall continue in full force and effect, both before and after
giving effect to the transactions contemplated by this letter, (ii) is not
subject to any defense, counterclaim, setoff, right of recoupment, abatement,
reduction or other claim or determination, and (iii) is and shall continue to be
governed by the terms and provisions of the Existing Guaranty and other Credit
Documents as supplemented, modified and amended.
Very truly yours,
LONDON AUSTRALIAN & GENERAL
PROPERTY COMPANY LIMITED
By: /s/ R. E. Whitten
-----------------------
ACKNOWLEDGED AND AGREED:
HONDO MAGDALENA OIL & GAS LIMITED
/s/ John J. Hoey
- -----------------------
-4-
FIRST AMENDMENT
TO
SECURITY INTEREST AGREEMENT
Security interest in Securities
DATED this 18th day of March 1998
BETWEEN:
(1) LONDON AUSTRALIAN & GENERAL PROPERTY COMPANY LIMITED, a company
incorporated in England whose registered office is a 4 Grosvenor
Place, London SW1X 7DL, England ("Lender"), as assignee of THAMESEDGE
LIMITED, a company incorporated in England whose registered office is
a 4 Grosvenor Place, London SW1X 7DL, England ("Original Lender")
AND
(2) HONDO OIL & GAS COMPANY, a Delaware corporation whose principal
office is at 10375 Richmond Avenue, Suite 900, Houston, Texas 77042
USA (the "Debtor")
AND
(3) FOLIO TRUST COMPANY LIMITED, a company incorporated in Jersey whose
registered office is at Westaway Chambers, 39 Don Street, St. Helier,
Jersey, Channel Islands ("Folio Trust")
AND
(4) FOLIO NOMINEES LIMITED, a company incorporated in the British Virgin
Islands whose administrative office is at Westaway Chambers, 39 Don
Street, St. Helier, Jersey, Channel Islands ("Folio Nominees")
WHEREAS
(A) The Debtor has entered into a certain Security Interest
Agreement, dated May 13, 1997 (the "Original Security Interest Agreement"), in
favor of the Original Lender, in which the Debtor (among other things) granted a
lien and security interest in certain Collateral to the Original Lender;
(B) London Australian & General Property Company Limited has received
an assignment from Thamesedge Limited ("Thamesedge") of all of the Obligations
and all of Thamesedge's rights and duties under the Original Security Interest
Agreement;
<PAGE>
(C) The Lender has agreed to extend additional credit to the Debtor
and to extend the maturity dates of the Obligations;
(D) As a condition thereto, the Lender has requested, and the Debtor
has agreed, to enter into this Amendment;
(E) Capitalized terms used and not otherwise defined or amended in
this Amendment shall have the meanings respectively assigned to them in (or
determined in accordance with) the Original Security Interest Agreement.
In consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth, IT IS HEREBY AGREED AS FOLLOWS:
1. Amendment to Original Security Interest Agreement. The
Original Security Interest Agreement is hereby amended as of the date first
written above as follows:
(A) All references in the Original Security Interest
Agreement or in this Amendment to "this Agreement" or "this Security Interest
Agreement", or similar references, shall mean the Original Security Interest
Agreement, as amended by this Amendment, and as the same may be further amended,
restated or otherwise modified or supplemented from time to time in accordance
with the terms thereof. This Amendment may be referred to in this Agreement as
the "First Security Interest Agreement Amendment".
(B) In Section 1 of the Original Security Interest
Agreement, clauses (i), (ii) and (iii) are amended to read:
"(i) all monies and liabilities payable
under the credit and loan facilities
(as same has been and may be
supplemented, modified, amended or
restated from time to time)
described in the First Schedule;
(ii) any other indebtedness or
liabilities whatsoever of the Debtor
now existing or hereafter incurred
on any account or accounts in favor
of the Lender; and
(iii) all other costs, charges, legal or
other expenses (incurred by the
Lender in respect of the facilities
detailed in the First Schedule) on a
full and unqualified indemnity
basis;
(collectively the "Obligations"):"
(C) In Section 8, the following new paragraph is added at
the end thereof without the deletion or modification of any other material:
"With respect to any Collateral and subject to any
contrary requirement of applicable law, (x) the Lender
shall collect the cash proceeds received from any sale or
other
-2-
<PAGE>
liquidation or disposition or from any other source and
(y) after deducting all costs and expenses incurred by the
Lender and any person designated by the Lender to take any
of the actions in connection with such collection and sale
or other liquidation or disposition (including attorneys'
disbursements, expenses and fees), the Lender in its sole
and absolute discretion may retain the same as additional
or substitute Collateral or may apply the same (first to
interest then to principal) to the Obligations described
in and in direct order set forth on the First Schedule. In
the event any funds remain after satisfaction in full of
all of the Obligations, then the remainder shall be
returned to the Debtor, subject, however, to any other
rights or interests the Lender may have therein under any
other instrument, agreement or document or applicable law.
If the amount of all proceeds received with respect to and
in liquidation of the Collateral that shall be applied to
payment of the Obligations shall be insufficient to pay
and satisfy all of the Obligations in full, the Debtor
acknowledges and agrees that the Debtor shall remain and
be jointly and severally liable for any deficiency.
(D) The First Schedule is amended to read as follows:
FIRST SCHEDULE
--------------
The Obligations
1. Amended and Restated Note dated as of 18th
December, 1997 in the principal amount of
US$7,500,000 (seven million five hundred
thousand United States dollars) which amends,
restates and replaces that certain Note dated
31st October, 1994, in the principal amount of
US$5,000,000.00 (five million United States
dollars), as assigned to Thamesedge and, in
turn, to London Australian & General Property
Company ("LAGP"), as same may be supplemented,
modified, amended or restated from time to time
(the "Facility Note");
2. Amended and Restated Revolving Credit Agreement
dated 2nd July, 1997 between Debtor and Lender,
as same has been, and as same may be,
supplemented, modified, amended or restated
from time to time, including any Promissory
Note or Notes issued thereunder, as same has
been, and as same may be, supplemented,
modified, amended or restated from time to time
(the "Revolving Credit Note");
3. Amended and Restated Note dated as of 18th
December, 1997 in the principal amount of
US$4,500,000 (four million five hundred
thousand United States dollars) which amends,
restates and replaces that certain Note dated
30th April, 1993, in the principal amount of
US$3,000,000.00 (three million United States
dollars) from Via Verde Development Company
("Via Verde") to Lonrho, as assigned to
Thamesedge and, in turn, to LAGP, as same may
be supplemented, modified, amended or restated
from time to time, including to
-3-
<PAGE>
add unpaid interest to principal (the "Via
Verde Note"), secured by a deed of trust
recorded as Instrument No. 93-840817 in the
Real Property Records of Los Angeles County,
California as same has been, and as same may
be, supplemented, modified, amended or restated
from time to time (the "Via Verde Mortgage"),
and guaranteed by Debtor in a Guaranty dated
30th April, 1993 as same has been, and as same
may be, supplemented, modified, amended or
restated from time to time (the "Hondo
Guaranty");
4. Amended and Restated Note dated as of 18th
December, 1997 in the principal amount of
US$5,500,000 (five million five hundred
thousand United States dollars) which amends,
restates and replaces that certain Note dated
25th June, 1993, in the principal amount of
US$4,000,000.00 (four million United States
dollars) from Hondo to Lonrho, as assigned to
Thamesedge and, in turn, to LAGP, as same may
be supplemented, modified, amended or restated
from time to time, including to add unpaid
interest to principal (the "Valley Gateway
Note"), secured by a deed of trust dated 30th
August, 1993, granted by Borrower and Newhall
Refining Co., Inc. ("Newhall") recorded as
Instrument No. 93-2006475 in the Real Property
Records of Los Angeles, California, as same has
been, and as same may be, supplemented,
modified, amended or restated from time to time
(the "Valley Gateway Mortgage");
5. Consolidated, Amended and Restated Note dated
18th December, 1997 in the principal amount of
US$40,000,000 (forty million United States
dollars) which consolidates, amends, restates
and replaces that certain Notes dated 1st
September, 1991, in the original principal
amount of US$10,000,000.00 (ten million United
States dollars); dated 1st November, 1991 in
the original principal amount of
US$9,000,000.00 (nine million United States
dollars); and dated 20th December, 1991, in the
original principal amount of US$13,000,000.00
(thirteen million United States dollars) from
Debtor to Lonrho Plc ("Lonrho"), as assigned to
Thamesedge and, in turn, to LAGP, as each has
been, and as each may be, supplemented,
modified, amended, consolidated and/or restated
from time to time, including to add unpaid
interest to principal (the "Lonrho Notes");
6. Note Purchase Agreement dated 28th November,
1988, between Debtor (formerly known as Pauley
Petroleum Inc.) and Thamesedge Limited
("Thamesedge"), as same has been, and as same
may be, supplemented, modified amended or
restated from time to time (the "Thamesedge
Note Purchase Agreement") and an Amended and
Restated Note dated as of 18th December, 1997
in the principal amount of US$75,000,000
(seventy-five million United States dollars)
which amends, restates and replaces that
certain Note dated 30th November, 1988, for
US$75,000,000.00 (seventy-five million United
States dollars) from Debtor to Thamesedge, as
same may be
-4-
<PAGE>
supplemented, modified, amended or restated
from time to time, including to add unpaid
interest to principal (the "Thamesedge Note");
The Thamesedge Note, the Lonrho Notes, the Via
Verde Notes, the Valley Gateway Note, the
Facility Note and the Revolving Credit Note,
are collectively referred to as the
"Indebtedness";
By assignment dated 29th March, 1996, between
Lonrho and Thamesedge, Lonrho assigned all of
its interests in any Indebtedness owed to it to
Thamesedge; and
By assignment dated 29th August, 1997, between
Thamesedge and LAGP, Thamesedge assigned all of
its interest in any Indebtedness owed to it to
LAGP.
2. Acknowledgment. The Debtor hereby acknowledges and
certifies and agrees that: (a) the pledge and security interest granted by the
Debtor to the Lender under this Agreement as Collateral for the Obligations (i)
remains and shall continue in full force and effect, both before and after
giving effect to this Amendment, (ii) is not subject to any defence,
counterclaim, set off, right of recoupment, abatement, reduction or other claim
or determination, and (iii) is and shall continue to be governed by the terms
and provisions of the Original Security Interest Agreement, as amended by this
Amendment and as the same may be further amended or otherwise modified from time
to time in accordance with the terms thereof.
3. Representations and Warranties. To induce the Lender to
enter into this Amendment and consummate the transactions contemplated hereby,
the Debtor hereby represents and warrants to the Lender that as of the date of
this Amendment the representations and warranties set forth in the Agreement are
true and correct in all material respects with the same effect as though those
representations and warranties had been made on and as of the date hereof.
4. Counterparts. This Amendment may be signed in two or more
counterpart copies, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, shall constitute a single
agreement binding upon all of the parties hereto.
5. Governing Law, Etc. This Amendment shall be governed by
and construed in accordance with the applicable terms and provisions of the
Original Security Interest Agreement (as amended hereby), which terms and
provisions are incorporated herein by reference.
[END OF PAGE]
-5-
<PAGE>
6. Agreement to Continue as Amended. The Original Security
Interest Agreement, as amended by this Amendment, shall remain and continue in
full force and effect from and after the date hereof.
IN WITNESS whereof the parties hereto have hereunto set their hands and seals
the day and year first above written.
The Common Seal of
LONDON AUSTRALIAN & GENERAL PROPERTY
COMPANY LIMITED
was hereunto affixed
in the presence of:
/s/ R.E. Whitten Director
- ---------------------------------
/s/ N. J. Morrell Director
- ---------------------------------
SIGNED BY
- ---------
duly authorized
for and on behalf of:
HONDO OIL & GAS
COMPANY
/s/ John J. Hoey President
- ---------------------------------
THE COMMON SEAL of
- ---------------
FOLIO TRUST COMPANY LIMITED
was hereunto affixed
in the presence of:
/s/ R. David Johnson Director
- ---------------------------------
/s/ Nicholas St. Clair Morgan Director
- ---------------------------------
THE COMMON SEAL of
- ---------------
FOLIO NOMINEES LIMITED
was hereunto affixed
in the presence of:
/s/ R. David Johnson Director
- ---------------------------------
/s/ Nicholas St. Clair Morgan Director
- ---------------------------------
-6-
AMENDMENT
TO
NOTE PURCHASE AGREEMENT
INTRODUCTION
------------
This Agreement, dated as of December 18, 1997 (this "Amendment"), is
by and between HONDO OIL & GAS COMPANY (formerly known as Pauley Petroleum
Inc.), a Delaware corporation (the "Company"), and LONDON AUSTRALIAN & GENERAL
PROPERTY COMPANY LIMITED, a United Kingdom corporation (the "Present
Noteholder"), as assignee of Thamesedge, Ltd.
RECITALS
--------
The Company and the Present Noteholder (as assignee of Thamesedge
Ltd.), being the sole Noteholder, are parties to a Note Purchase Agreement dated
November 28, 1988, as amended by letter agreements December 17, 1993, November
10, 1994, December 22, 1995, December 13, 1996 and December 18, 1997
(collectively, the "Existing Note Purchase Agreement"), pursuant to which there
is outstanding at December 18, 1997 $39,733,394.28, including $9,233,394.28 of
interest which has been added to principal in accordance with the terms of said
letter agreements. Capitalized terms used and not otherwise defined or amended
in this Amendment shall have the meanings respectively assigned to them in the
Existing Note Purchase Agreement.
The Company has requested that the Noteholder (a) extend the
mandatory redemption date of the Notes from January 1, 1998 (as same has
heretofore been extended pursuant to said letter agreements) to January 15, 1999
and (b) consent to the past and future incurrence of additional Indebtedness
(and extensions to the maturity of such Indebtedness) from Lonrho Plc and its
wholly-owned subsidiaries. The Noteholder is willing to so extend the mandatory
redemption date of the Notes and consent to the incurrence of such Indebtedness
and maturity extensions based on (a) the Company's representation that by
October 1, 1998 the Noteholders shall have received a report that the Company's
proved reserves will have increased to a minimum of 65,475,554 mcf and the
Company's agreement that if its proved reserves fail to reach such level, an
Event of Default will occur, (b) the Company's agreement to delete the
subordination provisions contained in Section 9 of the Existing Note Purchase
Agreement and (c) the Company's agreement to conform certain default provisions
contained in Section 8.01 of the Existing Note Purchase Agreement to cross
default provisions contained in the Company's other loan and credit arrangements
with the Present Noteholder.
The Company has requested that the Present Noteholder enter into this
Amendment in order to reflect the foregoing, and the Noteholder has agreed to do
so, all upon the terms and provisions and subject to the conditions hereinafter
set forth.
AGREEMENT
---------
In consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
<PAGE>
1. Amendment to Existing Note Purchase Agreement. The Existing Note
Purchase Agreement is hereby amended as of the date first written
above as follows:
(A) In Section 1.01 of the Existing Note Purchase
Agreement, the definition of "Agreement" is hereby deleted in its entirety, and
the following new definition is hereby inserted in its place:
""Agreement" shall mean this Note Purchase Agreement dated
November 28, 1988 between the Company and Thamesedge Ltd., together
with all exhibits thereto, as amended by letter agreements December
17, 1993, November 10, 1994, December 22, 1995, December 13, 1996 and
December 18, 1997 among the Company and the then sole Noteholder and
the First Amendment, and as the same may be supplemented, modified,
amended or restated from time to time."
(B) In Section 1.01 of the Existing Note Purchase
Agreement, the following new definition of "First Amendment" is hereby inserted
in its proper alphabetical position without the deletion or modification of any
other material:
""First Amendment" shall mean the First Amendment dated as
of December 18, 1997 to Agreement."
(C) In Section 1.01 of the Existing Note Purchase
Agreement, the following definitions of the following existing terms are deleted
in their entirety:
"Bank Agreements"
"Senior Debt"
(D) In Section 1.02 of the Existing Note Purchase
Agreement, the following "Other Definitions" are hereby inserted in their
respective proper alphabetical positions without the deletion or modification of
any other material:
"Term Defined in Section
----- ------------------
Act 2.01
Hondo Magdalena 8.01(4)"
(E) Section 2.01 of the Existing Note Purchase Agreement
is amended to delete same in its entirety and to substitute the following in its
place:
"Section 2.01 Issue of Notes. The Company has authorized
the issuance of $75,000,000 in aggregate principal amount of its 6%
Senior Notes due January 15, 1999 (the "Notes", the term "Notes"
including the singular number as well as the plural and the term
"Note" including the plural number as well as the singular). The
Notes shall be substantially in the form of Exhibit A attached to the
First Amendment. The terms and provisions in the Notes shall
constitute, and are hereby expressly made, a part of this Agreement.
The Notes may have notations, legends or endorsements required by law
or usage. Each Note will be dated its date of authentication.
-2-
<PAGE>
Notwithstanding anything in the foregoing to the contrary,
if, in the opinion of its Board of Directors, the Company does not
have sufficient cash resources to pay interest on the Notes when due,
then the Company may offer to the Noteholder a payment of the
interest in shares of the Company's common stock, valued at (i) the
last reported sales price regular way on the interest due day or, in
case no such reported sale takes place on such day, the average of
the reported closing bid and asked prices regular way on such day, in
either case on the American Stock Exchange or other principal
national securities exchange on which the Company's common stock is
listed or, if not listed on any national securities exchange, on The
Nasdaq Stock Market's National Market System or, (ii) if (i) is not
applicable, the average of the bid and asked prices at the end of the
interest due day in the over-the-counter market as furnished by any
New York Stock Exchange member firm selected by the Noteholder in
good faith for that purpose. In making this determination, the
Company's management will not, without the consent of the Noteholder,
allocate cash resources to new capital projects not related to the
Opon Association Contract dated July 15, 1987 between Empressa
Colombiana de Petroleos and Opon Development Company. The Noteholder
will then notify the Company whether it will either accept the
payment of interest in the Company's common stock or add the amount
of interest due to the principal of the Notes. If the Noteholder
accepts the payment of interest in the Company's common stock, the
Company will issue the requisite number of shares to Noteholder
within ten business days after the Company receives notice of
acceptance from Noteholder. The Noteholder recognizes that any shares
of the Company's common stock that it may acquire by the payment of
interest in the Company's common stock will not have been registered
under the Securities Act of 1933, as amended (the "Act"), and may not
be sold in the absence of an effective registration under the Act or
an exemption from the registration requirements of the Act. If the
Noteholder so requests at any time and from time to time after the
date shares of he Company's common stock are issued to the Noteholder
pursuant to this provision, the Company will use its best efforts to
effect registration under the Act of the shares so issued."
(F) Section 6.05(b) of the Existing Note Purchase
Agreement is amended to delete existing clause (xiii) thereof in its entirety
and to substitute the following therefor:
"(xii) Indebtedness to Lonrho Plc. or to any
direct or indirect wholly-owned Subsidiary of Lonrho Plc.,
including any and all deferrals, renewals, extensions,
refundings of, or amendments, modifications or supplements
to, any such Indebtedness."
(G) Section 6.06 of the Existing Agreement is hereby
deleted in its entirety.
(H) Section 6.07 of the Existing Agreement is amended to
substitute the word "the" at the beginning thereof for the word "The" and to add
the following before the new word "the" at the beginning of Section 6.07:
"Except with respect to transactions with Lonrho Plc. or
any direct or indirect wholly- owned Subsidiary of Lonrho Plc., "
-3-
<PAGE>
(I) Section 8.01 of the Existing Agreement is amended to
delete existing clauses (1) and (4) thereof and to substitute the following
therefor:
"(1) the Company defaults in the payment of
interest on any Note when the same becomes due and payable
and the Default continues for a period of three (3) days;
"(4) the Company, Hondo Magdalena Oil & Gas
Limited, presently a wholly-owned subsidiary of the
Company ("Hondo Magdalena"), and any of their respective
subsidiaries shall (i) fail to pay any Indebtedness (but
excluding Indebtedness evidenced by this Note) of the
Company, Hondo Magdalena or such subsidiary (as the case
may be), or any interest or premium thereon, when due
(whether upon scheduled maturity, required prepayment,
acceleration, demand or other notice or formality of any
kind) and such failure shall continue after the applicable
grace period, if any, specified in the agreement or
instrument relating to such Indebtedness or (ii) fail to
perform or observe any term, covenant or condition on its
part to be performed or observed under any agreement or
instrument relating to any such Indebtedness, when
required to be performed or observed, and such failure
shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect
of such failure to perform or observe is to accelerate, or
to permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall be declared
to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment), prior
to the stated maturity thereof."
(J) At the conclusion of clause (7) of Section 8.01 of the
Existing Note Purchase Agreement, the following is hereby inserted:
"; or"
(K) In Section 8.01 of the Existing Note Purchase
Agreement, the following new subsection (8) is hereby inserted at the end
thereof:
"(8) the Company shall have failed to furnish
to Lender, by October 1, 1998, a proved gas reserve report
of Netherland, Sewell & Associates that shows that a
minimum of 13,000,000 mcf (25%) of proved gas reserve
exists, which are subject to the Opon Association Contract
in which Hondo Magdalena then participates, above the
proved gas reserve of 52,475,554 mcf at September 30,
1997;"
(L) Section 9 of the Existing Note Purchase Agreement is
amended to deleted same in its entirety and substitute the following thereof:
"SECTION 9. CONVERSION
9.01 Right to Convert. Certain of the Notes are
convertible into shares of the Company's Common Stock,
$1.00 par value per share, to the extent
-4-
<PAGE>
indicated on the face of such Notes and in accordance with
the specific terms of such Notes."
(M) In Section 11.01 of the Existing Note Purchase
Agreement, the addresses to which notices and other communications are to be
given are amended to read as follows (with the rest of such Section 11.01
remaining unchanged)
"If to the Company:
Hondo Oil & Gas Company
10375 Richmond Avenue, Suite 900
Houston, Texas 77042
Attention: John J. Hoey
If to you:
London Australian & General Property Company Limited
4 Grovesnor Place
London, SW1X 7DL, England
Attention: R. E. Whitten
If to any other Noteholder at such address as such other
Noteholder may designate by notice to the Company."
(N) Section 11.05 of the Existing Note Purchase Agreement
is amended to delete same in its entirety and to substitute the following in its
place:
"Section 1.05 Governing Law. This Agreement and the Notes
shall be governed by the laws of the State of New York
(other than those that would defer to the substantive laws
of another jurisdiction). Without in any way limiting the
preceding choice of law, the parties intend (among other
things) to thereby avail themselves of the benefit of
Section 5-1401 of the General Obligations Law of the State
of New York."
2. Acknowledgment of Outstanding Loans. The Company hereby acknowledges,
certifies and agrees that: (a) pursuant to the Existing Note Purchase
Agreement, the Noteholder has made loans to the Company that are
outstanding as of the date of this Amendment in the aggregate
principal amount of $39,733,394.28 (including interest of
$9,233,394.28 which has been added to principal); and (b) the
obligations of the Company to repay those loans (with interest) to
the Noteholder and to perform or otherwise satisfy its other
obligations: (i) remain and shall continue in full force and effect,
both before and after giving effect to this Amendment, (ii) are not
subject to any defense, counterclaim, setoff, right of recoupment,
abatement, reduction or other claim or determination, and (iii) are
and shall continue to be governed by the terms and provisions of the
Existing Note Purchase Agreement as supplemented, modified and
amended by this Amendment.
-5-
<PAGE>
3. Bringdown of Representations, Etc. As of the date of this Amendment,
both before and after giving effect to the terms and provisions of
this Amendment: (a) the representations and warranties of the Company
set forth in the Existing Note Purchase Agreement (except Sections
3.11, 3.12 and 3.13) are true and correct in all material respects
with the same effect as though those representations and warranties
had been made on and as of the date hereof; (b) no Event of Default
or Default has occurred and is continuing; (c) the Board of Directors
of the Company has duly authorized the execution and delivery by the
Company of the Existing Note Purchase Agreement and this Amendment;
and (d) there are no actions, suits or proceedings pending or, to the
best knowledge of the undersigned, threatened or contemplated by any
person for the liquidation, dissolution or bankruptcy of the Company
or otherwise threatening its existence or challenging or calling into
question the power or authority of the Company to execute or deliver
the Existing Note Purchase Agreement or this Amendment or to perform
any of its obligations hereunder or thereunder.
4. Counterparts. This Amendment may be signed in two or more counterpart
copies of the entire document or of signature pages to the document,
each of which may be executed by one or more of the parties hereto,
but all of which, when taken together, shall constitute a single
agreement binding upon all of the parties hereto.
5. Governing Law, Etc. Sections 11.05 ("Governing Law"), as amended
hereby, 11.06 ("Successors"), 11.07 ("No Adverse Interpretation of
Other Agreements"), 11.08 ("Severability") and 11.10 ("Amendment and
Waiver") of the Existing Note Purchase Agreement are incorporated
herein by reference and shall pertain separately to this Amendment as
well as the Existing Note Purchase Agreement.
6. Agreement to Continue as Amended. The Existing Note Purchase
Agreement, as supplemented, modified and amended by this Amendment,
shall remain and continue in full force and effect after the date
hereof.
[END OF PAGE]
-6-
<PAGE>
7. Entire Agreement. This Amendment contains the entire agreement of the
parties and supersedes all other representations, warranties,
agreements and understandings, oral or otherwise, among the parties
with respect to the matters contained in this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their respective officers thereunto
duly authorized. as of the date first above written.
HONDO OIL & GAS COMPANY
By: /s/ John J. Hoey
--------------------------
John J. Hoey
President
LONDON AUSTRALIAN & GENERAL
PROPERTY COMPANY LIMITED
By: /s/ R. E. Whitten
--------------------------
R.E. Whitten
Director
-7-
<PAGE>
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE LAWS OF ANY STATE OR OF ENGLAND, AND NO TRANSFER HEREOF MAY BE EFFECTED
UNLESS SUCH TRANSFER SHALL BE REGISTERED UNDER OR EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE LAWS
OF ANY STATE OR OF ENGLAND.
No. __ $_________
HONDO OIL & GAS COMPANY
(FORMERLY PAULEY PETROLEUM INC.)
Amended and Restated 6% Senior Note due January 15, 1999
Hondo Oil & Gas Company (formerly known as Pauley Petroleum Inc.), a
Delaware corporation (the "Company"), promises to pay to London Australian &
General Property Company Limited or registered assigns, the principal sum of
______________________________ Dollars (or so much as may be advanced, including
the addition of interest to principal, and outstanding hereunder) on January 15,
1999.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
This Note has been issued by the Company to renew, extend,
consolidate, amend, restate and replace that certain 13-1/2% Senior Subordinated
Note due 1998 (the "Prior Note") (in order to, among other things, implement an
Amendment to the Note Purchase Agreement (as defined on the next page hereof)
pursuant to which the Prior Note was issued), to evidence all indebtedness and
other amounts outstanding under the Prior Note, and to evidence any further
interest that may be added to principal pursuant to the terms of this Note. All
additions to principal (including the addition of interest to principal) and
payments made pursuant to this Note may be recorded by the Noteholder on its
books and records, and such books and records (or any statement or certificate
of the Noteholder based thereon) shall be conclusive as to the existence and
amounts thereof absent manifest error. Although issued in substitution for and
restatement of the Prior Note, this Note shall not be deemed to have been issued
in payment, satisfaction, cancellation or novation of any of the Prior Note.
Additional provisions of this Note are set forth on the other side of
this Note.
The portion of principal amount of this Note set forth below (subject
to approval by the Company's stockholders at their 1998 Annual Meeting) is
convertible in accordance with Section 5 of this Note at the Conversion Price
set forth below (subject to adjustment if certain events set forth in Section 5
of this Note occur after the date hereof):
------------------------------------------------------------
Conversion Box
------------------------------------------------------------
Principal Amount Conversion Price
---------------- ----------------
$ $
Dated: ____________________
HONDO OIL & GAS COMPANY
By: ____________________
President
By ____________________
[Assistant] Secretary
<PAGE>
HONDO OIL & GAS COMPANY
(Formerly PAULEY PETROLEUM INC.)
6% Senior Notes Due January 15, 1999
1. Interest. Hondo Oil & Gas Company (formerly Pauley Petroleum
Inc.), a Delaware corporation ("Company"), promises to pay interest on the
principal amount of this Note at the rate per annum shown above (provided,
however, that if the Company's stockholders shall fail to approve the right of
the Holders to convert $7,000,000 principal amount of the Note at a conversion
price of $7.70 per share at their 1998 Annual Meeting, the interest rate
applicable to the portion of this Note that would have otherwise been so
convertible shall be 13.5% per annum). The Company will pay interest
semiannually on April 1 and October 1 of each year, commencing May 1, 1989.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or , if no interest has been paid, from November 4, 1988, in any
case to (but excluding) the applicable interest payment date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
Notwithstanding anything in the foregoing to the contrary, if, in the
opinion of its Board of Directors, the Company does not have sufficient cash
resources to pay interest on the Notes when due, then the Company may offer to
the Noteholder a payment of the interest in shares of the Company's common
stock, valued at (i) the last reported sales price regular way on the interest
due day or, in case no such reported sale takes place on such day, the average
of the reported closing bid and asked prices regular way on such day, in either
case on the American Stock Exchange or other principal national securities
exchange on which the Company's common stock is listed or, if not listed on any
national securities exchange, on The Nasdaq Stock Market's National Market
System or, (ii) if (i) is not applicable, the average of the bid and asked
prices at the end of the interest due day in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected by the Noteholder
in good faith for that purpose. In making this determination, the Company's
management will not, without the consent of the Noteholder, allocate cash
resources to new capital projects not related to the Opon Association Contract
dated July 15, 1987 between Empressa Colombiana de Petroleos and Opon
Development Company. The Noteholder will then notify the Company whether it will
either accept the payment of interest in the Company's common stock or add the
amount of interest due to the principal of the Notes. If the Noteholder accepts
the payment of interest in the Company's common stock, the Company will issue
the requisite number of shares to Noteholder within ten business days after the
Company receives notice of acceptance from Noteholder. The Noteholder recognizes
that any shares of the Company's common stock that it may acquire by the payment
of interest in the Company's common stock will not have been registered under
the Securities Act of 1933, as amended (the "Act"), and may not be sold in the
absence of an effective registration under the Act or an exemption from the
registration requirements of the Act. If the Noteholder so requests at any time
and from time to time after the date shares of he Company's common stock are
issued to the Noteholder pursuant to this provision, the Company will use its
best efforts to effect registration under the Act of the shares so issued.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the persons who are registered Holders of Notes
at the close of business on the record date for the next interest payment date
even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to the Company to collect
principal payments. The Company will pay principal and interest in money of the
United States of America that at the time of payment is legal tender for payment
of public and private debts, which may include a check payable in such money. It
may mail an interest check to a Holder's registered address.
-2-
<PAGE>
3. Note Purchase Agreement. The Notes are issued under a Note
Purchase Agreement dated as of November 1, 1988 (as same may be supplemented,
modified, amended or restated from time to time, the "Note Purchase Agreement")
between the Company and Lonrho Plc. The Notes are subject to all of the terms of
the Note Purchase Agreement, and Noteholders are referred to the Note Purchase
Agreement for a statement of such terms. The Notes are unsecured general
obligations of the Company limited to $75,000,000 in aggregate principal amount.
4. Optional Redemption. The Company at its option may redeem all the
Notes at any time or some of them from time to time on or after November 1, 1991
at the following redemption prices (expressed in percentages of principal
amount), plus accrued interest to the redemption date:
If redeemed during the 12-month period beginning November 1:
Year Percentage Year Percentage
- ---- ---------- ---- ----------
1991................ 107.714% 1994................. 101.928%
1992................ 105.786% 1995 and
1993................ 103.857% thereafter........ 100.000%
provided, however, that none of the Notes will be redeemed prior to November 1,
1993, directly or indirectly from or in anticipation of funds borrowed by the
Company at an effective interest cost to the Company of less than 13-1/2% per
annum.
5. Conversion. Subject to approval by the stockholders of the Company
at the Company's 1998 Annual Meeting of Stockholders, the Noteholder may, at its
option, at any time prior to the payment in full of this Note, elect to convert
up to the principal amount of this Note set forth in the Conversion Box on page
1 of this Note (or any portion thereof) into a number of fully paid and
non-assessable shares of the Company's common stock, $1.00 par value per share
(the "Common Stock"), determined by dividing the principal amount to be so
converted by the Conversion Price per share set forth in the Conversion Box on
page 1 of this Note (as adjusted as set forth below if certain events set forth
below occur after the date set forth on page 1 of this Note).
Upon any transfer, each Note issued shall reflect on it the portion
of the principal amount of the Note being transferred that is convertible, with
the remaining balance of such conversion privileges being retained by the
transferee. Absent any such instruction to the Company, such conversion
privileges shall be transferred pro rata to the portion of the Note being
transferred and the portion of the Note being retained.
The exercise of such conversion privilege shall be made by giving
notice thereof to the Company (specifying the principal amount and at the
Conversion Price) and surrendering the Note being converted to the Company. The
balance of any such Note surrendered which is not converted shall be reissued to
the Noteholder exercising such conversion privilege with appropriate adjustments
to reflect the remaining principal amount convertible. The portion of any Note
converted shall bear interest only to (but excluding) the date the Company
issues a stock certificate representing the shares of Common Stock being issued
to the Noteholder upon such conversion. No fractional shares of Common Stock
shall be issued upon conversion of any Note. In lieu of any such fractional
shares, the Noteholder, upon conversion, shall be entitled to the cash
equivalent of such fractional share of Common Stock based upon the market price
therefor (determined as of the date the Company issues such Common Stock to
-3-
<PAGE>
the Noteholder utilizing a similar method of determining such market price as
that set forth in Section 2.01 of this Note Purchase Agreement).
If the Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by combination, reverse stock split or otherwise) its outstanding
shares of Common Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination will be proportionately increased.
If the Company consolidates or merges into or sells, leases,
transfers or otherwise disposes of all or substantially all of its assets, or if
there occurs any recapitalization, reorganization, reclassification in such a
way that holders of Common Stock are entitled to receive securities, cash or
other assets with respect to or in exchange for Common Stock, the portion of the
Notes then convertible will become convertible into the kind and amount of
securities, cash or other assets which the Holder would have received
immediately after the transaction as if the Holder had converted the portion of
this Note then convertible immediately before the effective date of the
transaction at the applicable Conversion Prices in effect immediately prior to
such effective date.
6. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and whole multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Note Purchase Agreement. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption. Also, it need
not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed.
7. Persons Deemed Owners. The registered holder of a Note may be
treated as its owner for all purposes.
8. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Note Purchase Agreement or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Notes.
The Company will furnish to any Noteholder upon written request and
without charge a copy of the Note Purchase Agreement. Requests may be made to:
Secretary, Hondo Oil & Gas Company, Enserch Tower, 10375 Richmond Avenue, Suite
900, Houston, Texas 77042.
-4-
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE LAWS OF ANY STATE OR OF ENGLAND, AND NO TRANSFER HEREOF MAY BE EFFECTED
UNLESS SUCH TRANSFER SHALL BE REGISTERED UNDER OR EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE LAWS
OF ANY STATE OR OF ENGLAND.
No. 1 $75,000,000
HONDO OIL & GAS COMPANY
(FORMERLY PAULEY PETROLEUM INC.)
Amended and Restated 6% Senior Note due January 15, 1999
Hondo Oil & Gas Company (formerly known as Pauley Petroleum Inc.), a
Delaware corporation (the "Company"), promises to pay to London Australian &
General Property Company Limited or registered assigns, the principal sum of
SEVENTY-FIVE MILLION Dollars (or so much as may be advanced, including the
addition of interest to principal, and outstanding hereunder) on January 15,
1999.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
This Note has been issued by the Company to renew, extend,
consolidate, amend, restate and replace that certain 13-1/2% Senior Subordinated
Note due 1998 (the "Prior Note") (in order to, among other things, implement an
Amendment to the Note Purchase Agreement (as defined on the next page hereof)
pursuant to which the Prior Note was issued), to evidence all indebtedness and
other amounts outstanding under the Prior Note, and to evidence any further
interest that may be added to principal pursuant to the terms of this Note. All
additions to principal (including the addition of interest to principal) and
payments made pursuant to this Note may be recorded by the Noteholder on its
books and records, and such books and records (or any statement or certificate
of the Noteholder based thereon) shall be conclusive as to the existence and
amounts thereof absent manifest error. Although issued in substitution for and
restatement of the Prior Note, this Note shall not be deemed to have been issued
in payment, satisfaction, cancellation or novation of any of the Prior Note.
Additional provisions of this Note are set forth on the other side of
this Note.
The portion of principal amount of this Note set forth below (subject
to approval by the Company's stockholders at their 1998 Annual Meeting) is
convertible in accordance with Section 5 of this Note at the Conversion Price
set forth below (subject to adjustment if certain events set forth in Section 5
of this Note occur after the date hereof):
------------------------------------------------------------
Conversion Box
------------------------------------------------------------
Principal Amount Conversion Price
---------------- ----------------
$7,000,000 $7.70
------------------------------------------------------------
Dated: As of December 18, 1997
HONDO OIL & GAS COMPANY
By: /s/ John J. Hoey
-----------------------
President
By /s/ Stanton J. Urquhart
-----------------------
Secretary
<PAGE>
HONDO OIL & GAS COMPANY
(Formerly PAULEY PETROLEUM INC.)
6% Senior Notes Due January 15, 1999
1. Interest. Hondo Oil & Gas Company (formerly Pauley Petroleum
Inc.), a Delaware corporation ("Company"), promises to pay interest on the
principal amount of this Note at the rate per annum shown above (provided,
however, that if the Company's stockholders shall fail to approve the right of
the Holders to convert $7,000,000 principal amount of the Note at a conversion
price of $7.70 per share at their 1998 Annual Meeting, the interest rate
applicable to the portion of this Note that would have otherwise been so
convertible shall be 13.5% per annum). The Company will pay interest
semiannually on April 1 and October 1 of each year, commencing May 1, 1989.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or , if no interest has been paid, from November 4, 1988, in any
case to (but excluding) the applicable interest payment date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
Notwithstanding anything in the foregoing to the contrary, if, in the
opinion of its Board of Directors, the Company does not have sufficient cash
resources to pay interest on the Notes when due, then the Company may offer to
the Noteholder a payment of the interest in shares of the Company's common
stock, valued at (i) the last reported sales price regular way on the interest
due day or, in case no such reported sale takes place on such day, the average
of the reported closing bid and asked prices regular way on such day, in either
case on the American Stock Exchange or other principal national securities
exchange on which the Company's common stock is listed or, if not listed on any
national securities exchange, on The Nasdaq Stock Market's National Market
System or, (ii) if (i) is not applicable, the average of the bid and asked
prices at the end of the interest due day in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected by the Noteholder
in good faith for that purpose. In making this determination, the Company's
management will not, without the consent of the Noteholder, allocate cash
resources to new capital projects not related to the Opon Association Contract
dated July 15, 1987 between Empressa Colombiana de Petroleos and Opon
Development Company. The Noteholder will then notify the Company whether it will
either accept the payment of interest in the Company's common stock or add the
amount of interest due to the principal of the Notes. If the Noteholder accepts
the payment of interest in the Company's common stock, the Company will issue
the requisite number of shares to Noteholder within ten business days after the
Company receives notice of acceptance from Noteholder. The Noteholder recognizes
that any shares of the Company's common stock that it may acquire by the payment
of interest in the Company's common stock will not have been registered under
the Securities Act of 1933, as amended (the "Act"), and may not be sold in the
absence of an effective registration under the Act or an exemption from the
registration requirements of the Act. If the Noteholder so requests at any time
and from time to time after the date shares of he Company's common stock are
issued to the Noteholder pursuant to this provision, the Company will use its
best efforts to effect registration under the Act of the shares so issued.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the persons who are registered Holders of Notes
at the close of business on the record date for the next interest payment date
even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to the Company to collect
principal payments. The Company will pay principal and interest in money of the
United States of America that at the time of payment is legal tender for payment
of public and private debts, which
-2-
<PAGE>
may include a check payable in such money. It may mail an interest check to a
Holder's registered address.
3. Note Purchase Agreement. The Notes are issued under a Note
Purchase Agreement dated as of November 1, 1988 (as same may be supplemented,
modified, amended or restated from time to time, the "Note Purchase Agreement")
between the Company and Lonrho Plc. The Notes are subject to all of the terms of
the Note Purchase Agreement, and Noteholders are referred to the Note Purchase
Agreement for a statement of such terms. The Notes are unsecured general
obligations of the Company limited to $75,000,000 in aggregate principal amount.
4. Optional Redemption. The Company at its option may redeem all the
Notes at any time or some of them from time to time on or after November 1, 1991
at the following redemption prices (expressed in percentages of principal
amount), plus accrued interest to the redemption date:
If redeemed during the 12-month period beginning November 1:
Year Percentage Year Percentage
- ---- ---------- ---- ----------
1991........... 107.714% 1994.................. 101.928%
1992........... 105.786% 1995 and
1993........... 103.857% thereafter......... 100.000%
provided, however, that none of the Notes will be redeemed prior to November 1,
1993, directly or indirectly from or in anticipation of funds borrowed by the
Company at an effective interest cost to the Company of less than 13-1/2% per
annum.
5. Conversion. Subject to approval by the stockholders of the Company
at the Company's 1998 Annual Meeting of Stockholders, the Noteholder may, at its
option, at any time prior to the payment in full of this Note, elect to convert
up to the principal amount of this Note set forth in the Conversion Box on page
1 of this Note (or any portion thereof) into a number of fully paid and
non-assessable shares of the Company's common stock, $1.00 par value per share
(the "Common Stock"), determined by dividing the principal amount to be so
converted by the Conversion Price per share set forth in the Conversion Box on
page 1 of this Note (as adjusted as set forth below if certain events set forth
below occur after the date set forth on page 1 of this Note).
Upon any transfer, each Note issued shall reflect on it the portion
of the principal amount of the Note being transferred that is convertible, with
the remaining balance of such conversion privileges being retained by the
transferee. Absent any such instruction to the Company, such conversion
privileges shall be transferred pro rata to the portion of the Note being
transferred and the portion of the Note being retained.
The exercise of such conversion privilege shall be made by giving
notice thereof to the Company (specifying the principal amount and at the
Conversion Price) and surrendering the Note being converted to the Company. The
balance of any such Note surrendered which is not converted shall be reissued to
the Noteholder exercising such conversion privilege with appropriate adjustments
to reflect the remaining principal amount convertible. The portion of any Note
converted shall bear interest only to (but excluding) the date the Company
issues a stock certificate representing the shares of Common Stock being issued
to the Noteholder upon such conversion. No fractional shares of
-3-
<PAGE>
Common Stock shall be issued upon conversion of any Note. In lieu of any such
fractional shares, the Noteholder, upon conversion, shall be entitled to the
cash equivalent of such fractional share of Common Stock based upon the market
price therefor (determined as of the date the Company issues such Common Stock
to the Noteholder utilizing a similar method of determining such market price as
that set forth in Section 2.01 of this Note Purchase Agreement).
If the Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by combination, reverse stock split or otherwise) its outstanding
shares of Common Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination will be proportionately increased.
If the Company consolidates or merges into or sells, leases,
transfers or otherwise disposes of all or substantially all of its assets, or if
there occurs any recapitalization, reorganization, reclassification in such a
way that holders of Common Stock are entitled to receive securities, cash or
other assets with respect to or in exchange for Common Stock, the portion of the
Notes then convertible will become convertible into the kind and amount of
securities, cash or other assets which the Holder would have received
immediately after the transaction as if the Holder had converted the portion of
this Note then convertible immediately before the effective date of the
transaction at the applicable Conversion Prices in effect immediately prior to
such effective date.
6. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and whole multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Note Purchase Agreement. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption. Also, it need
not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed.
7. Persons Deemed Owners. The registered holder of a Note may be
treated as its owner for all purposes.
8. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Note Purchase Agreement or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Notes.
The Company will furnish to any Noteholder upon written request and
without charge a copy of the Note Purchase Agreement. Requests may be made to:
Secretary, Hondo Oil & Gas Company, Enserch Tower, 10375 Richmond Avenue, Suite
900, Houston, Texas 77042.
-4-
[1991 Notes]
CONSOLIDATED, AMENDED AND RESTATED
PROMISSORY NOTE
US $40,000,000.00 As of December 18, 1997
FOR VALUE RECEIVED, Hondo Oil & Gas Company, a Delaware corporation
("Borrower"), hereby promises to pay to the order of London Australian & General
Property Company Limited, a United Kingdom corporation ("Lender"), the principal
sum of FORTY MILLION AND 00/100 DOLLARS (US $40,000,000.00) or so much as may be
advanced (including the addition of interest to principal) and outstanding
hereunder (the "Loans"), on January 15, 1999 (the "Maturity Date"). Borrower
promises to pay interest on the unpaid principal balance hereof from (and
including) October 1, 1997 to (but excluding) the date of payment in full of
such amount at a rate per annum equal at all times to six percent (6%) per annum
(or the maximum interest rate permitted by law, whichever is less). Interest
shall be payable on each April 1 (for the period through March 31) and October 1
(for the period through September 30) until maturity; provided, however, that
any amount of principal that is not paid when due (whether at stated maturity,
by acceleration or otherwise) shall bear interest from (and including) the date
on which such amount is due until (but excluding) the date such amount is paid
in full on demand, at a rate per annum equal at all times to eleven percent
(11%) per annum (or the maximum interest rate permitted by law, whichever is
less). Both interest and principal as herein provided shall be payable in lawful
money of the United States of America at the offices of Lender, 4 Grosvenor
Place, London SW1X 7DL England, or at such other place as from time to time may
be designated in writing by Lender.
Notwithstanding anything in the foregoing to the contrary, if, in the
opinion of its Board of Directors, Borrower does not have sufficient cash
resources to pay interest on this Note when due, then Borrower may offer to
Lender a payment of the interest in shares of Borrower's common stock, valued at
(i) the last reported sales price regular way on the interest due day or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way on such day, in either case on the
American Stock Exchange or other principal national securities exchange on which
Borrower's common stock is listed or, if not listed on any national securities
exchange, on The Nasdaq Stock Market's National Market System or, (ii) if (i) is
not applicable, the average of the bid and asked prices at the end of the
interest due day in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected by Lender in good faith for that purpose. In
making this determination, Borrower's management will not, without the consent
of Lender, allocate cash resources to new capital projects not related to the
Opon Association Contract dated July 15, 1987 between Empressa Colombiana de
Petroleos and Opon Development Company. Lender will then notify Borrower whether
it will either accept the payment of interest in Borrower's common stock or add
the amount of interest due to the principal of this Note. If Lender accepts the
payment of interest in Borrower's common stock, Borrower will issue the
requisite number of shares to Lender within ten business days after Borrower
receives notice of acceptance from Lender. Lender recognizes that any shares of
Borrower's common stock that it may acquire by the payment of interest in
Borrower's common stock will not have been registered under the Securities Act
of 1933, as amended (the "Act"), and may not be sold in the absence of an
effective registration under the Act or an exemption from the registration
requirements of the Act. If Lender so requests at any time and
<PAGE>
from time to time after the date shares of Borrower's common stock are issued to
Lender pursuant to this provision, Borrower will use its best efforts to effect
registration under the Act of the shares so issued.
No borrowings may be made by Borrower under this Note after the date
hereof, except pursuant to the immediately preceding paragraph. All additions to
principal (including the addition of interest to principal) and payments made
pursuant to this Note may be recorded by Lender on its books and records or any
Grid attached hereto, and such books and records and any Grid attached hereto
(or any statement or certificate of Lender based thereon) shall be conclusive as
to existence and amounts thereof absent manifest error.
This Note is secured under, and entitled to the benefits of, that
certain Security Interest Agreement dated May 13, 1997 among the Lender, the
Borrower, Folio Trust Company Limited and Folio Nominees Limited (as same has
been and may be supplemented, modified, amended or restated from time to time,
the "Security Interest Agreement").
Borrower and Lender, as assignee of Thamesedge Ltd., in turn assignee
of Lonrho Plc ("Original Lender"), are parties to those certain letter
agreements dated May 20, 1991, June 20, 1991, July 19, 1991, September 1, 1991,
November 1, 1991, and December 20, 1991 (collectively, the "1991 Letter
Agreements") by and between Borrower and Original Lender (as amended by letter
agreements dated December 18, 1992, December 17, 1993, November 10, 1994,
December 22, 1995, December 13, 1996 and December 18, 1997, and as same may be
from time to time further supplemented, amended or restated, collectively, the
"Letter Agreements") pursuant to which 1991 Letter Agreements Lender made loans
to Borrower in the total amount of US $32,000,000, and to which there has been
added to principal, pursuant to the Letter Agreements, accrued but unpaid
interest in the total amount of $7,137,048.86 through October 1, 1997 and
against which a payment of $5,000,000 of principal was made on October 18, 1994.
Borrower hereby acknowledges, certifies and agrees that: (a) pursuant
to the Letter Agreements, Borrower has issued the following promissory notes to
Lender (collectively, the "Prior Notes"): Promissory Notes dated (i) September
1, 1991, in the original principal amount of $10,000,000 (which, in turn,
consolidated, renewed and replaced those certain three Promissory Notes, being
the Note dated May 20, 1991, in the original principal amount of US $5,000,000,
the Note dated June 20, 1991, in the original principal amount of US $3,000,000,
and the Note dated July 19, 1991, in the original principal amount of US
$2,000,000), (ii) November 1, 1991, in the original principal amount of US
$9,000,000 and (iii) December 20, 1991, in the original principal amount of US
$13,000,000; (b) pursuant to the Prior Notes, Lender has made loans to Borrower
that are outstanding as of the date hereof in the aggregate principal amount of
U.S.$34,137,048.86, after giving effect to the aforesaid payment of $5,000,000
of principal paid against the Note issued on September 1, 1991 and interest
added to principal of the Prior Notes as hereinabove provided; (c) this Note has
been issued by Borrower to renew, extend, consolidate, amend, restate and
replace the Prior Notes (in order to, among other things, implement the
aforesaid December 18, 1997 letter agreement), to evidence all indebtedness and
other amounts outstanding under the Prior Note, and to evidence any further
interest that may be added to principal pursuant to the terms of this Note; (d)
although issued in substitution for and restatement of the Prior Notes, this
Note shall not be deemed to have been issued in payment, satisfaction,
cancellation or novation of any of the Prior
-2-
<PAGE>
Notes; and (e) Borrower's obligations to repay those loans (with interest) to
Lender and to perform or otherwise satisfy Borrower's other obligations, as well
as the security interests granted to Lender by Borrower under the Security
Interest Agreement, and any other related loan documents (i) each remain and
shall continue in full force and effect, both before and after giving effect to
this renewal and extension, (ii) are not subject as of the date of this renewal
and extension to any defense, counterclaim, setoff, right of recoupment,
abatement, reduction or other claim or determination, and (iii) are and shall be
governed by the terms and provisions of this Note, the Letter Agreements and the
Security Interest Agreement.
Notwithstanding the foregoing, the Lender may, by notice to the
Borrower at any time thereafter, declare all or any portion of the principal
amount of this Note, all or any part of the then accrued but unpaid interest
thereon, and any or all other amounts payable hereunder to be forthwith due and
payable at any time after:
(a) the Borrower shall fail to pay any installment of
principal of, or interest on, this Note when due and such
failure shall remain unremedied for three (3) days;
(b) the Borrower, Hondo Magdalena Oil & Gas Limited,
presently a wholly-owned subsidiary of the Borrower
("Hondo Magdalena"), and any of their respective
subsidiaries shall (i) fail to pay any Debt (but excluding
indebtedness evidenced by this Note) of the Borrower,
Hondo Magdalena or such subsidiary (as the case may be),
or any interest or premium thereon, when due (whether upon
scheduled maturity, required prepayment, acceleration,
demand or other notice or formality of any kind) and such
failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating
to such Debt or (ii) fail to perform or observe any term,
covenant or condition on its part to be performed or
observed under any agreement or instrument relating to any
such Debt, when required to be performed or observed, and
such failure shall continue after the applicable grace
period, if any, specified in such agreement or instrument,
if the effect of such failure to perform or observe is to
accelerate, or to permit the acceleration of, the maturity
of such Debt; or any such Debt shall be declared to be due
and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the
stated maturity thereof. "Debt" means all (i) indebtedness
for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property
or services, (iv) obligations as lessee under leases that
have been or should be, in accordance with generally
accepted accounting principles, recorded as capital
leases, (v) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise
to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds
referred to in clauses (i) through (v) above, and (vi)
liabilities in respect of unfunded vested benefits under
plans covered by Title IV of ERISA;
(c) the Borrower shall have failed to furnish to Lender,
by October 1, 1998, a proved gas reserve report of
Netherland, Sewell & Associates that shows that a minimum
of 13,000,000 mcf (25%) of proved gas reserve exists,
which are subject
-3-
<PAGE>
to the Opon Association Contract in which Hondo Magdalena
then participates, above the proved gas reserve of
52,475,554 mcf at September 30, 1997;
(d) the Borrower, Hondo Magdalena or any of their
respective subsidiaries shall generally not pay its debts
as they become due, shall admit in writing its inability
to pay its debts or shall make a general assignment for
the benefit of creditors; or any proceeding shall be
instituted by or against the Borrower, Hondo Magdalena or
any of their respective subsidiaries seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its Debts
under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any
substantial part of its property; or the Borrower, Hondo
Magdalena or any of their respective subsidiaries shall
take any corporate or other action to authorize any of the
actions set forth above in this paragraph (d); or
(e) a final judgment or order for the payment of money in
excess of $75,000 shall be rendered against the Borrower,
Hondo Magdalena or any of their respective subsidiaries,
and any such judgment or order shall continue unsatisfied
and in effect for a period of 60 consecutive days.
(f) any other default (whether in whole or in part) shall
occur in the due observance or performance of any other
term or provision of this Note, the Letter Agreements or
the Security Interest Agreement;
(g) This Note, the Letter Agreements, the Security
Interest Agreement (in whole or in part) shall cease to be
in full force or effect or shall be contested, challenged
or repudiated by the Borrower or any surety.
If this Note is placed in the hands of an attorney for collection
after default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally agree
to pay reasonable attorneys' fees and collection costs to the holder hereof in
addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note
hereby severally waive demand, presentment for payment, protest, notice of
protest, notice of intention to accelerate the maturity of this Note, diligence
in collection, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Note or in any of its terms, provisions and covenants,
or any releases or substitutions of any security, or any delay, indulgence or
other act of any trustee or any holder hereof, whether before or after maturity.
This Note and the rights and duties of the parties hereto shall be
governed by the laws of the State of New York (other than those that would defer
to the substantive laws of another jurisdiction).
-4-
<PAGE>
Without in any way limiting the preceding choice of law, the parties intend
(among other things) to thereby avail themselves of the benefit of Section
5-1401 of the General Obligations Law of the State of New York.
All notices and other communications provided for hereunder shall be
in writing and shall be delivered to the addressees at the applicable addresses
set forth below by mail, telecopy, Federal Express or other equivalent overnight
carrier or by telephone (confirmed in writing within 24 hours) or telecopy or
hand-delivered, if to Borrower, to it at Hondo Oil & Gas Company, 10375 Richmond
Avenue, Suite 900, Houston, TX 77042, telephone (713) 954-4600, telecopier (713)
954-4601, Attention: John J. Hoey; if to Lender, to it at London Australian &
General Property Company, 4 Grosvenor Place, London, SW1X 7DL England, telephone
011-44-171-201-6000, telecopier 011-44-171-201-6100, Attention R. E. Whitten
with a copy to Rudolph H. Funke, Esq. at 805 Third Avenue, 18th Floor, New York,
NY 10022, telephone 212-715-7001, telecopy 212-838-8141; or, as to each party,
to it at such other address as shall be designated by such party in a written
notice to the other party. All such notices and communications shall not be
effective until received by Lender.
Borrower hereby irrevocably submits to the jurisdiction of any New
York State or United States Federal court sitting in New York City over any
action or proceeding arising out of or relating to the Letter Agreements, this
Note or the Security Interest Agreement, and hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
such New York State or Federal court. Borrower irrevocably consents to the
service of any and all process in any such action or proceeding by sending
copies of such process to it at its address and in the manner determined under
the immediately preceding paragraph hereof. Borrower agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Borrower further waives any objections to venue in such State
and any objection to an action or proceeding in such State on the basis of forum
non conveniens. Borrower further agrees that any action or proceeding brought by
it against Lender shall be brought only in New York State or United States
Federal court sitting in New York County, New York. Borrower and Lender waive
any right it may have to jury trial. Nothing in this paragraph shall affect the
right of Lender to serve legal process in any other manner permitted by law or
affect the right of Lender to bring any action or proceeding against Borrower or
any of its properties in the courts of any other jurisdictions. To the extent
that Borrower has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether from service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, Borrower hereby irrevocable waives such
immunity in respect of its obligations under the Letter Agreements, this Note
and the Security Interest Agreement.
HONDO OIL & GAS COMPANY
By: /s/ John J. Hoey
------------------------
John J. Hoey, President
-5-
<PAGE>
SCHEDULE TO NOTE
----------------
Amount of Principal Principal Notation
Date Advance Paid Outstanding Made By
---- --------- ------ ----------- -------
12/18/97 Carryover from - $34,137,048.86
Prior Note
-6-
[Via Verde Note]
AMENDED AND RESTATED
PROMISSORY NOTE
US $4,500,000.00 As of December 18, 1997
FOR VALUE RECEIVED, Via Verde Development Company, a California
corporation ("Borrower"), hereby promises to pay to the order of London
Australian & General Property Company Limited, a United Kingdom corporation
("Lender"), the principal sum of FOUR MILLION FIVE HUNDRED THOUSAND AND 00/100
DOLLARS (US $4,500,000.00) or so much as may be advanced (including the addition
of interest to principal) and outstanding hereunder (the "Loans"), in ten (10)
semi-annual installments, commencing January 15, 1999, the amount of each
payment to equal the amount then outstanding on this Note divided by the number
of then remaining installments, including the installment to be made on such
date (the "Maturity Date"). Borrower promises to pay interest on the unpaid
principal balance hereof from (and including) October 1, 1997 to (but excluding)
the date of payment in full of such amount at a rate per annum equal at all
times to six percent (6%) per annum (or the maximum interest rate permitted by
law, whichever is less). Interest shall be payable on each April 1 (for the
period through March 31) and October 1 (for the period through September 30)
until maturity; provided, however, that any amount of principal that is not paid
when due (whether at stated maturity, by acceleration or otherwise) shall bear
interest from (and including) the date on which such amount is due until (but
excluding) the date such amount is paid in full on demand, at a rate per annum
equal at all times to eleven percent (11%) per annum (or the maximum interest
rate permitted by law, whichever is less). Both interest and principal as herein
provided shall be payable in lawful money of the United States of America at the
offices of Lender, 4 Grosvenor Place, London SW1X 7DL England, or at such other
place as from time to time may be designated in writing by Lender.
Notwithstanding anything in the foregoing to the contrary, if, in the
opinion of its Board of Directors, Borrower does not have sufficient cash
resources to pay interest on this Note when due, then Hondo Oil & Gas Company, a
Delaware corporation and the owner of all of the capital stock of Borrower
("Hondo"), may offer to Lender, on behalf of Borrower, a payment of the interest
in shares of Hondo's common stock, valued at (i) the last reported sales price
regular way on the interest due day or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices
regular way on such day, in either case on the American Stock Exchange or other
principal national securities exchange on which Hondo's common stock is listed
or, if not listed on any national securities exchange, on The Nasdaq Stock
Market's National Market System or, (ii) if (i) is not applicable, the average
of the bid and asked prices at the end of the interest due day in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected by Lender in good faith for that purpose. In making this determination,
Hondo's management will not, without the consent of Lender, allocate cash
resources to new capital projects not related to the Opon Association Contract
dated July 15, 1987 between Empressa Colombiana de Petroleos and Opon
Development Company. Lender will then notify Hondo whether it will either accept
the payment of interest in Hondo's common stock or add the amount of interest
due to the principal of this Note. If Lender accepts the payment of interest in
Hondo's common stock, Hondo will issue the requisite
<PAGE>
number of shares to Lender within ten business days after Hondo receives notice
of acceptance from Lender. Lender recognizes that any shares of Hondo's common
stock that it may acquire by the payment of interest in Hondo's common stock
will not have been registered under the Securities Act of 1933, as amended (the
"Act"), and may not be sold in the absence of an effective registration under
the Act or an exemption from the registration requirements of the Act. If Lender
so requests at any time and from time to time after the date shares of Hondo's
common stock are issued to Lender pursuant to this provision, Hondo will use its
best efforts to effect registration under the Act of the shares so issued.
No borrowing may be made by Borrower under this Note after the date
hereof, except pursuant to the immediately preceding paragraph. All additions to
principal (including the addition of interest to principal) and payments made
pursuant to this Note may be recorded by Lender on its books and records or any
Grid attached hereto, and such books and records and any Grid attached hereto
(or any statement or certificate of Lender based thereon) shall be conclusive as
to existence and amounts thereof absent manifest error.
This Note is secured under, and entitled to the benefits of, that
certain Deed of Trust dated April 30, 1993, recorded as Instrument No. 93-840817
in the Real Property Records of Los Angeles County, California and an Assignment
of Rents dated April 30, 1993 by Borrower, as Trustor, to Chicago Title Company
as Trustee, as same has been, and as same may be, supplemented, modified,
amended or restated from time to time (collectively, the "Via Verde Mortgage"),
and is supported by a Guaranty dated April 30, 1993 from Hondo Oil & Gas Company
as same has been, and as same may be, supplemented, modified, amended or
restated from time to time (the "Hondo Guaranty");
Borrower and Lender, as assignee of Thamesedge Ltd., in turn assignee
of Lonrho Plc ("Original Lender"), are parties to those certain letter
agreements dated December 17, 1993, November 10, 1994, December 22, 1995,
December 13, 1996 and December 18, 1997, and as same may be from time to time
further supplemented, amended or restated, collectively, the "Letter
Agreements") pursuant to which 1994 Letter Agreement Lender made loans to
Borrower in the total amount of US $3,000,000 and to which there has been added
to principal, pursuant to the Letter Agreements, accrued but unpaid interest in
the total amount of $585,680.86 through October 1, 1997.
Borrower hereby acknowledges, certifies and agrees that: (a) pursuant
to the Letter Agreements, Borrower has issued a Promissory Note dated April 30,
1993 in the original principal amount of $3,000,000 (the "Prior Note"); (b)
pursuant to the Prior Note, Lender has made loans to Borrower that are
outstanding as of the date hereof in the aggregate principal amount of
U.S.$3,585,680.86, after giving effect to interest added to principal of the
Prior Note as hereinabove provided; (c) this Note has been issued by Borrower to
renew, extend, amend, restate and replace the Prior Note (in order to, among
other things, implement the aforesaid December 18, 1997 letter agreement), to
evidence all indebtedness and other amounts outstanding under the Prior Note,
and to evidence any further advances of interest that may be added to principal
pursuant to the terms of this Note; (d) although issued in substitution for and
restatement of the Prior Note, this Note shall not be deemed to have been issued
in payment, satisfaction, cancellation or novation of the Prior Note; and (e)
Borrower's obligations to repay those loans (with interest) to Lender and to
perform
-2-
<PAGE>
or otherwise satisfy Borrower's other obligations, as well as the security
interests granted to Lender by Borrower under the Via Verde Mortgage, and any
other related loan documents (i) each remain and shall continue in full force
and effect, both before and after giving effect to this renewal and extension,
(ii) are not subject as of the date of this renewal and extension to any
defense, counterclaim, setoff, right of recoupment, abatement, reduction or
other claim or determination, and (iii) are and shall be governed by the terms
and provisions of this Note, the Letter Agreements and the Via Verde Mortgage.
Notwithstanding the foregoing, the Lender may, by notice to the
Borrower at any time thereafter, declare all or any portion of the principal
amount of this Note, all or any part of the then accrued but unpaid interest
thereon, and any or all other amounts payable hereunder to be forthwith due and
payable at any time after:
(a) the Borrower shall fail to pay any installment of
principal of, or interest on, this Note when due and such
failure shall remain unremedied for three (3) days;
(b) the Borrower, Hondo Magdalena Oil & Gas Limited,
presently a wholly-owned subsidiary of the Borrower
("Hondo Magdalena"), and any of their respective
subsidiaries shall (i) fail to pay any Debt (but excluding
indebtedness evidenced by this Note) of the Borrower,
Hondo Magdalena or such subsidiary (as the case may be),
or any interest or premium thereon, when due (whether upon
scheduled maturity, required prepayment, acceleration,
demand or other notice or formality of any kind) and such
failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating
to such Debt or (ii) fail to perform or observe any term,
covenant or condition on its part to be performed or
observed under any agreement or instrument relating to any
such Debt, when required to be performed or observed, and
such failure shall continue after the applicable grace
period, if any, specified in such agreement or instrument,
if the effect of such failure to perform or observe is to
accelerate, or to permit the acceleration of, the maturity
of such Debt; or any such Debt shall be declared to be due
and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the
stated maturity thereof. "Debt" means all (i) indebtedness
for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property
or services, (iv) obligations as lessee under leases that
have been or should be, in accordance with generally
accepted accounting principles, recorded as capital
leases, (v) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise
to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds
referred to in clauses (i) through (v) above, and (vi)
liabilities in respect of unfunded vested benefits under
plans covered by Title IV of ERISA;
(c) the Borrower shall have failed to furnish to Lender,
by October 1, 1998, a proved gas reserve report of
Netherland, Sewell & Associates that shows that a minimum
of 13,000,000 mcf (25%) of proved gas reserve exists,
which are subject
-3-
<PAGE>
to the Opon Association Contract in which Hondo Magdalena
then participates, above the proved gas reserve of
52,475,554 mcf at September 30, 1997;
(d) the Borrower, Hondo Magdalena or any of their
respective subsidiaries shall generally not pay its debts
as they become due, shall admit in writing its inability
to pay its debts or shall make a general assignment for
the benefit of creditors; or any proceeding shall be
instituted by or against the Borrower, Hondo Magdalena or
any of their respective subsidiaries seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its Debts
under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any
substantial part of its property; or the Borrower, Hondo
Magdalena or any of their respective subsidiaries shall
take any corporate or other action to authorize any of the
actions set forth above in this paragraph (d); or
(e) a final judgment or order for the payment of money in
excess of $75,000 shall be rendered against the Borrower,
Hondo Magdalena or any of their respective subsidiaries,
and any such judgment or order shall continue unsatisfied
and in effect for a period of 60 consecutive days.
(f) any other default (whether in whole or in part) shall
occur in the due observance or performance of any other
term or provision of this Note, the Letter Agreements or
the Via Verde Mortgage;
(g) This Note, the Letter Agreements, the Via Verde
Mortgage (in whole or in part) shall cease to be in full
force or effect or shall be contested, challenged or
repudiated by the Borrower or any surety.
If this Note is placed in the hands of an attorney for collection
after default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally agree
to pay reasonable attorneys' fees and collection costs to the holder hereof in
addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note
hereby severally waive demand, presentment for payment, protest, notice of
protest, notice of intention to accelerate the maturity of this Note, diligence
in collection, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Note or in any of its terms, provisions and covenants,
or any releases or substitutions of any security, or any delay, indulgence or
other act of any trustee or any holder hereof, whether before or after maturity.
This Note and the rights and duties of the parties hereto shall be
governed by the laws of the
-4-
<PAGE>
State of New York, (other than those that would defer to the substantive laws of
another jurisdiction). Without in any way limiting the preceding choice of law,
the parties intend (among other things) to thereby avail themselves of the
benefit of Section 5-1401 of the General Obligations Law of the State of New
York.
All notices and other communications provided for hereunder shall be
in writing and shall be delivered to the addressees at the applicable addresses
set forth below by mail, telecopy, Federal Express or other equivalent overnight
carrier or by telephone (confirmed in writing within 24 hours) or telecopy or
hand-delivered, if to Borrower, to it at Hondo Oil & Gas Company, 10375 Richmond
Avenue, Suite 900, Houston, TX 77042, telephone (713) 954-4600, telecopier (713)
954-4601, Attention: John J. Hoey; if to Lender, to it at London Australian &
General Property Company, 4 Grosvenor Place, London, SW1X 7DL England, telephone
011-44-171-201-6000, telecopier 011-44-171-201-6100, Attention R. E. Whitten
with a copy to Rudolph H. Funke, Esq. at 805 Third Avenue, 18th Floor, New York,
NY 10022, telephone 212-715-7001, telecopy 212-838-8141; or, as to each party,
to it at such other address as shall be designated by such party in a written
notice to the other party. All such notices and communications shall not be
effective until received by Lender.
Borrower hereby irrevocably submits to the jurisdiction of any New
York State or United States Federal court sitting in New York City over any
action or proceeding arising out of or relating to the Letter Agreements, this
Note or the Via Verde Mortgage, and hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State or Federal court. Borrower irrevocably consents to the service of any
and all process in any such action or proceeding by sending copies of such
process to it at its address and in the manner determined under the immediately
preceding paragraph hereof. Borrower agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Borrower further waives any objections to venue in such State and any objection
to an action or proceeding in such State on the basis of forum non conveniens.
Borrower further agrees that any action or proceeding brought by it against
Lender shall be brought only in New York State or United States Federal court
sitting in New York County, New York. Borrower and Lender waive any right it may
have to jury trial. Nothing in this paragraph shall affect the right of Lender
to serve legal process in any other manner permitted by law or affect the right
of Lender to bring any action or proceeding against Borrower or any of its
properties in the courts of any other jurisdictions. To the extent that Borrower
has or hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether from service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, Borrower hereby irrevocable waives such immunity in respect of
its obligations under the Letter Agreements, this Note and the Via Verde
Mortgage.
VIA VERDE DEVELOPMENT COMPANY
By: /s/ John J. Hoey
-------------------------
John J. Hoey, President
-5-
<PAGE>
SCHEDULE TO NOTE
----------------
Amount of Principal Principal Notation
Date Advance Paid Outstanding Made By
---- --------- ------ ----------- -------
12/18/97 Carryover from - $3,585,680.86
Prior Note
-6-
[Via Verde Guaranty]
FIRST GUARANTY AMENDMENT
As of December 18, 1997
Hondo Oil & Gas Company
10375 Richmond Avenue, Suite 900
Houston, Texas 77042
Re: Guaranty
--------
Gentlemen:
As you know, London Australian & General Property Company Limited
("Lender") is in the process of amending various of its credit arrangements with
you, including that certain Promissory Note dated April 30, 1993 in the original
principal amount of $3,000,000 issued by your wholly-owned subsidiary, Via Verde
Development Company (as heretofore amended and as currently in effect, the
"Existing Note"), which you guarantied pursuant to your Guaranty executed and
delivered as of April 30, 1993 (as currently in effect, the "Existing Guaranty")
in our favor (as assignee of Thamesedge Ltd., which, in turn, was the assignee
of Lonrho Plc., the "Original Lender"). Under a proposed Amended and Restated
Note being executed and delivered contemporaneously herewith by Borrower to us
(the "Amended and Restated Note"), among other things (a) the amount heretofore
loaned and which may be loaned (and, accordingly, the principal amount subject
to the Guaranty), is being increased to $4,500,000 (including $1,500,000
representing interest added to principal), (b) the maturity date of the Existing
Note is being extended to January 15, 1999 and (c) various Events of Default are
being added to the Existing Note to provide, among other things, that it shall
be an Event of Default (i) if you shall have failed to furnish to Lender, by
October 1, 1998, a proved gas reserve report of Netherland, Sewell & Associates
that shows that a minimum of 13,000,000 mcf (25%) of proved gas reserve exists,
which are subject to the Opon Association Contract in which Hondo Magdalena then
participates, above the proved gas reserve of 52,475,554 mcf at September 30,
1997, (ii) if you, your wholly-owned subsidiary, Hondo Magdalena Oil & Gas
Limited, or any of their respective subsidiaries default with respect to their
Debt (as defined) and (iii) to add certain other Events of Default similar to
those in your other loan instruments to us.
We understand that you have reviewed a copy of the final version of the
proposed Amended and Restated Promissory Note. For all purposes, "Guaranty"
means the Existing Guaranty, as modified by this letter, and as the same may be
further supplemented, modified, amended and restated from time to time in the
manner provided therein.
Please execute this letter to acknowledge your agreement to the Amended
and Restated Note and that your guarantee and other obligations under the
Guaranty remain and continue in full force
<PAGE>
and effect both before and after giving effect to the Amended and Restated Note
and related documentation (including, without limitation, the matters set forth
in this letter). Our request to you in this instance does not obligate us to
notify you or seek your consent in the future as to any amendment to the Amended
and Restated Note or other matter where (pursuant to your Guaranty, or
otherwise) such notice or consent is not required.
Your signature, where indicated below, also will constitute your
acknowledgment of and agreement to the following modifications to the Existing
Guaranty (without limiting the prior paragraph of this letter):
i. All references in the Existing Guaranty to "Lonrho Plc"
shall be to "London Australian & General Property Company
Limited (the "Lender")" and all references in the Existing
Guaranty to "Lonrho" shall be to "Lender" for all purposes
of the Guaranty;
ii. The Guaranty now includes, among other things, all amounts
borrowed and to be borrowed (and interest thereon) under
the Amended and Restated Note;
iii. Section 6 of the Existing Guaranty is deleted and the
following is substituted in its place:
"SECTION 6. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing
and mailed (certified mail, return receipt requested),
telecopied or delivered personally, if to the Guarantor,
to it at Hondo Oil & Gas Company ,10375 Richmond Avenue,
Suite 900, Houston, TX 77042, telecopier (713) 954-4601,
attention John J. Hoey; if to Lender, to it at London
Australia & General Property Company, Four Grosvenor
Place, London, SW1X 7DL, England, telecopier
011-44-171-201-6100, Attention: R. E. Whitten, with a copy
to Rudolph H. Funke, Esq. at 805 Third Avenue, 18th Floor,
New York, NY 10022, telecopier 212-838-8141; or, as to
each party, at such other address as shall be designated
by such party in a written notice to the other party. All
such notices and other communications shall be effective,
if mailed, 72 hours after being deposited in the mails or,
if telecopied or delivered, when received.
iv. Section 9 of the Existing Guaranty is deleted and the
following is substituted in its place:
"SECTION 9. Governing Laws. This Guaranty shall be
governed by, and construed in accordance with, the laws of
the State of New York (other than those that would defer
to the substantive laws of another jurisdiction). Without
in any way limiting the preceding choice of law, the
parties intend (among other things) to thereby avail
themselves of the benefit of Section 5-1401 of the General
Obligations Law of the State of New York."
-2-
<PAGE>
v. The following new Section 10 is hereby added to the
Existing Guaranty:
"SECTION 10. Consent to Jurisdiction; Waiver of
Immunities.
(a) Guarantor hereby irrevocably submits to the
jurisdiction of any New York or federal court sitting in New York in
any action or proceeding arising out of or relating to this Guaranty,
and the Guarantor hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in
such New York or federal court. The Guarantor hereby irrevocably
waives, to the fullest extent they may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or
proceeding. The Guarantor hereby irrevocably appoints John J. Hoey
(the "Process Agent"), with an office on the date hereof at Hondo Oil
& Gas Company, 10375 Richmond Avenue, Suite 900, Houston, TX 77042,
telephone (713) 954-4600, telecopier (713) 954-4601, as its agent to
receive, on behalf of the Guarantor and its property, service of
copies of the summons and complaint and any other process that may be
served in any such action or proceeding. Such service may be made by
mailing or delivering a copy of such process to the Guarantor in care
of the Process Agent at the Process Agent's address above, and the
Guarantor hereby irrevocably authorizes and directs the Process Agent
to accept such service on its behalf. As an alternative method of
service, Guarantor also irrevocably consents to the service of any
and all process in any such action or proceeding by the mailing of
copies of such process to Guarantor at its address specified in
Section 10. Guarantor agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law.
(b) Nothing in this Section shall affect the right of the
Lender to serve legal process in any other manner permitted by law or
affect the right of the Lender to bring any action or proceeding
against Guarantor or its property in the courts of any other
jurisdictions.
(c) To the extent that Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise)
with respect to Guarantor or its property, Guarantor hereby
irrevocably waives such immunity in respect of its obligations under
this Guaranty."
Your signature, where indicated below, also will constitute your
acknowledgment of and agreement and certification that: (a) pursuant to the
existing Via Verde Note, the Lender has made loans to the Borrower that are
outstanding as of the date of this letter in the aggregate principal amount of
$3,479,554.45 (including $479,554.45 of interest added to principal); (b) the
obligations of the Borrower to repay all loans (including those to be made
pursuant to the Amended and Restated Note) with interest, to the Lender and to
perform or otherwise satisfy all other obligations, (i) each remain and shall
continue in full force and effect, both before and after giving effect to the
-3-
<PAGE>
transactions contemplated by this letter, (ii) are not subject to any defense,
counterclaim, setoff, right of recoupment, abatement, reduction or other claim
or determination, and (iii) are and shall continue to be governed by the terms
and provisions of the Amended and Restated Note as same may be supplemented,
modified, amended or restated in the future; (e) your absolute, unconditional
and irrevocable guarantee to the Lender of the full and punctual payment and
satisfaction of the foregoing and any and all other obligations the Borrower (i)
remains and shall continue in full force and effect, both before and after
giving effect to the transactions contemplated by this letter, (ii) is not
subject to any defense, counterclaim, setoff, right of recoupment, abatement,
reduction or other claim or determination, and (iii) is and shall continue to be
governed by the terms and provisions of the Existing Guaranty as supplemented,
modified and amended.
Very truly yours,
LONDON AUSTRALIAN & GENERAL
PROPERTY COMPANY LIMITED
By: /s/ R.E. Whitten
-------------------------
ACKNOWLEDGED AND AGREED:
HONDO OIL & GAS COMPANY
/s/ John J. Hoey
- -------------------------
-4-
[Newhall/Valley Gateway Note]
AMENDED AND RESTATED
PROMISSORY NOTE
US $5,500,000.00 As of December 18, 1997
FOR VALUE RECEIVED, Hondo Oil & Gas Company, a Delaware corporation
("Borrower"), hereby promises to pay to the order of London Australian & General
Property Company Limited, a United Kingdom corporation ("Lender"), the principal
sum of FIVE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS (US $5,500,000.00)
or so much as may be advanced (including the addition of interest to principal)
and outstanding hereunder (the "Loans"), in ten (10) semi-annual installments,
commencing January 15, 1999, the amount of each payment to equal the amount then
outstanding on this Note divided by the number of then remaining installments,
including the installment to be made on such date (the "Maturity Date").
Borrower promises to pay interest on the unpaid principal balance hereof from
(and including) October 1, 1997 to (but excluding) the date of payment in full
of such amount at a rate per annum equal at all times to six percent (6%) per
annum (or the maximum interest rate permitted by law, whichever is less).
Interest shall be payable on each April 1 (for the period through March 31) and
October 1 (for the period through September 30) until maturity; provided,
however, that any amount of principal that is not paid when due (whether at
stated maturity, by acceleration or otherwise) shall bear interest from (and
including) the date on which such amount is due until (but excluding) the date
such amount is paid in full on demand, at a rate per annum equal at all times to
eleven percent (11%) per annum (or the maximum interest rate permitted by law,
whichever is less). Both interest and principal as herein provided shall be
payable in lawful money of the United States of America at the offices of
Lender, 4 Grosvenor Place, London SW1X 7DL England, or at such other place as
from time to time may be designated in writing by Lender.
Notwithstanding anything in the foregoing to the contrary, if, in the
opinion of its Board of Directors, Borrower does not have sufficient cash
resources to pay interest on this Note when due, then Borrower may offer to
Lender a payment of the interest in shares of Borrower's common stock, valued at
(i) the last reported sales price regular way on the interest due day or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way on such day, in either case on the
American Stock Exchange or other principal national securities exchange on which
Borrower's common stock is listed or, if not listed on any national securities
exchange, on The Nasdaq Stock Market's National Market System or, (ii) if (i) is
not applicable, the average of the bid and asked prices at the end of the
interest due day in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected by Lender in good faith for that purpose. In
making this determination, Borrower's management will not, without the consent
of Lender, allocate cash resources to new capital projects not related to the
Opon Association Contract dated July 15, 1987 between Empressa Colombiana de
Petroleos and Opon Development Company. Lender will then notify Borrower whether
it will either accept the payment of interest in Borrower's common stock or add
the amount of interest due to the principal of this Note. If Lender accepts the
payment of interest in Borrower's common stock, Borrower will issue the
requisite number of shares
<PAGE>
to Lender within ten business days after Borrower receives notice of acceptance
from Lender. Lender recognizes that any shares of Borrower's common stock that
it may acquire by the payment of interest in Borrower's common stock will not
have been registered under the Securities Act of 1933, as amended (the "Act"),
and may not be sold in the absence of an effective registration under the Act or
an exemption from the registration requirements of the Act. If Lender so
requests at any time and from time to time after the date shares of Borrower's
common stock are issued to Lender pursuant to this provision, Borrower will use
its best efforts to effect registration under the Act of the shares so issued.
No borrowing may be made by Borrower under this Note after the date
hereof, except pursuant to the immediately preceding paragraph. All additions to
principal (including the addition of interest to principal) and payments made
pursuant to this Note may be recorded by Lender on its books and records or any
Grid attached hereto, and such books and records and any Grid attached hereto
(or any statement or certificate of Lender based thereon) shall be conclusive as
to existence and amounts thereof absent manifest error.
This Note is secured under, and entitled to the benefits of, that
certain Deed of Trust dated August 30, 1993, granted by Borrower and Newhall
Refining Co., Inc. ("Newhall") recorded as Instrument No. 93-2006475 in the Real
Property Records of Los Angeles, California, as same has been, and as same may
be, supplemented, modified, amended or restated from time to time (the "Valley
Gateway Mortgage");
Borrower and Lender, as assignee of Thamesedge Ltd., in turn assignee
of Lonrho Plc ("Original Lender"), are parties to those certain letter
agreements dated December 17, 1993, November 10, 1994, December 22, 1995,
December 13, 1996 and December 18, 1997, and as same may be from time to time
further supplemented, amended or restated, collectively, the "Letter
Agreements") pursuant to which 1994 Letter Agreement Lender made loans to
Borrower in the total amount of US $4,000,000 and to which there has been added
to principal, pursuant to the Letter Agreements, accrued but unpaid interest in
the total amount of $672,858.12 through October 1, 1997.
Borrower hereby acknowledges, certifies and agrees that: (a) pursuant
to the Letter Agreements, Borrower has issued a Promissory Note dated June 25,
1993 in the original principal amount of $4,000,000 (the "Prior Note"); (b)
pursuant to the Prior Note, Lender has made loans to Borrower that are
outstanding as of the date hereof in the aggregate principal amount of
U.S.$4,672,858.12, after giving effect to interest added to principal of the
Prior Note as hereinabove provided; (c) this Note has been issued by Borrower to
renew, extend, amend, restate and replace the Prior Note (in order to, among
other things, implement the aforesaid December 18, 1997 letter agreement), to
evidence all indebtedness and other amounts outstanding under the Prior Note,
and to evidence any further advances of interest that may be added to principal
pursuant to the terms of this Note; (d) although issued in substitution for and
restatement of the Prior Note, this Note shall not be deemed to have been issued
in payment, satisfaction, cancellation or novation of the Prior Note; and (e)
Borrower's obligations to repay those loans (with interest) to Lender and to
perform
-2-
<PAGE>
or otherwise satisfy Borrower's other obligations, as well as the security
interests granted to Lender by Borrower under the Valley Gateway Mortgage, and
any other related loan documents (i) each remain and shall continue in full
force and effect, both before and after giving effect to this renewal and
extension, (ii) are not subject as of the date of this renewal and extension to
any defense, counterclaim, setoff, right of recoupment, abatement, reduction or
other claim or determination, and (iii) are and shall be governed by the terms
and provisions of this Note, the Letter Agreements and the Valley Gateway
Mortgage.
Notwithstanding the foregoing, the Lender may, by notice to the
Borrower at any time thereafter, declare all or any portion of the principal
amount of this Note, all or any part of the then accrued but unpaid interest
thereon, and any or all other amounts payable hereunder to be forthwith due and
payable at any time after:
(a) the Borrower shall fail to pay any installment of
principal of, or interest on, this Note when due and such
failure shall remain unremedied for three (3) days;
(b) the Borrower, Hondo Magdalena Oil & Gas Limited,
presently a wholly-owned subsidiary of the Borrower
("Hondo Magdalena"), and any of their respective
subsidiaries shall (i) fail to pay any Debt (but excluding
indebtedness evidenced by this Note) of the Borrower,
Hondo Magdalena or such subsidiary (as the case may be),
or any interest or premium thereon, when due (whether upon
scheduled maturity, required prepayment, acceleration,
demand or other notice or formality of any kind) and such
failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating
to such Debt or (ii) fail to perform or observe any term,
covenant or condition on its part to be performed or
observed under any agreement or instrument relating to any
such Debt, when required to be performed or observed, and
such failure shall continue after the applicable grace
period, if any, specified in such agreement or instrument,
if the effect of such failure to perform or observe is to
accelerate, or to permit the acceleration of, the maturity
of such Debt; or any such Debt shall be declared to be due
and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the
stated maturity thereof. "Debt" means all (i) indebtedness
for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property
or services, (iv) obligations as lessee under leases that
have been or should be, in accordance with generally
accepted accounting principles, recorded as capital
leases, (v) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise
to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds
referred to in clauses (i) through (v) above, and (vi)
liabilities in respect of unfunded vested benefits under
plans covered by Title IV of ERISA;
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<PAGE>
(c) the Borrower shall have failed to furnish to Lender,
by October 1, 1998, a proved gas reserve report of
Netherland, Sewell & Associates that shows that a minimum
of 13,000,000 mcf (25%) of proved gas reserve exists,
which are subject to the Opon Association Contract in
which Hondo Magdalena then participates, above the proved
gas reserve of 52,475,554 mcf at September 30, 1997;
(d) the Borrower, Hondo Magdalena or any of their
respective subsidiaries shall generally not pay its debts
as they become due, shall admit in writing its inability
to pay its debts or shall make a general assignment for
the benefit of creditors; or any proceeding shall be
instituted by or against the Borrower, Hondo Magdalena or
any of their respective subsidiaries seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its Debts
under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any
substantial part of its property; or the Borrower, Hondo
Magdalena or any of their respective subsidiaries shall
take any corporate or other action to authorize any of the
actions set forth above in this paragraph (d); or
(e) a final judgment or order for the payment of money in
excess of $75,000 shall be rendered against the Borrower,
Hondo Magdalena or any of their respective subsidiaries,
and any such judgment or order shall continue unsatisfied
and in effect for a period of 60 consecutive days.
(f) any other default (whether in whole or in part) shall
occur in the due observance or performance of any other
term or provision of this Note, the Letter Agreements or
the Valley Gateway Mortgage;
(g) This Note, the Letter Agreements, the Valley Gateway
Mortgage (in whole or in part) shall cease to be in full
force or effect or shall be contested, challenged or
repudiated by the Borrower or any surety.
If this Note is placed in the hands of an attorney for collection
after default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally agree
to pay reasonable attorneys' fees and collection costs to the holder hereof in
addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note
hereby severally waive demand, presentment for payment, protest, notice of
protest, notice of intention to accelerate the maturity of this Note, diligence
in collection, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Note or in any of its terms, provisions and covenants,
or any releases or substitutions of any
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<PAGE>
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
This Note and the rights and duties of the parties hereto shall be
governed by the laws of the State of New York (other than those that would defer
to the substantive laws of another jurisdiction). Without in any way limiting
the preceding choice of law, the parties intend (among other things) to thereby
avail themselves of the benefit of Section 5-1401 of the General Obligations Law
of the State of New York.
All notices and other communications provided for hereunder shall be
in writing and shall be delivered to the addressees at the applicable addresses
set forth below by mail, telecopy, Federal Express or other equivalent overnight
carrier or by telephone (confirmed in writing within 24 hours) or telecopy or
hand-delivered, if to Borrower, to it at Hondo Oil & Gas Company, 10375 Richmond
Avenue, Suite 900, Houston, TX 77042, telephone (713) 954-4600, telecopier (713)
954-4601, Attention: John J. Hoey; if to Lender, to it at London Australian &
General Property Company, 4 Grosvenor Place, London, SW1X 7DL England, telephone
011-44-171-201-6000, telecopier 011-44-171-201-6100, Attention R. E. Whitten
with a copy to Rudolph H. Funke, Esq. at 805 Third Avenue, 18th Floor, New York,
NY 10022, telephone 212-715-7001, telecopy 212-838-8141; or, as to each party,
to it at such other address as shall be designated by such party in a written
notice to the other party. All such notices and communications shall not be
effective until received by Lender.
Borrower hereby irrevocably submits to the jurisdiction of any New
York State or United States Federal court sitting in New York City over any
action or proceeding arising out of or relating to the Letter Agreements, this
Note or the Valley Gateway Mortgage, and hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
such New York State or Federal court. Borrower irrevocably consents to the
service of any and all process in any such action or proceeding by sending
copies of such process to it at its address and in the manner determined under
the immediately preceding paragraph hereof. Borrower agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Borrower further waives any objections to venue in such State
and any objection to an action or proceeding in such State on the basis of forum
non conveniens. Borrower further agrees that any action or proceeding brought by
it against Lender shall be brought only in New York State or United States
Federal court sitting in New York County, New York. Borrower and Lender waive
any right it may have to jury trial. Nothing in this paragraph shall affect the
right of Lender to serve legal process in any other manner permitted by law or
affect the right of Lender to bring any action or proceeding against Borrower or
any of its properties in the courts of any other jurisdictions. To the extent
that Borrower has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether from service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, Borrower hereby irrevocable waives such
immunity in respect of its obligations under the Letter Agreements, this Note
and the Valley Gateway Mortgage.
HONDO OIL & GAS COMPANY
By: /s/ John J. Hoey
-----------------------
John J. Hoey, President
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<PAGE>
SCHEDULE TO NOTE
Amount of Principal Principal Notation
Date Advance Paid Outstanding Made By
---- --------- ------ ----------- -------
12/18/97 Carryover from - $4,672,858.12
Prior Note
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