[Via Verde Guaranty]
FIRST GUARANTY AMENDMENT
As of December 18, 1997
Hondo Oil & Gas Company
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: Guaranty
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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 ▇▇▇▇▇▇▇ and Restated
Note being executed and delivered contemporaneously herewith by ▇▇▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ & 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ then
participates, above the proved gas reserve of 52,475,554 mcf at September 30,
1997, (ii) if you, your wholly-owned subsidiary, Hondo ▇▇▇▇▇▇▇▇▇ 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
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 ,▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, telecopier (▇▇▇) ▇▇▇-▇▇▇▇,
attention ▇▇▇▇ ▇. ▇▇▇▇; 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. ▇▇▇▇▇▇▇, with a copy
to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, telecopier ▇▇▇-▇▇▇-▇▇▇▇; 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."
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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 ▇▇▇▇ ▇. ▇▇▇▇
(the "Process Agent"), with an office on the date hereof at Hondo Oil
& Gas Company, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
telephone (▇▇▇) ▇▇▇-▇▇▇▇, telecopier (▇▇▇) ▇▇▇-▇▇▇▇, 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. ▇▇▇▇▇▇▇▇▇ 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
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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. ▇▇▇▇▇▇▇
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ACKNOWLEDGED AND AGREED:
HONDO OIL & GAS COMPANY
/s/ ▇▇▇▇ ▇. ▇▇▇▇
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