AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
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This Amended and Restated Revolving Credit Agreement (referred to
herein as the "Agreement" or "this Agreement") is made as of July 2,
1997 between HONDO OIL & GAS COMPANY, a Delaware corporation (the
"Borrower"), and THAMESEDGE, LTD., a United Kingdom corporation (the
"Lender").
RECITALS
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Lender and Borrower entered into a Revolving Credit Agreement as of
June 28, 1996 (the "1996 Agreement") under which Lender agreed to
advance to Borrower $13,500,000. The Borrower has requested that Lender
make additional advances of $7,000,000 and to include those advances
under the terms and conditions of the 1996 Agreement. The Lender has
agreed to make additional revolving advances to the Borrower from time
to time in a new aggregate amount not to exceed $20,500,000 of principal
at any time outstanding plus all accrued interest. The monies will be
used exclusively as follows:
- $18,200,000 for Borrowers wholly owned subsidiary, Hondo
Xxxxxxxxx Oil & Gas Limited ("Hondo Xxxxxxxxx"), for its requirements
pursuant to the OPON Budget hereinafter defined; and
- $2,300,000 to meet Borrower's corporate general and
administrative expenses.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.01 Definitions. The following terms, as used herein,
shall have the following respective meanings:
"AMEX" means the American Stock Exchange.
"Advances" has the meaning set forth in Section 2.01.
"Business Day" means any day of the year on which banks are not
required or authorized to close in London or Houston, Texas.
"Closing Date" has the meaning set forth in Section 3.01.
"Code" means the Internal Revenue Code of 1986.
"Commitment" has the meaning set forth in Section 2.01.
"Credit Documents" means this Agreement, the Note, and the
Guaranty.
"Debt" means, as to any Person, all (a) indebtedness for borrowed
money, (b) obligations evidenced by bonds, debentures, notes or other
similar instruments, (c) obligations to pay the deferred purchase price
of property or services, (d) obligations as lessee under leases that
have been or should be, in accordance with generally accepted accounting
principles, recorded as capital leases, (d) obligations under direct or
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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 (a) through (d) above, and
(f) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Default" means any event or condition that would, with the giving
of any requisite notice and/or the passage of any requisite period of
time, constitute an Event of Default.
"Event of Default" has the meaning set forth in Section 6.01.
"Free Cash Flow" means that amount of Borrower's net income
attributable to Hondo Xxxxxxxxx reported each year in accordance with
GAAP as applicable to the international petroleum industry, applied
consistently after deduction of all expenses incurred by Borrower or
Hondo Xxxxxxxxx in each respective year which are directly related to
the operations of Hondo Xxxxxxxxx in Colombia including, but not limited
to: (i) Hondo Magdalena's share of royalty and other financial
obligations due the government of Colombia; (ii) Hondo Magdalena's share
of operating expenses under operating agreements and the Association
Contract of 15th July 1987; (iii) overhead and general and
administrative expenses attributable to operating agreements and the
Association Contract of 15th July 1987; and (iv) remittance and income
taxes.
"GAAP" means generally accepted accounting principles for the
United States or Colombia, as applicable.
"Governmental Action" means any authorization, approval, consent,
waiver, exception, license, filing registration, permit, notarization,
special lease or other requirement of any Governmental Person.
"Governmental Person" means, whether domestic or foreign, any
national, federal, state or local government, any political subdivision
thereof or any governmental, quasi-governmental (including, without
limitation, AMEX or other markets in which Borrower's securities are
traded), judicial, public, statutory or regulator instrumentality,
authority, body, bureau or entity, including any central bank and any
comparable authority.
"Governmental Rule" means any treaty, law, rule, regulation,
ordinance, order, code, interpretation, judgment, writ, injunction,
decree, directive, guideline, policy or similar form of decision of any
Governmental Person.
"Guaranty" means the Amended and Restated Guaranty of Hondo
Xxxxxxxxx substantially in the form of Exhibit B.
"Guarantor" means Hondo Xxxxxxxxx.
"Lien" means, with respect to any asset, (a) any lien, charge,
claims, mortgage, security interest, pledge, negative pledge or other
encumbrance of any kind in respect of such asset or (b) the interest of
a vendor or lessor under any conditional sale agreement, capital lease
or other title-retention agreement relating to such asset.
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"Note" means the Promissory Note of the Borrower substantially in
the form of Exhibit A.
"OPON" means the Opon Association Contract dated July 15, 1987
between Empresa Colombiana de Petroleos ("Ecopetrol") and Opon
Development Company.
"OPON Budget" means the budgets for the calendar years 1996 and
1997 in connection with OPON, prepared by Amoco Colombia Petroleum
Company and submitted at the operating committee meetings on April 10,
1996, and November 5, 1996, and the drilling of Opon Well No. 14 as
described in letter dated Xxxx 00, 0000, xxxx Xxxxx Xxxxxxxx Petroleum
Company to Hondo Xxxxxxxxx and Opon Development Company copies of which
have been previously supplied to Lender.
"Person" means any individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or any Governmental Person.
"PIK Shares" means the securities, assets or property issued as
payment in kind for interest on Advances pursuant to Section 2.05(b)(i).
"Termination Date" means January 1, 1999 or the earlier date of
termination of the Commitment pursuant to Section 6.01.
SECTION 1.02 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP
on a basis consistent with that used in the preparation of the financial
statements referred to in Section 4.01(e).
SECTION 1.03 Interpretation. In the Agreement the singular
includes the plural and the plural the singular; words importing any
gender include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating, amending
or replacing the statute referred to; references to "writing" include
printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "including," "includes" and "include"
shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections),
exhibits, annexes or schedules are to those of this Agreement unless
otherwise indicated; references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and
other modifications to such instruments, and references to Persons
include their respective permitted successors and assigns.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01 The Advances. The Lender agrees, on the terms and
conditions hereinafter set forth, 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 $20,500,000, as such amount is reduced from time to
time pursuant to Section 2.03 (the "Commitment"). Each Advance shall be
in an amount not less than $1,000,000 and, if greater shall be in
increments of $100,000. Within the limits of the Commitment, the
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Borrower may borrow, prepay pursuant to Section 2.04(a) and reborrow
under this Section 2.01.
SECTION 2.02 Making the Advances. Each Advance 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.
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); (ii) advances
repaid (or to be repaid) in kind pursuant to Section 2.05(b); and (iii)
in accordance with Section 6.01.
SECTION 2.04 Optional and Mandatory Prepayments of Advances.
(a) The Borrower may, upon at least three Business Day's notice to
the Lender stating the proposed date and amount of the prepayment,
prepay the Advances in whole or in part with accrued interest to the
date of such prepayment on the amount prepaid, provided that each
partial prepayment shall be in a principal amount not less than
$100,000.
(b) The Borrower shall immediately repay to the Lender, and there
shall become due and payable by the Borrower an amount equal to the
amount by which the aggregate amount of the Advances outstanding exceeds
the Commitment at any time.
(c) The Borrower shall immediately repay to the Lender, and there
shall become due and payable by the Borrower, an amount equal to 75% of
Free Cash Flow immediately upon receipt by OPON
(for avoidance of doubt said 75% being over and above the 5% net profits
interest agreed to be paid by Borrower to Lender pursuant to agreement
among Borrower, Lender and Lonrho Plc dated as of December 18, 1992, as
amended.)
SECTION 2.05. Principal and Interest.
(a) The Borrower shall repay the unpaid principal amount of each
Advance, and shall pay interest on each Advance, in accordance with the
terms of the Note.
(b) Notwithstanding the foregoing:
(i) Payment in Kind. If, in the opinion of management, Borrower
does not have sufficient cash resources to pay interest on any of
the Advances 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 AMEX or other principal national
securities exchange on which the Borrower's Common Stock is listed
or, if not listed on any national securities exchange, on The
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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 Lender in
good faith for that purpose. In making this determination, the
Borrower's management will not, without the consent of Lender
allocate cash resources to new capital projects not related to
OPON. Lender will then notify Borrower whether it will either
accept the payment of interest in kind or add the amount of
interest due to the principal of the note. If Lender accepts the
payment of interest in kind, Borrower will issue the requisite
number of shares to Lender within ten business days after Borrower
receives notice of acceptance from Lender in the same manner as
provided in other loans between Borrower and Lender.
(ii) Unregistered Shares. Lender recognizes that any PIK Shares
will not have been registered under the Securities Act of 1933 and
may not be sold in the absence of an effective registration under
said Act or an exemption from the registration requirements of said
Act.
(iii) Registration Rights. If Lender so requests at any time and
from time to time, Borrower will use its best efforts to promptly
effect registration under the Securities Act of 1933 of the PIK
shares so issued.
SECTION 2.06 Payments and Computations.
(a) The Borrower shall make each payment under the Note and any
Credit Document 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 location as it may designate, in immediately available
funds. All computations of interest under the Note shall be made by the
Lender on the basis of a year of 360 days and the actual number of days
(including the first day but excluding the last day) occurring in the
period for which such interest is payable.
(b) Any amount payable under the Note or any Credit Document not
paid when due shall bear interest until paid at the rate specified in
the Note for late payments.
SECTION 2.07 Payment on Non-Business Days. Whenever any payment
to be made under the Note or any Credit Document 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.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01 Conditions Precedent to Effectiveness. The Agreement
shall become effective on the day (the "Closing Date") that is the later
of July 2, 1997 or when the Lender shall have received all of the
following, each dated the Closing Date and otherwise in form and
substance satisfactory to the Lender shall have been delivered to
Lender; provided, however, that this Agreement shall be null and void
(and the 1996 Agreement shall remain effective) unless all the following
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shall have occurred or been delivered to Lender on or prior to July 31,
1997:
(a) the Note executed by the Borrower;
(b) copies of the resolutions of the Board of Directors of the
Borrower unanimously authorizing this Agreement and the Note and the
transactions contemplated hereby and thereby, certified by the Secretary
of the Borrower to be in full force and effect, and all documents
evidencing other necessary corporate action and governmental approvals,
if any, with respect to this Agreement and the Note;
(c) a certificate of the Secretary of the Borrower certifying the
names and true signatures of the officers of the Borrower authorized to
sign this Agreement and the Note and the other documents to be delivered
by the Borrower hereunder;
(d) the Guaranty executed by the Guarantor;
(e) copies of resolutions of the board of directors of Guarantor
authorizing the Guaranty, certified by the Secretary or Assistant
Secretary of such Guarantor to be in full force and effect together with
all other documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Guaranty;
(f) a certificate of the Secretary or Assistant Secretary of
Guarantor certifying the names and true signatures of the officers of
the Guarantor authorized to sign the Guaranty and the other documents to
be delivered by Guarantor hereunder;
(g) certificates of good standing of each of the Borrower and the
Guarantor, dated as of a recent date, from appropriate officials of the
state of incorporation of such company;
(h) a favorable opinion of Xxxxxxx X. XxXxxxxx, Esq. as counsel
for the Borrower and as counsel for Guarantor covering such matters as
may be required by Lender; and
(i) a letter from Xxxxxxx X. XxXxxxxx, Esq. as the "Process Agent"
pursuant to which the Process Agent agrees to act as process agent for
Borrower and Guarantor and to forward forthwith to Borrower and
Guarantor all process received by the Process Agent.
SECTION 3.02 Conditions Precedent to All Advances. The obligation
of the Lender to make each Advance shall be subject to the further
conditions precedent that on the date of such Advance:
(a) the representations and warranties contained in Section 4.01
are correct on and as of the date of such Advance as though made on and
as of such date;
(b) no event has occurred and is continuing, or would result from
such Advance, that constitutes a Default or an Event of Default; and
(c) The Lender shall have received such other approvals, opinions
and documents as the Lender may reasonably request.
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ARTICLE IIIA
OPTION TO CONVERT DEBT INTO SHARES OF COMMON STOCK OF BORROWER
SECTION 3A.01 Option to Convert. As additional consideration and
requirement for the increase in the commitment reflected in this
Agreement, Lender will have the option to convert $7,000,000 of the
principal amount of the outstanding balance of the Note Purchase
Agreement dated November 28, 1988, between Xxxxxx Petroleum Inc. (now
Borrower) and Lender, as amended, and Note dated November 30, 1988, for
$75,000,000 from Xxxxxx Petroleum Inc. to Lender, as amended (the
"Thamesedge Note"), into shares of common stock, $1.00 par value, of
Borrower at the conversion price of $7.70 per share (110% of the closing
price of such shares on the American Stock Exchange on July 1, 1997).
SECTION 3A.02 Approval by Borrower's Stockholders. Such
conversion option will be subject to and conditioned upon approval by
Borrower's stockholders at the next annual meeting of stockholders to be
held approximately March 1998. Lender agrees to provide a letter from
Lonrho Plc to Borrower, substantially in the form of Exhibit C, to the
effect that on the matter of the approval of the option to convert such
debt, Lonrho Plc agrees to cause its subsidiaries, The Hondo Company and
Lender, to vote at that meeting the Borrower's shares held by them in
proportion to the votes cast by stockholders other than The Hondo
Company and Thamesedge. If the conversion option is not approved by the
stockholders, then the interest rate on such $7,000,000 will become
13.5% per annum (the original rate of the Thamesedge Note) on the date
of the meeting at which such conversion option is not approved.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of Delaware and is duly qualified,
in good standing and authorized to do business in all other
jurisdictions within the United States wherein the character of the
properties owned or held by it or the nature of the business transacted
by it makes such qualification necessary. The Borrower has taken all
actions and procedures customarily taken in order to enter, for the
purpose of conducting business or owning property, each jurisdiction
outside the United States wherein the character of the properties owned
or held by it or the nature of the business transacted by it makes such
actions and procedures desirable.
(b) The execution, delivery and performance by the Borrower of the
Credit Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby, are within the Borrower's
corporate powers, have been duly authorized by all necessary corporate
action and do not contravene (i) the Borrower's charter documents or
bylaws or (ii) any applicable Governmental Rule, (including, without
limitation, AMEX or other markets in which Borrower's securities are
traded) or any contractual restriction binding on or affecting the
Borrower.
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(c) No Governmental Action is required for the due execution,
delivery and performance by the Borrower of this Agreement, or any
Credit Documents or the consummation of the transactions contemplated
hereby and thereby.
(d) The Credit Documents to which the Borrower is a party when
delivered hereunder will be, legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their
respective terms.
(e) The consolidated balance sheet of the Borrower and its
subsidiaries as of September 30, 1996 and 1995 and the related
statements of operations, changes in stockholders' equity and cash flows
of the Borrower and its subsidiaries for the years then ended, audited
by Ernst & Young and copies of which have been delivered to the Lender,
fairly present in conformity with generally accepted accounting
principles the financial position of the Borrower and its subsidiaries
as of such dates and the results of the operations and cash flows for
such periods. No material adverse change has occurred in the financial
position, results of operations or business or prospects of the Borrower
since September 30, 1996 except as described in documents on file by
Borrower with the Securities and Exchange Commission, copies of which
have been delivered to Lender, or of which Lender has actual knowledge.
(f) There is no fact that the Borrower has not disclosed in
writing to the Lender, or of which Lender has actual knowledge, that has
or will have a material adverse effect on the financial condition of the
Borrower or the ability of the Borrower to perform any of its
obligations under any Credit Documents or the Guarantor under any Credit
Documents.
(g) There are no actions, suits or proceedings pending against
or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any subsidiary of the Borrower that could materially and
adversely affect the financial condition or operations of the Borrower
or any such subsidiary of the Borrower or the ability of the Borrower or
the Guarantor to perform its obligations under any Credit Documents,
except as described in the financial statements referred to in Section
4.01(e).
(h) The obligations of the Borrower under this Agreement and the
Guarantor under the Guarantee will rank at least pari passu with all
claims of other senior creditors of the Borrower and the Guarantor, as
the case may be.
(i) The Borrower, the Guarantor and each of their subsidiaries
have good title to their respective assets, and the same are not subject
to any Liens.
The only permitted exceptions to the Representations and Warranties
set forth above are set forth in Schedule 1 attached hereto.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01 Covenants of the Borrower. So long as any amount due
hereunder or under the Note or any other Credit Document shall remain
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unpaid or the Lender shall have any Commitment hereunder, the Borrower
will, unless the Lender shall otherwise consent in writing, comply in
all respects with the following:
(a) The Borrower and its subsidiaries will at all time maintain
full and accurate books of account and records in conformity with GAAP.
The Borrower and its subsidiaries will maintain a standard system of
accounting and will furnish the following statements and reports to the
Lender at the Borrower's expense:
(i) as soon as available and in any event within 120 days after
the end of each fiscal year of the Borrower, complete consolidated
financial statements of the Borrower and its subsidiaries, together
with all notes thereto, prepared in reasonable detail in accordance
with GAAP, together with an opinion, based on an audit using
generally accepted auditing standards by Ernst & Young or other
independent certified public accountants selected by the Borrower
and acceptable to the Lender, stating without exception or
qualification that such financial statements have been prepared in
accordance with GAAP consistently applied and present fairly, in
all material respects, the consolidated financial position, result
of operations and cash flows presented, such financial statements
to contain a balance sheet as of the end of such fiscal year and
statements of earnings, stockholders' equity and cash flows for
such fiscal year, each setting forth in comparative form the
corresponding figures for the preceding fiscal year;
(ii) as soon as available and in any event within 120 days after
the end of each fiscal year of Guarantor complete consolidated
financial statements of Guarantor together with all notes thereto,
prepared in reasonable detail in accordance with GAAP
internationally recognized in the industry, together with an
opinion, based on an audit using generally accepted auditing
standards by Ernst & Young or other independent certified public
accountants acceptable to the Lender, stating without exception or
qualification that such financial statements have been prepared in
accordance with GAAP consistently applied and present fairly, in
all material respects, the consolidated financial position, and
result of operations and cash flows presented, such financial
statements to contain a balance sheet as of the end of such fiscal
year, a consolidated profit and loss statement for such fiscal year
and a statement of cash flows for such fiscal year, each setting
forth in comparative form the corresponding figures for the
preceding fiscal year;
(iii) as soon as available, and in any event within 60 days after
the end of each fiscal quarter of the Borrower, the Borrower's
consolidated balance sheet as of the end of such fiscal quarter and
statements of the Borrower's consolidated earnings, and cash flows
for such quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter all in
reasonable detail and prepared in accordance with GAAP, subject to
changes resulting from normal year-end adjustments; and, together
with each such set of financial statements and each set of
financial statements furnished under subsection (i) of this
section, a certificate signed by the chief financial officer of the
Borrower stating that financial statements are accurate and
complete and present fairly, in all material respects, the
consolidated financial position and result of operations presented,
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stating that the chief financial officer of the Borrower has
reviewed this Agreement and that no Default or Event of Default
exists at the time of such certificate or, if he concludes that a
Default or Event of Default exists, specifying its nature and the
action being taken or proposed to be taken with respect thereto;
(iv) forthwith upon the occurrence of any Default or Event of
Default, a certificate of the chief financial officer of the
Borrower setting forth the details thereof and the action that the
Borrower is taking or proposes to take with respect thereto;
(v) promptly upon the mailing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy
statements so mailed;
(vi) promptly after the Borrower has become aware of the same,
notice of all pending or threatened litigation or arbitration
proceedings and proceedings before any Governmental Person that
could materially and adversely affect the financial condition or
operations of the Borrower or the Guarantor;
(vii) promptly upon any such occurrence, written notice to the
Lender of any sale of assets by the Borrower in excess of $150,000
in any one transaction; and
(viii) from time to time such additional information regarding the
financial position, results of operations, cash flows or business
or prospects of the Borrower or the Guarantor as the Lender may
reasonably request.
(b) The Borrower will preserve and maintain its, and cause its
subsidiaries to preserve and maintain their corporate existence and all
of its right, privileges and franchises necessary or desirable in the
normal conduct of its business and will conduct its business in a
regular manner. The Borrower will notify the Lender 30 days in advance
of any change in the location of its or any of its subsidiary's
principal place of business, of the establishment or discontinuance of
its principal place of business or of a change in the corporate name,
trade names or articles of incorporation or bylaws of the Borrower or
any subsidiary of the Borrower.
(c) The Borrower will keep, and will cause each of its
subsidiaries to keep, all of its properties necessary, in the reasonable
judgment of its Board of Directors, in its business in good working
order and condition, ordinary wear and tear excepted, and will permit
representatives of the Lender to inspect such properties and to examine
and make extracts from the books and records of the Borrower and its
subsidiaries during normal business hours.
(d) The Borrower will comply with the requirements of all
applicable Governmental Rules, a breach of which could have a material
adverse effect on the consolidated financial condition or the business
taken as a whole of the Borrower and its subsidiaries, except where
contested in good faith and by proper proceedings.
(e) The Borrower will, and will cause its subsidiaries to, keep
proper books of records and accounts in which full, true and correct
entries in conformity with GAAP shall be made of all dealings and
transactions in relation to the Borrower's and its subsidiaries'
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business and activities. The Borrower will, and will cause its
subsidiaries to, permit representatives of the Lender to visit and
inspect all of its and its subsidiaries' properties to the extent
permitted by applicable law and applicable safety and security policies
of the Borrower and its subsidiaries (and to the extent such visitation
and inspection shall not interfere with the normal operations of the
Borrower and its subsidiaries) and to examine, subject to proprietary
and confidentiality policies and agreements of or binding upon the
Borrower and its subsidiaries, any or all of their books and records and
to discuss their affairs, finances and accounts with their officers and
employees, subject to proprietary and confidentiality policies and
agreements of or binding upon the Borrower and its subsidiaries, all at
such reasonable times and as often as may reasonably be desired.
(f) The Borrower will pay and discharge all taxes, assessments,
governmental charges and levies imposed on it, on its income or profits
or on any of its property prior to the date on which interest and
penalties attach thereto, except that the Borrower will not be required
hereby to pay any such tax, assessment, charge or levy the payment of
which is being contested in good faith and by proper proceedings and
against which it is maintaining adequate reserves.
(g) The Borrower will, and will cause its subsidiaries to,
maintain insurance with responsible companies in such amounts and
against such risks as is usually carried by owners of similar businesses
and properties in the same general areas in which they operate.
(h) The Borrower will not create or suffer to exist any Lien upon
or with respect to any of its properties, whether now owned or hereafter
acquired, or assign any right to receive income, except as set forth on
Schedule 1.
(i) The Borrower will not (A) consolidate with or merge into any
other Person or (B) sell, lease or otherwise transfer all or any
substantial part of its assets to any other person.
(j) The Borrower will not take any action that would result in the
Borrower's obligations to the Lender under this Agreement and the Note
not ranking at least pari passu in right of payment with all senior
obligations of the Borrower to other creditors unless approved by
Lender.
(k) The Borrower will use the proceeds of this loan in the manner
specified in the recitals first above written.
(l) The Borrower will undertake no new capital projects not
related to OPON of any type for so long as any monies remain due under
any of the Credit Documents.
(m) The Borrower will not sell, pledge, encumber transfer or in
any way adversely affect the shares of or the assets held by Hondo
Xxxxxxxxx and it will similarly cause Hondo Xxxxxxxxx to do likewise.
ARTICLE VI
EVENTS OF DEFAULT
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SECTION 6.01 Events of Default. If any of the following events
(each an "Event of Default") shall occur and be continuing:
(a) the Borrower shall fail to pay any installment of principal
of, or interest on, the Advances and/or other amounts payable under this
Agreement, the Note or any Credit Document when due and such failure
shall remain unremedied for 3 days;
(b) the Borrower or Guarantor shall fail to perform or observe any
other term, covenant or agreement contained in any Credit Document on
its part to be performed or observed and any such failure shall remain
unremedied for 10 days after written notice thereof shall have been
given to the Borrower or Guarantor (as the case may be) by the Lender;
(c) any representation or warranty made by the Borrower or
Guarantor (or any of their officers) in or in connection with any Credit
Document or Advance shall prove to have been incorrect in any material
respect when made;
(d) the Borrower, Guarantor and any of their respective
subsidiaries shall (i) fail to pay any Debt (but excluding indebtedness
evidenced by the Note) of the Borrower, Guarantor 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;
(e) the Borrower, Guarantor 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, the Guarantor 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, Guarantor 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
(e);
(f) a final judgment or order for the payment of money in excess
of $75,000 shall be rendered against the Borrower, the Guarantor or any
of their subsidiaries, and any such judgment or order shall continue
unsatisfied and in effect for a period of 60 consecutive days;
(g) any of the Credit Documents shall be terminated, repudiated or
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contested in any respect, any material provision of any of the Credit
Documents shall for any reason cease to be valid and binding on the
Borrower or Guarantor, Guarantor shall breach any obligation set forth
in its Guaranty or there shall be a material adverse change in the
financial condition of the Borrower or Guarantor affecting the ability
of the Borrower or Guarantor to perform their respective obligations
under the Note or the Guaranty; then, and in any such event, the Lender
may, by notice to the Borrower, (i) declare the Commitment to make
Advances to be terminated, whereupon the same shall forthwith terminate,
and/or (ii) declare all Advances, all interest thereon and all other
amounts payable under this Agreement the Note and all Credit Documents
to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Note, or consent to any departure by
the Borrower therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 7.02 Notices, Etc. Except as otherwise specifically
provided in this Agreement 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 the Borrower, to it at Hondo Oil & Gas Company, 00000
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, XX 00000, telephone (000) 000-0000,
telecopier (000) 000-0000, Attention: Xxxxxxx X. XxXxxxxx, Esq.; if to
the Lender, to it at Thamesedge, Ltd., 0 Xxxxxxxxx Xxxxx, Xxxxxx, XX0X
0XX Xxxxxxx, telephone 000-00-000-000-0000, telecopier 011-44-171-201-
6100, Attention Xxxxx Xxxxxxx with a copy to Xxxxxxx X. Xxxxx, Esq. at
000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, telephone 212-715-
7001, telecopy 000-000-0000; 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, except that
notices to the Lender pursuant to the provisions of Article II shall not
be effective until received by the Lender.
SECTION 7.03 No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or
under the Note shall operate as a waiver thereof, nor shall any single
or partial exercise of any right hereunder or under the Note preclude
any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 7.04. Costs, Expenses and Taxes. The Borrower agrees to
pay on demand all out-of-pocket costs and expenses in connection with
the preparation, execution, delivery, administration and amendment of
this Agreement, the Note, the Guaranty and the other Credit Documents
13
to be delivered hereunder, including the reasonable fees and out-of-
pocket expenses of counsel for the Lender with respect thereto and with
respect to advising the Lender as to its rights and responsibilities
under this Agreement, and all costs and expenses, if any (including
reasonable fees and expenses of counsel), in connection with the
enforcement of this Agreement, the Note, the Guaranty and the other
Credit Documents to be delivered hereunder. In addition, the Borrower
shall pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement,
the Note and the other Credit Documents to be delivered hereunder, and
agrees to save the Lender harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
SECTION 7.05 Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, the Lender is hereby authorized at
any time and from time to time, without notice to the Borrower (any such
notice being expressly waived by the Borrower), to set off and apply any
indebtedness at any time owing by the Lender to or for the credit or the
account of the Borrower against any and all of the obligations of the
Borrower now or hereafter existing under this Agreement and the Note,
irrespective of whether or not the Lender shall have made any demand
under this Agreement or the Note and although such obligations may be
unmatured. The Lender agrees to notify the Borrower promptly after any
such set off and application, provided that the failure to give such
notice shall not affect the availability of such set off and
application. The rights of the Lender under this Section are in
addition to other rights and remedies (including other rights of setoff)
that the Lender may have.
SECTION 7.06 Binding Effect: Governing Law. This Agreement shall
be binding upon and inure to the benefit of the Borrower and the Lender
and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lender. This Agreement
and the Note shall be governed by, and construed in accordance with, the
laws of the State of New York (without giving effect to New York's
principles of conflicts of law, other than title 14 of Article 5 of New
York's General Obligations Law).
SECTION 7.07 Counterparts. This Agreement may be executed in any
number of counterparts, and all such counterparts taken together shall
be deemed to constitute one and the same instrument.
SECTION 7.08 Entirety of Agreement. The Credit Documents
represent the complete understanding between the parties with respect to
the subject matter of this transaction.
SECTION 7.09 Jurisdiction.
(a) 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
Agreement or the Note, 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
14
determined under Section 7.02 hereof. 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.
(b) Nothing in this Section 7.09 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.
(c) 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,
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 Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
HONDO OIL & GAS COMPANY
By: /s/ Xxxx X. Xxxx
--------------------------
Xxxx X. Xxxx
President and CEO
THAMESEDGE, LTD.
By: /S/ R. E. Xxxxxxx
--------------------------
Name: R. E. Xxxxxxx
Title: Finance Director
By: /s/ N. J. Xxxxxxx
--------------------------
Name: N. J. Xxxxxxx
Title: Chief Executive
15
