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 Xxxxxx 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:
1
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 Xxxxxxxxx 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.
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,
2
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 Op\n 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
(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 Xxxxxxxxx Oil & Gas Limited,
presently a wholly-owned subsidiary of the Company ("Hondo
Xxxxxxxxx"), and any of their respective subsidiaries shall
(i) fail to pay any Indebtedness (but excluding Indebtedness
evidenced by this Note) of the Company, Hondo Xxxxxxxxx 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,
Xxxxxx & 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 Xxxxxxxxx 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 indicated on the
face of such Notes and in accordance with the specific
terms of such Notes."
4
(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
00000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxx
If to you:
London Australian & General Property Company Limited
0 Xxxxxxxxx Xxxxx
Xxxxxx, XX0X 0XX, Xxxxxxx
Attention: R. E. Xxxxxxx
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."
1. 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.
2. 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
5
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.
3. 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.
4. 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.
5. Agreement to Continue as Amended. The Existing Note Purchase
Agreement, as supplemented, modified and amended by this Amend-
ment, shall remain and continue in full force and effect after the
date hereof.
6. 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/ Xxxx X. Xxxx
-------------------------------
Xxxx X. Xxxx; President
LONDON AUSTRALIAN & GENERAL
PROPERTY COMPANY LIMITED
By: /s/ R. E. Xxxxxxx
-------------------------------
R.E. Xxxxxxx; Director
6
