[LETTERHEAD OF HONDO OIL & GAS COMPANY APPEARS HERE]
December 13, 1996
Thamesedge, Ltd.
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"), and its wholly-owned
subsidiaries, Via Verde Development Company, a California corporation
("Via Verde"), and Newhall Refining Co., Inc., a Delaware corporation
("Newhall"), and Thamesedge, Ltd. ("Thamesedge"), with reference to:
a) Note Purchase Agreement dated November 28, 1988, between
Pauley Petroleum Inc. (now Hondo) and 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");
b) Letter agreements dated November 28, 1988 and December 18,
1992, between Hondo and Thamesedge referring to and amending
the Thamesedge Note Purchase Agreement and the Thamesedge
Note;
c) Net Profits Share Agreement dated December 18, 1992, by and
among Hondo, Lonrho Plc ("Lonrho") and Thamesedge (the "Net
Profits Share Agreement");
d) Amended and Restated Letter Agreement dated December 20,
1991, between Hondo and Lonrho (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 (the "Lonrho Notes");
e) Letter Agreement dated December 18, 1992, between Hondo and
Lonrho referring to and amending the Lonrho Loan Agreement and
the Lonrho Notes;
f) Note dated April 30, 1993, for $3,000,000 from Via Verde to
Lonrho (the "Via Verde Note"), secured by Deed of Trust dated
recorded as Instrument No. 93-840817 in the Real Property
Records of Los Angeles County, California, (the "Via Verde
Mortgage"), guaranteed by Hondo in Guaranty dated April 30,
1993 (the "Hondo Guaranty"), and subject to a letter agreement
dated April 30, 1993;
g) Note dated June 25, 1993, for $4,000,000 from Hondo to
Lonrho (the "Valley Gateway Note"), secured by Deed of Trust
dated August 30, 1993, granted by Hondo and Newhall, recorded
as Instrument No. 93-2006475 in the Real Property Records of
Los Angeles County, California, (the "Valley Gateway
Mortgage");
Thamesedge, Ltd. Letter Agreement
December 13, 1996
Page 2
h) Letter Agreement dated December 17, 1993, between Hondo,
Via Verde, Newhall, and Lonrho and Thamesedge, restructuring
the above-described indebtedness and amending the Thamesedge
Note, the Lonrho Notes, the Via Verde Note and the Valley
Gateway Note;
i) Letter Agreement dated November 10, 1994, between Hondo,
Via Verde, Newhall, and Lonrho and Thamesedge, restructuring
the above-described indebtedness and amending the Thamesedge
Note, the Lonrho Notes, the Via Verde Note and the Valley
Gateway Note, and creating a new $5,000,000 loan facility and
a Note therefor dated October 31, 1994 (the "Facility Note");
j) Letter Agreement dated December 22, 1995, between Hondo,
Via Verde, Newhall, and Lonrho and Thamesedge, restructuring
the above-described indebtedness and amending the Thamesedge
Note, the Lonrho Notes, the Via Verde Note and the Valley
Gateway Note; and
k) Revolving Credit Agreement dated as of June 28, 1996,
between Hondo and Thamesedge (the "Revolving Credit
Agreement") and Promissory Note (the "Revolving Credit Note")
for $13,500,000 from Hondo to Thamesedge.
On March 29, 1996, Lonrho assigned to Thamesedge all of its
interest in the above-described agreements and notes. The Thamesedge
Note, the Lonrho Notes, the Via Verde Note, the Valley Gateway Note, the
Facility Note, and the Revolving Credit Note, each as amended, are
collectively referred to herein as the "Indebtedness".
Hondo and Thamesedge have agreed to extend the date of repayment
for the Indebtedness (i) by changing the mandatory redemption dates on
the Thamesedge Note from November 1, 1997 and 1998, to January 1, 1998;
and (ii) extend the principal repayment date of each of the Lonrho
Notes, the Via Verde Note, the Valley Gateway Note, the Facility Note
and the Revolving Credit Note from October 1, 1997 to January 1, 1998.
Hondo, Via Verde and Newhall, and Lonrho and Thamesedge hereby
agree, as follows:
1. Effective Date. This Agreement shall be effective for all
purposes on September 30, 1996.
2. Amendment of Notes. The Thamesedge Note, the Lonrho Notes
(collectively), the Via Verde Note, the Valley Gateway Note,
the Facility Note and the Revolving Credit Note, each will be
amended as provided, respectively, in Exhibits A, B, C, D, E
and F to this Agreement. Hondo and Via Verde, as applicable,
will execute the note amendments, Thamesedge will execute them
to acknowledge consent thereto, and the note amendments will
be attached to the original notes held by Thamesedge.
Thamesedge, Ltd. Letter Agreement
December 13, 1996
Page 3
3. Conversion of Part of the Indebtedness into Common Stock.
Thamesedge will have the option to convert $13,500,000 of the
principal amount of the Thamesedge Note into shares of common
stock, $1.00 par value, of Hondo at the conversion price of
$12.325 per share (110% of the closing price of such shares on
the American Stock Exchange on December 11, 1996). Such
conversion option will be subject to the approval of the
stockholders of Hondo. If the conversion option is not
approved by the stockholders, then the interest rate on such
$13,500,000 of the Thamesedge debt will become 13.5% per annum
(the original rate of the Thamesedge Note) at the time such
conversion is not approved.
4. Pledge of Shares of Hondo Magdalena. Hondo will pledge as
security for the Indebtedness, except the $13,500,000 that is
subject to the conversion option above, all of the shares of
Hondo's subsidiary, Hondo Magdalena Oil & Gas Limited, a
Jersey, Channel Islands corporation.
5. Effect on Other Agreements. Except as amended by the note
amendments, the terms and provisions of the above-described
agreements relating to the Lonrho Indebtedness shall remain in
full force and effect, including, without limiting the
generality of the foregoing, the Letter Agreements dated
December 17, 1993, November 10, 1994 and December 22, 1995.
The parties agree to execute such other and further documents
as may be necessary to effect the understandings of this
latter agreement. Nothing in this letter agreement shall be
construed as an agreement on the part of Lonrho or Thamesedge
to provide extensions of the maturity or other restructuring
of the Indebtedness in the future.
Thamesedge, Ltd. Letter Agreement
December 13, 1996
Page 4
Please confirm that the foregoing correctly sets forth the
agreement between us.
Very truly yours,
HONDO OIL & GAS COMPANY
By: /s/ John J. Hoey
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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 of first above written:
THAMESEDGE, LTD.
By: /s/ R.E. Whitten
-----------------------
R. E. Whitten, Director
Exhibit A
Thamesedge Note
This Note Amendment dated September 30, 1996 amends that
certain 13.5% Senior Subordinated Note due 1998 dated November
28, 1988 in the original principal amount of US$75,000,000, from
Pauley Petroleum Inc. (now Hondo Oil & Gas Company), to
Thamesedge, Ltd., as amended by Note Amendments dated September
30, 1993, September 30, 1994 and September 30, 1995 (the
"Original Note"), and is attached to the Original Note.
Effective on September 30, 1996, the Original Note is amended as
follows:
1. Principal Amount. As of September 30, 1996, the
principal amount of the Original Note owing is US$
36,361,684.44, and interest accrued thereon is US$
1,090,850.52.
2. Principal Repayment. The mandatory Redemption dates
on the Original Note are amended to January 1, 1998,
with the aggregate principal of the Original Note then
outstanding, plus accrued interest, being payable on
such date.
3. Letter Agreement. This Note Amendment is issued and
delivered under that certain letter agreement dated
December 13, 1996, by and among Hondo Oil & Gas
Company, Via Verde Development Company, and Newhall
Refining Co., Inc., and Thamesedge, Ltd.
HONDO OIL & GAS COMPANY
By:
-----------------------
John J. Hoey, President
The undersigned hereby acknowledges and consents to this Note
Amendment.
THAMESEDGE, LTD.
By:
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Name:
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Title:
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Exhibit B
Lonrho Notes
This Note Amendment dated September 30, 1996 amends those
certain Promissory Notes dated September 1, 1991, in the original
principal amount of US$10,000.000, dated November 1, 1991, in the
original principal amount of US$9,000,000, and dated December 20,
1991, in the original principal amount of US$13,000,000, each
from Hondo Oil & Gas Company, to Lonrho Plc, as amended by Note
Amendments dated September 30, 1993, September 30, 1994 and
September 30, 1995 (the "Original Notes"), and is attached to the
Original Notes. On March 29, 1996, Lonrho Plc assigned to
Thamesedge, Ltd. all of its interest in the Original Notes.
Effective on September 30, 1996, the Original Notes are amended
as follows:
1. Principal Amount. As of September 30, 1996, the
principal amount of the Original Notes owing is US$
31,199,830.26, and interest accrued thereon is US$
951,594.81.
2. Principal Repayment. The principal of the Original
Notes, together with all accrued interest to such date,
is payable on January 1, 1998.
3. Letter Agreement. This Note Amendment is issued and
delivered under that certain letter agreement dated
December 13, 1996, by and among Hondo Oil & Gas
Company, Via Verde Development Company, and Newhall
Refining Co., Inc., and Thamesedge, Ltd.
HONDO OIL & GAS COMPANY
By:
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John J. Hoey, President
The undersigned hereby acknowledges and consents to this Note
Amendment.
THAMESEDGE, LTD.
By:
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Name:
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Title:
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Exhibit C
Via Verde Note
This Note Amendment dated September 30, 1996 amends that
certain Promissory Note dated April 30, 1993, in the original
principal amount of US$3,000.000, from Hondo Oil & Gas Company to
Lonrho Plc, as amended by Note Amendments dated September 30,
1993, September 30, 1994 and September 30, 1995 (the "Original
Note"), and is attached to the Original Note. On March 29, 1996,
Lonrho Plc assigned to Thamesedge, Ltd. all of its interest in
the Original Note. Effective on September 30, 1996, the Original
Note is amended as follows:
1. Principal Amount. As of September 30, 1996, the
principal amount of the Original Note owing is US$
3,277,161.85, and interest accrued thereon is US$
99,953.43.
2. Principal Repayment. The principal of this note is
payable on the earlier of (i) the sale of the property
securing the loan or (ii) in ten (10) semi-annual
installments, commencing on January 1, 1998.
3. Letter Agreement. This Note Amendment is issued and
delivered under that certain letter agreement dated
December 13, 1996, by and among Hondo Oil & Gas
Company, Via Verde Development Company, and Newhall
Refining Co., Inc., and Thamesedge, Ltd.
VIA VERDE DEVELOPMENT COMPANY
By:
-----------------------
John J. Hoey, President
The undersigned hereby acknowledges and consents to this Note
Amendment.
THAMESEDGE, LTD.
By:
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Name:
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Title:
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Exhibit D
Valley Gateway Note
This Note Amendment dated September 30, 1996 amends that
certain Promissory Note dated June 25, 1993, in the original
principal amount of US$4,000.000, from Hondo Oil & Gas Company to
Lonrho Plc, as amended by Note Amendments dated September 30,
1993, September 30, 1994 and September 30, 1995 (the "Original
Note"), and is attached to the Original Note. On March 29, 1996,
Lonrho Plc assigned to Thamesedge, Ltd. all of its interest in
the Original Note. Effective on September 30, 1996, the
Original Note is amended as follows:
1. Principal Amount. As of September 30, 1996, the
principal amount of the Original Note owing is US$
4,270,796.24, and interest accrued thereon is US$
130,259.28.
2. Principal Repayment. The principal of this note is
payable on the earlier of (i) the sale of the property
securing the loan or (ii) in ten (10) semi-annual
installments, commencing on January 1, 1998.
3. Letter Agreement. This Note Amendment is issued and
delivered under that certain letter agreement dated
December 13, 1996, by and among Hondo Oil & Gas
Company, Via Verde Development Company, and Newhall
Refining Co., Inc., and Thamesedge, Ltd.
HONDO OIL & GAS COMPANY
By:
-----------------------
John J. Hoey, President
The undersigned hereby acknowledges and consents to this Note
Amendment.
THAMESEDGE, LTD.
By:
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Name:
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Title:
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Exhibit E
Facility Note
This Note Amendment dated September 30, 1996 amends that
certain Promissory Note dated October 31, 1994, in the original
principal amount of US$5,000.000, from Hondo Oil & Gas Company to
Lonrho Plc, as amended by Note Amendment dated September 30, 1995
(the "Original Note"), and is attached to the Original Note. On
March 29, 1996, Lonrho Plc assigned to Thamesedge, Ltd. all of
its interest in the Original Note. Effective on September 30,
1996, the Original Note is amended as follows:
1. Principal Amount. As of September 30, 1996, the
principal amount of the Original Note owing is US$
5,000,000.00, and interest accrued thereon is US$
138,216.67.
2. Principal Repayment. The principal of the Original
Note is payable on January 1, 1998.
3. Letter Agreement. This Note Amendment is issued and
delivered under that certain letter agreement dated
December 13, 1996, by and among Hondo Oil & Gas
Company, Via Verde Development Company, and Newhall
Refining Co., Inc., and Thamesedge, Ltd.
HONDO OIL & GAS COMPANY
By:
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John J. Hoey, President
The undersigned hereby acknowledges and consents to this Note
Amendment.
THAMESEDGE, LTD.
By:
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Name:
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Title:
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Exhibit F
Revolving Credit Note
This Note Amendment dated September 30, 1996 amends that
certain Promissory Note dated June 28, 1996, in the original
principal amount of US$13,500.000, from Hondo Oil & Gas Company
to Thamesedge, Ltd.. (the "Original Note"), and is attached to
the Original Note. Effective on September 30, 1996, the Original
Note is amended as follows:
1. Principal Amount. As of September 30, 1996, no
principal amounts have been advanced.
2. Principal Repayment. The principal of the Original Note
is payable on January 1, 1998.
3. Interest Payment Dates. In addition to the interest
payment dates specified in the Original Note, interest on
the unpaid principal advanced shall be paid on October 1,
1997.
4. Letter Agreement. This Note Amendment is issued and
delivered under that certain letter agreement dated December
13, 1996, by and among Hondo Oil & Gas Company, Via Verde
Development Company, and Newhall Refining Co., Inc., and
Thamesedge, Ltd.
HONDO OIL & GAS COMPANY
By:
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John J. Hoey, President
The undersigned hereby acknowledges and consents to this Note
Amendment.
THAMESEDGE, LTD.
By:
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Name:
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Title:
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