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 amendment or
other matter where (pursuant to your Guaranty, or otherwise) such notice
or consent is not required.
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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 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.
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(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 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,
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LONDON AUSTRALIAN & GENERAL
PROPERTY COMPANY LIMITED
By: /s/ R. E. Whitten
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ACKNOWLEDGED AND AGREED:
HONDO MAGDALENA OIL & GAS LIMITED
/s/ John J. Hoey
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