[Facility Note]
AMENDED AND RESTATED PROMISSORY NOTE
US $7,500,000.00 As of December 18, 1997
FOR VALUE RECEIVED, Hondo Oil & Gas Company, a Delaware corporation
("Borrower"), hereby promises to pay to the order of London Australian &
General Property Company Limited, a United Kingdom corporation
("Lender"), the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND AND
00/100 DOLLARS (US $7,500,000.00) or so much as may be advanced
(including the addition of interest to principal) and outstanding
hereunder (the "Loans"), on January 15, 1999 (the "Maturity Date").
Borrower promises to pay interest on the unpaid principal balance hereof
from (and including) October 1, 1997 to (but excluding) the date of
payment in full of such amount at a rate per annum equal at all times to
six percent (6%) per annum (or the maximum interest rate permitted by
law, whichever is less). Interest shall be payable on each April 1 (for
the period through March 31) and October 1 (for the period through
September 30) until maturity; provided, however, that any amount of
principal that is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest from (and including) the
date on which such amount is due until (but excluding) the date such
amount is paid in full on demand, at a rate per annum equal at all times
to eleven percent (11%) per annum (or the maximum interest rate
permitted by law, whichever is less). Both interest and principal as
herein provided shall be payable in lawful money of the United States of
America at the offices of Lender, 4 Grosvenor Place, London SW1X 7DL
England, or at such other place as from time to time may be designated
in writing by Lender.
Notwithstanding anything in the foregoing to the contrary, if, in the
opinion of its Board of Directors, Borrower does not have sufficient
cash resources to pay interest on this Note 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 the American Stock Exchange or other
principal national securities exchange on which Borrower'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 Lender in good faith for
that purpose. In making this determination, Borrower's management will
not, without the consent of Lender, allocate cash resources to new
capital projects not related to the Opon Association Contract dated July
15, 1987 between Empressa Colombiana de Petroleos and Opon Development
Company. Lender will then notify Borrower whether it will either accept
the payment of interest in Borrower's common stock or add the amount of
interest due to the principal of this Note. If Lender accepts the
payment of interest in Borrower's common stock, Borrower will issue the
requisite number of shares to Lender within ten business days after
Borrower receives notice of acceptance from Lender. Lender recognizes
that any shares of Borrower's common stock that it may acquire by the
payment of interest in Borrower's common stock will not have been
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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
Lender so requests at any time and from time to time after the date
shares of he Company's common stock are issued to Lender pursuant to
this provision, Borrower will use its best efforts to effect
registration under the Act of the shares so issued.
No borrowing may be made by Borrower under this Note after the date
hereof, except pursuant to the immediately preceding paragraph. All
additions to principal (including the addition of interest to principal)
and payments made pursuant to this Note may be recorded by Lender on its
books and records or any Grid attached hereto, and such books and
records and any Grid attached hereto (or any statement or certificate of
Lender based thereon) shall be conclusive as to existence and amounts
thereof absent manifest error.
This Note is secured under, and entitled to the benefits of, that
certain Security Interest Agreement dated May 13, 1997 among the Lender,
the Borrower, Folio Trust Company Limited and Folio Nominees Limited (as
same has been and may be supplemented, modified, amended or restated
from time to time, the "Security Interest Agreement").
Borrower and Lender, as assignee of Thamesedge Ltd., in turn assignee of
Lonrho Plc ("Original Lender"), are parties to those certain letter
agreements dated November 10, 1994, December 22, 1995, December 13, 1996
and December 18, 1997, and as same may be from time to time further
supplemented, amended or restated, collectively, the "Letter
Agreements") pursuant to which 1994 Credit Letter Lender made loans to
Borrower in the total amount of US $5,000,000 and to which there has
been added to principal, pursuant to the Letter Agreements, accrued but
unpaid interest in the total amount of $455,545.22 through October 1,
1997.
Borrower hereby acknowledges, certifies and agrees that: (a) pursuant to
the Letter Agreements, Borrower has issued a Promissory Note dated
October 31, 1994 in the original principal amount of $5,000,000 (the
"Prior Note"); (b) pursuant to the Prior Note, Lender has made loans to
Borrower that are outstanding as of the date hereof in the aggregate
principal amount of U.S.$5,455,545.22, after giving effect to interest
added to principal of the Prior Note as hereinabove provided; (c) this
Note has been issued by Borrower to renew, extend, amend, restate and
replace the Prior Note (in order to, among other things, implement the
aforesaid December 18, 1997 letter agreement), to evidence all
indebtedness and other amounts outstanding under the Prior Note, and to
evidence any further advances of interest that may be added to principal
pursuant to the terms of this Note; (d) although issued in substitution
for and restatement of the Prior Note, this Note shall not be deemed to
have been issued in payment, satisfaction, cancellation or novation of
the Prior Note; and (e) Borrower's obligations to repay those loans
(with interest) to Lender and to perform or otherwise satisfy Borrower's
other obligations, as well as the security interests granted to Lender
by Borrower under the Security Interest Agreement, and any other related
loan documents (i) each remain and shall continue in full force and
effect, both before and after giving effect to this renewal and
extension, (ii) are not subject as of the date of this renewal and
extension to any defense, counterclaim, setoff, right of recoupment,
abatement, reduction or other claim or determination, and (iii) are and
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shall be governed by the terms and provisions of this Note, the Letter
Agreements and the Security Interest Agreement.
Notwithstanding the foregoing, the Lender may, by notice to the Borrower
at any time thereafter, declare all or any portion of the principal
amount of this Note, all or any part of the then accrued but unpaid
interest thereon, and any or all other amounts payable hereunder to be
forthwith due and payable at any time after:
(a) the Borrower shall fail to pay any installment of principal of, or
interest on, this Note when due and such failure shall remain unremedied
for three (3) days;
(b) the Borrower, Hondo Magdalena Oil & Gas Limited, presently a
wholly-owned subsidiary of the Borrower ("Hondo Magdalena"), and any of
their respective subsidiaries shall (i) fail to pay any Debt (but
excluding indebtedness evidenced by this Note) of the Borrower, Hondo
Magdalena 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. "Debt" means all (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of
property or services, (iv) obligations as lessee under leases that have
been or should be, in accordance with generally accepted accounting
principles, recorded as capital leases, (v) obligations under direct or
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 (i) through (v) above, and
(vi) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA;
(c) 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;
(d) the Borrower, Hondo Magdalena 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, Hondo Magdalena 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
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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, Hondo
Magdalena 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 (d); or
(e) a final judgment or order for the payment of money in excess of
$75,000 shall be rendered against the Borrower, Hondo Magdalena or any
of their respective subsidiaries, and any such judgment or order shall
continue unsatisfied and in effect for a period of 60 consecutive days.
(f) any other default (whether in whole or in part) shall occur in the
due observance or performance of any other term or provision of this
Note, the Letter Agreements or the Security Interest Agreement;
(g) This Note, the Letter Agreements, the Security Interest Agreement
(in whole or in part) shall cease to be in full force or effect or shall
be contested, challenged or repudiated by the Borrower or any surety.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby
is proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings,
Borrower and all endorsers, sureties and guarantors of this Note jointly
and severally agree to pay reasonable attorneys' fees and collection
costs to the holder hereof in addition to the principal and interest
payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment for payment, protest, notice of
protest, notice of intention to accelerate the maturity of this Note,
diligence in collection, the bringing of any suit against any party and
any notice of or defense on account of any extensions, renewals, partial
payments or changes in any manner of or in this Note or in any of its
terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any
holder hereof, whether before or after maturity.
This Note and the rights and duties of the parties hereto 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.
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 Borrower, to it at
Hondo Oil & Gas Company, 10375 Richmond Avenue, Suite 900, Houston, TX
77042, telephone (713) 954-4600, telecopier (713) 954-4601, Attention:
John J. Hoey; if to Lender, to it at London Australian & General
Property Company, 4 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, telecopy 212-838-
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8141; 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 not be effective until received by
Lender.
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 the Letter
Agreements, this Note or the Security Interest Agreement, 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. 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 determined under the
immediately preceding paragraph hereof. 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. 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. Borrower further agrees that any
action or proceeding brought by it against Lender shall be brought only
in New York State or United States Federal court sitting in New York
County, New York. Borrower and Lender waive any right it may have to
jury trial. Nothing in this paragraph shall affect the right of Lender
to serve legal process in any other manner permitted by law or affect
the right of Lender to bring any action or proceeding against Borrower
or any of its properties in the courts of any other jurisdictions. To
the extent that 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, Borrower hereby irrevocable waives such immunity in respect of
its obligations under the Letter Agreements, this Note and the Security
Interest Agreement.
HONDO OIL & GAS COMPANY
By: /s/ John J. Hoey
--------------------------
John J. Hoey, President
[END OF PAGE]
SCHEDULE TO NOTE
Amount of Principal Principal Notation
Date Advance Paid Outstanding Made By
---- --------- --------- ----------- --------
Carryover
12/18/97 from Prior -- $5,455,545.22
Note
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