SECURITY INTEREST AGREEMENT
Security interest in Securities
-------------------------------
DATED this 13th of May, 1997
BETWEEN:-
(1) THAMESEDGE LIMITED a company incorporated in England whose
registered office is at 0 Xxxxxxxxx Xxxxx, Xxxxxx XX0X 0XX, Xxxxxxx
(the "Leader")
AND
(2) HONDO OIL & GAS COMPANY a Delaware corporation whose principal
office is at 00000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx,
00000 XXX (the "Debtor")
AND
(3) FOLIO TRUST COMPANY LIMITED a company incorporated in Jersey whose
registered office is at Westaway Xxxxxxxx, 00 Xxx Xxxxxx, Xx.
Xxxxxx, Xxxxxx, Xxxxxxx Xxxxxxx ("Folio Trust")
AND
(4) FOLIO NOMINEES LIMITED a company incorporated in the British Virgin
Islands whose administrative office is at Westaway Xxxxxxxx, 00 Xxx
Xxxxxx, Xx. Xxxxxx, Xxxxxx, Xxxxxxx Xxxxxxx ("Folio Nominees")
WHEREAS:
(A) The Lender has agreed to continue to make available to the Debtor
certain credit and loan facilities made under the Obligations (as
hereinafter defined);
(B) The Debtor has therefore agreed to furnish the Lender with security
for the Obligations from time to time owed by the Debtor to the
Lender;
(C) Folio Trust and Folio Nominees (collectively referred to as the
"Nominees") hold on trust as nominees for the benefit of the Debtor
shares in a company known as Hondo Xxxxxxxxx Oil & Gas Limited, a
company registered in Jersey, Channel Islands ("Hondo");
IT IS HEREBY AGREED AS FOLLOWS:
Grant of security interest and assignment
l. As a continuing security for the payment on demand to the Lender
of:
(i) the monies and liabilities payable under the credit and loan
facilities described in the First Schedule;
(ii) any other indebtedness or liabilities whatsoever of the Debtor
on any account or accounts; and
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(iii) all other costs, charges, legal or other expenses (incurred by
the Lender in respect of the facilities detailed in the First
Schedule) on a full and unqualified indemnity basis;
(collectively the "Obligations"):
(a) the Debtor as beneficial owner HEREBY ASSIGNS to the Lender
beneficial title to the stocks, shares, bonds and other
securities identified in the Second Schedule together with all
and any property and rights arising and/or deriving therefrom
or in any way granted in respect thereof and any securities
substituted therefor or added thereto (the "Collateral") and
agrees that the Lender shall have a security interest in the
same; and
(b) the Nominees, contracting to this Security Interest Agreement
as Trustees of the Collateral, and not otherwise, as legal
owners do HEREBY AGREE that from the date hereof they hold the
Collateral on behalf of and for the benefit of the Lender
under the terms of this Security Interest Agreement.
Warranty and undertaking
2. The Debtor and the Nominees hereby jointly and severally warrant,
undertake and agree that:
(a) the Lender is and shall continue to be solely and beneficially
entitled to all rights in relation to the Collateral (subject
to the terms hereof); and
(b) the Debtor and the Nominees shall not take or omit to take any
action which will or might impair the value of the Collateral
or create or permit to exist any mortgage or charge upon and
shall procure that no lien, encumbrance or right of set-off or
other equities whatsoever shall in any case or in any manner
arise or affect the Collateral, either in priority to, or pari
passu with the Lender's rights hereunder;
(c) the Debtor and the Nominees shall not procure the issue of
further shares in Hondo without the prior permission of the
Lender in writing and any such permission shall be without
prejudice to, or waiver of, the Lender's rights pursuant to
this Security Interest Agreement.
Restriction on the Collateral
3. The Debtor agrees (without prejudice to the security interests and
other rights of the Lender pursuant to this Security Interest
Agreement) that dealings with the Collateral are conditional upon
the Lender having received discharge in full of the Obligations and
until such discharge the Debtor shall not be entitled to deal with
the Collateral PROVIDED THAT the Lender may in its absolute
discretion permit the Debtor to deal with the Collateral subject to
such conditions as the Lender shall from time to time specify and
any such permission shall be without prejudice to, or waiver of,
the Lender's rights pursuant to this Security Interest Agreement.
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Set-off and Lien
4. In addition and without prejudice to any other rights of the Lender
pursuant to this Security Interest Agreement, in the event that
payment of the Obligations is not made when due the Lender shall
have the benefit of any lien over securities. The Lender shall be
entitled (as well before as after demand) to combine or consolidate
all monies now or hereafter standing to the Debtor's credit with
the Lender on any account and in any currency and to set off the
Debtor's liability under the Obligations against any credit balance
in any account whatever in the name of the Debtor (whether sole or
joint with any other person or persons) with the Lender or any
subsidiary of the Lender.
The Collateral; voting, calls and other matters
5. (a) The Debtor shall promptly pay or procure that the Nominees
promptly pay all calls and all other monies the Debtor or the
Nominees are lawfully required to pay (or would have lawfully
been required to pay had the Debtor not assigned beneficial
title to the Collateral to the Lender pursuant hereto) and in
the event of default the Lender may make such payment in which
event such sums paid shall be secured under this Security
Interest Agreement and payable on demand together with
interest at the then prevailing lending interest rate (as
determined by the Lender) compounded at such rests as the
Lender shall determine until actual payment by the Debtor.
(b) Provided that no Event of Default has occurred the Debtor may
continue to instruct the Nominees as to how they should
exercise all voting and other rights and powers attached to
the Collateral.
(c) The Lender is not under any obligation to take any step or
action in respect of any right of the Debtor in connection
with the Collateral, including without limitation any
obligation to pay any call or instalment or present any
investment coupon, bond or stock called for repayment or
redemption and shall have no liability for having taken or
abstained from taking any such step or action.
Further assurance and agency
6. (a) The Debtor and the Nominees undertake without delay or
impediment to execute and sign from time to time all
transfers, powers of attorney and other documents required by
the Lender to perfect its title to the Collateral or to vest
the Collateral in a purchaser from, or trustee or nominee of,
the Lender and the Debtor and the Nominees hereby appoint the
Lender (or any person nominated by the Lender) the agent of
the Debtor and the Nominees at any time after demand hereunder
to give effectual discharge for, or otherwise howsoever to
deal with, the Collateral including (without limitation) to
sign, seal and deliver any transfer, give and perfect any
assurance, deed, notice, request or do any act, in connection
with the Lender's rights under this Security Interest
Agreement.
(b) In accordance with Article 5(2)(a) of the Powers of Attorney
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(Jersey) Law, 1995 (the "Powers of Attorney Law"), for the
purpose of facilitating the exercise of the powers of the
Lender under the Law and of the powers given pursuant to this
Security Interest Agreement, the Debtor and the Nominees
hereby irrevocably jointly and severally appoint the Lender as
the Debtor and the Nominees' attorney (with full power of
substitution in accordance with Article 8 of the Powers of
Attorney Law) for the Debtor and the Nominees and in the name
and on behalf of the Debtor and the Nominees to sign, execute,
seal, deliver, acknowledge, tile, register and perfect any and
all such assurances, documents, instruments, agreements,
certificates and consent whatsoever and to do any and all such
acts and things whatsoever which the Debtor and the Nominees
might or could do in relation to the Collateral or in relation
to any matters dealt with in this Security Interest Agreement
and which the Lender may deem to be necessary or advisable in
order to give full effect to the purposes of this Security
Interest Agreement. Without limitation, this power of attorney
extends to anything referred to in clause 6(a) hereof and to
any sale or other disposal by the Lender of the Collateral
pursuant to this Security Interest Agreement. The Debtor and
the Nominees hereby covenant with the Lender to ratify and
confirm any lawful exercise or purported exercise of this
power of attorney.
Events of Default
7. The occurrence of any of the following shall be an event of default
(each an "Event of Default") namely:
(a) any breach of any of the terms of any of the Obligations or of
this Security Interest Agreement;
(b) failure to pay on demand any money or liability hereby
secured; or
(c) the Debtor: (in relation to any law or jurisdiction)
(i) being unable to pay debts when due or being otherwise
insolvent; resolving or taking any step or procedure,
preparatory to ceasing trading or stopping or suspending
payments; being subject to any Order in respect of
bankruptcy, winding-up, desastre, administration,
receivership, reconstruction, compromise with creditors,
execution of judgment, sequestration or attachment of
assets; or
(ii) doing or omitting to do anything as a result of which the
Debtor is or is liable to be struck off the Register of
Companies (or its equivalent) in its place of
incorporation.
Enforcement
8. Upon the occurrence of an Event of Default and provided that the
Lender has served on the Debtor and the Nominees a notice in
accordance with the Law, specifying the particular Event of Default
complained of and the Debtor has failed to remedy such Event of
Default (if capable of remedy) within 14 days following receipt of
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such notice, the Lender shall be entitled without notice or further
demand to:
(a) (i) exercise and be entitled to any and all rights of an
owner in relation to the Collateral;
(ii) collect, receive or compromise and give a good discharge
for any and all monies and claims for monies due and to
become due for the time being under or in the Collateral;
and otherwise put into force and effect all rights, powers and
remedies available to it, at law or otherwise; and
(b) exercise the power of sale over the Collateral or any of it
without further process and without the necessity for any
application in respect thereof by the Lender to the Royal
Court and the power of sale may be exercised in such manner
and for such consideration as the Lender sees fit (and for
consideration payable by instalments with or without security
if the Lender decides and by way of sale to itself or its
nominees or associates at the discretion of the Lender) and
the Lender shall not be liable for any loss caused by
application of the proceeds of sale in accordance with the
Law.
Other arrangements
9. The Lender may increase, extend or otherwise amend any facility
given to the Debtor, give time to release or make other
arrangements with the Debtor (or if the Debtor is more than one
person any one or more of them) or any surety, in each case without
prejudicing any rights or interests pursuant to this Security
Interest Agreement and the rights of the Lender pursuant to this
Security Interest Agreement shall not be affected by:
(a) the making or absence of any demand;
(b) the absence, or any defective exercise of the Debtor's
borrowing powers;
(c) the death, insolvency or disability of the Debtor or where the
Debtor is more than one person, any one or more of them; or
(d) any change in the constitution of the Debtor.
10. The rights of the Lender under this Security Interest Agreement are
in addition to and are not to prejudice or be prejudiced by any
guarantee or any other security which the Lender may now or
hereafter hold for the Obligations nor are they to prejudice any
other rights of lien or set-off the Lender may have.
11. The Lender may assign or otherwise transfer the benefit of this
Security Interest Agreement.
Conditional Discharge and Retention of Security
12. (a) Any settlement, discharge or release between the Debtor and
the Lender shall be conditional on no security given or
payment made to the Lender by the Debtor or any other person
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being avoided or reduced by virtue of any enactment relating
to insolvency for the time being in force. The Lender shall be
entitled (subject to any limit in the total amount recoverable
hereunder) to recover the value or amount of any such security
or payment from the Debtor subsequently as if such settlement,
discharge or release had not occurred.
(b) The Lender may retain any security held by it for the Debtor's
liability under the Obligations for the relevant period after
repayment of all sums due to the Lender from the Debtor. If
within the relevant period after such repayment a
representation shall be presented for an order for the
winding-up or bankruptcy order, the Lender may continue to
retain such security or any part of it for such further period
as the Lender shall determine in its discretion. In this
clause, the "relevant period" means the relevant statutory
period, extended by one month, within which any payment or
security made to or held by the Lender may be avoided or
invalidated under any applicable - relating to insolvency.
Currency
13. On any set-off, appropriation or exercise of a power of sale under
this Security Interest Agreement, the Lender may from time to time
convert the proceeds of sale of, or any other monies received in
relation to the Collateral, into the currency or currency of the
Obligations or any of them and such a conversion shall be at the
then prevailing spot or forward rate of exchange (as conclusively
determined by the Lender) for the purchase of the other currency
with the existing currency.
Interpretation
14. (a) In this Security Interest Agreement:
(i) the "Law" means the Security Interests (Jersey) Law, 1983
as amended from time to time;
(ii) the expression the "Debtor" shall include personal
representatives and successors and the Debtor shall be
the "debtor" for the purposes of the Law;
(iii) the expression the "Lender" shall include its successors
and assigns and the Lender shall be the "secured party"
for the purposes of the Law;
(iv) the expression the "Obligations" shall include all monies
payable and all indebtedness or liability of the Debtor
whether actual or contingent, whether alone or jointly
with another, and whether as principal or surety and the
words "monies", "liabilities" and "indebtedness" shall be
construed accordingly; and
(v) the singular shall include the plural;
(b) The headings used herein are for description only and shall
not affect the construction of any provision of this Security
Interest Agreement.
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(c) In the event of invalidity or unenforceability of any
provision hereunder that part shall be severed from the
remainder and shall not prejudice the validity or
enforceability of the remainder.
(d) Where this Security Interest Agreement is executed by more
than one person, the obligations and liabilities of each of
them shall be joint and several and every agreement and
undertaking on their part shall he construed accordingly.
(e) This Security Interest Agreement and any variation thereof
shall be deemed to constitute a separate security agreement
for each and every one of the securities subject hereto and no
defect in respect of any one of such securities shall affect
the validity of this Security Interest Agreement in relation
to the other such securities or any of them.
Law, Jurisdiction and Notices
15. (a) The parties hereto agree that this Security Interest Agreement
shall in all respects be governed by and construed in
accordance with the law of the Island of Jersey, and the
parties hereto hereby agree to submit to the non-exclusive
jurisdiction of the Courts of Jersey.
(b) Any notice or demand to be given or made pursuant to this
Security Interest Agreement or the Law shall be given or made
when delivered to any party to this Security Interest
Agreement, or posted to any party to this Security Interest
Agreement at that party's last known address, or sent by fax
to any fax number recorded for that party and shall be deemed
to have been received immediately upon delivery, or 48 hours
after posting, or immediately after completion of facsimile
transmission.
SCHEDULES
FIRST SCHEDULE
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The Obligations
1. Note Purchase Agreement dated 28th November, 1988, between Xxxxxx
Petroleum Inc. and Thamesedge Limited ("Thamesedge"), as amended
(the "Thamesedge Note Purchase Agreement") and a Note dated 30th
November, 1988, for US$75,000,000.00 (seventy-five million United
States dollars) from Xxxxxx Petroleum Inc. to Thamesedge Limited
(the "Thamesedge Note") excepting therefrom US$13,500,000.00
(thirteen million five hundred thousand United States dollars) of
the principal balance which is subject to an option to convert such
an amount into shares in the common stock of the Debtor;
2. Letter agreements dated 28th November, 1988, and 18th December,
1992, referring to and amending the Thamesedge Note Purchase
Agreement and the Thamesedge Note;
3. Net Profits Share Agreement dated 18th December, 1992, by and among
Hondo Oil & Gas Company("Hondo"), Lonrho Plc ("Lonrho") and
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Thamesedge (the "Net Profits Share Agreement");
4. Amended and Restated Letter Agreement dated 20th December, 1991,
between Hondo and Lonrho (the "Lonrho Loan Agreement") and Notes
dated 1st September, 1991, for US$10,000,000.00 (ten million United
States dollars), dated 1st November, 1991 for US$9,000,000.00 (nine
million United States dollars) and dated 20th December, 1991, for
US$13,000,000.00 (thirteen million United States dollars) (the
"Lonrho Notes");
5. Letter Agreement dated 18th December, 1992 between Hondo and Lonrho
referring to and amending the Lonrho Loan Agreement and the Lonrho
Notes;
6. Note dated 30th April, 1993, for US$3,000,000.00 (three million
United States dollars) from Via Verde Development Company ("Via
Verde") to Lonrho (the "Via Verde Note"), secured by a deed of
trust recorded as Instrument No. 93-840817 in the Real Property
Records of Los Angeles County, California (the "Via Verde
Mortgage"), guaranteed by Hondo in a Guaranty dated 30th April,
1993, (the "Honda Guaranty") and subject to a Letter Agreement
dated 30th April, 1993;
7. Note dated 25th June, 1993, for US$4,000,000.00 (four million
United States dollars) from Hondo to Lonrho (the "Valley Gateway
Note") secured by a deed of trust dated 30th August, 1993, granted
by Hondo and Newhall Refining Co., Inc., ("Newhall") recorded as
Instrument No. 00-0000000 in the Real Property Records of Los
Angeles County, California (the "Valley Gateway Mortgage");
8. Letter Agreement dated 17th December, 1993, between Hondo, Via
Verde, Newhall, Lonrho and Thamesedge, restructuring the
aforementioned indebtedness and amending the Thamesedge Note, the
Lonrho Notes, the Via Verde Note and the Valley Gateway Note;
9. Letter Agreement dated 10th November, 1994, between Hondo, Via
Verde. Newhall. Lonrho and Thamesedge, restructuring the
aforementioned restructured indebtedness and amending the amended
Thamesedge Note, the amended Lonrho Notes, the amended Via Verde
Note and the amended Valley Gateway Note; and creating a new
US$5,000,000.00 (five million United States dollars) loan facility
and a Note therefor dated 31st October, 1994 (the "Facility Note");
10. Letter Agreement dated 22nd December, 1995, between Hondo, Via
Verde, Newhall, Lonrho and Thamesedge, restructuring the
aforementioned restructured indebtedness, and amending the amended
Thamesedge Note, the amended Lonrho Notes, the amended Via Verde
Note and the amended Valley Gateway Note;
11. Revolving Credit Agreement dated 28th June, 1996, between Hondo and
Thamesedge and Promissory Note for US$13,500,000.00 (thirteen
million five hundred thousand United States dollars) from Hondo to
Thamesedge (the "Revolving Credit Note"):
12. The Thamesedge Note as amended, the Lonrho Notes as amended, the
Via Verde Notes as amended, the Valley Gateway Note as amended, the
Facility Note as amended, and the Revolving Credit Note as amended,
are collectively referred to hereafter as the "Indebtedness";
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13. Assignment dated 29th March, 1996, between Lonrho and Thamesedge
under which Lonrho assigned all or its interests in the
Indebtedness to Thamesedge; and
14. Letter Agreement dated the 13th December, 1996, between Hondo, Via
Verde, Newhall and Thamesedge amending the dates of repayment of
the Indebtedness and pledging, as security for the Indebtedness,
all of the shares of Hondo Xxxxxxxxx Oil & Gas Limited.
SECOND SCHEDULE
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The Collateral
12 shares in the share capital of Hondo Xxxxxxxxx Oil & Gas
Limited, whose registered office is at X.X. Xxx 0000, Xxxxxxxx
Xxxxxxxx, 00 Xxx Xxxxxx, Xx. Xxxxxx, Xxxxxx, Xxxxxxx Xxxxxxx, XX0
8UA, which are held by the Nominees on trust for the Debtor.
IN WITNESS whereof the parties hereto have hereunto set their hands and
seals the day and year first above written.
The Common Seal of
THAMESEDGE LIMITED
was hereunto affixed in the presence of:-
/s/ R.E. Xxxxxxx
Director
/s/ X. Xxxxxx
Secretary
Signed by:
/s/ Xxxx X. Xxxx
duly authorised
for and on behalf of
HONDO OIL & GAS COMPANY
The Common Seal of
FOLIO TRUST COMPANY LIMITED
was hereunto affixed in the presence of:-
/s/ Xxxxxx Xxxxx Xxxxxxx
Director
/s/ Xxxxx Xxxxxxx Xxxxxx
Director
The Common Seal of
FOLIO NOMINEES LIMITED
was hereunto affixed in the presence of:
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/s/ Xxxxxx Xxxxx Xxxxxxx
Director
/s/ Xxxxx Xxxxxxx Xxxxxx
Director
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