Exhibit 10.2
COMMERCIAL SECURITY AGREEMENT
This Commercial Security Agreement is entered into effective the 29th day
of January, 2001, by UHC NEW MEXICO CORPORATION, a New Mexico corporation
("Grantor") for the benefit of ALMAC FINANCIAL CORPORATION, a Texas corporation
("Lender"). For valuable consideration, Grantor grants to Lender a security
interest in the Collateral to secure the Indebtedness and agrees that Lender
shall have the rights stated in this Agreement with respect to the Collateral,
in addition to all other rights which Lender may have by law.
1. DEFINITIONS. The following words have the meanings assigned below when
used in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code as adopted
in the State of Texas ("Code"). All references to dollar amounts shall mean
amounts in lawful money of the United States of America.
(a) "Agreement" means this Commercial Security Agreement, as amended
or modified from time to time, together with all exhibits and schedules attached
from time to time.
(b) "Borrower" means UNITED HERITAGE CORPORATION, a Utah
corporation.
(c) "Collateral" means the following described property of Grantor,
whether now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located:
(i) All present and future "accounts", as defined in the Code,
together with any and all books of account, customer lists and other records
relating in any way to the foregoing (including, without limitation, computer
software, whether on tape, disk, card, strip, cartridge or any other form), and
in any case where an account arises from the sale of goods, the interest of
Debtor in such goods.
(ii) All present and hereafter acquired inventory (including
without limitation, all raw materials, work in process, and finished goods)
held, possessed, owned, held on consignment, or held for sale, lease, return or
to be furnished under contracts of services, in whole or in part, by Grantor
wherever located.
(iii) All equipment and fixtures of whatsoever kind and
character now or hereafter possessed, held, acquired, leased, or owned by
Grantor and used or usable in Grantor's business, and in any event shall
include, but shall not be limited to, all swabbing units or workover units, and
all other trucks, vehicles, machinery, tools, computer software, office
equipment, furniture, appliances, furnishings, fixtures, vehicles, motor
vehicles, together with all replacements, accessories, additions, substitutions,
and accessions to all of the foregoing, and all manuals, instructions and
records relating in any way to the foregoing (including, without limitation, any
computer software, whether on tape, disk, card, strip, cartridge or any other
form). The equipment covered by this Security Agreement includes, but is not
limited to, the swabbing units, workover units, trucks, vehicles, and other
equipment described in Exhibit A attached.
(iv) All present and future chattel paper, documents,
instruments (including promissory notes), investment property, deposit accounts,
general intangibles (including all permits, regulatory approvals, copyrights,
patents, trademarks, service marks, trade names, mask works, goodwill, licenses
and all other intellectual property), letter of credit rights, and all
supporting obligations, all as defined in the Code, now or hereafter owned,
held, or acquired by Grantor, and in any case where an account arises from the
sale of goods, the interest of Grantor in such goods, and all records relating
in any way to the foregoing (including, without limitation, any computer
software, whether on tape, disk, card, strip, cartridge or any other form). In
addition, the word "Collateral" includes all the following, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever
located: (i) all accessions, accessories, increases, and additions to and all
replacements of and substitutions for any property described above; (ii) all
products and produce of any of the property described in this Collateral
section; (iii) all proceeds (including, without limitation, insurance proceeds)
from the sale, lease, destruction, loss, or other disposition of any of the
property described in this Collateral section; and (iv) all records and data
relating to any of the property described in this Collateral section, whether in
the form of a writing, photograph, microfilm, microfiche, or electronic media,
together with all of Grantor's right, title, and interest in and to all computer
software required to utilize, create, maintain, and process any such records or
data on electronic media.
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67232.2 [August 9, 2001]
(v) All other present and future assets of Grantor.
(d) "Event of Default" means and includes any of the Events of
Default set forth below in the section titled "Events of Default."
(e) "Grantor" means UHC NEW MEXICO CORPORATION, a New Mexico
corporation.
(f) "Guarantor" means and includes without limitation, each and all
of the guarantors, sureties, and accommodation parties in connection with the
Indebtedness.
(g) "Indebtedness" means the indebtedness evidenced by the Note,
including all principal and accrued interest thereon, together with all other
liabilities, costs, and expenses for which Grantor or Borrower is responsible
under this Agreement or under any Related Documents, and all other obligations,
debts, and liabilities, plus any accrued interest thereon, owing by Borrower, or
any one or more of them, to Lender of any kind or character, now existing or
hereafter arising, as well as all present and future claims by Lender against
Borrower, or any one or more of them, and all renewals, extensions,
modifications, substitutions, and rearrangements of any of the foregoing;
whether such Indebtedness arises by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, overdraft, indemnity agreement, or
otherwise; whether such Indebtedness is voluntary or involuntary, due or not
due, direct or indirect, absolute or contingent, liquidated or unliquidated;
whether Borrower may be liable individually or jointly with others; whether
Borrower may be liable primarily or secondarily or as debtor, maker, comaker,
drawer, endorser, guarantor, surety, accommodation party, or otherwise.
(h) "Lender" means ALMAC FINANCIAL CORPORATION, a Texas corporation,
its successors and assigns (which is a secured party under the Code).
(i) "Note" means an amended and restated revolving credit note dated
January 29, 2001, in the principal amount of $1,750,000.00, executed by
Borrower, and payable to the order of Lender.
(j) "Related Documents" means and includes, without limitation, the
Note and all credit agreements, loan agreements, guaranties, pledge agreements,
security agreements, mortgages, deeds of trust, and all other instruments,
agreements, and documents, whether now or hereafter existing, executed in
connection with the Note.
2. WARRANTIES. Grantor warrants that: (a) Grantor has the full right,
power, and authority to enter into this Agreement and to pledge the Collateral
to Lender; (b) Grantor has established adequate means of obtaining from Borrower
on a continuing basis information about Borrower's financial condition; and (c)
Lender has made no representation to Grantor about Borrower or Borrower's
creditworthiness.
3. WAIVERS. Grantor waives notice of the incurring of any Indebtedness and
waives all requirements of presentment, protest, demand, and notice of dishonor
or non-payment to Grantor, Borrower, or any other party to the Indebtedness or
the Collateral. Lender may do any of the following with respect to any
obligation of any Borrower, without first notifying or obtaining the consent of
Grantor: (a) grant any extension of time for any payment, (b) grant any renewal,
(c) permit any modification of payment terms or other terms, (d) release
Borrower or any Guarantor from all or any portion of the Indebtedness, or (e)
exchange or release all or any portion of the Collateral or other security for
all or any portion of the Indebtedness. No such act or failure to act shall
affect Lender's rights against Grantor or the Collateral.
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4. OBLIGATIONS. Grantor represents and covenants to Lender as follows:
(a) Organization. Grantor is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas. Grantor has
its chief executive office at ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. Grantor
will notify Lender of any change in the location of Grantor's chief executive
office.
(b) Authorization. The execution, delivery, and performance of this
Agreement by Grantor have been duly authorized by all necessary action by
Grantor and do not conflict with, result in a violation of, or constitute a
default under (i) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding upon
Grantor or (ii) any law, governmental regulation, court decree, or order
applicable to Grantor. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a party,
and its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
(c) Perfection. Grantor hereby authorizes Lender to authenticate and
file all financing statements or amendments to financing statement in such
offices and places and at such times and as often as may be, in the judgment of
Lender, necessary to preserve, protect, and renew the security interests herein
created in the Collateral. Grantor agrees to execute such financing statements
and to take whatever other actions are requested by Lender to perfect and
continue Lender's security interest in the Collateral. Upon request of Lender,
Grantor will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby irrevocably appoints Lender as its attorney-in-fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor has disclosed to Lender all trade names and assumed
names currently used by Grantor, all trade names and assumed names used by
Grantor within the previous six (6) years, and all of Grantor's current business
locations. Grantor will notify Lender in writing at least thirty (30) days prior
to the occurrence of any of the following: (i) any changes in Grantor's name,
trade names or assumed names, or (ii) any change in Grantor's business locations
or the location of any of the Collateral.
(d) Enforceability. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is enforceable
in accordance with its terms, is genuine, and complies with applicable laws
concerning form, content, and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral. At
the time any account becomes subject to a security interest in favor of Lender,
the account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or theretofore shipped or delivered pursuant to a
contract of sale, or for services theretofore performed by Grantor with or for
the account debtor; Grantor will not adjust, settle, compromise, amend, or
modify any account, except in good faith and in the ordinary course of business;
provided, however, this exception shall automatically terminate upon the
occurrence of an Event of Default or upon Lender's written request.
(e) Removal of Collateral. Grantor shall keep the Collateral (or to
the extent the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at such
other locations as are acceptable to Lender. Except in the ordinary course of
its business, including the sale of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
Texas, without the prior written consent of Lender.
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(f) Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business, Grantor shall
not sell, offer to sell, or otherwise transfer or dispose of the Collateral.
Grantor shall not pledge, mortgage, encumber, or otherwise permit the Collateral
to be subject to any lien, security interest, encumbrance, or charge, other than
the security interest provided for in this Agreement, without the prior written
consent of Lender, even if junior in right to the security interests granted
under this Agreement. Unless waived by Lender, all proceeds from any disposition
of the Collateral (for whatever reason) shall be held in trust for Lender and
shall not be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.
(g) Title. Grantor represents and warrants to Lender that it is the
owner of the Collateral and holds good and marketable title to the Collateral,
free and clear of all security interests, liens, and encumbrances except for the
security interest under this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
(h) Collateral Schedules and Locations. As often as Lender shall
require, and insofar as the Collateral consists of accounts and general
intangibles, Grantor shall deliver to Lender schedules of such Collateral,
including such information as Lender may require, including without limitation
names and addresses of account debtors and aging of accounts and general
intangibles.
(i) Maintenance and Inspection. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss, or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral.
(j) Taxes, Assessments, and Liens. Grantor will pay when due all
taxes, assessments, and governmental charges or levies upon the Collateral and
provide Lender evidence of such payment upon its request. Grantor may withhold
any such payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in Lender's sole
opinion. If the Collateral is subjected to a lien which is not discharged within
fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient
corporate surety bond, or other security satisfactory to Lender in an amount
adequate to provide for the discharge of the lien plus any interest, costs,
attorneys fees, or other charges that could accrue as a result of foreclosure or
sale of the Collateral. In any contest Grantor shall defend itself and Lender
and shall satisfy any final adverse judgment before enforcement against the
Collateral. Grantor shall name Lender as an additional obligee under any surety
bond furnished in the contest proceedings.
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(k) Compliance With Governmental Requirements. Grantor is conducting
and will continue to conduct Grantor's businesses in material compliance with
all federal, state, and local laws, statutes, ordinances, rules, regulations,
orders, determinations and court decisions applicable to Grantor's businesses
and to the production, disposition, or use of the Collateral, including without
limitation, those pertaining to health and environmental matters such as the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986
(collectively, together with any subsequent amendments, hereinafter called
"CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended by the
Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980,
and the Hazardous Substance Waste Amendments of 1984 (collectively, together
with any subsequent amendments, hereinafter called "RCRA"). Grantor represents
and warrants that (i) none of the operations of Grantor is the subject of a
federal, state or local investigation evaluating whether any material remedial
action is needed to respond to a release or disposal of any toxic or hazardous
substance or solid waste into the environment; (ii) Grantor has not filed any
notice under any federal, state, or local law indicating that Grantor is
responsible for the release into the environment, the disposal on any premises
in which Grantor is conducting its businesses, or the improper storage, of any
material amount of any toxic or hazardous substance or solid waste or that any
such toxic or hazardous substance or solid waste has been released, disposed of,
or is improperly stored, upon any premises on which Grantor is conducting its
businesses; and (iii) Grantor otherwise does not have any known material
contingent liability in connection with the release into the environment,
disposal, or the improper storage, of any such toxic or hazardous substance or
solid waste. The terms "hazardous substance" and "release," as used herein,
shall have the meanings specified in CERCLA, and the terms "solid waste" and
"disposal," as used herein, shall have the meanings specified in RCRA; provided,
however, that to the extent that the laws of the State of Texas establish
meanings for such terms which are broader than that specified in either CERCLA
or RCRA, such broader meanings shall apply. The representations and warranties
contained herein are based on Grantor's due diligence in investigating the
Collateral for hazardous wastes and substances. Grantor hereby (a) releases and
waives any future claims against Lender for indemnity or contribution in the
event Grantor becomes liable for cleanup or other costs under any such laws, and
(b) agrees to indemnify and hold harmless Lender against any and all claims and
losses resulting from a breach of this provision of this Agreement. This
obligation to indemnify shall survive the payment of the Indebtedness and the
termination of this Agreement.
(l) Insurance. Grantor shall procure and maintain all risk
insurance, including without limitation fire, theft, and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages, and basis reasonably acceptable to
Lender. GRANTOR MAY FURNISH THE REQUIRED INSURANCE WHETHER THROUGH EXISTING
POLICIES OWNED OR CONTROLLED BY GRANTOR OR THROUGH EQUIVALENT INSURANCE FROM ANY
INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN THE STATE OF TEXAS. If
Grantor fails to provide any required insurance or fails to continue such
insurance in force, Lender may, but shall not be required to, do so at Grantor's
expense, and the cost of the insurance will be added to the Indebtedness. If any
such insurance is procured by Lender at a rate or charge not fixed or approved
by the State Board of Insurance, Grantor will be so notified, and Grantor will
have the option for five (5) days of furnishing equivalent insurance through any
insurer authorized to transact business in Texas. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be canceled or diminished without at least thirty (30) days prior
written notice to Lender and not including any disclaimer of the insurer's
liability for failure to give such a notice. Each insurance policy also shall
include an endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission, or default of Grantor or any other
person. In connection with all policies covering assets in which Lender holds or
is offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. If Grantor at any time
fails to obtain or maintain any insurance as required under this Agreement,
Lender may (but shall not be obligated to) obtain such insurance as Lender deems
appropriate, including if it so chooses "single interest insurance," which will
cover only Lender's interest in the Collateral.
(m) Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness. Application of insurance proceeds to
the payment of the Indebtedness will not extend, postpone, or waive any payments
otherwise due, or change the amount of such payments to be made, and proceeds
may be applied in such order and such amounts as Lender may elect.
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(n) Solvency. As of the date hereof, and after giving effect to this
Agreement and the completion of all other transactions contemplated by Grantor
at the time of the execution of this Agreement, (i) Grantor is and will be
solvent, (ii) the fair salable value of Grantor's assets exceeds and will
continue to exceed Grantor's liabilities (both fixed and contingent), (iii)
Grantor is paying and will continue to be able to pay its debts as they mature,
and (iv) if Grantor is not an individual, Grantor has and will have sufficient
capital to carry on Grantor's businesses and all businesses in which Grantor is
about to engage.
(o) Lien Not Released. The lien, security interest, and other
security rights of Lender hereunder shall not be impaired by any indulgence,
moratorium, or release granted by Lender, including but not limited to, the
following: (i) any renewal, extension, increase, or modification of any of the
Indebtedness; (ii) any surrender, compromise, release, renewal, extension,
exchange, or substitution granted in respect of any of the Collateral; (iii) any
release or indulgence granted to any endorser, guarantor, or surety of any of
the Indebtedness; (iv) any release of any other collateral for any of the
Indebtedness; (v) any acquisition of any additional collateral for any of the
Indebtedness; and (vi) any waiver or failure to exercise any right, power, or
remedy granted herein, by law, or in any Related Documents.
(p) Environmental Inspections. Upon Lender's reasonable request from
time to time, Grantor will obtain at Grantor's expense an inspection or audit
report addressed to Lender of Grantor's operations from an engineering or
consulting firm approved by Lender, indicating the presence or absence of toxic
and hazardous substances, underground storage tanks, and solid waste on any
premises in which Grantor is conducting business; provided, however, Grantor
will be obligated to pay for the cost of any such inspection or audit no more
than one time in any twelve (12) month period unless Lender has reason to
believe that toxic or hazardous substance or solid wastes have been dumped or
released on any such premises. If Grantor fails to order or obtain an inspection
or audit within ten (10) days after Lender's request, Lender may at its option
order such inspection or audit, and Grantor grants to Lender and its agents,
employees, contractors, and consultants access to the premises in which it is
conducting its business and a license (which is coupled with an interest and is
irrevocable) to obtain inspections and audits. Grantor agrees to promptly
provide Lender with a copy of the results of any such inspection or audit
received by Grantor. The cost of such inspections and audits by Lender shall be
a part of the Indebtedness, secured by the Collateral, and payable by Grantor on
demand.
(q) Chattel Paper. To the extent a security interest in the chattel
paper of Grantor is granted hereunder, Grantor represents and warrants that all
such chattel paper have only one original counterpart, and no other party other
than Grantor or Lender is in actual or constructive possession of any such
chattel paper. Grantor agrees that at the option of and on the request by
Lender, Grantor will either deliver to Lender all originals of the chattel paper
which is included in the Collateral or will ▇▇▇▇ all such chattel paper with a
legend indicating that such chattel paper is subject to the security interest
granted hereunder.
5. ACCOUNTS. Until default and except as otherwise provided below with
respect to accounts, Grantor may have possession of the tangible personal
property and beneficial use of all the Collateral and may use it in any lawful
manner not inconsistent with this Agreement or the Related Documents, provided
that Grantor's right to possession and beneficial use shall not apply to any
Collateral where possession of the Collateral by Lender is required by law to
perfect Lender's security interest in such Collateral. Until otherwise notified
by Lender, Grantor may collect any of the Collateral consisting of accounts. At
any time and even though no Event of Default exists, Lender may collect the
accounts, notify account debtors to make payments directly to Lender for
application to the Indebtedness, and verify the accounts with such account
debtors. Lender also has the right, at the expense of Grantor, to enforce
collection of such accounts and adjust, settle, compromise, ▇▇▇ for, or
foreclose on the amount owing under any such account, in the same manner and to
the same extent as Grantor. If Lender at any time has possession of any
Collateral, whether before or after an Event of Default, Lender shall be deemed
to have exercised reasonable care in the custody and preservation of the
Collateral if Lender takes such action for that purpose as Grantor shall request
or as Lender, in Lender's sole discretion, shall deem appropriate under the
circumstances, but failure to honor any request by Grantor shall not of itself
be deemed to be a failure to exercise reasonable care. Lender shall not be
required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve, or maintain any security
interest given to secure the Indebtedness.
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6. EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may
(but shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining, and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the Note rate from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses shall become a
part of the Indebtedness and be payable on demand by Lender. Such right shall be
in addition to all other rights and remedies to which Lender may be entitled
upon the occurrence of an Event of Default.
7. EVENTS OF DEFAULT. Each of the following shall constitute an "Event of
Default" under this Agreement:
(a) Default on Indebtedness. Failure of Borrower to make any payment
when due on the Indebtedness.
(b) Other Defaults. Failure of Grantor or Borrower to comply with or
to perform any other term, obligation, covenant, or condition contained in this
Agreement, the Note, any other Related Documents, or failure of Borrower to
comply with or to perform any term, obligation, covenant, or condition contained
in any other agreement now existing or hereafter arising between Lender and
Borrower.
(c) False Statements. Any warranty, representation, or statement
made or furnished to Lender under this Agreement, the Note, or any other Related
Documents is false or misleading in any material respect.
8. RIGHTS AND REMEDIES. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Code. In addition and without limitation, Lender may exercise
any one or more of the following rights and remedies:
(a) Accelerate Indebtedness. Lender may declare the entire
Indebtedness immediately due and payable, without notice.
(b) Assemble Collateral. Lender may require Grantor to deliver to
Lender all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may require Grantor
to assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter, provided
Lender does so without a breach of the peace or a trespass, upon the property of
Grantor to take possession of and remove the Collateral. If the Collateral
contains other goods not covered by this Agreement at the time of repossession,
Grantor agrees Lender may take such other goods, provided that Lender makes
reasonable efforts to return them to Grantor after repossession.
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(c) Sell the Collateral. Lender shall have full power to sell,
lease, transfer, or otherwise dispose of the Collateral or the proceeds thereof
in its own name or that of Grantor. Lender may sell the Collateral (as a unit or
in parcels) at public auction or private sale. Lender may buy the Collateral, or
any portion thereof, (i) at any public sale, and (ii) at any private sale if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations. Lender
shall not be obligated to make any sale of Collateral regardless of a notice of
sale having been given. Lender may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Lender will
give Grantor reasonable notice of the time and place of any public sale thereof
or of the time after which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of reasonable notice shall be met
if such notice is given at least ten (10) days prior to the date any public
sale, or after which a private sale, of any of such Collateral is to be held.
All expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale, and
selling the Collateral, shall become a part of the Indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate from
date of expenditure until repaid.
(d) Appoint Receiver. To the extent permitted by applicable law,
Lender shall have the following rights and remedies regarding the appointment of
a receiver: (i) Lender may have a receiver appointed as a matter of right, (ii)
the receiver may be an employee of Lender and may serve without bond, and (iii)
all fees of the receiver and his or her attorney shall become part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
(e) Collect Revenues and Accounts. Lender, either itself or through
a receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may transfer any Collateral into its own name or that of its
nominee and receive the payments, rents, income, and revenues therefrom and hold
the same as security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar property, Lender may
demand, collect, receipt for, settle, compromise, adjust, ▇▇▇ for, foreclose, or
realize on the Collateral as Lender may determine. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open, and dispose of mail
addressed to Grantor; change any address to which mail and payments are to be
sent; and endorse notes, checks, drafts, money orders, documents of title,
instruments, and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.
(f) Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Borrower for any deficiency
remaining on the Indebtedness due to Lender after application of all amounts
received from the exercise of the rights provided in this Agreement. Borrower
shall be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
(g) Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Code, as amended from
time to time. In addition, Lender shall have and may exercise any or all other
rights and remedies it may have available at law, in equity, or otherwise.
Grantor waives any right to require Lender to proceed against any third party,
exhaust any other security for the Indebtedness, or pursue any other right or
remedy available to Lender.
(h) Cumulative Remedies. All of Lender's rights and remedies,
whether evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Grantor or Borrower under this Agreement, after Grantor or
Borrower's failure to perform, shall not affect Lender's right to declare a
default and to exercise its remedies.
Security Agreement - Page 8 of 11
67232.2 [August 9, 2001]
9. MISCELLANEOUS PROVISIONS. (a) Amendments. This Agreement, together with
any Related Documents, constitutes the entire understanding and agreement of the
parties as to the matters set forth in this Agreement and supersedes all prior
written and oral agreements and understandings, if any, regarding same. No
alteration of or amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or bound by the
alteration or amendment.
(b) Applicable Law. This Agreement has been delivered to Lender and
is performable in ▇▇▇▇▇▇▇ County, Texas. Courts within the State of Texas have
jurisdiction over any dispute arising under or pertaining to this Agreement, and
venue for such dispute shall be in ▇▇▇▇▇▇▇ County, Texas. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
AND APPLICABLE FEDERAL LAWS.
(c) Attorneys Fees and Other Costs. Grantor will upon demand pay to
Lender the amount of any and all costs and expenses (including without
limitation, reasonable attorneys fees and expenses) which Lender may incur in
connection with (i) the perfection and preservation of the security interests
created under this Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, the Collateral,
(iii) the exercise or enforcement of any of the rights of Lender under this
Agreement, or (iv) the failure by Grantor to perform or observe any of the
provisions hereof.
(d) Termination. Upon (i) the satisfaction in full of the
Indebtedness and all obligations hereunder, (ii) the termination or expiration
of any commitment of Lender to extend credit that would become Indebtedness
hereunder, and (iii) Lender's receipt of a written request from Grantor for the
termination hereof, this Agreement and the security interests created hereby
shall terminate. Upon termination of this Agreement and Grantor's written
request, Lender will, at Grantor's sole cost and expense, return to Grantor such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof and execute and deliver to Grantor such
documents as Grantor shall reasonably request to evidence such termination.
(e) Indemnity. Grantor hereby agrees to indemnify, defend, and hold
harmless Lender, and its officers, directors, shareholders, employees, agents,
attorneys, and representatives (each an "Indemnified Person") from and against
any and all liabilities, obligations, claims, losses, damages, penalties,
actions, judgments, suits, costs, expenses, or disbursements of any kind or
nature (collectively the "Claims") which may be imposed on, incurred by, or
asserted against, any Indemnified Person (whether or not caused by any
Indemnified Person's sole, concurrent, or contributory negligence) arising in
connection with this Agreement, the Related Documents, the Indebtedness, or the
Collateral (including, without limitation, the enforcement of the Related
Documents and the defense of any Indemnified Person's action or inactions in
connection with the Related Documents). WITHOUT LIMITATION, THE FOREGOING
INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO ANY CLAIMS
WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH
OR ANY OTHER INDEMNIFIED PERSON, except to the limited extent that the Claims
against the Indemnified Person are proximately caused by such Indemnified
Person's gross negligence or willful misconduct. The indemnification provided
for in this Section shall survive the termination of this Agreement and shall
extend and continue to benefit each individual or entity who is or has at any
time been an Indemnified Person hereunder.
(f) Captions. Captions and headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.
Security Agreement - Page 9 of 11
67232.2 [August 9, 2001]
(g) Notice. All notices required to be given under this Agreement
shall be given in writing, and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or deposited in
the United States mail, first class, postage prepaid, addressed to the party to
whom the notice is to be given at the address shown below. Any party may change
its address for notices under this Agreement by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, if there is more
than one Grantor or Borrower, notice to any Grantor or Borrower will constitute
notice to all Grantor and Borrowers. For notice purposes, Grantor and Borrower
will keep Lender informed at all times of Grantor and Borrower's current
addresses.
(h) Power of Attorney. Grantor hereby irrevocably appoints Lender as
its true and lawful attorney-in-fact, such power of attorney being coupled with
an interest, with full power of substitution to do the following in the place
and stead of Grantor and in the name of Grantor: (i) to demand, collect,
receive, receipt for, ▇▇▇, and recover all sums of money or other property which
may now or hereafter become due, owing or payable from the Collateral; (ii) to
execute, sign and endorse any and all claims, instruments, receipts, checks,
drafts, or warrants issued in payment for the Collateral; (iii) to settle or
compromise any and all claims arising under the Collateral, and, in the place
and stead of Grantor, to execute and deliver its release and settlement for the
claim; and (iv) to file any claim or claims or to take any action or institute
or take part in any proceedings, either in its own name or in the name of
Grantor, or otherwise, which in the discretion of Lender may seem to be
necessary or advisable. This power is given as security for the Indebtedness,
and the authority hereby conferred is and shall be irrevocable and shall remain
in full force and effect until renounced by Lender.
(i) Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
(j) Successor Interests. Subject to the limitations set forth above
on transfer of the Collateral, this Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns; provided, however,
Grantor's rights and obligations hereunder may not be assigned or otherwise
transferred without the prior written consent of Lender.
Security Agreement - Page 10 of 11
67232.2 [August 9, 2001]
(k) Waiver. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right to thereafter demand strict compliance with that provision or any
other provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Grantor, shall constitute a waiver of any of Lender's
rights or of any of Grantor's obligations as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing consent
to subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Lender.
Signed effective the 29th day of January, 2001.
ATTEST: GRANTOR:
UHC NEW MEXICO CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
Grantor's address:
▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Lender's address:
ALMAC FINANCIAL CORPORATION
▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Exhibits
A - Equipment List
Security Agreement - Page 11 of 11
67232.2 [August 9, 2001]
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
Effective as of
Up to $1,750,000.00 Cleburne, Texas January 29, 2001
FOR VALUE RECEIVED, the undersigned UNITED HERITAGE CORPORATION, a Utah
corporation (the "Borrower"), hereby unconditionally promises to the pay to the
order of ALMAC FINANCIAL CORPORATION, a Texas corporation (the "Lender"), at its
offices in Cleburne, Texas, in lawful money of the United States of America on
January 29, 2003, the principal amount of ONE MILLION SEVEN HUNDRED FIFTY
THOUSAND DOLLARS ($1,750,000.00), or, if less, the aggregate unpaid principal
amount of all advances made by the Lender to the Borrower. The Borrower further
agrees to pay interest in like money as it accrues from the date hereof until
maturity on the outstanding principal amount outstanding on each date at a rate
per annum equal to ten percent (10%), computed on the basis of a year consisting
of 365 days. Accrued interest shall be payable on the last day of each calendar
month beginning February 28, 2001, and at maturity. Notwithstanding anything
herein to the contrary, in no event shall this note accrue interest in excess of
the highest lawful rate of interest permitted by applicable law.
Payments on this note, whether at the scheduled payment date or
otherwise, shall be applied first to accrued interest and then to principal.
The principal evidenced by this note may be drawn, repaid, and re-drawn
from the Lender any number of times, in whole or in part, prior to maturity;
provided, however, in no event shall the outstanding principal balance hereunder
exceed ONE MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($1,750,000.00). The
holder of this note is authorized to endorse on the schedule attached hereto and
made a part hereof the date and amount of each loan advance or repayment made by
the Borrow under this note. Each endorsement shall constitute prima facie
evidence of the accuracy of the information endorsed. The failure to make any
such endorsement shall not affect the obligations of the Borrower under this
note.
This note is secured by (a) the pledge of all of the issued and
outstanding capital stock of UHC PETROLEUM CORPORATION, a Texas corporation, and
UHC NEW MEXICO CORPORATION, a New Mexico corporation (these two subsidiaries are
collectively called the "O&G Subs"), and all of the outstanding capital stock of
NATIONAL HERITAGE SALES CORPORATION, a Texas corporation ("National Heritage"),
pursuant to a Pledge Agreement (herein so called), dated as of January 29, 2001,
executed by the Borrower in favor of the Lender, (b) deed of trust or mortgage
liens created upon the oil and gas properties of the O&G Subs and the assignment
of production from those properties, pursuant to a Deed of Trust (herein so
called), dated as of January 29, 2001, executed by UHC Petroleum Corporation in
favor of the Lender, and a Mortgage (herein so called), dated as of January 29,
2001, executed by UHC New Mexico Corporation in favor of the Lender, and (c)
security
Note - Page 1 of 4
67228.2 [August 9, 2001]
interests created on all other assets of the O&G Subs and National Heritage,
pursuant to three Security Agreements (herein so called), dated as of January
29, 2001, executed by National Heritage and the O&G Subs, respectively, in favor
of the Lender.
If any one or more of the following events (collectively called "Events
of Default" or separately an "Event of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay the principal of this note at
maturity;
(b) The Borrower shall fail to pay all accrued interest on the note
within five (5) days after due in accordance with the terms of this note;
(c) Any material default under the Pledge Agreement, or any
representation or warranty by the Borrower in the Pledge Agreement shall be
untrue in any material respect;
(d) Any material default in the under the Security Agreements, or any
representation or warranty in the Security Agreements shall be untrue in any
material respect; or
(e) Any material default under the Deed of Trust or Mortgage, or any
representation or warranty in the Deed of Trust or Mortgage shall be untrue in
any material respect.
All parties now and hereafter liable with respect to this note, whether
maker, principal surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
This promissory note amends and restates that certain Revolving Credit
Note dated January 29, 2001, in the original principal amount of up to One
Million Dollars, given by the Borrower as maker to the Lenders as the Payee. The
Borrower confirms that this Amended and Restated Revolving Credit Agreement
shall be deemed the "Note" defined in the Pledge Agreement, and all indebtedness
evidenced by this Amended and Restated Revolving Credit Note shall be secured by
the "Collateral" described in the Pledge Agreement.
Note - Page 2 of 4
67228.2 [August 9, 2001]
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE STATE OF TEXAS.
THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
Executed this ___ day of August, 2001, but effective as of the date
first written above.
ATTEST: UNITED HERITAGE CORPORATION
By:____________________________ By:___________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
67228.2 [August 9, 2001]
Note - Page 3 of 4
67228.2 [August 9, 2001]
SCHEDULE OF LOAN ADVANCES, PAYMENTS AND PREPAYMENTS
Unpaid Principal
TRANSACTION Amount After
DATE TRANSACTION TYPE AMOUNT ($) Transaction ($) NOTATION MADE BY
----------- ---------------------- --------------------------- ----------------------------- ----------------------------
----------- ---------------------- --------------------------- ----------------------------- ----------------------------
----------- ---------------------- --------------------------- ----------------------------- ----------------------------
----------- ---------------------- --------------------------- ----------------------------- ----------------------------
----------- ---------------------- --------------------------- ----------------------------- ----------------------------
----------- ---------------------- --------------------------- ----------------------------- ----------------------------
----------- ---------------------- --------------------------- ----------------------------- ----------------------------
Note - Page 4 of 4
67228.2 [August 9, 2001]
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
Effective as of
Up to $3,000,000.00 Cleburne, Texas September 6, 2001
FOR VALUE RECEIVED, the undersigned UNITED HERITAGE CORPORATION, a Utah
corporation (the "Borrower"), hereby unconditionally promises to the pay to the
order of ALMAC FINANCIAL CORPORATION, a Texas corporation (the "Lender"), at its
offices in Cleburne, Texas, in lawful money of the United States of America on
April 15, 2004, the principal amount of THREE MILLION DOLLARS ($3,000,000.00),
or, if less, the aggregate unpaid principal amount of all advances made by the
Lender to the Borrower. The Borrower further agrees to pay interest in like
money as it accrues from the date hereof until maturity on the outstanding
principal amount outstanding on each date at a rate per annum equal to ten
percent (10%), computed on the basis of a year consisting of 365 days. Accrued
interest shall be payable on the last day of each calendar month beginning July
1, 2002, and at maturity. Notwithstanding anything herein to the contrary, in no
event shall this note accrue interest in excess of the highest lawful rate of
interest permitted by applicable law.
Payments on this note, whether at the scheduled payment date or
otherwise, shall be applied first to accrued interest and then to principal.
The principal evidenced by this note may be drawn, repaid, and re-drawn
from the Lender any number of times, in whole or in part, prior to maturity;
provided, however, in no event shall the outstanding principal balance hereunder
exceed THREE MILLION DOLLARS ($3,000,000.00).
This note is secured by the following (collectively the "Security
Documents"): (a) the pledge of all of the issued and outstanding capital stock
of UHC PETROLEUM CORPORATION, a Texas corporation, and UHC NEW MEXICO
CORPORATION, a New Mexico corporation (these two subsidiaries are collectively
called the "O&G Subs"), and all of the outstanding capital stock of NATIONAL
HERITAGE SALES CORPORATION, a Texas corporation ("National Heritage"), pursuant
to a Pledge Agreement (herein so called), dated as of January 29, 2001, executed
by the Borrower in favor of the Lender, (b) deed of trust or mortgage liens
created upon the oil and gas properties of the O&G Subs and the assignment of
production from those properties, pursuant to a Deed of Trust (herein so
called), dated as of January 29, 2001, executed by UHC Petroleum Corporation in
favor of the Lender, and a Mortgage (herein so called), dated as of January 29,
2001, executed by UHC New Mexico Corporation in favor of the Lender, and (c)
security interests created on all other assets of the O&G Subs and National
Heritage, pursuant to three Security Agreements (herein so called), dated as of
January 29, 2001, executed by National Heritage and the O&G Subs, respectively,
in favor of the Lender.
Note - Page 1 of 3
67228.4
If any one or more of the following events (collectively called "Events
of Default" or separately an "Event of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay the principal of this note at
maturity;
(b) The Borrower shall fail to pay all accrued interest on the note
within five (5) days after due in accordance with the terms of this note;
(c) Any material default under the Pledge Agreement, or any
representation or warranty by the Borrower in the Pledge Agreement shall be
untrue in any material respect;
(d) Any material default in the under the Security Agreements, or any
representation or warranty in the Security Agreements shall be untrue in any
material respect; or
(e) Any material default under the Deed of Trust or Mortgage, or any
representation or warranty in the Deed of Trust or Mortgage shall be untrue in
any material respect.
All parties now and hereafter liable with respect to this note, whether
maker, principal surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
This promissory note amends and restates that certain Amended and
Restated Revolving Credit Note dated January 29, 2001, in the original principal
amount of up to $1,750,000, given by the Borrower as maker to the Lender as the
payee. The Borrower confirms that this Amended and Restated Revolving Credit
Agreement shall be deemed the "Note" defined in the Security Documents, and all
indebtedness evidenced by this Amended and Restated Revolving Credit Note shall
be secured by the "Collateral" described in the Security Documents.
Note - Page 2 of 3
67228.4
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE STATE OF TEXAS.
THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
Executed effective as of September 6, 2001.
ATTEST: UNITED HERITAGE CORPORATION
By:____________________________ By:___________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
67228.4
Note - Page 3 of 3
67228.4
To be filed in
▇▇▇▇▇▇▇ County, Texas
DEED OF TRUST AND SECURITY AGREEMENT
(Oil and Gas)
The undersigned, UHC PETROLEUM CORPORATION ("Mortgagor"), a Texas
corporation, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, TRUSTEE
(the "Trustee"), and ALMAC FINANCIAL CORPORATION, a Texas corporation
("Lender"), ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, agree as follows:
ARTICLE 1. - DEFINITIONS.
SECTION 1.1. DEFINED TERMS. For the purposes of this instrument:
(a) "Code" means the Texas Business and Commerce Code, except with
respect to Collateral situated in another state, in which case it means the
Uniform Commercial Code of that state.
(b) "Collateral" means Fixture Collateral, Personalty Collateral, and
Realty Collateral.
(c) "Effective Date" means the 29th day of January, 2001, but if no
date is specified, the term means the date of execution of this instrument.
(d) "Fixture Collateral" means all of Mortgagor's interest in and to
all Operating Equipment which is or becomes so related to the Oil and Gas
Property or any part thereof that an interest in the equipment arises under the
real property law of the state in which situated.
(e) "Governmental Authority" means the United States, the state,
county, city, or any other political subdivision in which the Mortgagor conducts
business or the Collateral is situated, and any other political subdivision,
agency, commission, or instrumentality exercising jurisdiction over Mortgagor,
the Obligations, or the Collateral or from time to time constituted to regulate
the development and operation of the Collateral and the production and sale of
Hydrocarbons and other minerals therefrom.
(f) "Governmental Requirements" means all laws, ordinances, rules,
regulations, judgments, decrees, orders, permits, grants, franchises, licenses,
agreements, or other restrictions of any Governmental Authority applicable to
Mortgagor, the Obligations, or the Collateral.
(g) "Hydrocarbons" means oil, gas, other liquid or gaseous
hydrocarbons, and all products refined therefrom.
(h) "Land" means all land described in Exhibit A attached, in the
Leases, or in any other documents, instruments, or agreements described in
Exhibit A.
(i) "Leases" means all oil and gas (or oil, gas, and mineral) leases
described in Exhibit A attached or that cover or relate to the Land or any part
thereof.
(j) "Obligations" means the aggregate of:
Deed of Trust and Security Agreement - Page 1 of 19
67231.1[August 9, 2001]
(1) An amended and restated revolving credit note dated
January 29, 2001, in the principal amount of $1,750,000.00, executed by United
Heritage Corporation ("Borrower"), payable to the order of Lender, and maturing
on January 29, 2003;
(2) Any and all other or additional indebtedness or
liabilities for which Borrower or Mortgagor is now or may become liable to
Lender in any manner (including without limitation overdrafts in a bank
account), whether under this instrument or otherwise, either primarily or
secondarily, absolutely or contingently, directly or indirectly, and whether
matured or unmatured, regardless of how the indebtedness or liability may have
been or may be acquired by Lender; and
(3) Any and all extensions and renewals of or substitutes for
any of the foregoing indebtedness, obligations, and liabilities or any part
thereof.
The Obligations secured by this instrument may include future advances to be
made by Lender. Although Mortgagor acknowledges that Lender is not obligated to
do so, Lender and Mortgagor presently contemplate that Lender may make future
loans to Mortgagor which are intended to be Obligations secured by this
instrument.
(k) "Oil and Gas Property" means all Mortgagor's interests of whatever
nature (including but not limited to all royalties, overriding royalties,
mineral interests, working interests, net profits interests, production
payments, and other interests), whether now owned or hereafter acquired, in:
(1) The Land;
(2) The Leases;
(3) (i) The properties now or hereafter pooled or unitized
with the Leases or the Land; (ii) all presently existing or future unitization
agreements, communitization agreements, pooling agreements, and declarations of
pooled units and the units created thereby (including, without limitation, all
units created under any Governmental Requirement) affecting all or any portion
of the Leases or the Land, and including, without limitation, the units which
may be described or referred to in Exhibit A; (iii) all operating agreements,
contracts, subleases, farmouts, and other agreements which relate to any of the
Leases or any part of the Land or which relate to the production, sale,
purchase, exchange, or processing of the Hydrocarbons from or attributable to
the Leases or the Land; and (iv) the Leases and the Land described in Exhibit A
even though Mortgagor's interests therein are incorrectly described or a
description of a part or all of the Leases or the Land or Mortgagor's interests
therein are omitted; and
(4) All unsevered and unextracted Hydrocarbons in, under, or
attributable to the Land.
(l) "Operating Equipment" means all surface or subsurface machinery,
equipment, facilities, supplies, or other property of whatsoever kind or nature
now or hereafter located on any of the Oil and Gas Property, which are useful
for the production, treatment, storage, or transportation of Hydrocarbons.
(m) "Personalty Collateral" means all of Mortgagor's interest in and to
all Operating Equipment, all Hydrocarbons extracted from or attributable to the
Oil and Gas Property, all Production Sale Contracts, and all rents, issues,
profits, proceeds, products, revenues, and other income from or attributable to
the preceding collateral.
Deed of Trust and Security Agreement - Page 2 of 19
67231.1[August 9, 2001]
(n) "Proceeds" means whatever is received upon the sale, exchange,
collection, or other disposition of the Collateral and from insurance payable by
reason of loss or damage to the Collateral.
(o) "Production Sale Contract" means a contract now in effect or
hereafter entered into for the sale, purchase, exchange, or processing of
Hydrocarbons extracted from or attributable to the Oil and Gas Property.
(p) "Realty Collateral" means all of Mortgagor's interest, now owned or
hereafter acquired, in and to the Oil and Gas Property.
Other terms are defined hereafter in this instrument.
ARTICLE 2. - CREATION OF SECURITY.
SECTION 2.1. GRANT. In consideration of Lender's advancing or extending
the funds or credit constituting the Obligations, and in consideration of the
mutual covenants contained herein, and for the purpose of securing payment and
performance of the Obligations, Mortgagor grants, bargains, sells, and conveys
the Realty Collateral and Fixture Collateral unto Trustee for the benefit of
Lender.
SECTION 2.2. CREATION OF SECURITY INTEREST. In addition to the grant
contained in Section 2.1, and for the same consideration, Mortgagor grants to
Lender a security interest in all Personalty Collateral and Fixture Collateral,
now owned or hereafter acquired by Mortgagor, and all Proceeds.
SECTION 2.3. PROCEEDS. The claim of Proceeds shall not be construed to
mean that Lender consents to the sale or other disposition of any part of the
Collateral other than Hydrocarbons extracted from or attributable to the Oil and
Gas Property and sold in the ordinary course of business.
ARTICLE 3. - ASSIGNMENT OF PROCEEDS.
SECTION 3.1. LENDER'S RECEIPT OF PRODUCTION PROCEEDS. (a) Lender will
be entitled to receive all Hydrocarbons (and the Proceeds therefrom) which are
extracted from or attributable to the Oil and Gas Property beginning at 7:00
a.m. on the Effective Date. Mortgagor authorizes and directs all parties
producing, purchasing, and receiving Hydrocarbons or the Proceeds therefrom to
treat Lender as entitled in Mortgagor's place and stead to receive the same; and
further those parties will be fully protected in so treating Lender and will be
under no obligation to see to the application by Lender of any Proceeds received
by it.
(b) Mortgagor hereby assigns to Lender all liens and security interests
of Mortgagor securing payment of proceeds from the sale of Hydrocarbons,
including security interests provided by the Code.
SECTION 3.2. APPLICATION OF PROCEEDS. All payments received by Lender
pursuant to Section 3.1 above shall be placed in a collateral collection account
at Lender and on the 25th day of each month applied as follows:
(a) First, toward satisfaction of all costs and expenses incurred in
connection with the collection of Proceeds and the payment of any part of the
Obligations not represented by a written instrument.
(b) Second, to the payment of all accrued interest on the Obligations.
(c) Third, to the payment of any then due and owing principal
constituting part of the Obligations.
(d) The balance, if any, may either be applied against any unmatured
principal constituting part of the Obligations (the method of application being
wholly in Lender's discretion) or, at Lender's option, may be released to
Mortgagor.
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SECTION 3.3. MORTGAGOR'S PAYMENT DUTIES. Nothing contained herein will
limit Mortgagor's absolute duty to make payment on the Obligations when the
Proceeds received by Lender pursuant to this Article 3 are insufficient to pay
the interest and principal then owing, and the receipt of Proceeds by Lender
will be in addition to all other security now or hereafter existing to secure
payment of the Obligations.
SECTION 3.4. LIABILITY OF LENDER. Lender has no obligation to enforce
collection of any Proceeds and is hereby released from all responsibility in
connection therewith except the responsibility to account for Proceeds actually
received.
SECTION 3.5. ASSIGNMENT OF AWARDS AND SETTLEMENTS. All judgments,
awards of damages, and settlements hereafter made resulting from condemnation
proceedings (or threatened condemnation proceedings) or the taking of all or any
part of the Collateral under the power of eminent domain, or for any damage
(whether caused by such taking or otherwise) to any part of Collateral, or to
any rights appurtenant thereto, are hereby assigned by Mortgagor to Lender to be
applied to the Obligations.
ARTICLE 4. - MORTGAGOR'S WARRANTIES AND COVENANTS.
SECTION 4.1. PAYMENT OF OBLIGATIONS. Mortgagor covenants that Mortgagor
shall pay all Obligations when due. If any part of the Obligations is not
evidenced by a writing specifying a due date, Mortgagor agrees to pay the same
upon demand. All Obligations are payable to Lender at the address shown above.
SECTION 4.2. WARRANTIES. (a) Mortgagor warrants that:
(1) Mortgagor, to the extent of the interests specified in
Exhibit A, has valid and indefeasible title to each property right or interest
constituting the Collateral and has a good and legal right to grant and convey
same to the Trustee and Lender; and
(2) Without limitation as to the coverage of this instrument,
where an expense interest, a revenue interest, or a royalty interest is shown,
Mortgagor's expense interest is not greater than that shown and that its revenue
or royalty interest is not less than that shown; and
(3) Mortgagor is receiving payment, on a monthly basis, for
its share of production from all ▇▇▇▇▇ located on the Land or Leases, or on
lands or leases pooled therewith, and, where a revenue interest is shown for a
well or ▇▇▇▇▇ in Exhibit A, Mortgagor is receiving payment for not less than the
share of production shown on the exhibit; and
(4) The oil and gas (or oil, gas, and mineral) leases included
in Oil and Gas Property are valid and subsisting and all rentals and royalties
due under each of them have been properly and timely paid; and
(5) If any ▇▇▇▇▇ are listed in Exhibit A, then those ▇▇▇▇▇ are
situated on the Land or on the real property covered by the Leases, or on lands
or leases pooled therewith; and
(6) No approval or consent of any Governmental Authority is
necessary to authorize the execution and delivery of this instrument or of any
other written instruments constituting or evidencing the Obligations, or to
authorize the observance or performance by Mortgagor of the covenants contained
in this instrument or in the other written instruments; and
(7) All information contained in statements furnished or to be
furnished Lender by or on behalf of Mortgagor in connection with any of the
Obligations or any request made pursuant to this instrument is or will be
complete and accurate; and
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(8) This instrument creates a first lien and first security
interest on the Collateral; and the Collateral is free from all liens, security
interests, or other encumbrances except as specifically set forth in Exhibit A;
and
(9) Mortgagor is not obligated, by virtue of a prepayment
arrangement under any Production Sale Contract containing a "take or pay" clause
or similar arrangement, to deliver Hydrocarbons at some future time without then
or thereafter receiving full payment therefor; and
(10) No portion of the Collateral is subject to (i) any
contractual or other obligation to deliver Hydrocarbons produced from the
Collateral to third parties for a price less than the market value thereof (or
in the case of an existing gas sales contract, less than the full regular
contract price therefor) or (ii) any contractual or other arrangement whereby
payment for production from the Collateral will not be received
contemporaneously with delivery (i.e., within 30 days after delivery for oil and
within 60 days after delivery for gas); and
(11) No part of the Collateral is subject to a gas balancing
arrangement under which an imbalance exists with respect to which Mortgagor is
in an "overproduced" status and will be required to: (i) permit one or more
third parties to take a portion of the production attributable to the Collateral
without payment of the full market price thereof (or in the case of an existing
Production Sale Contract, full regular contract); or (ii) make payment in cash,
in order to correct the imbalance; and
(12) There are no "back in" or "reversionary" interests held
by third parties which would reduce the interest of Mortgagor in the Collateral
except as set forth in Exhibit A; and
(13) There are no prior consent rights or preferential
purchase rights in third parties affecting any part of the Collateral.
(b) All of the warranties and representations of Mortgagor contained in
this instrument are and will be in all respects true and correct both as of the
date of execution of this instrument and the Effective Date and as of the date
of each extension of credit by Lender to Mortgagor, and the warranties contained
in Section 4.2(a)(5) also shall be in all respects true and correct when any
item such as referred to therein is furnished to Lender.
(c) Mortgagor warrants and agrees forever to defend the Collateral
against every person whomsoever lawfully claiming the same or any part thereof,
and Mortgagor shall maintain and preserve the lien and security interest herein
created as long as any of the Obligations remain unpaid.
SECTION 4.3. FURTHER ASSURANCES. Mortgagor agrees to execute and
deliver such other and further instruments and do such other and further acts as
in the opinion of Lender may be necessary or desirable to carry out more
effectively the purposes of this instrument, including, without limiting the
generality of the foregoing:
(a) Prompt correction of any defect which may hereafter be discovered
in the title to the Collateral, or in the execution and acknowledgment of this
instrument, any written instrument constituting or evidencing any of the
Obligations, or any other document used in connection herewith; and
(b) Prompt execution and delivery of all division or transfer orders
which in Lender's opinion are required to transfer to Lender the proceeds from
the sale of all Hydrocarbons severed and extracted from or attributable to the
Oil and Gas Property.
SECTION 4.4. OPERATION OF MORTGAGED PROPERTY. As long as any of the
Obligations remain unpaid, and whether or not Mortgagor is the operator of the
Oil and Gas Property, Mortgagor shall (at Mortgagor's own expense):
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(a) Do all things necessary to keep Mortgagor's rights in the
Collateral unimpaired; and
(b) Not abandon any well or forfeit, surrender, or release any lease,
sublease, farmout, or any operating agreement without Lender's prior written
consent; and
(c) Cause the Collateral to be maintained, developed, and protected
against drainage and continuously operated for the production of Hydrocarbons in
a good and workmanlike manner as a prudent operator would in accordance with
generally accepted practices, applicable operating agreements, and all
Governmental Requirements; and
(d) Promptly pay or cause to be paid when due and owing (and upon
request provide Lender with proof of payment) all rentals and royalties payable
in respect of the Collateral; all expenses incurred in or arising from the
operation or development of the Collateral; and all taxes, assessments, and
governmental charges legally imposed upon this instrument, upon the Collateral,
and upon the interest of Lender or of the Trustee; and
(e) Cause the Operating Equipment to be kept in good and effective
operating condition and cause to be made all repairs, renewals, replacements,
additions, and improvements thereof or thereto needful to the production of
Hydrocarbons from the Oil and Gas Property; and permit the Trustee and Lender
(through their agents and employees) to enter upon the Oil and Gas Property for
the purpose of investigating and inspecting the conditions and operations of the
Collateral; and
(f) Cause the Collateral to be kept free and clear of liens, charges,
security interests, and encumbrances of every character other than the lien and
security interest created by this instrument; taxes constituting a lien but not
due and payable; defects or irregularities in title which are not such as to
interfere materially with the development, operation, or value of the Collateral
and not such as to affect materially the title thereto; those set forth or
referred to in Exhibit A; those being contested in good faith by Mortgagor and
which do not, in the judgment of Lender, jeopardize the Trustee's and Lender's
rights in and to the Collateral; and those consented to in writing by Lender;
and
(g) Carry with standard insurance companies and in amounts satisfactory
to Lender the following insurance: workers' compensation insurance and public
liability and property damage insurance in respect of all activities in which
Mortgagor might incur liability for death or injury or damage to or destruction
of property; and to the extent insurance is carried by others engaged in similar
undertakings in the same general areas in which the Collateral is located, well
damage and blow out insurance and insurance in respect of the Operating
Equipment against loss or damage by fire, lightning, hail, tornado, explosion,
and other similar risks. All policies of insurance shall provide for not less
than ten days prior written notice to Lender of cancellation, and Lender shall
be named as a loss payee of all insurance insuring any of the Operating
Equipment against loss or damage. Lender may apply any insurance payments which
it receives toward part or full satisfaction of any or all of the Obligations
whether or not they are then due.
SECTION 4.5. RECORDING AND FILING. Mortgagor shall pay all costs of
filing, registering, and recording this and every other instrument in addition
or supplemental thereto, and all financing statements Lender may require, in
such offices and places and at such times and as often as may be, in the
judgment of Lender, necessary to preserve, protect, and renew the lien and
security interest herein created as a first lien and prior security interest on
and in the Collateral and otherwise do and perform all matters or things
necessary or expedient to be done or observed by reason of any Governmental
Requirements for the purpose of effectively creating, maintaining, and
preserving the lien and security interest created herein and on the Collateral.
Mortgagor shall also pay the costs of obtaining reports from appropriate filing
officers concerning financing statement filings in respect of any of the
Collateral in which a security interest is granted herein. Mortgagor hereby
authorizes Lender to authenticate and file all financing statements or
amendments to financing statement in such offices and places and at such times
and as often as may be, in the judgment of Lender, necessary to preserve,
protect, and renew the security interests herein created in the Collateral.
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SECTION 4.6. RECORDS, STATEMENTS, AND REPORTS. (a) Mortgagor shall at
all times keep complete and accurate business records in conformity with
generally accepted accounting principles consistently applied, and Lender may
from time to time have access to and examine and copy such records.
(b) When and to the extent required by Lender, Mortgagor shall furnish
to Lender:
(1) Within sixty days after the close of each fiscal year of
Mortgagor, a copy of Mortgagor's annual audited financial statements, consisting
of at least a balance sheet as of the close of the year, a statement of
operations, a statement of cash flow, a statement of changes in shareholders'
equity (if Mortgagor is a corporation), and a statement of contingent
liabilities, signed by independent certified public accountants acceptable to
Lender and accompanied by the accountants' opinion that the report fairly
presents the financial condition of Mortgagor as of the close of the fiscal year
and the results of its operations for the year; and
(2) Within forty-five days after the end of the first three
fiscal quarters of each fiscal year of Mortgagor, a copy of Mortgagor's
unaudited quarterly financial statements, consisting of at least a balance
sheet, a statement of operations, a statement of cash flow, a statement of
changes in shareholders' equity, and a statement of contingent liabilities, for
the quarter and for the period from the beginning of the fiscal year to the
close of the quarter; and
(3) Whenever requested by Lender (but not more than once a
year), a report prepared by an independent petroleum engineer or engineering
firm acceptable to Lender, prepared in accordance with the customary standards
and procedures of the petroleum industry, estimating the quantity of
Hydrocarbons recoverable from the Oil and Gas Property and the projected income
and expense attributable to the Collateral, including without limitation, a
description of reserves, net revenue interests and working interests
attributable to the reserves, rates of production, gross revenues, operating
expenses, ad valorem taxes, capital expenditures necessary to cause the Oil and
Gas Property to achieve the rate of production set forth in the report, net
revenues and present value of future net revenues attributable to the reserves
and production therefrom, a statement of the assumptions upon which the
determinations were made, and any other matters related to the operation of the
Oil and Gas Property and the estimated income therefrom; and
(4) Monthly, a report on a lease-by-lease or unit basis
showing the gross proceeds from the sale of Hydrocarbons produced from the Oil
and Gas Property; the quantity of Hydrocarbons sold; the severance, gross
production, occupation, or gathering taxes deducted from or paid out of the
proceeds; the lease operating expenses, tangible drilling costs, and capital
expenditures; the number of ▇▇▇▇▇ operated, drilled, or abandoned; and such
other information as Lender may reasonably request; and
(5) Within 30 days of any change and at any time upon request
by Lender, a list showing the name and address of each purchaser of Hydrocarbons
produced from or attributable to the Realty Collateral; and
(6) Such other information concerning the business affairs and
financial condition of Mortgagor as Lender may from time to time reasonably
request.
(c) All financial information shall be in form, substance, and detail
satisfactory to Lender in its sole and absolute discretion and, unless Lender
consents in writing, shall be prepared in accordance with generally accepted
accounting principles applied on a basis consistent with the preceding year and
certified as accurately presenting the financial condition of Mortgagor by a
certified public accountant or authorized officer or representative of
Mortgagor, acceptable to Lender.
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SECTION 4.7. CORPORATION, PARTNERSHIP, OR OTHER ENTITY. If Mortgagor is
a corporation, partnership, or any other entity, it is, and will continue to be,
duly organized, formed, and existing under the laws of the state in which it is
incorporated, organized, or formed, duly qualified to transact business in each
state where the conduct of its business requires it to be qualified, and duly
authorized to execute and deliver the written instruments comprising the
Obligations and this instrument and to observe and perform its duties thereunder
and hereunder. Mortgagor will not, without the prior written consent of Lender,
make any material change in its management or reorganize or consolidate or merge
with any other corporation, partnership, or other entity.
SECTION 4.8. INDEMNIFICATION. Mortgagor agrees to indemnify Trustee,
Lender, and Lender's officers, directors, shareholders, employees, agents,
attorneys, partners, and their respective heirs, successors, and assigns
(collectively "Indemnified Parties") against, and to reimburse Indemnified
Parties with respect to, all claims, actions, liabilities, damages, losses, and
judgments, including strict liability claims (all of which are hereafter
referred to as "Claims"), and all costs and expenses and other charges of any
description whatsoever, including (without limitation) attorneys fees, court
costs, administrative costs, costs of appeal, and all costs and expenses
incurred in investigating into or defending against any Claims, made against or
sustained or incurred by Indemnified Parties, arising or related in any way to
the Collateral, this instrument, or the Obligations, and including the
assertion, either before or after the payment in full of the Obligations, that
Lender wrongfully received Hydrocarbons or Proceeds pursuant to this instrument.
Indemnified Parties will have the right to employ attorneys and to defend
against Claims; and, unless furnished with reasonable indemnity, Indemnified
Parties will have the right to pay or compromise and adjust all Claims.
Mortgagor shall indemnify and pay to Indemnified Parties all amounts as may be
paid by Indemnified Parties in compromise or adjustment of any Claim or as may
be adjudged against Indemnified Parties in respect of any Claim. The liabilities
of Mortgagor as set forth in this Section 4.8 will survive the termination of
this instrument.
ARTICLE 5. - DEFAULT.
SECTION 5.1. EVENTS OF DEFAULT. The term "Event of Default" means the
occurrence of any of the following events or the existence of any of the
following conditions:
(a) Failure by Mortgagor to make punctual payment when due of any of
the Obligations or other failure to keep or punctually perform any of the
provisions contained herein, in the Loan Agreement, in any other written
instrument evidencing any of the Obligations, or in any other agreement with
Lender (whether now existing or entered into hereafter); or
(b) Any warranty, representation, or statement by Mortgagor or made or
furnished to Lender by or on behalf of Mortgagor in connection with the
Obligations is determined by Lender to be untrue in any material respect; or
(c) Any Event of Default under the Loan Agreement; or
(d) Mortgagor's title to any substantial part of the Collateral becomes
the subject matter of litigation which would or might, in Lender's opinion, upon
final determination result in substantial impairment or loss of the security
provided by this instrument; or
(e) Mortgagor sells, conveys, mortgages, or grants security interests
in or otherwise disposes of or encumbers any of the Collateral or any of
Mortgagor's right, title, or interest therein (excluding sales of extracted
Hydrocarbons in the ordinary course of Mortgagor's business) without first
securing Lender's written consent; or
(f) Mortgagor becomes insolvent, or makes a general assignment for the
benefit of creditors, or institutes or consents to any proceeding in insolvency
or bankruptcy or for the adjustment, extension, or composition of debts, or for
any other relief under any bankruptcy or insolvency law or laws relating to the
relief of debtors; or
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(g) Mortgagor is adjudged bankrupt, or any involuntary proceeding is
instituted against Mortgagor in insolvency or bankruptcy or for the
readjustment, extension, or composition of debts or for any other relief under
any bankruptcy or insolvency law or laws relating to the relief of debts, and
such proceedings are not dismissed within thirty days after being instituted; or
(h) Any substantial part of the property or assets of Mortgagor or any
part of the Collateral is attached or is placed in the hands of a receiver,
trustee, or other officer or representative of a court or of creditors, and the
attachment or receivership continues for any period of thirty consecutive days;
or
(i) Mortgagor's death, liquidation, termination of existence, merger or
consolidation with another, or forfeiture of right to do business, or a material
change in the business, management, or ownership of Mortgagor; or
(j) Lender deems any part of the Collateral or the prospects for
repayment of the Obligations impaired.
SECTION 5.2. ACCELERATION UPON DEFAULT. Upon the occurrence of any
Event of Default, or at any time thereafter, Lender may, at its option, declare
the entire unpaid principal of and the interest accrued on the Obligations to be
forthwith due and payable, without any notice, presentment, notice of intent to
accelerate, notice of acceleration, or demand of any kind, all of which are
hereby expressly waived.
SECTION 5.3. OPERATION OF PROPERTY. Upon the occurrence of an Event of
Default, or at any time thereafter, and in addition to all other rights herein
conferred on the Trustee, the Trustee (or any person, firm, or corporation
designated by Lender) will have the right and power, but will not be obligated,
to enter upon and take possession of all or any part of the Collateral, to
exclude Mortgagor therefrom, and to hold, use, administer, manage, and operate
the same to the extent that Mortgagor could do so. The Trustee, or any person,
firm, or corporation designated by Lender, may operate the property without any
liability to Mortgagor in connection with the operations except for bad faith;
and the Trustee, or any person, firm, or corporation designated by Lender, will
have the right to collect, receive, and receipt for all Hydrocarbons produced
and sold from the properties, to make repairs, to purchase machinery and
equipment, to conduct workover operations, to drill additional ▇▇▇▇▇, and to
exercise every power, right, and privilege of Mortgagor with respect to the
Collateral. Providing there has been no foreclosure sale, when and if the
expenses of the operation and development (including costs of unsuccessful
work-over operations or additional ▇▇▇▇▇) have been paid and the Obligations
paid, the properties shall be returned to the Mortgagor.
SECTION 5.4. ANCILLARY RIGHTS. Upon the occurrence of an Event of
Default, or at any time thereafter, and in addition to all other rights, Lender
may proceed by a suit or suits in equity or at law for the specific performance
of any covenant or agreement herein contained or in aid of the execution of any
power herein granted, for the appointment of a receiver pending any foreclosure
or sale hereunder, or for the enforcement of any other appropriate legal or
equitable remedy.
ARTICLE 6. - LENDER'S RIGHTS AS TO REALTY COLLATERAL UPON DEFAULT.
SECTION 6.1. JUDICIAL FORECLOSURE. Upon the occurrence of an Event of
Default, or at any time thereafter, in lieu of the exercise of the non-judicial
power of sale hereafter given, Lender may proceed by suit for foreclosure of its
lien and for a sale of the Realty Collateral.
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SECTION 6.2. NON-JUDICIAL FORECLOSURE (TEXAS). Upon the occurrence of
an Event of Default, or at any time thereafter, the Trustee shall, in response
to Lender's request (which Mortgagor agrees will be presumed to have been
given), enforce this trust by selling the Realty Collateral situated in Texas in
its entirety or in parcels, as the Trustee may elect, to the highest bidder for
cash at public auction in accordance with the Texas Property Code, as then
amended. Where the Realty Collateral is situated in more than one county, it may
be sold in any county in which any part is situated. Notice shall be given in
each such county and shall designate the county where the sale is to be made.
Notice of the proposed sale shall be given by posting written notice thereof in
each county in which the Realty Collateral to be sold is situated and serving
written notice of the proposed sale upon each debtor obligated to pay the
Obligations according to Lender's records in accordance with the Texas Property
Code, as then amended. The affidavit of any person having knowledge of the facts
to the effect that the posting and service was completed shall be prima facie
evidence of those facts. Sale of a part of the Realty Collateral will not
exhaust the power of sale, and sales may be made from time to time until all the
property is sold or the Obligations are paid in full.
SECTION 6.3. NON-JUDICIAL FORECLOSURE (STATES OTHER THAN TEXAS). Upon
the occurrence of any Event of Default, or at any time thereafter, to the extent
permitted by law the Trustee shall, in response to Lender's request (which
Mortgagor agrees will be presumed to have been given), enforce this trust by
selling the Realty Collateral situated in states other than Texas. The action of
the Trustee shall conform to the law of the state where the Realty Collateral is
located, and unless prohibited by the law of that state, the Trustee may sell at
one or more sales, as an entirety or in parcels, as the Trustee may elect, at
such place or places and otherwise in such manner and upon such notice as may be
required by law, or, in the absence of any such requirement, as the Trustee may
deem appropriate, and to make conveyance to the purchaser or purchasers. Unless
prohibited by the law of that state, where the Realty Collateral is situated in
more than one county (or judicial district), it may be sold in any county (or
judicial district) in which any part is situated. The Trustee may postpone the
sale of all or any portion of the Realty Collateral by public announcement at
the time fixed and place of sale, and from time to time thereafter may further
postpone the sale by public announcement made at time of sale fixed by the
preceding postponement. Sale of a part of the Realty Collateral will not exhaust
the power of sale, and sales may be made from time to time until all the
property is sold or the Obligations are paid in full.
ARTICLE 7. - RIGHTS AS TO PERSONALTY AND FIXTURE COLLATERAL UPON DEFAULT.
SECTION 7.1. PERSONALTY COLLATERAL. Upon the occurrence of an Event of
Default, or at any time thereafter, Lender may, without notice to Mortgagor,
exercise its right to declare all Obligations secured by the security interest
created herein to be immediately due and payable in which case Lender will have
all rights and remedies granted by law and particularly by the Code, including
but not limited to, the right to take possession of the Personalty Collateral,
and for this purpose Lender may enter upon any premises on which any or all of
the Personalty Collateral is situated and take possession of and operate
Personalty Collateral or remove it therefrom. Lender may require Mortgagor to
assemble the Personalty Collateral and make it available to Lender at a place to
be designated by Lender which is reasonably convenient to both parties. Unless
the Personalty Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, Lender will give
Mortgagor reasonable notice of the time and place of any public sale or of the
time after which any private sale or other disposition of the Personalty
Collateral is to be made. This requirement of sending reasonable notice will be
met if the notice is mailed, postage prepaid, to Mortgagor at the address
designated above at least five days before the time of the sale or disposition.
SECTION 7.2. SALE WITH REALTY COLLATERAL. In the event of foreclosure,
whether judicial or non-judicial, at Lender's option it may proceed under the
Code as to the Personalty Collateral or it may proceed as to both Realty
Collateral and Personalty Collateral in accordance with its rights and remedies
in respect of the Realty Collateral.
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SECTION 7.3. FIXTURE COLLATERAL. Upon the occurrence of an Event of
Default, or at any time thereafter, Lender may elect to treat the Fixture
Collateral as either Realty Collateral or as Personalty Collateral and proceed
to exercise such rights as apply to the type of Collateral selected.
ARTICLE 8. - OTHER PROVISIONS CONCERNING FORECLOSURE.
SECTION 8.1. LENDER AS PURCHASER. Lender reserves the right to bid and
become the purchaser at any foreclosure sale and credit its bid at the sale
against the Obligations.
SECTION 8.2. CERTAIN ASPECTS OF NON-JUDICIAL FORECLOSURE. Recitals
contained in any conveyance to any purchaser at any sale made hereunder will
conclusively establish the truth and accuracy of the matters therein stated,
including, without limiting the generality of the foregoing, nonpayment of the
unpaid principal sum of, and the interest accrued on, the written instruments
constituting part or all of the Obligations after the same have become due and
payable, advertisement and conduct of the sale in the manner provided herein,
and appointment of any successor Trustee hereunder. Any purchaser or purchasers
will be provided with a general warranty deed binding Mortgagor. Mortgagor
ratifies and confirms all legal acts that the Trustee may do in carrying out the
Trustee's duties and obligations under this instrument.
SECTION 8.3. EFFECT OF SALE. Any sale or sales of the Collateral or any
part thereof will operate to divest all right, title, interest, claim, and
demand whatsoever either at law or in equity, of Mortgagor in and to the
premises and the property sold, and will be a perpetual bar, both at law and in
equity, against Mortgagor, Mortgagor's heirs, personal representatives,
successors, or assigns, and against any and all persons claiming or who shall
thereafter claim all or any of the property sold from, through, or under
Mortgagor, or Mortgagor's heirs, personal representatives, successors, or
assigns. The purchaser or purchasers at the foreclosure sale will receive
immediate possession of the property purchased; and if Mortgagor retains
possession of the Realty Collateral, or any part thereof, subsequent to sale,
Mortgagor will be considered a tenant at sufferance of the purchaser or
purchasers.
SECTION 8.4. APPLICATION OF PROCEEDS. (a) The proceeds of any sale of
the Collateral or any part thereof, whether judicial or non-judicial, will be
applied as follows:
(i) First, to the payment of all expenses incurred by Lender
and the Trustee in connection therewith, including, without limiting the
generality of the foregoing, court costs, legal fees and expenses, a commission
to the Trustee of five percent of the sale price of the Realty Collateral, and
expenses of any entry or taking of possession, holding, preparing for sale,
advertising, selling, and conveying;
(ii) Second, to the payment of the Obligations; and
(iii) Third, any surplus thereafter remaining will be paid to
Mortgagor or Mortgagor's successors or assigns, as their interest may appear.
(b) Mortgagor will remain liable for any deficiency owing on the
Obligations after application of the net proceeds of any foreclosure sale.
SECTION 8.5. SUCCESSOR TRUSTEES. The Trustee may resign in writing
addressed to Lender or be removed at any time with or without cause by an
instrument in writing duly executed by Lender. In case of the death,
resignation, or removal of the Trustee, a successor Trustee or Co-Trustees may
be appointed by Lender or Lender's authorized agent by instrument of
substitution complying with any applicable requirements of law, and in the
absence of any such requirement, without other formality than an appointment and
designation in writing. Any appointment and designation will be full evidence of
the right and authority to make the same and of all facts therein recited. Upon
the making of any appointment and designation, all the estate and title of the
Trustee in all of the Realty Collateral will vest in the named successor
Trustee, and the successor will thereupon succeed to all the rights, powers,
privileges, immunities, and duties hereby conferred upon the Trustee. All
references herein to the Trustee will be deemed to refer to the Trustee from
time to time acting hereunder.
Deed of Trust and Security Agreement - Page 11 of 19
67231.1[August 9, 2001]
ARTICLE 9. - ENVIRONMENTAL.
SECTION 9.1. GENERAL/DEFINITIONS. Mortgagor covenants and warrants that
the Land and Mortgagor's and any operator's use of the Collateral will at all
times comply with and conform to all applicable Governmental Requirements
relating to the environment and to the transportation, distribution, storage,
placement, handling, treatment, discharge, manufacture, generation, production,
processing, or disposal (collectively "Treatment") of any emissions, discharges,
leakage, venting, exposure, releases, or threatened releases (collectively
"Release") of pollutants, contaminants, chemicals, waste, waste products,
petroleum products, radioactive waste, poly-chlorinated biphenyls, asbestos, or
any other industrial, toxic, flammable, corrosive, hazardous, or harmful
substances (collectively "Waste") into the environment including, without
limitation, ambient air, surface water, ground water, or land (collectively
"Applicable Environmental Laws"). Mortgagor further covenants that it will not
engage in or permit the operator or any other party to engage in any Treatment
or Release of Waste in, on, or affecting the Land or the Collateral in violation
of Applicable Environmental Laws.
SECTION 9.2. ENVIRONMENTAL WARRANTIES. (a) Mortgagor further warrants
that: (i) Mortgagor is not aware and has not received notice of any past or
present violations by any party, including prior operators or owners, of
Applicable Environmental Laws affecting the Land or the Collateral; (ii)
Mortgagor has obtained all permits, licenses, and authorizations required under
Applicable Environmental Laws affecting the Land or the Collateral; (iii) no
liens arising under Applicable Environmental Laws affect the Collateral or
Mortgagor; (iv) Mortgagor does not have any liability for the Treatment or
Release of Waste in violation of Applicable Environmental Laws; (v) neither
Mortgagor or any of the Collateral is the subject of any existing, pending, or
threatened claim, action, or investigation for violations of Applicable
Environmental Laws; and (vi) all Waste, if any, generated in connection with the
Collateral has been transported, treated, and disposed of in accordance with
Applicable Environmental Laws.
(b) All warranties set forth above will be deemed to be made
by Mortgagor upon each advance under the Obligations.
SECTION 9.3. ENVIRONMENTAL NOTICE AND INSPECTION. Immediately upon
receipt of any notice from any party of a violation of Section 9.1 or if any of
the warranties in Section 9.2 become false, Mortgagor shall fully inform Lender
of the violation and take all steps necessary to clean up all contamination
related to the Treatment or Release of Waste and affecting the Land or the
Collateral and fully restore them to their prior condition. Without being liable
for any discoveries, Lender has the right, but not the obligation, to inspect
and monitor Mortgagor's compliance with the terms of this Article.
SECTION 9.4. ENVIRONMENTAL INDEMNITY. Notwithstanding any other
limitation of liability in this or any other agreement or instrument between
Mortgagor and Lender, Mortgagor agrees to indemnify Indemnified Parties against,
and to reimburse Indemnified Parties with respect to, all Claims, including
claims for bodily injury, property damage, abatement, remediation, and strict
liability claims, and all costs and expenses and other charges of any
description whatsoever, including (without limitation) attorneys fees, court
costs, administrative costs, costs of appeal, and all costs and expenses
incurred in investigating into or defending against any Claims, made against or
sustained or incurred by Indemnified Parties arising or related in any way to
Treatment or Release of any Waste in, on, or affecting the Land or the
Collateral, whether or not caused by Mortgagor or by the violation of Section
9.1.
Deed of Trust and Security Agreement - Page 12 of 19
67231.1[August 9, 2001]
SECTION 9.5. SURVIVAL AND REMEDIES. (a) Notwithstanding anything in
this instrument or any other instrument or agreement between Mortgagor and
Lender to the contrary, the undertakings of Mortgagor in this Article shall
survive the expiration or termination of this instrument regardless of the means
of such expiration or termination. Specifically, the indemnification in Section
9.4 shall run from the actual knowledge of Lender of any Treatment or Release of
Waste or other environmental condition covered by this Article.
(b) Upon the receipt by Lender of notice required by this
Article, or the discovery by Lender of any Treatment or Release of Waste
affecting the Land or Collateral in violation of Applicable Environmental Laws,
Lender may in its discretion, without limitation, (1) rescind the loan,
requiring Mortgagor to refund immediately all consideration previously
transferred to Mortgagor which has not been repaid, or (2) accelerate the
Obligations and seek appointment of a receiver for the Collateral, or (3) take
any other action provided by any instrument executed by and between Mortgagor
and Lender relating to this transaction. Mortgagor consents to the rescission or
receivership in such event.
ARTICLE 10. - OTHER STATE PROVISIONS.
SECTION 10.1. [INTENTIONALLY DELETED.]
ARTICLE 11. - MISCELLANEOUS.
SECTION 11.1. MORTGAGOR'S WAIVERS. Mortgagor agrees that Mortgagor will
not at any time insist upon or plead or in any manner whatever claim the benefit
of any appraisement, valuation, stay, extension, or redemption law now or
hereafter in force, if it would prevent or hinder the enforcement or foreclosure
of this instrument, the absolute sale of the Collateral, or the possession
thereof by any purchaser at any sale made pursuant to this instrument or
pursuant to the decree of any court of competent jurisdiction. Mortgagor, for
Mortgagor and all who may claim through or under Mortgagor, hereby waives the
benefit of all such laws and to the extent that Mortgagor may lawfully do so
under applicable state law, waives any and all right to have the Realty
Collateral marshaled upon any foreclosure of the lien hereof or sold in inverse
order of alienation, and Mortgagor agrees that the Trustee may sell the Realty
Collateral as an entirety.
SECTION 11.2. POOLING AND UNITIZATION. Mortgagor may not enter into
pooling or unitization agreements, or make an election under any applicable
forced pooling statute, affecting all or any part of any Oil and Gas Property
without the prior written consent of Lender. The interest in any unit
attributable to the Oil and Gas Property (or any part thereof) included therein
will become a part of the Realty Collateral, the Fixture Collateral, and the
Personalty Collateral, as the case may be, and will be subject to the lien and
security interest hereof in the same manner and with the same effect as though
the unit and the interest of Mortgagor therein were specifically described in
Exhibit A.
SECTION 11.3. ADVANCES BY LENDER OR THE TRUSTEE. If Mortgagor fails to
perform or keep any of its covenants of whatsoever kind or nature contained in
this instrument, Lender, the Trustee, or any receiver appointed hereunder, may,
but will not be obliged to, make advances to perform the same in Mortgagor's
behalf, and Mortgagor hereby agrees to repay the advanced sums and any
attorneys' fees incurred in connection therewith upon demand plus interest at
the maximum lawful rate. No advance will be deemed to relieve Mortgagor from any
default hereunder.
SECTION 11.4. DEFENSE OF CLAIMS. Mortgagor shall promptly notify the
Trustee and Lender in writing of the commencement of any legal proceedings
affecting Lender's interest in the Collateral, or any part thereof, and shall
take such action, employing attorneys acceptable to the Trustee and Lender, as
may be necessary to preserve Mortgagor's, the Trustee's, and Lender's rights
affected thereby; and should Mortgagor fail or refuse to take any such action,
the Trustee or Lender may take the action in behalf of and in the name of
Mortgagor and at Mortgagor's expense. Moreover, Lender or the Trustee on behalf
of Lender may take independent action in connection therewith as they may in
their discretion deem proper, and Mortgagor hereby agrees to make reimbursement
for all sums advanced and all expenses incurred in such actions plus interest at
the maximum lawful rate.
Deed of Trust and Security Agreement - Page 13 of 19
67231.1[August 9, 2001]
SECTION 11.5. TERMINATION. If all the Obligations are paid in full and
the covenants herein contained are well and truly performed, then all of the
Collateral will revert to Mortgagor and the entire estate, right, title, and
interest of the Trustee and Lender will thereupon cease. In such case Lender
shall, upon the request of Mortgagor and at Mortgagor's cost and expense,
deliver to Mortgagor proper instruments acknowledging the release of this
instrument.
SECTION 11.6. RENEWALS, AMENDMENTS, AND OTHER SECURITY. Renewals and
extensions of the Obligations may be given at any time, amendments may be made
to agreements relating to any part of the Obligations or the Collateral, and
Lender may take or hold other security for the Obligations without notice to or
consent of Mortgagor. The Trustee or Lender may resort first to other security
or any part thereof, or first to the security herein given or any part thereof,
or from time to time to either or both, even to the partial or complete
abandonment of any security, and such action will not be a waiver of any rights
conferred by this instrument.
SECTION 11.7. EFFECT OF INSTRUMENT. This instrument shall be deemed and
construed to be, and may be enforced as, an assignment of production, a
collateral assignment, chattel mortgage or security agreement, contract, deed of
trust, financing statement, financing statement filed as a fixture filing, and
real estate mortgage, and as any one or more of them if appropriate under
applicable state law. This instrument shall also be effective as a financing
statement covering minerals or the like (including oil and gas) and accounts to
be financed at the wellhead or minehead. This instrument is to be filed in the
real estate records of the appropriate jurisdictions and in such other records
as Lender may decide.
SECTION 11.8. LIMITATIONS ON INTEREST. Regardless of any provision
contained in this instrument, any note representing the Obligations, or any
other instrument executed or delivered in connection with the Obligations, it is
the express intent of the parties that at no time shall Mortgagor pay interest
in excess of the maximum lawful rate (or any other interest amount which might
in any way be deemed usurious), and Lender will never be considered to have
contracted for or to be entitled to charge, receive, collect, or apply as
interest, any amount in excess of the maximum lawful rate (or any other interest
amount which might in any way be deemed usurious). In the event that Lender ever
receives, collects, or applies as interest any such excess, the amount which
would be excessive interest will be applied to the reduction of the principal
balance of the Obligations, or if paid in full, any remaining excess shall
forthwith be paid to Mortgagor. In determining whether the interest exceeds the
maximum lawful rate (or any other interest amount which might in any way be
deemed usurious), Mortgagor and Lender shall, to the maximum extent permitted
under applicable law: (a) characterize any non-principal payment (other than
payments expressly designated as interest) as an expense or fee rather than as
interest; (b) exclude voluntary prepayments and the effect thereof; and (c)
spread the total amount of interest throughout the entire contemplated term of
the Obligations so that the interest rate is uniform throughout the term.
SECTION 11.9. UNENFORCEABLE OR INAPPLICABLE PROVISIONS. If any
provision hereof or of any of the written instruments constituting part or all
of the Obligations is invalid or unenforceable in any jurisdiction, the other
provisions hereof and of the written instruments will remain in full force and
effect in that jurisdiction, and the remaining provisions hereof will be
liberally construed in favor of the Trustee and Lender in order to carry out the
provisions hereof. The invalidity of any provision of this instrument in any
jurisdiction will not affect the validity or enforceability of any provision in
any other jurisdiction. Any reference herein contained to a statute or law of a
state in which no part of the Collateral is situated will be deemed inapplicable
to, and not used in, the interpretation hereof.
Deed of Trust and Security Agreement - Page 14 of 19
67231.1[August 9, 2001]
SECTION 11.10. RIGHTS CUMULATIVE. Each and every right, power, and
remedy herein given to the Trustee and Lender, or either of them, or in any
other written instrument relating to the Obligations, will be cumulative and not
exclusive; and each and every right, power, and remedy whether specifically
herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the Trustee, or Lender, as
the case may be, and the exercise, or the beginning of the exercise, of any such
right, power, or remedy will not be deemed a waiver of the right to exercise, at
the same time or thereafter, any other right, power, or remedy. A waiver by
Lender or the Trustee of any right or remedy on any occasion will not be a bar
to the exercise of any right or remedy on any subsequent occasion.
SECTION 11.11. NON-WAIVER. No act, delay, omission, or course of
dealing between Lender or Trustee and Mortgagor will be a waiver of any of
Lender's or Trustee's rights or remedies. No waiver, change, or modification in
whole or in part of this instrument or any other written instrument will be
effective unless in a writing signed by Lender.
SECTION 11.12. LENDER'S EXPENSES. Mortgagor agrees to pay in full all
reasonable expenses and attorneys fees of Lender which may have been or may be
incurred by Lender in connection with the preparation of this instrument and
other related documents, the lending hereunder, the collection of the
Obligations, and the enforcement of any of Mortgagor's obligations hereunder and
under any documents executed in connection with the Obligations.
SECTION 11.13. SUBROGATION. To the extent that funds advanced as any of
the Obligations are used to pay indebtedness secured by any outstanding lien,
security interest, charge, or prior encumbrance against the Collateral, such
proceeds have been advanced by Lender at Mortgagor's request, and Lender shall
be subrogated to any and all such liens, security interests, charges, or
encumbrances, irrespective of whether those liens, security interests, charges,
or encumbrances are released; provided, however, that the terms and provisions
of this instrument shall govern the rights and remedies of Lender and shall
supersede the terms, provisions, rights, and remedies under the instruments
creating the liens, security interests, charges, or encumbrances to which Lender
is subrogated.
SECTION 11.14. GOVERNING LAW/VENUE. Except to the extent that the laws
of another state must apply to Realty Collateral situated within that state,
this instrument shall be governed by the laws of the State of Texas and
applicable Federal laws. Mortgagor and Lender irrevocably agree that venue for
any action or dispute related to the Collateral or this instrument must be in
▇▇▇▇▇▇▇ County, Texas.
SECTION 11.15. INTERPRETATION. (a) Article and section headings used in
this instrument are intended for convenience only and shall be given no
significance whatever in interpreting and construing the provisions of this
instrument.
(b) As used in this instrument, "Lender", "Trustee", and " Mortgagor"
include their respective heirs, personal representatives, successors, and
assigns. Unless context otherwise requires, words in the singular number include
the plural and in the plural number include the singular. Words of the masculine
gender include the feminine and neuter gender, and words of the neuter gender
may refer to any gender.
(c) The term "Mortgagor" includes all persons who execute this
instrument as Mortgagor. If more than one person executes this instrument as
Mortgagor, their duties and liabilities under this instrument will be joint and
several.
(d) This instrument and any and all other agreements and instruments
executed in connection herewith are to be liberally construed for the benefit of
Lender to ensure the prompt payment of the Obligations in accordance with their
terms and to ensure Lender's realization of the benefits intended to be derived
from all such agreements and instruments.
Deed of Trust and Security Agreement - Page 15 of 19
67231.1[August 9, 2001]
(e) All documents or items required to be delivered to Lender by
Mortgagor must be in form, substance, and detail acceptable to Lender, in its
sole and absolute discretion.
SECTION 11.16. COUNTERPARTS. This instrument may be executed in any
number of counterparts, each of which will for all purposes be deemed to be an
original, and all of which are identical except that, to facilitate recordation,
in any particular counterpart portions of Exhibit A which describe properties
situated in counties other than the county in which the counterpart is to be
recorded may have been omitted. A master counterpart containing all exhibits has
been filed in ▇▇▇▇▇▇▇ County, Texas, or may be found in the files of Lender.
SECTION 11.17. ADDITIONAL PROVISIONS.
Deed of Trust and Security Agreement - Page 16 of 19
67231.1[August 9, 2001]
Executed effective on the 29th day of January, 2001.
ATTEST: MORTGAGOR:
UHC PETROLEUM CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
STATE OF TEXAS ss.
ss.
COUNTY OF TARRANT ss.
(Texas and New Mexico) This instrument was acknowledged before me on
the ___ day of August, 2001, by ▇▇▇▇▇▇ ▇. ▇▇▇▇, President of UHC PETROLEUM
CORPORATION, a Texas corporation, on behalf of the corporation.
__________________________________
NOTARY PUBLIC, STATE OF TEXAS
My Commission expires:
_____________________ __________________________________
(Type or print name)
THIS INSTRUMENT WAS PREPARED BY AND
AFTER RECORDING PLEASE RETURN TO :
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
67231.1 [August 3, 2001]
Deed of Trust and Security Agreement - Page 17 of 19
67231.1[August 9, 2001]
Introduction to Exhibit A to
Deed of Trust and Security Agreement (Oil and Gas)
This instrument covers all of Mortgagor's interest now owned or
hereafter acquired in the oil and gas (or oil, gas, and mineral) leases, land,
unit declarations, and pooling orders described in Exhibit A (or described in
the instruments referred to in Exhibit A), together with all amendments or
ratifications affecting any of those leases, unit declarations, or pooling
orders. Without limitation as to the coverage of this instrument, Mortgagor
warrants that where an expense interest, a revenue interest, or an overriding
royalty interest is shown (or similar designations), that Mortgagor's expense
interest is not greater than that shown and that Mortgagor's revenue or
overriding royalty interest is not less than that shown.
Reference herein to book and page, liber and page, file numbers, film
code numbers, or other recording information refer to the recording location of
each respective lease in the county where the land covered by the lease is
located. Any reference herein to oil or gas ▇▇▇▇▇ or land covered is for
warranty of interest, administra tive convenience, and identification and is not
intended to limit or restrict the rights, titles, interests, or properties
covered by this instrument.
This instrument may be executed in counterparts. To facilitate
recordation, the exhibits which describe properties in counties other than the
county in which the counterpart is to be recorded may have been omitted. A
complete copy of this instrument may be found at Lender's offices.
In some instances, the "Land Covered" column includes abbreviations
indicating the township and range of the county in which the interests are
located. For example: "T-27-N, R-10-W" is Township 27 North, Range 10 West. The
following abbreviations, and various combinations of the abbreviations, may
appear before or after the section number to designate a portion of a section:
N/2 = North Half NE or NE/4 = ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇/▇ ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇ or SE/4 = Southeast Quarter
E/2 = East Half NW or NW/4 = Northwest Quarter
W/2 = West Half SW or SW/4 = Southwest Quarter
If two or more of the above abbreviations appear in sequence, the first
abbreviation is that specified portion of the next abbreviation. For example:
"SW/4 SW/4 SE/4" is the Southwest Quarter of the Southwest Quarter of the
Southeast Quarter of the particular section described.
The abbreviations "WI," "NRI," "ORRI," "BPO," and "APO" are defined as
follows:
(a) "WI" is short for "working interest" and represents the expense
interest attributable to each well.
(b) "NRI" is short for "net revenue interest" and represents the share
of production of oil, gas and other minerals attributable to the working
interest or expense interest.
(c) "ORRI" is short for "overriding royalty interest" and represents
the overriding royalty attributable to oil and gas production from each well.
(d) "BPO" and "APO" refer to "before payout" and "after payout"
respectively, as payout may be defined in agreements affecting the applicable
interest or interests.
Deed of Trust and Security Agreement - Page 18 of 19
67231.1[August 9, 2001]
Exhibit A to
Deed of Trust and Security Agreement
Notwithstanding the specific description of oil and gas properties set
forth in this Exhibit, this Deed of Trust covers all of Mortgagor's interest now
owned or hereafter acquired in any and all oil and gas properties, oil and gas
(or oil, gas, and mineral) leases, land, or units, situated in whole or in part
in ▇▇▇▇▇▇▇ County, Texas.
THIS INSTRUMENT WAS PREPARED BY AND
AFTER RECORDING PLEASE RETURN TO :
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
67231.1 [August 3, 2001]
Deed of Trust and Security Agreement - Page 19 of 19
67231.1[August 9, 2001]
COMMERCIAL GUARANTY
This Commercial Guaranty is entered into effective January 29, 2001, by
UHC PETROLEUM CORPORATION, a Texas corporation, UHC NEW MEXICO CORPORATION, a
New Mexico corporation, and NATIONAL HERITAGE SALES CORPORATION, a Texas
corporation (collectively "Guarantors"), for the benefit of ALMAC FINANCIAL
CORPORATION, a Texas corporation ("Lender"). For valuable consideration,
Guarantors absolutely and unconditionally jointly and severally guarantee and
promise to pay to Lender or its order, in legal tender of the United States of
America, the Indebtedness (as defined below) of UNITED HERITAGE CORPORATION, a
Utah corporation ("Borrower"), to Lender on the terms and conditions set forth
in this Guaranty. Under this Guaranty, the liability of Guarantors is unlimited
and the obligations of Guarantors are continuing.
1. DEFINITIONS. The following words have the meanings assigned below when
used in this Guaranty:
(a) "Borrower" means UNITED HERITAGE CORPORATION, a Utah
corporation.
(b) "Guarantors" means UHC PETROLEUM CORPORATION, a Texas
corporation, UHC NEW MEXICO CORPORATION, a New Mexico corporation, and NATIONAL
HERITAGE SALES CORPORATION, a Texas corporation, jointly and severally.
(c) "Guaranty" means this Guaranty executed by Guarantors in favor
of Lender.
(d) "Indebtedness" means and includes any and all of Borrower's
liabilities, obligations, debts, and indebtedness to Lender, now existing or
hereinafter incurred or created, including, without limitation, all loans,
advances, interest, costs, attorneys fees, debts, overdraft indebtedness, credit
card indebtedness, lease obligations, other obligations, and liabilities of
Borrower, or any of them, any present or future judgments against Borrower, or
any of them, and all renewals, extensions, modifications, substitutions, and
rearrangements of the foregoing; and whether any such Indebtedness is
voluntarily or involuntarily incurred, due or not due, absolute or contingent,
direct or indirect, liquidated or unliquidated, determined or undetermined;
whether Borrower may be liable individually or jointly with others, or primarily
or secondarily, or as debtor, maker, comaker, drawer, endorser, guarantor, or
surety; whether such Indebtedness arises by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, overdraft, indemnity agreement, or
otherwise; whether recovery on the Indebtedness may be or may become barred or
unenforceable against Borrower for any reason whatsoever; and whether the
Indebtedness arises from transactions which may be voidable on account of
infancy, insanity, ultra ▇▇▇▇▇, or otherwise.
(e) "Lender" means ALMAC FINANCIAL CORPORATION, a Texas corporation,
its successors and assigns.
(f) "Related Documents" means and includes without limitation all
promissory notes, credit agreements, loan agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments, agreements,
and documents, whether now or hereafter existing, executed in connection with
the Indebtedness.
Commercial Guaranty - Page 1 of 7
67524.1 [August 9, 2001]
2. NATURE OF GUARANTY. This is a guaranty of payment and not of
collection. Guarantors' liability under this Guaranty shall be open and
continuous for so long as this Guaranty remains in force. Guarantors intend to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of all Indebtedness.
Accordingly, no payments made upon the Indebtedness will discharge or diminish
the continuing liability of Guarantors in connection with any remaining portions
of the Indebtedness or any of the Indebtedness which subsequently arises or is
thereafter incurred or contracted.
3. DURATION OF GUARANTY. This Guaranty will take effect when received by
Lender without the necessity of any acceptance by Lender, or any notice to
Guarantors or to Borrower, and will continue in full force until all
Indebtedness incurred, committed, or contracted before receipt by Lender of any
notice of revocation shall have been fully and finally paid and satisfied and
all other obligations of Guarantors under this Guaranty shall have been
performed in full. If Guarantors elect to revoke this Guaranty, Guarantors may
only do so in writing. Guarantors' written notice of revocation must be
delivered to Lender at the address of Lender listed above or such other place as
Lender may designate in writing. This Guaranty may be revoked only with respect
to Indebtedness incurred or contracted by Borrower, or acquired or committed to
by Lender after the date on which written notice of revocation is actually
received by Lender. No notice of revocation hereof shall be effective as to any
Indebtedness: (a) existing at the date of receipt of such notice; (b) incurred
or contracted by Borrower, or acquired or committed to by Lender, prior to
receipt of such notice; (c) now existing or hereafter created pursuant to or
evidenced by a loan agreement or commitment in existence prior to receipt of
such notice under which Borrower is or may become obligated to Lender; or (d)
renewals, extensions, consolidations, substitutions, and refinancings of the
foregoing. Guarantors waive notice of revocation given by any other guarantor of
the Indebtedness. If any Guarantor is an individual, this Guaranty shall bind
the estate of Guarantor as to Indebtedness created both before and after the
death or incapacity of Guarantor, regardless of Lender's actual notice of
Guarantor's death or incapacity. Subject to the foregoing, Guarantor's executor
or administrator or other legal representative may terminate this Guaranty in
the same manner in which Guarantors might have terminated it and with the same
effect. Release of any other guarantor of the Indebtedness, or termination or
revocation of any other guaranty of the Indebtedness, shall not affect the
liability of Guarantors under this Guaranty. It is anticipated that fluctuations
may occur in the aggregate amount of Indebtedness covered by this Guaranty, and
it is specifically acknowledged and agreed by Guarantors that reductions in the
amount of Indebtedness, even to zero dollars shall not constitute a termination
of this Guaranty.
4. AUTHORIZATION TO LENDER. Guarantors authorize Lender, either before or
after any revocation hereof, without notice or demand and without lessening or
otherwise affecting Guarantors' liability under this Guaranty, from time to
time: (a) prior to revocation as set forth above, to make one or more additional
secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (b) to alter,
compromise, renew, extend, accelerate, or otherwise change one or more times the
time for payment or other terms of the Indebtedness or any part of the
Indebtedness, including increases and decreases of the rate of interest on the
Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (c) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, fail or decide not to perfect, and
release any such security, with or without the substitution of new collateral;
(d) to release, substitute, agree not to ▇▇▇, or deal with any one or more of
Borrower's sureties, endorsers, or other guarantors on any terms or in any
manner Lender may choose; (e) to determine how, when, and what application of
payments and credits shall be made on the Indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any non-judicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of the
Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
Commercial Guaranty - Page 2 of 7
67524.1 [August 9, 2001]
5. REPRESENTATIONS, WARRANTIES, AND COVENANTS. Guarantors represent,
warrant, and covenant to Lender that (a) no representations or agreements of any
kind have been made to Guarantors which would limit or qualify in any way the
terms of this Guaranty; (b) this Guaranty is executed at Borrower's request and
not at the request of Lender; (c) Guarantors have not and will not, without the
prior written consent of Lender, sell, lease, assign, encumber, hypothecate,
transfer, or otherwise dispose of all or substantially all of Guarantors'
assets, or any interest therein; (d) Lender has made no representation to
Guarantors as to the creditworthiness of Borrower; (e) Guarantors will provide
to Lender financial statements and other financial information regarding
Guarantors as Lender may request from time to time, in form and detail
acceptable to Lender, and all such financial information heretofore and
hereafter provided to Lender is and shall be true and correct in all material
respects and fairly presents the financial condition of Guarantors as of the
dates thereof, and no material adverse change has occurred in the financial
condition of Guarantors since the date of the most current financial statements
provided to Lender; (f) Guarantors are familiar with the current financial
condition of Borrower and has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's future financial
condition and is not relying on Lender to provide such information to
Guarantors; (g) as of the date hereof, and after giving effect to this Guaranty,
(i) Guarantors are and will be solvent, (ii) the fair saleable value of
Guarantors' assets exceeds and will continue to exceed Guarantors' liabilities
(both fixed and contingent), (iii) Guarantors are and will continue to be able
to pay Guarantors' debts as they mature, and (iv) if any Guarantor is not an
individual, Guarantors have and will continue to have sufficient capital to
carry on its business and all businesses in which it is about to engage; and (h)
Guarantors have the power and authority to execute, deliver, and perform this
Guaranty and the other Related Documents executed by Guarantors. Guarantors
agree to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantors' risks under this
Guaranty, and Guarantors further agree that Lender shall have no obligation to
disclose to Guarantors any information or documents acquired by Lender in the
course of its relationship with Borrower.
6. WAIVERS. (a) General Waivers. Guarantors waive any right to require
Lender (i) to continue lending money or to extend other credit to Borrower; (ii)
to make any presentment, protest, demand, or notice of any kind, including
notice of any nonpayment of the indebtedness or of any nonpayment related to any
collateral, or notice of any action or non-action on the part of Borrower,
Lender, any surety, endorser, or other guarantor in connection with the
Indebtedness or in connection with the creation of new or additional loans or
obligations; (iii) to notify Guarantors of any change in the manner, place,
time, or terms of payment of any of the Indebtedness (including, without
limitation, any renewal, extension, or other modification of any of the
Indebtedness); or (iv) to notify Guarantors of any change in the interest rate
accruing on any of the Indebtedness (including, without limitation, any periodic
change in such interest rate that occurs because such Indebtedness accrues
interest at a variable rate which may fluctuate from time to time). Should
Lender seek to enforce the obligations of Guarantors hereunder, Guarantors waive
any right to require Lender to first (i) resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor of the Indebtedness; (ii) to proceed directly against, marshal,
enforce, or exhaust any collateral held by Lender from Borrower, Guarantors, any
other guarantor, or any other person; or (iii) to pursue any other remedy within
Lender's power.
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67524.1 [August 9, 2001]
(b) Waiver of Defenses. Guarantors waive all rights under, or the
requirements imposed by, Chapter 34 of the Texas Business and Commerce Code.
Guarantors also waive any and all rights or defenses arising by reason of (i)
any election of remedies by Lender which destroys or otherwise adversely affects
Guarantors' subrogation rights or Guarantors' rights to proceed against Borrower
for reimbursement, including without limitation, any loss of rights Guarantors
may suffer by reason of any law limiting, qualifying, or discharging the
Indebtedness; (ii) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal tender
of the Indebtedness; (iii) any right to claim discharge of the Indebtedness on
the basis of unjustified impairment of any collateral for the Indebtedness; or
(iv) any defenses given to guarantors at law or in equity other than actual
payment and performance of the Indebtedness. This Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
all or any part of the Indebtedness is rescinded or must otherwise be returned
by Lender upon the insolvency, bankruptcy, or reorganization of Borrower,
Guarantors, any other guarantor of all or any part of the Indebtedness, or
otherwise, all as though such payment had not been made.
(c) Waiver of Claims. Guarantors further waive and agree not to
assert or claim at any time any deductions to the amount guaranteed under this
Guaranty for any claim of set off, counterclaim, counter demand, recoupment, or
similar right, whether such claim, demand, or right may be asserted by Borrower,
Guarantors, or both. In addition to any other waivers, agreements, and covenants
of Guarantors set forth herein, Guarantors hereby further waive and release all
claims, causes of action, defenses, and offsets for any act or omission of
Lender, its directors, officers, employees, representatives, or agents in
connection with Lender's administration of the Guaranteed Indebtedness, except
for Lender's willful misconduct and gross negligence.
(d) Waiver of Subrogation. Notwithstanding any provision in this
Guaranty to the contrary, Guarantors hereby waive and release (i) any and all
rights of subrogation, reimbursement, indemnification, or contribution which it
may have after payment in full or in part of the Indebtedness against others
liable on any of the Indebtedness, (ii) any and all rights to be subrogated to
the rights of Lender in any collateral or security for any of the Indebtedness
after payment in full or in part of the Indebtedness, and (iii) any and all
other rights and claims of Guarantors against Borrower or any third party as a
result of Guarantors' payment of any Indebtedness.
(e) Waivers Binding. Guarantors warrant and agree that each of the
waivers set forth above is made with Guarantors' full knowledge of its
significance and consequences and that, under the circumstances, the waivers are
reasonable and not contrary to public policy or law. If any such waiver is
determined to be contrary to any applicable law or public policy, such waiver
shall be effective only to the extent permitted by law or public policy.
7. PAYMENT BY GUARANTORS. In the event of a default in the payment or
performance of all or any part of the Indebtedness when such Indebtedness
becomes due, whether by its terms, by acceleration, or otherwise, Guarantors
shall, without notice or demand, promptly pay the amount due thereon to Lender,
in lawful money of the United States. The exercise by Lender of any right or
remedy under this Guaranty or under any other agreement or instrument, at law,
in equity or otherwise, shall not preclude concurrent or subsequent exercise of
any other right or remedy. Whenever Guarantors pay any sum which is or may
become due under this Guaranty, written notice must be delivered to Lender
contemporaneously with such payment. In the absence of such notice to Lender by
Guarantors, any sum received by Lender on account of the Indebtedness shall be
conclusively deemed paid by Borrower.
Commercial Guaranty - Page 4 of 7
67524.1 [August 9, 2001]
8. MISCELLANEOUS PROVISIONS. (a) Amendments. This Guaranty, together
with any Related Documents, constitutes the entire understanding and agreement
of the parties as to the matters set forth in this Guaranty and supersedes all
prior written and oral agreements and understandings, if any, regarding same. No
alteration of or amendment to this Guaranty shall be effective unless given in
writing and signed by the party or parties sought to be charged or bound by the
alteration or amendment.
(b) Applicable Law. This Guaranty has been delivered to Lender and
is performable in ▇▇▇▇▇▇▇ County, Texas. Courts within the State of Texas have
jurisdiction over any dispute arising under or pertaining to this Guaranty, and
venue for such dispute shall be in ▇▇▇▇▇▇▇ County, Texas. THIS GUARANTY SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAWS.
(c) Costs and Expenses. Guarantors shall also pay on demand by
Lender all costs and expenses, including, without limitation, all reasonable
attorneys fees, incurred by Lender in connection with the enforcement or
collection of this Guaranty and with the collection or sale of any collateral
securing this Guaranty. This covenant shall survive the payment of the
Indebtedness.
(d) Notice. All notices required to be given by either party to the
other under this Guaranty shall be in writing and, except for revocation notices
by Guarantors, shall be effective when actually delivered or when deposited with
a nationally recognized overnight courier, or when deposited in the United
States mail, first class postage prepaid, addressed to the party to whom the
notice is to be given at the address shown below or to such other addresses as
either party may designate to the other in writing. All revocation notices by
Guarantors shall be in writing and shall be effective only upon delivery to
Lender as provided above in the section titled "DURATION OF GUARANTY." For
notice purposes, Guarantors agree to keep Lender informed at all times of
Guarantors' current address. In the event that Guarantors are entitled to
receive any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Indebtedness or this Guaranty, reasonable notice
shall be deemed given when such notice is given pursuant to the terms of this
Subsection ten (10) days prior to the date any public sale, or after which any
private sale, of any such collateral is to be held.
(e) Interpretation. In all cases where there is more than one
Borrower, then all words used in this Guaranty in the singular shall be deemed
to have been used in the plural where the context and construction so require;
and where there is more than one Borrower named in this Guaranty, the word
"Borrower" shall mean all and any one or more of them. This Guaranty is for the
benefit of Lender, its successors and assigns. This Guaranty is binding upon
Guarantors and Guarantors' heirs, executors, administrators, personal
representatives, and successors. Caption headings in this Guaranty are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Guaranty. If a court of competent jurisdiction finds any
provision of this Guaranty to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances, and all provisions of
this Guaranty in all other respects shall remain valid and enforceable. If any
one or more of Borrower or Guarantors are corporations, limited liability
companies, or partnerships, it is not necessary for Lender to inquire into the
powers of Borrower or Guarantors or of the officers, directors, managers,
members, partners, or agents acting or purporting to act on their behalf, and
any Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed under this Guaranty.
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67524.1 [August 9, 2001]
(f) Waiver. Lender shall not be deemed to have waived any rights
under this Guaranty unless such waiver is given in writing and signed by Lender,
and then only in the specific instance and for the purpose given. No delay or
omission on the part of Lender in exercising any right shall operate as a waiver
of such right or any other right. A waiver by Lender of a provision of this
Guaranty shall not prejudice or constitute a waiver of Lender's right to
thereafter demand strict compliance with that provision or any other provision
of this Guaranty. No prior waiver by Lender, nor any course of dealing between
Lender and Guarantors, shall constitute a waiver of any of Lender's rights or of
any of Guarantors' obligations as to any future transactions. Whenever the
consent of Lender is required under this Guaranty, the granting of such consent
by Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required, and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
EACH UNDERSIGNED GUARANTORS ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTORS' EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY". NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE.
Signed effective the 29th day of January, 2001.
GUARANTORS:
ATTEST: UHC PETROLEUM CORPORATION
By:_________________________ By:_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
ATTEST: UHC NEW MEXICO CORPORATION
By:_________________________ By:_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
ATTEST: NATIONAL HERITAGE SALES CORPORATION
By:_________________________ By:_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
Commercial Guaranty - Page 6 of 7
67524.1 [August 9, 2001]
Guarantors' Address:
▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Lender's address:
ALMAC FINANCIAL CORPORATION
▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
67524.1 [August 9, 2001]
Commercial Guaranty - Page 7 of 7
67524.1 [August 9, 2001]
To be filed in
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
Counties, New Mexico
MORTGAGE, DEED OF TRUST, AND SECURITY AGREEMENT
(OIL AND GAS)
The undersigned, UHC NEW MEXICO CORPORATION ("Mortgagor"), a New Mexico
corporation, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, TRUSTEE
(the "Trustee"), and ALMAC FINANCIAL CORPORATION, a Texas corporation
("Lender"), ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, agree as follows:
ARTICLE 1. - DEFINITIONS.
SECTION 1.1. DEFINED TERMS. For the purposes of this instrument:
(a) "Code" means the Texas Business and Commerce Code, except with
respect to Collateral situated in another state, in which case it means the
Uniform Commercial Code of that state.
(b) "Collateral" means Fixture Collateral, Personalty Collateral, and
Realty Collateral.
(c) "Effective Date" means the 29th day of January, 2001, but if no
date is specified, the term means the date of execution of this instrument.
(d) "Fixture Collateral" means all of Mortgagor's interest in and to
all Operating Equipment which is or becomes so related to the Oil and Gas
Property or any part thereof that an interest in the equipment arises under the
real property law of the state in which situated.
(e) "Governmental Authority" means the United States, the state,
county, city, or any other political subdivision in which the Mortgagor conducts
business or the Collateral is situated, and any other political subdivision,
agency, commission, or instrumentality exercising jurisdiction over Mortgagor,
the Obligations, or the Collateral or from time to time constituted to regulate
the development and operation of the Collateral and the production and sale of
Hydrocarbons and other minerals therefrom.
(f) "Governmental Requirements" means all laws, ordinances, rules,
regulations, judgments, decrees, orders, permits, grants, franchises, licenses,
agreements, or other restrictions of any Governmental Authority applicable to
Mortgagor, the Obligations, or the Collateral.
(g) "Hydrocarbons" means oil, gas, other liquid or gaseous
hydrocarbons, and all products refined therefrom.
(h) "Land" means all land described in Exhibit A attached, in the
Leases, or in any other documents, instruments, or agreements described in
Exhibit A.
(i) "Leases" means all oil and gas (or oil, gas, and mineral) leases
described in Exhibit A attached or that cover or relate to the Land or any part
thereof.
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67238.1[August 9, 2001]
(j) "Obligations" means the aggregate of:
(1) An amended and restated revolving credit note dated
January 29, 2001, in the principal amount of $1,750,000.00, executed by United
Heritage Corporation ("Borrower"), payable to the order of Lender, and maturing
on January 29, 2003;
(2) Any and all other or additional indebtedness or
liabilities for which Borrower or Mortgagor is now or may become liable to
Lender in any manner (including without limitation overdrafts in a bank
account), whether under this instrument or otherwise, either primarily or
secondarily, absolutely or contingently, directly or indirectly, and whether
matured or unmatured, regardless of how the indebtedness or liability may have
been or may be acquired by Lender; and
(3) Any and all extensions and renewals of or substitutes for
any of the foregoing indebtedness, obligations, and liabilities or any part
thereof.
The Obligations secured by this instrument may include future advances to be
made by Lender. Although Mortgagor acknowledges that Lender is not obligated to
do so, Lender and Mortgagor presently contemplate that Lender may make future
loans to Mortgagor which are intended to be Obligations secured by this
instrument.
(k) "Oil and Gas Property" means all Mortgagor's interests of whatever
nature (including but not limited to all royalties, overriding royalties,
mineral interests, working interests, net profits interests, production
payments, and other interests), whether now owned or hereafter acquired, in:
(1) The Land;
(2) The Leases;
(3) (i) The properties now or hereafter pooled or unitized
with the Leases or the Land; (ii) all presently existing or future unitization
agreements, communitization agreements, pooling agreements, and declarations of
pooled units and the units created thereby (including, without limitation, all
units created under any Governmental Requirement) affecting all or any portion
of the Leases or the Land, and including, without limitation, the units which
may be described or referred to in Exhibit A; (iii) all operating agreements,
contracts, subleases, farmouts, and other agreements which relate to any of the
Leases or any part of the Land or which relate to the production, sale,
purchase, exchange, or processing of the Hydrocarbons from or attributable to
the Leases or the Land; and (iv) the Leases and the Land described in Exhibit A
even though Mortgagor's interests therein are incorrectly described or a
description of a part or all of the Leases or the Land or Mortgagor's interests
therein are omitted; and
(4) All unsevered and unextracted Hydrocarbons in, under, or
attributable to the Land.
(l) "Operating Equipment" means all surface or subsurface machinery,
equipment, facilities, supplies, or other property of whatsoever kind or nature
now or hereafter located on any of the Oil and Gas Property, which are useful
for the production, treatment, storage, or transportation of Hydrocarbons.
(m) "Personalty Collateral" means all of Mortgagor's interest in and to
all Operating Equipment, all Hydrocarbons extracted from or attributable to the
Oil and Gas Property, all Production Sale Contracts, and all rents, issues,
profits, proceeds, products, revenues, and other income from or attributable to
the preceding collateral.
(n) "Proceeds" means whatever is received upon the sale, exchange,
collection, or other disposition of the Collateral and from insurance payable by
reason of loss or damage to the Collateral.
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67238.1[August 9, 2001]
(o) "Production Sale Contract" means a contract now in effect or
hereafter entered into for the sale, purchase, exchange, or processing of
Hydrocarbons extracted from or attributable to the Oil and Gas Property.
(p) "Realty Collateral" means all of Mortgagor's interest, now owned or
hereafter acquired, in and to the Oil and Gas Property.
Other terms are defined hereafter in this instrument.
ARTICLE 2. - CREATION OF SECURITY.
SECTION 2.1. GRANT. In consideration of Lender's advancing or extending
the funds or credit constituting the Obligations, and in consideration of the
mutual covenants contained herein, and for the purpose of securing payment and
performance of the Obligations, Mortgagor grants, bargains, sells, and conveys
the Realty Collateral and Fixture Collateral unto Trustee for the benefit of
Lender.
SECTION 2.2. CREATION OF SECURITY INTEREST. In addition to the grant
contained in Section 2.1, and for the same consideration, Mortgagor grants to
Lender a security interest in all Personalty Collateral and Fixture Collateral,
now owned or hereafter acquired by Mortgagor, and all Proceeds.
SECTION 2.3. PROCEEDS. The claim of Proceeds shall not be construed to
mean that Lender consents to the sale or other disposition of any part of the
Collateral other than Hydrocarbons extracted from or attributable to the Oil and
Gas Property and sold in the ordinary course of business.
ARTICLE 3. - ASSIGNMENT OF PROCEEDS.
SECTION 3.1. LENDER'S RECEIPT OF PRODUCTION PROCEEDS. (a) Lender will
be entitled to receive all Hydrocarbons (and the Proceeds therefrom) which are
extracted from or attributable to the Oil and Gas Property beginning at 7:00
a.m. on the Effective Date. Mortgagor authorizes and directs all parties
producing, purchasing, and receiving Hydrocarbons or the Proceeds therefrom to
treat Lender as entitled in Mortgagor's place and stead to receive the same; and
further those parties will be fully protected in so treating Lender and will be
under no obligation to see to the application by Lender of any Proceeds received
by it.
(b) Mortgagor hereby assigns to Lender all liens and security interests
of Mortgagor securing payment of proceeds from the sale of Hydrocarbons,
including security interests provided by the Code.
SECTION 3.2. APPLICATION OF PROCEEDS. All payments received by Lender
pursuant to Section 3.1 above shall be placed in a collateral collection account
at Lender and on the 25th day of each month applied as follows:
(a) First, toward satisfaction of all costs and expenses incurred in
connection with the collection of Proceeds and the payment of any part of the
Obligations not represented by a written instrument.
(b) Second, to the payment of all accrued interest on the Obligations.
(c) Third, to the payment of any then due and owing principal
constituting part of the Obligations.
(d) The balance, if any, may either be applied against any unmatured
principal constituting part of the Obligations (the method of application being
wholly in Lender's discretion) or, at Lender's option, may be released to
Mortgagor.
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67238.1[August 9, 2001]
SECTION 3.3. MORTGAGOR'S PAYMENT DUTIES. Nothing contained herein will
limit Mortgagor's absolute duty to make payment on the Obligations when the
Proceeds received by Lender pursuant to this Article 3 are insufficient to pay
the interest and principal then owing, and the receipt of Proceeds by Lender
will be in addition to all other security now or hereafter existing to secure
payment of the Obligations.
SECTION 3.4. LIABILITY OF LENDER. Lender has no obligation to enforce
collection of any Proceeds and is hereby released from all responsibility in
connection therewith except the responsibility to account for Proceeds actually
received.
SECTION 3.5. ASSIGNMENT OF AWARDS AND SETTLEMENTS. All judgments,
awards of damages, and settlements hereafter made resulting from condemnation
proceedings (or threatened condemnation proceedings) or the taking of all or any
part of the Collateral under the power of eminent domain, or for any damage
(whether caused by such taking or otherwise) to any part of Collateral, or to
any rights appurtenant thereto, are hereby assigned by Mortgagor to Lender to be
applied to the Obligations.
ARTICLE 4. - MORTGAGOR'S WARRANTIES AND COVENANTS.
SECTION 4.1. PAYMENT OF OBLIGATIONS. Mortgagor covenants that Mortgagor
shall pay all Obligations when due. If any part of the Obligations is not
evidenced by a writing specifying a due date, Mortgagor agrees to pay the same
upon demand. All Obligations are payable to Lender at the address shown above.
SECTION 4.2. WARRANTIES. (a) Mortgagor warrants that:
(1) Mortgagor, to the extent of the interests specified in
Exhibit A, has valid and indefeasible title to each property right or interest
constituting the Collateral and has a good and legal right to grant and convey
same to the Trustee and Lender; and
(2) Without limitation as to the coverage of this instrument,
where an expense interest, a revenue interest, or a royalty interest is shown,
Mortgagor's expense interest is not greater than that shown and that its revenue
or royalty interest is not less than that shown; and
(3) Mortgagor is receiving payment, on a monthly basis, for
its share of production from all ▇▇▇▇▇ located on the Land or Leases, or on
lands or leases pooled therewith, and, where a revenue interest is shown for a
well or ▇▇▇▇▇ in Exhibit A, Mortgagor is receiving payment for not less than the
share of production shown on the exhibit; and
(4) The oil and gas (or oil, gas, and mineral) leases included
in Oil and Gas Property are valid and subsisting and all rentals and royalties
due under each of them have been properly and timely paid; and
(5) If any ▇▇▇▇▇ are listed in Exhibit A, then those ▇▇▇▇▇ are
situated on the Land or on the real property covered by the Leases, or on lands
or leases pooled therewith; and
(6) No approval or consent of any Governmental Authority is
necessary to authorize the execution and delivery of this instrument or of any
other written instruments constituting or evidencing the Obligations, or to
authorize the observance or performance by Mortgagor of the covenants contained
in this instrument or in the other written instruments; and
(7) All information contained in statements furnished or to be
furnished Lender by or on behalf of Mortgagor in connection with any of the
Obligations or any request made pursuant to this instrument is or will be
complete and accurate; and
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(8) This instrument creates a first lien and first security
interest on the Collateral; and the Collateral is free from all liens, security
interests, or other encumbrances except as specifically set forth in Exhibit A;
and
(9) Mortgagor is not obligated, by virtue of a prepayment
arrangement under any Production Sale Contract containing a "take or pay" clause
or similar arrangement, to deliver Hydrocarbons at some future time without then
or thereafter receiving full payment therefor; and
(10) No portion of the Collateral is subject to (i) any
contractual or other obligation to deliver Hydrocarbons produced from the
Collateral to third parties for a price less than the market value thereof (or
in the case of an existing gas sales contract, less than the full regular
contract price therefor) or (ii) any contractual or other arrangement whereby
payment for production from the Collateral will not be received
contemporaneously with delivery (i.e., within 30 days after delivery for oil and
within 60 days after delivery for gas); and
(11) No part of the Collateral is subject to a gas balancing
arrangement under which an imbalance exists with respect to which Mortgagor is
in an "overproduced" status and will be required to: (i) permit one or more
third parties to take a portion of the production attributable to the Collateral
without payment of the full market price thereof (or in the case of an existing
Production Sale Contract, full regular contract); or (ii) make payment in cash,
in order to correct the imbalance; and
(12) There are no "back in" or "reversionary" interests held
by third parties which would reduce the interest of Mortgagor in the Collateral
except as set forth in Exhibit A; and
(13) There are no prior consent rights or preferential
purchase rights in third parties affecting any part of the Collateral.
(b) All of the warranties and representations of Mortgagor contained in
this instrument are and will be in all respects true and correct both as of the
date of execution of this instrument and the Effective Date and as of the date
of each extension of credit by Lender to Mortgagor, and the warranties contained
in Section 4.2(a)(5) also shall be in all respects true and correct when any
item such as referred to therein is furnished to Lender.
(c) Mortgagor warrants and agrees forever to defend the Collateral
against every person whomsoever lawfully claiming the same or any part thereof,
and Mortgagor shall maintain and preserve the lien and security interest herein
created as long as any of the Obligations remain unpaid.
SECTION 4.3. FURTHER ASSURANCES. Mortgagor agrees to execute and
deliver such other and further instruments and do such other and further acts as
in the opinion of Lender may be necessary or desirable to carry out more
effectively the purposes of this instrument, including, without limiting the
generality of the foregoing:
(a) Prompt correction of any defect which may hereafter be discovered
in the title to the Collateral, or in the execution and acknowledgment of this
instrument, any written instrument constituting or evidencing any of the
Obligations, or any other document used in connection herewith; and
(b) Prompt execution and delivery of all division or transfer orders
which in Lender's opinion are required to transfer to Lender the proceeds from
the sale of all Hydrocarbons severed and extracted from or attributable to the
Oil and Gas Property.
SECTION 4.4. OPERATION OF MORTGAGED PROPERTY. As long as any of the
Obligations remain unpaid, and whether or not Mortgagor is the operator of the
Oil and Gas Property, Mortgagor shall (at Mortgagor's own expense):
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(a) Do all things necessary to keep Mortgagor's rights in the
Collateral unimpaired; and
(b) Not abandon any well or forfeit, surrender, or release any lease,
sublease, farmout, or any operating agreement without Lender's prior written
consent; and
(c) Cause the Collateral to be maintained, developed, and protected
against drainage and continuously operated for the production of Hydrocarbons in
a good and workmanlike manner as a prudent operator would in accordance with
generally accepted practices, applicable operating agreements, and all
Governmental Requirements; and
(d) Promptly pay or cause to be paid when due and owing (and upon
request provide Lender with proof of payment) all rentals and royalties payable
in respect of the Collateral; all expenses incurred in or arising from the
operation or development of the Collateral; and all taxes, assessments, and
governmental charges legally imposed upon this instrument, upon the Collateral,
and upon the interest of Lender or of the Trustee; and
(e) Cause the Operating Equipment to be kept in good and effective
operating condition and cause to be made all repairs, renewals, replacements,
additions, and improvements thereof or thereto needful to the production of
Hydrocarbons from the Oil and Gas Property; and permit the Trustee and Lender
(through their agents and employees) to enter upon the Oil and Gas Property for
the purpose of investigating and inspecting the conditions and operations of the
Collateral; and
(f) Cause the Collateral to be kept free and clear of liens, charges,
security interests, and encumbrances of every character other than the lien and
security interest created by this instrument; taxes constituting a lien but not
due and payable; defects or irregularities in title which are not such as to
interfere materially with the development, operation, or value of the Collateral
and not such as to affect materially the title thereto; those set forth or
referred to in Exhibit A; those being contested in good faith by Mortgagor and
which do not, in the judgment of Lender, jeopardize the Trustee's and Lender's
rights in and to the Collateral; and those consented to in writing by Lender;
and
(g) Carry with standard insurance companies and in amounts satisfactory
to Lender the following insurance: workers' compensation insurance and public
liability and property damage insurance in respect of all activities in which
Mortgagor might incur liability for death or injury or damage to or destruction
of property; and to the extent insurance is carried by others engaged in similar
undertakings in the same general areas in which the Collateral is located, well
damage and blow out insurance and insurance in respect of the Operating
Equipment against loss or damage by fire, lightning, hail, tornado, explosion,
and other similar risks. All policies of insurance shall provide for not less
than ten days prior written notice to Lender of cancellation, and Lender shall
be named as a loss payee of all insurance insuring any of the Operating
Equipment against loss or damage. Lender may apply any insurance payments which
it receives toward part or full satisfaction of any or all of the Obligations
whether or not they are then due.
SECTION 4.5. RECORDING AND FILING. Mortgagor shall pay all costs of
filing, registering, and recording this and every other instrument in addition
or supplemental thereto, and all financing statements Lender may require, in
such offices and places and at such times and as often as may be, in the
judgment of Lender, necessary to preserve, protect, and renew the lien and
security interest herein created as a first lien and prior security interest on
and in the Collateral and otherwise do and perform all matters or things
necessary or expedient to be done or observed by reason of any Governmental
Requirements for the purpose of effectively creating, maintaining, and
preserving the lien and security interest created herein and on the Collateral.
Mortgagor shall also pay the costs of obtaining reports from appropriate filing
officers concerning financing statement filings in respect of any of the
Collateral in which a security interest is granted herein. Mortgagor hereby
authorizes Lender to authenticate and file all financing statements or
amendments to financing statement in such offices and places and at such times
and as often as may be, in the judgment of Lender, necessary to preserve,
protect, and renew the security interests herein created in the Collateral.
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SECTION 4.6. RECORDS, STATEMENTS, AND REPORTS. (a) Mortgagor shall at
all times keep complete and accurate business records in conformity with
generally accepted accounting principles consistently applied, and Lender may
from time to time have access to and examine and copy such records.
(b) When and to the extent required by Lender, Mortgagor shall furnish
to Lender:
(1) Within sixty days after the close of each fiscal year of
Mortgagor, a copy of Mortgagor's annual audited financial statements, consisting
of at least a balance sheet as of the close of the year, a statement of
operations, a statement of cash flow, a statement of changes in shareholders'
equity (if Mortgagor is a corporation), and a statement of contingent
liabilities, signed by independent certified public accountants acceptable to
Lender and accompanied by the accountants' opinion that the report fairly
presents the financial condition of Mortgagor as of the close of the fiscal year
and the results of its operations for the year; and
(2) Within forty-five days after the end of the first three
fiscal quarters of each fiscal year of Mortgagor, a copy of Mortgagor's
unaudited quarterly financial statements, consisting of at least a balance
sheet, a statement of operations, a statement of cash flow, a statement of
changes in shareholders' equity, and a statement of contingent liabilities, for
the quarter and for the period from the beginning of the fiscal year to the
close of the quarter; and
(3) Whenever requested by Lender (but not more than once a
year), a report prepared by an independent petroleum engineer or engineering
firm acceptable to Lender, prepared in accordance with the customary standards
and procedures of the petroleum industry, estimating the quantity of
Hydrocarbons recoverable from the Oil and Gas Property and the projected income
and expense attributable to the Collateral, including without limitation, a
description of reserves, net revenue interests and working interests
attributable to the reserves, rates of production, gross revenues, operating
expenses, ad valorem taxes, capital expenditures necessary to cause the Oil and
Gas Property to achieve the rate of production set forth in the report, net
revenues and present value of future net revenues attributable to the reserves
and production therefrom, a statement of the assumptions upon which the
determinations were made, and any other matters related to the operation of the
Oil and Gas Property and the estimated income therefrom; and
(4) Monthly, a report on a lease-by-lease or unit basis
showing the gross proceeds from the sale of Hydrocarbons produced from the Oil
and Gas Property; the quantity of Hydrocarbons sold; the severance, gross
production, occupation, or gathering taxes deducted from or paid out of the
proceeds; the lease operating expenses, tangible drilling costs, and capital
expenditures; the number of ▇▇▇▇▇ operated, drilled, or abandoned; and such
other information as Lender may reasonably request; and
(5) Within 30 days of any change and at any time upon request
by Lender, a list showing the name and address of each purchaser of Hydrocarbons
produced from or attributable to the Realty Collateral; and
(6) Such other information concerning the business affairs and
financial condition of Mortgagor as Lender may from time to time reasonably
request.
(c) All financial information shall be in form, substance, and detail
satisfactory to Lender in its sole and absolute discretion and, unless Lender
consents in writing, shall be prepared in accordance with generally accepted
accounting principles applied on a basis consistent with the preceding year and
certified as accurately presenting the financial condition of Mortgagor by a
certified public accountant or authorized officer or representative of
Mortgagor, acceptable to Lender.
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SECTION 4.7. CORPORATION, PARTNERSHIP, OR OTHER ENTITY. If Mortgagor is
a corporation, partnership, or any other entity, it is, and will continue to be,
duly organized, formed, and existing under the laws of the state in which it is
incorporated, organized, or formed, duly qualified to transact business in each
state where the conduct of its business requires it to be qualified, and duly
authorized to execute and deliver the written instruments comprising the
Obligations and this instrument and to observe and perform its duties thereunder
and hereunder. Mortgagor will not, without the prior written consent of Lender,
make any material change in its management or reorganize or consolidate or merge
with any other corporation, partnership, or other entity.
SECTION 4.8. INDEMNIFICATION. Mortgagor agrees to indemnify Trustee,
Lender, and Lender's officers, directors, shareholders, employees, agents,
attorneys, partners, and their respective heirs, successors, and assigns
(collectively "Indemnified Parties") against, and to reimburse Indemnified
Parties with respect to, all claims, actions, liabilities, damages, losses, and
judgments, including strict liability claims (all of which are hereafter
referred to as "Claims"), and all costs and expenses and other charges of any
description whatsoever, including (without limitation) attorneys fees, court
costs, administrative costs, costs of appeal, and all costs and expenses
incurred in investigating into or defending against any Claims, made against or
sustained or incurred by Indemnified Parties, arising or related in any way to
the Collateral, this instrument, or the Obligations, and including the
assertion, either before or after the payment in full of the Obligations, that
Lender wrongfully received Hydrocarbons or Proceeds pursuant to this instrument.
Indemnified Parties will have the right to employ attorneys and to defend
against Claims; and, unless furnished with reasonable indemnity, Indemnified
Parties will have the right to pay or compromise and adjust all Claims.
Mortgagor shall indemnify and pay to Indemnified Parties all amounts as may be
paid by Indemnified Parties in compromise or adjustment of any Claim or as may
be adjudged against Indemnified Parties in respect of any Claim. The liabilities
of Mortgagor as set forth in this Section 4.8 will survive the termination of
this instrument.
ARTICLE 5. - DEFAULT.
SECTION 5.1. EVENTS OF DEFAULT. The term "Event of Default" means the
occurrence of any of the following events or the existence of any of the
following conditions:
(a) Failure by Mortgagor to make punctual payment when due of any of
the Obligations or other failure to keep or punctually perform any of the
provisions contained herein, in the Loan Agreement, in any other written
instrument evidencing any of the Obligations, or in any other agreement with
Lender (whether now existing or entered into hereafter); or
(b) Any warranty, representation, or statement by Mortgagor or made or
furnished to Lender by or on behalf of Mortgagor in connection with the
Obligations is determined by Lender to be untrue in any material respect; or
(c) Any Event of Default under the Loan Agreement; or
(d) Mortgagor's title to any substantial part of the Collateral becomes
the subject matter of litigation which would or might, in Lender's opinion, upon
final determination result in substantial impairment or loss of the security
provided by this instrument; or
(e) Mortgagor sells, conveys, mortgages, or grants security interests
in or otherwise disposes of or encumbers any of the Collateral or any of
Mortgagor's right, title, or interest therein (excluding sales of extracted
Hydrocarbons in the ordinary course of Mortgagor's business) without first
securing Lender's written consent; or
(f) Mortgagor becomes insolvent, or makes a general assignment for the
benefit of creditors, or institutes or consents to any proceeding in insolvency
or bankruptcy or for the adjustment, extension, or composition of debts, or for
any other relief under any bankruptcy or insolvency law or laws relating to the
relief of debtors; or
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(g) Mortgagor is adjudged bankrupt, or any involuntary proceeding is
instituted against Mortgagor in insolvency or bankruptcy or for the
readjustment, extension, or composition of debts or for any other relief under
any bankruptcy or insolvency law or laws relating to the relief of debts, and
such proceedings are not dismissed within thirty days after being instituted; or
(h) Any substantial part of the property or assets of Mortgagor or any
part of the Collateral is attached or is placed in the hands of a receiver,
trustee, or other officer or representative of a court or of creditors, and the
attachment or receivership continues for any period of thirty consecutive days;
or
(i) Mortgagor's death, liquidation, termination of existence, merger or
consolidation with another, or forfeiture of right to do business, or a material
change in the business, management, or ownership of Mortgagor; or
(j) Lender deems any part of the Collateral or the prospects for
repayment of the Obligations impaired.
SECTION 5.2. ACCELERATION UPON DEFAULT. Upon the occurrence of any
Event of Default, or at any time thereafter, Lender may, at its option, declare
the entire unpaid principal of and the interest accrued on the Obligations to be
forthwith due and payable, without any notice, presentment, notice of intent to
accelerate, notice of acceleration, or demand of any kind, all of which are
hereby expressly waived.
SECTION 5.3. OPERATION OF PROPERTY. Upon the occurrence of an Event of
Default, or at any time thereafter, and in addition to all other rights herein
conferred on the Trustee, the Trustee (or any person, firm, or corporation
designated by Lender) will have the right and power, but will not be obligated,
to enter upon and take possession of all or any part of the Collateral, to
exclude Mortgagor therefrom, and to hold, use, administer, manage, and operate
the same to the extent that Mortgagor could do so. The Trustee, or any person,
firm, or corporation designated by Lender, may operate the property without any
liability to Mortgagor in connection with the operations except for bad faith;
and the Trustee, or any person, firm, or corporation designated by Lender, will
have the right to collect, receive, and receipt for all Hydrocarbons produced
and sold from the properties, to make repairs, to purchase machinery and
equipment, to conduct workover operations, to drill additional ▇▇▇▇▇, and to
exercise every power, right, and privilege of Mortgagor with respect to the
Collateral. Providing there has been no foreclosure sale, when and if the
expenses of the operation and development (including costs of unsuccessful
work-over operations or additional ▇▇▇▇▇) have been paid and the Obligations
paid, the properties shall be returned to the Mortgagor.
SECTION 5.4. ANCILLARY RIGHTS. Upon the occurrence of an Event of
Default, or at any time thereafter, and in addition to all other rights, Lender
may proceed by a suit or suits in equity or at law for the specific performance
of any covenant or agreement herein contained or in aid of the execution of any
power herein granted, for the appointment of a receiver pending any foreclosure
or sale hereunder, or for the enforcement of any other appropriate legal or
equitable remedy.
ARTICLE 6. - LENDER'S RIGHTS AS TO REALTY COLLATERAL UPON DEFAULT.
SECTION 6.1. JUDICIAL FORECLOSURE. Upon the occurrence of an Event of
Default, or at any time thereafter, in lieu of the exercise of the non-judicial
power of sale hereafter given, Lender may proceed by suit for foreclosure of its
lien and for a sale of the Realty Collateral.
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SECTION 6.2. NON-JUDICIAL FORECLOSURE (TEXAS). [Intentionally deleted.]
SECTION 6.3. NON-JUDICIAL FORECLOSURE (STATES OTHER THAN TEXAS). Upon
the occurrence of any Event of Default, or at any time thereafter, to the extent
permitted by law the Trustee shall, in response to Lender's request (which
Mortgagor agrees will be presumed to have been given), enforce this trust by
selling the Realty Collateral situated in states other than Texas. The action of
the Trustee shall conform to the law of the state where the Realty Collateral is
located, and unless prohibited by the law of that state, the Trustee may sell at
one or more sales, as an entirety or in parcels, as the Trustee may elect, at
such place or places and otherwise in such manner and upon such notice as may be
required by law, or, in the absence of any such requirement, as the Trustee may
deem appropriate, and to make conveyance to the purchaser or purchasers. Unless
prohibited by the law of that state, where the Realty Collateral is situated in
more than one county (or judicial district), it may be sold in any county (or
judicial district) in which any part is situated. The Trustee may postpone the
sale of all or any portion of the Realty Collateral by public announcement at
the time fixed and place of sale, and from time to time thereafter may further
postpone the sale by public announcement made at time of sale fixed by the
preceding postponement. Sale of a part of the Realty Collateral will not exhaust
the power of sale, and sales may be made from time to time until all the
property is sold or the Obligations are paid in full.
ARTICLE 7. - RIGHTS AS TO PERSONALTY AND FIXTURE COLLATERAL UPON DEFAULT.
SECTION 7.1. PERSONALTY COLLATERAL. Upon the occurrence of an Event of
Default, or at any time thereafter, Lender may, without notice to Mortgagor,
exercise its right to declare all Obligations secured by the security interest
created herein to be immediately due and payable in which case Lender will have
all rights and remedies granted by law and particularly by the Code, including
but not limited to, the right to take possession of the Personalty Collateral,
and for this purpose Lender may enter upon any premises on which any or all of
the Personalty Collateral is situated and take possession of and operate
Personalty Collateral or remove it therefrom. Lender may require Mortgagor to
assemble the Personalty Collateral and make it available to Lender at a place to
be designated by Lender which is reasonably convenient to both parties. Unless
the Personalty Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, Lender will give
Mortgagor reasonable notice of the time and place of any public sale or of the
time after which any private sale or other disposition of the Personalty
Collateral is to be made. This requirement of sending reasonable notice will be
met if the notice is mailed, postage prepaid, to Mortgagor at the address
designated above at least five days before the time of the sale or disposition.
SECTION 7.2. SALE WITH REALTY COLLATERAL. In the event of foreclosure,
whether judicial or non-judicial, at Lender's option it may proceed under the
Code as to the Personalty Collateral or it may proceed as to both Realty
Collateral and Personalty Collateral in accordance with its rights and remedies
in respect of the Realty Collateral.
SECTION 7.3. FIXTURE COLLATERAL. Upon the occurrence of an Event of
Default, or at any time thereafter, Lender may elect to treat the Fixture
Collateral as either Realty Collateral or as Personalty Collateral and proceed
to exercise such rights as apply to the type of Collateral selected.
ARTICLE 8. - OTHER PROVISIONS CONCERNING FORECLOSURE.
SECTION 8.1. LENDER AS PURCHASER. Lender reserves the right to bid and
become the purchaser at any foreclosure sale and credit its bid at the sale
against the Obligations.
SECTION 8.2. CERTAIN ASPECTS OF NON-JUDICIAL FORECLOSURE. Recitals
contained in any conveyance to any purchaser at any sale made hereunder will
conclusively establish the truth and accuracy of the matters therein stated,
including, without limiting the generality of the foregoing, nonpayment of the
unpaid principal sum of, and the interest accrued on, the written instruments
constituting part or all of the Obligations after the same have become due and
payable, advertisement and conduct of the sale in the manner provided herein,
and appointment of any successor Trustee hereunder. Any purchaser or purchasers
will be provided with a general warranty deed binding Mortgagor. Mortgagor
ratifies and confirms all legal acts that the Trustee may do in carrying out the
Trustee's duties and obligations under this instrument.
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SECTION 8.3. EFFECT OF SALE. Any sale or sales of the Collateral or any
part thereof will operate to divest all right, title, interest, claim, and
demand whatsoever either at law or in equity, of Mortgagor in and to the
premises and the property sold, and will be a perpetual bar, both at law and in
equity, against Mortgagor, Mortgagor's heirs, personal representatives,
successors, or assigns, and against any and all persons claiming or who shall
thereafter claim all or any of the property sold from, through, or under
Mortgagor, or Mortgagor's heirs, personal representatives, successors, or
assigns. The purchaser or purchasers at the foreclosure sale will receive
immediate possession of the property purchased; and if Mortgagor retains
possession of the Realty Collateral, or any part thereof, subsequent to sale,
Mortgagor will be considered a tenant at sufferance of the purchaser or
purchasers.
SECTION 8.4. APPLICATION OF PROCEEDS. (a) The proceeds of any sale of
the Collateral or any part thereof, whether judicial or non-judicial, will be
applied as follows:
(i) First, to the payment of all expenses incurred by Lender
and the Trustee in connection therewith, including, without limiting the
generality of the foregoing, court costs, legal fees and expenses, a commission
to the Trustee of five percent of the sale price of the Realty Collateral, and
expenses of any entry or taking of possession, holding, preparing for sale,
advertising, selling, and conveying;
(ii) Second, to the payment of the Obligations; and
(iii) Third, any surplus thereafter remaining will be paid to
Mortgagor or Mortgagor's successors or assigns, as their interest may appear.
(b) Mortgagor will remain liable for any deficiency owing on the
Obligations after application of the net proceeds of any foreclosure sale.
SECTION 8.5. SUCCESSOR TRUSTEES. The Trustee may resign in writing
addressed to Lender or be removed at any time with or without cause by an
instrument in writing duly executed by Lender. In case of the death,
resignation, or removal of the Trustee, a successor Trustee or Co-Trustees may
be appointed by Lender or Lender's authorized agent by instrument of
substitution complying with any applicable requirements of law, and in the
absence of any such requirement, without other formality than an appointment and
designation in writing. Any appointment and designation will be full evidence of
the right and authority to make the same and of all facts therein recited. Upon
the making of any appointment and designation, all the estate and title of the
Trustee in all of the Realty Collateral will vest in the named successor
Trustee, and the successor will thereupon succeed to all the rights, powers,
privileges, immunities, and duties hereby conferred upon the Trustee. All
references herein to the Trustee will be deemed to refer to the Trustee from
time to time acting hereunder.
ARTICLE 9. - ENVIRONMENTAL.
SECTION 9.1. GENERAL/DEFINITIONS. Mortgagor covenants and warrants that
the Land and Mortgagor's and any operator's use of the Collateral will at all
times comply with and conform to all applicable Governmental Requirements
relating to the environment and to the transportation, distribution, storage,
placement, handling, treatment, discharge, manufacture, generation, production,
processing, or disposal (collectively "Treatment") of any emissions, discharges,
leakage, venting, exposure, releases, or threatened releases (collectively
"Release") of pollutants, contaminants, chemicals, waste, waste products,
petroleum products, radioactive waste, poly-chlorinated biphenyls, asbestos, or
any other industrial, toxic, flammable, corrosive, hazardous, or harmful
substances (collectively "Waste") into the environment including, without
limitation, ambient air, surface water, ground water, or land (collectively
"Applicable Environmental Laws"). Mortgagor further covenants that it will not
engage in or permit the operator or any other party to engage in any Treatment
or Release of Waste in, on, or affecting the Land or the Collateral in violation
of Applicable Environmental Laws.
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SECTION 9.2. ENVIRONMENTAL WARRANTIES. (a) Mortgagor further warrants
that: (i) Mortgagor is not aware and has not received notice of any past or
present violations by any party, including prior operators or owners, of
Applicable Environmental Laws affecting the Land or the Collateral; (ii)
Mortgagor has obtained all permits, licenses, and authorizations required under
Applicable Environmental Laws affecting the Land or the Collateral; (iii) no
liens arising under Applicable Environmental Laws affect the Collateral or
Mortgagor; (iv) Mortgagor does not have any liability for the Treatment or
Release of Waste in violation of Applicable Environmental Laws; (v) neither
Mortgagor or any of the Collateral is the subject of any existing, pending, or
threatened claim, action, or investigation for violations of Applicable
Environmental Laws; and (vi) all Waste, if any, generated in connection with the
Collateral has been transported, treated, and disposed of in accordance with
Applicable Environmental Laws.
(b) All warranties set forth above will be deemed to be made
by Mortgagor upon each advance under the Obligations.
SECTION 9.3. ENVIRONMENTAL NOTICE AND INSPECTION. Immediately upon
receipt of any notice from any party of a violation of Section 9.1 or if any of
the warranties in Section 9.2 become false, Mortgagor shall fully inform Lender
of the violation and take all steps necessary to clean up all contamination
related to the Treatment or Release of Waste and affecting the Land or the
Collateral and fully restore them to their prior condition. Without being liable
for any discoveries, Lender has the right, but not the obligation, to inspect
and monitor Mortgagor's compliance with the terms of this Article.
SECTION 9.4. ENVIRONMENTAL INDEMNITY. Notwithstanding any other
limitation of liability in this or any other agreement or instrument between
Mortgagor and Lender, Mortgagor agrees to indemnify Indemnified Parties against,
and to reimburse Indemnified Parties with respect to, all Claims, including
claims for bodily injury, property damage, abatement, remediation, and strict
liability claims, and all costs and expenses and other charges of any
description whatsoever, including (without limitation) attorneys fees, court
costs, administrative costs, costs of appeal, and all costs and expenses
incurred in investigating into or defending against any Claims, made against or
sustained or incurred by Indemnified Parties arising or related in any way to
Treatment or Release of any Waste in, on, or affecting the Land or the
Collateral, whether or not caused by Mortgagor or by the violation of Section
9.1.
SECTION 9.5. SURVIVAL AND REMEDIES. (a) Notwithstanding anything in
this instrument or any other instrument or agreement between Mortgagor and
Lender to the contrary, the undertakings of Mortgagor in this Article shall
survive the expiration or termination of this instrument regardless of the means
of such expiration or termination. Specifically, the indemnification in Section
9.4 shall run from the actual knowledge of Lender of any Treatment or Release of
Waste or other environmental condition covered by this Article.
(b) Upon the receipt by Lender of notice required by this
Article, or the discovery by Lender of any Treatment or Release of Waste
affecting the Land or Collateral in violation of Applicable Environmental Laws,
Lender may in its discretion, without limitation, (1) rescind the loan,
requiring Mortgagor to refund immediately all consideration previously
transferred to Mortgagor which has not been repaid, or (2) accelerate the
Obligations and seek appointment of a receiver for the Collateral, or (3) take
any other action provided by any instrument executed by and between Mortgagor
and Lender relating to this transaction. Mortgagor consents to the rescission or
receivership in such event.
Mortgage, Deed of Trust, and Security Agreement - Page 12 of 19
67238.1[August 9, 2001]
ARTICLE 10. - OTHER STATE PROVISIONS.
SECTION 10.1. NEW MEXICO. Pursuant to ss. ▇▇-▇-▇▇, ▇▇▇ ▇▇▇▇▇▇ Statutes,
as amended, Mortgagor agrees that the redemption period for any Realty
Collateral is shortened to one month, with respect to any Collateral situated
within the State of New Mexico.
ARTICLE 11. - MISCELLANEOUS.
SECTION 11.1. MORTGAGOR'S WAIVERS. Mortgagor agrees that Mortgagor will
not at any time insist upon or plead or in any manner whatever claim the benefit
of any appraisement, valuation, stay, extension, or redemption law now or
hereafter in force, if it would prevent or hinder the enforcement or foreclosure
of this instrument, the absolute sale of the Collateral, or the possession
thereof by any purchaser at any sale made pursuant to this instrument or
pursuant to the decree of any court of competent jurisdiction. Mortgagor, for
Mortgagor and all who may claim through or under Mortgagor, hereby waives the
benefit of all such laws and to the extent that Mortgagor may lawfully do so
under applicable state law, waives any and all right to have the Realty
Collateral marshaled upon any foreclosure of the lien hereof or sold in inverse
order of alienation, and Mortgagor agrees that the Trustee may sell the Realty
Collateral as an entirety.
SECTION 11.2. POOLING AND UNITIZATION. Mortgagor may not enter into
pooling or unitization agreements, or make an election under any applicable
forced pooling statute, affecting all or any part of any Oil and Gas Property
without the prior written consent of Lender. The interest in any unit
attributable to the Oil and Gas Property (or any part thereof) included therein
will become a part of the Realty Collateral, the Fixture Collateral, and the
Personalty Collateral, as the case may be, and will be subject to the lien and
security interest hereof in the same manner and with the same effect as though
the unit and the interest of Mortgagor therein were specifically described in
Exhibit A.
SECTION 11.3. ADVANCES BY LENDER OR THE TRUSTEE. If Mortgagor fails to
perform or keep any of its covenants of whatsoever kind or nature contained in
this instrument, Lender, the Trustee, or any receiver appointed hereunder, may,
but will not be obliged to, make advances to perform the same in Mortgagor's
behalf, and Mortgagor hereby agrees to repay the advanced sums and any
attorneys' fees incurred in connection therewith upon demand plus interest at
the maximum lawful rate. No advance will be deemed to relieve Mortgagor from any
default hereunder.
SECTION 11.4. DEFENSE OF CLAIMS. Mortgagor shall promptly notify the
Trustee and Lender in writing of the commencement of any legal proceedings
affecting Lender's interest in the Collateral, or any part thereof, and shall
take such action, employing attorneys acceptable to the Trustee and Lender, as
may be necessary to preserve Mortgagor's, the Trustee's, and Lender's rights
affected thereby; and should Mortgagor fail or refuse to take any such action,
the Trustee or Lender may take the action in behalf of and in the name of
Mortgagor and at Mortgagor's expense. Moreover, Lender or the Trustee on behalf
of Lender may take independent action in connection therewith as they may in
their discretion deem proper, and Mortgagor hereby agrees to make reimbursement
for all sums advanced and all expenses incurred in such actions plus interest at
the maximum lawful rate.
SECTION 11.5. TERMINATION. If all the Obligations are paid in full and
the covenants herein contained are well and truly performed, then all of the
Collateral will revert to Mortgagor and the entire estate, right, title, and
interest of the Trustee and Lender will thereupon cease. In such case Lender
shall, upon the request of Mortgagor and at Mortgagor's cost and expense,
deliver to Mortgagor proper instruments acknowledging the release of this
instrument.
Mortgage, Deed of Trust, and Security Agreement - Page 13 of 19
67238.1[August 9, 2001]
SECTION 11.6. RENEWALS, AMENDMENTS, AND OTHER SECURITY. Renewals and
extensions of the Obligations may be given at any time, amendments may be made
to agreements relating to any part of the Obligations or the Collateral, and
Lender may take or hold other security for the Obligations without notice to or
consent of Mortgagor. The Trustee or Lender may resort first to other security
or any part thereof, or first to the security herein given or any part thereof,
or from time to time to either or both, even to the partial or complete
abandonment of any security, and such action will not be a waiver of any rights
conferred by this instrument.
SECTION 11.7. EFFECT OF INSTRUMENT. This instrument shall be deemed and
construed to be, and may be enforced as, an assignment of production, a
collateral assignment, chattel mortgage or security agreement, contract, deed of
trust, financing statement, financing statement filed as a fixture filing, and
real estate mortgage, and as any one or more of them if appropriate under
applicable state law. This instrument shall also be effective as a financing
statement covering minerals or the like (including oil and gas) and accounts to
be financed at the wellhead or minehead. This instrument is to be filed in the
real estate records of the appropriate jurisdictions and in such other records
as Lender may decide.
SECTION 11.8. LIMITATIONS ON INTEREST. Regardless of any provision
contained in this instrument, any note representing the Obligations, or any
other instrument executed or delivered in connection with the Obligations, it is
the express intent of the parties that at no time shall Mortgagor pay interest
in excess of the maximum lawful rate (or any other interest amount which might
in any way be deemed usurious), and Lender will never be considered to have
contracted for or to be entitled to charge, receive, collect, or apply as
interest, any amount in excess of the maximum lawful rate (or any other interest
amount which might in any way be deemed usurious). In the event that Lender ever
receives, collects, or applies as interest any such excess, the amount which
would be excessive interest will be applied to the reduction of the principal
balance of the Obligations, or if paid in full, any remaining excess shall
forthwith be paid to Mortgagor. In determining whether the interest exceeds the
maximum lawful rate (or any other interest amount which might in any way be
deemed usurious), Mortgagor and Lender shall, to the maximum extent permitted
under applicable law: (a) characterize any non-principal payment (other than
payments expressly designated as interest) as an expense or fee rather than as
interest; (b) exclude voluntary prepayments and the effect thereof; and (c)
spread the total amount of interest throughout the entire contemplated term of
the Obligations so that the interest rate is uniform throughout the term.
SECTION 11.9. UNENFORCEABLE OR INAPPLICABLE PROVISIONS. If any
provision hereof or of any of the written instruments constituting part or all
of the Obligations is invalid or unenforceable in any jurisdiction, the other
provisions hereof and of the written instruments will remain in full force and
effect in that jurisdiction, and the remaining provisions hereof will be
liberally construed in favor of the Trustee and Lender in order to carry out the
provisions hereof. The invalidity of any provision of this instrument in any
jurisdiction will not affect the validity or enforceability of any provision in
any other jurisdiction. Any reference herein contained to a statute or law of a
state in which no part of the Collateral is situated will be deemed inapplicable
to, and not used in, the interpretation hereof.
SECTION 11.10. RIGHTS CUMULATIVE. Each and every right, power, and
remedy herein given to the Trustee and Lender, or either of them, or in any
other written instrument relating to the Obligations, will be cumulative and not
exclusive; and each and every right, power, and remedy whether specifically
herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the Trustee, or Lender, as
the case may be, and the exercise, or the beginning of the exercise, of any such
right, power, or remedy will not be deemed a waiver of the right to exercise, at
the same time or thereafter, any other right, power, or remedy. A waiver by
Lender or the Trustee of any right or remedy on any occasion will not be a bar
to the exercise of any right or remedy on any subsequent occasion.
Mortgage, Deed of Trust, and Security Agreement - Page 14 of 19
67238.1[August 9, 2001]
SECTION 11.11. NON-WAIVER. No act, delay, omission, or course of
dealing between Lender or Trustee and Mortgagor will be a waiver of any of
Lender's or Trustee's rights or remedies. No waiver, change, or modification in
whole or in part of this instrument or any other written instrument will be
effective unless in a writing signed by Lender.
SECTION 11.12. LENDER'S EXPENSES. Mortgagor agrees to pay in full all
reasonable expenses and attorneys fees of Lender which may have been or may be
incurred by Lender in connection with the preparation of this instrument and
other related documents, the lending hereunder, the collection of the
Obligations, and the enforcement of any of Mortgagor's obligations hereunder and
under any documents executed in connection with the Obligations.
SECTION 11.13. SUBROGATION. To the extent that funds advanced as any of
the Obligations are used to pay indebtedness secured by any outstanding lien,
security interest, charge, or prior encumbrance against the Collateral, such
proceeds have been advanced by Lender at Mortgagor's request, and Lender shall
be subrogated to any and all such liens, security interests, charges, or
encumbrances, irrespective of whether those liens, security interests, charges,
or encumbrances are released; provided, however, that the terms and provisions
of this instrument shall govern the rights and remedies of Lender and shall
supersede the terms, provisions, rights, and remedies under the instruments
creating the liens, security interests, charges, or encumbrances to which Lender
is subrogated.
SECTION 11.14. GOVERNING LAW/VENUE. Except to the extent that the laws
of another state must apply to Realty Collateral situated within that state,
this instrument shall be governed by the laws of the State of Texas and
applicable Federal laws. Mortgagor and Lender irrevocably agree that venue for
any action or dispute related to the Collateral or this instrument must be in
▇▇▇▇▇▇▇ County, Texas.
SECTION 11.15. INTERPRETATION. (a) Article and section headings used in
this instrument are intended for convenience only and shall be given no
significance whatever in interpreting and construing the provisions of this
instrument.
(b) As used in this instrument, "Lender", "Trustee", and " Mortgagor"
include their respective heirs, personal representatives, successors, and
assigns. Unless context otherwise requires, words in the singular number include
the plural and in the plural number include the singular. Words of the masculine
gender include the feminine and neuter gender, and words of the neuter gender
may refer to any gender.
(c) The term "Mortgagor" includes all persons who execute this
instrument as Mortgagor. If more than one person executes this instrument as
Mortgagor, their duties and liabilities under this instrument will be joint and
several.
(d) This instrument and any and all other agreements and instruments
executed in connection herewith are to be liberally construed for the benefit of
Lender to ensure the prompt payment of the Obligations in accordance with their
terms and to ensure Lender's realization of the benefits intended to be derived
from all such agreements and instruments.
(e) All documents or items required to be delivered to Lender by
Mortgagor must be in form, substance, and detail acceptable to Lender, in its
sole and absolute discretion.
Mortgage, Deed of Trust, and Security Agreement - Page 15 of 19
67238.1[August 9, 2001]
SECTION 11.16. COUNTERPARTS. This instrument may be executed in any
number of counterparts, each of which will for all purposes be deemed to be an
original, and all of which are identical except that, to facilitate recordation,
in any particular counterpart portions of Exhibit A which describe properties
situated in counties other than the county in which the counterpart is to be
recorded may have been omitted. A master counterpart containing all exhibits has
been filed in ▇▇▇▇▇▇ County, New Mexico, or may be found in the files of Lender.
SECTION 11.17. ADDITIONAL PROVISIONS.
Mortgage, Deed of Trust, and Security Agreement - Page 16 of 19
67238.1[August 9, 2001]
Executed effective on the 29th day of January, 2001.
ATTEST: MORTGAGOR:
UHC NEW MEXICO CORPORATION
By:_________________________ By:________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
STATE OF TEXAS ss.
ss.
COUNTY OF TARRANT ss.
(Texas and New Mexico) This instrument was acknowledged before me on
the ___ day of August, 2001, by ▇▇▇▇▇▇ ▇. ▇▇▇▇, President of UHC NEW MEXICO
CORPORATION, a New Mexico corporation, on behalf of the corporation.
______________________________________
NOTARY PUBLIC, STATE OF TEXAS
My Commission expires:
_____________________ ______________________________________
(Type or print name)
THIS INSTRUMENT WAS PREPARED BY AND
AFTER RECORDING PLEASE RETURN TO :
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
67238.1 [August 9, 2001]
Mortgage, Deed of Trust, and Security Agreement - Page 17 of 19
67238.1[August 9, 2001]
Introduction to Exhibit A to
Mortgage, Deed of Trust, and Security Agreement (Oil and Gas)
This instrument covers all of Mortgagor's interest now owned or
hereafter acquired in the oil and gas (or oil, gas, and mineral) leases, land,
unit declarations, and pooling orders described in Exhibit A (or described in
the instruments referred to in Exhibit A), together with all amendments or
ratifications affecting any of those leases, unit declarations, or pooling
orders. Without limitation as to the coverage of this instrument, Mortgagor
warrants that where an expense interest, a revenue interest, or an overriding
royalty interest is shown (or similar designations), that Mortgagor's expense
interest is not greater than that shown and that Mortgagor's revenue or
overriding royalty interest is not less than that shown.
Reference herein to book and page, liber and page, file numbers, film
code numbers, or other recording information refer to the recording location of
each respective lease in the county where the land covered by the lease is
located. Any reference herein to oil or gas ▇▇▇▇▇ or land covered is for
warranty of interest, administra tive convenience, and identification and is not
intended to limit or restrict the rights, titles, interests, or properties
covered by this instrument.
This instrument may be executed in counterparts. To facilitate
recordation, the exhibits which describe properties in counties other than the
county in which the counterpart is to be recorded may have been omitted. A
complete copy of this instrument may be found at Lender's offices.
In some instances, the "Land Covered" column includes abbreviations
indicating the township and range of the county in which the interests are
located. For example: "T-27-N, R-10-W" is Township 27 North, Range 10 West. The
following abbreviations, and various combinations of the abbreviations, may
appear before or after the section number to designate a portion of a section:
N/2 = North Half NE or NE/4 = ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇/▇ ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇ or SE/4 = Southeast Quarter
E/2 = East Half NW or NW/4 = Northwest Quarter
W/2 = West Half SW or SW/4 = Southwest Quarter
If two or more of the above abbreviations appear in sequence, the first
abbreviation is that specified portion of the next abbreviation. For example:
"SW/4 SW/4 SE/4" is the Southwest Quarter of the Southwest Quarter of the
Southeast Quarter of the particular section described.
The abbreviations "WI," "NRI," "ORRI," "BPO," and "APO" are defined as
follows:
(a) "WI" is short for "working interest" and represents the expense
interest attributable to each well.
(b) "NRI" is short for "net revenue interest" and represents the share
of production of oil, gas and other minerals attributable to the working
interest or expense interest.
(c) "ORRI" is short for "overriding royalty interest" and represents
the overriding royalty attributable to oil and gas production from each well.
(d) "BPO" and "APO" refer to "before payout" and "after payout"
respectively, as payout may be defined in agreements affecting the applicable
interest or interests.
Mortgage, Deed of Trust, and Security Agreement - Page 18 of 19
67238.1[August 9, 2001]
Exhibit A to
Mortgage, Deed of Trust, and Security Agreement (Oil and Gas)
Notwithstanding the specific description of oil and gas properties set
forth in this Exhibit, this Mortgage covers all of Mortgagor's interest now
owned or hereafter acquired in any and all oil and gas properties, oil and gas
(or oil, gas, and mineral) leases, land, or units, situated in whole or in part
in ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ Counties, New Mexico, or either county.
THIS INSTRUMENT WAS PREPARED BY AND
AFTER RECORDING PLEASE RETURN TO :
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
67238.1 [August 9, 2001]
Mortgage, Deed of Trust, and Security Agreement - Page 19 of 19
67238.1[August 9, 2001]
FIRST AMENDMENT TO
AMENDED AND RESTATED REVOLVING CREDIT NOTE
This First Amendment to Amended and Restated Revolving Credit Note is
executed effective _________________, 2003, by UNITED HERITAGE CORPORATION, a
Utah corporation (the "Borrower"), UHC PETROLEUM CORPORATION, a Texas
corporation, UHC NEW MEXICO CORPORATION, a New Mexico corporation, and NATIONAL
HERITAGE SALES CORPORATION, a Texas corporation (collectively "Guarantors"), and
ALMAC FINANCIAL CORPORATION, a Texas corporation (the "Lender").
Recitals:
Borrower is legally obligated to pay an Amended and Restated Revolving
Credit Note (the "Note") dated effective September 6, 2001, in the principal
amount of $3,000,000, executed by Borrower, and payable to the order of Lender.
Payment of the Note is unconditionally guaranteed by Guarantors pursuant to a
Commercial Guaranty (the "Guaranty") dated January 29, 2001, executed by
Guarantors in favor of Lender. The Note matures on April 15, 2004, and Borrower
and Guarantors have requested that Lender extend the Maturity Date. Capitalized
terms herein have the meanings assigned in the Note.
Agreement:
For valuable consideration, including the funds previously advanced by
Lender to Borrower under the Note, the receipt and sufficiency of which are
acknowledged, Borrower, Guarantors, and Lender agree and stipulate as follows:
1. The recitals above are true and correct and form the basis for this
amendment.
2. The Maturity Date of the Note is extended until April 15, 2005.
3. The Note will continue to be due and payable as follows:
(a) interest shall be due and payable monthly as it accrues on
the last day of each month during the term of the Note; and
(b) the outstanding principal balance of the Note, together
with all accrued but unpaid interest, shall be due and payable on the Maturity
Date, as extended.
4. Borrower acknowledges that the outstanding principal balance of the
Note as of _________________, 2003, is $____________________, and that Borrower
has no defenses or setoffs to payment of the Note.
Amendment to Revolving Credit Note - Page 1 of 4
113254.1 [August 14, 2003]
5. Except as specifically amended herein, the Note remains unchanged;
and Borrower and Guarantors ratify the Note, as amended. Guarantors further
ratify the Guaranty and agree that they have no defenses to payment under the
Guaranty. All liens and security interests securing payment of the Note are
renewed and extended until the Note is paid in full.
6. Borrower, Guarantors, and Lender have consummated a transaction
pursuant to which Lender has agreed to renew and extend loans, or to otherwise
extend credit or make financial accommodations to or for the benefit of Borrower
in an aggregate amount up to $3,000,000. In connection with the Note, Borrower,
Guarantors, and Lender have executed and delivered and may hereafter execute and
deliver certain agreements, instruments, and documents (collectively hereinafter
referred to as the "Written Loan Agreement). It is the intention of Borrower,
Guarantors, and Lender that this section be incorporated by reference into each
of the written agreements, instruments, and documents comprising the Written
Loan Agreement. Borrower, Guarantors, and Lender each warrant and represent that
the entire agreement made and existing by or among them with respect to the
Loans is and shall be contained within the Written Loan Agreement, and that no
agreements or promises exist or shall exist by or among Borrower, Guarantors,
and Lender that are not reflected in the Written Loan Agreement.
[The remainder of this page is intentionally blank.]
Amendment to Revolving Credit Note - Page 2 of 4
113254.1 [August 14, 2003]
THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES.
Executed effective on the date stated above.
BORROWER:
ATTEST: UNITED HERITAGE CORPORATION
By:____________________________ By:___________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
GUARANTORS:
ATTEST: UHC PETROLEUM CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
ATTEST: UHC NEW MEXICO CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
ATTEST: NATIONAL HERITAGE SALES CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
LENDER:
ATTEST: ALMAC FINANCIAL CORPORATION
By:____________________________ By:___________________________________
▇▇▇▇▇ ▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
Amendment to Revolving Credit Note - Page 3 of 4
113254.1 [August 14, 2003]
This amendment was prepared by:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
113254.1 [August 14, 2003]
Amendment to Revolving Credit Note - Page 4 of 4
113254.1 [August 14, 2003]
PLEDGE AGREEMENT
This Pledge Agreement ("Agreement") is made as of the 29th day of January,
2001, by UNITED HERITAGE CORPORATION ( "Pledgor"), a Utah corporation, in favor
of ALMAC FINANCIAL CORPORATION, a Texas corporation ("Secured Party"). Pledgor
hereby agrees with Secured Party as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the meanings indicated below:
(a) The term "Code" shall mean the Uniform Commercial Code as in
effect in the State of Texas on the date of this Agreement or as it may
hereafter be amended from time to time.
(b) The term "Collateral" shall mean all property specifically
described on Schedule A attached hereto and made a part hereof.
(c) The term "Indebtedness" shall mean (i) all indebtedness,
obligations, and liabilities of Pledgor to Secured Party of any kind or
character, now existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or joint
and several, and regardless of whether such indebtedness, obligations, and
liabilities may, prior to their acquisition by Secured Party, be or have been
payable to or in favor of a third party and subsequently acquired by Secured
Party (it being contemplated that Secured Party may make such acquisitions from
third parties), including without limitation the indebtedness evidenced by the
Note and all other indebtedness, obligations, and liabilities of Pledgor to
Secured Party now existing or hereafter arising by note, draft, acceptance,
guaranty, endorsement, letter of credit, assignment, purchase, overdraft,
discount, indemnity agreement, or otherwise; (ii) all accrued but unpaid
interest on any of the indebtedness described in (i) above; (iii) all
obligations of Pledgor to Secured Party under any documents evidencing,
securing, governing, or pertaining to all or any part of the indebtedness
described in (i) and (ii) above; (iv) all costs and expenses incurred by Secured
Party in connection with the collection and administration of all or any part of
the indebtedness and obligations described in (i), (ii), and (iii) above or the
protection or preservation of, or realization upon, the collateral securing all
or any part of such indebtedness and obligations, including without limitation
all reasonable attorneys fees; and (v) all renewals, extensions, modifications,
and rearrangements of the indebtedness and obligations described in (i), (ii),
(iii), and (iv) above.
(d) The term "Loan Documents" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing, or pertaining to the
Indebtedness.
(e) "Note" means an amended and restated revolving credit note dated
January 29, 2001, in the principal amount of $1,750,000.00, executed by Pledgor,
and payable to the order of Secured Party.
(f) The term "Obligated Party" shall mean any party other than
Pledgor who secures, guarantees and/or is otherwise obligated to pay all or any
portion of the Indebtedness.
(g) The term "Secured Party" shall mean ALMAC FINANCIAL CORPORATION,
a Texas corporation, its successors and assigns, including without limitation,
any party to whom it, or its successors or assigns, may assign its rights and
interests under this Agreement.
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67233.2 [August 9, 2001]
All words and phrases used herein which are expressly defined in Section 1.201,
Chapter 8 or Chapter 9 of the Code shall have the meaning provided for therein.
Other words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1.201, Chapter 8 or Chapter 9 of the Code.
2. SECURITY INTEREST. As security for the Indebtedness, Pledgor, for value
received, hereby grants to Secured Party a continuing security interest in the
Collateral.
3. VOTING RIGHTS. As long as no Event of Default shall have occurred
hereunder, any voting rights incident to any stock or other securities pledged
as Collateral may be exercised by Pledgor; provided, however, that Pledgor will
not exercise, or cause to be exercised, any such voting rights, without the
prior written consent of Secured Party, if the direct or indirect effect of such
vote will result in an Event of Default hereunder.
4. MAINTENANCE OF COLLATERAL. Other than the exercise of reasonable care
to assure the safe custody of any Collateral in Secured Party's possession from
time to time, Secured Party does not have any obligation, duty or responsibility
with respect to the Collateral. Without limiting the generality of the
foregoing, Secured Party shall not have any obligation, duty or responsibility
to do any of the following: (a) ascertain any maturities, calls, conversions,
exchanges, offers, tenders or similar matters relating to the Collateral or
informing Pledgor with respect to any such matters; (b) fix, preserve or
exercise any right, privilege or option (whether conversion, redemption or
otherwise) with respect to the Collateral unless (i) Pledgor makes written
demand to Secured Party to do so, (ii) such written demand is received by
Secured Party in sufficient time to permit Secured Party to take the action
demanded in the ordinary course of its business, and (iii) Pledgor provides
additional collateral, acceptable to Secured Party in its sole discretion; (c)
collect any amounts payable in respect of the Collateral (Secured Party being
liable to account to Pledgor only for what Secured Party may actually receive or
collect thereon); (d) sell all or any portion of the Collateral to avoid market
loss; (e) sell all or any portion of the Collateral unless and until (i) Pledgor
makes written demand upon Secured Party to sell the Collateral, and (ii) Pledgor
provides additional collateral, acceptable to Secured Party in its sole
discretion; or (f) hold the Collateral for or on behalf of any party other than
Pledgor.
5. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and warrants
the following to Secured Party:
(a) Due Authorization. The execution, delivery and performance of
this Agreement and all of the other Loan Documents by Pledgor have been duly
authorized by all necessary corporate action of Pledgor, to the extent Pledgor
is a corporation, or by all necessary partnership action, to the extent Pledgor
is a partnership.
(b) Enforceability. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Pledgor, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies may generally be
limited by equitable principles.
(c) Ownership and Liens. Pledgor has good and marketable title to
the Collateral free and clear of all liens, security interests, encumbrances or
adverse claims, except for the security interest created by this Agreement. No
dispute, right of setoff, counterclaim or defense exists with respect to all or
any part of the Collateral. Pledgor has not executed any other security
agreement currently affecting the Collateral and no financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office except as may have been executed or filed in favor
of Secured Party.
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67233.2 [August 9, 2001]
(d) No Conflicts or Consents. Neither the ownership, the intended
use of the Collateral by Pledgor, the grant of the security interest by Pledgor
to Secured Party herein nor the exercise by Secured Party of its rights or
remedies hereunder, will (i) conflict with any provision of (A) any domestic or
foreign law, statute, rule or regulation, (B) the articles or certificate of
incorporation, charter, bylaws or partnership agreement, as the case may be, of
Pledgor, or (C) any agreement, judgment, license, order or permit applicable to
or binding upon Pledgor or otherwise affecting the Collateral, or (ii) result in
or require the creation of any lien, charge or encumbrance upon any assets or
properties of Pledgor or of any person except as may be expressly contemplated
in the Loan Documents. Except as expressly contemplated in the Loan Documents,
no consent, approval, authorization or order of, and no notice to or filing
with, any court, governmental authority or third party is required in connection
with the grant by Pledgor of the security interest herein or the exercise by
Secured Party of its rights and remedies hereunder.
(e) Security Interest. Pledgor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party in the manner provided herein, free and clear of any lien,
security interest or other charge or encumbrance. This Agreement creates a
legal, valid and binding security interest in favor of Secured Party in the
Collateral.
(f) Location. Pledgor's residence or chief executive office, as the
case may be, and the office where the records concerning the Collateral are kept
is located at its address set forth on the signature page hereof.
(g) Solvency of Pledgor. As of the date hereof, and after giving
effect to this Agreement and the completion of all other transactions
contemplated by Pledgor at the time of the execution of this Agreement, (i)
Pledgor is and will be solvent, (ii) the fair saleable value of Pledgor's assets
exceeds and will continue to exceed Pledgor's liabilities (both fixed and
contingent), (iii) Pledgor is paying and will continue to be able to pay its
debts as they mature, and (iv) if Pledgor is not an individual, Pledgor has and
will have sufficient capital to carry on Pledgor's businesses and all businesses
in which Pledgor is about to engage.
(h) Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Pledgor or the issuer thereof
is bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral, except as has been disclosed to
Secured Party in writing. To the best of Pledgor's knowledge, no issuer of such
securities (other than securities of a class which are publicly traded) has any
outstanding stock rights, rights to subscribe, options, warrants or convertible
securities outstanding or any other rights outstanding entitling any party to
have issued to such party capital stock of such issuer, except as has been
disclosed to Secured Party in writing.
6. AFFIRMATIVE COVENANTS. Pledgor will comply with the covenants contained
in this Section at all times during the period of time this Agreement is
effective unless Secured Party shall otherwise consent in writing.
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67233.2 [August 9, 2001]
(a) Ownership and Liens. Pledgor will maintain good and marketable
title to all Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created by this
Agreement and the security interests and other encumbrances expressly permitted
by the other Loan Documents. Pledgor will not permit any dispute, right of
setoff, counterclaim or defense to exist with respect to all or any part of the
Collateral. Pledgor will cause any financing statement or other security
instrument with respect to the Collateral to be terminated, except as may exist
or as may have been filed in favor of Secured Party. Pledgor will defend at its
expense Secured Party's right, title and security interest in and to the
Collateral against the claims of any third party.
(b) Inspection of Books and Records. Pledgor will keep adequate
records concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect Pledgor's books
and records of or relating to the Collateral at any time during normal business
hours, to make and take away photocopies, photographs and printouts thereof and
to write down and record any such information.
(c) Adverse Claim. Pledgor covenants and agrees to promptly notify
Secured Party of any claim, action or proceeding affecting title to the
Collateral, or any part thereof, or the security interest created hereunder and,
at Pledgor's expense, defend Secured Party's security interest in the Collateral
against the claims of any third party. Pledgor also covenants and agrees to
promptly deliver to Secured Party a copy of all written notices received by
Pledgor with respect to the Collateral, including without limitation, notices
received from the issuer of any securities pledged hereunder as Collateral.
(d) Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Pledgor covenants and agrees to deliver to Secured Party any
certificates, documents or instruments representing or evidencing the
Collateral, with Pledgor's endorsement thereon and/or accompanied by proper
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
(e) Financing Statements. Pledgor hereby authorizes Secured Party to
authenticate and file all financing statements or amendments to financing
statement in such offices and places and at such times and as often as may be,
in the judgment of Secured Party, necessary to preserve, protect, and renew the
security interests herein created in the Collateral.
(f) Further Assurances. Pledgor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party. If all or any part of the Collateral is
securities issued by an agency or department of the United States, Pledgor
covenants and agrees, at Secured Party's request, to cooperate in registering
such securities in Secured Party's name or with Secured Party's account
maintained with a Federal Reserve Bank. When applicable law provides more than
one method of perfection of Secured Party's security interest in the Collateral,
Secured Party may choose the method(s) to be used.
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67233.2 [August 9, 2001]
7. NEGATIVE COVENANTS. Pledgor will comply with the covenants contained in
this Section at all times during the period of time this Agreement is effective,
unless Secured Party shall otherwise consent in writing.
(a) Transfer or Encumbrance. Pledgor will not (i) sell, assign (by
operation of law or otherwise) or transfer Pledgor's rights in any of the
Collateral, (ii) ▇▇▇▇▇ ▇ ▇▇▇▇ or security interest in or execute, file or record
any financing statement or other security instrument with respect to the
Collateral to any party other than Secured Party, or (iii) deliver actual or
constructive possession of any certificate, instrument or document evidencing
and/or representing any of the Collateral to any party other than Secured Party.
(b) Impairment of Security Interest. Pledgor will not take or fail
to take any action which would in any manner impair the value or enforceability
of Secured Party's security interest in any Collateral.
(c) Dilution of Ownership. As to any securities pledged as
Collateral (other than securities of a class which are publicly traded), Pledgor
will not consent to or approve of the issuance of (i) any additional shares of
any class of securities of such issuer (unless immediately upon issuance
additional securities are pledged and delivered to Secured Party pursuant to the
terms hereof to the extent necessary to give Secured Party a security interest
after such issuance in at least the same percentage of such issuer's outstanding
securities as Secured Party had before such issuance), (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities.
(d) Restrictions on Securities. Pledgor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party.
8. RIGHTS OF SECURED PARTY. Secured Party shall have the rights contained
in this Section at all times during the period of time this Agreement is
effective.
(a) Power of Attorney. Pledgor hereby irrevocably appoints Secured
Party as Pledgor's attorney-in-fact, such power of attorney being coupled with
an interest, with full authority in the place and stead of Pledgor and in the
name of Pledgor or otherwise, to take any action and to execute any instrument
which Secured Party may from time to time in Secured Party's discretion deem
necessary or appropriate to accomplish the purposes of this Agreement, including
without limitation, the following action: (i) transfer any securities,
instruments, documents or certificates pledged as Collateral in the name of
Secured Party or its nominee; (ii) use any interest, premium or principal
payments, conversion or redemption proceeds or other cash proceeds received in
connection with any Collateral to reduce any of the Indebtedness; (iii) exchange
any of the securities pledged as Collateral for any other property upon any
merger, consolidation, reorganization, recapitalization or other readjustment of
the issuer thereof, and, in connection therewith, to deposit and deliver any and
all of such securities with any committee, depository, transfer agent, registrar
or other designated agent upon such terms and conditions as Secured Party may
deem necessary or appropriate; (iv) exercise or comply with any conversion,
exchange, redemption, subscription or any other right, privilege or option
pertaining to any securities pledged as Collateral; provided, however, except as
provided herein, Secured Party shall not have a duty to exercise or comply with
any such right, privilege or option (whether conversion, redemption or
otherwise) and shall not be responsible for any delay or failure to do so; and
(v) file any claims or take any action or institute any proceedings which
Secured Party may deem necessary or appropriate for the collection and/or
preservation of the Collateral or otherwise to enforce the rights of Secured
Party with respect to the Collateral.
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67233.2 [August 9, 2001]
(b) Performance by Secured Party. If Pledgor fails to perform any
agreement or obligation provided herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be a part of the Indebtedness,
secured by the Collateral and payable by Pledgor on demand.
Notwithstanding any other provision herein to the contrary, Secured Party does
not have any duty to exercise or continue to exercise any of the foregoing
rights and shall not be responsible for any failure to do so or for any delay in
doing so.
9. EVENTS OF DEFAULT. Each of the following events or occurrences, and
Pledgor's failure to timely cure such following any notice, cure, or grace
period required by the Loan Agreement, constitutes an "Event of Default" under
this Agreement:
(a) Failure to Pay Indebtedness. The failure, refusal or neglect of
Pledgor to make any payment of principal or interest on the Indebtedness, or any
portion thereof, as the same shall become due and payable; or
(b) Non-Performance of Covenants. The failure of Pledgor or any
Obligated Party to timely and properly observe, keep or perform any covenant,
agreement, warranty or condition required herein; or
(c) Default Under other Loan Documents. The occurrence of an event
of default under any of the other Loan Documents.
(d) False Representation. Any representation contained herein made
by Pledgor is false or misleading in any material respect; or
(e) Collateral. The Collateral or any portion thereof is taken on
execution or other process of law in any action against Pledgor; or Pledgor
abandons the Collateral or any portion thereof; or
(f) Dilution of Ownership. The issuer of any securities (other than
securities of a class which are publicly traded) constituting Collateral
hereafter issues any shares of any class of capital stock (unless immediately
upon issuance, additional securities are pledged and delivered to Secured Party
pursuant to the terms hereof to the extent necessary to give Secured Party a
security interest after such issuance in at least the same percentage of such
issuer's outstanding securities as Secured Party had before such issuance) or
any options, warrants or other rights to purchase any such capital stock; or
(g) Bankruptcy of Issuer. (i) The issuer of any securities
constituting Collateral files a petition for relief under any Applicable
Bankruptcy Law, (ii) an involuntary petition for relief is filed against any
such issuer under any Applicable Bankruptcy Law and such involuntary petition is
not dismissed within thirty (30) days after the filing thereof, or (iii) an
order for relief naming any such issuer is entered under any Applicable
Bankruptcy Law.
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67233.2 [August 9, 2001]
10. REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Loan Documents or otherwise available to Secured Party,
Secured Party may exercise one or more of the rights and remedies provided in
this Section.
(a) Remedies. Secured Party may from time to time at its discretion,
without limitation and without notice except as expressly provided in any of the
Loan Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a secured party under the Code (whether or not the Code applies to
the affected Collateral);
(ii) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest granted hereunder by any
available judicial procedure;
(iii) sell or otherwise dispose of, at its office, on the
premises of Pledgor or elsewhere, the Collateral, as a unit or in parcels, by
public or private proceedings, and by way of one or more contracts (it being
agreed that the sale or other disposition of any part of the Collateral shall
not exhaust Secured Party's power of sale, but sales or other dispositions may
be made from time to time until all of the Collateral has been sold or disposed
of or until the Indebtedness has been paid and performed in full), and at any
such sale or other disposition it shall not be necessary to exhibit any of the
Collateral;
(iv) buy the Collateral, or any portion thereof, at any public
sale;
(v) buy the Collateral, or any portion thereof, at any private
sale if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations;
(vi) apply for the appointment of a receiver for the
Collateral, and Pledgor hereby consents to any such appointment; and
(vii) at its option, retain the Collateral in satisfaction of
the Indebtedness whenever the circumstances are such that Secured Party is
entitled to do so under the Code or otherwise.
Pledgor agrees that in the event Pledgor is entitled to receive any notice
under the Code, as it exists in the state governing any such notice, of the sale
or other disposition of any Collateral, reasonable notice shall be deemed given
when such notice is deposited in a depository receptacle under the care and
custody of the United States Postal Service, postage prepaid, at Pledgor's
address set forth on the signature page hereof, five (5) days prior to the date
of any public sale, or after which a private sale, of any of such Collateral is
to be held. Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Secured Party may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. Pledgor further acknowledges and agrees
that the redemption by Secured Party of any certificate of deposit pledged as
Collateral shall be deemed to be a commercially reasonable disposition under the
Code.
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67233.2 [August 9, 2001]
(b) Private Sale of Securities. Pledgor recognizes that Secured
Party may be unable to effect a public sale of all or any part of the securities
pledged as Collateral because of restrictions in applicable federal and state
securities laws and that Secured Party may, therefore, determine to make one or
more private sales of any such securities to a restricted group of purchasers
who will be obligated to agree, among other things, to acquire such securities
for their own account, for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges that each any such private sale may be at
prices and other terms less favorable then what might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that each such private
sale shall be deemed to have been made in a commercially reasonable manner and
that Secured Party shall have no obligation to delay the sale of any such
securities for the period of time necessary to permit the issuer to register
such securities for public sale under any federal or state securities laws.
Pledgor further acknowledges and agrees that any offer to sell such securities
which has been made privately in the manner described above to not less than
five (5) bona fide offerees shall be deemed to involve a "public sale" for the
purposes of the Code, notwithstanding that such sale may not constitute a
"public offering" under any federal or state securities laws and that Secured
Party may, in such event, bid for the purchase of such securities.
(c) Application of Proceeds. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held by
Secured Party as Collateral, and any cash proceeds received by Secured Party in
respect of any sale or other disposition of, collection from, or other
realization upon, all or any part of the Collateral as follows in such order and
manner as Secured Party may elect:
(i) to the repayment or reimbursement of the reasonable costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred by Secured Party in connection with (A) the administration of
the Loan Documents, (B) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, the Collateral, and (C) the
exercise or enforcement of any of the rights and remedies of Secured Party
hereunder;
(ii) to the payment or other satisfaction of any liens and
other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by applicable
law; and
(vi) by delivery to Pledgor or any other party lawfully
entitled to receive such cash or proceeds whether by direction of a court of
competent jurisdiction or otherwise.
(d) Deficiency. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the Collateral by
Secured Party are insufficient to pay all amounts to which Secured Party is
legally entitled, Pledgor and any party who guaranteed or is otherwise obligated
to pay all or any portion of the Indebtedness shall be liable for the
deficiency, together with interest thereon as provided in the Loan Documents.
(e) Non-Judicial Remedies. In granting to Secured Party the power to
enforce its rights hereunder without prior judicial process or judicial hearing,
Pledgor expressly waives, renounces and knowingly relinquishes any legal right
which might otherwise require Secured Party to enforce its rights by judicial
process. Pledgor recognizes and concedes that non-judicial remedies are
consistent with the usage of trade, are responsive to commercial necessity and
are the result of a bargain at arm's length. Nothing herein is intended to
prevent Secured Party or Pledgor from resorting to judicial process at either
party's option.
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67233.2 [August 9, 2001]
(f) Other Recourse. Pledgor waives any right to require Secured
Party to proceed against any third party, exhaust any Collateral or other
security for the Indebtedness, or to have any third party joined with Pledgor in
any suit arising out of the Indebtedness or any of the Loan Documents, or pursue
any other remedy available to Secured Party. Pledgor further waives any and all
notice of acceptance of this Agreement and of the creation, modification,
rearrangement, renewal or extension of the Indebtedness. Pledgor further waives
any defense arising by reason of any disability or other defense of any third
party or by reason of the cessation from any cause whatsoever of the liability
of any third party. Until all of the Indebtedness shall have been paid in full,
Pledgor shall have no right of subrogation and Pledgor waives the right to
enforce any remedy which Secured Party has or may hereafter have against any
third party, and waives any benefit of and any right to participate in any other
security whatsoever now or hereafter held by Secured Party. Pledgor authorizes
Secured Party, and without notice or demand and without any reservation of
rights against Pledgor and without affecting Pledgor's liability hereunder or on
the Indebtedness, to (i) take or hold any other property of any type from any
third party as security for the Indebtedness, and exchange, enforce, waive and
release any or all of such other property, (ii) apply such other property and
direct the order or manner of sale thereof as Secured Party may in its
discretion determine, (iii) renew, extend, accelerate, modify, compromise,
settle or release any of the Indebtedness or other security for the
Indebtedness, (iv) waive, enforce or modify any of the provisions of any of the
Loan Documents executed by any third party, and (v) release or substitute any
third party.
(g) Voting Rights. Upon the occurrence of an Event of Default,
Pledgor will not exercise any voting rights with respect to securities pledged
as Collateral. Pledgor hereby irrevocably appoints Secured Party as Pledgor's
attorney-in-fact (such power of attorney being coupled with an interest) and
proxy to exercise any voting rights with respect to Pledgor's securities pledged
as Collateral upon the occurrence of an Event of Default.
(h) Dividend Rights and Interest Payments. Upon the occurrence of an
Event of Default:
(i) all rights of Pledgor to receive and retain the dividends
and interest payments which it would otherwise be authorized to receive and
retain pursuant to Section 3 shall automatically cease, and all such rights
shall thereupon become vested with Secured Party which shall thereafter have the
sole right to receive, hold and apply as Collateral such dividends and interest
payments; and
(ii) all dividend and interest payments which are received by
Pledgor contrary to the provisions of clause (i) of this Subsection shall be
received in trust for the benefit of Secured Party, shall be segregated from
other funds of Pledgor, and shall be forthwith paid over to Secured Party in the
exact form received (properly endorsed or assigned if requested by Secured
Party), to be held by Secured Party as Collateral.
11. INDEMNITY. Pledgor hereby indemnifies and agrees to hold harmless
Secured Party, and its officers, directors, employees, agents and
representatives (each an "Indemnified Person") from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
(collectively, the "Claims") which may be imposed on, incurred by, or asserted
against, any Indemnified Person arising in connection with the Loan Documents,
the Indebtedness or the Collateral (including without limitation, the
enforcement of the Loan Documents and the defense of any Indemnified Person's
actions and/or inactions in connection with the Loan Documents). WITHOUT
LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON
WITH RESPECT TO ANY CLAIMS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT
OF THE NEGLIGENCE OF SUCH AND/OR ANY OTHER INDEMNIFIED PERSON, except to the
limited extent the Claims against an Indemnified Person are proximately caused
by Such Indemnified Person's gross negligence or willful misconduct. If Pledgor
or any third party ever alleges such gross negligence or willful misconduct by
any Indemnified Person, the indemnification provided for in this Section shall
nonetheless be paid upon demand, subject to later adjustment or reimbursement,
until such time as a court of competent jurisdiction enters a final judgment as
to the extent and effect of the alleged gross negligence or willful misconduct.
The indemnification provided for in this Section shall survive the termination
of this Agreement and shall extend and continue to benefit each individual or
entity who is or has at any time been an Indemnified Person hereunder.
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67233.2 [August 9, 2001]
12. MISCELLANEOUS. (a) Entire Agreement. This Agreement contains the
entire agreement of Secured Party and Pledgor with respect to the Collateral. If
the parties hereto are parties to any prior agreement, either written or oral,
relating to the Collateral, the terms of this Agreement shall amend and
supersede the terms of such prior agreements as to transactions on or after the
effective date of this Agreement, but all security agreements, financing
statements, guaranties, other contracts and notices for the benefit of Secured
Party shall continue in full force and effect to secure the Indebtedness unless
Secured Party specifically releases its rights thereunder by separate release.
(b) Amendment. No modification, consent or amendment of any
provision of this Agreement or any of the other Loan Documents shall be valid or
effective unless the same is in writing and signed by the party against whom it
is sought to be enforced.
(c) Actions by Secured Party. The lien, security interest and other
security rights of Secured Party hereunder shall not be impaired by (i) any
renewal, extension, increase or modification with respect to the Indebtedness,
(ii) any surrender, compromise, release, renewal, extension, exchange or
substitution which Secured Party may grant with respect to the Collateral, or
(iii) any release or indulgence granted to any endorser, guarantor or surety of
the Indebtedness. The taking of additional security by Secured Party shall not
release or impair the lien, security interest or other security rights of
Secured Party hereunder or affect the obligations of Pledgor hereunder.
(d) Waiver by Secured Party. Secured Party may waive any Event of
Default without waiving any other prior or subsequent Event of Default. Secured
Party may remedy any default without waiving the Event of Default remedied.
Neither the failure by Secured Party to exercise, nor the delay by Secured Party
in exercising, any right or remedy upon any Event of Default shall be construed
as a waiver of such Event of Default or as a waiver of the right to exercise any
such right or remedy at a later date. No single or partial exercise by Secured
Party of any right or remedy hereunder shall exhaust the same or shall preclude
any other or further exercise thereof, and every such right or remedy hereunder
may be exercised at any time. No waiver of any provision hereof or consent to
any departure by Pledgor therefrom shall be effective unless the same shall be
in writing and signed by Secured Party and then such waiver or consent shall be
effective only in the specific instances, for the purpose for which given and to
the extent therein specified. No notice to or demand on Pledgor in any case
shall of itself entitle Pledgor to any other or further notice or demand in
similar or other circumstances.
(e) Costs and Expenses. Pledgor will upon demand pay to Secured
Party the amount of any and all costs and expenses (including without
limitation, attorneys' fees and expenses), which Secured Party may incur in
connection with (i) the transactions which give rise to the Loan Documents, (ii)
the preparation of this Agreement and the perfection and preservation of the
security interests granted under the Loan Documents, (iii) the administration of
the Loan Documents, (iv) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, the Collateral, (v) the
exercise or enforcement of any of the rights of Secured Party under the Loan
Documents, or (vi) the failure by Pledgor to perform or observe any of the
provisions hereof.
Pledge Agreement - Page 10 of 14
67233.2 [August 9, 2001]
(F) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS,
EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION
OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
TEXAS.
(g) Venue. This Agreement has been entered into in the county in
Texas where Secured Party's address for notice purposes is located, and it shall
be performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising under or pertaining to
this Agreement and venue for any such disputes shall be in the county or
judicial district where this Agreement has been executed and delivered.
(h) Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable under
present or future laws, such provision shall be fully severable, shall not
impair or invalidate the remainder of this Agreement and the effect thereof
shall be confined to the provision held to be illegal, invalid or unenforceable.
(i) No Obligation. Nothing contained herein shall be construed as an
obligation on the part of Secured Party to extend or continue to extend credit
to Pledgor.
(j) Notices. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and given by (i) personal delivery, (ii) expedited delivery service with proof
of delivery, or (iii) United States mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended addressee at the
address set forth on the signature page hereof or to such different address as
the addressee shall have designated by written notice sent pursuant to the terms
hereof and shall be deemed to have been received either, in the case of personal
delivery, at the time of personal delivery, in the case of expedited delivery
service, as of the date of first attempted delivery at the address and in the
manner provided herein, or in the case of mail, upon deposit in a depository
receptacle under the care and custody of the United States Postal Service.
Either party shall have the right to change its address for notice hereunder to
any other location within the continental United States by notice to the other
party of such new address at least thirty (30) days prior to the effective date
of such new address.
(k) Binding Effect and Assignment. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on Pledgor
and the heirs, executors, administrators, personal representatives, successors
and assigns of Pledgor, and (iii) shall inure to the benefit of Secured Party
and its successors and assigns. Without limiting the generality of the
foregoing, Secured Party may pledge, assign or otherwise transfer the
Indebtedness and its rights under this Agreement and any of the other Loan
Documents to any other party. Pledgor's rights and obligations hereunder may not
be assigned or otherwise transferred without the prior written consent of
Secured Party.
Pledge Agreement - Page 11 of 14
67233.2 [August 9, 2001]
(l) Termination. It is contemplated by the parties hereto that from
time to time there may be no outstanding Indebtedness, but notwithstanding such
occurrences, this Agreement shall remain valid and shall be in full force and
effect as to subsequent outstanding Indebtedness. Upon (i) the satisfaction in
full of the Indebtedness, (ii) the termination or expiration of any commitment
of Secured Party to extend credit to Pledgor, (iii) written request for the
termination hereof delivered by Pledgor to Secured Party, and (iv) written
release delivered by Secured Party to Pledgor, this Agreement and the security
interests created hereby shall terminate. Upon termination of this Agreement and
Pledgor's written request, Secured Party will, at Pledgor's sole cost and
expense, return to Pledgor such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof and execute and
deliver to Pledgor such documents as Pledgor shall reasonably request to
evidence such termination.
(m) Cumulative Rights. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right or remedy which
Secured Party may otherwise have at law or in equity or under any of the other
Loan Documents, and the exercise of one or more of such rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of any other
rights or remedies.
(n) Gender and Number. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in the
singular number shall be held and construed to include the plural and words in
the plural number shall be held and construed to include the singular, unless in
each instance the context requires otherwise.
(o) Descriptive Headings. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
Signed effective the 29th day of January, 2001.
ATTEST: PLEDGOR:
UNITED HERITAGE CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
Pledgor's Address:
▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Secured Party's address:
ALMAC FINANCIAL CORPORATION
▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
67233.2[2001]
Pledge Agreement - Page 12 of 14
67233.2 [August 9, 2001]
SCHEDULE A
TO
PLEDGE AGREEMENT
Collateral
The following property is a part of the Collateral as defined in the Pledge
Agreement:
All of the issued and outstanding capital stock, membership interests, or
partnership interests of all existing and hereafter acquired companies,
subsidiaries, limited liability companies, or partnerships owned by UNITED
HERITAGE CORPORATION, including, without limitation, 100% of the issued and
outstanding shares in the following subsidiaries:
(a) UHC PETROLEUM CORPORATION, a Texas corporation, evidenced by
certificate number ___________, in the amount of ___ shares of the common stock,
___ par value per share
(b) UHC NEW MEXICO CORPORATION, a New Mexico corporation, evidenced
by certificate number ___________, in the amount of ___ shares of the common
stock, ___ par value per share
(c) NATIONAL HERITAGE SALES CORPORATION, a Texas corporation,
evidenced by certificate number ___________, in the amount of ___ shares of the
common stock, ___ par value per share
The term Collateral, as used herein, shall also include (i) all
certificates, instruments, and other documents evidencing the foregoing; (ii)
all renewals, replacements, and substitutions of all of the foregoing; (iii) all
Additional Property (as hereinafter defined); and (iv) all PRODUCTS and PROCEEDS
of all of the foregoing. The designation of proceeds does not authorize Pledgor
to sell, transfer, or otherwise convey any of the foregoing property. The
delivery at any time by Pledgor to Secured Party of any property as a pledge to
secure payment or performance of any indebtedness or obligation whatsoever shall
also constitute a pledge of such property as Collateral hereunder.
Collateral shall also include the following property (collectively, the
"Additional Property") which Pledgor becomes entitled to receive or shall
receive in connection with any other Collateral: (a) any stock certificate,
including without limitation, any certificate representing a stock dividend or
any certificate in connection with any recapitalization, reclassification,
merger, consolidation, conversion, sale of assets, combination of shares, stock
split or spin-off; (b) any option, warrant, subscription or right, whether as an
addition to or in substitution of any other Collateral; (c) any dividends or
distributions of any kind whatsoever, whether distributable in cash, stock or
other property; (d) any interest, premium or principal payments; and (e) any
conversion or redemption proceeds; provided, however, that until the occurrence
of an Event of Default (as hereinafter defined), Pledgor shall be entitled to
all cash dividends and all interest paid on the Collateral (except interest paid
on any certificate of deposit pledged hereunder) free of the security interest
created under this Agreement. All Additional Property received by Pledgor shall
be received in trust for the benefit of Secured Party. All Additional Property
and all certificates or other written instruments or documents evidencing and/or
representing the Additional Property that is received by Pledgor, together with
such instruments of transfer as Secured Party may request, shall immediately be
delivered to or deposited with Secured Party and held by
Schedule A
Secured Party as Collateral under the terms of this Agreement. If the Additional
Property received by Pledgor shall be shares of stock or other securities, such
shares of stock or other securities shall be duly endorsed in blank or
accompanied by proper instruments of transfer and assignment duly executed in
blank with, if requested by Secured Party, signatures guaranteed by a member or
member organization in good standing of an authorized Securities Transfer Agents
Medallion Program, all in form and substance satisfactory to Secured Party.
Secured Party shall be deemed to have possession of any Collateral in transit to
Secured Party or its agent.
Schedule A
To be filed in
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
Counties, New Mexico,
and ▇▇▇▇▇▇▇ County, Texas
RENEWAL AND MODIFICATION OF MORTGAGES
This instrument is signed effective September 6, 2001, by UNITED HERITAGE
CORPORATION ("Borrower"), a Utah corporation, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, UHC NEW MEXICO CORPORATION ("UHC New Mexico"), a New Mexico corporation,
UHC PETROLEUM CORPORATION ("UHC Petroleum"), a Texas corporation, and ALMAC
FINANCIAL CORPORATION ("Lender"), a Texas corporation, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, for the purposes of modifying, renewing, and extending certain
liens that secure payment of the indebtedness owing by Borrower to Lender.
Lender is the legal and equitable owner and holder of an Amended and
Restated Revolving Credit Note (the "Prior Note") dated January 29, 2001, in the
principal amount of $1,750,000, executed by Borrower, payable to the order of
Lender, and which matures January 29, 2003.
Payment of the Prior Note is secured, in part, by first liens and first
security interests created or described in the deeds of trust and mortgages
covering properties in New Mexico and Texas, and recorded as described in
Exhibit A attached (collectively the "Mortgages"). Capitalized terms below, not
otherwise defined herein, have the meanings assigned in the Mortgages. The liens
and security interests created, described, or renewed and extended by the
Mortgages will be collectively called the "Liens." For further reference, the
original Mortgages may be found in the files of Lender at the above address.
All unpaid amounts owing on the Prior Note have been renewed and extended,
and those amounts, together with additional sums owing by Borrower to Lender,
are now represented by an Amended and Restated Revolving Credit Note (the
"Note") dated September 6, 2001, in the principal amount of $3,000,000, executed
by Borrower, payable to the order of Lender, and maturing on April 15, 2004.
Borrower and Lender desire to amend the Mortgages to secure payment of the
Note and to renew and extend the Liens until the Note is paid.
In consideration of the loans represented by the Note and for other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower, UHC New Mexico, UHC Petroleum, and Lender agree as
follows:
(a) The Mortgages are amended to secure payment of the Note, and all
renewals and extensions, in addition to the other Obligations described therein,
and the Liens are renewed and extended until the Note is paid.
Renewal and Modification - Page 1 of 5
85791.2
(b) The Mortgages, as amended, are ratified, confirmed, and
acknowledged to be valid, subsisting, and binding upon UHC New Mexico and UHC
Petroleum. Borrower, UHC New Mexico, and UHC Petroleum represent and warrant
that no uncured breaches or defaults exist under the Mortgages; no event has
occurred or circumstance exists which, with the passing of time or giving of
notice, will constitute a default or breach under the Mortgages; and there are
no defenses or offsets with respect to the Note, the Prior Note, or the
Mortgages, as amended.
(c) All liens and security interests granted to Lender by Borrower,
UHC New Mexico, or UHC Petroleum in the future will secure payment of the Note.
(d) Borrower, UHC New Mexico, and UHC Petroleum will execute all
additional deeds of trust, mortgages, renewals, extensions, or other related
documents required by Lender to evidence the liens and security interests of
Lender.
(e) A default by Borrower, UHC New Mexico, or UHC Petroleum under
the Mortgages will, at Lender's option, be a default under any or all other
documents among Borrower, UHC New Mexico, UHC Petroleum, and Lender, or any two
or more of them, and a default in any of the other documents will be a default
under the Mortgages.
(f) Contemporaneously with the execution and delivery hereof,
Borrower shall pay all costs and expenses incident to the preparation,
execution, and recordation of this amendment and the other loan documents,
including, without limitation, recording fees and attorneys fees of Lender.
If necessary for recordation, there may be attached as Exhibit B a
description of the Realty Collateral covered by the Mortgages and located in the
county in which a counterpart is filed. A complete original of this amendment,
with complete exhibits, may be found in the files of Lender at the office
address shown above.
This instrument is binding upon and inures to the benefit of the parties
hereto and their respective heirs, personal representatives, successors, and
assigns.
Renewal and Modification - Page 2 of 5
85791.2
This instrument is executed in multiple originals and is effective as of
the date first written above.
BORROWER:
ATTEST: UNITED HERITAGE CORPORATION
By:____________________________ By:___________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
UHC NEW MEXICO:
ATTEST: UHC NEW MEXICO CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
UHC PETROLEUM:
ATTEST: UHC PETROLEUM CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
LENDER:
ATTEST: ALMAC FINANCIAL CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇ ▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
Renewal and Modification - Page 3 of 5
85791.2
STATE OF TEXAS ss.
ss.
COUNTY OF ▇▇▇▇▇▇▇ ▇▇.
(New Mexico and Texas) The foregoing document was acknowledged before
me on this ___ day of _____________, 2002, by ▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman of the
Board, President and Chief Executive Officer of UNITED HERITAGE CORPORATION, a
Utah corporation, on behalf of the corporation.
_________________________________
My commission expires: Notary Public, State of Texas
____________________ _________________________________
[Stamp or Seal] (Printed Name)
STATE OF TEXAS ss.
ss.
COUNTY OF ▇▇▇▇▇▇▇ ▇▇.
(New Mexico and Texas) The foregoing document was acknowledged before
me on this ___ day of _____________, 2002, by ▇▇▇▇▇▇ ▇. ▇▇▇▇, President of UHC
NEW MEXICO CORPORATION, a New Mexico corporation, and President of UHC PETROLEUM
CORPORATION, a Texas corporation, on behalf of the corporations.
_________________________________
My commission expires: Notary Public, State of Texas
____________________ _________________________________
[Stamp or Seal] (Printed Name)
STATE OF TEXAS ss.
ss.
COUNTY OF ▇▇▇▇▇▇▇ ▇▇.
(New Mexico and Texas) The foregoing document was acknowledged before
me on this ___ day of _____________, 2002, by ▇▇▇▇▇▇ ▇. ▇▇▇▇, President of ALMAC
FINANCIAL CORPORATION, a Texas corporation, on behalf of the corporation.
_________________________________
My commission expires: Notary Public, State of Texas
____________________ _________________________________
[Stamp or Seal] (Printed Name)
Exhibits:
A - Filing Information for Mortgages
B - Legal Descriptions if necessary for recordation (may be omitted)
Renewal and Modification - Page 4 of 5
85791.2
Exhibit A to
Renewal and Modification of Mortgages
Mortgages
1. Mortgage, Deed of Trust, and Security Agreement (Oil and Gas) dated
January 29, 2001, executed by UHC NEW MEXICO CORPORATION ("UHC New Mexico") in
favor of ALMAC FINANCIAL CORPORATION, and filed at Book 0415, Page 1532 on
8/28/01, in the County Records of ▇▇▇▇▇▇ County, New Mexico, and Book 82, Page
237 on 8/27/01, in the County Clerk Records of Roosevelt County, New Mexico.
2. Deed of Trust and Security Agreement (Oil and Gas) dated January 29,
2001, executed by UHC PETROLEUM CORPORATION ("UHC Petroleum") in favor of ALMAC
FINANCIAL CORPORATION, and filed at Volume 192, Page 285 on 8/27/01, in the
Official Public Records of ▇▇▇▇▇▇▇ County, Texas.
After Recording Please Return To: Prepared by:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.C. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ 76102-5341
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
Renewal and Modification - Page 5 of 5
85791.2
COMMERCIAL SECURITY AGREEMENT
This Commercial Security Agreement is entered into effective the 29th day
of January, 2001, by UHC PETROLEUM CORPORATION, a Texas corporation ("Grantor")
for the benefit of ALMAC FINANCIAL CORPORATION, a Texas corporation ("Lender").
For valuable consideration, Grantor grants to Lender a security interest in the
Collateral to secure the Indebtedness and agrees that Lender shall have the
rights stated in this Agreement with respect to the Collateral, in addition to
all other rights which Lender may have by law.
1. DEFINITIONS. The following words have the meanings assigned below when
used in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code as adopted
in the State of Texas ("Code"). All references to dollar amounts shall mean
amounts in lawful money of the United States of America.
(a) "Agreement" means this Commercial Security Agreement, as amended
or modified from time to time, together with all exhibits and schedules attached
from time to time.
(b) "Borrower" means UNITED HERITAGE CORPORATION, a Utah
corporation.
(c) "Collateral" means the following described property of Grantor,
whether now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located:
(i) All present and future "accounts", as defined in the Code,
together with any and all books of account, customer lists and other records
relating in any way to the foregoing (including, without limitation, computer
software, whether on tape, disk, card, strip, cartridge or any other form), and
in any case where an account arises from the sale of goods, the interest of
Debtor in such goods.
(ii) All present and hereafter acquired inventory (including
without limitation, all raw materials, work in process, and finished goods)
held, possessed, owned, held on consignment, or held for sale, lease, return or
to be furnished under contracts of services, in whole or in part, by Grantor
wherever located.
(iii) All equipment and fixtures of whatsoever kind and
character now or hereafter possessed, held, acquired, leased, or owned by
Grantor and used or usable in Grantor's business, and in any event shall
include, but shall not be limited to, all swabbing units or workover units, and
all other trucks, vehicles, machinery, tools, computer software, office
equipment, furniture, appliances, furnishings, fixtures, vehicles, motor
vehicles, together with all replacements, accessories, additions, substitutions,
and accessions to all of the foregoing, and all manuals, instructions and
records relating in any way to the foregoing (including, without limitation, any
computer software, whether on tape, disk, card, strip, cartridge or any other
form). The equipment covered by this Security Agreement includes, but is not
limited to, the swabbing units, workover units, trucks, vehicles, and other
equipment described in Exhibit A attached.
Security Agreement - Page 1 of 11
67232.1 [August 9, 2001]
(iv) All present and future chattel paper, documents,
instruments (including promissory notes), investment property, deposit accounts,
general intangibles (including all permits, regulatory approvals, copyrights,
patents, trademarks, service marks, trade names, mask works, goodwill, licenses
and all other intellectual property), letter of credit rights, and all
supporting obligations, all as defined in the Code, now or hereafter owned,
held, or acquired by Grantor, and in any case where an account arises from the
sale of goods, the interest of Grantor in such goods, and all records relating
in any way to the foregoing (including, without limitation, any computer
software, whether on tape, disk, card, strip, cartridge or any other form). In
addition, the word "Collateral" includes all the following, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever
located: (i) all accessions, accessories, increases, and additions to and all
replacements of and substitutions for any property described above; (ii) all
products and produce of any of the property described in this Collateral
section; (iii) all proceeds (including, without limitation, insurance proceeds)
from the sale, lease, destruction, loss, or other disposition of any of the
property described in this Collateral section; and (iv) all records and data
relating to any of the property described in this Collateral section, whether in
the form of a writing, photograph, microfilm, microfiche, or electronic media,
together with all of Grantor's right, title, and interest in and to all computer
software required to utilize, create, maintain, and process any such records or
data on electronic media.
(v) All other present and future assets of Grantor.
(d) "Event of Default" means and includes any of the Events of
Default set forth below in the section titled "Events of Default."
(e) "Grantor" means UHC PETROLEUM CORPORATION, a Texas corporation.
(f) "Guarantor" means and includes without limitation, each and all
of the guarantors, sureties, and accommodation parties in connection with the
Indebtedness.
(g) "Indebtedness" means the indebtedness evidenced by the Note,
including all principal and accrued interest thereon, together with all other
liabilities, costs, and expenses for which Grantor or Borrower is responsible
under this Agreement or under any Related Documents, and all other obligations,
debts, and liabilities, plus any accrued interest thereon, owing by Borrower, or
any one or more of them, to Lender of any kind or character, now existing or
hereafter arising, as well as all present and future claims by Lender against
Borrower, or any one or more of them, and all renewals, extensions,
modifications, substitutions, and rearrangements of any of the foregoing;
whether such Indebtedness arises by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, overdraft, indemnity agreement, or
otherwise; whether such Indebtedness is voluntary or involuntary, due or not
due, direct or indirect, absolute or contingent, liquidated or unliquidated;
whether Borrower may be liable individually or jointly with others; whether
Borrower may be liable primarily or secondarily or as debtor, maker, comaker,
drawer, endorser, guarantor, surety, accommodation party, or otherwise.
(h) "Lender" means ALMAC FINANCIAL CORPORATION, a Texas corporation,
its successors and assigns (which is a secured party under the Code).
(i) "Note" means an amended and restated revolving credit note dated
January 29, 2001, in the principal amount of $1,750,000.00, executed by
Borrower, and payable to the order of Lender.
(j) "Related Documents" means and includes, without limitation, the
Note and all credit agreements, loan agreements, guaranties, pledge agreements,
security agreements, mortgages, deeds of trust, and all other instruments,
agreements, and documents, whether now or hereafter existing, executed in
connection with the Note.
2. WARRANTIES. Grantor warrants that: (a) Grantor has the full right,
power, and authority to enter into this Agreement and to pledge the Collateral
to Lender; (b) Grantor has established adequate means of obtaining from Borrower
on a continuing basis information about Borrower's financial condition; and (c)
Lender has made no representation to Grantor about Borrower or Borrower's
creditworthiness.
3. WAIVERS. Grantor waives notice of the incurring of any Indebtedness and
waives all requirements of presentment, protest, demand, and notice of dishonor
or non-payment to Grantor, Borrower, or any other party to the Indebtedness or
the Collateral. Lender may do any of the following with respect to any
obligation of any Borrower, without first notifying or obtaining the consent of
Grantor: (a) grant any extension of time for any payment, (b) grant any renewal,
(c) permit any modification of payment terms or other terms, (d) release
Borrower or any Guarantor from all or any portion of the Indebtedness, or (e)
exchange or release all or any portion of the Collateral or other security for
all or any portion of the Indebtedness. No such act or failure to act shall
affect Lender's rights against Grantor or the Collateral.
Security Agreement - Page 2 of 11
67232.1 [August 9, 2001]
4. OBLIGATIONS. Grantor represents and covenants to Lender as follows:
(a) Organization. Grantor is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas. Grantor has
its chief executive office at ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. Grantor
will notify Lender of any change in the location of Grantor's chief executive
office.
(b) Authorization. The execution, delivery, and performance of this
Agreement by Grantor have been duly authorized by all necessary action by
Grantor and do not conflict with, result in a violation of, or constitute a
default under (i) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding upon
Grantor or (ii) any law, governmental regulation, court decree, or order
applicable to Grantor. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a party,
and its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
(c) Perfection. Grantor hereby authorizes Lender to authenticate and
file all financing statements or amendments to financing statement in such
offices and places and at such times and as often as may be, in the judgment of
Lender, necessary to preserve, protect, and renew the security interests herein
created in the Collateral. Grantor agrees to execute such financing statements
and to take whatever other actions are requested by Lender to perfect and
continue Lender's security interest in the Collateral. Upon request of Lender,
Grantor will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby irrevocably appoints Lender as its attorney-in-fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor has disclosed to Lender all trade names and assumed
names currently used by Grantor, all trade names and assumed names used by
Grantor within the previous six (6) years, and all of Grantor's current business
locations. Grantor will notify Lender in writing at least thirty (30) days prior
to the occurrence of any of the following: (i) any changes in Grantor's name,
trade names or assumed names, or (ii) any change in Grantor's business locations
or the location of any of the Collateral.
(d) Enforceability. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is enforceable
in accordance with its terms, is genuine, and complies with applicable laws
concerning form, content, and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral. At
the time any account becomes subject to a security interest in favor of Lender,
the account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or theretofore shipped or delivered pursuant to a
contract of sale, or for services theretofore performed by Grantor with or for
the account debtor; Grantor will not adjust, settle, compromise, amend, or
modify any account, except in good faith and in the ordinary course of business;
provided, however, this exception shall automatically terminate upon the
occurrence of an Event of Default or upon Lender's written request.
(e) Removal of Collateral. Grantor shall keep the Collateral (or to
the extent the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at such
other locations as are acceptable to Lender. Except in the ordinary course of
its business, including the sale of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
Texas, without the prior written consent of Lender.
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67232.1 [August 9, 2001]
(f) Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business, Grantor shall
not sell, offer to sell, or otherwise transfer or dispose of the Collateral.
Grantor shall not pledge, mortgage, encumber, or otherwise permit the Collateral
to be subject to any lien, security interest, encumbrance, or charge, other than
the security interest provided for in this Agreement, without the prior written
consent of Lender, even if junior in right to the security interests granted
under this Agreement. Unless waived by Lender, all proceeds from any disposition
of the Collateral (for whatever reason) shall be held in trust for Lender and
shall not be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.
(g) Title. Grantor represents and warrants to Lender that it is the
owner of the Collateral and holds good and marketable title to the Collateral,
free and clear of all security interests, liens, and encumbrances except for the
security interest under this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
(h) Collateral Schedules and Locations. As often as Lender shall
require, and insofar as the Collateral consists of accounts and general
intangibles, Grantor shall deliver to Lender schedules of such Collateral,
including such information as Lender may require, including without limitation
names and addresses of account debtors and aging of accounts and general
intangibles.
(i) Maintenance and Inspection. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss, or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral.
(j) Taxes, Assessments, and Liens. Grantor will pay when due all
taxes, assessments, and governmental charges or levies upon the Collateral and
provide Lender evidence of such payment upon its request. Grantor may withhold
any such payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in Lender's sole
opinion. If the Collateral is subjected to a lien which is not discharged within
fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient
corporate surety bond, or other security satisfactory to Lender in an amount
adequate to provide for the discharge of the lien plus any interest, costs,
attorneys fees, or other charges that could accrue as a result of foreclosure or
sale of the Collateral. In any contest Grantor shall defend itself and Lender
and shall satisfy any final adverse judgment before enforcement against the
Collateral. Grantor shall name Lender as an additional obligee under any surety
bond furnished in the contest proceedings.
(k) Compliance With Governmental Requirements. Grantor is conducting
and will continue to conduct Grantor's businesses in material compliance with
all federal, state, and local laws, statutes, ordinances, rules, regulations,
orders, determinations and court decisions applicable to Grantor's businesses
and to the production, disposition, or use of the Collateral, including without
limitation, those pertaining to health and environmental matters such as the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986
(collectively, together with any subsequent amendments, hereinafter called
"CERCLA"), the Resource Conservation and Recovery Act of 1976, as amended by the
Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980,
and the Hazardous Substance Waste Amendments of 1984 (collectively, together
with any subsequent amendments, hereinafter called "RCRA"). Grantor represents
and warrants that (i) none of the operations of Grantor is the subject of a
federal, state or local investigation evaluating whether any material remedial
action is needed to respond to a release or disposal of any toxic or hazardous
substance or solid waste into the environment; (ii) Grantor has not filed any
notice under any federal, state, or local law indicating that Grantor is
responsible for the release into the environment, the disposal on any premises
in which Grantor is conducting its businesses, or the improper storage, of any
material amount of any toxic or hazardous substance or solid waste or that any
such toxic or hazardous substance or solid waste has been released, disposed of,
or is improperly stored, upon any premises on which Grantor is conducting its
businesses; and (iii) Grantor otherwise does not have any known material
contingent liability in connection with the release into the environment,
disposal, or the improper storage, of any such toxic or hazardous substance or
solid waste. The terms "hazardous substance" and "release," as used herein,
shall have the meanings specified in CERCLA, and the terms "solid waste" and
"disposal," as used herein, shall have the meanings specified in RCRA; provided,
however, that to the extent that the laws of the State of Texas establish
meanings for such terms which are broader than that specified in either CERCLA
or RCRA, such broader meanings shall apply. The representations and warranties
contained herein are based on Grantor's due diligence in investigating the
Collateral for hazardous wastes and substances. Grantor hereby (a) releases and
waives any future claims against Lender for indemnity or contribution in the
event Grantor becomes liable for cleanup or other costs under any such laws, and
(b) agrees to indemnify and hold harmless Lender against any and all claims and
losses resulting from a breach of this provision of this Agreement. This
obligation to indemnify shall survive the payment of the Indebtedness and the
termination of this Agreement.
Security Agreement - Page 4 of 11
67232.1 [August 9, 2001]
(l) Insurance. Grantor shall procure and maintain all risk
insurance, including without limitation fire, theft, and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages, and basis reasonably acceptable to
Lender. GRANTOR MAY FURNISH THE REQUIRED INSURANCE WHETHER THROUGH EXISTING
POLICIES OWNED OR CONTROLLED BY GRANTOR OR THROUGH EQUIVALENT INSURANCE FROM ANY
INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN THE STATE OF TEXAS. If
Grantor fails to provide any required insurance or fails to continue such
insurance in force, Lender may, but shall not be required to, do so at Grantor's
expense, and the cost of the insurance will be added to the Indebtedness. If any
such insurance is procured by Lender at a rate or charge not fixed or approved
by the State Board of Insurance, Grantor will be so notified, and Grantor will
have the option for five (5) days of furnishing equivalent insurance through any
insurer authorized to transact business in Texas. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be canceled or diminished without at least thirty (30) days prior
written notice to Lender and not including any disclaimer of the insurer's
liability for failure to give such a notice. Each insurance policy also shall
include an endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission, or default of Grantor or any other
person. In connection with all policies covering assets in which Lender holds or
is offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. If Grantor at any time
fails to obtain or maintain any insurance as required under this Agreement,
Lender may (but shall not be obligated to) obtain such insurance as Lender deems
appropriate, including if it so chooses "single interest insurance," which will
cover only Lender's interest in the Collateral.
(m) Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness. Application of insurance proceeds to
the payment of the Indebtedness will not extend, postpone, or waive any payments
otherwise due, or change the amount of such payments to be made, and proceeds
may be applied in such order and such amounts as Lender may elect.
Security Agreement - Page 5 of 11
67232.1 [August 9, 2001]
(n) Solvency. As of the date hereof, and after giving effect to this
Agreement and the completion of all other transactions contemplated by Grantor
at the time of the execution of this Agreement, (i) Grantor is and will be
solvent, (ii) the fair salable value of Grantor's assets exceeds and will
continue to exceed Grantor's liabilities (both fixed and contingent), (iii)
Grantor is paying and will continue to be able to pay its debts as they mature,
and (iv) if Grantor is not an individual, Grantor has and will have sufficient
capital to carry on Grantor's businesses and all businesses in which Grantor is
about to engage.
(o) Lien Not Released. The lien, security interest, and other
security rights of Lender hereunder shall not be impaired by any indulgence,
moratorium, or release granted by Lender, including but not limited to, the
following: (i) any renewal, extension, increase, or modification of any of the
Indebtedness; (ii) any surrender, compromise, release, renewal, extension,
exchange, or substitution granted in respect of any of the Collateral; (iii) any
release or indulgence granted to any endorser, guarantor, or surety of any of
the Indebtedness; (iv) any release of any other collateral for any of the
Indebtedness; (v) any acquisition of any additional collateral for any of the
Indebtedness; and (vi) any waiver or failure to exercise any right, power, or
remedy granted herein, by law, or in any Related Documents.
(p) Environmental Inspections. Upon Lender's reasonable request from
time to time, Grantor will obtain at Grantor's expense an inspection or audit
report addressed to Lender of Grantor's operations from an engineering or
consulting firm approved by Lender, indicating the presence or absence of toxic
and hazardous substances, underground storage tanks, and solid waste on any
premises in which Grantor is conducting business; provided, however, Grantor
will be obligated to pay for the cost of any such inspection or audit no more
than one time in any twelve (12) month period unless Lender has reason to
believe that toxic or hazardous substance or solid wastes have been dumped or
released on any such premises. If Grantor fails to order or obtain an inspection
or audit within ten (10) days after Lender's request, Lender may at its option
order such inspection or audit, and Grantor grants to Lender and its agents,
employees, contractors, and consultants access to the premises in which it is
conducting its business and a license (which is coupled with an interest and is
irrevocable) to obtain inspections and audits. Grantor agrees to promptly
provide Lender with a copy of the results of any such inspection or audit
received by Grantor. The cost of such inspections and audits by Lender shall be
a part of the Indebtedness, secured by the Collateral, and payable by Grantor on
demand.
(q) Chattel Paper. To the extent a security interest in the chattel
paper of Grantor is granted hereunder, Grantor represents and warrants that all
such chattel paper have only one original counterpart, and no other party other
than Grantor or Lender is in actual or constructive possession of any such
chattel paper. Grantor agrees that at the option of and on the request by
Lender, Grantor will either deliver to Lender all originals of the chattel paper
which is included in the Collateral or will ▇▇▇▇ all such chattel paper with a
legend indicating that such chattel paper is subject to the security interest
granted hereunder.
5. ACCOUNTS. Until default and except as otherwise provided below with
respect to accounts, Grantor may have possession of the tangible personal
property and beneficial use of all the Collateral and may use it in any lawful
manner not inconsistent with this Agreement or the Related Documents, provided
that Grantor's right to possession and beneficial use shall not apply to any
Collateral where possession of the Collateral by Lender is required by law to
perfect Lender's security interest in such Collateral. Until otherwise notified
by Lender, Grantor may collect any of the Collateral consisting of accounts. At
any time and even though no Event of Default exists, Lender may collect the
accounts, notify account debtors to make payments directly to Lender for
application to the Indebtedness, and verify the accounts with such account
debtors. Lender also has the right, at the expense of Grantor, to enforce
collection of such accounts and adjust, settle, compromise, ▇▇▇ for, or
foreclose on the amount owing under any such account, in the same manner and to
the same extent as Grantor. If Lender at any time has possession of any
Collateral, whether before or after an Event of Default, Lender shall be deemed
to have exercised reasonable care in the custody and preservation of the
Collateral if Lender takes such action for that purpose as Grantor shall request
or as Lender, in Lender's sole discretion, shall deem appropriate under the
circumstances, but failure to honor any request by Grantor shall not of itself
be deemed to be a failure to exercise reasonable care. Lender shall not be
required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve, or maintain any security
interest given to secure the Indebtedness.
Security Agreement - Page 6 of 11
67232.1 [August 9, 2001]
6. EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may
(but shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining, and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the Note rate from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses shall become a
part of the Indebtedness and be payable on demand by Lender. Such right shall be
in addition to all other rights and remedies to which Lender may be entitled
upon the occurrence of an Event of Default.
7. EVENTS OF DEFAULT. Each of the following shall constitute an "Event of
Default" under this Agreement:
(a) Default on Indebtedness. Failure of Borrower to make any payment
when due on the Indebtedness.
(b) Other Defaults. Failure of Grantor or Borrower to comply with or
to perform any other term, obligation, covenant, or condition contained in this
Agreement, the Note, any other Related Documents, or failure of Borrower to
comply with or to perform any term, obligation, covenant, or condition contained
in any other agreement now existing or hereafter arising between Lender and
Borrower.
(c) False Statements. Any warranty, representation, or statement
made or furnished to Lender under this Agreement, the Note, or any other Related
Documents is false or misleading in any material respect.
8. RIGHTS AND REMEDIES. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Code. In addition and without limitation, Lender may exercise
any one or more of the following rights and remedies:
(a) Accelerate Indebtedness. Lender may declare the entire
Indebtedness immediately due and payable, without notice.
(b) Assemble Collateral. Lender may require Grantor to deliver to
Lender all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may require Grantor
to assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter, provided
Lender does so without a breach of the peace or a trespass, upon the property of
Grantor to take possession of and remove the Collateral. If the Collateral
contains other goods not covered by this Agreement at the time of repossession,
Grantor agrees Lender may take such other goods, provided that Lender makes
reasonable efforts to return them to Grantor after repossession.
Security Agreement - Page 7 of 11
67232.1 [August 9, 2001]
(c) Sell the Collateral. Lender shall have full power to sell,
lease, transfer, or otherwise dispose of the Collateral or the proceeds thereof
in its own name or that of Grantor. Lender may sell the Collateral (as a unit or
in parcels) at public auction or private sale. Lender may buy the Collateral, or
any portion thereof, (i) at any public sale, and (ii) at any private sale if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations. Lender
shall not be obligated to make any sale of Collateral regardless of a notice of
sale having been given. Lender may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Lender will
give Grantor reasonable notice of the time and place of any public sale thereof
or of the time after which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of reasonable notice shall be met
if such notice is given at least ten (10) days prior to the date any public
sale, or after which a private sale, of any of such Collateral is to be held.
All expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale, and
selling the Collateral, shall become a part of the Indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate from
date of expenditure until repaid.
(d) Appoint Receiver. To the extent permitted by applicable law,
Lender shall have the following rights and remedies regarding the appointment of
a receiver: (i) Lender may have a receiver appointed as a matter of right, (ii)
the receiver may be an employee of Lender and may serve without bond, and (iii)
all fees of the receiver and his or her attorney shall become part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
(e) Collect Revenues and Accounts. Lender, either itself or through
a receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may transfer any Collateral into its own name or that of its
nominee and receive the payments, rents, income, and revenues therefrom and hold
the same as security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar property, Lender may
demand, collect, receipt for, settle, compromise, adjust, ▇▇▇ for, foreclose, or
realize on the Collateral as Lender may determine. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open, and dispose of mail
addressed to Grantor; change any address to which mail and payments are to be
sent; and endorse notes, checks, drafts, money orders, documents of title,
instruments, and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.
(f) Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Borrower for any deficiency
remaining on the Indebtedness due to Lender after application of all amounts
received from the exercise of the rights provided in this Agreement. Borrower
shall be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
(g) Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Code, as amended from
time to time. In addition, Lender shall have and may exercise any or all other
rights and remedies it may have available at law, in equity, or otherwise.
Grantor waives any right to require Lender to proceed against any third party,
exhaust any other security for the Indebtedness, or pursue any other right or
remedy available to Lender.
(h) Cumulative Remedies. All of Lender's rights and remedies,
whether evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Grantor or Borrower under this Agreement, after Grantor or
Borrower's failure to perform, shall not affect Lender's right to declare a
default and to exercise its remedies.
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67232.1 [August 9, 2001]
9. MISCELLANEOUS PROVISIONS. (a) Amendments. This Agreement, together with
any Related Documents, constitutes the entire understanding and agreement of the
parties as to the matters set forth in this Agreement and supersedes all prior
written and oral agreements and understandings, if any, regarding same. No
alteration of or amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or bound by the
alteration or amendment.
(b) Applicable Law. This Agreement has been delivered to Lender and
is performable in ▇▇▇▇▇▇▇ County, Texas. Courts within the State of Texas have
jurisdiction over any dispute arising under or pertaining to this Agreement, and
venue for such dispute shall be in ▇▇▇▇▇▇▇ County, Texas. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
AND APPLICABLE FEDERAL LAWS.
(c) Attorneys Fees and Other Costs. Grantor will upon demand pay to
Lender the amount of any and all costs and expenses (including without
limitation, reasonable attorneys fees and expenses) which Lender may incur in
connection with (i) the perfection and preservation of the security interests
created under this Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, the Collateral,
(iii) the exercise or enforcement of any of the rights of Lender under this
Agreement, or (iv) the failure by Grantor to perform or observe any of the
provisions hereof.
(d) Termination. Upon (i) the satisfaction in full of the
Indebtedness and all obligations hereunder, (ii) the termination or expiration
of any commitment of Lender to extend credit that would become Indebtedness
hereunder, and (iii) Lender's receipt of a written request from Grantor for the
termination hereof, this Agreement and the security interests created hereby
shall terminate. Upon termination of this Agreement and Grantor's written
request, Lender will, at Grantor's sole cost and expense, return to Grantor such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof and execute and deliver to Grantor such
documents as Grantor shall reasonably request to evidence such termination.
(e) Indemnity. Grantor hereby agrees to indemnify, defend, and hold
harmless Lender, and its officers, directors, shareholders, employees, agents,
attorneys, and representatives (each an "Indemnified Person") from and against
any and all liabilities, obligations, claims, losses, damages, penalties,
actions, judgments, suits, costs, expenses, or disbursements of any kind or
nature (collectively the "Claims") which may be imposed on, incurred by, or
asserted against, any Indemnified Person (whether or not caused by any
Indemnified Person's sole, concurrent, or contributory negligence) arising in
connection with this Agreement, the Related Documents, the Indebtedness, or the
Collateral (including, without limitation, the enforcement of the Related
Documents and the defense of any Indemnified Person's action or inactions in
connection with the Related Documents). WITHOUT LIMITATION, THE FOREGOING
INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO ANY CLAIMS
WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH
OR ANY OTHER INDEMNIFIED PERSON, except to the limited extent that the Claims
against the Indemnified Person are proximately caused by such Indemnified
Person's gross negligence or willful misconduct. The indemnification provided
for in this Section shall survive the termination of this Agreement and shall
extend and continue to benefit each individual or entity who is or has at any
time been an Indemnified Person hereunder.
(f) Captions. Captions and headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.
Security Agreement - Page 9 of 11
67232.1 [August 9, 2001]
(g) Notice. All notices required to be given under this Agreement
shall be given in writing, and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or deposited in
the United States mail, first class, postage prepaid, addressed to the party to
whom the notice is to be given at the address shown below. Any party may change
its address for notices under this Agreement by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, if there is more
than one Grantor or Borrower, notice to any Grantor or Borrower will constitute
notice to all Grantor and Borrowers. For notice purposes, Grantor and Borrower
will keep Lender informed at all times of Grantor and Borrower's current
addresses.
(h) Power of Attorney. Grantor hereby irrevocably appoints Lender as
its true and lawful attorney-in-fact, such power of attorney being coupled with
an interest, with full power of substitution to do the following in the place
and stead of Grantor and in the name of Grantor: (i) to demand, collect,
receive, receipt for, ▇▇▇, and recover all sums of money or other property which
may now or hereafter become due, owing or payable from the Collateral; (ii) to
execute, sign and endorse any and all claims, instruments, receipts, checks,
drafts, or warrants issued in payment for the Collateral; (iii) to settle or
compromise any and all claims arising under the Collateral, and, in the place
and stead of Grantor, to execute and deliver its release and settlement for the
claim; and (iv) to file any claim or claims or to take any action or institute
or take part in any proceedings, either in its own name or in the name of
Grantor, or otherwise, which in the discretion of Lender may seem to be
necessary or advisable. This power is given as security for the Indebtedness,
and the authority hereby conferred is and shall be irrevocable and shall remain
in full force and effect until renounced by Lender.
(i) Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
(j) Successor Interests. Subject to the limitations set forth above
on transfer of the Collateral, this Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns; provided, however,
Grantor's rights and obligations hereunder may not be assigned or otherwise
transferred without the prior written consent of Lender.
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67232.1 [August 9, 2001]
(k) Waiver. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right to thereafter demand strict compliance with that provision or any
other provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Grantor, shall constitute a waiver of any of Lender's
rights or of any of Grantor's obligations as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing consent
to subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Lender.
Signed effective the 29th day of January, 2001.
ATTEST: GRANTOR:
UHC PETROLEUM CORPORATION
By:_________________________ By:__________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
Grantor's address:
▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Lender's address:
ALMAC FINANCIAL CORPORATION
▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Exhibits
A - Equipment List
Security Agreement - Page 11 of 11
67232.1 [August 9, 2001]