DEVELOPMENT AND EXPLORATION AGREEMENT
Lothian
Oil Inc. (“Lothian”),
whose address is ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, and
UHC
Petroleum Corporation, and
UHC
Petroleum Services Corporation, and
ratified by United
Heritage Corporation (collectively
referred to in this Agreement as “UHC”),
whose
address is ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, entered into a
definitive agreement providing for Lothian to acquire shares of the common
stock
of United Heritage Corporation (the “Share Transaction”). The stock purchase
agreement provides that it is contingent on Lothian and UHCP entering into
a
Development and Exploration Agreement (this “Agreement”) concerning the
ownership, exploration, and development of UHCP’s Oil and Gas Leases in the Cato
San ▇▇▇▇▇▇ Unit, ▇▇▇▇▇▇ County, New Mexico; the ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ County,
New Mexico; the Tomahawk Field, Roosevelt County, New Mexico (collectively
referred to as the “New Mexico Properties”); and the ▇▇▇▇▇▇▇ Field, ▇▇▇▇▇▇▇
County, Texas (the “▇▇▇▇▇▇▇ Property”).
For
valuable consideration, the receipt and sufficiency of which is acknowledged,
and the mutual benefits to be derived by Lothian and UHC, Lothian and UHC enter
into this Agreement and agree as follows:
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1.
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Lothian
and UHC will enter into a secured loan agreement, to be dated March
31,
2006, providing for loan advances, by Lothian to UHC, of up to $2,500,000
for the development of the Leases in the ▇▇▇▇▇▇▇ Property. The term
of the
loan shall be for ten (10) years from the date on which this Agreement
is
executed by the Parties. Loan advances shall be used by or on behalf
of
UHC to pay for one hundred percent (100%) of the capital cost of
drilling
and equipping new ▇▇▇▇▇ and establishing and improving production
from
existing ▇▇▇▇▇ in the ▇▇▇▇▇▇▇ Property. Advances under the loan shall
be
repayable, monthly, from 70% of UHC’s share of the oil and gas proceeds
from the ▇▇▇▇▇▇▇ Property, with interest payable monthly at Citibank’s
prime lending rate of interest plus 1%. The loan by Lothian to UHC
shall
be evidenced by a credit agreement providing for UHC to execute a
promissory note to Lothian, secured by a deed of trust and mortgage
on 70%
of UHC’s interests in the leases it owns in the ▇▇▇▇▇▇▇ Property. As part
consideration for granting this loan, UHC shall deliver to Lothian
an
assignment of 70% of UHC’s interest in the ▇▇▇▇▇▇▇ Property, which
assignment shall become effective when the full amount of the loan,
together with all accrued interest, has been repaid and paid in full
to
Lothian, as provided for in the Credit Agreement.
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In
the event UHC shall receive a bona fide offer to purchase its interest
in
the ▇▇▇▇▇▇▇ Property prior to the assignment to Lothian becoming
effective, and UHC elects to accept the offer, Lothian is granted
and
shall have the right of first refusal to purchase the ▇▇▇▇▇▇▇ Property
on
the same terms and conditions provided for in that offer. Upon UHC
accepting the offer (either from a third party, or Lothian electing
to
exercise its right of first refusal), the assignment to Lothian of
the 70%
interest shall become immediately effective, and the outstanding
balance
on the loan from Lothian to UHC shall be deemed paid in full. If
the full
amount of the loan has not been expended by or on behalf of UHC for
the
purposes stated above, Lothian shall remain obligated to expend that
amount for the original purposes of the loan, as stated above.
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2.
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Lothian
and UHC have entered into an Operating Agreement (the “OA”), naming
Lothian as Operator, governing the operations of all of the Leases
and
interests in properties included in the ▇▇▇▇▇▇▇ Property. Any conflicts
between the terms of the OA and this Agreement shall be governed
by the
terms of this Agreement.
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3.
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While
the OA entered into by the parties provides for Lothian to be the
designated Operator of the ▇▇▇▇▇▇▇ Property, UHC agrees to continue
to
serve as nominal operator for purposes of reporting to all state
and
federal agencies concerning the leases that are subject to this Agreement.
At such time as Lothian elects to be the nominal operator and assumes
all
reporting obligations, UHC agrees to execute such forms and documents
as
may be necessary to allow Lothian to be recognized as the Operator
of the
properties.
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4.
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This
Agreement contains all agreements and understandings of the parties
with
respect to its terms, and supersedes all prior understandings, agreements,
both written and oral, which may have been discussed and previously
agreed
on. This Agreement may only be amended in writing by Lothian and
UHC, if
both parties agree to the terms of the
amendment.
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This
Agreement shall be effective, for all purposes, as of March 31,
2006.
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| “Lothian” | ||
| Lothian Oil Inc. | ||
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| Date: April __, 2006 | By: | /s/ ▇▇▇ ▇▇▇▇ |
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▇▇▇ ▇▇▇▇ |
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| Secretary/Chief Financial Officer | ||
| “UHC” | ||
| UHC Petroleum Corporation | ||
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| Date: April __, 2006 | By: | /s/ C. ▇▇▇▇▇ ▇▇▇▇▇▇ |
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C. ▇▇▇▇▇ ▇▇▇▇▇▇ |
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| President/Chief Executive Officer | ||
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| United Heritage Corporation | ||
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| Date: April __, 2006 | By: | /s/ C. ▇▇▇▇▇ ▇▇▇▇▇▇ |
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C. ▇▇▇▇▇ ▇▇▇▇▇▇ |
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| President/Chief Executive Officer | ||
| UHC Petroleum Services Corporation | ||
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| Date: April __, 2006 | By: | /s/ C. ▇▇▇▇▇ ▇▇▇▇▇▇ |
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C. ▇▇▇▇▇ ▇▇▇▇▇▇ |
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| President/Chief Executive Officer | ||
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