Exhibit 10.3
FORM OF
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (hereinafter "Agreement") is made and entered
into on the 7th day of October 2005 by and between Lothian Oil Inc., a Delaware
corporation ("Pledgor") and______________________________ (collectively the
"Secured Parties") and Xxxxxx X. Xxxx, an individual (the "Pledgeholder") with
reference to the following facts:
RECITALS
WHEREAS, Pledgor has executed in favor of the Secured Parties a promissory
note (the "Note"), a copy of which is attached hereto as Exhibit "1" and is
incorporated herein by this reference, for the sum of $10,651,000 (together with
any accrued interest thereon, the "Borrowed Amount") in conjunction with the
purchase of 8,000,000 shares (the "Pledged Shares") of the common stock, $0.0001
par value, of United Heritage Corporation ("Common Stock") from the Secured
Parties pursuant to the terms of that certain Securities Purchase Agreement
dated of even date herewith; and
WHEREAS, Pledgor desires to pledge to the Secured Parties the interest of
Pledgor in the Pledged Shares it has purchased, pursuant to the terms of this
Agreement, for the purpose of securing payment of the Note; and
WHEREAS, Pledgor and the Secured Parties agree that Xxxxxx X. Xxxx shall
hold the shares as the Pledgeholder and shall manage and dispose of the shares
in accordance with the terms of this Agreement.
THEREFORE, in consideration of mutual covenants and promises contained
herein, and for valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties to this Agreement (hereinafter collectively
"parties" and individually "party") agree as follows:
AGREEMENT
1. Pledge of Stock and Proceeds.
(a) Original Pledge. As collateral security for the payment and/or
performance of the Indebtedness, as defined in section 1(f) below, Pledgor
hereby pledges, grants and assigns to Secured Parties a continuing security
interest in the following:
(i) the Pledged Shares; and
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(ii) except as otherwise set forth in section 2(b) below, the
proceeds of the Stock including, without limitation, any and all dividends,
cash, instruments and other property from time-to-time received, receivable, or
otherwise distributed in respect of or in exchange for any of the Pledged Shares
("Proceeds"). (The Pledged Shares and the Proceeds shall hereinafter be
collectively referred to as the "Collateral").
(b) Intentionally Omitted.
(c) Delivery of Stock Power to Secured Parties. Pledgor shall
deliver to the Pledgeholder, for the benefit of the Secured Parties,
concurrently with the execution of this Agreement, the Pledged Shares in
certificated form, along with Assignments of Corporate Shares in the form of
Exhibit "2" attached hereto and incorporated herein by this reference ("Stock
Assignments"), signed by Pledgor, in blank. The Stock Assignments shall cover
2,800,000 Pledged Shares, 1,733,333 Pledged Shares and 3,466,667 Pledged Shares,
such Stock Assignments to be used by the Pledgeholder for the benefit of the
Secured Parties in accordance with the terms of this Agreement.
(d) Secured Parties' Acceptance of Collateral; Appointment of
Pledgeholder as Pledgor's Attorney-In-Fact. Secured Parties hereby agree to
accept the Collateral and Pledgeholder agrees to hold and dispose of the
Collateral in accordance with and subject only to the terms of this Agreement.
Pledgor hereby irrevocably appoints the Pledgeholder as Pledgor's
attorney-in-fact to arrange for the transfer of the Collateral and to do and
perform all actions that are necessary or appropriate in order to effect the
terms of this Agreement.
(e) Release of Collateral. So long as there is no existing Default
(as defined below), the Pledgeholder shall release the Collateral from this
Agreement and return the Collateral to Pledgor as follows:
(i) Upon payment of $2,383,666 plus accrued interest, if any,
as required by Section 2(b) of the Note, the Pledgeholder shall
deliver 2,800,000 shares of the Pledged Shares, and any Proceeds
attributable to that portion of the Pledged Shares, to the Borrower;
(ii) Upon payment of $2,383,666 plus accrued interest, if any,
as required by Section 2(c) of the Note, the Pledgeholder shall
deliver 1,733,333 shares of the Pledged Shares, and any Proceeds
attributable to that portion of the Pledged Shares, to the Borrower;
and
(iii) Upon payment of the full unpaid principal balance owing
on the Note, plus all accrued, unpaid interest, the Pledgeholder
shall deliver 3,466,667 shares of the Pledged Shares, and any
Proceeds attributable to that portion of the Pledged Shares, to the
Borrower.
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(f) As used in this Agreement, the term "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
Pledgor is responsible under this Agreement, including collection costs and
attorneys fees, and all renewals, extensions, modifications, substitutions, and
rearrangements of any of the foregoing.
All of the Pledged Shares, and any Proceeds attributable to that
portion of the Pledged Shares, when released by the Pledgeholder to the
Borrower, shall be free of any lien or encumbrance.
2. Matters Pertaining to the Collateral.
(a) Voting and Consensual Rights. Pledgor shall retain the right to
vote the Pledged Shares and to exercise any other rights pertaining to the
Pledged Shares, provided, however, so long as Pledgor is in "Default" as defined
in Paragraph 3 of this Agreement, Secured Parties shall vote the Pledged Shares
and exercise any rights pertaining to the Pledged Shares.
(b) Rights to Dividends and Distributions. So long as Pledgor is not
in Default and except as expressly limited below, Pledgor shall be entitled to
receive and retain any Proceeds distributed on account of the Pledged Shares.
Notwithstanding the foregoing, Secured Parties, rather than Pledgor, shall be
entitled to collect and receive all of the following types of Proceeds, which
shall be added to and shall become a part of the Collateral:
(i) all proceeds paid or payable other than in cash, and all
instruments and other property distributed in respect of, or in exchange for,
the Pledged Shares;
(ii) all proceeds paid or payable with respect to the Pledged
Shares in connection with a partial or total liquidation or dissolution of
United Heritage Corporation (the "Company") or in connection with a reduction of
capital, capital surplus or paid-in surplus of the Company; and
(iii) all proceeds distributed in redemption of, or in
exchange for, the Pledged Shares. To the extent the foregoing proceeds exceed
the amount of Pledgor's obligations and liabilities under the Note and/or this
Agreement, Pledgor shall be entitled to receive these excess proceeds.
In the event and for so long as Pledgor is in Default as defined in
Section 3 below, Secured Parties shall receive all Proceeds with respect to the
Pledged Shares for immediate application to the Note.
(c) Stock Adjustments. In the event that, during the term of this
Agreement, any stock dividend, reclassification, readjustment, or other change
is declared or made in the capital structure of the Company, all new,
substituted and additional shares or other securities issued with respect to the
Pledged Shares by reason of any such change shall be delivered to and held by
the Pledgeholder for the benefit of the Secured Parties under the terms of this
Agreement in the same manner as the Pledged Shares.
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3. Default and Remedy on Default.
(a) The occurrence of any of the following shall constitute an event
of default ("Default") under this Agreement:
(i) Default Under Note. If an Event of Default, as set forth in
Section 9 of the Note, occurs and is not cured as specifically provided
therein, or
(ii) Default Under This Agreement. If Pledgor defaults in the due
performance or observance of any representation or obligation under the
Note or this Agreement, or
(iii) Bankruptcy of the Company. The Company files a petition for
relief under the Bankruptcy Code, an involuntary petition for relief is
filed against the Company under the Bankruptcy Code and such involuntary
petition is not dismissed within thirty (30) days after the filing
thereof, or an order for relief naming the Company is entered under the
Bankruptcy Code; or
(b) At the option of Secured Parties, upon the happening and during
the continuance of any Default, Secured Parties shall have all of the rights and
remedies set forth below:
(i) if Secured Parties so elect and give notice of such election to
Pledgor, the Pledgeholder may vote any or all shares of the Pledged Shares
as proxy for Pledgor and Secured Parties, for any lawful purpose and give
all consents, waivers and ratifications in respect of the Pledged Shares
and otherwise act on behalf of the Secured Parties with respect thereto as
though the Secured Parties were the outright owners thereof (Pledgor
hereby irrevocably constituting and appointing the Pledgeholder the proxy
and attorney-in-fact of Pledgor, with full power of substitution, to do
so);
(ii) the Pledgeholder, on behalf of the Secured Parties, will be
entitled to receive and apply to the Indebtedness all cash Proceeds or
other distributions made in respect to the Pledged Shares or other
Collateral;
(iii) the Pledgeholder, on behalf of the Secured Parties, may
demand, xxx for, collect or make any compromise or settlement of any
claims that the Secured Parties have in respect of payment of the
Indebtedness or foreclosure of the Collateral;
(iv) the Pledgeholder, on behalf of the Secured Parties, may sell,
resell, assign and deliver, or otherwise dispose of any or all of the
Collateral, for cash or credit, or both, and upon such terms at such place
or places, at such time or times and to such entities or other persons as
the Pledgeholder thinks expedient, all in accordance with the Texas
Uniform Commercial Code;
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(v) the Pledgeholder, on behalf of the Secured Parties, may cause
all or any part of the Collateral to be transferred into the Secured
Parties' names or the names of Secured Parties' nominee or nominees, in
satisfaction of the Note and as payment of the Borrowed Amount, all in
accordance with the Texas Uniform Commercial Code;
(vi) the Pledgeholder, on behalf of the Secured Parties, may
exercise any right, power or remedy or proceed against the Collateral in
any manner permitted by law or by this Agreement or the Note;
(vii) the Pledgeholder, on behalf of the Secured Parties, may take
any other action permitted by this Agreement, the Note, at law or in
equity, to collect the Borrowed Amount; and
(viii) Pledgor agrees that all Pledged Shares constitute collateral
of a type customarily sold on a recognized market. Accordingly, the
Pledgeholder and the Secured Parties shall all rights and remedies
provided under the UCC with respect to this type of collateral.
The above rights, powers and remedies of the Pledgeholder, on behalf of
the Secured Parties, are cumulative and not exclusive. To the maximum extent
permitted by applicable law, Pledgor waives all claims, damages, and demands
against Secured Parties arising out of the possession, retention or sale of the
Collateral.
(c) Pledgeholder's Right to Execute Documents. Pledgeholder shall
have the right to execute any document or form, in his name or in the name of
Pledgor, which may be necessary or desirable in connection with the retention or
sale of the Collateral.
4. Pledgor's Waiver.
Pledgor hereby waives (except as required by applicable statute and
cannot be waived) any right to require Pledgeholder (or the Secured Parties) to
proceed against any person or Collateral or to pursue any remedy in the power of
the Pledgeholder (or the Secured Parties).
5. Pledgor's Representations, Warranties and Covenants.
Pledgor represents, warrants and covenants to Secured Parties as
follows:
(a) This Agreement creates a valid and enforceable security interest
in the Collateral.
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(b) Upon delivery to the Pledgeholder as contemplated hereby, the
Collateral will be free of any security interests, liens, pledges or
encumbrances created by Pledgor (except for the security interest created
hereby), or any claims of third parties of any nature whatsoever, charges,
escrows, options, rights of first refusal, or other agreements, restrictions,
arrangements, commitments or obligations, written or oral, created by Pledgor,
affecting the legal or beneficial ownership of the Collateral.
(c) From and after the date hereof, Pledgor shall not make any
agreements restricting in any manner the transferability of the Collateral or
otherwise affecting the Collateral;
(d) Pledgor shall, at Pledgor's expense, take any steps necessary to
preserve the Secured Parties' rights in the Collateral against any claims of
third parties;
(e) Pledgor has arrangements for keeping informed of changes or
potential changes affecting the Collateral (including, without limitation,
rights to convert, rights to subscribe, payment of dividends, reorganization or
other exchanges, tender offers and voting rights), and the Pledgeholder and the
Secured Parties shall not have any responsibility or liability for informing
Pledgor of any such changes or potential changes or for taking any action or
omitting to take any action with respect thereto; and
(f) So long as the Indebtedness remains unpaid, Pledgor shall not
cause, and Pledgor will employ reasonable commercial efforts to prevent, the
issuance by United Heritage Corporation of additional shares of Common Stock at
a price of less than $1.00 per share; provided, however, that United Heritage
Corporation shall issue 222,222 shares of its Common Stock to Xxxxxxxxxx & Xxxxx
LLP and a warrant to purchase an additional 222,222 shares of its Common Stock
to Xxxxxxxxxx & Xxxxx LLP, said warrant having an exercise price of $0.50 per
share and having a term of five years, all in accordance with the resolution
passed by the United Heritage Corporation Board of Directors on April 20, 2004;
and provided further that the Pledgeholder may from time-to-time, in accordance
with the requirements of subsection 8(g) of this Agreement, waive the rights of
the Secured Parties to the protection afforded by this section 5(f).
(g) In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of the Collateral may
be effected after a Default, and also upon the persons or entities who may
qualify or be eligible to purchase the Collateral, Pledgor hereby agrees that
upon the occurrence of a Default, the Pledgeholder may, from time to time, if
the Collateral is not publicly traded on a nationally recognized stock exchange
and/or is considered a "restricted" security, attempt to sell all or any part of
the Collateral by a private placement, upon commercially reasonable terms
restricting the bidders and prospective purchasers to a limited number who will
represent and agree that they are purchasing for investment for their own
accounts only and not for distribution, and who will otherwise meet state or
federal securities law requirements, including those pertaining to sales made
pursuant to exemptions from registration under the Securities Act of 1933 and/or
registration or qualification under other state or federal securities laws.
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6. Matters Pertaining to Pledgeholder.
(a) The Pledgeholder shall not be personally liable for any act he
may do or omit to do under this Agreement while acting in good faith and in the
exercise of his best judgment, and any act done or omitted by the Pledgeholder
pursuant to the advice of the Pledgeholder's attorney shall be conclusive
evidence of such good faith. Except as expressly provided herein, the
Pledgeholder is expressly authorized and directed to disregard any and all
notices or warnings given by any of the parties, or by any other person or
corporation, excepting only orders or process of court, and is hereby expressly
authorized to comply with and obey any and all orders, judgments or decrees of
any court. If the Pledgeholder obeys or complies with any such order, judgment
or decree of any court, he shall not be liable to any of the parties or any
other person, firm or corporation by reason of such compliance, notwithstanding
that any such order, judgment or decree be subsequently reversed, modified,
annulled, set aside or vacated, or found to have been entered without
jurisdiction.
(b) The parties expressly agree the Pledgeholder has the absolute
right at the Pledgeholder's election, if the Pledgeholder considers it
appropriate, to file an action in interpleader in a court of proper jurisdiction
requiring the parties to answer and litigate their claims and rights among
themselves, and the Pledgeholder is authorized to deposit with the clerk of the
court all documents and funds held by him pursuant to this Agreement. In the
event such action is filed, the parties jointly and severally agree to pay all
costs, expenses and reasonable attorneys' fees that the Pledgeholder incurs in
such interpleader action. Upon filing of such action the Pledgeholder shall
thereupon be fully released and discharged from all obligations to further
perform any duties or obligations otherwise imposed by the terms of this
Agreement.
(c) The Pledgeholder shall not be bound in any way by any other
agreement between the parties as to which the Pledgeholder is not a party,
whether or not the Pledgeholder has knowledge thereof, nor by any notice of a
claim or demand with respect to this Agreement or the Collateral. The
Pledgeholder shall have no duties or responsibilities except as expressly set
forth in this Agreement. The Pledgeholder may rely conclusively on any
certificate, statement, request, waiver, receipt, agreement or other instrument
that the Pledgeholder believes to be genuine and to have been signed and
presented by an appropriate person or persons.
(d) The retention and distribution of the Collateral in accordance
with the terms and provisions of this Agreement shall fully and completely
release the Pledgeholder from any obligation or liability assumed by the
Pledgeholder hereunder as to the Collateral.
(e) The Pledgeholder, while in possession of the Collateral prior to
or following the occurrence of an event of Default, as hereinabove provided, and
while acting in accordance with the terms of this Agreement or applicable law,
is not responsible for any fluctuations in value or delays in disposing of the
Collateral.
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(f) The Pledgeholder shall not be liable in any respect for
verifying the identity, authority or rights of the parties executing or
delivering or purporting to execute and/or deliver this Agreement or any
documents or papers deposited hereunder. The Pledgeholder shall not be liable
for the loss of any rights with respect to this Agreement or any documents
deposited with the Pledgeholder.
(g) Notwithstanding anything herein to the contrary, the
Pledgeholder shall have no duty with respect to the Collateral other than the
duty to use reasonable care in the custody and preservation of the Collateral if
it is in the Pledgeholder's possession. The Pledgeholder shall be under no
obligation to take any steps necessary to preserve rights in the Collateral
against any other parties, to sell the Collateral if it threatens to decline in
value, or to exercise any rights represented thereby, including voting or
consensual rights, except as directed by Pledgor or the Secured Parties pursuant
to the terms of this Agreement.
(h) Pledgor and the Secured Parties agree to and each does hereby
indemnify, defend (with counsel acceptable to the Pledgeholder) and hold the
Pledgeholder harmless against any and all losses, damages, claims and expenses,
including reasonable attorneys' fees, that may be incurred by the Pledgeholder
by reason of his compliance with the terms of this Agreement. If, as a result of
any disagreement between the parties and/or adverse demands and claims being
made by any or all of them upon the Pledgeholder, the Pledgeholder shall become
involved in litigation, including any interpleader brought by the Pledgeholder
as provided in this Agreement, Pledgor and the Secured Parties each agree that
they shall be jointly and severally liable to the Pledgeholder on demand for all
costs, expenses and attorneys' fees that the Pledgeholder shall incur and/or be
compelled to pay by reason of such litigation.
7. Replacement of Pledgeholder.
In the event the Pledgeholder is or becomes unwilling or unable to
act in such capacity for any reason, the Secured Parties shall appoint a
successor. The Secured Parties (but not Pledgor) shall have the right, after
delivery of written notice signed by the Secured Parties to the Pledgeholder, to
terminate the Pledgeholder and to name the Pledgeholder's successor.
8. Miscellaneous.
(a) It is acknowledged by each party that such party either had
separate and independent advice of counsel or the opportunity to avail himself
or itself of same. This Agreement was prepared by each party in conjunction with
counseling from such party's respective attorney or the opportunity to obtain
such counseling. In light of these facts it is acknowledged that no party shall
be construed to be solely responsible for the drafting of this Agreement, and
therefore any ambiguity shall not be construed against any party as the alleged
draftsman of it. Each party shall pay all costs and expenses incurred or to be
incurred by such party in negotiating and preparing this Agreement and in
performing and complying with all representations, warranties, covenants,
agreements and conditions contained in this Agreement to be performed or
complied with by such party, including legal fees.
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(b) Each party agrees, without further consideration, to cooperate
and diligently perform any further acts, deeds and things and to execute and
deliver any documents that may be reasonably necessary to consummate, evidence,
confirm and/or carry out the intent and provisions of this Agreement, all
without undue delay or expense. Pledgor shall reimburse the Secured Parties for
any costs and expenses incurred by the Secured Parties in connection with any
breach or default of Pledgor under this Agreement, including collection efforts,
whether or not suit is commenced or judgment is entered. Furthermore, should any
party institute or should the parties otherwise become a party to any action or
proceeding to enforce or interpret this Agreement, the prevailing party in any
such action or proceeding shall be entitled to receive from the non-prevailing
party all costs and expenses of prosecuting or defending the action or
proceeding. This Agreement shall be governed in all respects by the laws of the
State of Texas as applied to agreements among Texas residents entered into and
to be performed entirely within Texas, without regard to the conflict of law
provisions thereof. Jurisdiction for the resolution of any dispute relating to
this Agreement, the Note or the Pledged Shares will be in a State District Court
in Xxxxxxx County, Texas.
(c) The parties expressly acknowledge and agree that this Agreement:
(i) is the final, complete and exclusive statement of the parties' agreement
with respect to the subject matter hereof, (ii) supersedes any prior or
contemporaneous promises, assurances, guarantees, representations,
understandings, conduct, proposals, conditions, commitments, acts, course of
dealing, warranties, interpretations or terms of any kind, oral or written
(collectively "Prior Agreements"), and that any such Prior Agreements are of no
force or effect except as expressly set forth herein, and (iii) may not be
varied, supplemented or contradicted by evidence of such Prior Agreements or by
evidence of subsequent oral agreements. Any agreement hereafter made shall be
ineffective to modify, supplement or discharge the terms of this Agreement, in
whole or in part, unless such agreement is in writing and signed by the party
against whom enforcement of the modification, supplement or discharge is sought.
By execution hereof, the parties specifically disavow any desire or intention to
create a "third party" beneficiary contract, and specifically declare that no
person or entity, save and except for the parties and their permitted
successors, and assigns, shall have any rights hereunder nor any right of
enforcement hereof. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof. If any term or provision of this Agreement or the application thereof
to any person or circumstance shall, to any extent, be determined to be invalid,
illegal or unenforceable, then the remaining part of this Agreement shall
nevertheless not be affected thereby and shall continue in full force and effect
to the fullest extent provided by law. This Agreement is to be read, construed
and applied together with the Note, which, taken together, set forth the
complete understanding and agreement of the parties with respect to the matters
referred to herein and therein.
(d) Pledgor may not delegate its duties under this Agreement, in
whole or in part, without the prior written consent of the Secured Parties,
which consent may be withheld in the Secured Parties' sole and arbitrary
discretion. Notwithstanding the preceding sentence, no such delegation shall
release Pledgor from any liability or obligation under this Agreement without
the written consent of the Secured Parties, which consent may be withheld in the
Secured Parties' sole and arbitrary discretion. Subject to the foregoing, all of
the representations, warranties, covenants, conditions and provisions of this
Agreement shall be binding upon and shall inure to the benefit of each party and
such party's respective heirs, executors, administrators, legal representatives,
successors and/or assigns.
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(e) The headings used in this Agreement are for convenience and
reference purposes only, and shall not be used in construing or interpreting the
scope or intent of this Agreement or any provision hereof. References to this
Agreement shall include all amendments or renewals thereof. As used in this
Agreement, each gender shall be deemed to include each other gender, including
neutral genders or genders appropriate for entities, if applicable, and the
singular shall be deemed to include the plural, and vice versa, as the context
requires.
(f) All notices, demands, requests, consents, approvals or other
communications ("Notices") given hereunder shall be as provided in the Note.
(g) Except as expressly provided otherwise herein, neither this
Agreement nor any of the terms, provisions, obligations or rights contained
herein, may be amended, modified, supplemented, augmented, rescinded, discharged
or terminated (other than by performance), except by a written instrument or
instruments signed by all of the parties to this Agreement. No waiver of any
breach of any term, provision or agreement contained herein, or of the
performance of any act or obligation under this Agreement, or of any extension
of time for performance of any such act or obligation, or of any right granted
under this Agreement, shall be effective and binding unless such waiver shall be
in a written instrument or instruments signed by each party claimed to have
given or consented to such waiver and each party affected by such waiver. Except
to the extent that the party or parties claimed to have given or consented to a
waiver may have otherwise agreed in writing, no such waiver shall be deemed a
waiver or relinquishment of any other term, provision, agreement, act,
obligation or right granted under this Agreement, or any preceding or subsequent
breach thereof. No forbearance by a party to seek a remedy for any noncompliance
or breach by another party hereto shall be deemed to be a waiver by such
forbearing party of its rights and remedies with respect to such noncompliance
or breach, unless such waiver shall be in a written instrument or instruments
signed by the forbearing party.
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WHEREFORE, the parties hereto have executed this Agreement as of the date
first set forth above.
Pledgor:
Lothian Oil Inc.
By:
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Xxx Xxxx
Chief Executive Officer
Address: 000 0xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Secured Parties:
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By:
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____________________, Trustee
By:
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____________________, Trustee
Pledgeholder:
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Xxxxxx X. Xxxx
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EXHIBIT "1"
PROMISSORY NOTE
$10,651,000 Date: October 6, 0000
Xxxxxxxx, Xxxxx
FOR VALUE RECEIVED, the receipt and sufficiency of which are acknowledged,
Lothian Oil, Inc., a Delaware corporation ("Maker"), hereby promises to pay to
the order of Xxxxxx X. Xxxx, as agent ("Agent") for___________________________
(collectively "Holders"), at the address designated on the signature page of
this Note or at such other place as Agent may designate by written notice to
Maker, the principal sum herein below described ("Principal Amount"), in the
manner and at the times provided and subject to the terms and conditions
described herein. This Note has been executed by Maker in conjunction with the
execution by Maker and Holders of that certain Securities Purchase Agreement of
even date herewith pursuant to which Maker will purchase eight million
(8,000,000) shares ("Shares") of United Heritage Corporation common stock from
the Holders.
1. Principal Amount and Interest.
The Principal Amount means the sum of ten million six hundred
fifty-one thousand dollars ($10,651,000). Interest on the unpaid Principal
Amount shall accrue from the date of this Note at the annual rate to be
determined quarterly as of each Interest Payment Date (as defined below) equal
to the sum of the prime rate of interest fixed by CitiBank, N.A. (the "Prime
Rate"), as of the date of this Note and on each Interest Payment Date, plus one
percent (1%).
2. Payment of Principal and Interest.
Maker shall pay the Principal Amount, subject to Section 5 below, as
follows:
(a) an installment of $3,500,000 shall be due and payable on the
date on which the Maker acquires 3,280,000 shares of common
stock of United Heritage Corporation and warrants to purchase
an additional 8,720,000 shares of common stock of United
Heritage Corporation in accordance with the terms of that
certain letter of intent dated August 9, 2005 and entered into
by the Maker and United Heritage Corporation on August 10,
2005 (the "Acquisition Date");
(b) an installment of $2,383,666 shall be due and payable on the
first anniversary of the Acquisition Date;
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(c) an installment of $2,383,666 shall be due and payable on the
second anniversary of the Acquisition Date; and
(d) the Note will mature and an installment equal to the remaining
unpaid Principal Amount shall be due and payable on the third
anniversary of the Acquisition Date.
Interest shall be payable in arrears with respect to each calendar
quarter on March 31, June 30, September 30 and December 31 of each year (each,
an "Interest Payment Date"), except that if any such date is a Saturday, Sunday
or legal holiday (a "Non-Business Day") then such interest payment shall be
payable on the next day that is not a Saturday, Sunday or legal holiday on which
banks in New York, New York are required or authorized to be closed (a "Business
Day").
All checks or other instruments representing payment of the
aforesaid installments shall be made payable to Agent or made in accordance with
Agent's reasonable instructions to Maker.
3. Security.
As security for payment of the Principal Amount due under this Note,
Maker shall pledge the Shares. Maker shall execute a Stock Pledge Agreement of
even date herewith evidencing Holders' security interest in the Shares (the
"Stock Pledge Agreement").
4. Representations and Warranties: Maker represents and warrants that the
following statements are true and correct:
(a) No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body (including,
without limitation, any court) is required, except such authorization or
approval as has already been obtained, either for the grant by Maker of the
security interest granted hereby or for the execution, delivery or performance
of this Note by Maker.
(b) The execution and delivery of this Note and the taking of any
other action required or contemplated hereby shall not cause a default or event
of default under any other agreement or commitment to which Maker is a party or
by which it is bound.
5. Prepayments.
Maker shall have the right to prepay any portion of the Principal
Amount without prepayment penalty or premium or discount.
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6. Late Charges.
If Maker fails to pay any installment of the Principal Amount or
interest within ten (10) days of the date when due, then Maker will pay a late
charge of 1% or the maximum allowed under state law of the overdue installment,
which ever is less (the "Late Charge").
7. Manner of Payments/Crediting of Payments.
Payments of any amount required hereunder shall be made in lawful
money of the United States and shall be credited first against accrued but
unpaid Late Charges, if any, thereafter against accrued but unpaid interest, if
any, and thereafter against the unpaid balance of the Principal Amount.
8. Interest Following Default.
Following and during the continuance of an event of default, the
outstanding Principal Amount of this Note shall bear interest at the highest
rate allowed by law, but in no event more than 12%. In this regard, Holders
reserve the right to add any accrued interest that is not paid when due to the
Principal Amount.
9. Default/Acceleration Upon Default.
At the option of Holders, all or any part of the indebtedness of
Maker hereunder shall immediately become due and payable, irrespective of any
agreed maturity date, upon the happening of any of the following events of
default:
(a) If accrued interest or any installment of the Principal Amount
under this Note is not paid within ten (10) days of the date when due;
(b) If Maker shall breach any non-monetary condition or obligation
imposed on Maker pursuant to the terms of this Note or the Stock Pledge
Agreement, provided, however, that if any such breach is reasonably susceptible
of being cured, Maker shall be entitled to a grace period of thirty (30) days
following written notice of such event of default to cure;
(c) If Maker shall make a general assignment for the benefit of
creditors;
(d) If a custodian, trustee, receiver, or agent is appointed or
takes possession of any of the Shares or substantially all of the property of
Maker;
(e) If Maker shall be adjudicated bankrupt or insolvent or admit in
writing Maker's inability to pay Maker's debts as they become due;
(f) If Maker shall apply for or consent to the appointment of a
custodian, trustee, receiver, intervenor, liquidator or agent of Maker, or
commence any proceeding related to Maker under any bankruptcy or reorganization
statute, or under any arrangement, insolvency, readjustment of debt,
dissolution, or liquidation law of any jurisdiction, whether now or hereafter in
effect;
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(g) If any petition is filed against Maker under the Bankruptcy Code
and either (1) the Bankruptcy Court orders relief against Maker, or (2) such
petition is not dismissed by the Bankruptcy Court within ninety (90) days of the
date of filing; or
(h) If any attachment, execution, or other writ is levied on any of
the Shares substantially all of the assets of Maker and which is not be
dismissed or stayed within sixty (60) days after the levy.
Maker shall notify Holder immediately if any event of default which is described
in sub-section (c) through sub-section (h), above, occurs.
10. Collection Costs and Attorneys' Fees.
Maker agrees to pay Holders all reasonable costs and expenses,
including reasonable attorneys' fees, paid or incurred by Holders in connection
with the collection or enforcement of this Note or any instrument securing
payment of this Note, including without limitation, defending the priority of
such instrument or conducting a trustee sale thereunder. In the event any
litigation is initiated concerning the enforcement, interpretation or collection
of this Note, the prevailing party in any proceeding shall be entitled to
receive from the non-prevailing party all costs and expenses including, without
limitation, reasonable attorneys' and other fees incurred by the prevailing
party in connection with such action or proceeding.
11. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen note, no right or remedy herein
conferred upon or reserved to Holders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
12. Waiver.
No delay or omission by Holders to exercise any right or remedy
arising upon any Event of Default shall impair the exercise of any such right or
remedy or constitute a waiver of any such Event of Default. Every right and
remedy given by this Note or by law to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Holders. No provision of
this Note may be waived unless in writing signed by Agent, and waiver of any one
provision of this Note shall not be deemed to be a waiver of any other
provision.
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13. Replacement Note.
If this Note is mutilated and surrendered to Maker or if Holders
claim and submit an affidavit or other evidence, satisfactory to Maker to the
effect that this Note has been lost, destroyed or wrongfully taken, then Maker
shall issue a replacement note.
14. Notice.
Any notice to either party under this Note shall be given by
personal delivery or by express mail, Federal Express, DHL or similar
airborne/overnight delivery service, or by mailing such notice by first class or
certified mail, return receipt requested, addressed to such party at the address
set forth below, or to such other address as either party from time to time may
designate by written notice. Notices delivered by overnight delivery service
shall be deemed delivered the next business day following consignment for such
delivery service. Mailed notices shall be deemed delivered and received in
accordance with this provision three (3) days after deposit in the United States
mail.
15. Usury Compliance.
All agreements between Maker and Holders are expressly limited, so
that in no event or contingency whatsoever, whether by reason of the
consideration given with respect to this Note, the acceleration of maturity of
the unpaid Principal Amount and interest thereon, or otherwise, shall the amount
paid or agreed to be paid to Holders for the use, forbearance, or detention of
the indebtedness which is the subject of this Note exceed the highest lawful
rate permissible under the applicable usury laws. If, under any circumstances
whatsoever, fulfillment of any provision of this Note shall involve transcending
the highest interest rate permitted by law which a court of competent
jurisdiction deems applicable, then the obligations to be fulfilled shall be
reduced to such maximum rate, and if, under any circumstances whatsoever,
Holders shall ever receive as interest an amount that exceeds the highest lawful
rate, the amount that would be excessive interest shall be applied to the
reduction of the unpaid Principal Amount under this Note and not to the payment
of interest, or, if such excessive interest exceeds the unpaid balance of the
Principal Amount under this Note, such excess shall be refunded to Maker. This
provision shall control every other provision of all agreements between Maker
and Holders.
16. Governing Law and Jurisdiction.
This Note shall be governed by, interpreted under and construed and
enforced in accordance with the laws of the State of Texas. Any action to
enforce payment of this Note shall be filed and heard solely in the State
District Court, Xxxxxxx County, Texas
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MAKER:
LOTHIAN OIL INC.,
By: Exhibit Only - Do not sign
------------------------------------
Xxx Xxxx, President
MAKER'S ADDRESS:
000 0xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxx Xxxx
HOLDERS' AND AGENT'S ADDRESS:
0 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxx
Attn: Xxxxxx X. Xxxx
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EXHIBIT "2"
ASSIGNMENT OF CORPORATE SHARES
(Without Certificate)
FOR VALUE RECEIVED, the undersigned hereby assigns to Xxxxxx X. Xxxx as
Pledgeholder under that certain Stock Pledge Agreement dated October ____, 2005,
_________________________ (____________) shares of the common stock of United
Heritage Corporation represented by certificate number(s) ____________________
standing in the undersigned's name on the books of said corporation, and does
hereby instruct and appoint the custodian of that corporation's stock books to
so transfer the said stock on the books of said corporation.
Dated: _____________________
-------------------------
EXHIBIT ONLY--DO NOT SIGN
-------------------------
WITNESS:
----------------------------------------
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