Document:

Exhibit
      10.13

     

    SECURITY
      AGREEMENT

     

    THIS
      SECURITY AGREEMENT (this “Agreement”)
      is
      made as of September 29, 2006 by and between (together
      with its successors and permitted assigns, the “Secured
      Party”);
      Heartland Oil and Gas Corp. (together with its successors and permitted assigns,
      the “Borrower”);
      and
      the subsidiaries of Borrower set forth on (together with their successors and
      permitted assigns, collectively and jointly and severally, the “Subsidiary
      Guarantors”,
      and
      together with the Borrower, collectively and jointly and severally, the
“Grantors”).

     

    Background

     

    On
      the
      date hereof, Secured Party is extending a loan to Borrower, and Borrower is
      issuing to Secured Party a Convertible Senior Secured Note in the principal
      amount of $___ (as
      the
      same may be amended, restated, modified, supplemented and/or replaced from
      time
      to time, the “Note”).

     

    In
      order
      to secure the prompt payment, performance and discharge in full of all of
      Borrower’s obligations under the Note, Borrower and the Subsidiary Guarantors
      have agreed to execute and deliver to the Secured Party this Agreement and
      to
      grant the Secured Party a perfected first priority security interest in certain
      property of each Grantor.

     

    Accordingly,
      each Grantor, intending to be legally bound, hereby agrees with the Secured
      Party as follows:

     

    1.
      DEFINITIONS. Capitalized terms used but not otherwise defined herein shall
      have
      the meanings assigned to such terms in the Note. The following terms, as used
      herein, shall have the following meanings: 

     

    “Account”
      shall be used herein as defined in the Uniform Commercial Code, but in any
      event
      shall include, but not be limited to, credit card receivables, lottery winnings,
      health-care-insurance receivables, any right to payment arising out of goods
      or
      other property (including, without limitation, intellectual property) sold
      or
      leased, licensed, assigned or disposed of or for services rendered which is
      not
      evidenced by an instrument or chattel paper, whether or not it has been earned
      by performance including all rights to payment of rents under a lease or license
      and payment under a charter or other contract and all rights incident to such
      lease, charter or contract.

     

    “As-Extracted
      Collateral”
      shall be used herein as defined in the Uniform Commercial Code, but in any
      event
      shall include, but not be limited to, oil, gas and other minerals and mineral
      rights.

     

    “Chattel
      Paper”
      shall be used herein as defined in the Uniform Commercial Code, but in any
      event
      shall include, but not be limited to, a writing or writings which evidence
      both
      a monetary obligation and a security interest in, or a lease of, specific
      goods.

     

    “Collateral”
      shall have the meaning ascribed to such term in Section 2. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Commercial
      Tort Claims”
      shall be used herein as defined in the Uniform Commercial Code and shall include
      those claims listed (including plaintiff, defendant and a description of the
      claim) on Schedule 10 attached hereto.

     

    “Deposit
      Account”
      shall be used herein as defined in the Uniform Commercial Code, but in any
      event
      shall include, but not be limited to, any demand, time, savings, passbook or
      similar account.

     

    “Document”
      shall be used herein as defined in the Uniform Commercial Code, but in any
      event
      shall include, but not be limited to, a bill of lading, dock warrant, dock
      receipt, warehouse receipt or order for the delivery of goods, and also any
      other document which in the regular course of business or financing is treated
      as adequately evidencing that the Person in possession of it is entitled to
      receive, hold and dispose of the document and the goods it covers.

     

    “Equipment”
      shall be used herein as defined in the Uniform Commercial Code, but in any
      event
      shall include, but not be limited to, tangible personal property held by any
      Grantor for use primarily in business and shall include equipment, machinery,
      furniture, vehicles, fixtures, furnishings, dyes, tools, and all accessories
      and
      parts now or hereafter affixed thereto as well as all attachments, replacements,
      substitutes, accessories, additions and improvements to any of the foregoing,
      but Equipment shall not include Inventory.

     

    “Event
      of Default”
      shall be used herein as defined in the Note.

     

    “Fixtures”
      shall be used herein as defined in the Uniform Commercial Code.

     

    “General
      Intangibles”
      shall be used herein as defined in the Uniform Commercial Code but in any event
      shall include, but not be limited to, all personal property of every kind and
      description of any Grantor other than Goods, Accounts, Fixtures, Documents,
      Letter-of-Credit Rights, Chattel Paper, Deposit Accounts, Instruments,
      Investment Property, Commercial Tort Claims and Supporting Obligations, and
      shall include, without limitation, payment intangibles, contract rights (other
      than Accounts), franchises, licenses, leases, all rights related to oil, gas,
      minerals, choses in action, books, records, customer lists, tax, insurance
      and
      other kinds of refunds, patents, trademarks, trade names, service marks,
      slogans, trade dress, copyrights, other intellectual property rights and
      applications for intellectual property rights, goodwill, plans, licenses,
      software (to the extent it does not constitute Goods) and other rights in
      personal property and all rights related to all of the foregoing.

     

    “Goods”
      shall be used herein as defined in the Uniform Commercial Code, but in any
      event
      shall include, but not be limited to, all computer programs imbedded in goods
      and any supporting information provided in connection with the transaction
      relating to the program and all other things that are movable, and all rights
      related to all of the foregoing.

     

    “Instruments”
      shall be used herein as defined in the Uniform Commercial Code, but in any
      event
      shall include, but not be limited to, promissory notes, negotiable certificates
      of deposit, a negotiable instrument or a security or any other writing which
      evidences a right to the payment of money and is not itself a security agreement
      or lease and is of a type which is, in the ordinary course of business,
      transferred by delivery with any necessary endorsement or
      assignment.

     

    
      
        
        

      

      
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    “Inventory”
      shall be used herein as defined in the Uniform Commercial Code but in any event
      shall include, but not be limited to, tangible personal property held by or
      on
      behalf of any Grantor (or in which any Grantor has an interest in mass or a
      joint or other interest) for sale or lease or to be furnished under contracts
      of
      service, tangible personal property which any Grantor has so leased or
      furnished, and raw materials, work in process and materials used, produced
      or
      consumed in any Grantor’s business, and shall include tangible personal property
      returned to such Grantor by the purchaser following a sale thereof by such
      Grantor and tangible personal property represented by Documents. All equipment,
      accessories and parts at any time attached or added to items of Inventory or
      used in connection therewith shall be deemed to be part of the
      Inventory.

     

    “Investment
      Property”
      shall be used herein as defined in the Uniform Commercial Code but in any event
      shall include, but not be limited to, all securities, whether certificated
      or
      uncertificated, all financial assets, all security entitlements, all securities
      accounts, all commodity contracts and all commodity accounts.

     

    “Letter-of-Credit
      Right”
      shall be used herein as defined in the Uniform Commercial Code, but in any
      event
      shall include, but not be limited to, any right to payment or performance under
      a letter of credit, whether or not the beneficiary has demanded or is at the
      time entitled to demand payment or performance.

     

    “Proceeds”
shall
      be used herein as defined in the Uniform Commercial Code but, in any event,
      shall include, but not be limited to, (a) any and all proceeds of any insurance
      (whether or not the Secured Party is named as the loss payee thereof),
      indemnity, warranty or guaranty payable to any Grantor or the Secured Party
      from
      time to time with respect to any of the Collateral, (b) any and all payments
      (in
      any form whatsoever) made or due and payable to any Grantor from time to time
      in
      connection with any requisition, confiscation, condemnation, seizure or
      forfeiture of all or any part of the Collateral by any Governmental Authority
      (or any person acting under color of Governmental Authority), (c) any and all
      amounts received when Collateral is sold, leased, licensed, exchanged, collected
      or disposed of, (d) any rights arising out of Collateral, and (e) any and all
      other amounts from time to time paid or payable under or in connection with
      any
      of the Collateral.

     

    “Secured
      Obligations”
      shall mean any obligation of the Borrower under the Note (including any amounts
      payable to Payee thereunder), any additional notes issued after the date hereof
      to the Secured Party pursuant to Section 6 of the Note, and any other
      indebtedness of Borrower to Secured Party whether now existing or hereafter
      arising.

     

    “Software”
shall
      be used herein as defined in the Uniform Commercial Code but in any event,
      shall
      include, but not be limited to, any computer program or supporting information
      provided in connection with the transaction relating to the
      program.

     

    “Supporting
      Obligations”
shall
      be used herein as defined in the Uniform Commercial Code but in any event shall
      include, but not be limited to, guarantees and letters of credit that support
      payment of another obligation.

     

    
      
        
        

      

      
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    “Uniform
      Commercial Code”
shall
      mean the Uniform Commercial Code in effect on the date hereof and as amended
      from time to time, and as enacted in the State of Nevada or in any state or
      states which, pursuant to the Uniform Commercial Code as enacted in the State
      of
      Nevada, has jurisdiction with respect to all, or any portion of, the Collateral
      or this Agreement, from time to time. It is the intent of the parties that
      the
      definitions set forth above should be construed in their broadest sense so
      that
      Collateral will be construed in its broadest sense. Accordingly if there are,
      from time to time, changes to defined terms in the Uniform Commercial Code
      that
      broaden the definitions, they are incorporated herein and if existing
      definitions in the Uniform Commercial Code are broader than the amended
      definitions, the existing ones shall be controlling. Similarly, where the phrase
      “as defined in the Uniform Commercial Code, but in any event shall include,
      but
      not be limited to . . .” is used above, it means as defined in the Uniform
      Commercial Code except that if any of the enumerated types of items specified
      thereafter would not fall within the Uniform Commercial Code definition, they
      shall nonetheless be included in the applicable definition for purposes of
      this
      Agreement.

    

    2.
      GUARANTY AND GRANT OF SECURITY INTEREST.

     

    (a)
      As
      security for the payment and performance of the Secured Obligations, each
      Grantor hereby pledges, hypothecates, delivers and assigns to the Secured Party,
      and creates in favor of the Secured Party, a first priority security interest
      in
      and to, all of such Grantor’s right, title and interest in and to all the
      following property, in all its forms, in each case whether now or hereafter
      existing, whether now owned or hereafter acquired, created or arising, and
      wherever located (collectively, but without duplication, the “Collateral”):

    

    (i)
      All
      Equipment;

     

    (ii)
      All
      Inventory and other Goods;

    

    (iii)
      All
      Accounts;

    

    (iv)
      All
      General Intangibles; (v) All Fixtures;

     

    (vi)
      All
      Documents, Letter-of-Credit Rights, and Chattel Paper;

    

    (vii)
      All
      Deposit Accounts;

     

    (viii)
      All Instruments and Investment Property;

    

    (ix)
      All
      Commercial Tort Claims; (x) All Supporting Obligations; (xi) All As-Extracted
      Collateral; and

    

    (xii)
      All
      Proceeds of any and all of the foregoing.

     

    
      
        
        

      

      
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    Notwithstanding
      the foregoing, nothing herein shall be deemed to constitute an assignment of
      any
      asset which, in the event of an assignment, becomes void by operation of
      applicable Law or the assignment of which is otherwise prohibited by applicable
      Law (in each case to the extent that such applicable Law is not overridden
      by
      Sections 9-406, 9-407 and/or 9-408 of the Uniform Commercial Code or other
      similar applicable Law); provided, however, that to the extent permitted
      by applicable Law, this Agreement shall create a valid security interest in
      such
      asset and, to the extent permitted by applicable Law, this Agreement shall
      create a valid security interest in the Proceeds of such asset.

     

    (b)
      For
      the avoidance of doubt, the Subsidiary Guarantors hereby jointly and severally
      agree to act as surety for the Borrower’s obligations under the Notes, and
      irrevocably and unconditionally guaranty to the Secured Party that the Notes
      shall be paid in full when due and payable, whether at the stated or accelerated
      maturity thereof or upon any mandatory or voluntary prepayment or otherwise.
      Notwithstanding the foregoing, the liability of each Subsidiary Guarantor
      hereunder is limited to an amount equal to (x) the amount that would render
      this
      guaranty void, voidable or unenforceable against such Subsidiary Guarantor’s
      creditors or creditors’ representatives under any applicable fraudulent
      conveyance, fraudulent transfer or similar act or under Section 544 or 548
      of
      the Bankruptcy Code of 1978, as amended, minus (y) $1.00 (one U.S.
      Dollar).

     

    (c)
      Secured Party acknowledges that Borrower is seeking to sell, to an unaffiliated
      third party on arms-length terms, certain assets (the “Sold
      Assets”)
      located in the counties set forth on Schedule 2. Secured Party shall,
      prior to or upon the closing of any sale of Sold Assets to an unaffiliated
      party, and without requiring any payment on the Notes in connection therewith,
      release the security interest granted to Secured Party hereby with respect
      to
      the Collateral included in the Sold Assets sold by Borrower in such
      transaction(s). In connection therewith, Secured Party shall file, or authorize
      the party acquiring such Sold Assets to file, termination statements and/or
      amendments to financing statements (as appropriate) under the Uniform Commercial
      Code and take such other action as may be appropriate to evidence the release
      of
      such Collateral from the security interest granted hereby. For the avoidance
      of
      doubt, no such sale shall require or result in the release of any security
      interest of the Secured Party of Collateral not included in such sale, including
      any Sold Assets not included in such sale.

     

    3.
      REPRESENTATIONS AND WARRANTIES OF THE GRANTORS. Each Grantor represents
      and warrants as follows. The following representations and warranties shall
      survive execution of this Agreement and shall not be affected or waived by
      any
      examination or inspection made by the Secured Party: 

     

    (a)
      Status. Each Grantor is duly organized and validly existing as a
      corporation in the State of Nevada. The organizational identification number
      of
      Borrower is C16136-98, and the organizational identification numbers of the
      other Grantors are set forth on Exhibit A. Each Grantor has perpetual
      existence and the power and authority to own its property and assets and to
      transact the business in which it is engaged or presently proposes to engage.
      Each Grantor has qualified to do business in each state or jurisdiction where
      its business or operations so require.

     

    
      
        
        

      

      
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    (b)
      Authority to Execute Agreement; Binding Agreement. Each Grantor has the
      corporate or other power to execute, deliver and perform its obligations under
      this Agreement, the Note and any other agreement or document contemplated hereby
      and thereby to which it is, or is to be, a party (collectively, the
“Loan
      Documents”)
      (including, without limitation, the right and power to give the Secured Party
      a
      security interest in the Collateral) and has taken all necessary corporate
      and
      other action to authorize the execution, delivery and performance of this
      Agreement, the Note and each other Loan Document to which it is, or is to be,
      a
      party. The Note has been duly executed and delivered by Borrower. The Note
      constitutes the legal, valid and binding obligation of Borrower, enforceable
      against Borrower in accordance with its terms except as such enforceability
      may
      be limited by applicable bankruptcy, insolvency, reorganization and similar
      laws
      of general application relating to or affecting the rights and remedies of
      creditors. This Agreement has been duly executed by each Grantor. This Agreement
      constitutes the legal, valid and binding obligation of each Grantor, enforceable
      against each Grantor in accordance with its terms except as such enforceability
      may be limited by applicable bankruptcy, insolvency, reorganization and similar
      laws of general application relating to or affecting the rights and remedies
      of
      creditors.

     

    (c)
      Grantors’ Title. Except for the security interests granted hereunder,
      each Grantor is, as to all Collateral presently owned, and shall be as to all
      Collateral hereafter acquired, the owner or in the case of leased or licensed
      assets, the lessee or licensee, of said Collateral free and clear from any
      liens, security interests, encumbrances or adverse claims.

     

    (d)
      Perfected Security Interest. This Agreement creates a valid, first
      priority security interest in the Collateral, securing payment of the Secured
      Obligations. Upon the filing of the Uniform Commercial Code financing statements
      in the offices set forth on Schedule 4 hereto and the recordation of this
      Agreement (or a short form hereof) at the United States Copyright Office, all
      security interests which may be perfected by filing shall have been duly
      perfected. Except for the filing of the Uniform Commercial Code financing
      statements referred to in the preceding sentence and the delivery of the
      Instruments referred to in paragraph (g) above, no action is necessary to
      create, perfect or protect such security interest. Without limiting the
      generality of the foregoing, except for the filing of said financing statements,
      no consent of any third parties and no authorization, approval or other action
      by, and no notice to or filing with any Governmental Authority or regulatory
      body is required for (i) the execution, delivery and performance of this
      Agreement, the Note or any other Loan Document, (ii) the creation or perfection
      of the security interest in the Collateral or (iii) the enforcement of the
      Secured Party’s rights hereunder and under the Note.

     

    (e)
      Absence of Conflicts with Other Agreements, Etc. Neither the pledge of
      the Collateral hereunder nor any of the provisions hereof (including, without
      limitation, the remedies provided hereunder) violates any of the provisions
      of
      any organizational documents of any Grantor, or any other agreement to which
      any
      Grantor or any of its property is a party or is subject, or any judgment,
      decree, order or award of any court, governmental body or arbitrator or any
      applicable law, rule or regulation applicable to the same. None of the
      provisions of the Note violates any of the provisions of any organizational
      documents of the Borrower, or any other agreement to which the Borrower or
      any
      of its property is a party or is subject, or any judgment, decree, order or
      award of any court, governmental body or arbitrator or any applicable law,
      rule
      or regulation applicable to the same.

     

    
      
        
        

      

      
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    4.
      COVENANTS OF GRANTORS. Each Grantor covenants that:

     

    (a)
      Filing of Financing Statements and Preservation of Interests. Immediately
      upon execution hereof, each Grantor shall cause to be duly filed in each office
      set forth on Schedule 4 Uniform Commercial Code financing statements and
      all filings with the United States Copyright Office and the United States Patent
      and Trademark Office, in each case in form and substance satisfactory to the
      Secured Party. Without limiting the obligation of the Grantors set forth in
      the
      preceding sentence, each Grantor hereby authorizes the Secured Party, and
      appoints the Secured Party as its attorney-in-fact, to file in such office
      or
      offices as the Secured Party deems necessary or desirable such financing and
      continuation statements and amendments and supplements thereto (including,
      without limitation, an “all assets” filing), and such other documents as the
      Secured Party may require to perfect, preserve and protect the security
      interests granted herein and ratifies all such actions taken by the Secured
      Party.

     

    (b)
      Transfer of Collateral. Other than the disposition of inventory in the
      ordinary course of the applicable Grantor’s business as presently, no Grantor
      shall sell, assign, transfer, encumber or otherwise dispose of any Collateral
      without the prior written consent of the Secured Party does not authorize any
      such disposition. For purposes of this provision, “dispose of any Collateral”
shall include, without limitation, the creation of a security interest or other
      encumbrance (whether voluntary or involuntary) on such Collateral.

    

    (c)
      Other Assurances.

     

    (i)
      Each
      Grantor agrees that from time to time, at the joint and several expense of
      the
      Grantors, it will promptly execute and deliver all such further instruments
      and
      documents, and take all such further action as may be necessary or desirable,
      or
      as the Secured Party may reasonably request, in order to perfect and protect
      any
      security interest granted or purported to be granted hereby or to enable the
      Secured Party to exercise and enforce its rights and remedies hereunder and
      with
      respect to any Collateral or to otherwise carry out the purposes of this
      Agreement.

     

    (ii)
      From
      and after the date hereof, each Grantor shall promptly execute and deliver
      all
      such further instruments and documents, and take all such further action as
      may
      be necessary or desirable, or as the Secured Party may request, in order to
      perfect any and all security interests in real estate owned, leased or otherwise
      held by such Grantor, it being the intent of the Grantors and the Secured Party
      that the Secured Party shall have a first priority security interest, as
      security for the payment and performance of the Secured Obligations, in and
      to,
      all of each Grantor’s right, title and interest in and to all real property, in
      all its forms, in each case whether now or hereafter existing, whether now
      owned
      or hereafter acquired, created or arising, and wherever located, subject to
      such
      permitted exceptions as to which the Secured Party shall agree.

     

    
      
        
        

      

      
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    5.
      REMEDIES UPON DEFAULT.

     

    (a)
      Upon
      the occurrence and during the continuation of an Event of Default, the Secured
      Party may exercise, in addition to any other rights and remedies provided
      herein, under other contracts and under law, all the rights and remedies of
      a
      secured party under the Uniform Commercial Code. Without limiting the generality
      of the foregoing, upon the occurrence and during the continuation of an Event
      of
      Default, (i) at the request of the Secured Party, each Grantor shall, at its
      cost and expense, assemble the Collateral owned or used by it as directed by
      the
      Secured Party; (ii) the Secured Party shall have the right (but not the
      obligation) to notify any account debtors and any obligors under Instruments
      or
      Accounts to make payments directly to the Secured Party and to enforce the
      Grantors’ rights against account debtors and obligors; (iii) the Secured Party
      may (but is not obligated to), without notice except as provided below, sell
      the
      Collateral at public or private sale, on such terms as the Agent deems to be
      commercially reasonable; (iv) the Secured Party may (but is not obligated to)
      direct any financial intermediary or any other Person holding Investment
      Property to transfer the same to the Agent or its designee; and (v) the Secured
      Party may (but is not obligated to) transfer any or all Intellectual Property
      registered in the name of any Grantor at the United States Patent and Trademark
      Office and/or Copyright Office into the name of the Secured Party or any
      designee or any purchaser of any Collateral. Each Grantor agrees that ten (10)
      days notice of any sale referred to in clause (iii) above shall constitute
      sufficient notice. The Secured Party may purchase Collateral at any such sale.
      The Grantors shall be liable to the Agent and the Secured Party for any
      deficiency amount.

     

    (b)
      The
      Secured Party may comply with any applicable Law in connection with a
      disposition of Collateral and compliance will not be considered adversely to
      affect the commercial reasonableness of any sale of the Collateral. The Secured
      Party may sell the Collateral without giving any warranties and may specifically
      disclaim such warranties. If the Secured Party sells any of the Collateral
      on
      credit, the Borrower will only be credited with payments actually made by the
      purchaser. The Secured Party may purchase Collateral at any such sale. In
      addition, each Grantor waives any and all rights that it may have to a judicial
      hearing in advance of the enforcement of any of the Secured Party’s rights and
      remedies hereunder, including, without limitation, its right following an Event
      of Default to take immediate possession of the Collateral and to exercise its
      rights and remedies with respect thereto.

     

    (c)
      For
      the purpose of enabling the Secured Party to further exercise rights and
      remedies under this Section 5 or elsewhere provided by agreement or applicable
      Law, each Grantor hereby grants to the Secured Party an irrevocable,
      nonexclusive license (exercisable without payment of royalty or other
      compensation to such Grantor) to use, license or sublicense following an Event
      of Default, any Intellectual Property now owned or hereafter acquired by such
      Grantor, and wherever the same may be located, and including in such license
      access to all media in which any of the licensed items may be recorded or stored
      and to all computer software and programs used for the compilation or printout
      thereof.

    

    6.
      OBLIGATIONS ABSOLUTE.

     

    (a)
      Change of Circumstance. THE RIGHTS OF THE SECURED PARTY HEREUNDER AND THE
      OBLIGATIONS OF THE
      GRANTORS HEREUNDER SHALL BE  ABSOLUTE
      AND UNCONDITIONAL, SHALL NOT BE SUBJECT TO ANY COUNTERCLAIM, SETOFF, RECOUPMENT
      OR DEFENSE BASED UPON ANY CLAIM THAT ANY GRANTOR OR ANY OTHER PERSON MAY HAVE
      AGAINST ANY SECURED PARTY AND SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL FULL
      AND INDEFEASIBLESATISFACTION
      OF THE SECURED OBLIGATIONS.

     

    
      
        
        

      

      
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    (b)
      Waiver of Right of Subrogation, Etc. Each Grantor hereby waives any and
      all rights of subrogation, reimbursement, or indemnity whatsoever in respect
      of
      such Grantor arising out of remedies exercised by the Secured Party hereunder
      until full and indefeasible payment of the Secured Obligations.

     

    (c)
      Other Waivers. Each Grantor hereby waives promptness, diligence and
      notice of acceptance of this Agreement. In connection with any sale or other
      disposition of Collateral, to the extent permitted by applicable Law, each
      Grantor waives any right of redemption or equity of redemption in the
      Collateral. Each Grantor further waives presentment and demand for payment
      of
      any of the Secured Obligations, protest and notice of protest, dishonor and
      notice of dishonor or notice of default or any other similar notice with respect
      to any of the Secured Obligations, and all other similar notices to which any
      Grantor might otherwise be entitled, except as otherwise expressly provided
      in
      the Loan Documents. The Secured Party is under no obligation to pursue any
      rights against third parties with respect to the Secured Obligations and each
      Grantor hereby waives any right it may have to require otherwise. Each Grantor
      (to the extent that it may lawfully do so) covenants that it shall not at any
      time insist upon or plead, or in any manner claim or take the benefit of, any
      stay, valuation, appraisal or redemption now or at any time hereafter in force
      that, but for this waiver, might be applicable to any sale made under any
      judgment, order or decree based on this Agreement; and each Grantor (to the
      extent that it may lawfully do so) hereby expressly waives and relinquishes
      all
      benefit of any and all such laws and hereby covenants that it will not hinder,
      delay or impede the execution of any power in this Agreement delegated to the
      Secured Party, but that it will suffer and permit the execution of every such
      power as though no such law or laws had been made or enacted.

     

    (d)
      Each
      Grantor further waives to the fullest extent permitted by law any right it
      may
      have under the constitution of the State of Nevada (or under the constitution
      of
      any other state in which any of the Collateral or any Grantor may be located),
      or under the Constitution of the United States of America, to notice (except
      for
      notice specifically required hereby) or to a judicial hearing prior to the
      exercise of any right or remedy provided by this Agreement to the Secured Party,
      and waives its rights, if any, to set aside or invalidate any sale duly
      consummated in accordance with the foregoing provisions hereof on the grounds
      (if such be the case) that the sale was consummated without a prior judicial
      hearing.

     

    (e)
      EACH
      GRANTOR’S WAIVERS UNDER THIS SECTION 6 HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY
      AND KNOWINGLY AND AFTER SUCH GRANTOR HAS BEEN APPRISED AND COUNSELED BY ITS
      ATTORNEY AS TO THE NATURE THEREOF AND ITS POSSIBLE ALTERNATIVE
      RIGHTS.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    7.
NO
      IMPLIED WAIVERS. No failure or delay on the part of the Secured Party in
      exercising any right, power or privilege under this Agreement or the other
      Loan
      Documents and no course of dealing between the Grantor, on the one hand, and
      the
      Secured Party, on the other hand, shall operate as a waiver of any such right,
      power or privilege. No single or partial exercise of any right, power or
      privilege under this Agreement or the other Loan Documents precludes any other
      or further exercise of any such right, power or privilege or the exercise of
      any
      other right, power or privilege. The rights and remedies expressly provided
      in
      this Agreement and the other Loan Documents are cumulative and not exclusive
      of
      any rights or remedies which the Secured Party would otherwise
      have.

    

    8.
      STANDARD OF CARE.

     

    (a)
In
      General. No act or omission of the Secured Party (or agent or employee of
      the Secured Party) shall give rise to any defense, counterclaim or offset in
      favor of any Grantor or any claim or action against the Secured Party (or agent
      or employee thereof), in the absence of gross negligence or willful misconduct
      of the Secured Party (or agent or employee thereof) as determined in a final,
      nonappealable judgment of a court of competent jurisdiction. The Secured Party
      shall be deemed to have exercised reasonable care in the custody and
      preservation of the Collateral in its possession if the Collateral is accorded
      treatment substantially equal to that which the Secured Party accords to other
      Collateral it holds, it being understood that it has no duty to take any action
      with respect to calls, conversions, exchanges, maturities, tenders or other
      matters relative to any Collateral or to preserve any rights of any parties
      and
      shall only be liable for losses which are a result of it gross negligence or
      willful misconduct as determined in a final, nonappealable judgment of a court
      of competent jurisdiction.

    

    (b)
No
      Duty to Preserve Rights. Without limiting the generality of the
      foregoing:

     

    (i)
      the
      Secured Party has no duty (either before or after an Event of Default) to
      collect any amounts in respect of the Collateral
      or to preserve any rights relating to the Collateral.

     

    (ii)
      the
      Secured Party has no obligation to clean-up or otherwise prepare the Collateral
      for sale.

     

    (iii)
      each Grantor shall remain obligated and liable under each contract or agreement
      included in the Collateral to be observed or performed by such Grantor
      thereunder, and the Secured Party shall not have any obligation or liability
      under any such contract or agreement by reason of or arising out of this
      Agreement or the receipt by the Secured Party of any payment relating to any
      of
      the Collateral.

     

    (c)
      Appointment and Powers of Agent. The Grantors each hereby irrevocably
      constitutes and appoints the Secured Party and any officer or agent thereof,
      with full power of substitution, as its true and lawful attorneys-in-fact and
      with full irrevocable power and authority in the place and stead of such Grantor
      or in the Secured Party’s own name, for the purpose of carrying out the terms of
      this Agreement, to take any and all appropriate action and to execute any and
      all documents and instruments that may be necessary or useful to accomplish
      the
      purposes of this Agreement.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    9.
      MISCELLANEOUS.

     

    (a)
      Assignment. No Grantor shall assign or transfer this Agreement or any
      rights or obligations hereunder without the prior written consent of the Secured
      Party. Notwithstanding the foregoing, if there should be any assignment of
      any
      rights or obligations by operation of law or in contravention of the terms
      of
      this Agreement or otherwise, then all covenants, agreements, representations
      and
      warranties made herein or pursuant hereto by or on behalf of any Grantor shall
      bind the successors and assigns of such Grantor, together with the preexisting
      Grantor. The rights and privileges of the Secured Party under this Agreement
      shall inure to the benefit of its successors and assigns.

     

    (b)
      Notices. All notices, requests, demands, directions and other
      communications provided for herein shall be in writing and shall be delivered
      or
      mailed in the manner specified in the Note addressed to a party at its address
      set forth in or determined pursuant to the Note, as the case may
      be.

     

    (c)
      Severability. Every provision of this Agreement is intended to be
      severable. If any term or provision of this Agreement shall be invalid, illegal
      or unenforceable for any reason, the validity, legality and enforceability
      of
      the remaining provisions shall not be affected or impaired thereby. Any
      invalidity, illegality or unenforceability in any jurisdiction shall not affect
      the validity, legality or enforceability of any such term or provision in any
      other jurisdiction.

     

    (d)
      Costs and Expenses. Without limiting any other cost reimbursement
      provisions in the Loan Documents, upon demand, the Grantors shall pay to the
      Secured Party the amount of any and all reasonable expenses incurred by the
      Secured Party hereunder or in connection herewith.

     

    (e)
      Counterparts; Integration. This Agreement may be executed in
      counterparts, including facsimiles thereof (and by different parties hereto
      in
      different counterparts), each of which shall constitute an original, but all
      of
      which when taken together shall constitute a single contract. This Agreement
      and
      the other Loan Documents constitute the entire contract among the parties
      relating to the subject matter hereof and supersede any and all previous
      agreements and understandings, oral or written, relating to the subject matter
      hereof.

     

    (f)
      Amendments and Waivers. The terms of this Agreement may be waived,
      altered or amended only by an instrument in writing duly executed by the
      Grantors and the Secured Party.

     

    (g)
      Headings. Headings to this Agreement are for purposes of reference only
      and shall not limit or otherwise affect the meaning hereof

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    10.
      TERMINATION; PARTIAL RELEASE.

     

    (a)
      At
      such time as all the Secured Obligations have been paid and performed in full,
      the security provided for herein shall terminate, provided, however, that all
      indemnities of the Borrower and each other Grantor contained in this Agreement
      shall survive and remain operative and in full force and effect regardless
      of
      the termination of this Agreement.

     

    (b)
      Effective upon the closing of a disposition of any Collateral in conformity
      with
      the provisions of the Note, and receipt by the Secured Party of a certification
      to such effect from an authorized officer of the Borrower, the security interest
      in the Collateral so disposed of shall terminate and the Secured Party shall
      deliver such releases as may be appropriate, provided, however, the security
      interest in all remaining Collateral shall remain in full force and
      effect.

    

    11.
      GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.

     

    (a)
      Governing Law. This Agreement and the rights and obligations of the
      parties hereunder shall be construed and interpreted in accordance with the
      laws
      of the State of Nevada (excluding the laws applicable to conflicts or choice
      of
      law).

     

    (b)
      Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
      FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
      BY
      JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
      TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
      HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
      PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
      OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON
      WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER
      AND
      (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
      ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS,
      THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      in
      the name and on behalf of the parties hereto as of the date first above
      written.

    
      	 	 	 
	 	HEARTLAND
              OIL AND
              GAS CORP.
	 
 	 
 	 
 
	 	By:  	 
	 	
              Name: 

              Title:

            
	 	
            

    

    
      	 	 	 
	 	HEARTLAND GAS GATHERING LLC
	 
 	 
 	 
 
	 	By:  	 
	 	
              Name:

              Title:

            
	 	
            

    

    
      	 	 	 
	 	HEARTLAND INTERNATIONAL OIL
              COMPANY
	 
 	 
 	 
 
	 	By:  	 
	 	
              Name: 

              Title:

            
	 	
            

    

    
      	 	 	 
	 	HEARTLAND OIL AND GAS INC.
	 
 	 
 	 
 
	 	By:  	
            
	 	
              Name: 

              Title:

            
	 	 

      	 	 	 
	 	
            
	 
 	 
 	 
 
	 	By:  	
            
	 	
              Name: 

              Title: 

            
	 	
            

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    

    
      	
               Exhibit
                A

            
	
               Subsidiary
                Guarantors

            
	 
	
              Name

            	 	
              Organizational
                Identification Number

            
	
              Heartland
                Gas Gathering LLC

            	 	
              6067052
                (Kansas)

            
	
              Heartland
                International Oil Company

            	 	
              264002
                (British Virgin Islands)

            
	
              Heartland
                Oil and Gas Inc.

            	 	
              3345196
                (Kansas)

            
	 	 	 

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Schedule
      2 

    Location
      of Sold Assets

    

    Nemaha
      County, Kansas 

    Brown
      County, Kansas 

    Doniphan
      County, Kansas

    Jackson
      County, Kansas 

    Atchison
      County, Kansas 

    Leavenworth
      County, Kansas 

    Jefferson
      County, Kansas 

    Pottawatomie
      County, Kansas 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    Schedule
      4 UCC 

    Filing
      Office(s)

    

    Secretary
      of State of the State of Nevada

    Secretary
      of State of the State of Kansas 

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    Schedule
      10 

    Commercial
      Tort Claims

     

    None
      

     

    
      
        
        

      

      
        17EXECUTION
      COPY

     

    ASSIGNMENT
      AND ASSUMPTION AGREEMENT

     

    THIS
      ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is entered into as of
      April 19, 2007 by and between SDS Capital Group SPC, Ltd. (“Assignor”), and
      Universal Property Development & Acquisition Corporation (“Assignee”),
      pursuant to that certain Note Purchase Agreement (the “Note Purchase Agreement”)
      dated as of April 19, 2007 by and among Assignor, BayStar Capital II, L.P.,
      and
      the Assignee. Capitalized terms not otherwise defined herein shall have the
      meanings ascribed to them in the Note Purchase Agreement. 

     

    BACKGROUND

     

    The
      Assignor and Assignee have entered into the Note Purchase Agreement pursuant
      to
      which the Assignor has agreed to transfer, assign, convey and set over unto
      the
      Assignee all of Assignor’s respective rights, title and interest in the Notes
      held by Assignor and the SDS Security Agreement.

     

    Pursuant
      to the terms and conditions of the Note Purchase Agreement, Assignee has agreed
      to accept such assignment and to assume and agree to perform, pay, observe,
      fulfill and discharge any obligations under the Notes and the SDS Security
      Agreement.

     

    NOW,
      THEREFORE, in consideration of the mutual covenants and agreements contained
      herein and in the Note Purchase Agreement, the parties hereto, intending to
      be
      legally bound, agree as follows: 

     

    1.  Assignment.
      Subject
      to the terms and conditions of the Note Purchase Agreement, Assignor hereby
      transfers, assigns, conveys and sets over unto Assignee all of Assignor’s
      respective rights, title and interest in the Notes held by the Assignor (as
      reflected on Schedule 2.1 to the Note Purchase Agreement) and the SDS
      Security Agreement.
      

     

    2.  Assumption.
      Subject
      to the terms and conditions of the Note Purchase Agreement, Assignee hereby
      accepts such assignment and does hereby assume and agree to perform, pay,
      observe, fulfill and discharge any obligations under the Notes held by the
      Assignor and the SDS Security Agreement in accordance with the terms of the
      Note
      Purchase Agreement. 

     

    3.  No
      Amendment to Notes or SDS Security Agreement.
      This
      Agreement shall not alter, modify or amend the terms of the Notes or the SDS
      Security Agreement in any respect other than to transfer the obligations
      thereunder to Assignee, nor shall it subject Assignee to any greater
      liabilities, obligations or duties in connection therewith than would have
      been
      enforceable against Assignor.

     

    4.  No
      Additional Representations and Warranties.
      Nothing
      contained in this Agreement shall be construed to limit or expand the
      representations, warranties and covenants set forth in the Note Purchase
      Agreement. In the event of any conflict or inconsistency between the terms
      of
      the Note Purchase Agreement and the terms of this Agreement, the terms of the
      Note Purchase Agreement will govern.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    5.  Further
      Assurances.
      Subject
      to the terms and conditions of the Note Purchase Agreement, Assignor shall,
      at
      any time and from time to time, at the request of Assignee, execute and deliver
      to Assignee all other and further instruments as are reasonably necessary to
      vest in Assignee full right, title and interest in or to the Notes and the
      SDS
      Security Agreement, in each case as contemplated by the Note Purchase
      Agreement.

     

    6.  Binding
      Effect.
      This
      Agreement shall be binding upon and shall inure to the benefit of the parties
      hereto and their respective successors and assigns.

     

    7.  Governing
      Law.
      This
      Agreement is made pursuant to, and shall be governed by and interpreted in
      accordance with, the laws of the State of Delaware without regard to otherwise
      applicable principles of conflicts of laws. 

     

    8.  Amendments.
      This
      Agreement cannot be amended, supplemented or modified except by a writing which
      makes specific reference to this Agreement, and which is signed by the party
      against which enforcement of any such amendment, supplement or modification
      is
      sought.

     

    9.  Counterparts.
      This
      Agreement may be signed in any number of counterparts, each of which shall
      be
      deemed an original, with the same effect as if the signatures thereto and hereto
      were upon the same instrument. A facsimile or electronic copy of this document
      shall have the same force and effect as the original.

     

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
      the
      date first above written.

    
      	 	 	 
	 	
              ASSIGNOR

               

              SDS
                CAPITAL GROUP SPC, LTD.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

              Title:

            
	 	
            

    

    
      	 	 	 
	 	
              ASSIGNEE

               

              UNIVERSAL
                PROPERTY DEVELOPMENT & ACQUISITION CORPORATION

            
	 
 	 
 	 
 
	 	By:  	
            
	 	
              

              Name:

              Title:

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