EXHIBIT 10.56
MEMBERSHIP PLEDGE AGREEMENT
This Membership Pledge Agreement is made this December 1, 1996, by and
between Contour Development Company, L.L.C., a Colorado limited liability
company, ("DEBTOR") and U.S. ENERGY CORP., a Wyoming corporation, and CRESTED
CORP., a Colorado corporation, (together "USECC") ("SECURED PARTY").
RECITALS
A. Debtor has executed and delivered to Secured Party two promissory
notes in the forms attached hereto as Exhibits "A" and "B" (the "Notes").
B. Debtor desires to give, and Secured Party has requested that Debtor
give, Secured Party a security interest in collateral to secure payment of all
obligations now due or which may become due under the Notes.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, the
covenants set forth herein, and subject to the conditions set forth herein, and
for other good and valuable consideration, the sufficiency and receipt of which
is hereby acknowledged, the parties agree as follows.
SECTION ONE
PLEDGE OF MEMBERSHIP INTEREST
To secure the payment and full performance of Debtor's obligations under
the Notes, Debtor hereby assigns, transfers to, and pledges with Secured Party,
all outstanding membership interests of Debtor in Tenderfoot Properties, L.L.C.,
a Colorado limited liability company (the "Company"), whether original issue,
redeemed or reacquired, delivered or to be delivered, and any other property
hereafter added thereto or substituted or exchanged therefor, together with any
and all membership rights, rights to subscribe, voting rights, liquidating
dividends, member distributions, new securities, or other property to which
Debtor is or may hereafter become entitled to receive an account of their
membership interests in the Company (the "MEMBERSHIP INTERESTS"). In the event
that Debtor receives additional property on account of the Membership Interests,
Debtor shall immediately deliver such additional property to Secured Party to be
held by Secured Party hereunder in the same manner as the Membership Interests
originally pledged.
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SECTION TWO
ADVANCES AND COSTS OF SECURED PARTY
Debtor shall pay prior to delinquency all taxes, assessments, and other
charges and liens against the Membership Interests. On the failure of Debtor to
do so, Secured Party, at its option, may pay any of such taxes, assessments,
charges, or liens for Debtor's account. All advances, charges, costs, and
expenses, including reasonable attorneys' fees, incurred or paid by Secured
Party in exercising any rights, powers, or remedies conferred on Secured Party
by this Membership Pledge Agreement, or in the enforcement thereof, shall be
secured hereunder and shall be paid to Secured Party by Debtor immediately and
without demand, and with interest thereon at then highest prevailing interest
rate set forth in the Notes.
SECTION THREE
TITLE TO COLLATERAL
Debtor hereby warrants absolute ownership of the Membership Interests,
free and clear of all liens and encumbrances. Debtor represents and warrants
that following consummation of the Master Resolution Agreement between the
parties, the parties owning membership interests in the Company, and their
percentage ownerships, will be:
Debtor 73%
Gunnison Center Properties, L.L.C. 27%
SECTION FOUR
RISK OF LOSS; REPORTS; INSPECTION
The Membership Interests shall be held by Secured Party at the risk and
expense of Debtor. While this Membership Pledge Agreement continues in effect,
Debtor shall provide quarterly reports to Secured Party setting froth in
reasonable detail the activities and business of the Company during the
preceding calendar quarter and the financial condition of the Company as of the
end of such calendar quarter. Each such report shall be signed by an officer or
Member of Debtor having knowledge of the Debtor's and the Company's activities,
business and financial condition and shall include a statement to the effect
that the Company is not in default under any agreement or obligation relating to
the Company's principal business, i.e., the development of Lot 17 in the
Gunnison Center/Meadows subdivision Phase 1R in Gunnison, Colorado, and Debtor
is not in default of any of the terms, covenants, or conditions of the
Membership Pledge Agreement, or, if any such default exists, specifying the
nature of such default with reasonable particularity sufficient to enable
Secured Party to understand the effect thereof (actual or potential) on the
Company's business, prospects, and financial condition and on the value and
enforceability of the security interest in the Membership Interests and any
additional collateral or other security given to Secured Party pursuant to the
terms of this Pledge Agreement. Secured Party shall have the same right of
inspection as any Member of the Company pursuant to Section 5.2 of the Company's
Operating Agreement as in effect on the date hereof.
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SECTION FIVE
RIGHTS OF SECURED PARTY IN COLLATERAL
In the event that Debtor defaults on its obligations to Secured Party
under either or both of the Notes, at any time, with or without notice, and at
the expense of Debtor, Secured Party, in its name or in the name of its nominee
or in the name of the Debtor, may, but shall not be obligated to,:
1. Collect by legal proceedings or otherwise all dividends, interest,
distributions, principal payments and other sums now or hereafter payable on or
on account of the Membership Interests.
2. Enter into any extension, reorganization, deposit, merger, or
consolidation agreement, or any agreement in any way relating to or affecting
the Membership Interests. In connection therewith, Secured party may deposit or
surrender control of the Membership Interests, accept other property in exchange
for the Membership Interests and do and perform all such acts as Secured Party
may deem proper as may be proper under the law. Any money or other property
received in exchange for the Membership Interests shall be applied to the
indebtedness or thereafter held by Secured Party pursuant to the provisions
hereof.
3. Make any compromise or settlement that Secured Party deems desirable
or proper with reference to the Membership Interests.
4. Insure, protect, and preserve the Membership Interests.
5. Cause the Membership Interests to be transferred into the name of
Secured Party or into the name of its nominee.
6. Exercise as to the Membership Interests all the rights, powers, and
remedies of an owner, including the right to vote the Membership Interests held
by Secured Party pursuant to this Pledge Agreement.
SECTION SIX
RIGHTS OF SECURED PARTY REGARDING INDEBTEDNESS
Debtor authorizes Secured Party, upon default, with notice and demand,
but without affecting the liability of Debtor hereunder, from time to time to:
1. Take and hold security in addition to and other than the Membership
Interests to secure Debtor's obligations to Secured Party, or any part thereof,
and exchange, enforce, waive, and release that additional collateral, the
Membership Interests, or any part thereof or any other such security.
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2. Apply the Membership Interests or other security and direct the order
or manner of sale thereof as Secured Party in its discretion may determine.
3. Release Debtor or any other parties from any obligations due Secured
Party.
SECTION SEVEN
NEGATIVE COVENANTS
For so long as any portion of the obligations due under the Notes
remains due, Debtor shall:
1. Not vote the Membership Interests in favor of any amendment to the
Articles of Organization or the Operating Agreement of the Company in any
material respect that would affect the security interest in the Membership
Interests granted herein;
2. Not vote the Membership Interests in favor of dissolution, merger,
reorganization or insolvency of the Company or take any action which would
render the Company insolvent;
3. Not permit the Company to incur indebtedness for borrowed funds, with
the exception of HUD loan or loans in an amount not to exceed $6,000,000;
4. Not permit the Company to sell or exchange Lot 17 in the Gunnison
Center/Meadows subdivision in Gunnison, Colorado, or any improvements or
structures thereon, except residential leasing in the ordinary course of
business;
5. Not permit the Company to issue new membership interests in the
Company that would result in the dilution of the percentage ownership of Debtor
in the Company, unless (i) such new membership interests are issued to increase
the capital of the Company, and (ii) after such issuance, the Membership
Interests continue to represent a controlling interest in the Company;
6. Not permit the Company to declare or pay and dividend or distribution
to members, unless any such distribution is made ratably to the Membership
Interests and the proceeds therefrom are made subject to the Secured Party's
security interest granted herein; and
7. Not receive any compensation as Manager of the Company, beyond
reimbursement of reasonable expenses incurred in the conduct of Company
business, without ratification by the Secured Party; however, Secured Party
acknowledges that Debtor shall be under contract with the Company to provide
construction management and development services for compensation.
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SECTION EIGHT
DEFAULT
Default hereunder shall occur on the happening of any one or more, of
the following events:
1. Failure of Debtor to keep or perform any of the terms or provisions
of this Membership Pledge Agreement, or any agreement or promissory note between
Debtor and Secured Party.
2. Default by Debtor in the payment of principal or interest when due of
any of the obligations owing to Secured Party under the Notes.
3. Any deterioration or impairment of the Membership Interests or any
part thereof or any decline or depreciation in the value or market price
thereof, whether actual or reasonably anticipated, that causes the Membership
Interests to become unsatisfactory in character or value.
4. Levy of any attachment, execution, or other process against Debtor or
any of the Membership Interests.
5. Dissolution, liquidation, insolvency, failure in business, general
assignment for the benefit of creditors, filing of any petition in bankruptcy or
for relief under the provisions of the U.S. Bankruptcy Code of, by, or against
Debtor or the Company.
SECTION NINE
REMEDIES
On the happening of any default hereunder, Secured Party may then or at
any time thereafter, at its election, apply, setoff, collect, or sell in one or
more sales, with or without any previous demands or demand of performance or
notice or advertisement, the whole or any part of the Membership Interests in
such order as Secured Party may elect, including a sale to itself. Any such sale
may be made either at a public or private sale and may be conducted at the place
of business of Secured Party or elsewhere. Any sale hereunder may be conducted
by an auctioneer or any officer, employee, attorney or agent of Secured Party.
Secured Party may be the purchaser of any or all the Membership Interests.
Secured Party shall have all additional remedies that are conferred on it as a
Secured Party under the Uniform Commercial Code or by other applicable laws of
the State of Colorado. All remedies available to Secured Party are non-exclusive
and may be exercised from time to time and in combination or separately, and the
exercise of any available remedy shall not prejudice or otherwise adversely
affect any other remedy or right of Secured Party, including the right to
realize upon other security now or hereafter held.
Proceeds of the sale of any of the Membership Interests and all sums
received or collected by Secured Party from or on account of the Membership
Interests shall be applied by Secured
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Party to the payment of expenses incurred or paid by Secured Party in connection
with any sale, transfer, or delivery of the Membership Interests, to the payment
of any other cost, charges attorneys' fees, or expenses mentioned herein, and to
the payment or discharge of the obligations of Debtor to Secured Party, or any
part thereof, all in such order and manner as in its discretion Secured Party
may determine. Secured Party may at any time deliver the Membership Interests or
any part thereof to Debtor, and the receipt by Debtor shall be a complete and
full discharge of Secured Party from any claim or obligation for the Membership
Interests so delivered, and Secured Party shall thereafter be discharged from
any liability or responsibility therefor.
SECTION TEN
WAIVER BY SECURED PARTY
The rights, powers, and remedies given to Secured Party by this
Membership Pledge Agreement shall be in addition to all rights, powers, and
remedies given to Secured Party by virtue of the Uniform Commercial Code or any
other law of the State of Colorado. Any forbearance, failure, or delay by
Secured Party in exercising any right, power, or remedy hereunder shall not be
deemed to be a waiver of such right, power, or remedy, and any single or partial
exercise of any right, power, or remedy hereunder shall not preclude the further
exercise thereof. Every right, power, and remedy of Secured Party shall continue
in full force and effect until such right, power, or remedy is specifically
waived by an instrument in writing executed by Secured Party.
SECTION ELEVEN
NOTICES AND DEMANDS
Secured Party shall be under no duty or obligation whatsoever to make or
give any presentments, demands for performance, notices of nonperformance,
protests, notices of protest, or notices of dishonor in connection with any
obligations or evidences of indebtedness held by Secured Party and secured by
the Membership Interests, or in connection with any obligations or evidences of
indebtedness that constitute in whole or in part the obligations of Debtor
secured hereunder.
SECTION TWELVE
TERM OF AGREEMENT
This Membership Pledge Agreement is a continuing agreement, and all the
rights, powers, and remedies hereunder shall apply to all past, present, and
future obligations of Debtor to Secured Party, including any indebtedness
arising under successive transactions that shall either continue the
obligations, increase or decrease them, or from time to time create new
obligations after all or any prior obligations have been satisfied, and
notwithstanding any merger, consolidation, reorganization, liquidation,
dissolution, or bankruptcy of Debtor or Secured Party. Until all indebtedness is
paid in full, the power of sale and all other rights, powers, and remedies
granted to Secured Party by this Agreement shall continue in effect
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until all obligations secured hereby have been satisfied in full or are no
longer otherwise valid.
SECTION THIRTEEN
GOVERNING LAW; ATTORNEYS FEES
This Membership Pledge Agreement shall be governed by and construed
according to the laws of the State of Colorado. Both parties agree that, should
either party default in any of the covenants or agreements herein contained, the
prevailing party in litigation shall be entitled to recover all costs and
expenses, including reasonable attorney's fees, which may arise or accrue from
enforcing this Agreement, any agreement or instrument entered into pursuant
hereto, or in pursuing any remedy provided hereunder or by applicable law,
whether incurred in litigation, nonjudicial proceedings or bankruptcy
proceedings.
SECTION FOURTEEN
FURTHER ASSURANCES; MODIFICATIONS; AND IMPLIED WAIVERS
To further assure the full performance of the obligations set forth
herein, the parties shall, upon the reasonable request of either of them, from
time to time execute and deliver all further instruments or assurances which may
be required or appropriate, such as one or more financing statements or
extensions thereof. No change, addition or erasure of any portion of this
Agreement shall be valid or binding upon either party unless evidenced in a
separate, subsequent document signed by the party charged with such change,
addition or erasure. It is declared by both parties that there are no oral or
other agreements or understandings between them affecting this Agreement except
as may be reduced to writing. The failure of either party at any time to require
performance by the other party of any provision hereof shall in no way affect
the full right to require such performance at any time thereafter. Nor shall the
waiver by either party of a breach of any provision hereof be taken or held to
be a waiver of any succeeding breach of such provision or as a waiver of the
provision itself.
IN WITNESS WHEREOF, the parties have set their hands as of the date
first above written.
Secured Party: Debtor:
U. S. Energy Corp./Crested Corp. Contour Development Company, L.L.C.
By /s/ Max T. Evans By: /s/ Val L. Olsen
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Its SECRETARY/PRESIDENT, RESPECTIVELY Its: MANAGING MEMBER
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