EXHIBIT 10.3

 

Loan and Security Agreement

 

Made on this the ________ day of ________________________ 2010, between MILLER
PETROLEUM, INC., herein called “Debtor”, of 3651 BAKER HIGHWAY, HUNTSVILLE, TN
37756 such address being Debtor’s mailing address and place of business at which
the property covered hereby is, or promptly after the making of the loan
referred to, will be located, and MILLER ENERGY INCOME 2009-A, LP herein called
“Secured Party,” of 3651 BAKER HIGHWAY, HUNTSVILLE, TN 37756, such address being
Secured Party’s address at which information concerning Secured Party’s Security
Interest hereunder may be obtained.

 

Whereas, Debtor desires to grant Secured Party a Security Interest pursuant to
the Tennessee Uniform Commercial Code in the personal property together with all
the equipment, parts, accessories and attachments and any and all replacements
and additions herein collectively called “Collateral” as described on the list
attached hereto as Exhibit A, which is incorporated herein by reference; and

 

Whereas, Debtor, upon the execution and delivery of this Agreement and
completion of other required details, will have incurred a debt of Two Million
Seven Hundred Twenty-One Thousand Four Hundred Forty-Three and 62/100 Dollars
($2,721,443.62) owed to Secured Party, which borrowing is evidenced by the
Debtor’s First Secured Promissory Note of even date herewith (“First Note”) in
the principal amount of Two Million Three Hundred Sixty-Five Thousand One
Hundred Seventy-Three and 92/100 Dollars ($2,365,173.92) and bearing interest at
the rate of twelve percent (12%) per annum and Second Secured Promissory Note
dated of even date herewith (“Second Note”) in the principal amount of Three
Hundred Fifty-Six Thousand, Two Hundred Sixty-Nine and 70/100 Dollars
($356,269.70) and bearing interest at the rate of twelve percent (12%) per
annum, (collectively the “Notes”) said Notes being payable and bearing interest
as therein set forth and any delinquent payment thereon bearing interest at the
maximum rate allowed by law (together with amounts added as a collection fee in
the event legal action to enforce the Notes is necessary).

 

NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby expressly
acknowledged, Debtor, intending to be legally bound, hereby grants to Secured
Party a Security Interest in the Collateral, in order to secure the payment of:
(1) the Notes; (2) all costs and expenses incurred in the collection of same and
enforcement of Secured Party’s rights hereunder; (3) all future advances made by
Secured Party for taxes, levies, insurance and repairs to or maintenance of said
Collateral; (4) all other money heretofore or hereafter advanced by Secured
Party to or for account of Debtor at the option of Secured Party, and all other
present or future, direct or contingent liabilities of Debtor to Secured Party
of any nature whatsoever; and (5) interest on (2), (3) and (4).

 

Until Default hereunder, Debtor shall be entitled to the possession of the
Collateral and to use and enjoy the same.

 

Escrow. Due to the related-party nature of this transaction, Debtor shall
deliver the certificates of title (“Titles”) to the Titled Collateral (as
indicated on Exhibit A) to an independent, third-party escrow agent (the “Escrow
Agent”) who shall hold the Titles for the benefit of Secured Party. The rights
and duties of the Escrow Agent are set forth in the Escrow Agreement between
Debtor, Secured Party, and the Escrow Agent of even date herewith (the “Escrow
Agreement”). Prior to delivery of the Titles, Debtor shall note the Security
Interest on the Titles, as required for perfection of the Security Interests
granted therein. The Security Interest in the Non-Titled Collateral (as
indicated on Exhibit A) shall be perfected by filing a Financing Statement with
the Tennessee Secretary of State.

 

The rights and privileges of Secured Party under this Agreement shall inure to
the benefit of its successors and assigns. All representations, warranties and
agreements of Debtor contained in this Agreement shall bind Debtor’s personal
representatives, heirs, successors and assigns. If any provision of this
Agreement shall for any reason be held to be invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision hereof, but
this Agreement shall be construed as if such invalid or unenforceable provision
had never been contained herein.

 

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Debtor Further Represents, Warrants and Agrees That:

 

The Collateral is personalty and that it is not and will not be affixed to real
estate in such manner as to become a fixture or part of the real estate. If the
Collateral is, or in the opinion of Secured Party may become, part of any real
estate Debtor will obtain and deliver to Secured Party a written waiver by the
record owner of the real estate of all interest in the Collateral and a written
subordination by any person who has a lien on the real estate which is or may be
superior to this security interest.

 

The statement herein as to Debtor’s residence or place of business and
possession and location of the Collateral specifically described herein are
true, and that Debtor has absolute title to the Collateral listed specifically
above free and clear of all liens, encumbrances and Security Interests except
the Security Interest hereby given to Secured Party and other rights, if any, of
Secured Party, and Debtor will defend the Collateral against the claims and
demands of all persons.

 

Without the prior written consent of Secured Party, Debtor will not sell,
exchange, lease or otherwise dispose of the Collateral or any of Debtor’s rights
therein or under this Agreement, or permit any lien or Security Interest to
attach to same except that created by this Agreement and other rights, if any,
of Secured Party; Debtor will maintain the Collateral in good condition and
repair and will pay and discharge all taxes, levies and other impositions levied
thereon as well as the cost of repairs to or maintenance of the same and will
not permit anything to be done that may impair the value of any of the
Collateral; if Debtor fails to pay such sums, Secured Party may do so for
Debtor’s account, adding the amount thereof to the other accounts secured
hereby; Debtor will at all times keep the Collateral insured in such form, in
such companies, in such amounts and against such risks as may be acceptable to
Secured Party.

 

Debtor will not permit any of the Collateral to be removed from the location
specified herein, except for temporary periods in the normal and customary use
thereof, without the prior written consent of Secured Party, and will permit
Secured Party to inspect the Collateral at any time. Debtor will not permit
anything to be done that may impair the value of any of the Collateral or the
security intended to be afforded by this Agreement.

 

Debtor will pay all costs of filing any financing, continuation or termination
statements with respect to the Security Interest created by this Agreement.
Secured Party is hereby appointed Debtor’s Attorney in Fact to do, at Secured
Party’s option and Debtor’s expense, all acts and things which Secured Party may
deem necessary to perfect and continue perfected the Security Interest created
by this Agreement and to protect the Collateral.

 

Default. Debtor shall be in default hereunder upon failure to pay when due any
amount payable hereunder or under the Notes or upon failure to observe or
perform any of the Debtor’s other agreements herein contained, or if any
warranty or statement by Debtor herein, or furnished in connection herewith is
false or misleading, or if proceedings in which Debtor is alleged to be
insolvent or unable to pay Debtor’s debts as they mature, are instituted by or
against Debtor under any of the provisions of the Bankruptcy Law or any other
law, or if Debtor makes an assignment for the benefit of creditors. Thereupon,
all sums secured hereby shall become immediately due and payable at Secured
Party’s option without notice to Debtor, and Secured Party may proceed to
enforce payment of the same, and to exercise any and all rights and remedies
provided by the Tennessee Uniform Commercial Code as well as all other rights
and remedies possessed by Secured Party. Whenever Debtor is in default
hereunder, Secured Party may demand that (i) Debtor assemble the Non-Titled
Collateral and make it available to Secured Party at a place reasonably
convenient to both parties; and/or (ii) Escrow Agent release the titles to the
Titled Collateral to Secured Party.

 

This Agreement shall be governed by the laws of the state of Tennessee, as the
Collateral is located therein.

 

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IN WITNESS WHEREOF, the parties have executed this Loan and Security Agreement
as of the date first written above.

 

DEBTOR

SECURED PARTY

MILLER PETROLEUM, INC.

MILLER ENERGY INCOME 2009-A, LP

 

By:  MILLER ENERGY GP, LLC

Its:  General Partner

 

By: _______________________________

By: __________________________

 

Paul W. Boyd

Scott Boruff

 

Its:  Chief Financial Officer

Its:  Sole Manager

 

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EXHIBIT A

 

TITLED COLLATERAL (Collateral to which title is evidenced by a Certificate of
Title)

 

 

1.

1991 INGERSOL Rand Model RD20 long tower derrick. This unit was completely
reconditioned in 2005, which included deck engine, air compressor, air coolers,
top head drive, and cables. Indicated hours of operation since refurbished,
2,392 hours. TITLE NO. 86323968.

 

Trucks and Pick-ups:

 

 

2.

2008 DODGE RAM 1500 crew cab, 4 wheel drive pick-up, S.N. 1D7HU18N58S584933,
powered by 4.7L V8 gasoline engine; Automatic transmission; Cruise control, air
conditioning, Odometer reading, 12,575 miles. TITLE NO. 78193702

 

 

3.

2008 DODGE RAM 1500 crew cab, 4 wheel drive pick-up, S.N. 1D7HU18N58S605411.
TITLE NO. 78193471

 

 

4.

1999 DODGE Ram 2500 Laramie extended cab, 4 wheel drive, pick-up, S.N.
1B7KF2361XJ558382, powered by CUMMINS 6.7L Turbo diesel engine; Five speed
transmission, running boards; Odometer reading, 115,555 miles. TITLE NO.
85803768

 

 

5.

2006 STERLING model A9500 tandem axle truck, S.N. 2FWJA3CV57AW81930, powered by
MERCEDES BENZ Model MBE4000, 12.8L diesel engine, with engine brake; FULLER 10
speed transmission, 11R22.5 tires, equipped with TIGER GENERAL WINCH MASTER,
Tulsa 70 hydraulic winch, with headache rack, Fifth wheel, in frame tail roller.
Odometer reading, 12,544 miles. TITLE NO. 86291057

 

 

6.

2007 STERLING model A9500 tandem axle truck, S.N. 2FWJA3CV77AW81931, powered by
MERCEDES BENZ Model MBE4000, 12.8L diesel engine, with engine brake; FULLER 10
speed transmission, 11R22.5 tires, equipped with TIGER GENERAL WINCH MASTER,
Tulsa 70 hydraulic winch, with headache rack, Fifth wheel, in frame tail roller.
Odometer reading, 16,044 miles. TITLE NO. 86291056

 

 

7.

1986 KENWORTH tandem axle truck, S.N. M329051, powered by CUMMINS diesel engine,
with engine brake; FULLER transmission; 11R22.5 tires, rear; 425/65R22.5 front
tires; Heavy duty front bumper; 85 Barrel capacity vacuum tank, with CHALLENGER
Model 367 pump. Odometer reading 319,884 miles. TITLE NO. 78132844.

 

 

8.

1989 MACK Model R688ST, tandem axle truck, S.N. 1M2N187Y0KW027952, powered by
MACK EE6350, 350 horsepower diesel engine, with engine brake; MAXI-TORQUE
transmission; Equipped with oil field winch bed, with TULSA 100,000# capacity
winch and headache rack; Heavy duty front oil field bumper; In frame tail
roller; 11R24.5 tires, front and rear. TITLE NO. 85229043

 

 

9.

1977 MACK Model R685S tandem axle truck, S.N. R685ST65112, powered by MACK 237
diesel engine; 6 speed, two stick transmission; unit equipped with TULSA 34
winch and headache rack; 11R24.5 tires; in frame tail roller. TITLE NO. 55828951

 

 

10.

1993 KENWORTH model W900, Tandem axle truck, S.N. 1XKWDB0X3PS585313, powered by
CATERPILLAR Model 3406 Diesel engine; FULLER transmission, Equipped with 80
barrel capacity vacuum tank, with all necessary hoses, valves and connections,
with MASPORT Model H7V vacuum pump. 11R24.5 tires with aluminum budd wheels;
Odometer reading, 181,509 miles. TITLE NO. 61600987

 

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11.

1965 INTERNATIONAL Model F230D tandem axle truck, S.N. FD103885H, powered by
CUMMINS 235 diesel engine, ( Newly rebuilt) Five speed transmission, with 4
speed auxiliary; Unit equipped with 24’L oil field bed, with (1) TULSA 64 winch,
with headache rack; and (1) BRADEN 60,000 # winch; 4 ½” gin poles, with pole
raisers, Full rolling tail board; 175 “ Wheel base. TITLE NO. 86291061

 

Trailers:

 

 

12.

2006 CIRCLE D TRUCK Sales, tandem axle vacuum trailer, S.N. TR19583, 150 barrel
capacity; NORTH STAR Model 109180, 4” trash pump. 11R24.5 tires. TITLE NO.
86291026

 

 

13.

2007 OVERBILT tri-axle drop deck trailer, S.N. 1Z9ND483370058982, 9’ neck; 40’
cargo deck, with tail roller; 21575R17.5 tires. TITLE NO. 86291023

 

 

14.

1974 ALAB tandem axle float trailer, S.N. D74087, 34’L, sliding axles; Full tail
roller; Has new flooring. TITLE NO. 86291021

 

 

15.

1981 HOBBS oil field float, S.N. 1H5J04023BN004301,40’L, full tail roller. TITLE
NO. 86291022

 

 

16.

1980 FRUEHAUF Model 140165 tandem axle trailer, S.N. FWT067246, 11R22.5 tires.
TITLE NO. 86291018

 

 

17.

1987

TRAILMOBILE, S.N. 1PTF71TJ7H9004585, sliding axles, 48’L. TITLE NO. 86291019

 

Miscellaneous:

 

 

18.

1974 INT’L WITCHTEK RIG, VIN: 427472Y035563; TITLE NO. 74484575

 

NON-TITLED COLLATERAL (Collateral to which no certificate of title applies)

 

Miscellaneous Equipment and Parts:

 

 

19.

(6) Steel constructed parts houses, skid mounted. @$3,000.00

 

 

20.

CONTINENTAL EMSCO 7” X 16” duplex mud pump complete with all necessary, valves,
controls, HYDRIL K-70-5000 pulsation dampener, OTECO relief valve; Mud gauge;
Powered by JOHN DEERE Model 6135FF485, S.N. RG615L000227, electric start.
(Engines are new, mud pump rebuilt in 2005, gear end and fluid end) All unitized
and skid mounted.

 

 

21.

CONTINENTAL EMSCO 7” X 16” duplex mud pump complete with all necessary, valves,
controls, HYDRIL K-70-5000 pulsation dampener, OTECO relief valve; Mud gauge;
Powered by JOHN DEERE Model 6135FF485, S.N. RG6135L000229, electric start.
(Engines are new, mud pump rebuilt in 2005, gear end and fluid end) All unitized
and skid mounted

 

 

22.

250 BBL Capacity water tanks, skidded. Units complete with suction and discharge
valves, ladders and manholes; Skidded.

 

 

23.

Bobcat welder/generator, Model 225, skidded.

 

 

24.

Bobcat welder/generator, Model 225, skidded.

 

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25.

24’L X 8” OD drill collars

 

 

26.

2006 CIRCLE D TRUCK Sales, tandem axle vacuum trailer, S.N. TR19583, 150 barrel
capacity; NORTH STAR Model 109180, 4” trash pump. 11R24.5 tires.

 

 

27.

Hydraulic excavator and swabbing unit, diesel engine, powershift transmission,
Wide tracks;

 

 

28.

Franklin Skidder; Cummins engine, 42 winch, 23.1 x 26 tires

 

 

29.

Cummins 220 deck engine, mounted on Crane Carrier with Red Diamond 6 cyl gas
engine, 5 and 3 transmission, 300’ drill pipe, all tools

 

 

30.

Terex GTH-844C Telescoping Forklift 2006

 

 

31.

CNR Tap

 

 

32.

Lindsay Gas Line

 

 

33.

Work Buggie

 

 

34.

D6 Dozer

 

 

35.

Trucking Track hoe & swabbing unit

 

 

36.

Schaffer 5K lb. BOP

 

 

37.

Tubing

 

 

38.

Work on Cat 320L Trackhoe

 

 

39.

Repairing Tanks

 

 

40.

Rebuilt Trailer

 

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