EXHIBIT 10.3

 

Execution Copy

 

SECURITY AND PLEDGE AGREEMENT

 

This SECURITY AND PLEDGE AGREEMENT, dated as of December 26, 2018 (this
“Agreement”), is between Viking Energy Group, Inc., a Nevada corporation (the
“Debtor”) and Bodel Holdings, L.L.C., Cleveland Holdings, L.L.C., Delbo
Holdings, L.L.C., DeQuincy Holdings, L.L.C., Gulf Coast Working Partners,
L.L.C., Oakley Holdings, L.L.C., SamJam Energy, L.L.C.; and Perry Point
Holdings, L.L.C. (collectively, the “Secured Parties”), and is being executed
and delivered in connection with the Secured Promissory Note executed and
delivered by the Debtor in favor of the Secured Parties on the date hereof (the
“Note”).

 

W I T N E S S E T H:

 

RECITALS

 

 

A. The Debtor owns all of the issued and outstanding membership units and/or
ownership interests in Ichor Energy Holdings, LLC, a Nevada limited liability
company (the “Ichor Holdings Membership Interests”).

 

 

 

 

B. In order to induce the Secured Parties to accept the Note in partial payment
of the purchase price under the Purchase and Sale Agreement dated as of
September 1, 2018 (the “PSA”) between the Sellers (as defined therein), as
sellers, and Debtor, as purchaser, and extend the loans evidenced by the Note,
and to secure the prompt payment, performance and discharge in full of all of
the Debtor’s obligations under the Note, the Debtor has agreed to execute and
deliver to the Secured Parties this Agreement and to grant the Secured Parties a
security interest in the Ichor Holdings Membership Interests.

 

NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Certain Definitions. As used in this Agreement, the following terms shall
have the meanings set forth in this Section 1. Terms used but not otherwise
defined in this Agreement that are defined in Article 9 of the UCC (such as
“account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC.

 

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(a) “Collateral” means the collateral in which the Secured Parties are granted a
security interest by this Agreement and which shall include the following
personal property of the Debtor, whether presently owned or existing or
hereafter acquired or coming into existence, wherever situated, and all
additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith, and all
dividends, interest, cash, notes, securities, equity interest or other property
at any time and from time to time acquired, receivable or otherwise distributed
in respect of, or in exchange for, any or all of the Pledged Securities (as
defined below):

 

(i) all of the issued and outstanding Ichor Holdings Membership Interests; and

 

(ii) the products and proceeds of all of the foregoing Collateral set forth in
clause (i) above.

 

Without limiting the generality of the foregoing, the “Collateral” shall include
all certificates representing such shares and/or equity interests and, in each
case, all rights, options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or distributed in respect
of, or exchanged for, any of the foregoing and all rights arising under or in
connection with the Pledged Securities, including, but not limited to:

 

(i) all other or additional interests, shares, or other securities paid or
distributed by way of dividend or otherwise in respect of any of the Pledged
Securities;

 

(ii) all other or additional interests, shares, or other securities paid or
distributed in respect of any of the Pledged Securities by way of stock-split,
reclassification, combination of shares or similar rearrangement; and

 

(iii) all other or additional shares, interests, or other securities which may
be paid in respect of any of the Pledged Securities by reason of any
consolidation, merger, exchange of stock, conveyance of assets, liquidation or
similar reorganization provided such consolidation.

 

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 UCC 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) “Intellectual Property” intentionally deleted.

 

(c) “Majority in Interest” means, at any time of determination, the majority in
interest (based on then-outstanding principal amounts of Note at the time of
such determination) of the Secured Parties.

 

(d) “Necessary Endorsements” means undated stock powers endorsed in blank or
other proper instruments of assignment duly executed and such other instruments
or documents as the Secured Parties (as that term is defined below) may
reasonably request.

 

(e) “Secured Obligations” means all of the liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several) due or to become due, or
that are now or may be hereafter contracted or acquired, or owing to, of the
Debtor to the Secured Parties, including, without limitation, all obligations
under this Agreement and the Note.

 

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(f) “Organizational Documents” means, the documents by which the Debtor was
organized (such as a articles of incorporation, certificate of limited
partnership or articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of preferred
equity) and which relate to the internal governance of such entity (such as
bylaws, a partnership agreement or an operating, limited liability or members
agreement).

 

(g) “Permitted Liens” means the following:

 

(i) Liens imposed by law for taxes that are not yet due or are being contested
in good faith, which in each case, have been appropriately reserved for;

 

(ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing Secured Obligations that are not overdue by more than thirty (30) days
or are being contested in good faith;

 

(iii) pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;

 

(iv) deposits to secure the performance of bids, trade contracts, leases,
statutory Secured Obligations, surety and appeal bonds, performance bonds and
other Secured Obligations of a like nature, in each case in the ordinary course
of business;

 

(v) Liens under this Agreement;

 

(h) “Pledged Interests” shall have the meaning ascribed to such term in Section
4(j).

 

(i) “Pledged Securities” means all of the Ichor Holdings Membership Interests.

 

(j) “UCC” means the Uniform Commercial Code of the State of Texas and or any
other applicable law of any state or states which 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 defined terms in the UCC should be
construed in their broadest sense so that the term “Collateral” will be
construed in its broadest sense. Accordingly if there are, from time to time,
changes to defined terms in the UCC that broaden the definitions, they are
incorporated herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.

 

2. Grant of Security Interest in Collateral. As an inducement for the Secured
Parties to extend the loans as evidenced by the Note and to secure the complete
and timely payment, performance and discharge in full, as the case may be, of
all of the Secured Obligations, the Debtor hereby unconditionally and
irrevocably pledges, grants and hypothecates to the Secured Parties a perfected,
security interest in and to, a lien upon and a right of set-off against all of
its respective right, title and interest of whatsoever kind and nature in and
to, the Collateral (a “Security Interest” and, collectively, the “Security
Interests”).

 

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3. Delivery of Certain Collateral. Contemporaneously or prior to the execution
of this Agreement, the Debtor shall deliver or cause to be delivered to the
Collateral Agent of the Secured Parties (a) any and all certificates and other
instruments representing or evidencing the Pledged Securities, and (b) any and
all certificates and other instruments or documents representing any of the
other Collateral, in each case, together with all Necessary Endorsements. The
Debtor is, contemporaneously with the execution hereof, delivering to Secured
Parties, or has previously delivered to Secured Parties, a true and correct copy
of each of the Organizational Documents governing the issuer of any of the
Pledged Securities.

 

4. Representations, Warranties, Covenants and Agreements of the Debtor. The
Debtor represents and warrants to, and covenants and agrees with, the Secured
Parties as follows:

 

(a) The Debtor has the requisite corporate, partnership, limited liability
company or other power and authority to enter into this Agreement and otherwise
to carry out its Secured Obligations hereunder. The execution, delivery and
performance by the Debtor of this Agreement and the filings contemplated therein
have been duly authorized by all necessary action on the part of the Debtor and
no further action is required by the Debtor. This Agreement has been duly
executed by the Debtor. This Agreement constitutes the legal, valid and binding
obligation of the Debtor, enforceable against the Debtor 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 and by general principles of
equity.

 

(b) The Debtor is the sole owner of the Collateral free and clear of any liens,
security interests, encumbrances, rights or claims, except for Permitted Liens,
and is fully authorized to grant the Security Interests. Except with respect to
Permitted Liens or as disclosed in this Agreement, there is not on file in any
governmental or regulatory authority, agency or recording office an effective
financing statement, security agreement, license or transfer or any notice of
any of the foregoing (other than those that will be filed in favor of the
Secured Parties pursuant to this Agreement) covering or affecting any of the
Collateral. As long as this Agreement shall be in effect, the Debtor shall not
execute and shall not knowingly permit to be on file in any such office or
agency any other financing statement or other document or instrument (except to
the extent filed or recorded in favor of the Secured Parties pursuant to the
terms of this Agreement) purporting to grant a security interest in the
Collateral except as to Permitted Liens.

 

(d) No written claim has been received that any Collateral or the Debtor's use
of any Collateral violates the rights of any third party. There has been no
adverse decision to the Debtor's claim of ownership rights in or exclusive
rights to use the Collateral in any jurisdiction or to the Debtor's right to
keep and maintain such Collateral in full force and effect, and there is no
proceeding involving said rights pending or, to the best knowledge of the
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.

 

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(e) The Debtor shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business and its Collateral
at the location designated by the Secured Parties, and may not relocate such
books of account and records or tangible Collateral unless it delivers to the
Secured Parties at least 30 days prior to such relocation (i) written notice of
such relocation and the new location thereof (which must be within the United
States) and (ii) evidence that appropriate financing statements under the UCC
and other necessary documents have been filed and recorded and other steps have
been taken to perfect the Security Interests to create in favor of the Secured
Parties a valid, perfected and continuing perfected lien in the Collateral,
subject to the priority requirements set forth in Section 2 of this Agreement.

 

(f) This Agreement creates, except as set forth in Section 2 herein, in favor of
the Secured Parties a valid first priority security interest in the Collateral
securing the payment and performance of the Secured Obligations. Upon making the
filings described in the immediately following paragraph, all security interests
created hereunder in any Collateral which may be perfected by filing Uniform
Commercial Code financing statements shall have been duly perfected. Except for
(i) the filing of the Uniform Commercial Code financing statements referred to
in the immediately following paragraph, (ii) the execution and delivery of
deposit account control agreements satisfying the requirements of Section
9-104(a)(2) of the UCC with respect to each deposit account of the Debtor, (iii)
if there is any investment property or deposit account included as Collateral
that can be perfected by “control” through an account control agreement, the
execution and delivery of securities account control agreements satisfying the
requirements of 9-106 of the UCC with respect to each such investment property
of the Debtor, and (iv) the delivery of the certificates and other instruments
provided in Section 3, Section 4(aa) and Section 4(cc), no action is necessary
to create, perfect or protect the security interests created hereunder. Without
limiting the generality of the foregoing, except for the foregoing, 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 (x) the execution, delivery and performance of this Agreement, (y)
the creation or perfection of the Security Interests created hereunder in the
Collateral or (z) the enforcement of the rights of the Secured Parties and the
Secured Parties hereunder.

 

(g) The Debtor hereby authorizes the Secured Parties to file one or more
financing statements under the UCC, with respect to the Security Interests, with
the proper filing and recording agencies in any jurisdiction deemed proper by
it.

 

(h) The execution, delivery and performance of this Agreement by the Debtor does
not (i) violate any of the provisions of any Organizational Documents of the
Debtor or any judgment, decree, order or award of any court, governmental body
or arbitrator or any applicable law, rule or regulation applicable to the Debtor
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing the Debtor's debt or otherwise) or other understanding to
which the Debtor is a party or by which any property or asset of the Debtor is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of the Debtor) necessary for the Debtor to enter
into and perform its Secured Obligations hereunder have been obtained.

 

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(i) All of the Pledged Securities are validly issued, fully paid and
non-assessable, and the Debtor is the legal and beneficial owner of the Pledged
Securities, free and clear of any lien, security interest or other encumbrance
except for the security interests created by this Agreement.

 

(j) The ownership and other equity interests in partnerships and limited
liability companies (if any) included in the Collateral (the “Pledged
Interests”) do not provide that they are securities governed by Article 8 of the
UCC.

 

(k) The Debtor shall at all times maintain the liens and Security Interests
provided for hereunder as valid and perfected, first priority (except as set
forth in Section 2 of this Agreement) liens and security interests in the
Collateral in favor of the Secured Parties until this Agreement and the Security
Interest hereunder shall be terminated pursuant to Section 14 hereof. The Debtor
hereby agrees to defend the same against the claims of any and all persons and
entities. The Debtor shall safeguard and protect all Collateral for the account
of the Secured Parties. At the request of the Secured Parties, the Debtor will
sign and deliver to the Secured Parties on behalf of the Secured Parties at any
time or from time to time one or more financing statements pursuant to the UCC
in form reasonably satisfactory to the Secured Parties and will pay the cost of
filing the same in all public offices wherever filing is, or is deemed by the
Secured Parties to be, necessary or desirable to effect the rights and Secured
Obligations provided for herein. Without limiting the generality of the
foregoing, the Debtor shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interests hereunder, and the Debtor
shall obtain and furnish to the Secured Parties from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interests hereunder.

 

(l) The Debtor shall not transfer, pledge, hypothecate, encumber, license, sell
or otherwise dispose of any of the Collateral (without the prior written consent
of a Majority in Interest).

 

(m) The Debtor shall, within five (5) days of obtaining knowledge thereof,
advise the Secured Parties promptly, in sufficient detail, of any material
adverse change in the Collateral, and of the occurrence of any event which would
have a material adverse effect on the value of the Collateral or on the Secured
Parties’ security interest therein or any Event of Default under the Note.

 

(n) The Debtor shall promptly execute and deliver to the Secured Parties such
further deeds, mortgages, confessions of judgment, assignments, security
agreements, financing statements or other instruments, documents, certificates
and assurances and take such further action as the Secured Parties may from time
to time request and may in their sole discretion deem necessary to perfect,
protect or enforce the Secured Parties’ security interest in the Collateral.

 

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(o) The Debtor shall promptly notify the Secured Parties in sufficient detail
upon becoming aware of any attachment, garnishment, execution or other legal
process levied against any Collateral and of any other information received by
the Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties hereunder.

 

(p) All information heretofore, herein or hereafter supplied to the Secured
Parties by or on behalf of the Debtor with respect to the Collateral is accurate
and complete in all material respects as of the date furnished.

 

(q) The Debtor shall, and cause Ichor Energy Holdings, LLC and each of its
subsidiaries to, at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.

 

(r) The Debtor will not change its name, type of organization, jurisdiction of
organization, organizational identification number (if it has one), legal or
corporate structure, or identity, or add any new fictitious name unless it
provides at least 30 days prior written notice to the Secured Parties of such
change and, at the time of such written notification, the Debtor provides any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this Agreement.

 

(s) The Debtor may not relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to the Secured
Parties and so long as, at the time of such written notification, the Debtor
provides any financing statements or fixture filings necessary to perfect and
continue the perfection of the Security Interests granted and evidenced by this
Agreement.

 

(t) The Debtor is organized under the laws of the State of Nevada.

 

(u) At any time and from time to time that any Collateral consists of
instruments, certificated securities or other items that require or permit
possession by the Secured Party to perfect the security interest created hereby,
the Debtor shall deliver such Collateral to the Collateral Agent, in each case,
together with all Necessary Endorsements.

 

(v) The Debtor hereby agrees to comply with any and all orders and instructions
of Secured Parties regarding the Pledged Interests consistent with the terms of
this Agreement without the further consent of the Debtor as contemplated by
Section 8-106 (or any successor section) of the UCC. Further, the Debtor agrees
that it shall not enter into a similar agreement (or one that would confer
“control” within the meaning of Article 8 of the UCC) with any other person or
entity.

 

(w) The Debtor shall cause all tangible chattel paper constituting Collateral to
be delivered to the Collateral Agent, or, if such delivery is not possible, then
to cause such tangible chattel paper to contain a legend noting that it is
subject to the security interest created by this Agreement. To the extent that
any Collateral consists of electronic chattel paper, the Debtor shall cause the
underlying chattel paper to be “marked” within the meaning of Section 9-105 of
the UCC (or successor Section thereto).

 

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(x) If there is any investment property or deposit account included as
Collateral that can be perfected by “control” through an account control
agreement, the Debtor shall cause such an account control agreement, in form and
substance in each case satisfactory to the Secured Parties, to be entered into
and delivered to the Secured Parties.

 

(y) To the extent that any Collateral is in the possession of any third party,
the Debtor shall join with the Secured Parties in notifying such third party of
the Secured Parties’ security interest in such Collateral and shall use its best
efforts to obtain an acknowledgement and agreement from such third party with
respect to the Collateral, in form and substance reasonably satisfactory to the
Secured Parties.

 

(zz) The Debtor shall vote the Pledged Securities to comply with the covenants
and agreements set forth herein and in the Note.

 

(aa) The Debtor shall register the pledge of the applicable Pledged Securities
on the books of the Debtor. The Debtor shall notify each issuer of Pledged
Securities to register the pledge of the applicable Pledged Securities in the
name of the Secured Parties on the books of such issuer. Further, except with
respect to certificated securities delivered to the Secured Parties, the Debtor
shall deliver to Secured Parties an acknowledgement of pledge (which, where
appropriate, shall comply with the requirements of the relevant UCC with respect
to perfection by registration) signed by the issuer of the applicable Pledged
Securities, which acknowledgement shall confirm that: (i) it has registered the
pledge on its books and records; and (ii) at any time directed by Secured
Parties during the continuation of an Event of Default, such issuer will
transfer the record ownership of such Pledged Securities into the name of any
designee of Secured Parties, will take such steps as may be necessary to effect
the transfer, and will comply with all other instructions of Secured Parties
regarding such Pledged Securities without the further consent of the Debtor.

 

(bb) In the event that, upon an occurrence of an Event of Default, Secured
Parties shall sell all or any of the Pledged Securities to another party or
parties (herein called the “Transferee”) or shall purchase or retain all or any
of the Pledged Securities, the Debtor shall, to the extent applicable: (i)
deliver to Secured Parties or the Transferee, as the case may be, the articles
of incorporation, bylaws, minute books, stock certificate books, corporate
seals, deeds, leases, indentures, agreements, evidences of indebtedness, books
of account, financial records and all other Organizational Documents and records
of Ichor Energy Holdings, LLC (but not including any items subject to the
attorney-client privilege related to this Agreement or any of the transactions
hereunder); (ii) direct the resignations of the persons then serving as officers
and directors of Ichor Energy Holdings, LLC, if so requested; and (iii) use its
best efforts to obtain any approvals that are required by any governmental or
regulatory body in order to permit the sale of the Pledged Securities to the
Transferee or the purchase or retention of the Pledged Securities by Secured
Parties and allow the Transferee or Secured Parties to continue the business of
the Debtor and its direct and indirect subsidiaries, including without
limitation the other Ichor Companies (as defined in the Note).

 

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(cc) The Debtor will from time to time, at the expense of the Debtor, 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 Parties
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Parties to
exercise and enforce their rights and remedies hereunder and with respect to any
Collateral or to otherwise carry out the purposes of this Agreement.

 

(dd) The Debtor shall cause Ichor Energy Holdings, LLC not to issue any
additional membership interests of Ichor Energy Holdings, LLC to any Person.

 

5. Effect of Pledge on Certain Rights. Intentionally Omitted.

 

6. Defaults. The following events shall be “Events of Default”:

 

(a) The occurrence of an Event of Default (as defined in the Note) under the
Note; or

 

(b) If any provision of this Agreement shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by the Debtor, or a proceeding shall be commenced by the Debtor, or by
any governmental authority having jurisdiction over the Debtor, seeking to
establish the invalidity or unenforceability thereof, or the Debtor shall deny
that the Debtor has any liability or obligation purported to be created under
this Agreement.

 

Until the earlier of (i) such time as the Ichor Credit Facility (as defined in
the Note) is paid in full in cash and all commitments to make extensions of
credit thereunder have been terminated and (ii) 90 days after delivery of
written notice to the administrative agent under the Ichor Credit Facility that
an Event of Default has occurred, Secured Party shall (notwithstanding anything
to the contrary herein) be prohibited from accelerating the Note and shall be
prohibited from (i) taking from or for the account of Debtor or any subsidiary
of Debtor, by set-off or in any other manner, the whole or any part of any
moneys which may now or hereafter be owing by Debtor or any subsidiary of Debtor
with respect to the Note, (ii) suing for payment of, or initiating or
participate with others in any suit, action or proceeding against Debtor or any
subsidiary of Debtor to (x) enforce payment of or to collect the whole or any
part of the amounts owed pursuant to the Note or (y) commence judicial
enforcement of any of the rights and remedies under the Note or applicable law
with respect to the Note, (iii) accelerating the amounts owed under the Note,
(iv) exercising any put option or to cause Debtor or any subsidiary of Debtor to
honor any redemption or mandatory prepayment obligation under the Note or (v)
taking any action under the provisions of any state or federal law, including,
without limitation, the Uniform Commercial Code, or under any contract or
agreement, enforcing, foreclosing upon, taking possession of or selling any
property or assets of Debtor or any subsidiary of Debtor; provided, that, the
Secured Party shall not be bound by this paragraph (other than with respect to
the prohibition on any exercise of remedies against the Ichor Companies or the
taking of any action described in the foregoing clauses (i)-(v) with respect to
the Ichor Companies) if (I) an Event of Default described in Section 6(a)(i),
6(a)(v), 6(a)(vii), 6(a)(viii), (6)(a)(ix) or (6)(a)(x) of the Note, or a
payment default under Section 6(a)(vi) constituting an Event of Default, has
occurred and is continuing or (II) the holders of the Debtor’s 10% Secured Notes
or other defaulted indebtedness or obligation as described in Section 6(a)(vi)
of the Note shall have elected to pursue any remedy or enforcement action with
respect to a default thereunder.

 

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7. Duty to Hold in Trust.

 

(a) Upon the occurrence of any Event of Default and at any time thereafter, the
Debtor shall, upon receipt of any revenue, income, dividend, interest or other
sums subject to the Security Interests, whether payable pursuant to the Note or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Parties, pro-rata in proportion to their
respective then-currently outstanding principal amount of Note for application
to the satisfaction of the Secured Obligations (and if any Note is not
outstanding, pro-rata in proportion to the initial purchases of the remaining
Note).

 

(b) If the Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares of Pledged
Securities or instruments representing Pledged Securities acquired after the
date hereof, or any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of the Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), the Debtor agrees to (i) accept the same as the agent of the Secured
Parties; (ii) hold the same in trust on behalf of and for the benefit of the
Secured Parties; (iii) to deliver any and all certificates or instruments
evidencing the same to Secured Parties on or before the close of business on the
fifth business day following the receipt thereof by the Debtor, in the exact
form received together with the Necessary Endorsements, to be held by Secured
Parties subject to the terms of this Agreement as Collateral; and (iv) take all
steps necessary to perfect the Secured Parties’ Security Interest in any such
additional property.

 

8. Rights and Remedies Upon Default.

 

(a) Subject in all respects to the last paragraph of Section 6 hereof, upon the
occurrence of any Event of Default and at any time thereafter, the Secured
Parties shall have the right to exercise all of the remedies conferred hereunder
and under the Note, and the Secured Parties shall have all the rights and
remedies of a secured party under the UCC. Without limitation, except as limited
by the last paragraph of Section 6 hereof, the Secured Parties, shall have the
following rights and powers:

 

(i) The Secured Parties shall have the right to take possession of the
Collateral and, for that purpose, enter, with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is or may be
placed and remove the same, and the Debtor shall assemble the Collateral and
make it available to the Secured Parties at places which the Secured Parties
shall reasonably select, whether at the Debtor's premises or elsewhere, and make
available to the Secured Parties, without rent, all of the Debtor’s respective
premises and facilities for the purpose of the Secured Parties taking possession
of, removing or putting the Collateral in saleable or disposable form.

 

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(ii) Upon notice to the Debtor by Secured Parties, all rights of the Debtor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise and all rights of the Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall
cease. Upon such notice, Secured Parties shall have the right to receive, any
interest, cash dividends or other payments on the Collateral and, exercise in
such Secured Parties’ discretion all voting rights pertaining thereto. Without
limiting the generality of the foregoing, Secured Parties shall have the right
(but not the obligation) to exercise all rights with respect to the Collateral
as if they were the sole and absolute owner thereof, including, without
limitation, to vote and/or to exchange, at their sole discretion, any or all of
the Collateral in connection with a merger, reorganization, consolidation,
recapitalization or other readjustment concerning or involving the Collateral or
the Debtor or any of its direct or indirect subsidiaries.

 

(iii) The Secured Parties shall have the right to assign, sell, lease or
otherwise dispose of and deliver all or any part of the Collateral, at public or
private sale or otherwise, either with or without special conditions or
stipulations, for cash or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or places, and upon such
terms and conditions as the Secured Parties may deem commercially reasonable,
all without (except as shall be required by applicable statute and cannot be
waived) advertisement or demand upon or notice to the Debtor or right of
redemption of the Debtor, which are hereby expressly waived. Upon each such
sale, lease, assignment or other transfer of Collateral, the Secured Parties
may, unless prohibited by applicable law which cannot be waived, purchase all or
any part of the Collateral being sold, free from and discharged of all trusts,
claims, right of redemption and equities of the Debtor, which are hereby waived
and released.

 

(b) The Secured Parties shall comply with any applicable law in connection with
a disposition of Collateral and such compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. The
Secured Parties may sell the Collateral without giving any warranties and may
specifically disclaim such warranties. If the Secured Parties sell any of the
Collateral on credit, the Debtor will only be credited with payments actually
made by the purchaser. In addition, the Debtor waives (except as shall be
required by applicable statute and cannot be waived) any and all rights that it
may have to a judicial hearing in advance of the enforcement of any of the
Secured Parties’ rights and remedies hereunder, including, without limitation,
their right following an Event of Default to take immediate possession of the
Collateral and to exercise their rights and remedies with respect thereto.

 

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9. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder or from payments made on account of any
insurance policy insuring any portion of the Collateral shall be applied (i)
first, to the reasonable costs, expenses of retaking, holding, storing,
processing and preparing for sale, selling, and the like, incurred by the
Secured Parties, their representatives, or the Collateral Agent (including,
without limitation, any taxes, fees and other costs incurred in connection
therewith) of the Collateral; (ii) second to the reasonable attorneys’ fees and
expenses incurred by the Secured Parties, their representatives, and the
Collateral Agent in enforcing the Secured Parties’ rights hereunder and in
connection with collecting, storing and disposing of the Collateral; and (iii)
then to satisfaction of the Secured Obligations pro rata among the Secured
Parties (based on then-outstanding principal and interest amounts of Note at the
time of any such determination), (with respect to the application of payment to
the outstanding balance due on the Note, proceeds shall first be applied to all
outstanding interest then accrued on the Note until all such interest has been
paid, prior to applying any proceeds to the principal of any of the Note) and to
the payment of any other amounts required by applicable law, after which the
Secured Parties shall pay to the Debtor any surplus proceeds. If, upon the sale,
license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Debtor will remain liable for the deficiency, and the reasonable
fees of any attorneys employed by the Secured Parties to collect such
deficiency. To the extent permitted by applicable law, the Debtor waives all
claims, damages and demands against the Secured Parties arising out of the
repossession, removal, retention or sale of the Collateral, unless due solely to
the gross negligence or willful misconduct of the Secured Parties as determined
by a final judgment (not subject to further appeal) of a court of competent
jurisdiction.

 

10. Securities Law Provision. The Debtor recognizes that Secured Parties may be
limited in their ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
“Securities Laws”), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. The Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold
to the public, and that Secured Parties have no obligation to delay the sale of
any Pledged Securities for the period of time necessary to register the Pledged
Securities for sale to the public under the Securities Laws. The Debtor shall
cooperate with Secured Parties in their attempt to satisfy any requirements
under the Securities Laws (including, without limitation, registration
thereunder if requested by Secured Parties) applicable to the sale of the
Pledged Securities by Secured Parties. 

 

11. Costs and Expenses. The Debtor agrees to pay all reasonable out-of-pocket
fees, costs and expenses incurred in connection with any filing required
hereunder, including without limitation, any financing statements pursuant to
the UCC, continuation statements, partial releases and/or termination statements
related thereto or any expenses of any searches reasonably required by the
Secured Parties. The Debtor shall also pay all other claims and charges which in
the reasonable opinion of the Secured Parties are reasonably likely to
prejudice, imperil or otherwise affect the Collateral or the Security Interests
therein. The Debtor will also, upon demand, pay to the Secured Parties the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of their counsel and of any experts and agents, which the Secured
Parties, may incur in connection with the creation, perfection, protection,
satisfaction, foreclosure, collection or enforcement of the Security Interest
and the preparation, administration, continuance, amendment or enforcement of
this Agreement and pay to the Secured Parties the amount of any and all
reasonable expenses, including the reasonable fees and expenses of their counsel
and of any experts and agents, which the Secured Parties may incur in connection
with (i) the enforcement of this Agreement, (ii) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the
Collateral, or (iii) the exercise or enforcement of any of the rights of the
Secured Parties under the Note. Until so paid, any fees payable hereunder shall
be added to the principal amount of the Note and shall bear interest at the
Default Rate.

 

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12. Responsibility for Collateral. The Debtor assumes all liabilities and
responsibility in connection with all Collateral, and the Secured Obligations
shall in no way be affected or diminished by reason of the loss, destruction,
damage or theft of any of the Collateral or its unavailability for any reason.
Without limiting the generality of the foregoing and except as required by
applicable law, (a) no Secured Party (i) has any 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, or (ii) has any obligation to
clean-up or otherwise prepare the Collateral for sale, and (b) the Debtor shall
remain obligated and liable under each contract or agreement included in the
Collateral to be observed or performed by the Debtor thereunder. No Secured
Party shall have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the receipt by any
Secured Party of any payment relating to any of the Collateral, nor shall any
Secured Party be obligated in any manner to perform any of the Secured
Obligations of the Debtor under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment received by any
Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Secured Parties or to
which any Secured Party may be entitled at any time or times.

 

13. Security Interests Absolute. All rights of the Secured Parties and all
Secured Obligations of the Debtor hereunder, shall be absolute and
unconditional, irrespective of: (a) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of or any consent to any departure
from the Note or any other agreement entered into in connection with the
foregoing; (b) any exchange, release or non-perfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any Guaranty, or any other security, for all or any of the
Secured Obligations; (c) any action by the Secured Parties to obtain, adjust,
settle and cancel in their sole discretion any insurance claims or matters made
or arising in connection with the Collateral; or (d) any other circumstance
which might otherwise constitute any legal or equitable defense available to the
Debtor, or a discharge of all or any part of the Security Interests granted
hereby. Until the Secured Obligations shall have been paid and performed in
full, the rights of the Secured Parties shall continue even if the Secured
Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations. The Debtor expressly waives presentment,
protest, notice of protest, demand, notice of nonpayment and demand for
performance. In the event that at any time any transfer of any Collateral or any
payment received by the Secured Parties hereunder shall be deemed by final order
of a court of competent jurisdiction to have been a voidable preference or
fraudulent conveyance under the bankruptcy or insolvency laws of the United
States, or shall be deemed to be otherwise due to any party other than the
Secured Parties, then, in any such event, the Debtor’s Secured Obligations
hereunder shall survive cancellation of this Agreement, and shall not be
discharged or satisfied by any prior payment thereof and/or cancellation of this
Agreement, but shall remain a valid and binding obligation enforceable in
accordance with the terms and provisions hereof. The Debtor waives all right to
require the Secured Parties to proceed against any other person or entity or to
apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. The Debtor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.

 

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14. Term of Agreement. This Agreement and the Security Interests shall terminate
on the date on which all payments under the Note have been indefeasibly paid in
full and all other Secured Obligations have been paid or discharged; provided,
however, that all indemnities of the Debtor contained in this Agreement
(including, without limitation, Annex A hereto) shall survive and remain
operative and in full force and effect regardless of the termination of this
Agreement.

 

15. Power of Attorney; Further Assurances.

 

(a) The Debtor authorizes the Secured Parties, and does hereby make, constitute
and appoint the Secured Parties and their officers, agents, successors or
assigns with full power of substitution, as the Debtor’s true and lawful
attorney-in-fact, with power, in the name of the Secured Parties or the Debtor,
to, after the occurrence and during the continuance of an Event of Default, (i)
endorse any note, checks, drafts, money orders or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Secured Parties;
(ii) to sign and endorse any financing statement pursuant to the UCC or any
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Collateral; (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and sue for monies due in respect of
the Collateral; (v) generally, at the option of the Secured Parties, and at the
expense of the Debtor, at any time, or from time to time, to execute and deliver
any and all documents and instruments and to do all acts and things which the
Secured Parties deem necessary to protect, preserve and realize upon the
Collateral and the Security Interests granted therein in order to effect the
intent of this Agreement and the Note all as fully and effectually as the Debtor
might or could do; and the Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Secured Obligations shall be outstanding.
The designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents or
agreements to which the Debtor is subject or to which the Debtor is a party.

 

(b) On a continuing basis, the Debtor will make, execute, acknowledge, deliver,
file and record, as the case may be, with the proper filing and recording
agencies in any jurisdiction, including, without limitation, the States of
Nevada and Kansas, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested by the
Secured Parties, to perfect and maintain the Security Interests granted
hereunder and otherwise to carry out the intent and purposes of this Agreement,
or for assuring and confirming to the Secured Parties the grant or perfection of
a perfected security interest in all the Collateral under the UCC.

 

  14

   

 

(c) The Debtor hereby irrevocably appoints the Secured Parties as the Debtor’s
attorney-in-fact, with full authority in the place, and instead, of the Debtor
and in the name of the Debtor, from time to time in the Secured Parties’
discretion, to take any action and to execute any instrument which the Secured
Parties may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in their sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of the Debtor where permitted by law, which
financing statements may (but need not) describe the Collateral as “all assets”
or “all personal property” or words of like import, and ratifies all such
actions taken by the Secured Parties. This power of attorney is coupled with an
interest and shall be irrevocable for the term of this Agreement and thereafter
as long as any of the Secured Obligations shall be outstanding.

 

16. Notices. All notices, requests, demands and other communications hereunder
and under the Note shall be subject to the notice provision of the PSA.

 

17. Other Security. To the extent that the Secured Obligations are now or
hereafter secured by property other than the Collateral or by the Guaranty,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Parties shall have the right, in their sole discretion, to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties’
rights and remedies hereunder.

 

18. Appointment of Collateral Agent. The Secured Parties in their sole
discretion may delegate certain of their rights hereunder to one or more
Collateral Agent. If and as applicable, the Secured Parties may insert the name
of the selected Collateral Agent in this Section 18. To this end, the Secured
Parties hereby appoint Brothers Investments, LLC to act as their Collateral
Agent (the “Collateral Agent”) for purposes of exercising any and all rights and
remedies of the Secured Parties hereunder. Such appointment shall continue until
revoked in writing by a Majority in Interest, at which time a Majority in
Interest may appoint a new Collateral Agent. 

 

19. Miscellaneous.

 

(a) No course of dealing between the Debtor and the Secured Parties, nor any
failure to exercise, nor any delay in exercising, on the part of the Secured
Parties, any right, power or privilege hereunder or under the Note shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.

 

(b) All of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Note or by any other
agreements, instruments or documents or by law or in equity or by statute shall
be cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Secured
Parties of any one or more of the rights, powers or remedies provided for hereby
or by the Note or by any other agreements, instruments or documents now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Secured Parties of all such
other rights, powers or remedies, and no failure or delay on the part of the
Secured Parties to exercise any such right, power or remedy shall operate as a
waiver thereof.

 

  15

   

 

(c) This Agreement, together with the exhibits and schedules hereto and the
other Transaction Documents, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into this Agreement and the exhibits and schedules
hereto. No provision of this Agreement may be waived, modified, supplemented or
amended except in a written instrument signed, in the case of an amendment, by
the Debtor and the Secured Parties holding 51% or more of the principal amount
of Note then outstanding, or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought.

 

(d) If any term, provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

 

(e) No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.

 

(f) This Agreement shall be binding upon and inure to the benefit of the parties
and their successors and permitted assigns. The Debtor and the Subsidiaries may
not assign this Agreement or any rights or Secured Obligations hereunder without
the prior written consent of each Secured Party (other than by merger). Any
Secured Party may assign any or all of its rights under this Agreement to any
Person to whom such Secured Party assigns or transfers any Secured Obligations,
provided such transferee agrees in writing to be bound, with respect to the
transferred Secured Obligations, by the provisions of this Agreement that apply
to the “Secured Parties.”

 

(g) Each party shall take such further action and execute and deliver such
further documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

 

  16

   

 

(h) Except to the extent mandatorily governed by the jurisdiction or situs where
the Collateral is located, all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Texas, without regard to the principles of conflicts of law thereof. Except to
the extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, the Debtor agrees that all proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and the Note (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of Houston, Texas. Except to the extent mandatorily
governed by the jurisdiction or situs where the Collateral is located, the
Debtor hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of Houston, Texas for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such proceeding is improper. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby.

 

(i) This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

 

(j) The Debtor shall indemnify, reimburse and hold harmless the Secured Parties
and their respective partners, members, shareholders, officers, directors,
employees and agents (inclusive of any Collateral Agent or other representative
appointed by the Secured Parties) (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”) from and against any and
all losses, claims, liabilities, damages, penalties, suits, costs and expenses,
of any kind or nature, (including fees relating to the cost of investigating and
defending any of the foregoing) imposed on, incurred by or asserted against such
Indemnitee in any way related to or arising from or alleged to arise from the
Note, this Agreement or the Collateral, except any such losses, claims,
liabilities, damages, penalties, suits, costs and expenses which result from the
gross negligence or willful misconduct of the Indemnitee as determined by a
final, non-appealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any other
indemnification provision in the Note or any other agreement, instrument or
other document executed or delivered in connection herewith or therewith.

 

(k) Nothing in this Agreement shall be construed to subject any Secured Party to
liability as a partner in the Debtor or any of its direct or indirect
subsidiaries that is a partnership or as a member in the Debtor or any of its
direct or indirect subsidiaries that is a limited liability company, no Secured
Party shall be deemed to have assumed any Secured Obligations under any
partnership agreement or limited liability company agreement, as applicable, of
the Debtor or any of its direct or indirect subsidiaries or otherwise, unless
and until any such Secured Party exercises its right to be substituted for the
Debtor as a partner or member, as applicable, pursuant hereto.

 

(l) To the extent that the grant of the security interest in the Collateral and
the enforcement of the terms hereof require the consent, approval or action of
any partner or member, as applicable, of the Debtor or any direct or indirect
subsidiary of the Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtor hereby represents that all such consents
and approvals have been obtained.

 

[SIGNATURE PAGE OF DEBTOR FOLLOWS]

 

  17

   

 

IN WITNESS WHEREOF, the parties hereto have caused this Security and Pledge
Agreement to be duly executed on the day and year first above written.

 

VIKING ENERGY GROUP, INC.

   

 

By:

/s/ James A. Doris

Name:

James A. Doris

Title:

President & CEO

 

[SIGNATURE PAGE OF SECURED PARTIES FOLLOWS]

 

  18

   

 

[SIGNATURE PAGE OF SECURED PARTIES TO SECURITY AND PLEDGE AGREEMENT]

 

 

Name of Secured Party:

 

BODEL HOLDINGS, LLC

CLEVELAND HOLDINGS, L.L.C.

DELBO HOLDINGS, L.L.C.

DEQUINCY HOLDINGS, L.L.C.

GULF COAST WORKING PARTNERS, L.L.C.

OAKLEY HOLDINGS, L.L.C.

SAMJAM ENERGY, L.L.C.

PERRY POINT HOLDINGS, L.L.C.

 

 

 

 

 

Signature of Authorized Signatory of Secured Party:

 

/s/ Jennifer Bohannon-Ramirez

 

 

 

 

 

Name of Authorized Signatory:

 

Jennifer Bohannon-Ramirez

 

 

 

 

 

Title of Authorized Signatory:

 

Manager of Brothers Investments, LLC,

as the sole member of each Secured Party

 

 

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ANNEX A

to

SECURITY AND PLEDGE

AGREEMENT

THE COLLATERAL AGENT

 

1. Appointment. The Secured Parties (all capitalized terms used herein and not
otherwise defined shall have the respective meanings provided in the Security
and Pledge Agreement to which this Annex A is attached (the "Agreement")), by
their acceptance of the benefits of the Agreement, hereby designate Brothers
Investments, LLC (the “Collateral Agent”) as the Collateral Agent to act as
specified herein and in the Agreement. Each Secured Party shall be deemed to
have irrevocably authorized the Collateral Agent to take such action on its
behalf under the provisions of the Agreement and the Note and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Collateral Agent by the terms hereof and thereof
and such other powers as are reasonably incidental thereto. The Collateral Agent
may perform any of its duties hereunder by or through its agents or employees.

 

2. Nature of Duties. The Collateral Agent shall have no duties or
responsibilities except those expressly set forth in the Agreement. Neither the
Collateral Agent nor any of its partners, members, shareholders, officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such under the Agreement or hereunder or in connection herewith or
therewith, be responsible for the consequence of any oversight or error of
judgment or answerable for any loss, unless caused solely by its or their gross
negligence or willful misconduct as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction. The duties of the
Collateral Agent shall be mechanical and administrative in nature; the
Collateral Agent shall not have by reason of the Agreement or any other
Transaction Document a fiduciary relationship in respect of the Debtor or any
Secured Party; and nothing in the Agreement or any other Transaction Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Secured Parties any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and therein.

 

3. Lack of Reliance on the Collateral Agent. Independently and without reliance
upon the Collateral Agent, each Secured Party, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Debtor and its
subsidiaries in connection with such Secured Party’s investment in the Debtor,
the creation and continuance of the Secured Obligations, the transactions
contemplated by the Transaction Documents, and the taking or not taking of any
action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Debtor and its subsidiaries, and of the value of the
Collateral from time to time, and the Secured Parties shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Secured Obligations are incurred
or at any time or times thereafter. The Collateral Agent shall not be
responsible to the Debtor or any Secured Party for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith, or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectability, priority or sufficiency of the Agreement or any other
Transaction Document, or for the financial condition of the Debtor or the value
of any of the Collateral, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
the Agreement or any other Transaction Document, or the financial condition of
the Debtor, or the value of any of the Collateral, or the existence or possible
existence of any default or Event of Default under the Agreement, the Note or
any of the other Transaction Documents.

 

  20

   

 

4. Certain Rights of the Collateral Agent. The Collateral Agent shall have the
right to take any action with respect to the Collateral, on behalf of all of the
Secured Parties. To the extent practical, the Collateral Agent may, but in no
case shall be required to, request instructions from the Secured Parties with
respect to any material act or action (including failure to act) in connection
with the Agreement or any other Transaction Document, and shall be entitled to
act or refrain from acting in accordance with the instructions of a Majority in
Interest; if such instructions are not provided despite the Collateral Agent’s
request therefor, the Collateral Agent shall be entitled to refrain from such
act or taking such action, and if such action is taken, shall be entitled to
appropriate indemnification from the Secured Parties in respect of actions to be
taken by the Collateral Agent; and the Collateral Agent shall not incur
liability to any person or entity by reason of so refraining. Without limiting
the foregoing, (a) no Secured Party shall have any right of action whatsoever
against the Collateral Agent as a result of the Collateral Agent acting or
refraining from acting hereunder in accordance with the terms of the Agreement
or any other Transaction Document, and the Debtor shall have no right to
question or challenge the authority of, or the instructions given by the
Majority in Interest to, the Collateral Agent pursuant to the foregoing and (b)
the Collateral Agent shall not be required to take any action which the
Collateral Agent believes (i) could reasonably be expected to expose it to
personal liability or (ii) is contrary to this Agreement, the Transaction
Documents or applicable law.

 

5. Reliance. The Collateral Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or tele copier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity, and, with respect to all legal matters pertaining to the Agreement
and the other Transaction Documents and their duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and their duties thereunder, upon advice of
other experts selected by it. Anything to the contrary notwithstanding, the
Collateral Agent shall have no obligation whatsoever to any Secured Party to
assure that the Collateral exists or is owned by the Debtor or is cared for,
protected or insured or that the liens granted pursuant to the Agreement have
been properly or sufficiently or lawfully created, perfected, or enforced or are
entitled to any particular priority.

 

6. Indemnification. To the extent that the Collateral Agent is not reimbursed
and indemnified by the Debtor, the Secured Parties will jointly and severally
reimburse and indemnify the Collateral Agent, in proportion to their initially
purchased respective principal amounts of Note, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Collateral Agent in performing
their duties hereunder or under the Agreement or any other Transaction Document,
or in any way relating to or arising out of the Agreement or any other
Transaction Document except for those determined by a final judgment (not
subject to further appeal) of a court of competent jurisdiction to have resulted
solely from the Collateral Agent’s own gross negligence or willful misconduct.
Prior to taking any action hereunder as Collateral Agent, the Collateral Agent
may require each Secured Party to deposit with it sufficient sums as the
Collateral Agent determines in good faith is necessary to protect the Collateral
Agent for costs and expenses associated with taking such action.

 

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7. Resignation by the Collateral Agent.

 

(a) The Collateral Agent may resign from the performance of all of its functions
and duties under the Agreement and the other Transaction Documents at any time
by giving 30 days' prior written notice (as provided in the Agreement) to the
Debtor and the Secured Parties. Such resignation shall take effect upon the
appointment of a successor Collateral Agent pursuant to clauses (b) and (c)
below.

 

(b) Upon any such notice of resignation, the Secured Parties, acting by a
Majority in Interest, shall appoint a successor Collateral Agent hereunder.

 

(c) If a successor Collateral Agent shall not have been so appointed within said
30-day period, the Collateral Agent shall then appoint a successor Collateral
Agent who shall serve as Collateral Agent until such time, if any, as the
Secured Parties appoint a successor Collateral Agent as provided above. If a
successor Collateral Agent has not been appointed within such 30-day period, the
Collateral Agent may petition any court of competent jurisdiction or may
interplead the Debtor and the Secured Parties in a proceeding for the
appointment of a successor Collateral Agent, and all fees, including, but not
limited to, extraordinary fees associated with the filing of interpleader action
and expenses associated therewith, shall be payable by the Debtor on demand.

 

8. Rights with respect to Collateral. Each Secured Party agrees with all other
Secured Parties and the Collateral Agent (a) that it shall not, and shall not
attempt to, exercise any rights with respect to its security interest in the
Collateral, whether pursuant to any other agreement or otherwise (other than
pursuant to this Agreement), or take or institute any action against the
Collateral Agent or any of the other Secured Parties in respect of the
Collateral or its rights hereunder (other than any such action arising from the
breach of this Agreement) and (b) that such Secured Party has no other rights
with respect to the Collateral other than as set forth in this Agreement and the
other Transaction Documents. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, such successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent and the
retiring Collateral Agent shall be discharged from its duties and Secured
Obligations under the Agreement. After any retiring Collateral Agent’
resignation or removal hereunder as Collateral Agent, the provisions of the
Agreement including this Annex A shall inure to their benefit as to any actions
taken or omitted to be taken by it while they were Collateral Agent.

 

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