Exhibit 10.2
ASSIGNMENT & SECURITY AGREEMENT
(Ownership Interests)(in Alpha & Panzica Oil & Gas Wells)
THIS ASSIGNMENT & SECURITY AGREEMENT (as the same may from time to time be
amended, restated or otherwise modified, this “Agreement”) is executed and
delivered at Cleveland, Ohio effective as of June 18, 2010, by JOHN D. OIL AND
GAS COMPANY, a Maryland corporation, and GREAT PLAINS EXPLORATION CO., LLC, an
Ohio limited liability company (collectively, the “Pledgor”), to RBS CITIZENS,
N.A., dba Charter One (“Lender”).
INTRODUCTION:
A. John D. Oil And Gas Company, a Maryland corporation (“John D. Oil”) is a
party with Lender to that certain First Amended and Restated Loan and Security
Agreement dated as of March 28, 2008.
B. Great Plains Exploration Company, LLC, an Ohio limited liability company
(“GPE”) is a party with Lender to that certain Loan and Security Agreement dated
August 2, 2007.
C. John D. Oil, and GPE are sometimes referred to collectively as the
“Borrowers”.
D. Borrowers and Lender are parties to the Forbearance Agreement dated as of
even date hereof (as the same may from time to time be amended, restated or
otherwise modified, the “Forbearance Agreement”) that sets forth, among other
things, the terms and conditions of Lender’s commitments to forbear pursuant to
the terms and conditions of the Forbearance Agreement; and
E. It is a condition precedent to the Lender entering into the Forbearance
Agreement that, among other things, Pledgor shall have executed and delivered to
Lender this Agreement.
THEREFORE, in consideration of the premises, to induce Lender to enter into the
Forbearance Agreement, and in consideration of the foregoing recitals
(incorporated herein by reference) and for other valuable considerations hereby
acknowledged as having been received, Pledgor hereby agrees, represents, and
warrants as follows:
1. Definitions. As used herein:
1.1. “Collateral” means all of the ownership interests or other economic or
equity interests owned by Pledgor in the Alpha and Panzica Oil and Gas Wells as
more fully described on Exhibit A attached hereto, all additional ownership or
economic interests or other equity interest of Borrowers from time to time
acquired by Pledgor by reason of dividends, distributions and similar
transactions with respect to the Collateral, and all proceeds, income, fees,
profits, surplus, dividends, distributions, cash, instruments and other property
from time to time received, receivable or otherwise distributed (collectively,
“Distributions”) in respect of or in exchange for any or all of such ownership
interests.

 

 

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1.2. “Debt” shall mean all obligations, liabilities and indebtedness of
Borrowers to Lender described in and pursuant to the Forbearance Agreement,
including but not limited to, the Judgment.
1.3 Capitalized terms used herein without definition have the meanings ascribed
to such terms in the Forbearance Agreement.
Without limiting the generality of the foregoing, it is hereby specifically
understood and agreed that Pledgor may from time to time hereafter deliver
additional securities to Lender as collateral security for its and Borrowers’
obligations under the Forbearance Agreement. Upon delivery to Lender, such
additional shares of securities shall be deemed to be part of the Collateral and
shall be subject to the terms of this Agreement whether or not Exhibit A is
amended to refer to such additional shares.
2. Security Interest. Pledgor hereby grants to Lender a security interest in the
Collateral as security for the Debt. Pledgor has executed appropriate transfer
powers in the form attached hereto as Exhibit B with respect to the Collateral.
Pledgor authorizes Lender at any time upon the occurrence of a Termination Event
under the Forbearance Agreement resulting from the failure to pay the Debt or
any part thereof when due, to transfer the Collateral owned by Pledgor into the
name of Lender or Lender’s nominee, but Lender shall be under no duty to do so.
Notwithstanding any provision or inference herein or elsewhere to the contrary,
Lender shall have no right to receive Distributions at any time unless and until
there shall have occurred a Termination Event under the Forbearance Agreement
which is not remedied within any period of grace provided under the Forbearance
Agreement, if any.
3. Pledgor’s Representations and Warranties. Pledgor represents and warrants to
Lender as follows:
3.1. Pledgor is the legal record and beneficial owner of, and has good and
marketable title to, the Collateral, and the Collateral is not subject to any
pledge, lien, mortgage, hypothecation, security interest, charge, option,
warrant, or other encumbrance whatsoever, nor to any agreement purporting to
grant to any third party a security interest in the property or assets of
Pledgor which would include the Collateral, except the lien created hereunder
and the security interest created by this Agreement or otherwise securing only
Lender.
3.2. All of the Collateral has been duly authorized and validly issued, and is
fully paid and non-assessable.
3.3. Pledgor has full power, authority and legal right to pledge all of the
Collateral owned by Pledgor pursuant to the terms of this Agreement.
3.4. No consent, license, permit, approval or authorization, filing or
declaration with any governmental authority, domestic or foreign, and no consent
of any other party, is required to be obtained by Pledgor in connection with the
pledge of the Collateral hereunder, which has not been obtained or made, and is
not in full force and effect.
3.5. The security interest in the Collateral hereunder creates a valid first
lien on, and a first perfected security interest in, the Collateral and/or the
proceeds thereof.

 

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3.6 Pledgor fully anticipates that the Debt will be repaid without the necessity
of selling the Collateral.
3.7. Pledgor has received consideration which is the reasonable equivalent value
of the obligations and liabilities that Pledgor has incurred to Lender.
4. Failure to Pay Debt. If the Debt or any part thereof shall not be paid in
full promptly when due and payable pursuant to the terms of the Forbearance
Agreement. Lender, in its discretion may, upon such terms and in such manner as
Lender shall deem advisable, sell, assign, transfer and deliver the Collateral,
or any part thereof, and in each case Lender shall apply the net proceeds of the
sale thereof to the Debt whether or not due, by such allocation as to item and
maturity as Lender in their discretion may deem advisable. No prior notice need
be given to Pledgor or anyone else in the case of any sale of Collateral which
Lender in good faith determines is customarily sold at any securities exchange
or in the over-the-counter market or in any other recognized market; but in any
other case Lender shall give Pledgor not fewer than ten days’ prior notice of
either the date after which any intended private sale may be made or the time
and place of any intended public sale. Pledgor waives advertisement of sale and,
except to the extent required by the preceding sentence, waive notice of any
kind in respect of any sale. At any public sale, Lender may purchase the
Collateral or any part thereof free from any right of redemption, which rights
are hereby waived and released. Any notice to Pledgor shall be sufficiently
given for all purposes when sent by registered or certified mail to the address
hereinafter set forth (or, in Lender’s discretion to any address of Pledgor
contained in Lender’s records) whether or not such notice is actually received,
but no other method of giving notice is hereby precluded.
5. Term of Security Agreement. Irrespective of any action, omission or course of
dealing whatever by Lender, but subject to the terms of the Forbearance
Agreement, this Agreement shall remain in full force and effect until the Debt
shall have been paid in full. Without limiting the generality of the foregoing,
Pledgor (a) agrees that Lender shall have no duty to make any presentment or
collection or to preserve any right of any kind, with reference to the
Collateral, and (b) agrees that Lender shall at all times have the right to
grant any indulgence to Borrowers and to deal in any other manner with
Borrowers, including the granting of any extension, renewal or increase of the
Debt or any part thereof, the increase or decrease of any rate of interest, the
forbearance from exercising any right, power, or privilege, including any right
to demand security, the release of, or forbearance from proceeding against, any
security or any obligor, the effecting of any other release, compromise or
settlement, the substitution of security (even if of a different character or
value), and (c) waives notice of the creation of any Debt, of any default under
any note or other instrument evidencing the Debt or any part thereof, of any
act, omission, or course of dealing by Lender, and any other notice to which
Pledgor might be entitled to but for the within waiver, and (d) acknowledges and
agrees that the termination or dissolution of Borrowers shall not affect the
rights of Lender under this Agreement and that this Agreement, notwithstanding
such event, shall remain in full force and effect until the Debt shall have been
paid in full. Upon the payment in full of the outstanding Debt, Lender shall
release its security interest in the Collateral and terminate all prior UUC
filings.

 

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6. Additional Covenants of Pledgor.
6.1. Pledgor covenants and agrees to defend the right, title and security
interest of Lender in and to the Collateral and the proceeds thereof, and to
maintain and preserve the lien and security interest provided for by this
Agreement against the claim and demands of all persons, so long as this
Agreement shall remain in effect.
6.2. Pledgor covenants and agrees not to sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, or create, incur or
permit to exist any pledge, lien, mortgage, hypothecation, security interest,
charge, option or any other encumbrance with respect to any of the Collateral,
or any interest therein, or any proceeds thereof, except for the lien and
security interest provided for by this Agreement and any security agreement
securing only Lender.
6.3. Pledgor covenants and agrees (a) to cooperate, in good faith, with Lender
and to do or cause to be done all such other acts as may be necessary to enforce
Lender’s rights under this Agreement, (b) not to take any action, or to fail to
take any action which would be adverse to Lender’s interest in the Collateral
and hereunder, and (c) to make any sale or sales of any portion or all of the
Collateral valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales at Pledgor’s expense.
7. Attorney-in-Fact. Pledgor hereby authorizes and empowers Lender to make,
constitute and appoint any officer or agent of Lender as Lender may select, in
its exclusive discretion, as Pledgor’s true and lawful attorney-in-fact, with
the power upon the occurrence and continuance of a Termination Event under the
Forbearance Agreement to endorse Pledgor’s name on all applications, documents,
papers and instruments necessary for Lender to take actions with respect to the
Collateral, including, without limitation, actions necessary for Lender to
assign, pledge, convey or otherwise transfer title in or dispose of the
Collateral to anyone else. Pledgor ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney shall
be irrevocable for the life of this Agreement.
8. Costs and Expenses. If Pledgor fails to comply with any of its obligations
hereunder, Lender may do so in Pledgor’s name or in Lender’s name, but at
Pledgor’s expense, and Pledgor hereby agrees to reimburse Lender in full for all
expenses, including reasonable attorney’s fees, incurred by Lender in
protecting, defending and maintaining the Collateral. Without limiting the
foregoing, any and all reasonable fees, costs and expenses, of whatever kind or
nature, including the reasonable attorney’s fees and expenses incurred in
connection with the filing or recording of any documents (including all taxes in
connection therewith) in public offices, the payment or discharge of any taxes,
maintenance fees, encumbrances or otherwise protecting, maintaining or
preserving the Collateral, or in defending or prosecuting any actions or
proceedings arising out of or related to the Collateral, shall be borne and paid
by Pledgor on demand by Lender.

 

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9. Interpretation. Each right, power or privilege specified or referred to in
this Agreement is in addition to any other rights, powers and privileges that
Lender may have acquired by operation of law, by other contract or otherwise. No
course of dealing in respect of, nor any omission or delay in the exercise of,
any right, power or privilege by Lender shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any further or other
exercise thereof or of any other, as each right, power or privilege may be
exercised by Lender either independently or concurrently with other rights,
powers and privileges and as often and in such order as Lender may deem
expedient. No waiver or consent granted by Lender in respect of this Agreement
shall be binding upon Lender unless specifically granted in writing, which
writing shall be strictly construed.
10. Assignment and Successors. This Agreement shall not be assigned by Pledgor
without the prior written consent of Lender. Any assignment of this Agreement by
Pledgor not consented to by Lender shall be null and void. This Agreement shall
bind and benefit the successors and assigns of Pledgor and Lender.
11. Governing Law. The provisions of this Agreement, and the respective rights
and duties of Pledgor and Lender hereunder, shall be governed by the laws of the
State of Ohio, without regard to principles of conflict of laws.
12. Severability. If at any time one or more provisions of this Agreement is or
becomes invalid, illegal or unenforceable in whole or in part, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
[Remainder of Page Intentionally Left Blank.]

 

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13. WAIVER. PLEDGOR WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG LENDER AND
PLEDGOR ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTES OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY LENDER’S ABILITY TO PURSUE
REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED
IN ANY NOTES OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED AND DELIVERED
BY PLEDGOR TO LENDER.
Executed and delivered at Cleveland, Ohio, as of the 18th day of June, 2010.

                              Address:               JOHN D. OIL AND GAS COMPANY
                                 
 
                                                     
 
  Attn:            By:   /s/ Gregory J. Osborne        
 
                       
 
                  Print Name: Gregory J. Osborne        
 
                  Print Title: President        
 
                            Address:               GREAT PLAINS EXPLORATION
CO., LLC                                  
 
                                                     
 
                           
 
              By:   /s/ Richard M. Osborne        
 
                           
 
                  Richard M. Osborne, Managing Member        

[Signature Page to                                          Pledge Agreement]

 

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EXHIBIT A
Collateral

1)  
John D. Oil and Gas Company owns a 50% ownership interest in Lucky Brothers,
LLC, an Ohio limited liability company (“Lucky”) which is the owner of the Alpha
Well. The Collateral shall be deemed to include all distributions, cash
available for distribution, profits and proceeds from Lucky. Upon an event of
default pursuant to the Forbearance Agreement, Lender may give written notice to
Lucky and the other members of Lucky of such default and instruct Lucky to
deliver all distributions, cash available for distribution, profits and proceeds
from John D. Oil’s membership interests in Lucky to Lender. The Collateral shall
be deemed to include any other interest that John D. Oil has in the Alpha Well.
  2)  
Great Plains Exploration Co., LLC owns a 30% ownership interest in PCO-Mayfield,
Ltd., an Ohio limited liability company (“Mayfield”) which is the owner of the
Panzica Well. The Collateral shall be deemed to include all distributions, cash
available for distribution, profits and proceeds from Mayfield. Upon an event of
default pursuant to the Forbearance Agreement, Lender may give written notice to
Mayfield and the other members of Mayfield of such default and instruct Mayfield
to deliver all distributions, cash available for distribution, profits and
proceeds from John D. Oil’s membership interests in Mayfield to Lender. The
Collateral shall be deemed to include any other interest that Great Plains
Exploration Co., LLC has in the Panzica Well.

 

 

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EXHIBIT B
IRREVOCABLE POWER TO TRANSFER SECURITY
FOR VALUE RECEIVED, the undersigned, John D. Oil and Gas Company does hereby
sell, assign and transfer unto RBS Citizens, N.A. dba Charter One all ownership
or economic interests it has in the Alpha Oil and Gas Well (collectively the
“Company”), standing in the name of the undersigned on the books of the Company
and does hereby irrevocably constitute and appoint
                                                             attorney to
transfer said interest(s) on the books of the Company with full power of
substitution in the premises.

          Dated:                       JOHN D. OIL AND GAS COMPANY
      By:           Print Name:   Gregory J. Osborne        Print Title:  
President   

 

 

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EXHIBIT B
IRREVOCABLE POWER TO TRANSFER SECURITY
FOR VALUE RECEIVED, the undersigned, Great Plains Exploration Co., LLC does
hereby sell, assign and transfer unto RBS Citizens, N.A. dba Charter One all
ownership or economic interests it has in the Panzica Oil and Gas Well
(collectively the “Company”), standing in the name of the undersigned on the
books of the Company and does hereby irrevocably constitute and appoint
                                                             attorney to
transfer said interest(s) on the books of the Company with full power of
substitution in the premises.

          Dated:                       GREAT
PLAINS EXPLORATION CO., LLC
      By:           Richard M. Osborne, Managing Member