Exhibit 10.05

 

[tlogo1.jpg]

 

Deed

 

Specific Security
Agreement (Shares)  

 

Discovery Energy Corp.

 

DEC Funding LLC

 

ANZ Tower 161 Castlereagh Street Sydney NSW 2000 Australia
GPO Box 4227 Sydney NSW 2001 Australia T +61 2 9225 5000  F +61 2 9322 4000
herbertsmithfreehills.com  DX 361 Sydney

 

 

 

 

[tlogo2.jpg]

 

Contents

 

  Table of contents                   1 Definitions, interpretation and deed
components 2         1.1 Definitions 2   1.2 Interpretation 6   1.3
Interpretation of inclusive expressions 8   1.4 Business Day 8   1.5
Incorporated definitions 8   1.6 Deed components 8         2 Mortgage 8        
2.1 Security interest 8   2.2 Priority 8   2.3 Authorisation 9         3
Discharge of the Mortgage 9         3.1 Discharge 9   3.2 Final discharge 9    
    4 Representations and warranties 9         4.1 Representations and
warranties 9   4.2 Survival of representations and warranties 10   4.3 Reliance
10         5 Undertakings of the Grantor 10         5.1 Dividends and voting 10
  5.2 Proxies and authorised representatives 11   5.3 Exceptional Distributions
11   5.4 Controlled Account 11   5.5 Distributions 12   5.6 Other Additional
Rights 12   5.7 Performance under the Finance Documents 12   5.8 Notices to the
Secured Party 13   5.9 Negative pledge 13   5.10 Further assurances 13   5.11
Title Documents for Certificated Securities 13   5.12 Irrevocable direction for
Certificated Securities 14   5.13 Perfection, registration and protection of
security 14   5.14 Term of undertakings 15         6 Enforcement 15         6.1
When enforceable 15   6.2 Assistance in realisation 15   6.3 Postponing or
delaying realisation or enforcement 16         7 Receiver 16         7.1
Appointment of Receiver 16   7.2 Agency of Receiver 16   7.3 Powers of Receiver
16   7.4 Nature of Receiver’s Powers 18   7.5 Status of Receiver after
commencement of winding up 18

 

 Specific Security Agreement (Shares)    Contents 1

 

 

[tlogo2.jpg]

 

Contents

          7.6 Powers exercisable by the Secured Party 18   7.7 Set off 19   7.8
Notice of exercise of rights 19   7.9 Termination of receivership and possession
19         8 Application and receipts of money 19         8.1 Order of
application 19   8.2 Money actually received 20   8.3 Amounts contingently due
20   8.4 Notice of an Encumbrance 20   8.5 Secured Party’s statement of
indebtedness 21   8.6 Secured Party’s receipts 21   8.7 Conversion of currencies
on application 21   8.8 Amounts payable on demand 21         9 Power of Attorney
22         9.1 Appointment of Attorney 22   9.2 Purposes of appointment 22   9.3
Exercise after Event of Default 22   9.4 Delegation and substitution 22        
10 Protection 23         10.1 Protection of third parties 23   10.2 Protection
of the Secured Party, Receiver and Attorney 23         11 Saving provisions 23  
      11.1 Statutory powers 23   11.2 No notice required unless mandatory 24  
11.3 Continuing security 24   11.4 No merger of security 24   11.5 Exclusion of
moratorium 24   11.6 Exclusion of PPSA provisions 25   11.7 Conflict 25   11.8
Consent of Secured Party 25   11.9 Completion of blank securities 25   11.10
Principal obligations 26   11.11 No obligation to marshal 26   11.12
Non-avoidance 26   11.13 Increase in financial accommodation 26         12
General 26         12.1 Confidential information 26   12.2 Performance by
Secured Party of the Grantor’s obligations 27   12.3 Grantor to bear cost 27  
12.4 Notices 27   12.5 Governing law and jurisdiction 27   12.6 Prohibition and
enforceability 27   12.7 Waivers 27   12.8 Variation 28   12.9 Cumulative rights
28   12.10 Assignment 28   12.11 Counterparts 28   12.12 Attorneys 28

 

 Specific Security Agreement (Shares)    Contents 2

 

 

[tlogo2.jpg]

 

Contents

    Schedules       Schedule 1   Notice details 30     Schedule 2   Notice of
lodgment of Deposit Documents 31     Schedule 3   Irrevocable direction from
Grantor 32     Signing page 33

 

Herbert Smith Freehills owns the copyright in this document and using it without
permission is strictly prohibited.

 

 Specific Security Agreement (Shares)    Contents 3

 

 

[tlogo2.jpg]

 

Specific Security Agreement (Shares)

 

Date ► 27 May 2016

 

Between the parties

    Grantor

Discovery Energy Corp.

 

of One Riverway Drive, Suite 1700, Houston, Texas 77056

 

(Discovery)

        Secured Party

DEC Funding LLC

 

Company number 802464276 (Texas) c/o Avista Capital Partners, 1000 Louisiana
Street, Suite 3700, Houston, Texas 77002

 

(DEC)

        Recitals

1    The Grantor is the legal and beneficial owner of the Mortgaged Property.

 

2    The Grantor has agreed to grant a security interest in the Mortgaged
Property to the Secured Party to secure the payment of the Secured Moneys.

        This deed witnesses that, for valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:    

 

 Specific Security Agreement (Shares)    page 1

 

 

[tlogo2.jpg]

 

1Definitions, interpretation and deed components

 

1.1Definitions

 

The meanings of the terms used in this deed are set out below.

 

  Term Meaning               Additional Rights

all present and future rights and property interests attaching to or arising out
of or otherwise in respect of the holding of an interest in the Shares
including:

 

1    any Distributions paid or payable, any bonus shares or other Marketable
Securities issued, and any rights to take up Marketable Securities, in respect
of the Shares;

 

2    any proceeds of, or from the disposal of or other dealing with, any Shares;

 

3    any rights or Marketable Security resulting from the conversion,
consolidation, subdivision, redemption, cancellation, reclassification or
forfeiture of any Share;

 

4    any in specie distribution in respect of any Shares; and

 

5    rights consequent upon a reduction of capital, buy back, liquidation or
scheme or arrangement,

 

and any present or future rights and property interests attaching to or arising
out of or otherwise in respect of any interest in any of the property specified
in items 1 to 5 inclusive of this definition.

              Australian Guarantee the document entitled ‘Deed of Guarantee and
Indemnity’ between the Guarantor and the Secured Party dated on or about the
date of this deed.               Australian Security Agreement the document
entitled ‘General Security Deed’ between the Guarantor and the Secured Party
dated on or about the date of this deed.               Attorney an attorney
appointed under any Finance Document.               Business Day

1    for the purposes of clause 12.4, a day on which banks are open for business
in the city where the notice or other communication is received excluding a
Saturday, Sunday or public holiday; and

 

2    for all other purposes, a day on which banks are open for business in New
York excluding a Saturday, Sunday or public holiday.

     

 

 Specific Security Agreement (Shares)    page 2

 

 

[tlogo2.jpg] 1    Definitions, interpretation and deed components

 

  Term Meaning               Certificated Security a Marketable Security title
to which is evidenced by a Title Document.               Collateral Security any
present or future Encumbrance, Guarantee or other document or agreement created
or entered into by a Transaction Party or any other person as security for, or
to credit enhance, the payment of any of the Secured Moneys.              
Controlled Account a bank account opened by the Grantor in accordance with
clause 5.4.               Corporations Act the Corporations Act 2001 (Cth).    
          Deposit Document in respect of the Guarantor, the Title Documents in
respect of the relevant Marketable Securities in it.               Designated
Bank the bank with which the Controlled Account is maintained.              
Distribution any money owing now or in the future in respect of the Mortgaged
Property and includes a cash dividend or other monetary distribution whether of
an income or capital nature.               Event of Default an Event of Default
as defined in the Principal Agreement and any other event of default (however
described) under, or as defined in, any Finance Document.              
Exceptional Distribution

a Distribution of the following kind:

 

1    a reduction of capital;

 

2    a buy-back of shares under a buy-back scheme or otherwise; or

 

3    any Distribution under a scheme of arrangement.

              Finance Document

1    this deed;

 

2    each Collateral Security;

 

3    the Principal Agreement;

     

 

 Specific Security Agreement (Shares)    page 3

 

 

[tlogo2.jpg] 1    Definitions, interpretation and deed components

 

  Term Meaning                

4    the Australian Guarantee;

 

5    the Australian Security Agreement;

 

6    the US Security Agreement;

 

7    the Securities Purchase Agreement;

 

8    any other Finance Document as defined in the Principal Agreement;

 

9    any document which the Grantor and the Secured Party agree, now or in the
future, is a Finance Document for the purposes of this deed,

 

or any document or agreement entered into or given under any of the above.

              Guarantor Discovery Energy SA Pty Ltd, ABN 89 158 204 052        
      Marketable Securities

1    marketable securities as defined in section 9 of the Corporations Act;

 

2    any option or right in respect of an unissued share;

 

3    any convertible note; and

 

4    any instrument or security which is a combination of any of the above.

              Mortgage the security created or expressed to be created by this
deed.               Mortgaged Property

all of the Grantor’s present and future interest in:

 

1    the Shares;

 

2    the Additional Rights;

 

3    the Controlled Account and any chose in action in respect of the Controlled
Account; and

 

4    any cash or other assets deposited by the Grantor at any time with or at
the direction of the Secured Party under clause Error! Reference source not
found..

              Permitted Encumbrance has the same meaning as Permitted Lien in
the Principal Agreement.               Power any right, power, authority,
discretion or remedy conferred on the Secured Party, Receiver or an Attorney by
any Finance Document or any applicable law.      

 

 Specific Security Agreement (Shares)    page 4

 

 

[tlogo2.jpg] 1    Definitions, interpretation and deed components

 

  Term Meaning               PPSA the Personal Property Securities Act 2009
(Cth).               Principal Agreement the terms of the Senior Secured
Convertible Debentures issued by the Grantor to the Secured Party on 27 May
2016.               Receiver a receiver or receiver and manager appointed under
this deed.               Related Corporation a related body corporate as defined
in section 9 of the Corporations Act.               Relevant Corporation any
company, corporation, body corporate or other entity whose Marketable Securities
form part of the Mortgaged Property.               Secured Moneys

all debts and monetary liabilities of the Grantor to the Secured Party under or
in relation to any Finance Document and in any capacity and irrespective of
whether the debts or liabilities:

 

1    are present or future;

 

2    are actual, prospective, contingent or otherwise;

 

3    are at any time ascertained or unascertained;

 

4    are owed or incurred by or on account of the Grantor alone, or severally or
jointly with any other person;

 

5    are owed to or incurred for the account of the Secured Party alone, or
severally or jointly with any other person;

 

6    are owed to any other person as agent (whether disclosed or not) for or on
behalf of the Secured Party;

 

7    are owed or incurred as principal, interest, fees, charges, Taxes, damages
(whether for breach of contract or tort or incurred on any other ground),
losses, costs or expenses, or on any other account;

 

8    are owed to or incurred for the account of the Secured Party directly or as
a result of:

 

·    the assignment and transfer to the Secured Party of any debt or liability
of the Grantor; or

 

·    any other dealing with any such debt or liability;

 

9    are owed to or incurred for the account of the Secured Party before the
date of this deed or before the date of any assignment of this deed to the
Secured Party by any other person or otherwise; or

 

10  comprise any combination of the above.

     

 

 Specific Security Agreement (Shares)    page 5

 

 

[tlogo2.jpg] 1    Definitions, interpretation and deed components

 

  Term Meaning               Securities Purchase Agreement the purchase
agreement for the Senior Secured Convertible Debentures dated 27 May 2016
between the Grantor and the Secured Party.               Security Agreement the
security agreement for the Senior Secured Convertible Debentures dated 27 May
2016 between the Grantor and the Secured Party.               Security Value the
value attributed to the Marketable Securities by the Secured Party in its
absolute discretion.               Shares any Marketable Security registered in
the name of the Grantor in the Guarantor in respect of which the Deposit
Document is deposited by the Grantor with the Secured Party for the purposes of
this deed.               Title Document any original, duplicate or counterpart
certificate or document evidencing title or ownership of an asset including, but
not limited to, any contract note, entitlement notice, marked transfer or share
certificate.               Transaction Party

1    the Grantor; or

 

2    the Guarantor.

              US Security Agreement the security agreement for the Senior
Secured Convertible Debentures dated 27 May 2016 between the Grantor, all of the
Grantor’s subsidiaries and the Secured Party.      

 

1.2Interpretation

 

In this deed:

 

(a)Headings and bold type are for convenience only and do not affect the
interpretation of this deed.

 

(b)The singular includes the plural and the plural includes the singular.

 

(c)Words of any gender include all genders.

 

(d)Other parts of speech and grammatical forms of a word or phrase defined in
this deed have a corresponding meaning.

 

(e)An expression importing a person or entity includes any body corporate,
partnership, trust, joint venture or other association, or any Governmental
Agency as well as an individual.

 

 Specific Security Agreement (Shares)    page 6

 

 

[tlogo2.jpg] 1    Definitions, interpretation and deed components

 

(f)A reference to any thing (including any right) includes a part of that thing
but nothing in this clause 1.2(f) implies that performance of part of an
obligation constitutes performance of the obligation.

 

(g)A reference to a clause, party, schedule, attachment or exhibit is a
reference to a clause of, and a party, schedule, attachment or exhibit to, this
deed.

 

(h)A reference to any legislation includes all delegated legislation made under
it and amendments, consolidations, replacements or re-enactments of any of them.

 

(i)A reference to a document includes all amendments or supplements to, or
replacements or novations of, that document.

 

(j)A reference to a party to a document includes that party’s successors and
permitted assignees.

 

(k)A promise on the part of 2 or more persons binds them jointly and severally.

 

(l)A reference to an agreement other than this deed includes a deed and any
legally enforceable undertaking, agreement, arrangement or understanding,
whether or not in writing.

 

(m)A reference to an asset includes all property of any nature, including a
business, and all rights, revenues and benefits.

 

(n)A reference to liquidation or insolvency includes appointment of an
administrator, compromise, arrangement, merger, amalgamation, reconstruction,
winding-up, dissolution, deregistration, assignment for the benefit of
creditors, scheme, composition or arrangement with creditors, insolvency,
bankruptcy, or any similar procedure or, where applicable, changes in the
constitution of any partnership or person, or death.

 

(o)A reference to a document includes any agreement in writing, or any
certificate, notice, deed, instrument or other document of any kind.

 

(p)No provision of this deed will be construed adversely to a party because that
party was responsible for the preparation of this deed or that provision.

 

(q)A reference to a body, other than a party to this deed (including an
institute, association or authority), whether statutory or not:

 

(1)which ceases to exist; or

 

(2)whose powers or functions are transferred to another body,

     is a reference to the body which replaces it or which substantially
succeeds to its powers or functions.

 

(r)References to time are to New York time.

 

(s)Where this deed confers any power or authority on a person that power or
authority may be exercised by that person acting personally or through an agent
or attorney.

 

(t)A reference to drawing, accepting, endorsing or other dealing with a bill
refers to drawing, accepting, endorsing or dealing within the meaning of the
Bills of Exchange Act 1909 (Cth).

 

(u)An Event of Default is ‘continuing’ or ‘subsisting’ if it has not been:

 

(1)remedied to the satisfaction of the Secured Party before a Power relating to
that Event of Default is exercised; or

 

(2)waived by the Secured Party in accordance with this deed.

 

 Specific Security Agreement (Shares)    page 7

 

 

[tlogo2.jpg] 2    Mortgage

 

1.3Interpretation of inclusive expressions

 

Specifying anything in this deed after the words ‘includes’ or ‘for example’ or
similar expressions does not limit what else is included unless there is express
wording to the contrary.

 

1.4Business Day

 

Where the day on or by which any thing is to be done is not a Business Day, that
thing must be done on or by the next Business Day.

 

1.5Incorporated definitions

 

A word or phrase (other than one defined in clause 1.1) defined in the Principal
Agreement has the same meaning in this deed.

 

1.6Deed components

 

This deed includes any schedule.

 

2Mortgage

 

2.1Security interest

 

(a)The Grantor as beneficial owner grants a security interest in the Mortgaged
Property to the Secured Party to secure payment of the Secured Moneys.    
  This security interest is a mortgage.

 

(b)A security interest in specific Shares and other related Mortgaged Property
is only created under this deed when the Grantor deposits with the Secured
Party:

 

(1)a certified copy of the Deposit Documents in respect of Guarantor which has
issued those Shares; and

 

(2)a notice in the form of, and completed in accordance with, Schedule 2 signed
by the Grantor stating that those Deposit Documents are lodged with the Secured
Party for the purposes of this deed, whereupon a security interest in those
Shares and related Mortgaged Property is created.

 

2.2Priority

 

(a)The parties intend that the Mortgage take priority over all other
Encumbrances and other interests in the Mortgaged Property at any time other
than any Permitted Encumbrance mandatorily preferred by law.

 

(b)Nothing in this deed will be construed as an agreement by the Secured Party
to subordinate the Mortgage to any other Encumbrance or interest affecting the
Mortgaged Property at any time.

 

 Specific Security Agreement (Shares)    page 8

 

 

[tlogo2.jpg] 3    Discharge of the Mortgage

 

2.3Authorisation

 

The Grantor must ensure that it obtains all Authorisations necessary to permit
the grant of the Mortgage in respect of any asset before it acquires any rights
in that asset.

 

3Discharge of the Mortgage

 

3.1Discharge

 

Subject to clause 3.2, at the written request of the Grantor, the Secured Party
must discharge the Mortgage if:

 

(a)the Secured Moneys have been paid in full; and

 

(b)the Grantor and each other Transaction Party has fully observed and performed
its respective obligations under this deed and each other Finance Document.

 

3.2Final discharge

 

(a)The Secured Party is not obliged to discharge the Mortgage under clause 3.1
if, at the time the requirements of clause 3.1 are satisfied, the Secured Party
is of the opinion (acting reasonably) that the Grantor or any other Transaction
Party owes further Secured Moneys contingently or otherwise to the Secured
Party.

 

(b)Clause 3.2(a) overrides any other clause to the contrary in this deed.

 

4Representations and warranties

 

4.1Representations and warranties

 

The Grantor represents and warrants to and for the benefit of the Secured Party
that:

 

(a)representations true: each of its representations and warranties contained in
the Finance Documents is correct and not misleading when made or repeated;

 

(b)legal and beneficial owner:

 

(1)it is the legal and beneficial owner of the Mortgaged Property and

 

(2)on it acquiring any property forming part of the Mortgaged Property, it will
be the legal and beneficial owner of that property

 

(c)no other interests:

 

(1)there is no Encumbrance over any of the Mortgaged Property other than an
Encumbrance created by a Finance Document and a Permitted Encumbrance;

 

(2)no person other than the Secured Party holds or has the benefit of an
Encumbrance or other interest in the Mortgaged Property other than under a
Permitted Encumbrance; and

 

(3)there is no agreement, filing or registration that would enable another
person to obtain a priority over the Mortgage which is inconsistent with the
priority contemplated by the Mortgage;

 

 Specific Security Agreement (Shares)    page 9

 

 

[tlogo2.jpg] 5    Undertakings of the Grantor

 

(d)Security:

 

(1)this deed creates the Encumbrance purported to be created by it over the
assets purported to be encumbered by it; and

 

(2)the Mortgage has been or, in the case of after-acquired property (as defined
in the PPSA) subject to the Mortgage on its acquisition, will be perfected; and

 

(3)the Mortgage has the priority contemplated by this deed;

 

(e)securities fully paid: all Marketable Securities forming part of the
Mortgaged Property are, or upon acquisition will be, fully paid;

 

(f)registers: the share register and any branch register for each Relevant
Corporation:

 

(1)is located in Australia on the date of this deed; and

 

(2)will be located in Australia on the date on which the security interest
created under this deed attaches to the Mortgaged Property;

 

(g)no further securities: the equity capital in each Relevant Corporation is as
notified to the Secured Party in writing before, or at the same time as, the
Mortgage is given, and there is no agreement, arrangement or understanding under
which further Marketable Securities with rights of conversion to shares in a
Relevant Corporation may be issued to any person; and

 

(h)Finance Documents representations and warranties: to the extent not already
provided by this clause 4, any representations and warranties made by the
Grantor in the Finance Documents are taken to be made again for the purposes of
this deed.

 

4.2Survival of representations and warranties

 

The representations and warranties in clause 4.1 survive the execution of this
deed.

 

4.3Reliance

 

(a)The Grantor acknowledges that it has not entered into this deed or any other
Finance Document in reliance on any representation, warranty, promise or
statement made by or on behalf of the Secured Party or of any person on behalf
of the Secured Party.

 

(b)The Grantor acknowledges that the Secured Party has entered into each Finance
Document in reliance on the representations and warranties given by the Grantor
under this deed.

 

5Undertakings of the Grantor

 

5.1Dividends and voting

 

(a)Until an Event of Default occurs:

 

(1)the Grantor may receive all Distributions, other than Exceptional
Distributions, in respect of the Mortgaged Property; and

 

 Specific Security Agreement (Shares)    page 10

 

 

[tlogo2.jpg] 5    Undertakings of the Grantor

 

(2)the Grantor may exercise all voting powers in respect of the Mortgaged
Property,

     without the need for any consent or direction from the Secured Party.

 

(b)The Grantor must not, exercise any voting powers in respect of the Mortgaged
Property under clause 5.1(a)(2) in any way which might adversely affect the
value of the Mortgaged Property.

 

(c)If an Event of Default occurs, the rights of the Grantor under clause 5.1(a)
immediately cease and the Secured Party, Receiver or Attorney is entitled to
receive all Distributions and exercise all voting powers in respect of the
Mortgaged Property to the exclusion of the Grantor.

 

5.2Proxies and authorised representatives

 

(a)The Grantor must not:

 

(1)appoint any proxy in respect of the Mortgaged Property without the prior
written consent of the Secured Party;

 

(2)appoint any authorised representative under section 250D of the Corporations
Act or any attorney in respect of the Mortgaged Property without the prior
written consent of the Secured Party.

 

(b)The Grantor must ensure that any proxy, authorised representative or
attorney:

 

(1)complies with any conditions specified by the Secured Party in respect of the
appointment of the proxy, authorised representative or attorney; and

 

(2)complies with the Finance Documents.

 

5.3Exceptional Distributions

 

The Grantor must promptly after receipt pay all Exceptional Distributions to the
Secured Party.

 

5.4Controlled Account

 

(a)The Secured Party may require the Grantor to promptly after being requested
to do so by the Secured Party open and maintain a bank account at a bank and
branch approved by the Secured Party on terms that:

 

(1)nominated Officers of the Secured Party must be signatories to the Controlled
Account;

 

(2)no withdrawals can be made from the Controlled Account without the signature
of one of those Officers;

 

(3)funds may be disposed of from the Controlled Account at the direction of the
Secured Party without further consent by the Grantor; and

 

(4)depositing an amount in the Controlled Account will not result in any person
coming under a present liability (within the meaning of section 341(3)(d) of the
PPSA) to pay:

 

·the Grantor; or

 

·a Related Corporation of the Grantor.

 

 Specific Security Agreement (Shares)    page 11

 

 

[tlogo2.jpg] 5    Undertakings of the Grantor

 

(b)If the Secured Party is not the Designated Bank, the Grantor must cause the
Designated Bank to enter into an agreement between the Designated Bank, the
Grantor and the Secured Party in form and substance satisfactory to the Secured
Party in which the Designated Bank agrees that:

 

(1)it will comply with and give effect to the terms set out in clause 5.4(a);

 

(2)it has no Encumbrance or other interest in the Controlled Account and it
waives all rights of set-off and combination in respect of the Controlled
Account; and

 

(3)if despite clause 5.4(b)(2) it has any Encumbrance or other interest in the
Controlled Account, that Encumbrance or other interest is subordinated in right
and priority of payment to the Secured Party's Encumbrance or other interest and
will not be exercised without the Secured Party’s consent; and

 

(4)it agrees that the laws specified in clause 12.5 will govern the Secured
Party’s security Interest in the Controlled Account.

 

5.5Distributions

 

(a)If an Event of Default occurs, the Grantor must deposit, or cause to be
deposited, all Distributions in the Controlled Account.

 

(b)The Grantor must give all notices and directions and execute all necessary
documents as requested by the Secured Party to ensure clause 5.5(a) is complied
with.

 

(c)A Power created under this clause 5.5 is not waived by any failure or delay
in exercise, or by the partial exercise, of that Power.

 

5.6Other Additional Rights

 

(a)The Grantor must acquire, at its own cost, any Additional Rights (other than
Distributions) it is entitled to acquire.

 

(b)The Grantor must immediately notify the Secured Party as soon as the Grantor
becomes aware of any entitlement to any Additional Rights.

 

5.7Performance under the Finance Documents

 

(a)The Grantor must fully and punctually perform its obligations under each
Finance Document.

 

(b)Without limiting clause 5.7(a), the Grantor must pay the Secured Moneys to
the Secured Party in accordance with this deed, each other Finance Document and
each other obligation under which the Secured Moneys are payable.

 

(c)The Grantor must ensure that no Event of Default occurs. Without affecting
the liability of the Grantor or the Powers in any other respect (including where
a breach of this clause 5.7(c) is also a breach of another provision of a
Finance Document), the Grantor is not liable in damages for breach of this
clause 5.7(c) but the Secured Party may exercise its Powers consequent upon or
following that breach.

 

 Specific Security Agreement (Shares)    page 12

 

 

[tlogo2.jpg] 5    Undertakings of the Grantor

 

5.8Notices to the Secured Party

 

In addition to its obligations in any other Finance Document, the Grantor must
notify the Secured Party as soon as the Grantor becomes aware of any data
contained in a registration under the PPSA with respect to the Mortgage being or
becoming incorrect.

 

5.9Negative pledge

 

The Grantor must not:

 

(a)sell, assign, transfer or otherwise dispose of or part with possession of;

 

(b)create or allow to exist or agree to any Encumbrance over; or

 

(c)attempt to do anything listed in clause 5.9(a) and 5.9(b) in respect of,

 

any of the Mortgaged Property except to the extent expressly permitted by any
Finance Document.

 

5.10Further assurances

 

The Grantor must:

 

(a)do anything which the Secured Party reasonably requests to:

 

(1)ensure, or enable the Secured Party to ensure, that this deed, the Mortgage,
or any Power is fully effective, enforceable and perfected with the contemplated
priority;

 

(2)more satisfactorily assure, mortgage or secure to the Secured Party the
Mortgaged Property in a manner consistent with the Finance Documents; or

 

(3)aid the exercise of any Power,

 

including executing any document, delivering Title Documents, executing and
delivering blank transfers or giving notice of the Mortgage to any third party;

 

(b)without limiting clause 5.10(a), when the Secured Party requests, execute:

 

(1)a legal mortgage in favour of the Secured Party over any of the Mortgaged
Property which is a Certificated Security; and

 

(2)any other form of security which the Secured Party considers appropriate for
the Mortgaged Property,      each in form and substance required by the Secured
Party;

 

(c)without limiting clause 5.10(a), cause a third party to provide any
Authorisation or take any other action (including executing any document)
required to give effect to clause 5.10(a).

 

5.11Title Documents for Certificated Securities

 

(a)The Grantor must deposit with the Secured Party, or as the Secured Party
directs:

 

(1)all the Title Documents in respect of any of the Mortgaged Property which is
a Certificated Security immediately after the creation of the Mortgage over that
Mortgaged Property or the acquisition of any asset which forms part of the
Mortgaged Property and which is a Certificated Security; and

 

 Specific Security Agreement (Shares)    page 13

 

 

[tlogo2.jpg] 5    Undertakings of the Grantor

 

(2)transfers in a form and of substance acceptable to the Secured Party, of such
of the Mortgaged Property that constitutes Certificated Securities executed by
the Grantor with the name of the transferee, the consideration and the date of
transfer and execution left blank.

 

(b)Subject to clause 5.11(c), the Secured Party may retain the Title Documents
and transfers deposited with the Secured Party until the Mortgage is discharged
under clause 3.

 

(c)If the Mortgage is enforced by the Secured Party, the Secured Party, a
Receiver or Attorney is entitled:

 

(1)to deal with the Title Documents and to complete any transfers as if it was
the absolute and unencumbered owner of the Mortgaged Property to which the Title
Documents relate; and

 

(2)in exercising a power of sale, to deliver any Title Document or transfers to
a purchaser of the Mortgaged Property to which it relates.

 

(d)While Title Documents for Mortgaged Property are, or in accordance with this
deed, should be lodged with the Secured Party, the Grantor must not elect to
convert evidence of the Mortgaged Property from certificates to an
uncertificated mode for the purposes of any automated transfer system operated
by ASX Limited or for any other purpose.

 

(e)If the Grantor makes any election referred to in clause 5.11(d), the Secured
Party may treat it as having no effect.

 

(f)The Grantor must ensure that the share register and any branch register for
each Relevant Corporation is located in Australia.

 

5.12Irrevocable direction for Certificated Securities

 

The Grantor must execute and deliver to the Secured Party on the date of this
deed (or before such later date as the Secured Party may agree in writing) the
document in the form and substance of Schedule 3 in respect of the Mortgaged
Property which is constituted by Certificated Securities.

 

5.13Perfection, registration and protection of security

 

(a)The Grantor must ensure that:

 

(1)the Mortgage is perfected in relation to all the Mortgaged Property subject
to it in all jurisdictions; and

 

(2)this deed and the Mortgage are registered and filed in all registers in all
jurisdictions      in which it must be perfected, registered and filed, to
ensure its enforceability, validity, perfection and priority against all persons
and to be effective as a security.

 

(b)Whenever the Secured Party requires that a Mortgage be perfected in a
particular way in relation to any part of the Mortgaged Property, the Grantor
must ensure that the Mortgage is perfected in that way.

 

(c)The Grantor will not be in breach of its obligation under this clause 5.13
and its representation and warranty under clause 4.1(d)(2) will not be incorrect
or misleading if the Secured Party fails to take any action which can only be
taken by the Secured Party to enable the Mortgage to be perfected as required
under this clause 5.13, after written request from the Grantor to take that
action.

 

 Specific Security Agreement (Shares)    page 14

 

 

[tlogo2.jpg] 6    Enforcement

 

(d)Whenever any part of the Mortgaged Property is transferred to or retained in
a place where this deed or the Mortgage, because of an increase in the Secured
Moneys or otherwise, bears insufficient stamp duty or is not registered or
recorded, or for any other reason is of limited or of no force or effect,
unenforceable, inadmissible in evidence or of reduced priority, the Grantor must
within 14 days after that transfer or retention ensure that:

 

(1)this deed is stamped to the satisfaction of the Secured Party;

 

(2)this deed is in full force and effect, enforceable, perfected, admissible in
evidence and not of reduced priority; and

 

(3)this deed and the Mortgage are registered in that place, or that part of the
Mortgaged Property is removed from that place.

 

5.14Term of undertakings

 

Each of the Grantor’s undertakings in this clause 5 continues in full force and
effect from the date of this deed until the Mortgage in respect of all the
Mortgaged Property is discharged under clause 3.

 

6Enforcement

 

6.1When enforceable

 

(a)If an Event of Default occurs:

 

(1)the Mortgage and each Collateral Security are immediately enforceable without
the need for any demand or notice to be given to the Grantor or any other
person;

 

(2)the Secured Moneys are immediately due and payable without the need for any
demand or notice to be given to the Grantor or any other person other than a
notice expressly required by a Finance Document; and

 

(3)the right of the Grantor to deal, for any purpose, with any of the Mortgaged
Property, other than by or through a Receiver appointed under this deed,
immediately ceases without the need for any demand or notice to be given to the
Grantor or any other person.

 

(b)The Secured Party agrees that it will not exercise any Power to enforce the
Mortgage under Chapter 4 of the PPSA until an Event of Default occurs.

 

6.2Assistance in realisation

 

After the Mortgage has become enforceable, the Grantor must take all action
required by the Secured Party, Receiver or Attorney to assist any of them to
realise the Mortgaged Property and exercise any Power including:

 

(a)executing all transfers, conveyances, assignments and assurances of any of
the Mortgaged Property;

 

 Specific Security Agreement (Shares)    page 15

 

 

[tlogo2.jpg] 7    Receiver

 

(b)doing anything necessary or desirable under the law in force in any place
where the Mortgaged Property is situated ; and

 

(c)giving all notices, orders, directions and consents which the Secured Party,
Receiver or Attorney thinks expedient.

 

6.3Postponing or delaying realisation or enforcement

 

The Secured Party, a Receiver or Attorney may postpone or delay the exercise of
any Power for such period as the Secured Party, Receiver or Attorney may in its
absolute discretion decide.

 

7Receiver

 

7.1Appointment of Receiver

 

If an Event of Default occurs, the Secured Party may at any time after its
occurrence:

 

(a)appoint any person or any 2 or more persons jointly, or severally, or jointly
and severally to be a receiver or a receiver and manager of the Mortgaged
Property;

 

(b)remove any Receiver and on the removal, retirement or death of any Receiver,
appoint another Receiver; and

 

(c)fix the remuneration and direct payment of that remuneration and any costs,
charges and expenses of the Receiver out of the proceeds of any realisation of
the Mortgaged Property.

 

7.2Agency of Receiver

 

(a)Subject to clause 7.5, each Receiver is the agent of the Grantor.

 

(b)The Grantor is responsible for the acts, defaults and remuneration of the
Receiver.

 

7.3Powers of Receiver

 

Subject to any express exclusion by the terms of the Receiver’s appointment, the
Receiver has, in addition to any powers conferred on the Receiver by applicable
law, and whether or not in possession of the Mortgaged Property or any part of
it, the following powers:

 

(a)Manage, possession or control: to manage, take possession of Title Documents
or assume control of any of the Mortgaged Property;

 

(b)sale: to sell or concur in selling any of the Mortgaged Property to any
person:

 

(1)by auction, private treaty or tender;

 

(2)on such terms and special conditions as the Secured Party or the Receiver
thinks fit;

 

(3)for cash or for a deferred payment of the purchase price, in whole or in
part, with or without interest or security;

 

(4)in conjunction with the sale of any property by any other person; and

 

(5)in one lot or in separate parcels,

 

 Specific Security Agreement (Shares)    page 16

 

 

[tlogo2.jpg] 7    Receiver

 

  and to complete a share transfer in favour of the Secured Party or any other
person designated by the Secured Party;    

(c)grant options to purchase: to grant to any person an option to purchase any
of the Mortgaged Property;

 

(d)acquire property: to acquire any interest in any property, in the name or on
behalf of the Grantor, which on acquisition forms part of the Mortgaged
Property;

 

(e)borrowings and security:

 

(1)to raise or borrow any money, in its name or the name, or on behalf of the
Grantor, from the Secured Party or any person approved by the Secured Party in
writing; and

 

(2)to secure money raised or borrowed under clause 7.3(e)(1) by an Encumbrance
over any of the Mortgaged Property, ranking in priority to, equal with, or
after, the Mortgage or any Collateral Security;

 

(f)income and bank accounts: to do anything to manage or obtain income from any
of the Mortgaged Property including operating any bank account which forms part
of the Mortgaged Property or opening and operating a new bank account;

 

(g)compromise: to make or accept any compromise or arrangement;

 

(h)surrender Mortgaged Property: to surrender or transfer any of the Mortgaged
Property to any person;

 

(i)exchange Mortgaged Property: to exchange with any person any of the Mortgaged
Property for any other property whether of equal value or not;

 

(j)employ or discharge: to employ or discharge any person as an employee,
contractor, agent or professional advisor for any of the purposes of this deed;

 

(k)delegate: to delegate to any person any Power of the Receiver;

 

(l)perform or enforce documents: to observe, perform, enforce, exercise or
refrain from exercising any right, power, authority, discretion or remedy of the
Grantor under, or otherwise obtain the benefit of:

 

(1)any document, agreement or right which attaches to or forms part of the
Mortgaged Property; and

 

(2)any document or agreement entered into in exercise of any Power by the
Receiver;

 

(m)receipts: to give receipts for all moneys and other assets which may come
into the hands of the Receiver;

 

(n)take proceedings: to commence, discontinue, prosecute, defend, settle or
compromise in its name or the name or on behalf of the Grantor, any proceedings
including proceedings in relation to any insurance in respect of any of the
Mortgaged Property;

 

(o)insolvency proceedings: to make any debtor bankrupt, wind-up any company,
corporation or other entity and do all things in relation to any bankruptcy or
winding-up which the Receiver thinks necessary or desirable including attending
and voting at creditors’ meetings and appointing proxies for those meetings;

 

(p)execute documents: to enter into and execute any document or agreement in the
name of the Receiver or the name or on behalf of the Grantor for any of the
purposes of this deed;

 

 Specific Security Agreement (Shares)    page 17

 

 

[tlogo2.jpg] 7    Receiver

 

(q)rights: to exercise any right, power, authority, discretion or remedy in
respect of the Mortgaged Property including:

 

(1)any voting right or power;

 

(2)the acceptance of any rights issue or other Additional Right;

 

(3)proving in any liquidation, scheme of arrangement or other composition for or
arrangement with a member or any secured or unsecured creditor and whether or
not under an order of the court;

 

(4)consenting on behalf of the Grantor in respect of the proof referred to in
clause 7.3(q)(3); and

 

(5)receiving all Distributions;

 

(r)ability of Grantor: to do anything the Grantor could do in relation to the
Mortgaged Property; and

 

(s)incidental power: to do anything necessary or incidental to the exercise of
any Power of the Receiver.

 

7.4Nature of Receiver’s Powers

 

The Powers of the Receiver must be construed independently and no one Power
limits the generality of any other Power. Any dealing under any Power of the
Receiver will be on the terms and conditions the Receiver thinks fit.

 

7.5Status of Receiver after commencement of winding up

 

(a)The power to appoint a Receiver under clause 7.1 may be exercised even if, at
the time an Event of Default occurs or at the time when a Receiver is appointed,
an order has been made or a resolution has been passed for the winding-up of the
Grantor.

 

(b)If for any reason, including operation of law, a Receiver:

 

(1)appointed in the circumstances described in clause 7.5(a); or

 

(2)appointed at any other time,

     ceases to be the agent of the Grantor upon or by virtue of, or as a result
of, an order being made or a resolution being passed for the winding up of the
Grantor, then the Receiver immediately becomes the agent of the Secured Party.

 

7.6Powers exercisable by the Secured Party

 

(a)Whether or not a Receiver is appointed under clause 7.1, the Secured Party
may, on or after the occurrence of an Event of Default and without giving notice
to any person, exercise any Power that could be conferred on a Receiver in
addition to any Power of the Secured Party.

 

(b)The exercise of any Power by the Secured Party, Receiver or Attorney does not
cause or deem the Secured Party, Receiver or Attorney:

 

(1)to be a mortgagee in possession;

 

(2)to account as mortgagee in possession; or

 

(3)to be answerable for any act or omission for which a mortgagee in possession
is liable.

 

 Specific Security Agreement (Shares)    page 18

 

 

[tlogo2.jpg] 8    Application and receipts of money

 

7.7Set off

 

If any Event of Default is subsisting, the Secured Party may apply any credit
balance in any currency in any of the Grantor’s accounts with the Secured Party
in and towards satisfaction of any of the Secured Moneys.

 

7.8Notice of exercise of rights

 

The Secured Party, Receiver or Attorney is not required:

 

(a)to give notice of the Mortgage or any Collateral Security to any debtor or
creditor of the Grantor or to any other person;

 

(b)to enforce payment of any money payable to the Grantor including any of the
debts or monetary liabilities charged by this deed or by any Collateral
Security; or

 

(c)to obtain the consent of the Grantor to any exercise of a Power.

 

7.9Termination of receivership and possession

 

The Secured Party may, at any time, terminate the appointment of a Receiver and
may, at any time, give up, or re-take, possession of the Mortgaged Property.

 

8Application and receipts of money

 

8.1Order of application

 

(a)At any time after the Mortgage is enforceable, all money received by the
Secured Party, Receiver, Attorney or any other person acting on their behalf
under this deed or any Collateral Security may be appropriated and applied
towards any amount and in any order that the Secured Party, Receiver, Attorney
or that other person determines in its absolute discretion, to the extent not
prohibited by law.

 

(b)Failing a determination under clause 8.1(a), the money must be applied in the
following manner and order:

 

(1)first, in payment of all costs, charges and expenses (including any GST) of
the Secured Party, Receiver or Attorney incurred in or incidental to the
exercise or performance or attempted exercise or performance of any Power;

 

(2)second, in payment of any other outgoings the Secured Party, Receiver or
Attorney thinks fit to pay;

 

(3)third, in payment to the Receiver of his remuneration;

 

(4)fourth, in payment and discharge, in order of their priority, of any
Encumbrances of which the Secured Party, Receiver or Attorney is aware and which
have priority to the Mortgage;

 

(5)fifth, in payment to the Secured Party towards satisfaction of the Secured
Moneys and applied against interest, principal or any other amount the Secured
Party, Receiver or Attorney thinks fit;

 

 Specific Security Agreement (Shares)    page 19

 

 

[tlogo2.jpg] 8    Application and receipts of money

 

(6)sixth, in payment only to the extent required by law, in order of their
priority, of other Encumbrances in respect of the Mortgaged Property of which
the Secured Party, Receiver or Attorney is aware and which are due and payable
in accordance with their terms;

 

(7)seventh, in payment of the surplus, if any, without interest to the Grantor,
and the Secured Party, Receiver or Attorney may pay the surplus to the credit of
an account in the name of the Grantor in the books of any bank carrying on
business within Australia and having done so is under no further liability in
respect of that surplus.

 

(c)Any amount required by law to be paid in priority to any amount specified in
clause 8.1(b) must be paid before any money is applied in payment of the amount
specified in clause 8.1(b).

 

8.2Money actually received

 

In applying any money towards satisfaction of the Secured Moneys the Grantor is
to be credited only with so much of the money which is available for that
purpose (after deducting any GST imposed) and which is actually received by the
Secured Party, Receiver or Attorney. The credit dates from the time of receipt.

 

8.3Amounts contingently due

 

(a)If at the time of a distribution of any money under clause 8.1 any part of
the Secured Moneys is contingently owing to the Secured Party, the Secured
Party, Receiver or Attorney may retain an amount equal to the amount
contingently owing or any part of it.

 

(b)If the Secured Party, Receiver or Attorney retains any amount under
clause 8.3(a), it must place that amount on short- term interest bearing deposit
until the amount contingently owing becomes actually due and payable or
otherwise ceases to be contingently owing at which time the Secured Party,
Receiver or Attorney must:

 

(1)pay to the Secured Party the amount which has become actually due to it; and

 

(2)apply the balance of the amount retained, together with any interest on the
amount contingently owing, in accordance with clause 8.1.

 

8.4Notice of an Encumbrance

 

(a)If the Secured Party receives actual or constructive notice of an Encumbrance
over the Mortgaged Property or of the perfection of an Encumbrance, the Secured
Party:

 

(1)may open a new account in the name of the Grantor in its books; or

 

(2)is regarded as having opened a new account in the name of the Grantor in its
books,

     on the date it received or was regarded as having received notice of the
Encumbrance or perfection.

 

(b)From the date on which that new account is opened or regarded as opened:

 

(1)all payments made by the Grantor to the Secured Party; and

 

 Specific Security Agreement (Shares)    page 20

 

 

[tlogo2.jpg] 8    Application and receipts of money

 

(2)all financial accommodation and advances by the Secured Party to the Grantor,

     are or are regarded as credited and debited, as the case may be, to the new
account unless otherwise specified by the Secured Party.

 

(c)The payments by the Grantor under clause 8.4(b) must be applied in the manner
determined by the Secured Party or, failing a determination:

 

(1)first, in reduction of the debit balance, if any, in the new account; and

 

(2)second, if there is no debit balance in the new account, in reduction of the
Secured Moneys which have not been debited or regarded as debited to the new
account.

 

8.5Secured Party’s statement of indebtedness

 

A certificate signed by any Officer of the Secured Party stating:

 

(a)the amount of the Secured Moneys due and payable; or

 

(b)the amount of the Secured Moneys, whether currently due and payable or not,

 

is sufficient evidence of that amount as at the date stated on the certificate,
or failing that as at the date of the certificate, unless the contrary is
proved.

 

8.6Secured Party’s receipts

 

(a)The receipt of any Officer of the Secured Party for any money payable to or
received by the Secured Party under this deed exonerates the payer from all
liability to enquire whether any of the Secured Moneys have become payable.

 

(b)Every receipt of an Officer of the Secured Party effectually discharges the
payer from:

 

(1)any future liability to pay the amount specified in the receipt; and

 

(2)being concerned to see to the application of, or being answerable or
accountable for any loss or misapplication of, the amount specified in the
receipt.

 

8.7Conversion of currencies on application

 

In making an application under clause 8.1, the Secured Party, Receiver or
Attorney may itself, or through its bankers, purchase one currency with another,
whether or not through an intermediate currency, whether spot or forward, in the
manner and amounts and at the times it thinks fit.

 

8.8Amounts payable on demand

 

If an amount payable under a Finance Document is not expressed to be payable on
a specified date, that amount is payable by the Grantor on demand by the Secured
Party.

 

 Specific Security Agreement (Shares)    page 21

 

 

[tlogo2.jpg] 9    Power of Attorney

 

9Power of Attorney

 

9.1Appointment of Attorney

 

In consideration of the Secured Party entering into the Finance Documents and
for other consideration received, the Grantor irrevocably appoints the Secured
Party and each Receiver severally its Attorney for the purposes set out in
clause 9.2.

 

9.2Purposes of appointment

 

The Attorney may, in its name or in the name of the Grantor, Secured Party or
Receiver do any of the following:

 

(a)do any thing which ought to be done by the Grantor under this deed or any
other Finance Document;

 

(b)exercise any right, power, authority, discretion or remedy of the Grantor
under:

 

(1)this deed;

 

(2)any other Finance Document; or

 

(3)any agreement forming part of the Mortgaged Property;

 

(c)do any thing which in the opinion of the Secured Party, Receiver or Attorney
is necessary or expedient for securing or perfecting the Mortgage and any
Collateral Security;

 

(d)execute in favour of the Secured Party any legal mortgage, transfer,
assignment and any other assurance of any of the Mortgaged Property;

 

(e)execute deeds of assignment, composition or release;

 

(f)do all things necessary to enable a transfer to be registered in favour of
the Secured Party, its nominee or any other person as the Secured Party directs
and deliver any Title Documents as the Secured Party directs;

 

(g)sell or otherwise part with the possession of any of the Mortgaged Property;
and

 

(h)generally, do any other thing, whether or not of the same kind as those set
out in clause 9.2(a) to 9.2(g), which in the opinion of the Secured Party,
Receiver or Attorney is necessary or expedient:

 

(1)to more satisfactorily secure to the Secured Party the payment of the Secured
Moneys; or

 

(2)in relation to any of the Mortgaged Property.

 

9.3Exercise after Event of Default

 

An Attorney must not exercise any Power under clause 9.2 until an Event of
Default occurs but a breach of this clause 9.3 does not affect the validity of
the Attorney’s act.

 

9.4Delegation and substitution

 

The Attorney may appoint a substitute attorney.

 

 Specific Security Agreement (Shares)    page 22

 

 

[tlogo2.jpg] 10    Protection

 

10Protection

 

10.1Protection of third parties

 

(a)No person dealing with the Secured Party, Receiver or Attorney is bound to
enquire whether:

 

(1)the Mortgage has become enforceable;

 

(2)the Receiver or Attorney is duly appointed; or

 

(3)any Power has been properly or regularly exercised.

 

(b)No person dealing with the Secured Party, Receiver or Attorney is affected by
express notice that the exercise of any Power was unnecessary or improper.

 

(c)The irregular or improper exercise of any Power is, as regards the protection
of any person, regarded as authorised by the Grantor and this deed and is valid.

 

10.2Protection of the Secured Party, Receiver and Attorney

 

(a)The Secured Party, Receiver or Attorney is not liable for any loss or damage,
including consequential loss or damage, arising directly or indirectly from:

 

(1)any omission or delay in the exercise or non exercise of any Power; or

 

(2)the neglect, default or dishonesty of any manager, Officer, employee, agent,
accountant, auctioneer or solicitor of the Grantor, the Secured Party, the
Receiver or Attorney.

 

(b)Clause 10.2(a) does not apply:

 

(1)in respect of the Secured Party, to any loss or damage which arises from the
wilful default, fraud or gross negligence of the Secured Party; and

 

(2)in respect of a Receiver or Attorney, to any loss or damage which arises from
the wilful default, fraud or gross negligence of the Receiver or Attorney.

 

11Saving provisions

 

11.1Statutory powers

 

(a)Subject to clause 11.1(b), the powers of the Secured Party under this deed or
any Collateral Security are in addition to any powers the Secured Party has
under applicable law.

 

(b)If the Secured Party exercises a Power in connection with this deed, that
exercise is taken not to be an exercise of a Power under the PPSA unless the
Secured Party states otherwise at the time of exercise. However, this clause
11.1(b) does not apply to a right, power or remedy which can only be exercised
under the PPSA.

 

 Specific Security Agreement (Shares)    page 23

 

 

[tlogo2.jpg] 11    Saving provisions

 

11.2No notice required unless mandatory

 

To the extent the law permits, the Grantor waives:

 

(a)its rights to receive any notice that is required by:

 

(1)any provision of the PPSA (including a notice of a verification statement);
or

 

(2)any other law, before a secured party or Receiver exercises a right, power or
remedy; and

 

(b)any time period that must otherwise lapse under any law before a secured
party or receiver exercises a right, power or remedy.

 

If the law which requires a period of notice or a lapse of time cannot be
excluded, but the law provides that the period of notice or lapse of time may be
agreed, that period or lapse is one day or the minimum period the law allows to
be agreed (whichever is the longer).

 

However, nothing in this clause prohibits the Secured Party or any Receiver from
giving a notice under the PPSA or any other law.

 

11.3Continuing security

 

The Mortgage is a continuing security despite:

 

(a)any settlement of account; or

 

(b)the occurrence of any other thing,

 

and remains in full force and effect until the Secured Party has given a
discharge of the Mortgage in respect of all the Mortgaged Property under clause
3.

 

11.4No merger of security

 

(a)Nothing in this deed merges, extinguishes, postpones, lessens or otherwise
prejudicially affects:

 

(1)any Encumbrance or indemnity in favour of the Secured Party contained in any
Finance Document; or

 

(2)any Power.

 

(b)No other Encumbrance or Finance Document which the Secured Party has the
benefit of in any way prejudicially affects any Power.

 

11.5Exclusion of moratorium

 

Without limiting clause 11.6 to the extent not excluded by law, a provision of
any legislation (other than a provision of the PPSA mentioned in section 115(1)
of the PPSA) which directly or indirectly:

 

(a)lessens, varies or affects in favour of the Grantor any obligations under
this deed or any Finance Document;

 

(b)stays, postpones or otherwise prevents or prejudicially affects the exercise
by the Secured Party, Receiver or Attorney of any Power; or

 

(c)confers any right on the Grantor or imposes any obligation on the Secured
Party or a Receiver or Attorney in connection with the exercise of any Power,

 

 Specific Security Agreement (Shares)    page 24

 

 

[tlogo2.jpg] 11    Saving provisions

 

is negatived and excluded from this deed and any Finance Document and all relief
and protection conferred on the Grantor by or under that legislation is also
negatived and excluded.

 

11.6Exclusion of PPSA provisions

 

To the extent the law permits:

 

(a)the provisions of the PPSA specified in section 115(1) of that Act (except
sections 121(4) (enforcement of security interests in liquid assets-notice to
higher priority parties and grantor), 123 (right to seize collateral), 128
(secured party may dispose of collateral), 129 (disposal by purchase), 134
(retention of collateral), 135 (notice of retention)) are excluded in full and
will not apply to the Mortgage;

 

(b)in the circumstances permitted under section 115(7) of the PPSA, sections 132
(secured party to give statement of account) and 137(3) (obligation to sell) of
the PPSA are also excluded and will not apply to the Mortgage; and

 

(c)the Grantor agrees not to exercise its rights to make any request of the
Secured Party under section 275 of the PPSA, to authorise the disclosure of any
information under that section or to waive any duty of confidence that would
otherwise permit non-disclosure under that section.

 

11.7Conflict

 

Where any right, power, authority, discretion or remedy of the Secured Party,
Receiver or an Attorney under this deed or any Finance Document is inconsistent
with the powers conferred by applicable law then, to the extent not prohibited
by that law, the powers conferred by applicable law are regarded as negatived or
varied to the extent of the inconsistency.

 

11.8Consent of Secured Party

 

(a)Whenever the doing of any thing by the Grantor is dependent upon the consent
or approval of the Secured Party, the Secured Party may withhold its consent or
give it conditionally or unconditionally in its absolute discretion unless
expressly stated otherwise in a Finance Document.

 

(b)Any conditions imposed on the Grantor under clause 11.8(a) must be complied
with by the Grantor.

 

11.9Completion of blank securities

 

(a)The Secured Party, a Receiver, Attorney or any Officer of the Secured Party
may complete, in favour of the Secured Party, any appointee of the Secured Party
or any purchaser, any instrument executed in blank by or on behalf of the
Grantor and deposited with the Secured Party as security under this deed or
under any Collateral Security.

 

(b)The Secured Party, a Receiver, Attorney or any Officer of the Secured Party
must not exercise any Power under clause 11.9(a) until an Event of Default
occurs but a breach of this clause 11.9(b) does not affect the validity of the
act of the Secured Party, Receiver, Attorney or Officer of the Secured Party.

 

 Specific Security Agreement (Shares)    page 25

 

 

[tlogo2.jpg] 12    General

 

11.10Principal obligations

 

The Mortgage and each Collateral Security is:

 

(a)a principal obligation and is not ancillary or collateral to any other
Encumbrance (other than another Collateral Security) or other obligation; and

 

(b)independent of, and unaffected by, any other Encumbrance or other obligation
which the Secured Party may hold at any time in respect of the Secured Moneys.

 

11.11No obligation to marshal

 

Before the Secured Party enforces the Mortgage, it is not required, to marshal
or to enforce or apply under, or appropriate, recover or exercise:

 

(a)any Encumbrance or Collateral Security held, at any time, by the Secured
Party; or

 

(b)any moneys or assets which the Secured Party, at any time, holds or is
entitled to receive.

 

11.12Non-avoidance

 

If any payment by the Grantor to the Secured Party is at any time avoided for
any reason including any legal limitation, disability or incapacity of or
affecting the Grantor or any other thing, and whether or not:

 

(a)any transaction relating to the Secured Moneys was illegal, void or
substantially avoided; or

 

(b)any thing was or ought to have been within the knowledge of the Secured
Party,       the Grantor:

 

(c)as an additional, separate and independent obligation, indemnifies the
Secured Party against that avoided payment; and

 

(d)acknowledges that any liability of the Grantor under the Finance Documents
and any Power is the same as if that payment had not been made.

 

11.13Increase in financial accommodation

 

The Secured Party may at any time increase the financial accommodation provided
under any Finance Document or otherwise provide further financial accommodation.

 

12General

 

12.1Confidential information

 

The Secured Party must not disclose to any person:

 

(a)this Deed; or

 

(b)any information about the Grantor,

 

except as permitted in the Principal Agreement.

 

 Specific Security Agreement (Shares)    page 26

 

 

[tlogo2.jpg] 12    General

 

12.2Performance by Secured Party of the Grantor’s obligations

 

If the Grantor defaults in fully and punctually performing any obligation
contained or implied in any Finance Document, the Secured Party may, without
prejudice to any Power, do all things necessary or desirable, in the opinion of
the Secured Party, to make good or attempt to make good that default to the
satisfaction of the Secured Party.

 

12.3Grantor to bear cost

 

Any thing which must be done by the Grantor under this deed, whether or not at
the request of the Secured Party, must be done at the cost of the Grantor.

 

12.4Notices

 

Any notice or other communication including any request, demand, consent or
approval, to or by a party to this deed must be given in accordance with the
notice requirements of the Principal Agreement.

 

12.5Governing law and jurisdiction

 

(a)This deed is governed by the laws of Victoria, Australia.

 

(b)The parties irrevocably submit to the non exclusive jurisdiction of the
courts of Victoria, Australia.

 

(c)The parties irrevocably waive any objection to the venue of any legal process
on the basis that the process has been brought in an inconvenient forum.

 

(d)The parties irrevocably waive any immunity in respect of its obligations
under this deed that it may acquire from the jurisdiction of any court or any
legal process for any reason including the service of notice, attachment before
judgment, attachment in aid of execution or execution.

 

(e)The Grantor appoints Discovery Energy SA Pty Ltd of Level 8, 350 Collins
Street, Melbourne, 3000 in relation to proceedings in Victoria as its agent to
receive service of any legal process on its behalf without excluding any other
means of service permitted by the law of the relevant jurisdiction.

 

12.6Prohibition and enforceability

 

(a)Any provision of, or the application of any provision of, any Finance
Document or any Power which is prohibited in any jurisdiction is, in that
jurisdiction, ineffective only to the extent of that prohibition.

 

(b)Any provision of, or the application of any provision of, any Finance
Document which is void, illegal or unenforceable in any jurisdiction does not
affect the validity, legality or enforceability of that provision in any other
jurisdiction or of the remaining provisions in that or any other jurisdiction.

 

12.7Waivers

 

(a)Waiver of any right arising from a breach of this deed or of any Power
arising upon default under this deed or upon the occurrence of an Event of
Default must be in writing and signed by the party granting the waiver.

 

(b)A failure or delay in exercise, or partial exercise, of:

 

 Specific Security Agreement (Shares)    page 27

 

 

[tlogo2.jpg] 12    General

 

(1)a right arising from a breach of this deed or the occurrence of an Event of
Default; or

 

(2)a Power created or arising upon default under this deed or upon the
occurrence of an Event of Default,

 

does not result in a waiver of that right or Power.

 

(c)A party is not entitled to rely on a delay in the exercise or non exercise of
a right or Power arising from a breach of this deed or on a default under this
deed or on the occurrence of an Event of Default as constituting a waiver of
that right or Power.

 

(d)A party may not rely on any conduct of another party as a defence to exercise
of a right or Power by that other party.

 

(e)This clause may not itself be waived except by writing.

 

12.8Variation

 

A variation of any term of this deed must be in writing and signed by the
parties.

 

12.9Cumulative rights

 

The Powers are cumulative and do not exclude any other right, power, authority,
discretion or remedy of the Secured Party, Receiver or Attorney.

 

12.10Assignment

 

(a)Subject to any Finance Document, the Secured Party may assign its rights
under this deed and each Collateral Security without the consent of the Grantor.

 

(b)The Grantor may not assign any of its rights under this deed or any
Collateral Security without the prior written consent of the Secured Party.

 

12.11Counterparts

 

This deed may be executed in any number of counterparts. All counterparts taken
together constitute one instrument. A party may execute this deed by signing any
counterpart.

 

12.12Attorneys

 

Each of the attorneys executing this deed states that the attorney has no notice
of the revocation of the power of attorney appointing that attorney.

 

 Specific Security Agreement (Shares)    page 28

 

 

[tlogo2.jpg]

 

Schedules

 

Table of contents

 

    Notice details 30     Notice of lodgment of Deposit Documents 31    
Irrevocable direction from Grantor 32

 

 Specific Security Agreement (Shares)    page 29

 

 

[tlogo2.jpg]

 

Schedule 1

 

Notice details

      Discovery Energy Corp.     Address One Riverway Drive, Suite 1700,
Houston, Texas 77056     Attention Keith Spickelmier     Phone (713) 248-5981  
  Fax (713) 622-1937     Email kspickelmier1@comcast.net and
kjm@discoveryenergy.com           DEC Funding LLC     Address c/o Avista Capital
Partners, 1000 Louisiana Street, Suite 3700, Houston, Texas 77002     Attention
Steven Webster     Phone (713) 328-1051     Fax (713) 328-1097     Email
webster@avistacap.com    

 

 Specific Security Agreement (Shares)    page 30

 

 

[tlogo2.jpg]

 

Schedule 2

 

Notice of lodgment of Deposit Documents

 

 

Clause 2.1(b)(2)

 

To: DEC Funding LLC

 

We refer to the Specific Security Agreement (Shares) dated 27 May 2016 between
you and us (Mortgage).

 

Attached to this notice is the Share Certificate for Discovery Energy SA Pty Ltd
which we now lodge with you for the purposes of the Mortgage as required by
clause 2.1(b) of the Mortgage.

 

We represent and warrant to you that the equity capital of Discovery Energy SA
Limited is fully represented by 1,000,000 Ordinary Fully Paid Shares and that we
are registered as the holder of 1,000,000 Ordinary Fully Paid Shares.

 

date ► May 27, 2016  

 

Executed for Discovery Energy Corp. by its authorised signatory:

 

sign here ► /s/ Michael D. Dahlke  

 

 Specific Security Agreement (Shares)    page 31

 

 

[tlogo2.jpg]

 

Schedule 3

 

Irrevocable direction from Grantor

 

 

Clause 5.12 (Irrevocable direction)

 

DISCOVERY ENERGY CORP.

 

May 27, 2016

 

The Share Registrar

 

Discovery Energy SA Pty Ltd (Company)

 

Dear Sir

 

We refer to the 1,000,000 Ordinary Fully Paid Shares (Shares) that we acquired
in the Company on 15 May 2012.

 

Under section 1071H of the Corporations Act you are irrevocably directed to
deliver to DEC Funding LLC (at [insert address of Secured Party], Attention:
[insert details of to whose attention the share scrip should be delivered]) all
certificates and other documents of title in relation to the Shares, and any
shares, debentures or interests issued or made available in relation to the
Shares.

 

Yours faithfully

 

for and on behalf of

 

Discovery Energy Corp.

 

  /s/ Michael D. Dahlke     Attorney/Director         print name    

 

 Specific Security Agreement (Shares)    page 32

 

 

[tlogo2.jpg]

 

Signing page

 

Executed as a deed

 

 

  Grantor          

Signed by

Discovery Energy Corp.

by

[tseal.jpg]

sign here ► /s/ Keith D. Spickelmier     Authorised Signatory         print name
            in the presence of:         sign here ►       witness         print
name        

 

 Specific Security Agreement (Shares)    page 33

 

 

[tlogo2.jpg]

 

  Secured Party          

Signed sealed and delivered for

DEC Funding LLC

 

[tseal.jpg]

sign here ► /s/ Steven Webster     Authorised Signatory         print name      
      in the presence of         sign here ►       Witness         print name  
        print address            

 

 Specific Security Agreement (Shares)    page 34