Camber Energy, Inc. 8-K [cei-8k_062520.htm]

 

Exhibit 10.2

 

NEITHER THIS SECURITY NOR THE SECURITIES TO BE ISSUED PURSUANT TO THIS AGREEMENT
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND ANY SECURITIES ISSUABLE PURSUANT TO THIS SECURITY MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED
BY SUCH SECURITIES.

 

Original Issue Date: June 25, 2020 Original Principal Amount: $4,200,000 Note:
10.5% SPN-No – B___  

 

10.5% SECURED PROMISSORY NOTE

(PARTIAL CONVERSION ENTITLEMENT)

DUE February 3, 2022

 

THIS 10.5% SECURED PROMISSORY NOTE is one of a series of duly authorized and
validly issued 10.5% Promissory Notes of Viking Energy Group, Inc., a Nevada
corporation, (the “Company”), having its principal place of business at 15915
Katy Freeway, Suite 450, Houston, Texas, 77094, designated as its 10.5% Secured
Promissory Note due February 3, 2022, subject to the extension rights set out
herein (this “Note”, or the “Note” and collectively with the other Notes of such
series, the “Notes”).

 

FOR VALUE RECEIVED, the Company promises to pay to Camber Energy, Inc. or its
registered assigns (the “Holder”), or shall have paid pursuant to the terms
hereunder, the principal sum of $4,200,000 (the “Original Principal Amount”) on
February 3, 2022, (the “Maturity Date”), or such earlier date as this Note is
required or permitted to be repaid as provided hereunder, and to pay interest to
the Holder on the aggregate then outstanding principal amount of this Note in
accordance with the provisions hereof. This Note is subject to the following
additional provisions:

 

Section 1.      Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Note, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase
Agreement, dated the date hereof (the “Purchase Agreement”), by and between the
Company and the purchasers therein and (b) the following terms shall have the
following meanings:

 

“Bankruptcy Event” means any of the following events: (a) the Company or any
Transaction Subsidiary (as defined in the Purchase Agreement), commences a case
or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction relating to the Company or any Transaction
Subsidiary, (b) there is commenced against the Company or any Transaction
Subsidiary any such case or proceeding that is not dismissed within 60 days
after commencement, (c) the Company or any Transaction Subsidiary is adjudicated
insolvent or bankrupt or any order of relief or other order approving any such
case or proceeding is entered, (d) the Company or any Transaction Subsidiary
suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60 calendar days
after such appointment, (e) the Company or any Transaction Subsidiary makes a
general assignment for the benefit of creditors, (f) the Company or any
Transaction Subsidiary calls a meeting of its creditors with a view to arranging
a composition, adjustment or restructuring of its debts or (g) the Company or
any Transaction Subsidiary, by any act or failure to act, expressly indicates
its consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.

 

Secured Promissory Note – Viking – February, 2020 Private Placement

 

 

“Change of Control Transaction” means the occurrence after the date hereof of
any of (a) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 51% of the
voting securities of the Company or any Transaction Subsidiary, (b) the Company
or any Transaction Subsidiary merges into or consolidates with any other Person,
or any Person merges into or consolidates with the Company and, after giving
effect to such transaction, the stockholders of the Company immediately prior to
such transaction own less than 51% of the aggregate voting power of the Company
or the successor entity of such transaction, (c) the Company or any Transaction
Subsidiary sells or transfers all or substantially all of its assets to another
Person and the stockholders of the Company immediately prior to such transaction
own less than 51% of the aggregate voting power of the acquiring entity
immediately after the transaction, (d) the execution by the Company or any
Transaction Subsidiary of an agreement to which the Company is a party or by
which it is bound, providing for any of the events set forth in clauses (a)
through (c) above.

 

“Event of Default” shall have the meaning set forth in Section 6(a).

 

“Late Fees” shall have the meaning set forth in Section 2(c).

 

“Mandatory Default Amount” means the outstanding principal amount of this Note
and accrued and unpaid interest hereon, in addition to the payment of all other
amounts, costs, expenses, late fees, and liquidated damages due in respect of
this Note.

 

“Nevada Courts” shall have the meaning set forth in Section 8(d).

 

“Note Register” shall have the meaning set forth in Section 2(b).

 

“Original Issue Date” means the date of the first issuance of this Note,
regardless of any transfers of any Note and regardless of the number of
instruments which may be issued to evidence such Notes.

 

Secured Promissory Note – Viking 2 

 

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock (or any other common stock of any other Person that references the
Trading Market for its common stock) is listed or quoted for trading on the date
in question: The NASDAQ Global Market; The NASDAQ Global Select Market; The
NASDAQ Capital Market; the New York Stock Exchange; NYSE Arca; the NYSE MKT or
the OTCQX Marketplace; the OTCQB Marketplace; the OTC Pink Marketplace or any
other tier of the OTC Link ATS operated by OTC Markets Group Inc. (or any
successor to any of the foregoing).

 

“Transaction Subsidiary” means Elysium Energy Holdings, LLC, a limited liability
company organized under the laws of the State of Nevada; and Ichor Energy
Holdings, LLC, a limited liability company organized under the laws of the State
of Nevada.

 

Section 2.              Interest.

 

a)            Payment of Interest. Subject to Section 9 of this Note, the
Company shall pay interest to the Holder on the outstanding principal amount of
this Note equal to ten and ½ percent (10.5%) per annum. All interest hereunder
will be payable quarterly (based on calendar quarters). All accrued but unpaid
interest hereunder shall be due and payable in cash on the Maturity Date, or the
Prepayment Date (including deemed Prepayment Date(s) resulting from
conversion(s) of Note principal pursuant to Section 9 herein), as applicable.

 

b)            Interest Calculations. Interest hereunder will be paid to the
Person in whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the “Note Register”).

 

c)            Late Fee. All overdue accrued and unpaid principal and interest to
be paid hereunder shall, if not paid within three (3) business days following
the applicable due date, entail a late fee at an interest rate equal to eighteen
percent (18%) per annum (the “Late Fees”) which shall accrue daily from the date
such interest is due hereunder through and including the date of actual payment
in full.

 

Section 3.              Registration of Transfers and Exchanges.

 

a)            Different Denominations. This Note is exchangeable for an equal
aggregate principal amount of Notes of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be payable
for such registration of transfer or exchange.

 

b)            Reliance on Note Register. Prior to due presentment for transfer
to the Company of this Note, the Company and any agent of the Company may treat
the Person in whose name this Note is duly registered on the Note Register as
the owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Note is overdue. In the event the Holder
assigns the Holder’s rights and entitlements under this Note to another Person
(the “Assignee”), the Company shall amend the Note Register only upon receiving
authorization to do so from each of the Holder and the Assignee.

 

Secured Promissory Note – Viking 3 

 

 

Section 4.              Security. The Note shall be secured by the Security and
Pledge Agreement dated as of June 25, 2020, by and between the Company and the
Holder, and the security interest granted to the Holder thereunder shall rank
equal to the security interests granted to the holders of the other Notes and
such other security agreements entered into between the Company and the Holder
from time to time.

 

Section 5.              Intentionally Omitted.

 

Section 6.              Events of Default.

 

a)            “Event of Default” means, wherever used herein, any of the
following events (whatever the reason for such event and whether such event
shall be voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or regulation of
any administrative or governmental body):

 

i.          any default in the payment of (A) the principal amount of any Note
or (B) interest, liquidated damages, Late Fees and other amounts owing to a
Holder on any Note, as and when the same shall become due and payable (whether
on the Maturity Date or by acceleration or otherwise) which default, solely in
the case of an interest payment or other default under clause (B) above, is not
cured within three (3) Trading Days;

 

ii.          the Company shall fail to observe or perform any other material
covenant or agreement contained in the Notes which failure is not cured, if
possible to cure, within the earlier to occur of (A) five (5) Trading Days after
notice of such failure sent by the Holder or by any other Holder to the Company
and (B) ten (10) Trading Days after the Company has become or should have become
aware of such failure;

 

iii.         a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under
(A) any of the Transaction Documents or (B) any other material agreement, lease,
document or instrument to which the Company or any Transaction Subsidiary is
obligated and/or which any of their respective assets are subject to or bound by
(and not covered by clause (vi) below);

 

iv.        any representation or warranty made in this Note, any other
Transaction Documents, any written statement pursuant hereto or thereto or any
other report, financial statement or certificate made or delivered to the Holder
or any other Holder shall be untrue or incorrect in any material respect as of
the date when made or deemed made;

 

v.         the Company or any Transaction Subsidiary shall be subject to a
Bankruptcy Event;

 

Secured Promissory Note – Viking 4 

 

 

vi.        the Company or any Transaction Subsidiary shall default on any of its
obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any indebtedness for
borrowed money or money due under any long term leasing or factoring arrangement
that (a) involves an obligation greater than $500,000, whether such indebtedness
now exists or shall hereafter be created, and (b) such default is not fully
cured by the Company or the Transaction Subsidiary prior to the expiration of
any applicable grace or cure period;

 

vii.       the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within five (5) Trading Days or the transfer of
shares of Common Stock through the Depository Trust Company System is no longer
available, “frozen” or “chilled”;

 

viii.       the Company or any Transaction Subsidiary shall be a party to any
Change of Control Transaction, or any Transaction Subsidiary shall agree to sell
or dispose of all or a portion of its assets in one transaction or a series of
related transactions, without the approval of the Holder or Holders (whether or
not such sale would constitute a Change of Control Transaction);

 

ix.         the Company fails to file with the Commission any required reports
under Section 13 or 15(d) of the Exchange Act such that it is not in compliance
with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);

 

x.          the Company or any Transaction Subsidiary shall: (i) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of it
or any of its properties, (ii) admit in writing its inability to pay its debts
as they mature, (iii) make a general assignment for the benefit of creditors,
(iv) be adjudicated a bankrupt or insolvent or be the subject of an order for
relief under Title 11 of the United States Code or any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute of any other jurisdiction or foreign country, or (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage or any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
against it in any proceeding under any such law, or (vi) take or permit to be
taken any action in furtherance of or for the purpose of effecting any of the
foregoing;

 

xi.         if any order, judgment or decree shall be entered, without the
application, approval or consent of the Company or any Transaction Subsidiary,
by any court of competent jurisdiction, approving a petition seeking liquidation
or reorganization of the Company or any Transaction Subsidiary, or appointing a
receiver, trustee, custodian or liquidator of the Company or any Transaction
Subsidiary, or of all or any substantial part of its assets, and such order,
judgment or decree shall continue unstayed and in effect for any period of sixty
(60) days;

 

Secured Promissory Note – Viking 5 

 

 

xii.        the occurrence of any levy upon or seizure or attachment of, or any
uninsured loss of or damage to, any property of the Company or any Transaction
Subsidiary having an aggregate fair value or repair cost (as the case may be) in
excess of $500,000 individually or in the aggregate, and any such levy, seizure
or attachment shall not be set aside, bonded or discharged within thirty (30)
days after the date thereof;

 

xiii.       any monetary judgment, writ or similar final process shall be
entered or filed against the Company or any Transaction Subsidiary or any of
their respective property or other assets for more than $500,000, and such
judgment, writ or similar final process shall remain unvacated, unbonded or
unstayed for a period of forty five (45) calendar days;

 

xiv.       any Transaction Subsidiary, without the written consent of the
Holders, shall enter into, create, incur, assume, guarantee or suffer to exist
any indebtedness for borrowed money of any kind, including but not limited to, a
guarantee, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom,
except Permitted Indebtedness (as defined in the Purchase Agreement);

 

xv.       the termination of that certain Agreement and Plan of Merger by and
between the Company and the Holder dated February 3, 2020, as amended from time
to time, for any reason prior to the closing of the transactions contemplated
therein; or

 

xvi.       any Transaction Subsidiary, without the written consent of the
Holders, shall enter into, create, incur, assume or suffer to exist any liens of
any kind, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom,
except Permitted Liens (as defined in the Purchase Agreement).

 

b)            Remedies Upon Event of Default. If any Event of Default occurs,
then the outstanding principal amount of this Note, plus accrued but unpaid
interest, liquidated damages and other amounts owing in respect thereof through
the date of acceleration, shall become, at the Holder’s election, immediately
due and payable in cash at the Mandatory Default Amount. Upon the payment in
full of the Mandatory Default Amount, the Holder shall promptly surrender this
Note to or as directed by the Company. In connection with such acceleration
described herein, the Holder need not provide, and the Company hereby waives,
any presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of the Note until such time, if any, as the Holder receives full payment
pursuant to this Section 6(b). No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.

 

Secured Promissory Note – Viking 6 

 

 

Section 7.              Prepayment. At any time upon not less than 10 days and
not more than 30 days prior written notice to the Holder, the Company may prepay
any portion of the principal amount of this Note, all accrued and unpaid
interest relating to such prepaid portion of the principal and all other amounts
due under this Note, provided that if such prepayment occurs prior to the date
that is one (1) year following the Original Issue Date, the Company shall pay a
prepayment penalty to the Holder equal to the amount of additional interest that
would have been paid to the Holder had the Company not prepaid the Note until
one (1) year following the Original Issue Date such that the total of the
Holder’s interest payments, if any, and the prepayment penalty shall equal to
10.5% of the Original Principal Amount of this Note. The written notice shall,
among other items, state the date such Prepayment Amount (as defined below) is
to be paid to the Holder, which shall not in any event be less than 10 days and
not more than 30 days from the date of mailing of the prepayment notice to the
Holder (the “Prepayment Date”). If the Company exercises its right to prepay the
Note, the Company shall make payment to the Holder of an amount in cash equal to
the sum of (x) the then outstanding principal amount of this Note, (y) all
accrued but unpaid interest and (z) all other amounts owed pursuant to this Note
including, but not limited to the prepayment penalty described above and all
Late Fees, if applicable (collectively the “Prepayment Amount”). If the entire
Prepayment Amount is not received by the Holder in immediately available funds
by wire transfer pursuant to wire transfer instructions provided to the Company
by the Holder, on or before the Prepayment Date, such shall, (at the election of
the Holder) be an Event of Default of the payment of principal pursuant to
Section 6(a)(1) hereof.

 

Section 8.             Miscellaneous.

 

a)            Notices. Any and all notices or other communications or deliveries
to be provided by the Holder hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier
service, addressed to the Company, at its registered office address, or such
other facsimile number or address as the Company may specify for such purposes
by notice to the Holder delivered in accordance with this Section 8(a). Any and
all notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, or sent by
a nationally recognized overnight courier service addressed to each Holder at
the facsimile number or address of the Holder appearing on the books of the
Company, or if no such facsimile number or address appears on the books of the
Company, at the principal place of business of such Holder, as set forth in the
Purchase Agreement. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 12:00
p.m. (New York City time) on any date, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number set forth on the signature pages attached hereto on a day
that is not a Trading Day or later than 12:00 p.m. (New York City time) on any
Trading Day, (iii) the second Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be given.

 

Secured Promissory Note – Viking 7 

 

 

b)            Absolute Obligation. Except as expressly provided herein, no
provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, liquidated damages
and accrued interest, as applicable, on this Note at the time, place, and rate,
and in the coin or currency, herein prescribed. This Note is a direct debt
obligation of the Company.

 

c)            Lost or Mutilated Note. If this Note shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note for the principal
amount of this Note so mutilated, lost, stolen or destroyed, but only upon
receipt of evidence of such loss, theft or destruction of such Note, and of the
ownership hereof, reasonably satisfactory to the Company.

 

d)            Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Nevada, without regard to the principles of conflict of laws thereof. Each party
agrees that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of Las Vegas, Nevada (the “Nevada Courts”).
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of
the Nevada Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such Nevada Courts, or such Nevada Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
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 Note 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 other manner permitted by applicable 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 Note or the transactions contemplated hereby. If any party shall commence
an action or proceeding to enforce any provisions of this Note, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or proceeding.

 

e)            Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note on any other
occasion. Any waiver by the Company or the Holder must be in writing.

 

Secured Promissory Note – Viking 8 

 

 

f)             Severability. If any provision of this Note is invalid, illegal
or unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of interest permitted
under applicable law. The Company covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on this Note as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Note, and the Company (to the
extent it may lawfully do so) hereby expressly waives all benefits or advantage
of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the Holder.

 

g)            Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder’s right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Note. The Company covenants to the
Holder that there shall be no characterization concerning this instrument other
than as expressly provided herein. Amounts set forth or provided for herein with
respect to payments shall be the amounts to be received by the Holder and shall
not, except as expressly provided herein, be subject to any other obligation of
the Company (or the performance thereof). The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Holder and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
Holder shall be entitled, in addition to all other available remedies, to an
injunction restraining any such breach or any such threatened breach, without
the necessity of showing economic loss and without any bond or other security
being required. The Company shall provide all information and documentation to
the Holder that is requested by the Holder to enable the Holder to confirm the
Company’s compliance with the terms and conditions of this Note.

 

h)            Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.

 

i)             Headings. The headings contained herein are for convenience only,
do not constitute a part of this Note and shall not be deemed to limit or affect
any of the provisions hereof.

 

Secured Promissory Note – Viking 9 

 

 

Section 9.              Conversion.

 

a)            Voluntary Conversion. At any time after the Original Issue Date
until the earlier of (i) the date that all amounts due under this Note have been
paid in full, or (ii) the date that is fifteen (15) business days following the
date that the Company’s Common Stock has traded at an average daily price of at
least fifty-five cents ($0.55) for fifteen (15) consecutive business days (as
reported by OTCMarkets.com), up to one hundred percent (100%) of the principal
amount of this Note in the aggregate shall be convertible, in whole or in part,
into shares of Common Stock at the option of the Holder, at any time and from
time to time (subject to the conversion limitations set forth in Section 9(e)
hereof). The Holder shall effect conversions by delivering to the Company a
Notice of Conversion, the form of which is attached hereto as Annex A (each, a
“Notice of Conversion”), specifying therein the principal amount of this Note
and/or any other amounts due under this Note to be converted and the date on
which such conversion shall be effected (such date, the “Conversion Date”). If
no Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is deemed delivered hereunder.
No ink-original Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any Notice of
Conversion form be required. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Note in an amount equal to the
applicable conversion amount. The Holder and the Company shall maintain a
Conversion Schedule showing the principal amount(s) and/or any other amounts due
under this Note converted and the date of such conversion(s). The Company may
deliver an objection to any Notice of Conversion within one (1) Business Day of
delivery of such Notice of Conversion. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in
the absence of manifest error. The Holder, and any assignee by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, (i) following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note may be less than the amount stated on
the face hereof, and (ii) this Note shall not be convertible pursuant to this
Section 9(a) after the date that is fifteen (15) business days following the
date that the Company’s Common Stock has traded at an average daily price of at
least fifty-five cents ($0.55) for fifteen (15) consecutive business days.

 

b)            Conversion Price. The conversion price in effect on any Conversion
Date shall be equal to twenty-four cents ($0.24) per share (the “Conversion
Price”), subject to adjustment as set forth herein. The Conversion Price will be
appropriately adjusted for any stock dividend, stock split, stock combination,
reclassification or similar transaction that proportionately decreases or
increases the Common Stock.

 

c)            Mechanics of Conversion.

 

i.           Conversion Shares Issuable Upon a Conversion. The number of
Conversion Shares issuable upon a conversion hereunder shall be determined by
the quotient obtained by dividing (x) the principal amount of the Note to be
converted (up to 100%) by (y) the Conversion Price.

 

Secured Promissory Note – Viking 10 

 

 

ii.          Delivery of Certificate Upon Conversion. Not later than two (2)
Trading Days after each Conversion Date (the “Share Delivery Date”), the Company
shall deliver, or cause to be delivered, to the Holder (A) a certificate or
certificates representing the Conversion Shares, which, on or after the date on
which if the resale of such Conversion Shares are covered by and are being sold
pursuant to an effective registration statement under the Securities Act or such
Conversion Shares are eligible to be sold under Rule 144 promulgated under the
Securities Act without the need for current public information, the Company has
received an opinion of counsel to such effect reasonably acceptable to the
Company, shall be free of restrictive legends and trading restrictions
representing the number of Conversion Shares being acquired or being sold, as
the case may be, upon the conversion of this Note, and (B) a bank check in the
amount of accrued and unpaid interest (if the Company has elected to pay accrued
interest in cash). All certificate or certificates required to be delivered by
the Company under this Section 9(c) shall be delivered electronically through
DTC or another established clearing corporation performing similar functions,
unless the Company or its Transfer Agent does not have an account with DTC
and/or is not participating in the DTC Fast Automated Securities Transfer
Program, then the Company shall issue and deliver to the address as specified in
such Conversion Notice, a certificate (or certificates), registered in the name
of the Holder or its designee, for the number of Conversion Shares to which the
Holder shall be entitled. If the Conversion Shares are not being sold pursuant
to an effective registration statement under the Securities Act or if the
Conversion Date is prior to the date on which such Conversion Shares are
eligible to be sold under Rule 144 promulgated under the Securities Act without
the need for current public information, the Conversion Shares shall bear a
restrictive legend in the following form, as appropriate:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

Notwithstanding the foregoing, commencing on such date that the Conversion
Shares are eligible for sale under Rule 144 subject to current public
information requirements, the Company, upon request and at the Holder’s expense,
shall obtain a legal opinion to allow for such sales under Rule 144.

 

Secured Promissory Note – Viking 11 

 

 

iii.         Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed
by the applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Company at any time on or before its
receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Note
delivered to the Company and the Holder shall promptly return to the Company the
Common Stock certificates issued to such Holder pursuant to the rescinded
Conversion Notice.

 

iv.         Obligation Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Note in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
Conversion Shares; provided, however, that such delivery shall not operate as a
waiver by the Company of any such action the Company may have against the
Holder. In the event the Holder of this Note shall elect to convert any or all
of the outstanding principal or interest amount hereof, the Company may not
refuse conversion based on any claim that the Holder or anyone associated or
affiliated with the Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on notice to Holder,
restraining and or enjoining conversion of all or part of this Note shall have
been sought. If the injunction is not granted, the Company shall promptly comply
with all conversion obligations herein.

 

v.         Reservation of Shares Issuable Upon Conversion. The Company covenants
that it will at all times beginning 30 days after the Original Issue Date,
reserve and keep available out of its authorized and unissued shares of Common
Stock a number of shares of Common Stock at least equal to 100% of the eligible
conversion amount for the sole purpose of issuance upon conversion of this Note,
each as herein provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and the other
holders of the Notes), not less than such aggregate number of shares of the
Common Stock as shall be issuable (taking into account the adjustments and
restrictions of Section 5, but ignoring any Beneficial Ownership Limitations or
other restrictions and/or limitations on conversions set forth herein or
elsewhere) upon the conversion of the then outstanding principal amount of this
Note and payment of interest hereunder. The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable.

 

Secured Promissory Note – Viking 12 

 

 

vi.         Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this Note. As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such conversion, the Company shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.

 

vii.        Transfer Taxes and Expenses. The issuance of certificates for shares
of the Common Stock on conversion of this Note shall be made without charge to
the Holder hereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificates, provided that, the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of this Note so converted and
the Company shall not be required to issue or deliver such certificates unless
or until the Person or Persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Company shall pay
all Transfer Agent fees required for same-day processing of any Notice of
Conversion.

 

d)            Holder’s Conversion Limitations. The Company shall not effect any
conversion of principal of this Note, and a Holder shall not have the right to
convert any principal of this Note, to the extent that after giving effect to
the conversion set forth on the applicable Notice of Conversion, the Holder
(together with the Holder’s Affiliates, and any Persons acting as a group
together with the Holder or any of the Holder’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Note with respect to
which such determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the remaining,
unconverted principal amount of this Note beneficially owned by the Holder or
any of its Affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, any other Notes) beneficially owned by
the Holder or any of its Affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 9(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. To the extent that the limitation
contained in this Section 9(d) applies, the determination of whether this Note
is convertible (in relation to other securities owned by the Holder together
with any Affiliates) and of which principal amount of this Note is convertible
shall be in the sole discretion of the Holder, and the submission of a Notice of
Conversion shall be deemed to be the Holder’s determination of whether this Note
may be converted (in relation to other securities owned by the Holder together
with any Affiliates) and which principal amount of this Note is convertible, in
each case subject to the Beneficial Ownership Limitation. To ensure compliance
with this restriction, the Holder will be deemed to represent to the Company
each time it delivers a Notice of Conversion that such Notice of Conversion has
not violated the restrictions set forth in this paragraph and the Company shall
have no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 9(d), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (i) the Company’s most recent periodic or annual report
filed with the Commission, as the case may be, (ii) a more recent public
announcement by the Company, or (iii) a more recent written notice by the
Company or the Company’s transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Note, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Note held by the Holder. The Holder, upon
not less than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 9(d), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon conversion of this Note held by the
Holder and the Beneficial Ownership Limitation provisions of this Section 9(d)
shall continue to apply. Any such increase or decrease will not be effective
until the 61st day after such notice is delivered to the Company. The Beneficial
Ownership Limitation provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 9(d) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Note.

 

Secured Promissory Note – Viking 13 

 

 

e)             Interest Payments upon Conversion. Any Share Delivery Date
pursuant to this Section 9 shall be considered a “Prepayment Date” with respect
to the payment of interest pursuant to Section 2(a).

 

f)             Optional Conversion upon Public Offering of Common Stock. In
addition to Holder’s other conversion rights hereunder and notwithstanding
anything to the contrary herein, all or any portion of the outstanding principal
amount of this Note shall, at the option of the Holder, be convertible into the
securities offered by the Company in connection with the Company’s first public
offering following the execution of this Note, at the closing of such public
offering, at a conversion price equal to eighty-five percent (85%) of the
offering price of the applicable security (representing a fifteen percent (15%)
discount) in such public offering.

  

Secured Promissory Note – Viking 14 

 

 

[signature page follows]

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a
duly authorized officer as of the date first above indicated.

 

 

VIKING ENERGY GROUP, Inc.

        By: /s/ James A. Doris     Name: James A. Doris     Title: President &
C.E.O.         Facsimile No. for Delivery of Notices: (646) 356-7034

 

Secured Promissory Note – Viking 15