Blueprint





 







Exhibit 10.3

 



SECURITY AGREEMENT

 


This
SECURITY AGREEMENT, dated as of November 6, 2017 (the
“Agreement”) is by and
among Petro River Oil Corp, Inc., a company duly organized and
validly existing under the laws of Delaware (the
“Company”)
and Petro Exploration Funding II, LLC, a company duly organized and
validly existing under the laws of New York (the
“Purchaser”).

 


The
Company and the Purchaser are parties to a Securities Purchase
Agreement dated as of September 20, 2017 (as modified and
supplemented and in effect from time to time, the
“Purchase
Agreement”), that provides, subject to the terms and
conditions thereof, for the issuance and sale by the Company to the
Purchaser, Notes and Warrants as more fully described in the
Purchase Agreement.

 


To
induce the Purchaser to enter into the Purchase Agreement, and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company has agreed to pledge
and grant a security interest in the Collateral (as hereinafter
defined) as security for the Secured Obligations (as hereinafter
defined). Accordingly, the parties hereto agree as
follows:

 

Section
1. Definitions. Each capitalized
term used herein and not otherwise defined shall have the meaning
assigned to such term in the Purchase Agreement. In addition, as
used herein:

 


“Accounts” shall have the
meaning ascribed thereto in Section 3(d) hereof.

 


“Business” shall mean the
businesses from time to time, now or hereafter, conducted by the
Company and its Subsidiaries.

 


“Collateral” shall have
the meaning ascribed thereto in Section 3 hereof.

 


“Copyright Collateral”
shall mean all Copyrights, whether now owned or hereafter acquired
by the Company, that are associated with the Business.

 


“Copyrights” shall mean
all copyrights, copyright registrations and applications for
copyright registrations, including those shown on Annex 3 hereto, and, without
limitation, all renewals and extensions thereof, the right to
recover for all past, present and future infringements thereof, and
all other rights of any kind whatsoever accruing thereunder or
pertaining thereto.

 


“Documents” shall have the
meaning ascribed thereto in Section 3(j) hereof.

 


“Equipment” shall have the
meaning ascribed thereto in Section 3(h) hereof.

 


“Event of Default” shall
have the meaning ascribed thereto in Section 8 of the
Note.

 


“Excluded
Assets”: the collective reference to (i) any asset subject to
a purchase money security interest (“PMSI Assets”) in
each case to the extent the grant by the Company of a security
interest pursuant to this Agreement in the Company’s right,
title and interest in such PMSI Asset (A) is prohibited by legally
enforceable provisions of any contract, agreement, instrument or
indenture governing such Intangible Asset or PMSI Asset, (B) would
give any other party to such contract, agreement, instrument or
indenture a legally enforceable right to terminate its obligations
thereunder or accelerate the indebtedness evidenced thereby or (C)
is permitted only with the consent of another party, if the
requirement to obtain such consent is legally enforceable and such
consent has not been obtained; (ii) Motor Vehicles the perfection
of a security interest in which is excluded from the Uniform
Commercial Code in the relevant jurisdiction; and (iii) the Capital
Stock in any Foreign Subsidiary, to the extent (but only to the
extent) required to prevent the Collateral from including more than
65% of all capital stock of any Foreign Subsidiary of the
Company.

 

 


 
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“Excluded Collateral”
shall mean the assets of the Company which secure the Permitted
Indebtedness and the assets listed on Annex 2 hereto.

 


“Foreign
Subsidiary”: any subsidiary of the Company that is organized
under the laws of a jurisdiction outside the United
States.

 


“Instruments” shall have
the meaning ascribed thereto in Section 3(e) hereof.

 


“Intellectual Property”
shall mean, collectively, all Copyright Collateral, all Patent
Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information,
know-how and trade secrets used or useful in the Business; (b) all
licenses or user or other agreements granted to the Company with
respect to any of the foregoing, in each case whether now or
hereafter owned or used including, without limitation, the licenses
or other agreements with respect to the Copyright Collateral, the
Patent Collateral or the Trademark Collateral; (c) all customer
lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys,
manuals, materials standards, processing standards, catalogs,
computer and automatic machinery software and programs, and the
like pertaining to the operation by the Company of the Business;
(d) all sales data and other information relating to sales now or
hereafter collected and/or maintained by the Company that pertain
to the Business; (e) all accounting information which pertains to
the Business and all media in which or on which any of the
information or knowledge or data or records which pertain to the
Business may be recorded or stored and all computer programs used
for the compilation or printout of such information, knowledge,
records or data; (f) all licenses, consents, permits, variances,
certifications and approvals of governmental agencies now or
hereafter held by the Company pertaining to the operation by the
Company and its Subsidiaries of the Business; and (g) all causes of
action, claims and warranties now or hereafter owned or acquired by
the Company in respect of any of the items listed
above.

 


“Inventory” shall have the
meaning ascribed thereto in Section 3(f) hereof.

 


“Issuers” shall mean,
collectively, the respective entities identified on Annex 1 hereto, and all other
entities formed by the Company or entities in which the Company
owns or acquires any capital stock or similar
interest.

 


“Motor Vehicles” shall
mean motor vehicles, tractors, trailers and other like property,
whether or not the title thereto is governed by a certificate of
title or ownership.

 


“Patent Collateral” shall
mean all Patents, whether now owned or hereafter acquired by the
Company that are associated with the Business.

 


“Patents” shall mean all
patents and patent applications, including those shown on
Annex 3 hereto,
and, without limitation, the inventions and improvements described
and claimed therein together with the reissues, divisions,
continuations, renewals, extensions and continuations-in-part
thereof, all income, royalties, damages and payments now or
hereafter due and/or payable under and with respect thereto,
including, without limitation, damages and payments for past or
future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding
thereto throughout the world.

 


“Permitted Indebtedness”
shall mean the Company’s existing indebtedness, liabilities
and obligations as disclosed on Annex 5 hereto and any future
capitalized leases, purchase money indebtedness and the
Notes.

 


“Permitted Liens” shall
mean (i) the Company’s existing Liens as disclosed in
Annex 6 hereto,
(ii) the security interests created by this Agreement, (iii) Liens
of local or state authorities for franchise, real estate or other
like taxes, (iv) statutory Liens of landlords and liens of
carriers, warehousemen, bailees, mechanics, materialmen and other
like Liens imposed by law, created in the ordinary course of
business and for amounts not yet due, (v) tax Liens not yet due and
payable and (vi) existing Liens which do not materially affect the
value of the Company’s property and do not materially
interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries.

 


 


 
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“Pledged Stock” shall have
the meaning ascribed thereto in Section 3(a) hereof.

 


“Real Estate” shall have
the meaning ascribed thereto in Section 3(l) hereof.

 


“Secured Obligations”
shall mean, collectively, (a) the principal of and interest on the
Notes issued or issuable (as applicable) by the Company and held by
the applicable Purchaser and all other amounts from time to time
owing to such Purchasers by the Company under the Purchase
Agreement and the Notes and (b) all obligations of the Company to
such Purchasers thereunder.

 


“Stock Collateral” shall
mean, collectively, the Collateral described in clauses (a) through
(c) of Section 3 hereof and the proceeds of and to any such
property and, to the extent related to any such property or such
proceeds, all books, correspondence, credit files, records,
invoices and other papers.

 


“Trademark Collateral”
shall mean all Trademarks, whether now owned or hereafter acquired
by the Company, that are associated with the Business.
Notwithstanding the foregoing, the Trademark Collateral does not
and shall not include any Trademark which would be rendered
invalid, abandoned, void or unenforceable by reason of its being
included as part of the Trademark Collateral.

 


“Trademarks” shall mean
all trade names, trademarks and service marks, logos, trademark and
service mark registrations, and applications for trademark and
service mark registrations, including those shown on Annex 3 hereto, and, without
limitation, all renewals of trademark and service mark
registrations, all rights corresponding thereto throughout the
world, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever
accruing thereunder or pertaining thereto, together, in each case,
with the product lines and goodwill of the business connected with
the use of, and symbolized by, each such trade name, trademark and
service mark.

 


“Uniform Commercial Code”
shall mean the Uniform Commercial Code as in effect in the State of
Nevada from time to time.

 

Section
2. Representations and Warranties.
The Company represents and warrants to each of the Purchasers
that:

 




a.

the Company is the
sole beneficial owner of the Collateral and no Lien exists or will
exist upon any Collateral at any time (and, with respect to the
Stock Collateral, no right or option to acquire the same exists in
favor of any other Person), except for Permitted Liens and the
pledge and security interest in favor of each of the Purchasers
created or provided for herein which pledge and security interest
will constitute a first priority perfected pledge and security
interest in and to all of the Collateral (other than (i)
Intellectual Property registered or otherwise located outside of
the United States of America, (ii) Real Estate, and (iii) as
otherwise set forth in this Agreement) upon the filing of the
applicable financing statements or delivery of stock certificates
required hereunder or other action required by this Agreement
necessary to establish “control” as that term is
defined in the Uniform Commercial Code over the Collateral for the
benefit of the Purchaser.





 




b.

the Pledged Stock
directly or indirectly owned by the Company in the entities
identified in Annex
1 hereto is, and all other Pledged Stock, whether issued now
or in the future, will be, duly authorized, validly issued, fully
paid and nonassessable, free and clear of all Liens other than
Permitted Liens and none of such Pledged Stock is or will be
subject to any contractual restriction, preemptive and similar
rights, or any restriction under the charter or by-laws of the
respective Issuers of such Pledged Stock, upon the transfer of such
Pledged Stock (except for any such restriction contained
herein);





 


 


 
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c.

the Pledged Stock
directly or indirectly owned by the Company in the entities
identified in Annex
1 hereto constitutes all of the issued and outstanding
shares of capital stock of any class of such Issuers beneficially
owned by the Company on the date hereof (whether or not registered
in the name of the Company) and said Annex 1 correctly identifies,
as at the date hereof, the respective Issuers of such Pledged
Stock;





 




d.

the Company owns
and possesses the right to use, and has done nothing to authorize
or enable any other Person to use, all of its Copyrights, Patents
and Trademarks, and all registrations of its material Copyrights,
Patents and Trademarks are valid and in full force and effect.
Except as may be set forth in said Annex 3, the Company owns and
possesses the right to use all material Copyrights, Patents and
Trademarks, necessary for the operation of the
Business;





 




e.

to the
Company’s knowledge, (i) except as set forth in Annex 3 hereto, there is no
violation by others of any right of the Company with respect to any
material Copyrights, Patents or Trademarks, respectively, and (ii)
the Company is not, in connection with the Business, infringing in
any material respect upon any Copyrights, Patents or Trademarks of
any other Person; and no proceedings have been instituted or are
pending against the Company or, to the Company’s knowledge,
threatened, and no claim against the Company has been received by
the Company, alleging any such violation, except as may be set
forth in said Annex
3;





 




f.

the Company does
not own any material Trademarks registered in the United States of
America to which the last sentence of the definition of Trademark
Collateral applies; and





 

Section
3. Collateral. As collateral
security for the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Secured Obligations,
the Company hereby pledges, grants, collaterally assigns,
hypothecates and transfers to the Purchaser on behalf of the
Purchasers as hereinafter provided, a security interest in and Lien
upon all of the Company’s right, title and interest in, to
and under all personal property and other assets of the Company,
whether now owned or hereafter acquired by or arising in favor of
the Company, whether now existing or hereafter coming into
existence, whether owned or consigned by or to, or leased from or
to the Company and regardless of where located, except for the
Excluded Collateral and the Excluded Assets, (all being
collectively referred to herein as “Collateral”)
including:

 




a.

the Company’s
direct or indirect ownership interest in the respective shares of
capital stock of the Issuers and all other shares of capital stock
of whatever class of the Issuers, now or hereafter owned by the
Company, together with in each case the certificates evidencing the
same (collectively, the “Pledged
Stock”);





 




b.

all shares,
securities, moneys or property representing a dividend on any of
the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from
a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of,
or otherwise in respect of, the Pledged Stock;





 




c.

without affecting
the obligations of the Company under any provision prohibiting such
action hereunder or under the Purchase Agreement or the Notes, in
the event of any consolidation or merger in which any Issuer is not
the surviving corporation, all shares of each class of the capital
stock of the successor corporation (unless such successor
corporation is the Company itself) formed by or resulting from such
consolidation or merger (the Pledged Stock, together with all other
certificates, shares, securities, properties or moneys as may from
time to time be pledged hereunder pursuant to clause (a) or (b)
above and this clause (c) being herein collectively called the
“Stock
Collateral”);





 


 


 
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d.

all accounts and
general intangibles (each as defined in the Uniform Commercial
Code) of the Company constituting any right to the payment of
money, including (but not limited to) all moneys due and to become
due to the Company in respect of any loans or advances for the
purchase price of Inventory or Equipment or other goods sold or
leased or for services rendered, all moneys due and to become due
to the Company under any guarantee (including a letter of credit)
of the purchase price of Inventory or Equipment sold by the Company
and all tax refunds (such accounts, general intangibles and moneys
due and to become due being herein called collectively
“Accounts”);





 




e.

all instruments,
chattel paper or letters of credit (each as defined in the Uniform
Commercial Code) of the Company evidencing, representing, arising
from or existing in respect of, relating to, securing or otherwise
supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called “Instruments”);





 




f.

all inventory (as
defined in the Uniform Commercial Code) of the Company and all
goods obtained by the Company in exchange for such inventory
(herein collectively called “Inventory”);





 




g.

all Intellectual
Property and all other accounts or general intangibles of the
Company not constituting Intellectual Property or
Accounts;





 




h.

all equipment (as
defined in the Uniform Commercial Code) of the Company (herein
collectively called “Equipment”);





 




i.

each contract and
other agreement of the Company relating to the sale or other
disposition of Inventory or Equipment;





 




j.

all deposit
accounts (as defined in the Uniform Commercial Code) of the Company
(herein collectively called “Deposit
Accounts”);





 




k.

all documents of
title (as defined in the Uniform Commercial Code) or other receipts
of the Company covering, evidencing or representing Inventory or
Equipment (herein collectively called “Documents”);





 




l.

all rights, claims
and benefits of the Company against any Person arising out of,
relating to or in connection with Inventory or Equipment purchased
by the Company, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such
Inventory or Equipment;





 




m.

all estates in land
together with all improvements and other structures now or
hereafter situated thereon, together with all rights, privileges,
tenements, hereditaments, appurtenances, easements, including, but
not limited to, rights and easements for access and egress and
utility connections, and other rights now or hereafter appurtenant
thereto ("Real
Estate");





 




n.

all other tangible
or intangible property of the Company, including, without
limitation, all proceeds, products and accessions of and to any of
the property of the Company described in clauses (a) through (m)
above in this Section 3 (including, without limitation, any
proceeds of insurance thereon), and, to the extent related to any
property described in said clauses or such proceeds, products and
accessions, all books, correspondence, credit files, records,
invoices and other papers, including without limitation all tapes,
cards, computer runs and other papers and documents in the
possession or under the control of the Company or any computer
bureau or service company from time to time acting for the
Company.





 


Notwithstanding
anything to the contrary herein, this security interest shall be
junior to the security interest created by the promissory note
issued to Petro Exploration Funding, LLC in the aggregate principal
amount of $2,000,00 on June 15, 2017 (the “Prior Secured
Note”).

 


 


 
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Section
4. Further Assurances; Remedies.
In furtherance of the grant of the pledge and security interest
pursuant to Section 3 hereof, the Company hereby agrees with the
Purchaser and each of the Purchasers as follows:

 

4.01 Delivery
and Other Perfection. The Company shall:

 




a.

if any of the
above-described shares, securities, monies or property required to
be pledged by the Company under clauses (a), (b) and (c) of Section
3 hereof are received by the Company, forthwith either (x) transfer
and deliver to the Purchaser such shares or securities so received
by the Company (together with the certificates for any such shares
and securities duly endorsed in blank or accompanied by undated
stock powers duly executed in blank) all of which thereafter shall
be held by the Purchaser, pursuant to the terms of this Agreement,
as part of the Collateral or (y) take such other action as the
Purchaser shall reasonably deem necessary or appropriate to duly
record the Lien created hereunder in such shares, securities,
monies or property referred to in said clauses (a), (b) and (c) of
Section 3;





 




b.

deliver and pledge
to the Purchaser, at the Purchaser's request, any and all
Instruments, endorsed and/or accompanied by such instruments of
assignment and transfer in such form and substance as the Purchaser
may request; provided, that so long as no Event of Default shall
have occurred and be continuing, the Company may retain for
collection in the ordinary course any Instruments received by it in
the ordinary course of business and the Purchaser shall, promptly
upon request of the Company, make appropriate arrangements for
making any other Instrument pledged by the Company available to it
for purposes of presentation, collection or renewal (any such
arrangement to be effected, to the extent deemed appropriate by the
Purchaser, against trust receipt or like document);





 




c.

give, execute,
deliver, file and/or record any financing statement, notice,
instrument, document, agreement or other papers that may be
necessary (in the reasonable judgment of the Purchaser) to create,
preserve, perfect or validate any security interest granted
pursuant hereto or to enable the Purchaser to exercise and enforce
their rights hereunder with respect to such security interest,
including, without limitation, causing any or all of the Stock
Collateral to be transferred of record into the name of the
Purchaser or its nominee (and the Purchaser agrees that if any
Stock Collateral is transferred into its name or the name of its
nominee, the Purchaser will thereafter promptly give to the Company
copies of any notices and communications received by it with
respect to the Stock Collateral), provided that notices to account
debtors in respect of any Accounts or Instruments shall be subject
to the provisions of Section 4.09 below;





 




d.

upon the
acquisition after the date hereof by the Company of any Equipment
covered by a certificate of title or ownership cause the Purchaser
to be listed as the lienholder on such certificate of title and
within 120 days of the acquisition thereof (or such other time as
the Purchaser may approve in its sole discretion) deliver evidence
of the same to the Purchaser;





 




e.

keep accurate books
and records relating to the Collateral, and, during the
continuation of an Event of Default, stamp or otherwise mark such
books and records in such manner as the Purchaser may reasonably
require in order to reflect the security interests granted by this
Agreement;





 




f.

furnish to the
Purchaser from time to time (but, unless an Event of Default shall
have occurred and be continuing, no more frequently than quarterly)
statements and schedules further identifying and describing the
material Copyright Collateral, the Patent Collateral and the
Trademark Collateral, respectively, and such other reports in
connection with the Copyright Collateral, the Patent Collateral and
the Trademark Collateral, as the Purchaser may reasonably request,
all in reasonable detail;





 


 


 
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g.

permit
representatives of the Purchaser, upon reasonable notice, at any
time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, and permit
representatives of the Purchaser to be present at the
Company’s place of business to receive copies of all
communications and remittances relating to the Collateral, and
forward copies of any notices or communications by the Company with
respect to the Collateral, all in such manner as the Purchaser may
reasonably require; provided, however, that so long as an Event of
Default is not continuing, such visits shall be made not more than
once per fiscal year at Company’s expense; and





 




h.

upon the occurrence
and during the continuance of any Event of Default, upon request of
the Purchaser, promptly notify each account debtor in respect of
any Accounts or Instruments that such Collateral has been assigned
to the Purchaser hereunder, and that any payments due or to become
due in respect of such Collateral are to be made directly to the
Purchaser.





 

4.02 Other
Financing Statements and Liens. Except with respect to
Permitted Indebtedness or as otherwise permitted under Schedule
3.1(a) of the Purchase Agreement, without the prior written consent
of the Purchaser, the Company shall not file or authorize or permit
to be filed, in any jurisdiction, any financing statement or like
instrument with respect to the Collateral in which the Purchaser is
not named as the sole secured party for the benefit of each of the
Purchasers, except for Permitted Liens.

 

4.03 Preservation
of Rights. The Purchaser shall not be required to take steps
necessary to preserve any rights against prior parties to any of
the Collateral.

 

4.04 Special
Provisions Relating to Certain Collateral.

 




a.

Stock Collateral.





 




(1)

The Company will
cause the Stock Collateral to constitute at all times 100% of the
total number of shares of each class of capital stock of each
Issuer then outstanding that is owned directly or indirectly by the
Company.





 




(2)

So long as no Event
of Default shall have occurred and be continuing, the Company shall
have the right to exercise all voting, consensual and other powers
of ownership pertaining to the Stock Collateral for all purposes
not inconsistent with the terms of this Agreement, the Purchase
Agreement, the Notes or any other instrument or agreement referred
to herein or therein, provided that the Company agrees that it will
not vote the Stock Collateral in any manner that is inconsistent
with the terms of this Agreement, the Purchase Agreement, the Notes
or any such other instrument or agreement; and the Purchaser shall
execute and deliver to the Company or cause to be executed and
delivered to the Company all such proxies, powers of attorney,
dividend and other orders, and all such instruments, without
recourse, as the Company may reasonably request for the purpose of
enabling the Company to exercise the rights and powers which it is
entitled to exercise pursuant to this Section
4.04(a)(2).





 




(3)

Unless and until an
Event of Default has occurred and is continuing, the Company shall
be entitled to receive and retain any dividends on the Stock
Collateral paid in cash out of earned surplus.





 


 


 
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(4)

If any Event of
Default shall have occurred, then so long as such Event of Default
shall continue, and whether or not the Purchaser exercises any
available right to declare any Secured Obligations due and payable
or seeks or pursues any other relief or remedy available to it
under applicable law or under this Agreement, the Purchase
Agreement, the Notes or any other agreement relating to such
Secured Obligations, all dividends and other distributions on the
Stock Collateral shall be paid directly to the Purchaser and
retained by it as part of the Stock Collateral, subject to the
terms of this Agreement, and, if the Purchaser shall so request in
writing, the Company agrees to execute and deliver to the Purchaser
appropriate additional dividend, distribution and other orders and
documents to that end, provided that if such Event of Default is
cured, any such dividend or distribution theretofore paid to the
Purchaser shall, upon request of the Company (except to the extent
theretofore applied to the Secured Obligations) be returned by the
Purchaser to the Company.





 




b.

Intellectual
Property.





 




(1)

For the purpose of
enabling the Purchaser to exercise rights and remedies under
Section 4.05 hereof at such time as the Purchaser shall be lawfully
entitled to exercise such rights and remedies, and for no other
purpose, the Company hereby grants to the Purchaser, to the extent
assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to the Company) to
use, assign, license or sublicense any of the Intellectual Property
(other than the Trademark Collateral or goodwill associated
therewith) now owned or hereafter acquired by the Company, wherever
the same may be located, including in such license reasonable
access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the
compilation or printout thereof.





 




(2)

Notwithstanding
anything contained herein to the contrary, so long as no Event of
Default shall have occurred and be continuing and following notice
by the Purchaser of the termination of Company’s rights with
respect thereto, the Company will be permitted to exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or
take other actions with respect to the Intellectual Property in the
ordinary course of the business of the Company. In furtherance of
the foregoing, unless an Event of Default shall have occurred and
is continuing, the Purchaser shall from time to time, upon the
request of the Company, execute and deliver any instruments,
certificates or other documents, in the form so requested, which
the Company shall have certified are appropriate (in its judgment)
to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to clause (1)
immediately above as to any specific Intellectual Property).
Further, upon the payment in full of all of the Secured Obligations
or earlier expiration of this Agreement or release of the
Collateral, the Purchaser shall grant back to the Company the
license granted pursuant to clause (1) immediately above. The
exercise of rights and remedies under Section 4.05 hereof by the
Purchaser shall not terminate the rights of the holders of any
licenses or sublicenses theretofore granted by the Company in
accordance with the first sentence of this clause (2).





 


 


 
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4.05 Events
of Default, etc. During the period during which an Event of
Default shall have occurred and be continuing:

 




a.

the Company shall,
at the request of the Purchaser, assemble the Collateral owned by
it at such place or places, reasonably convenient to both the
Purchaser and the Company, designated in its request;





 




b.

the Purchaser may
make any reasonable compromise or settlement deemed desirable with
respect to any of the Collateral and may extend the time of
payment, arrange for payment in installments, or otherwise modify
the terms of, any of the Collateral;





 




c.

the Purchaser shall
have all of the rights and remedies with respect to the Collateral
of a secured party under the Uniform Commercial Code (whether or
not said Code is in effect in the jurisdiction where the rights and
remedies are asserted) and such additional rights and remedies to
which a secured party is entitled under the laws in effect in any
jurisdiction where any rights and remedies hereunder may be
asserted, including, without limitation, the right, to the maximum
extent permitted by law, to exercise all voting, consensual and
other powers of ownership pertaining to the Collateral as if the
Purchaser were the sole and absolute owner thereof (and the Company
agrees to take all such action as may be appropriate to give effect
to such right);





 




d.

the Purchaser in
its discretion may, in its name or in the name of the Company or
otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no
obligation to do so; and





 




e.

the Purchaser may,
upon 10 Business Days, prior written notice to the Company of the
time and place, with respect to the Collateral or any part thereof
which shall then be or shall thereafter come into the possession,
custody or control of the Purchaser, or any of its respective
Purchasers, sell, lease, assign or otherwise dispose of all or any
of such Collateral, at such place or places as the Purchaser deems
best, and for cash or on credit or for future delivery (without
thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to effect any
such disposition or of time or place thereof (except such notice as
is required above or by applicable statute and cannot be waived)
and the Purchaser or anyone else may be the purchaser, lessee,
assignee or recipient of any or all of the Collateral so disposed
of at any public sale (or, to the extent permitted by law, at any
private sale), and thereafter hold the same absolutely, free from
any claim or right of whatsoever kind, including any right or
equity of redemption (statutory or otherwise), of the Company, any
such demand, notice or right and equity being hereby expressly
waived and released. In the event of any sale, assignment, or other
disposition of any of the Trademark Collateral, the goodwill of the
Business connected with and symbolized by the Trademark Collateral
subject to such disposition shall be included, and the Company
shall supply to the Purchaser or its designee, for inclusion in
such sale, assignment or other disposition, all Intellectual
Property relating to such Trademark Collateral. The Purchaser may,
without notice or publication, adjourn any public or private sale
or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so
adjourned.





 


The
proceeds of each collection, sale or other disposition under this
Section 4.05, including by virtue of the exercise of the license
granted to the Purchaser in Section 4.04(b)(1) hereof, shall be
applied in accordance with Section 4.09 hereof.

 


 


 
-9-








 






 


The
Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable
state securities laws, the Purchaser may be compelled, with respect
to any sale of all or any part of the Collateral, to limit
purchasers to those who will agree, among other things, to acquire
the Collateral for their own account, for investment and not with a
view to the distribution or resale thereof. The Company
acknowledges that any such private sales to an unrelated third
party in an arm’s length transaction may be at prices and on
terms less favorable to the Purchaser than those obtainable through
a public sale without such restrictions, and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to
have been made in a commercially reasonable manner and that the
Purchaser shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of
time necessary to permit the respective Issuer thereof to register
it for public sale.

 

4.06 Deficiency.
If the proceeds of sale, collection or other realization of or upon
the Collateral pursuant to Section 4.05 hereof are insufficient to
cover the costs and expenses of such realization and the payment in
full of the Secured Obligations, the Company shall remain liable
for any deficiency.

 

4.07 Removals,
etc. Without at least 30 days’ prior written notice to
the Purchaser or unless otherwise required by law, the Company
shall not (i) maintain any of its books or records with respect to
the Collateral at any office or maintain its chief executive office
or its principal place of business at any place, or permit any
Inventory or Equipment to be located anywhere other than at the
address indicated for the Company in Section 7.4 of the Purchase
Agreement or at one of the locations identified in Annex 4 hereto or in transit
from one of such locations to another or (ii) change its corporate
name, or the name under which it does business, from the name shown
on the signature page hereto.

 

4.08 Private
Sale. The Purchaser shall incur no liability as a result of
the sale of the Collateral, or any part thereof, at any private
sale to an unrelated third party in an arm’s length
transaction pursuant to Section 4.05 hereof conducted in a
commercially reasonable manner. The Company hereby waives any
claims against the Purchaser arising by reason of the fact that the
price at which the Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a
public sale or was less than the aggregate amount of the Secured
Obligations, even if the Purchaser accepts the first offer received
and does not offer the Collateral to more than one
offeree.

 

4.09 Application
of Proceeds. Except as otherwise herein expressly provided,
the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at
the time held by the Purchaser under this Section 4, shall be
applied by the Purchaser:

 


First, to the payment of the
costs and expenses of such collection, sale or other realization,
including reasonable out-of-pocket costs and expenses of the
Purchaser and the fees and expenses of its Purchasers and counsel,
and all expenses, and advances made or incurred by the Purchaser in
connection therewith;

 


Next, to the payment in full of
the Secured Obligations in each case equally and ratably in
accordance with the respective amounts thereof then due and owing
to each of the Purchasers; and

 


Finally, to the payment to the
Company, or its successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then
remaining.

 


As used
in this Section 4, “proceeds” of Collateral
shall mean cash, securities and other property realized in respect
of, and distributions in kind of, Collateral, including any thereof
received under any reorganization, liquidation or adjustment of
debt of the Company or any issuer of or obligor on any of the
Collateral.

 


 


 
-10-








 






 

4.10 Attorney-in-Fact.
Without limiting any rights or powers granted by this Agreement to
the Purchaser while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any
Event of Default, the Purchaser is hereby appointed the
attorney-in-fact of the Company for the purpose of carrying out the
provisions of this Section 4 and taking any action and executing
any instruments which the Purchaser may deem necessary or advisable
to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, so long as the
Purchasers shall be entitled under this Section 4 to make
collections in respect of the Collateral, the Purchaser shall have
the right and power to receive, endorse and collect all checks made
payable to the order of the Company representing any dividend,
payment, or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.

 

4.11 Perfection.
(i) Concurrently with the execution and delivery of this Agreement
or within 10 Business Days following the date hereof, the Company
shall file such financing statements and other documents in such
offices as the Purchaser may reasonably request to perfect the
security interests granted by Section 3 of this Agreement that may
be perfected by such filing; (ii) the Company shall within 10
Business Days following the date hereof, grant control over any
Deposit Accounts to the Purchaser];and (iii) at any time requested
by the Purchaser, the Company shall deliver to the Purchaser all
share certificates of capital stock directly or indirectly owned by
the Company in the entities identified in Annex 1 hereto, accompanied by
undated stock powers duly executed in blank.

 

4.12 Termination.
When all Secured Obligations shall have been paid in full under the
Purchase Agreement, this Agreement shall terminate, and the
Purchaser shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of the Company and
to be released and cancelled all licenses and rights referred to in
Section 4.04(b)(1) hereof. The Purchaser shall also execute and
deliver to the Company upon such termination such Uniform
Commercial Code termination statements, certificates for
terminating the Liens on the Motor Vehicles and such other
documentation as shall be reasonably requested by the Company to
effect the termination and release of the Liens on the
Collateral.

 

4.13 Expenses.
The Company agrees to pay to the Purchaser all reasonable
out-of-pocket expenses (including reasonable expenses for legal
services of every kind) of, or incident to, the enforcement of any
of the provisions of this Section 4, or performance by the
Purchaser of any obligations of the Company in respect of the
Collateral which the Company has failed or refused to perform upon
reasonable notice, or any actual or attempted sale, or any
exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the
Purchaser in respect thereof, by litigation or otherwise, including
expenses of insurance, and all such expenses shall be Secured
Obligations to the Purchaser secured under Section 3
hereof.

 

4.14 Further
Assurances. The Company agrees that, from time to time upon
the written reasonable request of the Purchaser, the Company will
execute and deliver such further documents and do such other acts
and things as the Purchaser may reasonably request in order fully
to effect the purposes of this Agreement.

 

4.15 Indemnity.
Each of the Purchasers hereby jointly and severally covenants and
agrees to reimburse, indemnify and hold the Purchaser harmless from
and against any and all claims, actions, judgments, damages,
losses, liabilities, costs, transfer or other taxes, and expenses
(including, without limitation, reasonable attorneys’ fees
and expenses) incurred or suffered without any gross negligence,
bad faith or willful misconduct by the Purchaser, arising out of or
incident to any investigation, proceeding or litigation arising out
of this Agreement or the administration of the Purchaser’s
duties hereunder, or resulting from its actions or inactions as
Purchaser.

 

Section
5. Miscellaneous.

 

5.01 No
Waiver. No failure on the part of the Purchaser or any of
its Purchasers to exercise, and no course of dealing with respect
to, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise by the Purchaser or any of its Purchasers of
any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of
any remedies provided by law.

 


 


 
-11-








 






 

5.02 Governing
Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of Nevada.

 

5.03 Notices.
All notices, requests, consents and demands hereunder shall be in
writing and facsimile (facsimile confirmation required) or
delivered to the intended recipient at its address or telex number
specified pursuant to Section 7.4 of the Purchase Agreement and
shall be deemed to have been given at the times specified in said
Section 7.4.

 

5.04 Waivers,
etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the
Company and the Purchaser. Any such amendment or waiver shall be
binding upon each of the Purchasers and the Company.

 

5.05 Successors
and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the
Company and each of the Purchasers (provided, however, that the
Company shall not assign or transfer its rights hereunder without
the prior written consent of the Purchaser).

 

5.06 Counterparts.
This Agreement may be executed in any number of counterparts, all
of which together shall constitute one and the same instrument and
any of the parties hereto may execute this Agreement by signing any
such counterpart.

 

5.07 Purchaser.
Each Purchaser agrees to appoint Iroquois Master Fund Ltd. as its
Purchaser for purposes of this Agreement. The Purchaser may employ
Purchasers and attorneys-in-fact in connection herewith and shall
not be responsible for the negligence or misconduct of any such
Purchasers or attorneys-in-fact selected by it in good
faith.

 


Severability. If any provision
hereof is invalid and unenforceable in any jurisdiction, then, to
the fullest extent permitted by law, (i) the other provisions
hereof shall remain in full force and effect in such jurisdiction
and shall be liberally construed in favor of the Purchasers in
order to carry out the intentions of the parties hereto as nearly
as may be possible and (ii) the invalidity or unenforceability of
any provision hereof in any jurisdiction shall not affect the
validity or enforceability of such provision in any other
jurisdiction.

 


 
-12-








 






 

 


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

 


	
 

	
COMPANY:                                                                 

 

PETRO RIVER OIL
CORP.

 


By:
______________________________


Stephen
Brunner


President


 


 


 

PURCHASER:                                                                 

 

PETRO EXPLORATION
FUNDING II, LLC


 


By:
______________________________


Scot
Cohen


Manager








 

 







 


 Signature
Page to Security Agreement


 


 

-13-








 






ANNEX
1


 


ENTITIES
IN WHICH THE COMPANY IS PLEDGING ITS CAPITAL STOCK

 


                                                                                         
Approximate


Entity                                                                           
Percentage Interest


 

Megawest Kansas
Energy
Corp                                               
56%

 

Bandolier Energy
Group,
LLC                                                 
53%

 


 

 




 


 


 

-14-








 






ANNEX
2

 


EXCLUDED
COLLATERAL

 


 


 


 


None


 


 


 




 


 


 

-15-








 






ANNEX
3

 


LIST OF
LOCATIONS


 


 


 


 




 

-16-








 






ANNEX
4


 


PATENTS,
COPYRIGHTS AND TRADEMARKS


 

 


 


All
patents, copyrights and trademarks as set forth in the Companies
public filings.


 




 

-17-








 






ANNEX
5

 


PERMITTED
INDEBTEDNESS


 


Up to
$250,000 in the ordinary course of business.


$2 million promissory note
issued June 7, 2017 to Petro Exploration Funding, LLC


 


 




 

-18-








 






ANNEX
6

 


PERMITTED
LIENS


 


 

 


Up to
$250,000 in the ordinary course of business.

 


$2
million promissory note issued June 7, 2017 to Petro Exploration
Funding, LLC


 

 


 




 

-19-