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GENERAL SECURITY AGREEMENT

THIS
SECURITY AGREEMENT (as amended, modified, renewed, supplemented, replaced or
extended from time to time, this Agreement) dated this 8th
day of August, 2013, is made by and between CARDERO RESOURCE CORP., a
corporation existing under the laws of the Province of British Columbia (the
Borrower), and E.L. II Properties Trust and Kopple Family Partnership,
L.P. (collectively, the Lenders).

WHEREAS:

|A. | The Borrower is indebted to the Lenders pursuant to
      Senior Secured Notes (the Notes).                                                                                                                                                                                                                                                                                                                                 
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                               
|B. | As a condition precedent to the Lenders extending certain
      credit to the Borrower, the Borrower is required to execute and deliver
      this Agreement, and to grant to the Lenders and to create a security
      interest in all personal property of the Borrower, as hereinafter provided
      as security for the payment and performance of the obligations and
      liabilities of the Borrower to the Lenders.

NOW THEREFORE, to induce the Lenders to extend credit to
the Borrower, and in consideration thereof, and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
Borrower and the Lenders agree as follows:

|1. | DEFINITIONS; INTERPRETATION
|-- | ---------------------------
|   |                            
|   | 1.1                        
|   |                            
|   | 1.2                        

|2. | GRANT OF SECURITY INTEREST; COLLATERAL
|-- | --------------------------------------
|   |                                       
|   | 2.1                                   
|   |                                       
|   |                                       

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| | (b) | all (i) additional shares or other securities now or
      hereafter acquired by the Borrower, (ii) warrants, options or other rights
      now or hereafter acquired by the Borrower entitling the Borrower to
      acquire any interest in shares or other equity securities of or other
      equity interests, (iii) securities, property, interest, dividends and
      other payments and distributions issued as an addition to, in redemption
      of, in renewal or exchange for, in substitution or upon conversion of, or
      otherwise on account of, the Pledged Shares or such additional shares or
      other equity securities or other interests in the Borrower, and (iv) cash
      and non-cash proceeds and supporting obligations of or with respect to the
      Pledged Shares and any such Additional Pledged Share Collateral, in each
      case from time to time received or receivable by, or otherwise paid or
      distributed to or acquired by, the Borrower (the Additional Pledged
      Share Collateral and, together with the Pledged Shares, the
      Pledged Collateral);
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (c) | all accounts and book debts of the Borrower, chattel
      paper, documents of title, instruments, and intangibles of the Borrower,
      including all debts, dues, claims choses in action and demands of every
      nature and kind, howsoever arising or secured, including letters of
      credit, guarantees and advices of credit which are now due, owing or
      accruing or growing due to or owned by or which may hereafter become due,
      owing or accruing or growing due to or owned by the Borrower, whether or
      not arising out of or in connection with the sale or lease of goods or the
      rendering of services, and all supporting obligations of any or all of the
      forgoing (Accounts);                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (d) | all inventory of the Borrower, including all merchandise,
      goods and other personal property which are held for sale or lease or
      leased by the Borrower or to be furnished under a contract of service, all
      raw materials, work in process, materials used or consumed in the
      Borrowers business and finished goods, all goods in which the Borrower
      has an interest in mass or a joint or other interest or gifts of any kind
      (including goods in which the Borrower has an interest or right as
      consignee), and all goods which are returned to or repossessed by the
      Borrower, together with all additions and accessions thereto and
      replacements therefor and products thereof and documents therefor
      (Inventory);                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (e) | all goods and equipment of the Borrower and all parts
      thereof and all accessions, additions, attachments, improvements,
      substitutions and replacements thereto and therefor, including, all
      machinery, tools, dies, blueprints, catalogues, computer hardware and
      software, furniture, furnishings, vehicles and fixtures
      (Equipment);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (f) | Borrower does hereby charge as and by way of a floating
      charge, and grant to the Lenders a security interest in and to all the
      Borrower's right, title and interest in and to all its presently owned or
      held and after acquired or held real, immovable and leasehold property and
      all interests therein, and all easements, rights-of-way, privileges,
      benefits, licences, improvements and rights whether
connected therewith or appurtenant thereto or separately owned or held,
including all structures, plant and other fixtures (all which is hereinafter
collectively called the Real Property).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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For the purposes of Section 203 of the
Land Title Act (British Columbia), the floating charge created by this Security
Agreement over Real Property shall become a fixed charge thereon upon the
earliest of:

| | (i)  | the occurrence of an event of default; or                                                                                 
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| |      |                                                                                                                           
| | (ii) | the Lenders taking any action to enforce and realize on
      the Security Interests created by this Security
  Agreement,

| | (g) | all money maintained in a deposit account in the
      Borrowers name with any financial institution, and all certificates,
      instruments and other writings, if any, from time to time representing,
      evidencing or deposited into such accounts, and all interest, dividends,
      cash, instruments and other property from time to time received,
      receivable or otherwise distributed in respect of or in exchange for any
      or all of the foregoing;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (h) | all now existing and hereafter arising contracts and
      agreements to which the Borrower is party (each, an Assigned
      Agreement), including, without limitation, all rights of the Borrower
      to receive moneys due and to become due under or pursuant to the Assigned
      Agreements, all rights of the Borrower to receive proceeds of any
      insurance, indemnity, warranty or guaranty with respect to the Assigned
      Agreements, all claims of the Borrower for damages arising out of or for
      breach of or default under the Assigned Agreements, and all rights of the
      Borrower to terminate, amend, supplement or modify the Assigned
      Agreements, to perform thereunder and to compel performance and otherwise
      exercise all remedies thereunder; provided, however,that with
      respect to any such contract or agreement where the grant of a security
      interest in the Borrowers right, title and interest therein is prohibited
      by the terms thereof, or would give any other party the right to terminate
      its obligations thereunder, or is not permitted because any necessary
      consent to such grant has not been obtained, the Borrower Collateral shall
      include only the rights of the Borrower to receive moneys due and to
      become due, if any, under or pursuant to such contract or
  agreement;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (i) | all books, records, writings, data bases, information and
      other property relating to, used or useful in connection with, embodying,
      incorporating or referring to, any of the foregoing Borrower
      Collateral;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (j) | all cash and cash equivalents held by the Borrower not
      otherwise included in the foregoing Borrower Collateral;
  and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| | (k) | all products and proceeds of the foregoing Borrower
      Collateral (with the term proceeds having the meaning provided in
      the PPSA and also including any voluntary or involuntary disposition, and
      all rights to payment, including return premiums, with respect to any
      insurance).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.2 | Excluded Collateral. Notwithstanding Section 2.1,
      the Borrower Collateral shall not include: (a) any property held in trust
      by the Borrower and/or lawfully belonging to others, (b) the last day of
      the term of any lease of real property, provided that the Borrower shall
      stand possessed of such last day and shall assign and transfer such
      interest as instructed by the Lenders; (c) the interests described in the
      proviso to Section 2.1(h); or (d) any consumer goods used as such by the
      Borrower.                                                                                                                                                                                                                                                                                                                                                                 
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 2.3 | Borrower Remains Liable. Anything herein to the
      contrary notwithstanding, (a) the Borrower shall remain liable under all
      Assigned Agreements, to the extent set forth therein, to perform all of
      its duties and obligations thereunder to the same extent as if this
      Agreement had not been executed, (b) the exercise by the Lenders of any of
      the rights hereunder shall not release the Borrower from any of its duties
      or obligations under such Assigned Agreements, and (c) the Lenders shall
      not have any obligation or liability under any Assigned Agreements by
      reason of this Agreement, nor shall the Lenders be obligated to perform
      any of the obligations or duties of the Borrower thereunder or to take any
      action to collect or enforce any such contract, agreement or other
      document included in the Borrower Collateral hereunder.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 2.4 | Continuing Security Interest. The Borrower agrees
      that this Agreement shall create a general collateral continuing security
      interest in the Borrower Collateral which shall remain in effect until
      terminated in accordance with Section 9.13.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 2.5 | Attachment.The Borrower and the Lenders intend
      that the security interest created hereby attaches to existing Borrower
      Collateral upon the execution of this Agreement and that the security
      interest will attach to Borrower Collateral acquired after the effective
      time of this Agreement at the time that the Borrower acquires rights in
      that Borrower Collateral. The Borrower and the Lenders agree that value
      has been given. The Borrower represents and warrants that it has rights in
      the existing Borrower Collateral.                                                                                                                                                                                                                                                                                                                                             

3.SECURED OBLIGATIONS

The
obligations secured by this Agreement shall consist of all indebtedness,
obligations and liabilities of the Borrower to the Lenders, including, without
limitation, those arising under the Transaction Documents, whether now existing
or hereafter arising, as principal or surety, voluntary or involuntary, whether
or not jointly owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, together with all
expenses (including legal fees on a solicitor and client basis) incurred by the
Lenders, their receiver, receiver-manager or agent in the preparation,
perfection and enforcement of security and other agreements held by the Lenders in respect of such obligations and liabilities and
interest thereon (all of which obligations, liabilities, expenses and interest
are referred to collectively as the Secured Obligations).

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**4.**       **REPRESENTATIONS AND WARRANTIES**

In
addition to all representations and warranties of the Borrower and all schedules
related thereto or referenced therein, as the case may be, set forth in the
Transaction Documents and any other document executed and delivered by the
Borrower in connection therewith (collectively, the Documents), which
are incorporated herein by this reference, the Borrower hereby represents and
warrants that:

| | 4.1 | Sole Owner. The Borrower is the sole owner of and
      has good and marketable title to the Borrower Collateral (or will be the
      sole owner of and will have good and marketable title to, in the case of
      after-acquired Borrower Collateral).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.2 | No Adverse Claim. Except as disclosed to the
      Lenders in writing, no Person has (or, in the case of after-acquired
      Borrower Collateral, at the time the Borrower acquires rights therein,
      will have) any right, title, claim or interest (by way of security
      interest or other Lien) in, against or to the Borrower Collateral other
      than Permitted Encumbrances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.3 | Full Disclosure. All information heretofore,
      herein or hereafter supplied to the Lenders by or on behalf of the
      Borrower with respect to the Borrower Collateral is accurate and complete
      in all material respects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.4 | Delivery of Borrower Collateral. The Borrower has
      delivered to the Lenders all instruments and chattel paper and other items
      of Borrower Collateral in which a security interest is or may be perfected
      by possession, together with such additional writings, including
      assignments, with respect thereto as the Lenders shall request.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.5 | Chief Executive Office; Trade Names; Collateral
      Location; Records Location. The Borrowers chief executive office is
      set forth on Schedule 1; the only trade name(s) or style(s) used by
      the Borrower are set forth on Schedule 1; and, except as otherwise
      disclosed on Schedule 1, the Borrower Collateral and the Borrowers
      records concerning the Borrower Collateral are located at its chief
      executive office. Except as set forth in Schedule 1, the Borrower
      has not, at any time in the past: (a) been known as or used any other
      corporate, trade or fictitious name; (b) changed its name; (c) been the
      surviving or resulting corporation in a merger or consolidation; or (d)
      acquired through asset purchase or otherwise any business of any
      Person.                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.6 | Enforceability; Priority of Security Interest. (a)
      This Agreement creates a security interest which is enforceable against
      the Borrower Collateral in which the Borrower now has rights and will
      create a security interest which is enforceable against the Borrower
      Collateral in which the Borrower hereafter acquires rights at the time the
      Borrower acquires any such rights; and (b) other than
  Permitted Encumbrances, the Lenders have a perfected and first
      priority security interest in the Borrower Collateral, in which the
      Borrower now has rights, and, subject to Permitted Encumbrances, will have
      a perfected and first priority security interest in the Borrower
      Collateral in which the Borrower hereafter acquires rights at the time the
      Borrower acquires any such rights, in each case securing the payment and
  performance of the Secured Obligations.

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| | 4.7 | Other Financing Statements. Other than (a)
      financing statements disclosed to, and searches conducted by, the Lenders
      and (b) financing statements in favor of the Lenders, no effective
      financing statement naming the Borrower as debtor, assignor, grantor,
      mortgagor, pledgor or the like and covering all or any part of the
      Borrower Collateral is on file in any filing or recording office in any
      jurisdiction.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 4.8 | Rights to Payment.                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | (a) | The Accounts and any and all of the Borrowers rights and
      claims to the payment or receipt of money or other forms of consideration
      of any kind in, to and under or with respect to its chattel paper,
      documents of title, intangibles, instruments, proceeds and supporting
      obligations (collectively, Rights to Payment) represent valid,
      binding and enforceable obligations of the account debtors or other
      Persons obligated thereon, representing undisputed, bona fidetransactions completed in accordance with the terms and provisions
      contained in any documents related thereto, and are and will be genuine,
      free from any Lien (other than Permitted Encumbrances) and not subject to
      any adverse claims, counterclaims, setoffs, defaults, disputes, defenses,
      discounts, retainages, holdbacks or conditions precedent of any kind of
      character, except to the extent reflected by the Borrowers reserves for
      uncollectible Rights to Payment or to the extent, if any, that such
      account debtors or other Persons may be entitled to normal and ordinary
      course trade discounts, returns, adjustments and allowances in accordance
      with Section 5.13, or as otherwise disclosed to the Lenders in
    writing;
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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (b) | to the best of the Borrowers knowledge, all account
      debtors and other obligors on the Rights to Payment are solvent and
      generally paying their debts as they come due;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (c) | all Rights to Payment comply with all applicable laws
      concerning form, content and manner of preparation and execution,
      including where applicable any federal or state consumer credit
    laws;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d) | the Borrower has not assigned any of its rights under the
      Rights to Payment other than Permitted Encumbrances as provided in this
      Agreement or as set forth in the other Transaction
  Documents;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| | (e) | all statements made, all unpaid balances and all other
      information in the Borrowers books and other documentation relating to
      the Rights to Payment are true and correct and in all material respects
      what they purport to be; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                      
| | (f) | the Borrower has no knowledge of any material fact or
      circumstance which would impair the validity or collectibility of any of
      the Rights to Payment.                                                                                    

| | 4.9  | Inventory. No inventory is stored with any bailee,
      warehouseman or similar Person or on any premises leased to the Borrower,
      nor has any inventory been consigned to the Borrower or consigned by the
      Borrower to any Person or is held by the Borrower for any Person under any
      bill and hold or other arrangement, except as set forth in
      Schedule 1.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                        
| | 4.10 | Equipment.                                                                                                                                                                                                                                                                                                                                                                             

| | (a) | none of the Equipment or other Borrower Collateral is
      affixed to real property except Borrower Collateral with respect to which
      the Borrower has supplied the Lenders with all information and
      documentation necessary to make all fixture filings required to perfect
      and protect the priority of the Lenders security interest in all such
      Borrower Collateral which may be fixtures as against all Persons having an
      interest in the premises to which such property may be affixed;
  and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (b) | none of the Equipment is leased from or to any Person,
      except as otherwise disclosed to the Lenders in writing or revealed in
      public searches.                                                                                                                                                                                                                                                                                                                                                                        

| | 4.11 | Valid Issuance of Pledged Collateral. All the
      Pledged Shares have been, and upon issuance any Additional Pledged Share
      Collateral will be, duly and validly issued, and are and will be fully
      paid and non assessable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 4.12 | Capitalization of the Pledged Subsidiary. The
      Pledged Shares constitute 100% of the issued and outstanding shares of
      capital stock and other ownership interests of the various issuers owned
      by the Borrower (which, as of the date hereof, constitutes 100% of the
      issued and outstanding shares of capital stock and other ownership
      interests of each issuer).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 4.13 | Options, Warrants, Etc. Other than as set out in
      the Disclosure Record, no securities convertible into or exchangeable for
      any shares of capital stock or other ownership interests of any issuer, or
      any options, warrants or other commitments entitling any Person to
      purchase or otherwise acquire any shares of capital stock or other
      ownership interests of any issuer, are issued and outstanding. For the
      purposes of this Section 4.13 Disclosure Record means all
      information circulars, prospectuses (including preliminary prospectuses),
      annual information forms, offering memoranda, financial statements,
      managements discussion and analysis, technical reports, material change
      reports and news releases filed with the Exchanges and/or the securities regulatory
      authorities in British Columbia, Alberta and Ontario on or during the 12
  months preceding the date hereof.

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| | 4.14 | Transfer Restrictions. Other than pursuant to or
      disclosed by or in the Transaction Documents, there are no restrictions on
      the transferability of the Pledged Shares to the Lenders or with respect
      to the foreclosure, transfer or disposition thereof by the
  Lenders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.15 | Shareholders Agreements. There are no
      shareholders, partners or members agreements, voting trusts, proxy
      agreements or other agreements or understandings which affect or relate to
      the voting or giving of written consents with respect to any of the
      Pledged Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.16 | No Violation of Securities Laws. None of the
      shares in the capital of the Borrower or the Pledged Shares has been
      issued, converted or transferred in violation of the securities
      registration, securities disclosure or similar laws of any jurisdiction to
      which they may be subject.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.17 | Control Agreements. No control agreements exist
      with respect to any Borrower Collateral other than any control agreements
      in favor of the Lenders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4.18 | Leases. The Borrower is not and will not become a
      lessee under any real property lease or enter into any customer agreement
      or other agreement governing the location of Borrower Collateral at the
      premises of another Person pursuant to which the lessor or such other
      Person may obtain any rights in any of the Borrower Collateral, and no
      such lease or other such agreement now prohibits, restrains, impairs or
      will prohibit, restrain or impair such Borrowers right to remove any
      Borrower Collateral from the premises at which such Borrower Collateral is
      situated, except for the usual and customary restrictions contained in
      such leases of real property and those disclosed to the Lenders prior to
      the date of this Agreement.

**5.**      
**COVENANTS AND AGREEMENTS**

In
addition to all covenants and agreements of the Borrower set forth in the other
Documents, which are incorporated herein by this reference, the Borrower hereby
agrees, at no cost or expense to the Lenders:

| | 5.1 | Preservation of Security Interest. To do all acts
      (other than acts which are required to be done by the Lenders) that may be
      necessary to maintain, preserve and protect the Borrower Collateral and
      the first (subject to Permitted Encumbrances) priority, perfected security
      interest of the Lenders therein.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                         
| | 5.2 | Actions and Proceedings. To appear in and defend
      any action or proceeding which may affect its title to or the Lenders
      interest in the Borrower Collateral as reasonably requested by the Lenders
      or as is reasonable and appropriate in accordance with prudent business
      practice.                            

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| | 5.3 | Use of Collateral. Not to use any Borrower
      Collateral, or permit any Borrower Collateral to be used, unlawfully or in
      violation of any provision of this Agreement, any other agreement with the
      Lenders related hereto, or any law, rule, regulation, order, writ,
      judgment, injunction, decree or award binding on the Borrower or affecting
      any of the Borrower Collateral or any contractual obligation affecting any
      of the Borrower Collateral.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 5.4 | Shareholders Agreements. Other than as permitted
      in any of the other Transaction Documents, the Borrower will not amend the
      any existing shareholder agreement or enter into any other partners or
      members agreement, voting trust, proxy agreement or other agreement or
      understanding which affects or relates to the voting or giving of written
      consents with respect to any of the shares in the capital of the Borrower
      or the Pledged Shares without the prior written consent of the
    Lenders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 5.5 | Issuance of Additional Shares. The Borrower will
      not consent to or approve, or allow Cardero Coal Ltd. (the
      Guarantor) to consent to or approve, the issuance to any person
      or entity of any additional shares of any class of capital stock or other
      ownership interests of the Guarantor, or of any securities convertible
      into or exchangeable for any such shares or other ownership interests, or
      any warrants, options or other rights to purchase or otherwise acquire any
      such shares or other ownership interests, except as approved in writing by
      the Lenders or to another subsidiary of the Borrower provided they remain
      as Pledged Shares.                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 5.6 | Transfer of Collateral; Liens. Not to surrender or
      lose possession of (other than to the Lenders), sell, encumber, lease,
      rent, or otherwise dispose of or transfer any Borrower Collateral or right
      or interest therein except as expressly provided herein or in the other
      Transaction Documents, and to keep the Borrower Collateral free of all
      Liens except Permitted Encumbrances and as expressly permitted by the
      Transaction Documents or otherwise approved in writing by the Lenders;
      provided, however,that, unless an Event of Default shall have
      occurred under the Notes and has not been waived in writing (each an
      Event of Default), the Borrower may, in the ordinary course of
      business, sell or lease (provided it registers and perfects any financing
      lease or conditional sale agreement in accordance with applicable law) any
      Borrower Collateral consisting of inventory and consisting of equipment in
      accordance with the provisions of the Notes.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | 5.7 | Delivery of Collateral. To account fully for and
      promptly deliver to the Lenders, in the form received, all documents,
      chattel paper, all certificated securities with respect to investment
      property, instruments and agreements constituting Borrower Collateral
      hereunder, and all proceeds of the Borrower Collateral received, all
      endorsed to the Lenders or in blank, as requested by the Lenders, and
      accompanied by such stock powers as appropriate and until so delivered all
      such documents, instruments, agreements and proceeds shall be held by the
      Borrower in trust for the Lenders, separate from all other property of the
      Borrower.                                                                                                                                                                                                                                                                                                                                                  

---

| | 5.8  | Records. To keep separate, accurate and complete
      records of the Borrower Collateral and to provide the Lenders with such
      records and such other reports and information relating to the Borrower
      Collateral as the Lenders may reasonably request from time to time. To
      keep the records concerning the Borrower Collateral at the location(s)
      referred to in Section 4.5 and not to remove such records from such
      location(s) without the prior written consent of the Lenders.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 5.9  | Chief Executive Office; Names. To give the Lenders
      30 days prior written notice of any change in the Borrowers chief
      executive office or legal name or trade name(s) or style(s) referred to in
      Section 4.5.                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 5.10 | Location of Collateral. To keep the Borrower
      Collateral at the location(s) described in Section 4.5 and not to remove
      the Borrower Collateral from such locations (other than disposals of
      Borrower Collateral expressly permitted by the Transaction Documents or
      hereunder).                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 5.11 | Maintenance of Collateral. To keep the Borrower
      Collateral in good condition and repair and not to cause or permit any
      waste or unusual or unreasonable depreciation of the Borrower
      Collateral.                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 5.12 | Leased Premises. At the Lenders request, to use
      commercially reasonable efforts to obtain from each Person from whom the
      Borrower leases any premises or supplies any goods to at which any
      Borrower Collateral is at any time present such collateral access,
      subordination, waiver, consent and estoppel agreements as the Lenders may
      require, in form and substance satisfactory to the Lenders.                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 5.13 | Rights to Payment. To:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

---

| | (c) | if any discount, allowance, credit, extension of time for
      payment, agreement to make a rebate or otherwise to reduce the amount
      owing on, or compromise or settle, an Account or other Right to Payment
      exists or occurs, or if, to the knowledge of the Borrower, any dispute,
      setoff, claim, counterclaim or defense exists or has been asserted or
      threatened with respect to an Account or other Right to Payment, disclose
      such fact fully to the Lenders in the books relating to such Account or
      other Right to Payment and in connection with any invoice or report
      furnished by the Borrower to the Lenders relating to such Account or other
      Right to Payment;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (d) | if any Accounts arise from contracts with the government
      of the United States or any department, agency or instrumentality thereof,
      or the government of Canada, immediately notify the Lenders thereof and
      execute any documents and instruments and take any other steps requested
      by the Lenders in order that all monies due and to become due thereunder
      shall be assigned to the Lenders and notice thereof given to the
      appropriate authorities under the Federal Assignment of Claims Actof the United States or the Financial Administration Actof
      Canada;                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (e) | in accordance with its sound business judgment perform
      and comply in all material respects with its obligations in respect of the
      Accounts and other Rights to Payment;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (f) | upon the request of the Lenders (i) at any time, notify
      all or any designated portion of the account debtors and other obligors on
      the Rights to Payment of the security interest hereunder, and (ii) upon
      the occurrence of an Event of Default that is not waived in writing by the
      Lenders, notify the account debtors and other obligors on the Rights to
      Payment or any designated portion thereof that payment shall be made
      directly to the Lenders or to such other Person or location as the Lenders
      shall specify; and                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (g) | upon the occurrence and during the continuance of any
      Event of Default, at the option of the Lenders, establish such lockbox or
      similar arrangements for the payment of the Accounts and other Rights to
      Payment as the Lenders shall require.                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| | 5.14 | Inventory. To:
| | ---- | --------------
| |      |               
| |      | (a)           
| |      |               
| |      | (b)           
| |      |               
| |      | (c)           

---

| | 5.15 | License Agreement and Other Assigned Agreements.
      To:
| | ---- | ----------------------------------------------------------
| |      |                                                           
| |      | (a)                                                       
| |      |                                                           
| |      | (b)                                                       

|6. | AUTHORIZED ACTION BY THE LENDERS; RIGHTS TO
      PAYMENT
|-- | ---------------------------------------------------------
|   |                                                          
|   | 6.1                                                      
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          
|   |                                                          

---

The foregoing power of attorney is coupled with an interest and
irrevocable so long as the Lenders have any obligation to make any credit
facility available or the Secured Obligations have not been indefeasibly paid
and performed in full. The Borrower hereby ratifies, to the extent permitted by
law, all that the Lenders shall lawfully and in good faith do or cause to be
done by virtue of and in compliance with this Section 6.1. The Borrower agrees
to reimburse the Lenders upon demand for any costs and expenses, including
reasonable attorneys fees, the Lenders may incur while acting as the Borrowers
attorney-in-fact hereunder, all of which costs and expenses are included in the
Secured Obligations.

| | 6.2 | Collection of Rights to Payment. Until the Lenders
      exercise their rights hereunder to collect Rights to Payment, the Borrower
      shall endeavor in the first instance diligently to collect all amounts due
      or to become due on or with respect to the Rights to Payment. At the
      request of the Lenders, upon and after the occurrence of any Event of
      Default which has not been waived in writing, all remittances received by
      the Borrower shall be held in trust for the Lenders and, in accordance
      with the Lenders instructions, remitted to the Lenders in the form
      received (with any necessary endorsements or instruments of assignment or
      transfer).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 6.3 | Investment Property and Instruments. Upon and
      after the occurrence of any Event of Default, the Lenders shall be
      entitled to receive all distributions and payments of any nature with
      respect to any investment property or instruments, and all such
      distributions or payments received by the Borrower shall be held in trust
      for the Lenders and, in accordance with the Lenders instructions,
      remitted to the Lenders in the form received (with any necessary
      endorsements or instruments of assignment or transfer). Following the
      occurrence of an Event of Default which has not been waived in writing,
      any such distributions and payments with respect to any investment
      property held in any securities account shall be held and retained in such
      securities account, in each case as part of the Borrower Collateral
      hereunder. Additionally, the Lenders shall have the right, upon the
      occurrence of an Event of Default which has not been waived in writing,
      following prior written notice to the Borrower, to vote and to give
      consents, ratifications and waivers with respect to any investment
      property and instruments of the Borrower, and to exercise all rights of
      conversion, exchange, subscription or any other rights, privileges or
      options pertaining thereto, as if the Lenders were the absolute owner
      thereof; providedthat the Lenders shall have no duty to exercise
      any of the foregoing rights afforded to it and shall not be responsible to
      the Borrower or any other Person for any failure to do so or delay in
      doing so.

|7. | REMEDIES; NOTICE OF SALE; RECEIVERS
|-- | -----------------------------------
|   |                                    
|   | 7.1                                

---

| | (a) | foreclose or otherwise enforce the Lenders security
      interest in any manner permitted by law or provided for in this
      Agreement;                                                                                                                                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (b) | sell, lease or otherwise dispose of any Borrower
      Collateral at one or more public or private sales at the Lenders place of
      business or any other place or places, including any brokers board or
      securities exchange, whether or not such Borrower Collateral is present at
      the place of sale, for cash or credit or future delivery, on such terms
      and in such manner as the Lenders may determine;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (c) | recover from the Borrower all costs and expenses,
      including reasonable attorneys fees and disbursements, incurred or paid
      by the Lenders in exercising any right, power or remedy provided by this
      Agreement;                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (d) | require the Borrower to assemble the Borrower Collateral
      and make it available to the Lenders at a place to be designated by the
      Lenders;                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (e) | enter onto property where any Borrower Collateral is
      located and take possession thereof with or without judicial process;
      and                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (f) | prior to the disposition of the Borrower Collateral,
      store, process, repair or recondition it or otherwise prepare it for
      disposition in any manner and to the extent the Lenders deems appropriate
      and in connection with such preparation and disposition, without charge,
      use any trade-mark, tradename, copyright, patent or technical process used
      by the Borrower.                              

| | 7.2 | Notice of Sale. The Borrower shall be given 20
      calendar days prior notice of the time and place of any public sale or of
      the time after which any private sale or other intended disposition of
      Borrower Collateral is to be made, which notice the Borrower hereby agrees
      shall be deemed reasonable notice thereof. Upon any sale or other
      disposition pursuant to this Agreement, the Lenders shall have the right
      to deliver, assign and transfer to the purchaser thereof the Borrower
      Collateral or portion thereof so sold or disposed of. The Lenders shall
      have the right upon any public sale, and, to the extent permitted by law,
      upon any private sale, to purchase the whole or any part of the Borrower
      Collateral so sold. Each purchaser at any such sale or other disposition
      (including the Lenders) shall hold the Borrower Collateral free from any
      claim or right of whatever kind, including any equity or right of
      redemption of the Borrower and the Borrower specifically waives (to the
      extent permitted by law) all rights of redemption, stay or appraisal which
      it has or may have under any rule of law or statute now existing or
      hereafter adopted.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 7.3 | License. For the purpose of enabling the Lenders
      to exercise their rights and remedies under this Section 7.3 or otherwise
      in connection with this Agreement, the Borrower hereby grants to the
      Lenders an irrevocable, non-exclusive and assignable license (exercisable
      without payment or royalty or other compensation to the Borrower) or (to
      the extent permitted by the applicable license)
  sublicense to use, license or sublicense any Intellectual Property
      Collateral, subject with respect to trade-marks to reasonable and
  appropriate quality control provisions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

---

| | 7.4 | Appointment of Receiver. Upon the occurrence of an
      Event of Default which has not been waived in writing, the Lenders may, in
      addition to any other rights it may have, appoint by instrument in writing
      a receiver or receiver and manager (both of which are herein called a
      Receiver) of all or any part of the Borrower Collateral or may
      institute proceedings in any court of competent jurisdiction for the
      appointment of such a Receiver. Any such Receiver is hereby given and
      shall have the same powers and rights and exclusions and limitations of
      liability as the Lenders have under this Agreement, at law or in equity.
      In exercising any such powers, any such Receiver shall, to the extent
      permitted by law, act as and for all purposes shall be deemed to be the
      agent of the Borrower and the Lenders shall not be responsible for any act
      or default of any such Receiver. The Lenders may appoint one or more
      Receivers hereunder and may remove any such Receiver or Receivers and
      appoint another or others in his or their stead from time to time. Any
      Receiver so appointed may be an officer or employee of the Lenders. A
      court need not appoint, ratify the appointment by the Lenders of or
      otherwise supervise in any manner the actions of any Receiver. Upon the
      Borrower receiving notice from the Lenders of the taking of possession of
      the Borrower Collateral or the appointment of a Receiver, all powers,
      functions, rights and privileges of the Borrower and, to the extent
      permitted by law, its directors and officers with respect to the Borrower
      Collateral shall cease, unless specifically continued by the written
      consent of the Lenders.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 7.5 | Carrying on BusinessUpon the occurrence of an
      Event of Default which has not been waived in writing, the Lenders may
      carry on, or concur in the carrying on of, all or any part of the business
      or undertaking of the Borrower, may, subject to the rights and liens of
      third parties but to the exclusion of the Borrower, enter upon, occupy and
      use all or any of the premises, buildings, plant and undertakings of or
      occupied or used by the Borrower and may use all or any of the tools,
      machinery, equipment and intangibles of the Borrower for such time as the
      Lenders sees fit, free of charge, to carry on the business of the Borrower
      and, if applicable, to manufacture or complete the manufacture of any
      Inventory and to pack and ship the finished product.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 7.6 | Dealing with Borrower CollateralUpon the
      occurrence of an Event of Default which has not been waived in writing,
      the Lenders may seize, collect, realize, dispose of, enforce, release to
      third parties or otherwise deal with the Borrower Collateral or any part
      thereof in such manner, upon such terms and conditions and at such time or
      times as may seem to it advisable, all without notice to the Borrower
      except as otherwise required by any applicable law. The Lenders may
      demand, sue for and receive any Accounts with or without notice to the
      Borrower, give such receipts, discharges and extensions of time and make
      such compromises in respect of any Accounts which may, in the Lenders
      absolute discretion, seem bad or doubtful. The Lenders may charge on their
      own behalf and pay to others, sums for costs and expenses incurred
      including, without limitation, legal fees and expenses on a solicitor and his own client scale and
      Receivers and accounting fees, in or in connection with seizing,
      collecting, realizing, disposing, enforcing or otherwise dealing with the
      Borrower Collateral and in connection with the protection and enforcement
      of the rights of the Lenders hereunder including, without limitation, in
      connection with advice with respect to any of the foregoing. The amount of
      such sums shall be deemed advanced to the Borrower by the Lenders, shall
      become part of the Secured Obligations, shall bear interest at the highest
      rate per annum charged by the Lenders on the Secured Obligations or any
      part thereof and shall be secured by this Agreement.                                                                                     

---

| | 7.7  | Right to UseThe Borrower hereby grants to the
      Lenders a license or other right, upon the occurrence of an Event of
      Default which has not been waived in writing, to use, without charge, all
      of the Borrowers present and future property, whether real or personal,
      including, without limitation, labels, patents, copyrights, rights of use
      of any name, trade secrets, trade names, trade-marks, services marks, and
      advertising matter, or any other property of any nature or of a similar
      nature, as it pertains to the Borrower Collateral, in completing
      production of, advertising for sale, and selling of any Borrower
      Collateral and the Borrowers rights under all licenses and all franchise
      agreements shall inure to the Lenders.                                                                                                                                                     
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 7.8  | Retention of Borrower CollateralUpon notice to
      the Borrower and subject to any obligation to dispose of any of the
      Borrower Collateral, as provided in the PPSA, the Lenders may elect to
      retain all or any part of the Borrower Collateral in satisfaction of the
      Secured Obligations or any of them.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 7.9  | Pay Liens.The Lenders may pay any Liens that may
      exist or be threatened against the Borrower Collateral. In addition, the
      Lenders may borrow money required for the maintenance, preservation or
      protection of the Borrower Collateral or for the carrying on of the
      business or undertaking of the Borrower and may grant further security
      interests in the Borrower Collateral in priority to the security interest
      created hereby as security for the money so borrowed. In every such case
      the amounts so paid or borrowed together with costs, charges and expenses
      incurred in connection therewith shall be deemed to have been advanced to
      the Borrower by the Lenders, shall become part of the Secured Obligations,
      shall bear interest at the highest rate per annum charged by the Lenders
      on the Secured Obligations or any part thereof and shall be secured by
      this Agreement.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 7.10 | Application of Payments.Any and all payments made
      in respect of the Secured Obligations from time to time and moneys
      realized on the Borrower Collateral may be applied to such part or parts
      of the Secured Obligations as the Lenders may see fit. The Lenders shall,
      at all times and from time to time, have the right to change any
      appropriation as it may see fit. Any insurance moneys received by the
      Lenders pursuant to this Agreement may, at the option of the Lenders, be
      applied against the Secured Obligations as the Lenders thinks
  fit.                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 7.11 | Set-off.The Secured Obligations will be paid by
      the Borrower without regard to any equities between the Borrower and the
      Lenders or any right of set-off or cross-claim. If an Event of Default exists, any
      indebtedness owing by the Lenders to the Borrower may be set off and
      applied by the Lenders against the Secured Obligations either before or
      after maturity, without demand upon or notice to anyone and regardless of
      the currency in which the indebtedness is denominated.                                                                                                                                                                                                                                                                                                                                                                                                                                        

---

| | 7.12 | Deficiency.If the proceeds of the realization of
      the Borrower Collateral are insufficient to repay the Lenders all amounts
      owing to it, the Borrower shall forthwith pay such deficiency or cause
      such deficiency to be paid to the Lenders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 7.13 | Lenders Not LiableThe Lenders shall not be liable
      or accountable for any failure to seize, collect, realize, dispose of,
      enforce or otherwise deal with the Borrower Collateral, shall not be bound
      to institute proceedings for any such purposes or for the purpose of
      preserving any rights of the Lenders, the Borrower or any other person,
      firm or corporation in respect of the Borrower Collateral and shall not be
      liable or responsible for any loss, cost or damage whatsoever which may
      arise in respect of any such failure including, without limitation,
      resulting from the negligence of the Lenders or any of their officers,
      servants, agents, solicitors, attorneys, Receivers or otherwise unless
      arising from gross negligence or wilful misconduct. Neither the Lenders
      nor their officers, servants, agents, or Receivers shall be liable by
      reason of any entry into possession of the Borrower Collateral or any part
      thereof, to account as a mortgagee in possession, for anything except
      actual receipts, for any loss on realization, for any act or omission for
      which a mortgagee in possession might be liable, for any negligence in the
      carrying on or occupation of the business or undertaking of the Borrower
      or for any loss, cost, damage or expense whatsoever which may arise in
      respect of any such actions, omissions or negligence unless arising from
      gross negligence or wilful misconduct.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 7.14 | Extensions of TimeThe Lenders may grant renewals,
      extensions of time and other indulgences, take and give up securities,
      accept compositions, grant releases and discharges, perfect or fail to
      perfect any securities, release any part of the Borrower Collateral to
      third parties and otherwise deal or fail to deal with the Borrower,
      subsidiaries of the Borrower, guarantors, sureties and others and with the
      Borrower Collateral and other securities as the Lenders may see fit, all
      without prejudice to the liability of the Borrower to the Lenders or the
      Lenders rights and powers under this Security Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 7.15 | Rights in AdditionThe rights and powers conferred
      by this Section are in supplement of and in addition to and not in
      substitution for any other rights or powers the Lenders may have from time
      to time under this Agreement or under applicable law. The Lenders may
      proceed by way of any action, suit, remedy or other proceeding at law or
      in equity and no such remedy for the enforcement of the rights of the
      Lenders shall be exclusive of or dependent on any other such remedy. Any
      one or more of such remedies may from time to time be exercised separately
      or in combination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|8. | PERFECTION AND PRIORITY
|-- | -----------------------
|   |                        
|   | 8.1                    
|   |                        
|   | 8.2                    
|   |                        
|   | 8.3                    

|9. | MISCELLANEOUS
|-- | -------------
|   |              
|   | 9.1          

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| | 9.2 | Notices. All notices required or permitted under
      this Agreement shall be given in the manner and to the addresses specified
      in the Notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 9.3 | No Waiver; Cumulative Remedies. No failure on the
      part of the Lenders to exercise, and no delay in exercising, any right,
      remedy, power or privilege under this Agreement shall operate as a waiver
      thereof, nor shall any single or partial exercise of any such right,
      remedy, power or privilege preclude any other or further exercise thereof
      or the exercise of any other right, remedy, power or privilege. The rights
      and remedies under this Agreement are cumulative and not exclusive of any
      rights, remedies, powers and privileges that may otherwise be available to
      the Lenders.        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 9.4 | Binding Effect. This Agreement shall be binding
      upon the Borrower and its successors and assigns, including any successor
      by reason of amalgamation, and inure to the benefit of and be enforceable
      by the Lenders and their successors, endorsees, transferees and
      assigns.                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 9.5 | Assignment. The Borrower may not assign or
      otherwise transfer any of its rights or obligations hereunder without the
      prior written consent of the Lenders, and any attempted assignment in
      violation of this provision shall be null and void. The Lenders may,
      without notice to or the further consent of the Borrower, assign this
      Agreement in whole or in part to any Person acquiring an interest in the
      Secured Obligations in accordance with the provisions of the other
      Transaction Documents.                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 9.6 | Costs and Expenses. The Borrower agrees to pay on
      demand all reasonable costs and expenses of the Lenders, any Receiver, or
      the agents of the Lenders or any Receiver, and reasonable fees and
      disbursements of counsel in connection with the perfection, enforcement,
      or preservation of any rights under, this Agreement and the other
      Documents.                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 9.7 | Severability. Whenever possible, each provision of
      this Agreement shall be interpreted in such manner as to be effective and
      valid under all applicable laws and regulations. If, however, any
      provision of this Agreement shall be prohibited by or invalid under any
      such law or regulation, it shall be deemed modified to conform to the
      minimum requirements of such law or regulation, or, if for any reason it
      is not deemed so modified, it shall be ineffective and invalid only to the
      extent of such prohibition or invalidity without affecting the remaining
      provisions of this Agreement.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 9.8 | Governing Law.This Agreement is to be construed
      in accordance with and governed by the internal laws of the Province of
      British Columbia and the federal laws of Canada applicable therein without
      giving effect to any choice of law rule that would cause the application
      of the laws of any jurisdiction other than the internal laws of the
      Province of British Columbia and the federal laws of Canada applicable
      therein to the rights and duties of the Borrower and the
  Lenders.                                                                                                                         

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| | 9.9  | Submission to Jurisdiction. The Borrower hereby
      (a) submits to the non- exclusive jurisdiction of the courts of the
      Province of British Columbia sitting in Vancouver for the purpose of any
      action or proceeding arising out of or relating to this Agreement and the
      other Documents, (b) agrees that all claims in respect of any such action
      or proceeding may be heard and determined in such courts, (c) irrevocably
      waives (to the extent permitted by applicable law) any objection which it
      now or hereafter may have to the laying of venue of any such action or
      proceeding brought in any of the foregoing courts, and any objection on
      the ground that any such action or proceeding in any such court has been
      brought in an inconvenient forum and (d) agrees that a final judgment in
      any such action or proceeding shall be conclusive and may be enforced in
      other jurisdictions by suit on the judgment or in any other manner
      permitted by law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 9.10 | Judgment CurrencyIf, for the purposes of
      obtaining judgment in any court, it is necessary to convert a sum due
      hereunder or any other Document in one currency into another currency, the
      rate of exchange used shall be that at which in accordance with practices
      of the Lenders could purchase the first currency with such other currency
      on the Business Day preceding that on which final judgment is given. The
      obligation of the Borrower in respect of any such sum due from it to the
      Lenders hereunder or under the other Documents shall, notwithstanding any
      judgment in a currency (the Judgment Currency) other than that in
      which such sum is denominated in accordance with the applicable provisions
      of the Transaction Documents or other relevant document (the Agreement
      Currency), be discharged only to the extent that on the Business Day
      following receipt by the Lenders of any sum adjudged to be so due in the
      Judgment Currency, the Lenders may in accordance with normal practices
      purchase the Agreement Currency with the Judgment Currency. If the amount
      of the Agreement Currency so purchased is less than the sum originally due
      to the Lenders from the Borrower in the Agreement Currency, the Borrower
      agrees, as a separate obligation and notwithstanding any such judgment, to
      indemnify the Lenders against such loss. If the amount of the Agreement
      Currency so purchased is greater than the sum originally due to the
      Lenders in such currency, the Lenders agree to return the amount of any
      excess to the Borrower (or to any other Person who may be entitled thereto
      under applicable law). The agreements in this Section 10.11 shall survive
      the repayment of all Secured Obligations.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 9.11 | Entire Agreement. This Agreement and the other
      Transaction Documents constitute the entire agreement of the parties
      hereto with respect to the matters set forth herein and supersede any
      prior agreements, commitments, drafts, communications, discussions and
      understandings, oral or written, with respect thereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 9.12 | Counterparts. This Agreement may be executed in
      several counterparts, each of which shall be deemed an original and all of
      which shall together constitute one and the same instrument. Signatures
      delivered by facsimile (or similar electronic method) shall have the
      effect of originals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| | 9.13 | Termination. Upon indefeasible payment and
      performance in full of all Secured Obligations, the security interests
      created by this Agreement shall terminate and the Lenders shall execute
      and deliver to the Borrower such documents and instruments reasonably
      requested by the Borrower as shall be necessary to evidence termination of
      all security interests given by the Borrower to the Lenders
    hereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 9.14 | Indemnity.The Borrower hereby agrees to indemnify
      the Lenders, and their successors, assigns, agents and employees, from and
      against any and all liabilities, damages, penalties, suits, costs, and
      expenses of any kind and nature (including, without limitation, all
      expenses of litigation or preparation therefor whether or not the Lenders
      are a party thereto) imposed on, incurred by or asserted against the
      Lenders, or their successors, assigns, agents and employees, in any way
      relating to or arising out of this Agreement, or the manufacture,
      purchase, acceptance, rejection, ownership, delivery, lease, possession,
      use, operation, condition, sale, return or other disposition of any
      Borrower Collateral (including, without limitation, latent and other
      defects, whether or not discoverable by the Lenders or the Borrower, and
      any claim for patent, trade-mark or copyright infringement), except for
      the gross negligence or willful misconduct of the Lenders.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 9.15 | Acknowledgement of Receipt.The Borrower
      acknowledges receipt of a copy of this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 9.16 | Paramountcy. In the event of any conflict or
      inconsistency with the provisions hereof and the provisions of the Notes
      between the Borrower and the Lenders, the provisions of the Notes shall
      prevail and govern but only to the extent of such conflict or
      inconsistency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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|10. | EFFECTIVE TIME
|--- | --------------
|    |               
|    | 10.1          

IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Agreement under seal by their duly authorized
signing officers as of the date first above written.



CARDERO RESOURCE CORP.



| | By: | (signed) Lawrence Talbot               
| | --- | ---------------------------------------
| |     | Name: Lawrence Talbot                  
| |     | Title: Vice-President & General Counsel
| |     | Authorized Signing Officer             



E.L. II PROPERTIES TRUST



| | By: | (signed) Robert Kopple         
| | --- | -------------------------------
| |     | Name: Robert C. Kopple, Trustee
| |     | Authorized Signing Officer     



KOPPLE FAMILY PARTNERSHIP, L.P.By its General Partner, E.L. II Properties Trust

| | By: | (signed) Robert Kopple         
| | --- | -------------------------------
| |     | Name: Robert C. Kopple, Trustee
| |     | Authorized Signing Officer     

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SCHEDULE 1TO SECURITY AGREEMENT

LOCATIONS OF EQUIPMENT, INVENTORY,CHIEF
EXECUTIVE OFFICE AND BOOKS AND RECORDS:



Suite 2300 - 1177 West Hastings Street Vancouver, British
Columbia CANADA V6E 2K3

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