EXHIBIT 99.3 - SECURITY AGREEEMENT
SECURITY AGREEMENT
1. Identification.
This Security Agreement (the "Agreement"), dated as of January ___, 2007,
is entered into by and between South Texas Oil Company, a Nevada corporation
("Debtor") and Longview Fund, L.P. (the "Lender").
2. Recitals.
2.1 The Lender has made, is making and will be making loans to Debtor
(the "Loans"). It is beneficial to Debtor that the Loans are made.
2.2 The Loans are and will be evidenced by one or more promissory notes
(each a "Note") issued by Debtor on or about the date of and after the date of
this Agreement pursuant to a Loan Agreement to which Debtor and Lender are
parties. The Notes will be executed by Debtor as "Borrower" or "Debtor" for
the benefit of Lender as the "Payee" thereof.
2.3 In consideration of the Loans made and to be made by Lender to
Debtor and for other good and valuable consideration, and as security for the
performance by Debtor of its obligations under the Notes and as security for
the repayment of the Loans and all other sums due from Debtor to Lender arising
under the Loan Agreement, and any other agreement between or among them
inclusive of the items and matters described as "Obligations" in the Loan
Agreement (collectively, the "Obligations"), Debtor, for good and valuable
consideration, receipt of which is acknowledged, has agreed to grant to the
Lender, a security interest in the Collateral (as such term is hereinafter
defined), on the terms and conditions hereinafter set forth. Obligations
include all future advances by Lender to Debtor made pursuant to the Loan
Agreement.
2.4 The following defined terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, General
Intangibles, Instruments, Inventory and Proceeds.
3. Grant of General Security Interest in Collateral.
1.1 As security for the Obligations of Debtor, Debtor hereby grants the
Lender, a security interest in the Collateral.
1.2 "Collateral" shall mean all of the following property of Debtor:
(A) All now owned and hereafter acquired right, title and
interest of Debtor in, to and in respect of all Accounts, Goods, real or
personal property, all present and future books and records relating to the
foregoing and all products and Proceeds of the foregoing, and as set forth
below:
(i) All now owned and hereafter acquired right, title and
interest of Debtor in, to and in respect of all: Accounts, interests in goods
represented by Accounts, returned, reclaimed or repossessed goods with respect
thereto and rights as an unpaid vendor; contract rights; Chattel Paper;
investment property; General Intangibles (including but not limited to, tax and
duty claims and refunds, registered and unregistered patents, trademarks,
service marks, certificates, copyrights trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, chooses in action and other
claims, and existing and future leasehold interests in equipment, real estate
and fixtures); Documents; Instruments; letters of credit, bankers' acceptances
or guaranties; cash moneys, deposits; securities, bank accounts, deposit
accounts, credits and other property now or hereafter owned or held in any
capacity by Debtor, as well as agreements or property securing or relating to
any of the items referred to above;
(ii) Goods: All now owned and hereafter acquired right,
title and interest of Debtor in, to and in respect of goods, including, but not
limited to:
(a) All Inventory, wherever located, whether now
owned or hereafter acquired, of whatever kind, nature or description, including
all raw materials, work-in-process, finished goods, and materials to be used or
consumed in Debtor' business; finished goods, timber cut or to be cut, oil,
gas, hydrocarbons, and minerals extracted or to be extracted, and all names or
marks affixed to or to be affixed thereto for purposes of selling same by the
seller, manufacturer, lessor or licensor thereof and all Inventory which may be
returned to any Debtor by its customers or repossessed by any Debtor and all of
Debtor's right, title and interest in and to the foregoing (including all of a
Debtor's rights as a seller of goods);
(b) All Equipment and fixtures, wherever located,
whether now owned or hereafter acquired, including, without limitation, all
machinery, furniture and fixtures, and any and all additions, substitutions,
replacements (including spare parts), and accessions thereof and thereto
(including, but not limited to Debtor's rights to acquire any of the foregoing,
whether by exercise of a purchase option or otherwise);
(iii) Property: All now owned and hereafter acquired right,
title and interests of Debtor in, to and in respect of any other personal
property in or upon which a Debtor has or may hereafter have a security
interest, lien or right of setoff;
(iv) Books and Records: All present and future books and
records relating to any of the above including, without limitation, all
computer programs, printed output and computer readable data in the possession
or control of the Debtor, any computer service bureau or other third party; and
(v) Products and Proceeds: All products and Proceeds of
the foregoing in whatever form and wherever located, including, without
limitation, all insurance proceeds and all claims against third parties for
loss or destruction of or damage to any of the foregoing.
(B) All now owned and hereafter acquired right, title and
interest of Debtor in, to and in respect of the following:
(i) the shares of stock, partnership interests, member
interests or other equity interests at any time and from time to time acquired
by Debtor of any and all entities now or hereafter existing, (such entities,
being hereinafter referred to collectively as the "Pledged Issuers" and
individually as a "Pledged Issuer"), the certificates representing such shares,
partnership interests, member interests or other interests all options and
other rights, contractual or otherwise, in respect thereof and all dividends,
distributions, cash, instruments, investment property and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares, partnership interests, member interests
or other interests;
(ii) all additional shares of stock, partnership interests,
member interests or other equity interests from time to time acquired by
Debtor, of any Pledged Issuer, the certificates representing such additional
shares, all options and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, instruments, investment
property and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, interests or equity; and
(iii) all security entitlements of Debtor in, and all
Proceeds of any and all of the foregoing in each case, whether now owned or
hereafter acquired by a Debtor and howsoever its interest therein may arise or
appear (whether by ownership, security interest, lien, claim or otherwise).
Notwithstanding anything to the contrary contained herein or the Loan
Agreement, Collateral shall not include any personal property which is, or at
the time of a Debtor's acquisition thereof is or becomes subject to a purchase
money mortgage or other purchase money lien or security interest (including
capital leases), but only to the extent that the purchase price of such asset
is not derived from Note proceeds.
(C) All Receivables as defined in the Loan Agreement.
3.3 The Lender is hereby specifically authorized, after the Maturity
Date (defined in the Notes) accelerated or otherwise, or after an Event of
Default (as defined herein) and the expiration of any applicable cure period,
to transfer any Collateral into the name of the Lender and to take any and all
action deemed advisable to the Lender to remove any transfer restrictions
affecting the Collateral.
4. Perfection of Security Interest.
4.1 Debtor shall prepare, execute and deliver to the Lender UCC-1
Financing Statements. The Lender is instructed to prepare and file at Debtor's
cost and expense, financing statements in such jurisdictions deemed advisable
to the Lender, including but not limited to the States of Nevada and Texas.
4.2 The Debtor shall promptly deliver to Lender, upon Lender's request,
stock certificates representing all of the shares of outstanding capital stock
of the Debtor (the "Securities"). All such certificates shall be held by or on
behalf of Lender pursuant hereto and shall be delivered in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment or undated stock powers executed in blank, all in form
and substance satisfactory to Lender.
4.3 All other certificates and instruments constituting Collateral
from time to time required to be pledged to Lender pursuant to the terms hereof
(the "Additional Collateral") shall be delivered to Lender promptly upon
receipt thereof by or on behalf of Debtor. All such certificates and
instruments shall be held by or on behalf of Lender pursuant hereto and shall
be delivered in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment or undated stock powers
executed in blank, all in form and substance satisfactory to Lender. If any
Collateral consists of uncertificated securities, unless the immediately
following sentence is applicable thereto, Debtor shall cause Lender (or its
custodian, nominee or other designee) to become the registered holder thereof,
or cause each issuer of such securities to agree that it will comply with
instructions originated by Lender with respect to such securities without
further consent by Debtor. If any Collateral consists of security
entitlements, Debtor shall transfer such security entitlements to Lender (or
its custodian, nominee or other designee) or cause the applicable securities
intermediary to agree that it will comply with entitlement orders by Lender
without further consent by Debtor.
4.4 Within five (5) days after the receipt by a Debtor of any
Additional Collateral, a Pledge Amendment, duly executed by such Debtor, in
substantially the form of Annex I hereto (a "Pledge Amendment"), shall be
delivered to Lender in respect of the Additional Collateral to be pledged
pursuant to this Agreement. Debtor hereby authorizes Lender to attach each
Pledge Amendment to this Agreement and agrees that all certificates or
instruments listed on any Pledge Amendment delivered to Lender shall for all
purposes hereunder constitute Collateral.
4.5 If Debtor shall receive, by virtue of Debtor being or having been
an owner of any Collateral, any (i) stock certificate (including, without
limitation, any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split, spin-off or
split-off), promissory note or other instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Collateral, or
otherwise, (iii) dividends payable in cash (except such dividends permitted to
be retained by Debtor pursuant to Section 5.2 hereof) or in securities or other
property or (iv) dividends or other distributions in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, Debtor shall receive such stock
certificate, promissory note, instrument, option, right, payment or
distribution in trust for the benefit of Lender, shall segregate it from
Debtor's other property and shall deliver it forthwith to Lender, in the exact
form received, with any necessary endorsement and/or appropriate stock powers
duly executed in blank, to be held by Lender as Collateral and as further
collateral security for the Obligations.
5. Distribution.
5.1 So long as an Event of Default or a Default (as defined in the Loan
Agreement) does not exist, Debtor shall be entitled to exercise all voting
power pertaining to any of the Collateral, provided such exercise is not
contrary to the interests of the Lender and does not impair the Collateral.
5.2. At any time an Event of Default exists or has occurred, all rights
of Debtor, upon notice given by Lender, to exercise the voting power and
receive payments, which it would otherwise be entitled to pursuant to Section
5.1, shall cease and all such rights shall thereupon become vested in Lender,
which shall thereupon have the sole right to exercise such voting power and
receive such payments.
5.3 All dividends, distributions, interest and other payments which are
received by Debtor contrary to the provisions of Section 5.2 shall be received
in trust for the benefit of Lender as security and Collateral for payment of
the Obligations shall be segregated from other funds of Debtor, and shall be
forthwith paid over to Lender as Collateral in the exact form received with any
necessary endorsement and/or appropriate stock powers duly executed in blank,
to be held by Lender as Collateral and as further collateral security for the
Obligations.
6. Further Action By Debtor; Covenants and Warranties.
6.1 Lender at all times shall have a perfected security interest in the
Collateral, the Securities, Additional Collateral (the "Perfected Collateral").
Debtor has and will continue to have full title to the Collateral free from any
liens, leases, encumbrances, judgments or other claims. Lender's security
interest in the Collateral constitutes and will continue to constitute a first,
prior and indefeasible security interest in favor of Lender. Debtor will do
all acts and things, and will execute and file all instruments (including, but
not limited to, security agreements, financing statements, continuation
statements, etc.) reasonably requested by Lender to establish, maintain and
continue the perfected security interest of Lender in the Perfected Collateral,
and will promptly on demand, pay all costs and expenses of filing and
recording, including the costs of any searches reasonably deemed necessary by
Lender from time to time to establish and determine the validity and the
continuing priority of the security interest of Lender, and also pay all other
claims and charges that, in the opinion of Lender, exercised in good faith, are
reasonably likely to materially prejudice, imperil or otherwise affect the
Collateral or Lender's security interests therein.
6.2 Other than in the ordinary course of business, for fair value and
in cash, and except for Collateral which is substituted by assets of identical
or greater value (with the consent of the Lender) or which is inconsequential
in value, Debtor will not sell, transfer, assign or pledge those items of
Collateral (or allow any such items to be sold, transferred, assigned or
pledged), without the prior written consent of Lender other than a transfer of
the Collateral to a wholly-owned United States formed and located wholly-owned
subsidiary or to another Debtor on prior notice to Lender, and provided the
Collateral remains subject to the security interest herein described. Although
Proceeds of Collateral are covered by this Agreement, this shall not be
construed to mean that Lender consents to any sale of the Collateral, except as
provided herein. Sales of Collateral in the ordinary course of business shall
be free of the security interest of Lender and Lender shall promptly execute
such documents (including without limitation releases and termination
statements) as may be required by Debtor to evidence or effectuate the same.
6.3 Debtor will, at all reasonable times during regular business hours
and upon reasonable notice, allow Lender or its representatives free and
complete access to the Collateral and all of such Debtor's records which in any
way relate to the Collateral, for such inspection and examination as Lender
reasonably deems necessary.
6.4 Debtor, at its sole cost and expense, will protect and defend this
Security Agreement, all of the rights of Lender hereunder, and the Collateral
against the claims and demands of all other persons.
6.5 Debtor will promptly notify Lender of any levy, distraint or other
seizure by legal process or otherwise of any part of the Collateral, and of any
threatened or filed claims or proceedings that are reasonably likely to affect
or impair any of the rights of Lender under this Security Agreement in any
material respect.
6.6 Debtor, at its own expense, will obtain and maintain in force
insurance policies covering losses or damage to those items of Collateral which
constitute physical personal property, which insurance shall be of the types
customarily insured against by companies in the same or similar business,
similarly situated, in such amounts (with such deductible amounts) as is
customary for such companies under the same or similar circumstances, similarly
situated. Debtor shall make the Lender a loss payee thereon to the extent of
its interest in the Collateral. Lender is hereby irrevocably (until the
Obligations are paid in full) appointed Debtor's attorney-in-fact to endorse
any check or draft that may be payable to such Debtor so that Lender may
collect the proceeds payable for any loss under such insurance. The proceeds
of such insurance, less any costs and expenses incurred or paid by Lender in
the collection thereof, shall be applied either toward the cost of the repair
or replacement of the items damaged or destroyed, or on account of any sums
secured hereby, whether or not then due or payable.
6.7 Lender may, at its option, and without any obligation to do so,
pay, perform and discharge any and all amounts, costs, expenses and liabilities
herein agreed to be paid or performed by Debtor. Upon Debtor's failure to do
so, all amounts expended by Lender in so doing shall become part of the
Obligations secured hereby, and shall be immediately due and payable by Debtor
to Lender upon demand and shall bear interest at the lesser of 15% per annum or
the highest legal amount from the dates of such expenditures until paid.
6.8 Upon the request of Lender, Debtor will furnish to Lender within
five (5) business days thereafter, or to any proposed assignee of this Security
Agreement, a written statement in form reasonably satisfactory to Lender, duly
acknowledged, certifying the amount of the principal and interest and any other
sum then owing under the Obligations, whether to its knowledge any claims,
offsets or defenses exist against the Obligations or against this Security
Agreement, or any of the terms and provisions of any other agreement of Debtor
securing the Obligations. In connection with any assignment by Lender of this
Security Agreement, Debtor hereby agrees to cause the insurance policies
required hereby to be carried by Debtor, if any, to be endorsed in form
satisfactory to Lender or to such assignee, with loss payable clauses in favor
of such assignee, and to cause such endorsements to be delivered to Lender
within ten (10) calendar days after request therefor by Lender.
6.9 Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Lender from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports
and other reasonable assurances or instruments and take further steps relating
to the Collateral and other property or rights covered by the security interest
hereby granted, as the Lender may reasonably require to perfect its security
interest hereunder.
6.10 Debtor represents and warrants that it is the true and lawful
exclusive owner of the Collateral, free and clear of any liens and
encumbrances.
6.11 Debtor hereby agrees not to divest itself of any right under the
Collateral except as permitted herein absent prior written approval of the
Lender.
6.12 Debtor shall cause each Subsidiary of Debtor in existence on the
date hereof and each Subsidiary not in existence on the date hereof to execute
and deliver to Lender promptly and in any event within 10 days after the
formation, acquisition or change in status thereof (A) a guaranty guaranteeing
the Obligations and (B) if requested by Lender, a security and pledge agreement
substantially in the form of this Agreement together with (x) certificates
evidencing all of the capital stock of each Subsidiary of and any entity owned
by such Subsidiary, (y) undated stock powers executed in blank with signatures
guaranteed, and (z) such opinion of counsel and such approving certificate of
such Subsidiary as Lender may reasonably request in respect of complying with
any legend on any such certificate or any other matter relating to such shares
and (C) such other agreements, instruments, approvals, legal opinions or other
documents reasonably requested by Lender in order to create, perfect, establish
the first priority of or otherwise protect any lien purported to be covered by
any such pledge and security agreement or otherwise to effect the intent that
all property and assets of such Subsidiary shall become Collateral for the
Obligations. For purposes of this Agreement, "Subsidiary" means, with respect
to any entity at any date, any corporation, limited or general partnership,
limited liability company, trust, estate, association, joint venture or other
business entity) of which more than 50% of (A) the outstanding capital stock
having (in the absence of contingencies) ordinary voting power to elect a
majority of the board of directors or other managing body of such entity,
(B) in the case of a partnership or limited liability company, the interest in
the capital or profits of such partnership or limited liability company or
(C) in the case of a trust, estate, association, joint venture or other entity,
the beneficial interest in such trust, estate, association or other entity
business is, at the time of determination, owned or controlled directly or
indirectly through one or more intermediaries, by such entity. As of the date
of this Agreement, Debtor has no Subsidiaries. Debtor will promptly complete
and deliver to lender Annex I hereto upon the acquisition of each Subsidiary.
7. Power of Attorney.
At any time an Event of Default exists or has occurred, Debtor hereby
irrevocably constitutes and appoints the Lender as the true and lawful attorney
of Debtor, with full power of substitution, in the place and stead of such
Debtor and in the name of such Debtor or otherwise, at any time or times, in
the discretion of the Lender, to take any action and to execute any instrument
or document which the Lender may deem necessary or advisable to accomplish the
purposes of this Agreement. This power of attorney is coupled with an interest
and is irrevocable until the Obligations are indefeasibly satisfied.
8. Performance By The Lender.
If a Debtor fails to perform any material covenant, agreement, duty or
obligation of such Debtor under this Agreement, the Lender may, after any
applicable cure period, at any time or times in its discretion, take action to
effect performance of such obligation. All reasonable expenses of the Lender
incurred in connection with the foregoing authorization shall be payable by
Debtor as provided in Paragraph 12.1 hereof. No discretionary right, remedy or
power granted to the Lender under any part of this Agreement shall be deemed to
impose any obligation whatsoever on the Lender with respect thereto, such
rights, remedies and powers being solely for the protection of the Lender.
9. Event of Default.
An event of default ("Event of Default") shall be deemed to have occurred
hereunder upon the occurrence of any event of default as defined and described
in this Agreement, in the Notes, the Loan Agreement, Transaction Documents, and
any other agreement to which Debtor and Lender are parties. Upon and after
any Event of Default, after the applicable cure period, if any, any or all of
the Obligations shall become immediately due and payable at the option of the
Lender, and the Lender may dispose of Collateral as provided below. A default
by Debtor of any of its material obligations pursuant to this Agreement, the
Loan Agreement and such other agreements shall be an Event of Default hereunder
and an "Event of Default" as defined in the Loan Agreement.
10. Disposition of Collateral.
Upon and after any Event of Default which is then continuing,
10.1 The Lender may exercise its rights with respect to each and every
component of the Collateral, without regard to the existence of any other
security or source of payment for the Obligations. In addition to other rights
and remedies provided for herein or otherwise available to it, the Lender shall
have all of the rights and remedies of a lender on default under the Uniform
Commercial Code then in effect in the State of New York.
10.2 If any notice to Debtor of the sale or other disposition of
Collateral is required by then applicable law, five business (5) days prior
written notice (which Debtor agree is reasonable notice within the meaning of
Section 9.612(a) of the Uniform Commercial Code) shall be given to Debtor of
the time and place of any sale of Collateral which Debtor hereby agree may be
by private sale. The rights granted in this Section are in addition to any and
all rights available to Lender under the Uniform Commercial Code.
10.3 The Lender is authorized, at any such sale, if the Lender deems it
advisable to do so, in order to comply with any applicable securities laws, to
restrict the prospective bidders or purchasers to persons who will represent
and agree, among other things, that they are purchasing the Collateral for
their own account for investment, and not with a view to the distribution or
resale thereof, or otherwise to restrict such sale in such other manner as the
Lender deems advisable to ensure such compliance. Sales made subject to such
restrictions shall be deemed to have been made in a commercially reasonable
manner.
10.4 All proceeds received by the Lender in respect of any sale,
collection or other enforcement or disposition of Collateral, shall be applied
(after deduction of any amounts payable to the Lender pursuant to Paragraph
12.1 hereof) against the Obligations. Upon indefeasible payment in full of
all Obligations, Debtor shall be entitled to the return of all Collateral,
including cash, which has not been used or applied toward the payment of
Obligations or used or applied to any and all costs or expenses of the Lender
incurred in connection with the liquidation of the Collateral (unless another
person is legally entitled thereto). Any assignment of Collateral by the
Lender to Debtor shall be without representation or warranty of any nature
whatsoever and wholly without recourse. To the extent allowed by law, Lender
may purchase the Collateral and pay for such purchase by offsetting up to such
Lender's portion of the purchase price with sums owed to such Lender by Debtor
arising under the Obligations or any other source.
11. Waiver of Automatic Stay. Debtor acknowledges and agrees that should a
proceeding under any bankruptcy or insolvency law be commenced by or against
Debtor, or if any of the Collateral should become the subject of any bankruptcy
or insolvency proceeding, then the Lender should be entitled to, among other
relief to which the Lender may be entitled under the Loan Agreement and any
other agreement to which the Debtor and Lender are parties, (collectively "Loan
Documents") and/or applicable law, an order from the court granting immediate
relief from the automatic stay pursuant to 11 U.S.C. Section 362 to permit the
Lender to exercise all of its rights and remedies pursuant to the Loan
Documents and/or applicable law. Debtor EXPRESSLY WAIVES THE BENEFIT OF THE
AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, Debtor EXPRESSLY
ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER
SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT
LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR
INHIBIT IN ANY WAY THE ABILITY OF THE LENDER TO ENFORCE ANY OF ITS RIGHTS AND
REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. Debtor hereby
consents to any motion for relief from stay which may be filed by the Lender in
any bankruptcy or insolvency proceeding initiated by or against Debtor, and
further agrees not to file any opposition to any motion for relief from stay
filed by the Lender. Debtor represents, acknowledges and agrees that this
provision is a specific and material aspect of this Agreement, and that the
Lender would not agree to the terms of this Agreement if this waiver were not a
part of this Agreement. Debtor further represents, acknowledges and agrees
that this waiver is knowingly, intelligently and voluntarily made, that neither
the Lender nor any person acting on behalf of the Lender has made any
representations to induce this waiver, that Debtor has been represented (or has
had the opportunity to be represented) in the signing of this Agreement and in
the making of this waiver by independent legal counsel selected by Debtor and
that Debtor has had the opportunity to discuss this waiver with counsel.
Debtor further agrees that any bankruptcy or insolvency proceeding initiated by
Debtor will only be brought in the Federal Court within the Southern District
of New York.
12. Miscellaneous.
12.1 Expenses. Debtor shall pay to the Lender, on demand, the amount of
any and all reasonable expenses, including, without limitation, attorneys'
fees, legal expenses and brokers' fees, which the Lender may incur in
connection with (a) sale, collection or other enforcement or disposition of
Collateral; (b) exercise or enforcement of any the rights, remedies or powers
of the Lender hereunder or with respect to any or all of the Obligations upon
breach or threatened breach; or (c) failure by Debtor to perform and observe
any agreements of Debtor contained herein which are performed by the Lender.
12.2 Waivers, Amendment and Remedies. No course of dealing by the
Lender and no failure by the Lender to exercise, or delay by the Lender in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right, remedy or power of
the Lender. No amendment, modification or waiver of any provision of this
Agreement and no consent to any departure by Debtor therefrom, shall, in any
event, be effective unless contained in a writing signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. The rights, remedies and powers
of the Lender, not only hereunder, but also under any instruments and
agreements evidencing or securing the Obligations and under applicable law are
cumulative, and may be exercised by the Lender from time to time in such order
as the Lender may elect.
12.3 Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being faxed (provided that a copy is
delivered by first class mail) to the party to receive the same at its address
set forth below or to such other address as either party shall hereafter give
to the other by notice duly made under this Section:
To Debtor: South Texas Oil Company
2802 Flintrock Trace, Suite 252
Austin, TX 78738
Fax: (512) 263-5046
With a copy to: Owen M. Naccarato, Esq.
Naccarato & Associates
18301 Von Karman Avenue, Suite 430
Irvine, CA 92612
Fax: (949) 851-9262
To Lender: Longview Fund, L.P.
600 Montgomery Street, 44th Floor
San Francisco, CA 94111
Fax: (415) 981-5301
If to Debtor or Lender,
with a copy by telecopier only to:
Grushko & Mittman, P.C.
551 Fifth Avenue, Suite 1601
New York, New York 10176
Fax: (212) 697-3575
Any party may change its address by written notice in accordance with this
paragraph.
12.4 Term; Binding Effect. This Agreement shall (a) remain in full
force and effect until payment and satisfaction in full of all of the
Obligations; (b) be binding upon Debtor, and its successors and permitted
assigns; and (c) inure to the benefit of the Lender and its respective
successors and assigns.
12.5 Captions. The captions of Paragraphs, Articles and Sections in
this Agreement have been included for convenience of reference only, and shall
not define or limit the provisions hereof and have no legal or other
significance whatsoever.
12.6 Governing Law; Venue; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to conflicts of laws principles that would result in the
application of the substantive laws of another jurisdiction, except to the
extent that the perfection of the security interest granted hereby in respect
of any item of Collateral may be governed by the law of another jurisdiction.
Any legal action or proceeding against a Debtor with respect to this Agreement
may be brought in the courts in the State of New York or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, Debtor hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Debtor hereby irrevocably waives any objection which they may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
aforesaid courts and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum. If any provision of this
Agreement, or the application thereof to any person or circumstance, is held
invalid, such invalidity shall not affect any other provisions which can be
given effect without the invalid provision or application, and to this end the
provisions hereof shall be severable and the remaining, valid provisions shall
remain of full force and effect.
12.7 Entire Agreement. This Agreement contains the entire agreement of
the parties and supersedes all other agreements and understandings, oral or
written, with respect to the matters contained herein.
12.8 Counterparts/Execution. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
13. Reasonable Care. The Lender is required to exercise reasonable care in
the custody and preservation of any Collateral in its possession; provided,
however, that the Lender shall be deemed to have exercised reasonable care in
the custody and preservation of any of the Collateral if it takes such action
for that purposes as any owner thereof reasonably requests in writing at times
other than upon the occurrence and during the continuance of any Event of
Default, but failure of the Lender, to comply with any such request at any time
shall not in itself be deemed a failure to exercise reasonable care.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Security Agreement, as of the date first written above.
"DEBTOR" "LENDER"
SOUTH TEXAS OIL COMPANY LONGVIEW FUND, L.P.
a Nevada corporation
By: _____________________________________By:__________________________________
Its: ____________________________________Its:_________________________________
THIS SECURITY AGREEMENT MAY BE SIGNED BY FACSIMILE SIGNATURE AND
DELIVERED BY CONFIRMED FACSIMILE TRANSMISSION.
ANNEX I
TO
SECURITY AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated _________ __ 200_, is delivered pursuant to
Section 4.3 of the Security Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Security
Agreement, dated January ___, 2007, as it may heretofore have been or hereafter
may be amended, restated, supplemented or otherwise modified from time to time
and that the shares listed on this Pledge Amendment shall be hereby pledged and
assigned to Lender and become part of the Collateral referred to in such
Security Agreement and shall secure all of the Obligations referred to in such
Security Agreement.
Name of Issuer Number Class Certificate
of Shares Number(s)
SOUTH TEXAS OIL COMPANY
By: _____________________________________