PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT (this “Agreement”), effective as of November 10, 2011 (the “Effective Date”), is by and among TRI-VALLEY CORPORATION, a Delaware corporation (“Debtor”), and G. THOMAS GAMBLE, an individual, and GEORGE T. GAMBLE 1991 TRUST (collectively, “Secured Parties”).

 

 

A.          The Debtor executed and delivered to (i) G. Thomas Gamble, that certain Promissory Note dated August 29, 2011 in the original principal amount of $150,000.00, (ii) G. Thomas Gamble, that certain Promissory Note dated October 13, 2011 in the original principal amount of $1,000,000.00 (the “Gamble Notes”), and (iii) George T. Gamble 1991 Trust, that certain Promissory Note dated November 10, 2011 in the original principal amount of $2,000,000.00 (collectively, the “Notes”).  The Notes are due and payable on demand by Secured Parties.

 

B.           Select Resources Corporation, Inc., a Delaware corporation (“Select Resources”), is a wholly-owned subsidiary of Debtor, and Debtor owns all of the issued and outstanding shares of common stock of Select Resources (the “Select Securities”).

 

C.           Tri-Valley Oil & Gas Co., a California corporation (“TVOG”, together with Select Resources, a “Subsidiary” and collectively, the “Subsidiaries”), is a wholly-owned subsidiary of Debtor, and Debtor owns all of the issued and outstanding shares of common stock of TVOG (the “TVOG Securities”).

 

D.           As a condition to the issuance of the $2,000,000 note dated as of November 10, 2011 and in consideration of the agreement of the Secured Parties to extend the time upon which the Secured Parties may demand payment of the Notes pending completion and execution of definitive agreements by and among the parties, Debtor agreed to grant to Secured Parties security interest in certain of its property and assets as set forth herein, including a pledge of 100% of the Select Securities and TVOG Securities (collectively, the “Pledged Securities”) and execute and deliver this Agreement.

 

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:

 

 

 

 

In each case, the foregoing shall be covered by this Agreement, whether any of Debtor’s ownership or other rights therein are presently held or hereafter acquired (by operation of law or otherwise) and howsoever any of Debtor’s interests therein may arise or appear (whether by ownership, security interest, claim or otherwise).  For purposes hereof, the terms supporting obligations and proceeds shall have the meanings set forth in the Uniform Commercial Code as enacted from time to time in the state of New York or in any other applicable jurisdiction (“UCC”).

 

 

 

 

 

 

 

 

 

 

5.   Covenants; Further Assurances.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(i)           Defined Terms.  As used in this Agreement, the following terms have the meanings assigned to such terms below:

 

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto, as hereafter amended.

 

“Encumbrance” means any mortgage, lien, pledge, charge, security interest, claim, encumbrance, right of first refusal, preemptive right or other restrictions of any kind.

 

“Indebtedness” of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including “capital leases” in accordance with GAAP) (other than trade payables entered into in the ordinary course of business), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, notes or similar instruments whether convertible or not, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all indebtedness referred to in clauses (i) through (v) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, (vii) all contingent obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vi) above; (viii) banker’s acceptances; (ix) the balance deferred and unpaid of the purchase price of any property or services due more than three months after such property is acquired or such services are completed; (x) hedging obligations; and (xi) obligations under convertible securities. In addition, the term “Indebtedness” of the Debtor or its Subsidiaries, as applicable, includes (a) all Indebtedness of others secured by an Encumbrance on any assets of any of the Debtor or any of its Subsidiaries (whether or not such Indebtedness is assumed by the Debtor or such Subsidiaries), and (b) to the extent not otherwise included, the guarantee by any of the Debtor or any of the Subsidiaries of any Indebtedness of any other Person.

 

“Insolvency Event” means, with respect to any person: (i) the commencement of a voluntary case by such person under the Bankruptcy Code or the seeking of relief by such person under any bankruptcy or insolvency or analogous law in any jurisdiction outside of the United States; (ii) the commencement of an involuntary case against such person under the Bankruptcy Code or any bankruptcy or insolvency or analogous law in any jurisdiction outside of the United States and the petition is not controverted within ten (10) days, or is not dismissed within sixty (60) days, after commencement of the case; (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of such person; (iv) such person commences (including by way of applying for or consenting to the appointment of, or the taking of possession by, a rehabilitator, receiver, custodian, trustee, conservator or liquidator (collectively, a “conservator”) of such person or all or any substantial portion of its property) any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency, liquidation, rehabilitation, conservatorship or similar law of any jurisdiction whether now or hereafter in effect relating to such person; (v) any such proceeding of the type set forth in clause (iv) above is commenced against such person to the extent such proceeding is consented to by such person or remains undismissed for a period of sixty (60) days; (vi) such person is adjudicated insolvent or bankrupt; (vii) any order of relief or other order approving any such case or proceeding is entered; (viii) such person suffers any appointment of any conservator or the like for it or any substantial part of its property that continues undischarged or unstayed for a period of sixty (60) days; (ix) such person makes a general assignment for the benefit of creditors or generally does not pay its debts as such debts become due; (x) such person admits in writing its inability to pay its debts when due; or (xi) any corporate (or similar organizational) action is taken by such person for the purpose of effecting any of the foregoing.

 

“Material Indebtedness” means, as to the Debtor or any of its Subsidiaries, any particular Indebtedness of the Debtor or such Subsidiary in excess of the aggregate principal amount of $100,000.

 

10.         Remedies.

 

(a)          If any Event of Default shall have occurred and be continuing:

 

               (i)          Secured Parties shall have all of the rights, remedies and privileges with respect to repossession, retention and sale of the Collateral and disposition of the proceeds thereof as are afforded to Secured Parties by this Agreement and the applicable sections of the UCC (whether or not the UCC applies to the affected Collateral).

 

               (ii)         Without limiting the scope of the foregoing clause (i):

 

             (A)          Secured Parties shall have the right to sell, resell, assign, and deliver the Collateral for sale, provided that only such portion of the Collateral as is necessary to satisfy the obligations arising under the Notes or Purchase Agreement may be sold by Secured Parties.  Secured Parties will give Debtor, to the extent notice of sale shall be required by law, at least ten (10) days’ prior written notice of the time and place of any sale of the Collateral or the time after which any private sale or any other intended disposition of the Collateral is to be made.  Any such notice shall be deemed to meet any requirement hereunder or under any applicable law (including the UCC) that reasonable notification be given of the time and place of such sale or other disposition.  Such notice may be given without any demand for performance or other demand, all such demands being hereby expressly waived by Debtor.  Secured Parties shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  Secured Parties may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

 

             (B)          In the event of any such sale or sales, the Collateral so purchased shall be held by the purchaser absolutely free from any and all claims or rights of Debtor of every kind and nature whatsoever, including any equity of redemption or similar rights, all such equity of redemption and similar rights being hereby expressly waived and released by Debtor.  Secured Parties may disclaim warranties of title, possession, quiet enjoyment and the like.  The proceeds of the sale of any Collateral, together with any other additional collateral security at the time received and held hereunder, shall be received and applied: first, to the payment of all of the Secured Parties’ costs and expenses of sale, including reasonable attorneys’ fees; second, to the payment of the obligations of Debtor and the other parties under the Notes, in such order of priority as Secured Parties shall determine; and third, any remaining proceeds shall be paid to shall be paid over to the Debtor or to whomsoever may be lawfully entitled to receive such surplus.

              (C)          Debtor recognizes that Secured Parties may be unable to effect a public sale of all or any part of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the “Securities Act”), or other applicable laws, rules or regulations, but may be compelled to resort to one or more private sales to a restricted group of Secured Parties who will, among other things, be obliged to agree to acquire the Collateral or any part thereof for their own account, for investment and not with a view to the distribution or resale thereof.  Debtor agrees that private sales so made may be at prices and on terms less favorable than if the Collateral were sold at public sales, and that Secured Parties have no obligation to delay the sale of any Collateral for the period of time necessary to permit the Collateral to be registered for public sale under the Securities Act or any other applicable law, rule or regulation.  Debtor agrees that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner.

 

                (iii)        Debtor shall take any action that Secured Parties may request in the exercise of its rights and remedies under this Agreement in order to transfer and assign to Secured Parties, or to such one or more third parties as Secured Parties may designate, or to a combination of the foregoing, any or all of the Collateral.

 

                (iv)        Secured Parties shall have the right, for and in the name, place and stead of Debtor, to execute endorsements, assignments and other instruments of conveyance or transfer with respect to all or any of the Collateral, and in connection therewith, Debtor hereby irrevocably appoints Secured Parties and its agents, successors or assigns, or any of them, as attorneys-in-fact for Debtor to execute, deliver, file and record such items for Debtor and in Debtor’s name, place and stead.  This power of attorney, being coupled with an interest, shall be irrevocable.

 

 

 

12.         Addresses for Notices.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This Agreement has been duly executed and delivered to be effective as of the Effective Date.

 

 

	DEBTOR:
	TRI-VALLEY CORPORATION, a Delaware corporation
	By:	/s/	Maston N. Cunningham
			Maston N. Cunningham,
			Chief Executive Officer
	SECURED PARTIES:
	/s/ G. Thomas Gamble
	G. THOMAS GAMBLE, an individual
	/s/ G. Thomas Gamble
	GEORGE T. GAMBLE, TRUSTEE, OF
	GEORGE T. GAMBLE 1991 TRUST

 

 

 

Registered Holder (Debtor)		Corporation (Issuer)		Jurisdiction of Organization of Issuer		Ownership of Debtor in Issuer (common shares of Issuer)
Tri-Valley Corporation		Select Resources Corporation, Inc.		Delaware		1,000 shares of Common Stock
Tri-Valley Corporation		Tri-Valley Oil & Gas Co.		California		1,000 shares of Common Stock

 

 

 

Schedule 1(a)-1