SECURED CONVERTIBLE NOTE

 

EXHIBIT 99.4   Secured Convertible Note - Longview International Equity Fund, LP

 

THIS   NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT

BEEN REGISTERED   UNDER   THE   SECURITIES ACT OF 1933, AS AMENDED.   THIS NOTE AND

THE COMMON SHARES ISSUABLE UPON   CONVERSION   OF   THIS   NOTE   MAY   NOT   BE SOLD,

OFFERED   FOR   SALE,   PLEDGED   OR   HYPOTHECATED   IN   THE ABSENCE OF AN EFFECTIVE

REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT   OR AN OPINION OF COUNSEL

REASONABLY SATISFACTORY TO SOUTH TEXAS OIL COMPANY THAT   SUCH   REGISTRATION   IS

NOT REQUIRED.

 

SECURED CONVERTIBLE NOTE

 

       FOR   VALUE   RECEIVED,   SOUTH   TEXAS   OIL   COMPANY,   a Nevada corporation

(hereinafter    called    "Borrower"),    hereby    promises   to   pay   to   LONGVIEW

INTERNATIONAL   EQUITY   FUND,   LP,   600   Montgomery   Street,    44th   Floor,   San

Francisco,   CA   94111,   Fax:   (415)   981-5300 (the "Holder") or order,   without

demand, the sum of $84,783 dollars with   simple   interest   accruing on July 28,

2007 (the "Maturity Date"), or sooner as described herein.

 

       This Note has been entered into pursuant to the terms   of a subscription

agreement between the Borrower and the Holder, dated of even date herewith (the

"Subscription   Agreement"),   and   shall   be   governed   by   the   terms   of   such

Subscription   Agreement.    Unless   otherwise   separately   defined   herein,   all

capitalized terms used in this Note shall have the same meaning as is set forth

in the Subscription Agreement.   The following terms shall apply to this Note:

 

                                   ARTICLE I

 

                              GENERAL PROVISIONS

 

       1.1    Interest   Rate.     Subject to Section 5.7 hereof, interest payable

on this Note shall accrue at a rate   per   annum   (the "Interest Rate") equal to

the "prime rate" published in The Wall Street Journal   from   time to time, plus

four   percent (4%).   The interest rate shall be increased or decreased   as   the

case may   be for each increase or decrease in the prime rate in an amount equal

to such increase   or decrease in the prime rate; each change to be effective as

of the day of the change   in   such   rate.    The Interest Rate shall not be less

than eight percent (8%).

 

       1.2    Conversion Privileges.   The Conversion   Privileges   set   forth   in

Article   II   shall   remain   in   full force and effect immediately from the date

hereof and until the Note is paid   in   full   regardless of the occurrence of an

Event of Default.   The Note shall be payable in   full   on   the   Maturity   Date,

unless   previously   converted   into   Common Stock in accordance with Article II

hereof; provided, that if an Event of   Default   has   occurred, the Borrower may

not pay this Note, without the consent of the Holder,   until   up   to   one   year

after   the   later   of   the date the Event of Default has been cured or one year

after the Maturity Date.

 

       1.3    Default Interest   Rate.     A   default   interest   rate   of   fifteen

percent   (15%)   per   annum   shall apply to amounts owed hereunder which are not

paid on their respective due dates.   Interest payable on this Note shall accrue

from the date of this Note and   be   payable   upon   each   Conversion, January 1,

2006,   semi-annually   thereafter,   and   on   the Maturity Date,   accelerated   or

otherwise, when the principal and remaining accrued   but   unpaid interest shall

be due and payable, or sooner as described below.

 

                                  ARTICLE II

 

                               CONVERSION RIGHTS

 

       The Holder shall have the right to convert the principal   due under this

Note   into   Shares   of   the Borrower's Common Stock, $.001 par value per   share

("Common Stock") as set forth below.

 

       2.1.   Conversion into the Borrower's Common Stock.

 

       (a)    The Holder shall   have   the   right   from and after the date of the

issuance of this Note and then at any time until this   Note   is   fully paid, to

convert any outstanding and unpaid principal portion of this Note,   and accrued

interest,   at the election of the Holder (the date of giving of such notice   of

conversion being   a "Conversion Date") into fully paid and nonassessable shares

of Common Stock as   such   stock exists on the date of issuance of this Note, or

any shares of capital stock   of   Borrower   into   which   such Common Stock shall

hereafter   be changed or reclassified, at the conversion price   as   defined   in

Section 2.1(b)   hereof (the "Conversion Price"), determined as provided herein.

Upon delivery to   the   Borrower   of a completed Notice of Conversion, a form of

which is annexed hereto, Borrower   shall issue and deliver to the Holder within

three (3) business days from the Conversion   Date   (such   third   day   being the

"Delivery Date") that number of shares of Common Stock for the portion   of   the

Note   converted   in   accordance   with   the   foregoing.    At the election of the

Holder, the Borrower will deliver accrued but unpaid interest   on   the   Note in

the manner provided in Section 1.3 through the Conversion Date directly to   the

Holder   on   or   before   the   Delivery   Date   (as   defined   in   the Subscription

Agreement).    The   number   of   shares   of   Common Stock to be issued upon   each

conversion of this Note shall be determined   by   dividing   that   portion of the

principal of the Note and interest to be converted, by the Conversion Price.

 

        (b)    The   Borrower   shall   issue for each $1,000 of Note principal   and

interest for which a Notice of Conversion   is   given, an amount of Common Stock

equal to 0.000195652 of the Common Stock of the   Company outstanding on a fully

diluted basis as of the last day preceding the relevant   Conversion   Date.   For

the   purposes   of   the   aforedescribed calculation, "fully diluted basis" shall

include all of the Shares   of   Common   Stock issuable upon conversion of all of

the Notes issuable to the Subscription Agreement   as   if   all   such   Notes were

fully   converted   on   the Initial Closing Date but shall not thereafter include

shares of Common Stock issued upon actual conversion of such Notes and exercise

of the Warrants; issuable   pursuant   to the Subscription Agreement. As employed

in this Note, "fully diluted basis" means   all   of the outstanding Common Stock

together   with   all   Common Stock that may be issued   upon   the   conversion   or

exercise of all outstanding   options,   warrants,   convertible   instruments   and

similar   agreements as of a determination date, including Common Stock added to

treasury after Initial Closing Date.

       (c)      The   Conversion   Price   and   number   and kind of shares or other

securities to be issued upon conversion determined pursuant   to Section 2.1(a),

shall be subject to adjustment from time to time upon the happening   of certain

events while this conversion right remains outstanding, as follows:

 

       A.     Merger,   Sale   of Assets, etc.   If the Borrower at any time   shall

consolidate with or merge into   or   sell or convey all or substantially all its

assets to any other corporation, this   Note, as to the unpaid principal portion

thereof and accrued interest thereon, shall   thereafter   be   deemed to evidence

the   right to purchase such number and kind of shares or other   securities   and

property   as   would   have   been   issuable   or   distributable on account of such

consolidation,   merger,   sale   or   conveyance, upon   or   with   respect   to   the

securities subject to the conversion   or   purchase   right   immediately prior to

such consolidation, merger, sale or conveyance.   The foregoing   provision shall

similarly   apply   to   successive transactions of a similar nature by   any   such

successor or purchaser.    Without limiting the generality of the foregoing, the

anti-dilution provisions of this Section shall apply to such securities of such

successor   or   purchaser   after    any    such   consolidation,   merger,   sale   or

conveyance.

 

       B.     Reclassification, etc.   If the   Borrower   at   any   time   shall, by

reclassification   or   otherwise,   change   the   Common Stock into the same or   a

different number of securities of any class or classes   that   may   be issued or

outstanding, this Note, as to the unpaid principal portion thereof and   accrued

interest   thereon, shall thereafter be deemed to evidence the right to purchase

an adjusted number of such securities and kind of securities as would have been

issuable as   the   result   of   such   change   with   respect   to   the Common Stock

immediately prior to such reclassification or other change.

 

       C.     Stock Splits, Combinations and Dividends.   If the shares of Common

Stock are subdivided or combined into a greater or smaller number   of shares of

Common Stock, or if a dividend is paid on the Common Stock in shares   of Common

Stock,   the   Conversion   Price   shall   be   proportionately   reduced   in case of

subdivision   of   shares   or stock dividend or proportionately increased in   the

case of combination of shares,   in   each such case by the ratio which the total

number of shares of Common Stock outstanding immediately after such event bears

to the total number of shares of Common   Stock outstanding immediately prior to

such event.

 

       D.     Share Issuance.    So long as   this   Note   is   outstanding,   if the

Borrower   shall   issue   or agree to issue any shares of Common Stock except for

the   Excepted Issuances (as   defined   in   the   Subscription   Agreement)   for   a

consideration   less   than   the   Conversion   Price in effect at the time of such

issue, then, and thereafter successively upon   each   such issue, the Conversion

Price shall be reduced to such other lower issue price.    For   purposes of this

adjustment,   the   issuance   of any security carrying the right to convert   such

security into shares of Common   Stock   or   of   any   warrant, right or option to

purchase   Common Stock shall result in an adjustment to   the   Conversion   Price

upon the issuance   of   the above-described security and again upon the issuance

of shares of Common Stock   upon   exercise of such conversion or purchase rights

if such issuance is at a price lower   than   the   then   applicable   Maximum Base

Price.   The reduction of the Conversion Price described in this paragraph is in

addition   to   other   rights   of   the   Holder   described   in   this   Note and the

Subscription Agreement.

 

       (d)    Whenever   the   Conversion   Price   is   adjusted pursuant to Section

2.1(c) above, the Borrower shall promptly mail to the   Holder   a notice setting

forth the Conversion Price after such adjustment and setting forth   a statement

of the facts requiring such adjustment.

 

       (e)    During   the   period   the   conversion   right exists, Borrower   will

reserve from its authorized and unissued Common Stock not less than 175% of the

number   of   shares of Common Stock issuable upon the full   conversion   of   this

Note.   Borrower   represents   that   upon   issuance, such shares will be duly and

validly   issued,   fully   paid and non-assessable.    Borrower   agrees   that   its

issuance of this Note shall   constitute full authority to its officers, agents,

and transfer agents who are charged   with   the   duty   of   executing and issuing

stock certificates to execute and issue the necessary certificates   for   shares

of Common Stock upon the conversion of this Note.

 

       2.2    Method of Conversion.   This Note may be converted by the Holder in

whole   or   in   part   as described in Section 2.1(a) hereof and the Subscription

Agreement.   Upon partial   conversion   of   this   Note, a new Note containing the

same date and provi