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SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made and entered into as of the 17th
day of March, 2006, by and between Brasada California, Inc., a Delaware
corporation (the "Borrower"), Xxxx X. Xxxxx, Xxxxxx X. Tower, MMP LLP, and W.
Xxxx Xxxxxx (each a "Stockholder" and collectively, the "Stockholders"),and
Foothills Resources, Inc. ("Lender"), a Nevada corporation.
RECITALS:
The Borrower has issued and delivered or will issue and deliver to the
Lender Secured Bridge Promissory Note in the principal amount of up to Three
Million Dollars ($3,000,000), dated as of the date of this Agreement (each, a
"Note"). Pursuant to the Note, the Borrower has agreed to grant a security
interest in and to the Collateral (as defined in this Agreement) on the terms
and conditions set forth in this Agreement.
In consideration of the Debt (as defined in this Agreement) evidenced
by the Note, and to secure repayment thereof, the Stockholder has agreed grant
Lender a security interest in and to the Borrower Control Shares (as defined in
this Agreement).
NOW, THEREFORE, for and in consideration of the Debt (as defined in
this Agreement), and of the premises and intending to be legally bound, the
parties covenant and agree as follows:
1. Definitions. In addition to the words and terms defined elsewhere in
this Agreement, the following words and terms shall have the following
meanings, unless the context otherwise clearly requires:
"Accounts" shall have the meaning given to that term in the Code and
shall include without limitation all rights of the Borrower, whenever
acquired, to payment for goods sold or leased or for services rendered,
whether or not earned by performance.
"As-extracted Collateral" shall have the meaning given to that term
under the Code.
"Borrower Control Shares" shall mean Instruments representing or
evidencing equity interests representing 51% or more of the capital
stock of the Borrower or other equity interests therein.
"Bridge Loan Agreement" shall mean the Bridge Loan and Control Share
Pledge and Security Agreement by and between the Borrower and the
Lender dated as of even date herewith.
"Chattel Paper" shall have the meaning given to that term in the Code
and shall include without limitation all writings owned by the Borrower
or, whenever acquired, which evidence both a monetary obligation and a
security interest in or a lease of specific goods.
"Code" shall mean the Uniform Commercial Code as in effect on the date
of this Agreement and as amended from time to time, of the state or
states having jurisdiction with respect to all or any portion of the
Collateral from time to time.
"Collateral" shall mean (i) the Borrower Control Shares, and (ii) all
tangible and intangible assets of Borrower, including, without
limitation, collectively the Accounts, As-extracted Collateral, Chattel
Paper, Deposit Accounts, Documents, Equipment, Fixtures, General
Intangibles, Instruments, Intellectual Property, Inventory, Investment
Property, all oil and gas in and extracted from any other Collateral,
and Proceeds of each of them, as well as the meaning ascribed to that
term in Section 2.
"Debt" shall mean (i) all indebtedness, both principal and interest, of
the Borrower to the Lender now or after the date of this Agreement
evidenced by the Notes, (ii) all other debts, liabilities, duties and
obligations of the Borrower to the Lender arising after the date of
this Agreement contracted or incurred, whether arising under or in
connection with the Loan Documents or arising under or in connection
with any other agreement, instrument, or undertaking made by or for the
benefit of the Borrower to or for the benefit of the Lender, (iii) all
costs and expenses incurred by the Lender in the collection of any of
the indebtedness described in this paragraph or in connection with the
enforcement of any of the duties and obligations of the Borrower to the
Lender described in this paragraph, including reasonable attorneys' and
paralegals' fees and expenses, and (iv) all future advances made by the
Lender for the maintenance, protection, preservation or enforcement of,
or realization upon, the Collateral or any portion of the Collateral,
including advances for storage, transportation charges, taxes,
insurance, repairs and the like.
"Deposit Accounts" shall have the meaning given to that term in the
Code and shall include a demand, time, savings, passbook or similar
account maintained with a bank, savings bank, savings and loan
association, credit union, trust company or other organization that is
engaged in the business of banking.
"Documents" shall have the meaning given to that term in the Code and
shall include without limitation all warehouse receipts (as defined by
the Code) and other documents of title (as defined by the Code) owned
by the Borrower, whenever acquired.
"Equipment" shall have the meaning given to that term in the Code and
shall include without limitation all goods owned by the Borrower,
whenever acquired and wherever located, used or brought for use
primarily in the business or for the benefit of the Borrower and not
included in Inventory of the Borrower, together with all attachments,
accessories and parts used or intended to be used with any of those
goods or Fixtures, whether now or in the future installed therein or
thereon or affixed thereto, as well as all substitutes and replacements
thereof in whole or in part.
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"Escrow Agent" shall mean Gottbetter & Partners, LLP.
"Escrow Agreement" shall mean the Pledge and Escrow Agreement among the
Borrower, the Lender, the Stockholders and the Escrow Agent with
respect to the Pledged Shares.
"Event of Default" shall mean (i) any of the Events of Default
described in the Note or the Loan Documents, or (ii) any default by the
Borrower in the performance of its obligations under this Agreement.
"Fixtures" shall have the meaning given to that term in the Code, and
shall include without limitation leasehold improvements.
"General Intangibles" shall have the meaning given to that term in the
Code and shall include, without limitation, all leases under which the
Borrower now or in the future leases and or obtains a right to occupy
or use real or personal property, or both, all of the other contract
rights of the Borrower, whenever acquired, and customer lists, choses
in action, claims (including claims for indemnification), books,
records, patents, copyrights, trademarks, blueprints, drawings, designs
and plans, trade secrets, methods, processes, contracts, licenses,
license agreements, formulae, tax and any other types of refunds,
returned and unearned insurance premiums, rights and claims under
insurance policies, and computer information, software, records and
data, and oil, gas, or other minerals before extraction now owned or
acquired after the date of this Agreement by the Borrower.
"Instruments" shall have the meaning given to that term in the Code and
shall include, without limitation, all negotiable instruments (as
defined in the Code), all certificated securities (as defined in the
Code) and all other writings which evidence a right to the payment of
money now or after the date of this Agreement owned by the Borrower.
"Inventory" shall have the meaning given to that term in the Code and
shall include without limitation all goods owned by the Borrower,
whenever acquired and wherever located, held for sale or lease or
furnished or to be furnished under contracts of service, and all raw
materials, work in process and materials owned by the Borrower and used
or consumed in the Borrower's business, whenever acquired and wherever
located.
"Investment Property," "Securities Intermediary" and "Commodities
Intermediary" each shall have the meaning set forth in the Code.
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"Know-How" means all documented and undocumented research, ideas, data,
theories, conclusions, reports, drawings, designs, blueprints,
schematics, exhibits, models, prototypes, source code, object code,
flow charts, manuals, processes, specifications, formulae, product
configurations, notes, inventions (whether or not patentable and
whether or not reduced to practice) and any other information of any
kind developed, in development or maintained by the Borrower or any of
its employees, agents or representatives relating to any goods or
services sold or licensed or offered for sale or license by the
Borrower or goods or services which the Borrower has a present
intention to sell or license.
"Loan Documents" shall mean collectively, this Agreement, the Note, the
Bridge Loan Agreement, the Escrow Agreement and all other agreements,
documents and instruments executed and delivered in connection
therewith, as each may be amended, supplemented or modified from time
to time.
"Permitted Liens" shall mean all (i) all existing liens on the assets
of the Borrower which have been disclosed to the Lender by the Borrower
in the Bridge Loan Agreement, and (ii) all purchase money security
interests hereinafter incurred by the Borrower in the ordinary course
of business to the extent permitted by the Bridge Loan Agreement.
"Pledged Shares" shall mean the Borrower Control Shares.
"Pledgors" shall mean the Borrower and the Stockholders.
"Proceeds" shall have the meaning given to that term in the Code and
shall include without limitation whatever is received when Collateral
or Proceeds are sold, exchanged, collected or otherwise disposed of,
whether cash or non-cash, and includes without limitation proceeds of
insurance payable by reason of loss of or damage to Collateral.
"Trade Secret Rights" means all documentation, Know-How and other
materials owned by the Borrower that is considered to be proprietary to
the Borrower, is maintained on a confidential or secret basis, and is
generally not known to other persons or entities who are not subject to
confidentiality restrictions.
2. Security Interest. As security for the full and timely
payment of the Debt in accordance with the terms of the Debt and the performance
of the obligations of the Borrower under the Notes and this Agreement, the
Borrower and the Stockholders agree that the Lender shall have, and the Borrower
and the Stockholders grant and convey to and create in favor of the Lender, a
security interest under the Code in and to such of the Collateral as is now
owned or acquired after the date of this Agreement by the Borrower; provided,
that with respect to the Stockholders, the security interest granted hereunder
is limited to the Borrower Control Shares. The security interest granted to the
Lender in this Agreement shall be a first priority security interest, prior and
superior to the rights of all third parties existing on or arising after the
date of this Agreement, subject to the Permitted Liens. Certain of the
Collateral is described on Exhibit A hereto, which Collateral is included in the
Collateral.
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3. Provisions Applicable to the Collateral. The parties agree that the
following provisions shall be applicable to the Collateral:
(a) The Borrower covenants and agrees that at all times during the term
of this Agreement it shall keep accurate and complete books and records
concerning the Collateral that is now owned or acquired after the date of this
Agreement by the Borrower.
(b) The Lender or its representatives shall have the right, upon
reasonable prior written notice to the Borrower and during the regular business
hours of the Borrower, to examine and inspect the Collateral and to review the
books and records of the Borrower concerning the Collateral that is now owned or
acquired after the date of this Agreement by the Borrower and to copy the same
and make excerpts therefrom; provided, however, that from and after the
occurrence of an Event of Default, the rights of inspection and entry shall be
subject to the requirements of the Code.
(c) The Borrower shall at all times during the term of this Agreement
keep the Equipment, Inventory and Fixtures that are now owned or acquired after
the date of this Agreement by the Borrower at its various locations or, upon
written notice to the Lender, at such other locations for which the Lender has
filed financing statements, and at no other location without 20 days' prior
written notice to the Lender, except that the Borrower shall have the right
until one or more Events of Default shall occur to sell or otherwise dispose of
Inventory and other Collateral in the ordinary course of business.
(d) The Borrower shall not move the location of its principal executive
offices without prior written notification to the Lender.
(e) Without the prior written consent of the Lender, the Borrower shall
not sell, lease or otherwise dispose of any Equipment or Fixtures, except in the
ordinary course of their business.
(f) Promptly upon request of the Lender from time to time, the Borrower
shall furnish the Lender with such information and documents regarding the
Collateral and the Borrower's financial condition, business, assets or
liabilities, at such times and in such form and detail as the Lender may
request.
(g) At all times during the term of this Agreement, the Borrower shall
deliver to the Lender, upon its written request, without limitation,
(i) all invoices and customer statements rendered to account
debtors, documents, contracts, chattel paper, instruments and other
writings pertaining to the Borrower's contracts or the performance of
the Borrower's contracts,
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(ii) evidence of the Borrower's accounts and statements
showing the aging, identification, reconciliation and collection
thereof, and
(iii) reports as to the Borrower's inventory and sales,
shipment, damage or loss thereof, all of the foregoing to be certified
by authorized officers or other employees of the Borrower, and Borrower
shall take all necessary action during the term of this Agreement to
perfect any and all security interests in favor of Borrower and to
assign to Lender all such security interests in favor of Borrower.
(h) Notwithstanding the security interest in the Collateral granted to
and created in favor of the Lender under this Agreement, the Borrower shall have
the right until one or more Events of Default shall occur, at its own cost and
expense, to collect the Accounts and the Chattel Paper and to enforce its
contract rights.
(i) After the occurrence of an Event of Default, the Lender shall have
the right, in its sole discretion, to give notice of the Lender's security
interest to account debtors obligated to the Borrower and to take over and
direct collection of the Accounts and the Chattel Paper, to notify such account
debtors to make payment directly to the Lender and to enforce payment of the
Accounts and the Chattel Paper and to enforce the Borrower's contract rights. It
is understood and agreed by the Borrower that the Lender shall have no liability
whatsoever under this subsection (i) except for its own gross negligence or
willful misconduct.
(j) At all times during the term of this Agreement, Borrower shall
promptly deliver to the Lender, upon its written request, all existing leases,
and all other leases entered into by Borrower from time to time, covering any
Equipment or Inventory ("Leased Inventory") which is leased to third parties.
(l) Borrower shall not change its name, entity status, federal taxpayer
identification number, or provincial organizational or registration number, or
the state under which it is organized without the prior written consent of the
Lender.
(m) Borrower shall not close any of its Deposit Accounts or open any
new or additional Deposit Accounts without first giving the Lender at least
fifteen (15) days prior written notice thereof.
(n) The Borrower shall cooperate with the Lender, at Borrower's
expense, in perfecting Lender's security interest in any of the Collateral,
including the execution of any control agreement(s) required in order to perfect
Lender's security interest in the Deposit Accounts.
(o) Lender may file any necessary financing statements and other
documents Lender deems necessary in order to perfect Lender's security interest
without Borrower's signature. Borrower grants to Lender a power of attorney for
the sole purpose of executing any documents on behalf of Borrower which Lender
deems necessary to perfect Lender's security interest. Such power, coupled with
an interest, is irrevocable.
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(p) The parties agree that the Lender shall have the right to designate
and appoint a collateral agent to act for and on behalf of the Lenders with
respect to the Collateral under this Agreement, provided that Borrower is
notified in writing at least ten (10) days in advance of such appointment.
4. Additional Provisions Applicable to the Pledged Shares.
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(a) Simultaneously herewith the Pledgors have delivered to the Escrow
Agent one or more certificates representing the Pledged Shares, together with
stock powers duly executed in blank by the Pledgors. The Escrow Agent shall hold
such Pledged Shares pursuant to the terms of the Escrow Agreement.
(b) The Pledged Shares shall be held by the Escrow Agent as security
for the timely payment of all of the Borrower's obligations under the Note and
for the Pledgors' performance of all of their obligations under this Agreement,
as provided herein.
(c) The Escrow Agreement shall provide that while the Escrow Agent
holds the Pledged Shares as security, the Pledgors shall have the right to vote
the Pledged Shares at all meetings of the Borrower's stockholders to the same
extent as if such Pledged Shares were held by Pledgors; provided that no Event
of Default has occurred and is continuing and that the Pledgors are not in
default in the performance of any term of this Agreement. In the event of any
such a default or Event of Default, the Lender shall have the right to the
extent permitted by law to vote and to give consents, ratifications and waivers
and take any other action with respect to the Pledged Shares with the same force
and effect as if the Lender were the absolute and sole owner of the Pledged
Shares.
4. Actions with Respect to Accounts. The Borrower irrevocably
makes, constitutes and appoints the Lender its true and lawful attorney-in-fact
with power to sign its name and to take any of the following actions after the
occurrence and prior to the cure of an Event of Default, at any time without
notice to the Borrower and at the Borrower's expense:
(a) Verify the validity and amount of, or any other matter relating to,
the Collateral by mail, telephone, telegraph or otherwise;
(b) Notify all account debtors that the Accounts have been assigned to
the Lender and that the Lender has a security interest in the Accounts;
(c) Direct all account debtors to make payment of all Accounts directly
to the Lender;
(d) Take control in any reasonable manner of any cash or non-cash items
of payment or proceeds of Accounts;
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(e) Receive, open and dispose of all mail addressed to the Borrower;
(f) Take control in any manner of any rejected, returned, stopped in
transit or repossessed goods relating to Accounts;
(g) Enforce payment of and collect any Accounts, by legal proceedings
or otherwise, and for such purpose the Lender may:
(1) Demand payment of any Accounts or direct any account
debtors to make payment of Accounts directly to the Lender;
(2) Receive and collect all monies due or to become due to the
Borrower pursuant to the Accounts;
(3) Exercise all of the Borrower's rights and remedies with respect
to the collection of Accounts;
(4) Settle, adjust, compromise, extend, renew, discharge or release
Accounts in a commercially reasonable manner;
(5) Sell or assign Accounts on such reasonable terms, for such
reasonable amounts and at such reasonable times as the Lender
reasonably deems advisable;
(6) Prepare, file and sign the Borrower's name or names on any Proof
of Claim or similar documents in any proceeding filed under
federal or state bankruptcy, insolvency, reorganization or other
similar law as to any account debtor;
(7) Prepare, file and sign the Borrower's name or names on any notice
of lien, claim of mechanic's lien, assignment or satisfaction of
lien or mechanic's lien or similar document in connection with
the Collateral;
(8) Endorse the name of the Borrower upon any chattel papers,
documents, instruments, invoices, freight bills, bills of lading
or similar documents or agreements relating to Accounts or goods
pertaining to Accounts or upon any checks or other media of
payment or evidence of a security interest that may come into the
Lender, possession;
(9) Sign the name of the Borrower to verifications of Accounts and
notices of Accounts sent by account debtors to the Borrower; or
(10) Take all other actions that the Lender reasonably deems to be
necessary or desirable to protect the Borrower's interest in the
Accounts.
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(h) Negotiate and endorse any Document in favor of the Lender or its
designees, covering Inventory which constitutes Collateral, and related
documents for the purpose of carrying out the provisions of this Agreement and
taking any action and executing in the name of Borrower any instrument which the
Lender may reasonably deem necessary or advisable to accomplish the purpose
hereof. Without limiting the generality of the foregoing, the Lender shall have
the right and power to receive, endorse and collect checks and other orders for
the payment of money made payable to the Borrower representing any payment or
reimbursement made under, pursuant to or with respect to, the Collateral or any
part thereof and to give full discharge to the same. The Borrower does hereby
ratify and approve all acts of said attorney and agrees that said attorney shall
not be liable for any acts of commission or omission, nor for any error of
judgment or mistake of fact or law, except for said attorney's own gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable until the Debt is paid in full (at which time this power shall
terminate in full) and the Borrower shall have performed all of their
obligations under this Agreement. The Borrower further agrees to use its
reasonable efforts to assist the Lender in the collection and enforcement of the
Accounts and will not hinder, delay or impede the Lender in any manner in its
collection and enforcement of the Accounts.
5. Preservation and Protection of Security Interest. Each of
the Borrower and the Stockholders represents and warrants that it has, and
covenants and agrees that at all times during the term of this Agreement, it
will have, good and marketable title to the Collateral from time to time owned
or acquired by it free and clear of all mortgages, pledges, liens, security
interests, charges or other encumbrances, except for the Permitted Liens and
those junior in right of payment and enforcement to that of the Lender or in
favor of the Lender, and shall defend the Collateral against the claims and
demands of all persons, firms and entities whomsoever. Assuming Lender has taken
all required action to perfect a security interest in the Collateral as provided
by the Code, each of the Borrower and the Stockholders represents and warrants
that as of the date of this Agreement the Lender has, and that all times in the
future the Lender will have, a first priority perfected security interest in the
Collateral, prior and superior to the rights of all third parties in the
Collateral existing on the date of this Agreement or arising after the date of
this Agreement, subject to the Permitted Liens. Except as permitted by this
Agreement, each of the Borrower and the Stockholder covenants and agrees that it
shall not, without the prior written consent of the Lender (i) borrow against
the Collateral or any portion of the Collateral from any other person, firm or
entity, except for borrowings which are subordinate to the rights of the Lender,
(ii) grant or create or permit to attach or exist any mortgage, pledge, lien,
charge or other encumbrance, or security interest on, of or in any of the
Collateral or any portion of the Collateral except those in favor of the Lender
or the Permitted Liens, (iii) permit any levy or attachment to be made against
the Collateral or any portion of the Collateral, except those subject to the
Permitted Liens, or (iv) permit any financing statements to be on file with
respect to any of the Collateral, except financing statements in favor of the
Lender or those with respect to the Permitted Liens. The Borrower and the
Stockholders shall faithfully preserve and protect the Lender's security
interest in the Collateral and shall, at their own cost and expense, cause, or
assist the Lender to cause that security interest to be perfected and continue
perfected so long as the Debt or any portion of the Debt is outstanding, unpaid
or executory. For purposes of the perfection of the Lender's security interest
in the Collateral in accordance with the requirements of this Agreement, the
Borrower and the Stockholders shall from time to time at the request of the
Lender file or record, or cause to be filed or recorded, such instruments,
documents and notices, including assignments, financing statements and
continuation statements, as the Lender may reasonably deem necessary or
advisable from time to time in order to perfect and continue perfected such
security interest. The Borrower and the Stockholders shall do all such other
acts and things and shall execute and deliver all such other instruments and
documents, including further security agreements, pledges, endorsements,
assignments and notices, as the Lender in its discretion may reasonably deem
necessary or advisable from time to time in order to perfect and preserve the
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priority of such security interest as a first lien security interest in the
Collateral prior to the rights of all third persons, firms and entities, subject
to the Permitted Liens and except as may be otherwise provided in this
Agreement. The Borrower and the Stockholders agree that a carbon, photographic
or other reproduction of this Agreement or a financing statement is sufficient
as a financing statement and may be filed instead of the original.
6. Insurance. Risk of loss of, damage to or destruction of the
Equipment, Inventory and Fixtures is on the Borrower. The Borrower shall insure
the Equipment, Inventory and Fixtures against such risks and casualties and in
such amounts and with such insurance companies as is ordinarily carried by
corporations or other entities engaged in the same or similar businesses and
similarly situated or as otherwise reasonably required by the Lender in its sole
discretion. In the event of loss of, damage to or destruction of the Equipment,
Inventory or Fixtures during the term of this Agreement, the Borrower shall
promptly notify Lender of such loss, damage or destruction. At the reasonable
request of the Lender, each of the Borrower's policies of insurance shall
contain loss payable clauses in favor of the Borrower and the Lender as their
respective interests may appear and shall contain provision for notification of
the Lender thirty (30) days prior to the termination of such policy. At the
request of the Lender, copies of all such policies, or certificates evidencing
the same, shall be deposited with the Lender. If the Borrower fails to effect
and keep in full force and effect such insurance or fails to pay the premiums
when due, the Lender may (but shall not be obligated to) do so for the account
of the Borrower and add the cost thereof to the Debt. The Lender is irrevocably
appointed attorney-in-fact of the Borrower to endorse any draft or check which
may be payable to the Borrower in order to collect the proceeds of such
insurance. Unless an Event of Default has occurred and is continuing, the Lender
will turn over to the Borrower the proceeds of any such insurance collected by
it on the condition that the Borrower apply such proceeds either (i) to the
repair of damaged Equipment, Inventory or Fixtures, or (ii) to the replacement
of destroyed Equipment, Inventory or Fixtures with Equipment, Inventory or
Fixtures of the same or similar type and function and of at least equivalent
value (in the sole judgment of the Lender), provided such replacement Equipment,
Fixtures or Inventory is made subject to the security interest created by this
Agreement and constitutes a first lien security interest in the Equipment,
Inventory and Fixtures subject only to Permitted Liens and other security
interests permitted under this Agreement, and is perfected by the filing of
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financing statements in the appropriate public offices and the taking of such
other action as may be necessary or desirable in order to perfect and continue
perfected such security interest. Any balance of insurance proceeds remaining in
the possession of the Lender after payment in full of the Debt shall be paid
over to the Borrower or its order.
7. Maintenance and Repair. The Borrower shall maintain the
Equipment, Inventory and Fixtures, and every portion thereof, in good condition,
repair and working order, reasonable wear and tear alone excepted, and shall pay
and discharge all taxes, levies and other impositions assessed or levied thereon
as well as the cost of repairs to or maintenance of the same. If the Borrower
fails to do so, the Lender may (but shall not be obligated to) pay the cost of
such repairs or maintenance and such taxes, levies or impositions for the
account of the Borrower and add the amount of such payments to the Debt.
8. Preservation of Rights Against Third Parties; Preservation
of Collateral in Lender's Possession. Until such time as the Lender exercise its
right to effect direct collection of the Accounts and the Chattel Paper and to
effect the enforcement of the Borrower's contract rights, the Borrower assume
full responsibility for taking any and all commercially reasonable steps to
preserve rights in respect of the Accounts and the Chattel Paper and their
contracts against prior parties. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of such of the Collateral as may
come into its possession from time to time if the Lender takes such action for
that purpose as the Borrower shall request in writing, provided that such
requested action shall not, in the judgment of the Lender, impair the Lender's
security interest in the Collateral or its right in, or the value of, the
Collateral, and provided further that the Lender receives such written request
in sufficient time to permit the Lender to take the requested action.
9. Events of Default and Remedies.
(a) If any one or more of the Events of Default shall occur or shall
exist, the Lender may then or at any time thereafter, so long as such default
shall continue, foreclose the lien or security interest in the Collateral in any
way permitted by law, or upon fifteen (15) days prior written notice to the
Borrower or the Stockholders, sell any or all Collateral at private sale at any
time or place in one or more sales, at such price or prices and upon such terms,
either for cash or on credit, as the Lender, in its sole discretion, may elect,
or sell any or all Collateral at public auction, either for cash or on credit,
as the Lender, in its sole discretion, may elect, and at any such sale, the
Lender may bid for and become the purchaser of any or all such Collateral.
Pending any such action the Lender may liquidate the Collateral.
(b) If any one or more of the Events of Default shall occur or shall
exist, the Lender may then, or at any time thereafter, so long as such default
shall continue, grant extensions to, or adjust claims of, or make compromises or
settlements with, debtors, guarantors or any other parties with respect to
Collateral or any securities, guarantees or insurance applying thereon, without
notice to or the consent of the Borrower or the Stockholders, without affecting
the Borrower's or the Stockholders' liability under this Agreement or the Notes.
Each of the Borrower and the Stockholders waives notice of acceptance, of
nonpayment, protest or notice of protest of any Accounts or Chattel Paper or any
of its contract rights and any other notices to which the Borrower or the
Stockholders may be entitled.
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(c) If any one or more of the Events of Default shall occur or shall
exist and be continuing, then in any such event, the Lender shall have such
additional rights and remedies in respect of the Collateral or any portion
thereof as are provided by the Code and such other rights and remedies in
respect thereof which it may have at law or in equity or under this Agreement,
including without limitation the right to enter any premises where Equipment,
Inventory and/or Fixtures are located and take possession and control thereof
without demand or notice and without prior judicial hearing or legal
proceedings, which the Borrower and the Stockholders expressly waive.
(d) The Lender shall apply the Proceeds of any sale or liquidation of
the Collateral, and, subject to Section 6, any Proceeds received by the Lender
from insurance, first to the payment of the reasonable costs and expenses
incurred by the Lender in connection with such sale or collection, including
without limitation reasonable attorneys' fees and legal expenses, second to the
payment of the Debt, whether on account of principal or interest or otherwise as
the Lender, in its sole discretion, may elect, and then to pay the balance, if
any, to the Borrower or as otherwise required by law. If such Proceeds are
insufficient to pay the amounts required by law, the Borrower shall be liable
for any deficiency.
(e) Upon the occurrence of any Event of Default, the Borrower shall
promptly upon written demand by the Lender assemble the Equipment, Inventory and
Fixtures and make them available to the Lender at a place or places to be
designated by the Lender. The rights of the Lender under this paragraph to have
the Equipment, Inventory and Fixtures assembled and made available to it is of
the essence of this Agreement and the Lender may, at its election, enforce such
right by an action in equity for injunctive relief or specific performance,
without the requirement of a bond.
10. Defeasance. Notwithstanding anything to the contrary
contained in this Agreement upon payment and performance in full of the Debt,
this Agreement shall terminate and be of no further force and effect and the
Lender shall thereupon terminate its security interest in the Collateral. Until
such time, however, this Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns, provided that, without the
prior written consent of the Lender, the Borrower may not assign this Agreement
or any of its rights under this Agreement or delegate any of its duties or
obligations under this Agreement and any such attempted assignment or delegation
shall be null and void. This Agreement is not intended and shall not be
construed to obligate the Lender to take any action whatsoever with respect to
the Collateral or to incur expenses or perform or discharge any obligation, duty
or disability of the Borrower.
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11. Miscellaneous.
-------------
(a) The provisions of this Agreement are intended to be severable. If
any provision of this Agreement shall for any reason be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of such provision in any other jurisdiction or any other provision of this
Agreement in any jurisdiction.
(b) No failure or delay on the part of the Lender in exercising any
right, remedy, power or privilege under this Agreement and the Note shall
operate as a waiver thereof or of any other right, remedy, power or privilege of
the Lender under this Agreement, the Notes or any of the other Loan Documents;
nor shall any single or partial exercise of any such right, remedy, power or
privilege preclude any other right, remedy, power or privilege or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges of the Lender under this Agreement,
the Note and the other Loan Documents are cumulative and not exclusive of any
rights or remedies which they may otherwise have.
(c) Unless otherwise provided herein, all demands, notices, consents,
service of process, requests and other communications hereunder shall be in
writing and shall be delivered in person or by overnight courier service, or
mailed by certified mail, return receipt requested, addressed:
If to Borrower or to the Stockholders:
Brasada California, Inc.
X.X. Xxx 0000
Xxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Tower, Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
McGuireWoods LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
and with a copy to:
W. Xxxx Xxxxxx
00000 Xxxxxx Xxx Xxxxx,
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
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If to Lender:
Foothills Resources, Inc.
Candiana Lodge, Wellfield X0, Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx, Xxxxxxx
Attn: J. Xxxx Xxxxxx, President and Chief Executive Officer
Facsimile: (000) 000000000000
with a copy to:
Gottbetter & Partners, LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
Any such notice shall be effective (a) when delivered, if delivered by hand
delivery or overnight courier service, or (b) five (5) days after deposit in the
United States mail, as applicable.
(d) The section headings contained in this Agreement are for reference
purposes only and shall not control or affect its construction or interpretation
in any respect.
(e) Unless the context otherwise requires, all terms used in this
Agreement which are defined by the Code shall have the meanings stated in the
Code.
(f) The Code shall govern the settlement, perfection and the effect of
attachment and perfection of the Lender's security interest in the Collateral,
and the rights, duties and obligations of the Lender, the Borrower and the
Stockholders with respect to the Collateral. This Agreement shall be deemed to
be a contract under the laws of the State of New York and the execution and
delivery of this Agreement and, to the extent not inconsistent with the
preceding sentence, the terms and provisions of this Agreement shall be governed
by and construed in accordance with the laws of that State.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument. All of such counterparts shall be read as though one, and they
shall have the same force and effect as though all the signers had signed a
single page.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, and intending to be legally bound, the parties have
executed and delivered this Security Agreement as of the day and year set forth
at the beginning of this Security Agreement.
FOOTHILLS RESOURCES, INC. BRASADA CALIFORNIA, INC.
By:______________________ By:______________________
Name: J. Xxxx Xxxxxx Name: Xxxxxx X. Tower
Title: Chief Executive Officer Title: Chief Executive Officer
XXXXXX X. TOWER XXXX X. XXXXX
----------------------------- ----------------------------
MMP LLP W. XXXX XXXXXX
By:_________________________ __________________________
Name:
Title: Managing Partner
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EXHIBIT A
Assets, rights and other interests acquired pursuant to the Farmout and
Participation Agreement dated January 3, 2006 between INNEX California, Inc. and
Brasada Resources LLC.
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