Exhibit 10.2

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Agreement”) by and among Mount Tam
Biotechnologies, Inc., a Nevada corporation (the “Debtor”) on the one hand, and
0851229 BC Ltd. on the other hand (“Secured Party”) is effective as of the 9th
day of November 2015 (the “Agreement”). In consideration of the financial
accommodations extended to the Debtor by the Secured Party, the Debtor hereby
agrees that the Secured Party shall have all of the rights given herein against
the Debtor in addition to those given by law or by the Secured Convertible
Promissory Note issued by the Debtor to the Secured Party effective as of
November 9, 2015 (the “Note”) or any other agreement or document underlying the
Liabilities:

 

1.                   The term “Liabilities” as herein used shall include all
indebtedness, obligations and liabilities of any kind of Debtor to the Secured
Party, whether now existing or hereafter incurred, including without limitation
those pursuant to or arising under the Note and any other promissory notes (the
Note and such other promissory notes, together with this Agreement, the “Loan
Documents”) executed between the Debtor and the Secured Party (as the same may
be amended, modified or restated from time to time and any Loan Documents
exchanged or substituted for the Loan Documents). Except as set forth on Exhibit
A hereto, on March 18, 2016, there is currently no other indebtedness,
obligations or known liabilities of the Debtor to the Secured Party.

 

2.                   In order to secure the performance of the Debtor's payment
and other obligations under the Loan Documents, the Debtor hereby grants to the
Secured Party a first priority security interest (the “Security Interest”),
subject only to Permitted Security Interests, in all of the present and future
assets of the Debtor and all products and proceeds of those assets, including
but not limited to the following, to secure the Debtor's due and punctual
payment of the Loan Documents (hereinafter referred to collectively as the
“Collateral”):

 

                      (a) All equipment, including machinery, motor vehicles,
office equipment, furniture, fixtures, along with all other parts, tools,
trade-ins, repairs, accessories, accessions, modifications, and replacements,
whether now owned or subsequently acquired, constructed, or attached or added
to, or placed in, the foregoing;

 

                      (b) All inventory, wherever located, including goods,
merchandise and other personal property, held for sale or lease or furnished or
to be furnished under a contract of service, or constituting raw materials, work
in process or materials used or consumed in the Debtor's business, or consigned
to others or held by others for return to the Debtor, whether now owned or
subsequently acquired or manufactured and wherever located;

 

                      (c) All accounts receivable, including, without
limitation, accounts, contracts, contract rights, chattel paper, instruments,
rents, deposits, general intangibles, and any other obligations of any kind
whether now existing or hereafter arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights now or hereafter
existing in and to all security agreements, notes, leases, licenses, franchises,
supply agreements, and other contracts securing or otherwise relating to any
such accounts, contracts, contract rights, chattel paper, instruments, rents,
deposits, general intangibles, or obligations;

 

                      (d) All general intangibles, including, but not limited
to, corporate names, trade names, trademarks, service marks, trade secrets,
inventions, copyrights (including without limitation copyrights for computer
programs) and all tangible property embodying copyrights, patents and patent
applications, license agreements relating to any of the foregoing and income
therefrom, books and records, blue prints and plans, computer programs, tapes
and related electronic data processing software, and all corporate ledgers;

 

 

 

 

                      (e) Any and all additions, accessions, substitutions or
replacements to or for any of the foregoing;

 

                      (f) Any and all products and proceeds of any or all of the
foregoing, including, without limitation, cash, cash equivalents, tax refunds
and the proceeds of insurance policies providing coverage against the loss or
destruction of or damage to any of the Collateral, or any indemnity, warranty,
or guarantee payable by reason of loss or damage to or otherwise with respect to
any of the Collateral (whether or not the Debtor is the loss payee thereof);

                       

                      (g) All of the Debtor's after-acquired property of the
kinds and types described in paragraphs (a) - (f) herein; and

 

                      (h) All records and data relating to any of the property
described above, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of the Debtor's right, title,
and interest in and to all computer software required to utilize, create,
maintain and process any of such records or data or electronic media.

 

                      “Permitted Security Interests” means (i) liens for taxes,
fees, assessments, or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings; (ii)
liens arising from judgments, decrees, or attachments; (iii) liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; and (iv) purchase
money security liens on equipment or vehicles that are hereafter acquired by the
Debtor.

 

3.                   The Debtor shall preserve the Collateral, keep the
Collateral in good repair, subject to ordinary wear and tear, and abstain from
and not permit the commission of waste with regard thereto. The Debtor shall
maintain insurance coverage in accordance with good business practice against
loss or damage to the Collateral by fire and other hazards, with such insurance
carriers as are reasonably satisfactory to the Secured Party. In the event of
loss or damage to the Collateral, the Debtor shall give immediate written notice
thereof to the Secured Party. In such event, if the Debtor fails promptly to
adjust or compromise any loss claims under the insurance, the Secured Party
shall have the right, at their election, to adjust or compromise any such loss
claims under such insurance.

 

4.                   The Secured Party is hereby authorized to from time to time
to file one or more financing statements (and extensions thereof) under the
Uniform Commercial Code (the “Code”), as in effect from time to time in the
State of Delaware and/or any such other jurisdiction as Secured Party may
decide, naming the Debtor as Debtor and the Secured Party as Secured Party and
indicating therein the items of Collateral herein specified. The Debtor will
from time to time execute such statements and such other notices, affidavits or
other documents as the Secured Party may reasonably deem necessary to protect
its Collateral interest hereunder. At this time, the Secured Party is not
requesting that the Debtor enter into any agreements other than this Agreement
with respect to the Security Interest or the perfection of the Security Interest
(such as landlord waivers, deposit account control agreements and intellectual
property security agreements) but it reserves the right to do so in its sole
discretion to protect its rights hereunder.

 

5.                   The Debtor shall not, without at least thirty days prior
written notice to the Secured Party, change its principal place of business,
change the location of the Collateral (excluding sales of inventory in the
ordinary course of business), or change its name or any trade name, in any such
case which would require the filing of an additional financing statement or
statements then or at any time in the future to preserve the Secured Party’
Security Interest in the Collateral.

 

 

 

 

6.                   Upon the occurrence of any Events of Default (as determined
under the Loan Documents) as a result of which the Secured Party require the
payment of amounts due under the Loan Documents whether or not prior to the
stated maturity date thereof, the Debtor shall, at the request of the Secured
Party, forthwith assemble the Collateral at such reasonable place or places as
the Secured Party designate in their request. In addition to any other rights
granted by law or under this Agreement, the Secured Party shall have the rights
and remedies with respect to the Collateral of a secured party under the Code
(whether or not the Code is in effect in the jurisdiction where the rights and
remedies are asserted). In addition, with respect to the Collateral or any part
thereof which shall then be or shall thereafter come into the possession or
custody of the Debtor, the Secured Party may sell or cause to be sold in
Delaware or elsewhere, in one or more sales or parcels, at such price as the
Secured Party may deem best, and for cash or on credit or for future delivery,
without assumption of any credit risk, all or any of the Collateral, at public
or private sale, without demand of performance or notice of intention to sell or
of time or place of sale (provided that any such transactions shall be in
accordance with the Code and all other applicable laws), and to the extent
permitted by law, the purchaser of any or all of the Collateral so sold shall
thereafter hold the same absolutely free from any claim or right of whatsoever
kind, any such demand, notice, claim or right being hereby expressly waived and
released. Notwithstanding the foregoing, unless the Collateral threatens to
decline speedily in value or is of a type sold on a recognized market, the
Secured Party will give the Debtor reasonable notice of the time and place of
any public sale thereof, or of the time after which any private sale or any
intended disposition is to be made. Any requirement of reasonable notice shall
be met if such notice is mailed, postage prepaid, to Debtor at the address given
below, at least five days before the time of the sale or disposition. Secured
Party may, in its own name, or in the name of any designee, buy at any public
sale and if the Collateral is of a type sold in a recognized market, or is of a
type which is the subject of widely distributed standard price quotations, buy
at private sale. The Secured Party shall apply the net cash receipts from any
such sale of the Collateral to the payment of principal of and/or interest of
all of the remaining Liabilities, whether or not then due. Notwithstanding that
the Secured Party, whether on its own behalf and/or on behalf of another or
others, may continue to hold any of the Collateral and regardless of the value
thereof, the Debtor shall be and remain liable for the payment in full, of
principal and interest, of any balance of the unsatisfied Liabilities at any
time unpaid.

   

7.                   Subsequent to the occurrence of an Event of Default under
the Loan Documents, if, in its sole discretion, the Secured Party deem it
desirable, it may remove any Collateral held by it or its agents from the state,
city, county or other governmental subdivision or jurisdiction in which it may
now or hereafter be held or deposited to any place which it designates and there
deal with it as herein provided and in accordance with applicable law.

 

8.                   In the event that the Debtor fails to do so after 30 days
written notice from the Secured Party, the Secured Party may, but shall not be
obligated to, contest, pay and/or discharge all liens, encumbrances, taxes or
assessments on, or claims or demands against (other than Permitted Security
Interests), any of the Collateral without the consent of the Debtor and take all
actions and proceedings in its name or in the name of the Debtor or of any other
appropriate person to remove or contest such liens, encumbrances, taxes or
assessments, claims or demands; and all sums advanced or paid by the Secured
Party, and all reasonable costs, attorneys’ fees and expenses relating thereto,
shall be Liabilities within the terms of this Agreement.

 

9.                   The Secured Party shall not be deemed to have modified,
discharged, terminated or waived any of its rights hereunder or any terms,
provisions or conditions hereof unless such modification, discharge, termination
or waiver is in writing and signed by its duly authorized officers or agents. No
such modification, discharge, termination or waiver, unless so expressly stated
therein, shall be effective as to any transaction which occurs subsequent to the
date thereof nor to any continuance thereof. This Agreement may not be amended
or modified without the prior written consent of the Debtor and the Secured
Party.

 

 

 

 

10.                   Upon reasonable notice during normal business hours, the
Debtor agrees to allow any representative of the Secured Party (or any agent or
nominee of the Secured Party) to visit and inspect any of the Debtor’s
properties relating to the Collateral, to examine the books and records and
accounts of the Debtor, all at such reasonable times and as often as the Secured
Party may reasonably request; provided that the Debtor shall not be obligated to
provide information (i) that the Debtor reasonably determines in good faith to
be a trade secret or confidential information (unless covered by an enforceable
confidentiality agreement, in form reasonably acceptable to the Debtor) or (ii)
the disclosure of which would adversely affect the attorney-client privilege
between the Debtor and its counsel; provided further that in each such case, the
Debtor shall inform the Secured Party in writing of its reliance on sub-clause
(i) or (ii). The Secured Party agrees, and shall cause each of its agents or
nominees, to hold in confidence and trust and not to use (except in connection
with monitoring its investment and prospects of repayment) or disclose any
information provided to or learned by it in connection with its rights under the
Loan Documents, unless required by applicable law, a court order or any other
governmental authority or to exercise or enforce any of its rights under the
Loan Documents.

 

11.                   This Agreement shall inure to the benefit of the parties
hereto, and their respective successors and assigns; provided that no party
shall assign its rights hereunder or delegate its obligations hereunder without
the prior written consent of the other party. No delay on the part of a party in
exercising any power or right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any power or right hereunder preclude
other or further exercise thereof or the exercise of any other power or right.
All rights and remedies of the Secured Party with respect to the Liabilities or
the Collateral, whether evidenced hereby or by any other instrument of paper,
shall be cumulative and may be exercised singularly or concurrently.

 

12.                   All notices, requests, instructions and documents,
hereunder shall be in writing and delivered personally or sent by registered or
certified mail, postage prepaid, as follows:

 

  (1) if to the Debtor:

Mount Tam Biotechnologies, Inc.

8001 Redwood Blvd.

Novato, CA 94945

Attn: President

 

  (2) if to the Secured Party:

 

c/o US Equity Holdings

336 Bon Air Center #418

Greenbrae, CA 94904

Attn: Chester P. Aldridge

 

or at such other address as either party may by written notice to the other
designate for this purpose. If delivered personally, the date on which a notice,
request, instruction or document is delivered shall be the date on which such
delivery is made, and if delivered by mail, the date on which such notice,
request, instruction or document is deposited in the mail shall be the date of
delivery.

 

 

 

 

13.                   If any term, condition or provision of this Agreement or
of any other agreement or document executed and/or delivered pursuant hereto is
determined to be invalid or unenforceable, such determination shall not affect
the validity or enforceability of any other term, condition or provision of this
Agreement.

 

14.                   (a) This Agreement and the Loan Documents contain the
entire agreement between the Party hereto with respect to the transactions
contemplated.

 

                       (b) This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable in the case of
contracts made and to be performed entirely within that state.

                  

                       (c) Each party hereto shall cooperate with and shall take
such further action and shall execute and deliver such further documents as may
be reasonably requested by the other party in order to carry out the provisions
and purposes of this Agreement (including but not limited to any actions
necessary to release the Security Interest upon the conversion, repayment or
termination of the Note).

 

                       (d) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.

 

***

 

 

 

 

IN WITNESS WHEREOF, this Agreement has been duly executed by the Party hereto as
of the date first above written.

 

SECURED PARTY:         0851229 BC LTD.         By:  /s/ Doug Froese     Name:
Doug Froese   Title: Director         DEBTOR:         Mount Tam Biotechnologies,
Inc.         By:  /s/ David R. Wells     Name: David R. Wells   Title: Interim
Chief Financial Officer  

 

 

 

 

Exhibit A

 

Loans evidenced by the Note in the following amounts on the following dates:

 

Date  Amount  11/9/15  $66,004.25  11/19/15  $25,000  12/17/15  $50,000 
1/15/16  $35,000  2/2/16  $40,000