EXHIBIT 10.4
 
SECURITY AGREEMENT
 
THIS SECURITY AGREEMENT is dated March 25, 2013 but effective as of January 31,
2013, by and between VICTORY ELECTRONIC CIGARETTES, INC., a Nevada corporation
(the “Debtor”); and TECKMINE INDUSTRIES, INC., a Nevada corporation (the
“Secured Party”).
 
WITNESSETH THAT:
 
A. WHEREAS the Debtor has executed a debenture in favor of the Secured Party in
the principal amount of USD$200,000 (the “Debenture”).
 
B. WHEREAS, the Debtor has agreed to enter into this Security Agreement in order
to secure its obligations to the Secured Party under the Debenture.
 
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
 
1.  THE SECURITY INTERESTS.
 
1.1 In order (i) to secure the due and punctual payment of the Debenture; (ii)
to secure the due and punctual payment and performance of all obligations of the
Debtor contained herein; (iii) to secure the due and punctual payment and
performance of all indebtedness, obligations and liabilities of the Debtor in
all other agreements executed or delivered by the Debtor in connection with the
Debenture; and (iv) to secure the payment and performance of all other
indebtedness, liabilities and obligations of the Debtor to the Secured Party of
every kind and description, whether direct, indirect or contingent, whether now
existing or hereafter arising or incurred, due or to become due, whether
otherwise secured or unsecured and howsoever evidenced, incurred or arising,
including all future advances to the Debtor (all of the foregoing indebtedness,
obligations and liabilities described in this paragraph are hereinafter
collectively called the “Obligations”), the Debtor hereby grants to the Secured
Party, and its respective successors and assigns, a continuing security interest
in, and hereby collaterally assigns to the Secured Party, the following
described fixtures, personal property and intangible property (hereinafter
collectively called the “Collateral”) whether now owned or hereafter acquired;
whether existing or hereafter arising and wherever located:
 
(a)  
All deposits and accounts receivable acquired by the Debtor in the operation of
the Debtor’s business.

 
(b)  
All rights of the Debtor under all contracts, agreements and reservations
acquired in connection with the operation of the Debtor’s business.

 
(c)  
All inventory, chattel, paper, accounts, equipment, and general intangibles.

 
(d)  
All shares of stock and any other ownership interests in any business entity.

 
(e)  
All assets, tangible or intangible, owned by the Debtor, including but not
limited to cash, investments, accounts receivable, inventory of raw materials,
work in progress or finished goods, equipment, trade names, and goodwill.

 
(f)  
All accessions, attachments, accessories, tools, parts, supplies, replacements,
and additions to any of the collateral described herein, whether added not or
later.

 
 
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(g)  
All products and produce of any of the property described in this Collateral
section.

 
(h)  
All accounts, general intangibles, instruments, rents, monies, payments, and all
other rights, arising out of a sale, lease, or other disposition of any of the
property described in this Collateral section.

 
(i)  
All proceeds (including insurance proceeds) from the sale, destruction, loss, or
other disposition of any of the property described in this Collateral section,
and sums due from a third party who has damaged or destroyed the Collateral or
from that party’s insurer, whether due to judgment, settlement, or other
process.

 
(j)  
All records and data relating to any of the property described in this
Collateral section, 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 such records or data on electronic media.

 
1.2 The security interests granted pursuant to this Section 1 (the “Security
Interests”) are granted as security only and shall not subject the Secured
Party, to, or transfer to the Secured Party, or in any way affect or modify, any
obligation or liability of the Debtor under any of the Collateral or any
transaction which gave rise thereto.
 
1.3 In addition to the Debenture, this Agreement secures all obligations, debts
and liabilities, plus interest thereon of the Debtor to the Secured Party, or
any one or more of them, as well as all claims by the Secured Party against the
Debtor or any one or more of them, whether now existing or hereafter arising,
whether related or unrelated to the purpose of the Debenture, whether voluntary
or otherwise, whether due or not due, direct or indirect, determined or
undetermined, absolute or contingent, liquidated or unliquidated whether the
Debtor may be liable individually or jointly with others, whether obligated as
guarantor, surety, accommodation party or otherwise, and whether recovery upon
such amounts may be or hereafter may become barred by any statute of
limitations, and whether the obligation to repay such amounts may be or
hereafter may become other wise unenforceable.
 
2.  FILING; FURTHER ASSURANCES.
 
2.1 The Debtor authorizes the Secured Party to file and record, any financing
statements, any carbon, photographic or other reproduction of a financing
statement or this Security Agreement (which the parties hereto agree shall be
sufficient as a financing statement hereunder), any specific assignments or
other paper that may be reasonably necessary or desirable, or that the Secured
Party may request, in order to create, confirm, preserve, perfect or validate
any Security Interest or to enable the Secured Party to exercise and enforce its
rights and remedies hereunder or under applicable law with respect to any of the
Collateral.
 
3.  REPRESENTATIONS AND WARRANTIES OF THE DEBTOR.
 
The Debtor hereby represents and warrants to the Secured Party as follows:
 
3.1 The Debtor is, or to the extent that certain Collateral is to be acquired
after the date hereof, will be, the owner of the Collateral free from any
adverse lien, security interest or encumbrance.
 
3.2 No financing statement covering the Collateral is on file in any public
office.
 
 
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3.3 The Collateral is used solely for commercial purposes and is not used or
bought for personal, family or household purposes.
 
4.  COVENANTS OF THE DEBTOR.
 
The Debtor hereby covenants and agrees as follows:
 
4.1 The Debtor will use all commercially reasonable efforts to defend the
Collateral against all claims and demands of all persons at any time claiming
any interest therein.
 
4.2 The Debtor will provide the Secured Party, at least fifteen (15) business
days prior to occurrence, with written notice of (i) any change in the
registered office of the Debtor or the office where the Debtor maintains its
books and records pertaining to the Collateral, or (ii) the movement or location
of Collateral to or at any address other than its current location.
 
4.3 The Debtor will promptly pay any and all taxes, assessments and governmental
charges upon the Collateral prior to the date penalties are attached thereto,
except to the extent that such taxes, assessments and charges shall be contested
in good faith by the Debtor and adequate reserves have been set aside therefor.
 
4.4 The Debtor will immediately notify the Secured Party of any event causing a
substantial loss or diminution in the value of all or any material part of the
Collateral and the amount or an estimate of the amount of such loss or
diminution.
 
4.5 Except for the sale of Collateral as inventory in the normal course of
business, the Debtor will not sell or offer to sell or otherwise assign,
transfer or dispose of the Collateral or any interest therein, without the prior
written consent of the Secured Party.
 
4.6 The Debtor will keep the Collateral free from any adverse lien or security
interest.
 
4.7 The Debtor will not knowingly use the Collateral in violation of any statute
or ordinance.
 
4.8 The Debtor will not change its name, identity or structure, without the
prior written consent of the Secured Party, which consent shall not be
unreasonably withheld.
 
4.9 The Debtor will keep its records concerning the Collateral, at the Debtor’s
executive office or at such other place or places of business as the Secured
Party may approve in writing. The Debtor will hold and preserve such records and
will permit representatives of the Secured Party at any time during normal
business hours to examine and inspect the Collateral and to make abstracts from
such records, and will furnish to the Secured Party such information and reports
regarding the Collateral as the Secured Party may from time to time reasonably
request.
 
 
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5.  GENERAL AUTHORITY.
 
5.1 The Debtor hereby appoints the Secured Party the Debtor’s true and lawful
attorney, with full power of substitution, in the name of the Debtor, the
Secured Party or otherwise, for the sole use and benefit of the Secured Party,
but at the Debtor’s expense, to the extent permitted by law to exercise, at any
time and from time to time after any Event of Default has occurred, all or any
of the following powers with respect to all or any of the Collateral (which
power shall be in addition and supplemental to any powers, rights and remedies
of the Secured Party described herein or otherwise available to the Secured
Party under applicable law):
 
(a)  
To demand, sue for, collect, receive and give acquaintance for any and all
moneys due or to become due upon or by virtue thereof.

 
(b)  
To receive, take, endorse, assign and deliver any and all checks, notes, drafts,
documents and other negotiable and non-negotiable instruments and chattel paper
taken or received by the Secured Party in connection therewith.

 
(c)  
To settle, compromise, compound, prosecute or defend any action or proceeding
with respect thereto.

 
(d)  
To discharge any taxes, liens, security interests or other encumbrances at any
time placed thereon.

 
(e)  
To execute such documents and instruments on behalf of the Debtor as may be
necessary to assign any Collateral as described herein. Such appointment as
attorney is irrevocable until the repayment and performance in full of the
Obligations and coupled with an interest.

 
5.2 The Secured Party agrees to notify the Debtor within 3 days of exercising
any of the powers granted to it under this Section 5.
 
6.  EVENTS OF DEFAULT.
 
6.1 The Debtor shall be in default under this Security Agreement upon the
occurrence of any one or more of the following events (each such event is herein
referred to as an “Event of Default”):
 
(a)  
Default shall be made in the payment of any installment of principal or interest
on the Debenture, the Obligations or any other sum secured hereby when due and
the failure to cure such default within ten (10) days after written notice of
default to the Debtor; or

 
(b)  
The Debtor transfers, assigns, alienates, mortgages, encumbers, pledges,
hypothecates or grants an interest in Collateral without the Secured Party’s
prior written consent, unless otherwise allowed by the terms of this Security
Agreement; or

 
(c)  
Material default by the Debtor in the observance or performance of any
non-monetary covenant or agreement contained herein, in the Debenture or any
other agreements related to the Debenture and the failure to cure such default
within thirty (30) days after written notice of default to the Debtor (or within
such other time period as may be therein specifically provided); or

 
(d)  
Breach by the Debtor of any representation or warranty contained herein or in
the Debenture; or

 
 
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(e)  
The Debtor shall file a voluntary petition in bankruptcy or shall be adjudicated
bankrupt or insolvent, or shall file any petition or answer seeking or
acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under any present or
future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency or other relief for debtors; or shall seek or consent to
or acquiesce in the appointment of any trustee, receiver or liquidator of the
Debtor or of all or any part of the Collateral, or of any or all of the
royalties, revenues, rents, issues or profits thereof, or shall make any general
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally as they become due; or

 
(f)  
A court of competent jurisdiction shall enter an order, judgment or decree
approving a petition filed against the Debtor seeking any reorganization,
dissolution or similar relief under any present or future federal, state or
other statute, law or regulation relating to bankruptcy, insolvency or other
relief for debtors, and such order, judgment or decree shall remain unvacated
and unstayed for an aggregate of sixty (60) days (whether or not consecutive)
from the first date of entry thereof; or any trustee, receiver or liquidator of
the Debtor or of all or any part of the Collateral, or of any or all of the
royalties, revenues, rents, issues or profits thereof, shall be appointed
without the consent or acquiescence of the Debtor and such appointment shall
remain unvacated and unstayed for an aggregate of sixty (60) days (whether or
not consecutive); or

 
(g)  
A writ of execution or attachment or any similar process shall be issued or
levied against all or any part of or interest in the Collateral, or any judgment
involving monetary damages shall be entered against the Debtor which shall
become a lien on the Collateral or any portion thereof or interest therein and
such execution, attachment or similar process or judgment is not released,
bonded, satisfied, vacated or stayed within sixty (60) days after its entry or
levy.

 
7.  REMEDIES UPON EVENT OF DEFAULT.
 
7.1 If an Event of Default shall have occurred and be continuing, the Secured
Party may take any of the following actions:
 
(a)  
The Secured Party may exercise all the rights and remedies of a the Secured
Party under Revised Article 9 of the Uniform Commercial Code (“UCC”) (whether or
not the UCC is in effect in the jurisdiction where such rights and remedies are
exercised) and, in addition, the Secured Party may, without being required to
give any notice, except as herein provided or as may be required by mandatory
provisions of law, including provisions that require a the Secured Party to act
in a commercially reasonable manner, (i) apply the cash, if any, then held by it
as Collateral hereunder, for the purposes and in the manner specified in Section
9 hereof, and (ii) if there shall be no such cash or if such cash shall be
insufficient to pay all the Obligations in full, sell the Collateral, or any
part or component thereof, at one or more public or private sales for cash, upon
credit or for future delivery, and at such price or prices as the Secured Party
may deem satisfactory.

 
(b)  
The Secured Party may require the Debtor to assemble all or any part of the
Collateral and make it available to the Secured Party at a place to be
designated by the Secured Party, which is reasonably convenient. Any holder of
an Obligation may be the purchaser of any or all of the Collateral so sold at
any public sale (and, if the Collateral is of a type customarily sold in a
recognized market at any private sale) and thereafter hold the same absolutely,
free from any right or claim of whatsoever kind. Upon any such sale, the Secured
Party shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely, free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Debtor.

 
 
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(c)  
The Secured Party shall give the Debtor at least ten (10) business days’ prior
written notice of its intention to make any such public or private sale. The
Secured Party and the Debtor agree that such notice constitutes “reasonable
notification” within the meaning of Section 9-611 of the UCC. Such notice in the
case of a public sale shall state the time and place fixed for such sale. Such
notice in the case of a private sale or disposition shall state the time after
which any private sale or other intended disposition is to be made.

 
(d)  
Any such public sale shall be held at such time or times within ordinary
business hours and at public or private place or places as the Secured Party may
fix in the notice of such sale. At any public or private sale, the Collateral
may be sold in one lot as an entirety or in separate parcels, as the Secured
Party may determine. The Secured Party shall not be obligated to make such sale
pursuant to any such notice. The Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and placed fixed for the
sale, and such sale may be made at any time or place to which the same may be
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Secured Party
until the selling price is paid by the purchaser thereof, but the Secured Party
shall not incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice.

 
(e)  
The Secured Party, instead of exercising the power of sale herein conferred upon
them, may proceed by a suit or suits at law or in equity to foreclose the
Security Interests and sell the Collateral, or any portion thereof, under a
judgment or decree of a court or courts of competent jurisdiction.

 
(f)  
All rights and remedies contained herein shall be separate and cumulative and in
addition to all other rights and remedies available to a the Secured Party under
applicable law, and the exercise of one shall not in any way limit or prejudice
the exercise of any other such rights or remedies.

 
(g)  
The Secured Party as attorney-in-fact pursuant to Section 5 hereof may, in the
name and stead of the Debtor, make and execute all conveyances, assignments and
transfers of any Collateral sold in accordance with this Agreement. The Debtor
shall, if so reasonably requested by the Secured Party, ratify and confirm any
sale or sales by executing and delivering to the Secured Party or to such
purchaser or purchasers, all such instruments as may, in the reasonable judgment
of the Secured Party, be advisable for such purpose.

 
(h)  
The receipt by the Secured Party of the purchase money paid at any such sale
made by it shall be a sufficient discharge therefor to any purchaser (other than
the Secured Party) of the Collateral, or any portion thereof, sold as aforesaid;
and no such purchaser (or his or its representatives or assigns) (other than the
Secured Party), after paying such purchase money and receiving such receipt,
shall be bound to see to the application of such purchase money or any part
thereof or in any manner whatsoever be answerable for any loss, misapplication
or nonapplication of any such purchase money, or any part thereof, or be bound
to inquire as to the authorization, necessity, expediency or regularity of any
such sale.

 
 
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8.  RIGHT OF SECURED PARTY TO USE AND OPERATE COLLATERAL, ETC.
 
8.1 Upon the occurrence and during the continuance of an Event of Default, to
the extent permitted by law, the Secured Party shall have the right and power to
take possession of all or any part of the Collateral, and to exclude the Debtor
and all persons claiming under the Debtor wholly or partly therefrom, and
thereafter to hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, the Secured Party may, from time to time, at
the expense of the Debtor, make all such repairs, replacements, alterations,
additions and improvements to and of the Collateral as the Secured Party may
deem proper. In such case, the Secured Party shall have the right to manage and
control the Collateral and to carry on the business and to exercise all rights
and powers of the Debtor in respect thereto as the Secured Party shall deem
best, including the right to enter into any and all such agreements with respect
to the leasing and/or operation of the Collateral or any part thereof as the
Secured Party may deem fit; and the Secured Party shall be entitled to collect
and receive all rents, issues, profits, fees, revenues and other income of the
same and every part thereof. Such rents, issues, profits, fees, revenues and
other income shall be applied to pay the expenses of holding and operating the
Collateral and of conducting the business thereof, and of all maintenance,
repairs, replacements, alterations, additions and improvements, and to make all
payments which the Secured Party may be required or may elect to make, if any,
for taxes, assessments, insurance and other charges upon the Collateral or any
part thereof, and all other payments which the Secured Party may be required or
authorized to make under any provision of this Security Agreement (including
legal costs and attorney’s fees). The remainder of such rents, issues, profits,
fees, revenues and other income shall be applied to the payment of the
Obligations in such order or priority as the Secured Party shall determine
(subject to the provisions of Section 9 hereof) and, unless otherwise provided
by law or by a court of competent jurisdiction, any surplus shall be paid over
to the Debtor.
 
9.  APPLICATION OF COLLATERAL AND PROCEEDS.
 
9.1 The proceeds of any sale of, or other realization upon, all or any part of
the Collateral shall be applied in the following order of priorities:
 
(a)  
First, to pay the expenses of such sale or other realization, including
reasonable commission to the Secured Party’s agent, and all expenses,
liabilities and advances incurred or made by the Secured Party in connection
therewith, and any other unreimbursed expenses for which the Secured Party is to
be reimbursed pursuant to Section 10;

 
(b)  
Second, to the payment of the Obligations in such order and manner as the
Secured Party in its sole discretion, shall determine; and

 
(c)  
Finally, unless applicable law otherwise provides, to pay to the Debtor, or its
successors or assigns, or as a court of competent jurisdiction may direct, any
surplus then remaining from such proceeds.

 
10.  EXPENSES; SECURED PARTY’S LIEN.
 
10.1 The Debtor will forthwith upon demand pay to the Secured Party:
 
(a)  
the amount of any taxes which the Secured Party may at any time be required to
pay by reason of the Security Interests (including any applicable transfer
taxes) or to free any of the Collateral from any lien thereon, and

 
(b)  
the amount of any and all reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of its counsel and of any agents not regularly
in its employ, which the Secured Party may incur in connection with (i) the
preparation and administration of this Security Agreement, (ii) the collection,
sale or other disposition of any of the Collateral, (iii) the exercise by the
Secured Party of any of the powers, rights or remedies conferred upon it or them
hereunder, or (iv) any default on the Debtor’s part hereunder.

 
 
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11.  TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
 
11.1 Upon the repayment and performance in full of all the Obligations, the
Security Interests and the General Authority and powers granted in Section 5
shall terminate and all rights to the Collateral shall revert to the Debtor.
Upon any such termination of the Security Interests or release of Collateral,
the Secured Party will, at the Debtor’s expense to the extent permitted by law,
execute and deliver to the Debtor such documents as the Debtor shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be.
 
12.  NOTICES.
 
12.1 All notices, requests, demands and other communications provided for
hereunder shall be in writing and either mailed, sent by nationally recognized
overnight courier service, or delivered in person to the applicable party.
 
13.  WAIVERS; NONEXCLUSIVE REMEDIES.
 
13.1 No failure on the part of the Secured Party to exercise, and no delay in
exercising, and no course of dealing with respect to, any right, power or remedy
under this Security Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise by the Secured Party of any right, power or remedy
under this Security Agreement preclude any other right, power or remedy. The
remedies in this Security Agreement are cumulative and are not exclusive of any
other remedies provided by law. The Debtor, to the extent it may lawfully do so,
hereby consents to the jurisdiction of the courts of British Columbia having
jurisdiction in Idaho for the purpose of any suit or proceeding brought in
connection with or with respect to this Security Agreement.
 
14.  WAIVER OF JURY TRIAL.
 
14.1 THE DEBTOR EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH
RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER AGREEMENTS EXECUTED IN
CONNECTION HEREWITH. NEITHER THE DEBTOR NOR ANY ASSIGNEE OF OR SUCCESSOR TO THE
DEBTOR, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY
OTHER LITIGATION OR PROCEDURE BASED UPON, OR ARISING OUT OF, THIS SECURITY
AGREEMENT OR ANY OF THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS ENTERED INTO
IN CONNECTION HEREWITH OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE
PARTIES HERETO, OR ANY OF THEM.
 
15.  CHANGES IN WRITING.
 
15.1 Neither this Security Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally but only by a statement in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
 
 
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16.  LAW; MEANING OF TERMS.
 
16.1 THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEVADA AND APPLICABLE FEDERAL LAWS THEREOF, except
to the extent that remedies provided by the laws of any state other than Nevada
are governed by the laws of said state. Unless otherwise defined herein, or
unless the context otherwise requires, all terms used herein which are defined
in the Nevada Uniform Commercial Code have the meanings therein stated.
 
17.  SEPARABILITY.
 
17.1 If any provision hereof is invalid or unenforceable in any jurisdiction,
the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Party.
 
18.  SUCCESSORS AND ASSIGNS.
 
18.1 This Security Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, including,
without limitation, any subsequent holders of the Debenture or any of the
Obligations, each of whom shall, without further act, become a party hereto by
becoming a holder of a Debenture or such Obligations.
 
19.  HEADINGS.
 
19.1 The headings in this Security Agreement are for the purposes of reference
only and shall not limit or otherwise affect the meaning hereof.
 
20.  COUNTERPARTS.
 
20.1 This Security Agreement may be executed by the parties hereto in several
counterparts hereof and by different parties hereto on separate counterparts
hereof, each of which shall be an original and all of which counterparts shall
together constitute one and the same agreement. Delivery of an executed
signature page of this Security Agreement by facsimile transmission shall be
effective as an in-hand delivery of an original executed counterpart thereof.
 
IN WITNESS WHEREOF, this Security Agreement has been executed by the parties
hereto all as of the day and year first above written.
 

 
DEBTOR:
          VICTORY ELECTRONIC CIGARETTES, INC.            
By:
/s/ Marc Hardgrove            
SECURED PARTY:
          TECKMINE INDUSTRIES, INC.            
By:
/s/ Nathan Woods  

 
 
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