Exhibit 10.4
 

 
 
 
 
COMMERCIAL SECURITY AGREEMENT

 

Principal Loan Date Maturity Loan No. Call/Coll Account Officer Initials
$3,500,000.00 03-13-2012 04-10-2013 56-80308-15        
References in the boxes above are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Any item above containing "'***" has been omitted due to text length
limitations..

 

Grantor: Greenkraft Inc.. a California corporation Lender:
Pacific Premier Bank
  2530 South Birch Street  
1600 Sunflower Ave., 2nd Floor
  Santa Ana, CA 92707  
Costa Mesa, CA 92626
(714) 431-4000

 
THIS COMMERCIAL SECURITY AGREEMENT dated March 13, 2012, is made and executed
between Greenkraft Inc., a California corporation ("Grantor") and Pacific
Premier Bank ("Lender").
 
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
a security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
 
COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:
 
All Inventory, equipment, accounts (including but not limited to all
health-care-insurance receivables), chattel paper, instruments (Including but
not limited to all promissory notes), letter-of-credit rights, letters of
credit, documents, deposit accounts, investment property, money, other rights to
payment and performance, and general intangibles (including but not limited to
all software and all payment Intangibles); ail attachments, accessions,
accessories, fittings, increases, tools, parts, repairs, supplies, and
commingled goods relating to the foregoing property, and all additions,
replacements of and substitutions for all or any part of the foregoing property;
all insurance refunds relating to the foregoing property; all good will relating
to the foregoing property; all records and data and embedded software relating
to the foregoing property, and ail equipment, inventory and software to utilize,
create, maintain and process any such records and data on electronic media: and
all supporting obligations relating to the foregoing property; all whether now
existing or hereafter arising, whether now owned or hereafter acquired or
whether now or hereafter subject to any rights in the foregoing property; and
all products and proceeds (including but not limited to all insurance payments)
of or relating to the foregoing property.
 
In addition, the word "Collateral" also Includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
 
(A)          All accessions, attachments, accessories, tools, parts, supplies,
replacements of and additions to any of the collateral described herein, whether
added now or later.
 
(B)           All products and produce of any of the property described in this
Collateral section.
 
(C)           All accounts, general Intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, consignment or
other disposition of any of the property described in this Collateral section.
 
(D)           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.
 
(E)            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 Grantor'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,
 
Some or all of the Collateral may be located on the following described real
estate: Real Property located at 2530 Search Birch Street, Santa Ana, CA 92707
 
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:
 
Organization. Grantor is a corporation for profit which is, and at all times
shall be, duly organized, validly existing, and in good standing under and by
virtue of the laws of the State of California. Grantor is duly authorized to
transact business in all other states in which Grantor is doing business, having
obtained all necessary filings, governmental licenses and approvals for each
state in which Grantor is doing business. Specifically, Grantor Is, and at all
times shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on Its business
or financial condition. Grantor has the full power and authority to own its
properties and to transact the business in which it is presently engaged or
presently proposes to engage. Grantor maintains an office at 2630 South Birch
Street, Santa Ana, CA 92707. Unless Grantor has designated otherwise in writing,
the principal office is the office at which Grantor keeps its books and records
including Its records concerning the Collateral, Grantor will notify Lender
prior to any change in the location of Grantor's state of organization or any
change in Grantor's name. Grantor shall do all things necessary to preserve and
to keep in full force and effect its existence, rights and privileges, and shall
comply with all regulations, rules, ordinances, statutes, orders and decrees of
any governmental or quasi-governmental authority or court applicable to Grantor
and Grantor's business activities.
 
Authorization. Grantor's execution, delivery, and performance of this Agreement
and all the Related Documents have been duly authorized by all necessary action
by Grantor, do not require the consent or approval of any other person,
regulatory authority, or governmental body, and do not conflict with, result in
a violation of, or constitute a default under (1) any provision of (a) Grantor's
articles of incorporation or organization, or bylaws, or (b) any agreement or
other instrument binding upon Grantor or (2) any law, governmental regulation,
court decree, or order applicable to Grantor or to Grantor's properties. Grantor
has the power and authority to enter into the Note and the Related Documents and
to grant collateral as security for the Indebtedness. Grantor has the further
power and authority to own and to hold all of Grantor's assets and properties,
and to carry on Grantor's business as presently conducted.
 
Perfection of Security Interest. Grantor agrees to take whatever actions are
requested by Lender to perfect and continue Lender's security interest in the
Collateral. Upon request of Lender, Grantor will deliver to Lender any and all
of the documents evidencing or constituting the Collateral, end Grantor will
note Lender's interest upon any and all chattel paper and instruments if not
delivered to Lender for possession by Lender. This is a continuing security
Agreement and will continue in effect even though all or any part of the
Indebtedness is paid In full and even though for a period of time Grantor may
not be indebted to Lender.
 
 

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Page 2
COMMERCIAL SECURITY AGREEMENT

 
Loan No: 56-800308-15
(Continued)
 

 
Notices to Lender. Grantor will promptly notify Lender in writing at Lender's
address shown above (or such other addresses as Lender may designate from time
to time) prior to any ell change in Grantor's name; (2) change in Grantor's
assumed business name(s); 13) change in the management of the Corporation
Grantor; (4) change In the authorized signer(s); (6) change in Grantor's
principal office address; (6) change in Grantor's state of organization; (7)
conversion of Grantor to a new or different type of business entity; or (8)
change in any other aspect of Grantor that directly or indirectly relates to any
agreements between Grantor and Lender. No change in Grantor's name or state of
organization will take effect until after Lender has received notice. Grantor
represents and warrants to Lender that Grantor has provided Lender with
Grantor's correct Employer Identification Number. Grantor promptly shall notify
Lender should Grantor apply for or obtain a new Employer Identification Number.
 
No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
 
Enforceability of Collateral. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, as defined by the Uniform Commercial
Code, the Collateral is enforceable in accordance with Its terms, is genuine,
and fully complies with all applicable laws and regulations concerning form,
content and manner of preparation and execution, and all persons appearing to be
obligated on the Collateral have authority and capacity to contract and are In
fact obligated as they appear to be on the Collateral. At the time any account
becomes subject to a security interest in favor of Lender, the account shall be
a good and valid account representing an undisputed, bone fide indebtedness
Incurred by the account debtor, for merchandise held subject to delivery
instructions or previously shipped or delivered pursuant to a contract of sale,
or for services previously performed by Grantor with or for the account debtor.
So long as this Agreement remains in effect, Grantor shall not, without Lender's
prior written consent, compromise, settle, adjust, or extend payment under or
with regard to any such Accounts. There shall be no setoffs or counter claims
against any of the Collateral, and no agreement shall have been made under which
any deductions or discounts may be claimed concerning the Collateral except
those disclosed to Lender In writing.
 
Location of the Collateral. Except in the Ordinary course of Grantor's business,
Grantor agrees to keep the Collateral (or to the extent the Collateral consists
of intangible property such as accounts or general intangibles, the records
concerning the Collateral) at Grantor's address shown above or at such other
locations as are acceptable to Lender. Upon Lender's request, Grantor will
deliver to Lender in form satisfactory to Lender a schedule of real properties
and Collateral locations relating to Grantor's operations, Including without
limitation the following: (1) all real property Grantor owns or is purchasing;
(2) all real property Grantor is renting or leasing; (3) all storage facilities
Grantor owns, rents, leases, or uses; and (4) all other properties where
Collateral is or may be located. Collateral consisting of inventory and other
goods is not currently located and, as long as this Agreement remains in effect,
will not be kept in a field or public warehouse or with a bailee, and shall be
kept only at locations approved by Lender. Grantor will not permit any of the
Collateral to be incorporated in or placed upon any real (immovable) property in
such a way that it becomes immobilized under applicable California law. Upon
Lender's request, Grantor shall cause any owners or mortgagees of the real
property upon which any of of the Collateral may be located to furnish to Lender
waivers with respect to any rights in or to the Collateral.
 
Removal of the Collateral. Except In the ordinary course of Grantor's business,
Including the sales of inventory, Grantor shall not remove the Collateral from
Its existing location without Lender's prior written consent. To the extent that
the Collateral consists of vehicles, or other titled property, Grantor shall not
take or permit any action which would require application for certificates of
title for the vehicles outside the State of California, without Lender's prior
written consent. If Grantor moves from Grantor's address shown above to another
location within the same state, Grantor may move the Collateral to Grantor's now
address, but only if Grantor gives Lender the new address in writing prior to
Grantor's moving. In any event, Grantor agrees to keep Lender informed at all
times of Grantor's current address. Grantor shall, whenever requested, advise
Lender of the exact location of the Collateral.
 
Transactions Involving Collateral. Except for inventory sold or accounts
collected In the ordinary course of Grantor's business, or as otherwise provided
for in this Agreement, Grantor shall not sell, offer to sell, or otherwise
transfer or dispose of the Collateral. While Grantor is not in default under
this Agreement, Grantor may sell inventory, but only in the ordinary course of
its business and only to buyers who qualify as a buyer in the ordinary course of
business. A sale In the ordinary course of Grantor's business does not include a
transfer in partial or total satisfaction of a debt or any bulk sale. Grantor
shall not pledge, mortgage, encumber or otherwise permit the Collateral to be
subject to any lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement, without the prior written
consent of Lender. This includes security Interests even if junior in right to
the security Interests granted under this Agreement. Unless waived by Lender,
all proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to any
sale or other disposition. Upon receipt, Grantor shall immediately deliver any
such proceeds to Lender.
 
Title. Grantor represents and warrants to Lender that Grantor holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral Is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
 
Collateral Schedules and Locations. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles, Grantor
shall deliver to Lender schedules of such Collateral, including such information
as Lender may require, including without limitation names and addresses of
account debtors and agings of accounts and general intangibles. Insofar as the
Collateral consists of inventory and equipment, Grantor shall deliver to Lender,
as often as Lender shall require, such lists, descriptions, and designations of
such Collateral as Lender may require to identify the nature, extent, and
location of such Collateral, Such Information shall be submitted for Grantor and
each of its subsidiaries or related companies.
 
Inspection of Collateral. Lender and Lender's designated representatives and
agents shall have the right at all reasonable times to examine and inspect the
Collateral wherever located.
 
Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, Its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. if the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the Lien plus any interest, coats, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender end shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished In the contest
proceedings.
 
Repairs and Maintenance. Grantor shall keep and maintain and shall cause others
to keep and maintain the Collateral In good order, repair and merchantable
condition. Grantor shall further make and/or cause all necessary repairs to be
made to the Collateral, including the repair and restoration of any portion of
the Collateral that may be damaged, lost or destroyed. In addition, Grantor
shall not, without the prior written consent of lender, make or permit to be
made any alterations to any of the Collateral that may reduce or Impair the
Collateral's use, value or marketability. Furthermore, Grantor shall not, nor
shall Grantor permit others to abandon, commit waste, or destroy the Collateral
or any part or parts thereof. Grantor further agrees to furnish Lender with
evidence that such taxes, assessments, and governmental and other charges have
been paid in full and In a timely manner. Grantor may withhold any such payment
or may elect to contest any lien if Grantor is In good faith conducting an
appropriate proceeding to contest the obligation to pay and so long as Lender's
interest in the Collateral is not jeopardized.
 
 

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Page 3
COMMERCIAL SECURITY AGREEMENT

 
Loan No: 56-800308-15
(Continued)
 

 
Compliance with Governmental Requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral, including all laws or regulations relating to the undue
erosion of highly-erodible land or relating to the conversion of wetlands for
the production of an agricultural product or commodity. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Lender's Interest in
the Collateral, in Lender's opinion, Is not jeopardized.
 
Hazardous Substances. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used in violation of any Environmental Laws or for the generation,
manufacture, storage, transportation, treatment, disposal, release or threatened
release of any Hazardous Substance. The representations and warranties contained
herein are based on Grantor's due diligence In investigating the Collateral for
Hazardous Substances. Grantor hereby (1) releases and waives any future claims
against Lender for Indemnity or contribution In the event Grantor becomes liable
for cleanup or other Mats under any Environmental Laws, and (2) agrees to
indemnify, defend, end hold harmless Lender against any and ail claims and
losses resulting from a breach of this provision of this Agreement. This
obligation to Indeminify and defend shall survive the payment of the
Indebtedness and the satisfaction of this Agreement.
 
Maintenance of Casualty Insurance. Grantor shall procure end maintain all risks
Insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, In form, amounts, coverages and basis reasonably acceptable to
Lender and Issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at least
thirty (30) days' prior written notice to Lender and not including any
disclaimer of the insurer's liability for failure to give such a notice. Each
insurance policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person. In connection with all policies covering assets
in which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any Insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if Lender so chooses *single Interest
insurance," which will cover only Lender's interest in the Collateral.
 
Application of Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral If the estimated cost of repair or replacement
exceeds $10,000.00, whether or not such casualty or loss is covered by
insurance. Lender may make proof of loss If Grantor falls to do so within
fifteen (15) days of the casualty. All proceeds of any insurance on the
Collateral, Including accrued proceeds thereon, shall be held by Lender as part
of the Collateral. If Lender consents to repair or replacement of the damaged or
destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay
or reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to pay all
of the Indebtedness, end shall pay the balance to Grantor. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral shall
be used to prepay the Indebtedness.
 
Required Insurance. So long as this Agreement remains In effect, Grantor shall,
at its sole cost, keep and/or cause others, at their expense, to keep the
Collateral constantly insured against loss by fire, by hazards included within
the term "extended coverage," and by such other hazards (including flood
insurance where applicable) as may be required by Lender.
 
Insurance Proceeds. Lander shall have the right to directly receive the proceeds
of all insurance protecting the Collateral. In the event that Grantor should
receive any such Insurance proceeds, Grantor agrees to immediately turn over and
to pay such proceeds directly to Lender. All insurance proceeds may be applied,
at its sole option and discretion, and In such a manner as Lender may determine
(after payment of all reasonable costs, expenses and attorneys' fees necessarily
paid or fees necessarily paid or incurred by Lender in this connection), for the
purpose of: (1) repairing or restoring the lost, damaged or destroyed
Collateral; or (2) reducing the then outstanding balance of Grantor's
Indebtedness.
 
Lender's receipt of such Insurance proceeds and the application of such proceeds
as provided herein shall not, however, affect the lien of this Agreement.
Nothing under this section shall be deemed to excuse Grantor from its
obligations promptly to repair, replace or restore any lost or damaged
Collateral, whether or not the same may be covered by Insurance, and whether or
not such proceeds of insurance are available, and whether such proceeds are
sufficient in amount to complete such repair, replacement or restoration to the
satisfaction of Lender. Furthermore, unless otherwise confirmed by Lender in
writing, the application or release of any Insurance proceeds by Lender shall
not be deemed to cure or waive any Event of Default under this Agreement. Any
proceeds which have not been disbursed within six 161 months after their receipt
and which Grantor has not committed to the repair or restoration of the
Collateral shall be used to prepay the indebtedness.
 
Insurance Reserves. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. if fifteen (15) days before payment Is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender, The reserve funds shell be held by Lender as a general
deposit and shall constitute a non-Interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the Insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
 
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (1) the name of the insurer; (2)
the risks insured; (3) the amount of the policy; (4) the property insured; (51
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (6) the expiration date of the policy. in
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.
 
Prior Encumbrances. To the extent applicable, Grantor shall fully and timely
perform any and all of Grantor's obligations under any prior Encumbrances
affecting the Collateral. Without limiting the foregoing, Grantor shall not
commit or permit to exist any breach of or default under any such prior
Encumbrances. Grantor shall further promptly notify Lender in writing upon the
occurrence of any event or circumstances that would, or that might, result in a
breach of or default under any such prior Encumbrance. Grantor shall further not
modify or extend any of the terms of any prior Encumbrance or any indebtedness
secured thereby, or request or obtain any additional loans or other extensions
of credit from any third party creditor or creditors whenever such additional
loan advances or other extensions of credit may be directly or indirectly
secured, whether by cross-collaterallzation or otherwise, by the Collateral, or
any part or parts thereof, with possible preference and priority over Lender's
security interest. Grantor additionally agrees to obtain, upon Lender's request,
and In form and substance as may then be satisfactory to Lender, appropriate
waivers and subordinations of any lessor's liens or privileges, vendor's liens
or privileges, purchase money security interests, and any other Encumbrances
that may affect the Collateral at any time.
 
 
 

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Page 4
COMMERCIAL SECURITY AGREEMENT

 
Loan No: 56-800308-15
(Continued)
 

 
Future Encumbrances. Grantor shall not, without the prior written consent of
Lender, grant any Encumbrance that may effect the Collateral, or any part or
parts thereof, nor shall Grantor permit or consent to any Encumbrance attaching
to or being filed against any of the Collateral in favor of anyone other than
Lender. Grantor shall further promptly pay when due all statements and charges
of mechanics, materialmen, laborers and others incurred in connection with the
alteration, improvement, repair and maintenance of the Collateral, or otherwise
furnish appropriate security or bond, so that no future Encumbrance may ever
attach to or be filed against any Collateral. In the event that the Collateral
or any part or parts thereof is and/or may be located in and/or on leased
premises, Grantor shall promptly pay the full amount of such rental or lease
payments whenever the same shall be due so that no lessor's lien or privilege
may ever attach to or affect any of the Collateral with possible preference and
priority over the lien of this Agreement. In the event that any of the
Collateral is purchased or otherwise acquired by Grantor on a credit or deferred
payment sales basis, Grantor shall promptly pay the full amount of the purchase
or acquisition price of such Collateral so that no vendor's lien or privilege,
or purchase money security Interest, may ever attach to or be asserted against
any of the Collateral with possible preference and priority over the lien of
this Agreement. Grantor additionally agrees to obtain, upon request by Lender,
and in form and substance as may then be satisfactory to Lender, appropriate
waivers and/or subordinations of any lessor's liens or privileges, vendor's
liens or privileges, purchase money security Interests, and any other
Encumbrances that may affect the Collateral at any time.
 
As long as this Agreement remains In effect, Grantor will not permit any levy,
attachment or restraint to be made affecting any of the Collateral, or permit
any notice of lien to be filed with respect to the Collateral or any part or
parts thereof, or permit any receiver, trustee, custodian or assignee for the
benefit of creditors to be appointed to take possession of any of the
Collateral. Notwithstanding the foregoing, Grantor may, at its sole expense,
contest in good faith by appropriate proceedings the validity or amount of any
levy, attachment, restraint or lien flied against or affecting the Collateral,
or any part or parts thereof; provided that (1) Grantor notifies Lender in
advance of Grantor's Intent to contest such a levy, attachment, restraint or
lien, and (2) Grantor provides additional security to Lender, in form and amount
satisfactory to Lender.
 
Notice of Encumbrances. Grantor shall immediately notify Lender in writing upon
the filing of any attachment, lien, judicial process, claim, or other
Encumbrance. Grantor additionally agrees to notify Lender immediately in writing
upon the occurrence of any default, or event that with the passage of time,
failure to cure, or giving of notice, might result in a default under any of
Grantor's obligations that may be secured by any presently existing or future
Encumbrance, or that might result in an Encumbrance affecting the Collateral, or
should any of the Collateral be seized or attached or levied upon, or threatened
by seizure or attachment or levy, by any person other than Lender.
 
Books and Records. Grantor will keep proper books and records with regard to
Grantor's business activities and the Collateral in which a security interest is
granted hereunder, in accordance with GAAP, applied on a consistent basis
throughout, which books and records shall at all reasonable times be open to
inspection and copying by Lender or Lender's designated agents. Lender shall
also have the right to inspect Grantor's books and records, and to discuss
Grantor's affairs and finances with Grantor's officers and representatives, at
such reasonable times as Lender may designate.
 
Financing Statements. Grantor authorizes Lender to file a UCC financing
statement, or alternatively, a copy of this Agreement to perfect Lender's
security Interest. At Lender's request, Grantor additionally agrees to sign all
other documents that are necessary to perfect, protect, and continue Lender's
security interest in the Property. Grantor will pay all filing fees, title
transfer fees, and other fees and costs involved unless prohibited by law or
unless Lender is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute documents necessary to transfer title if there is a
default. Lender may file a copy of this Agreement as a financing statement. If
Grantor changes Grantor's name or address, or the name or address of any person
granting a security interest under this Agreement changes, Grantor will promptly
notify the Lender of such change.
 
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral, Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the indebtedness, if Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose es Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of Itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights In the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.
 
ADDITIONAL COVENANTS. Grantor additionally agrees:
 
No Settlement or Compromise. Grantor will not, without the prior written consent
of Lender, compromise, settle, adjust or extend payment under any of the
Collateral.
 
Books and Records. Grantor will keep proper books and records with regard to
Grantor's business activities and the Collateral, which books and records shall
at all times be open to Inspection and copying by Lender or its designated
agent. Lender shell also have the right to inspect Grantor's books and records,
and to discuss Grantor's affairs and finances with Grantor at such reasonable
times as Lender may designate.
 
Aging of Accounts. Grantor will periodically, at such intervals requested by
Lender, furnish Lender with an aging of that part of the Collateral consisting
of accounts, together with a certificate executed by an officer of Grantor, in
such form and containing such representations and warranties regarding the
accounts as Lender may reasonably require.
 
Lock Box. Grantor agrees that Lender may at any time require Grantor to
institute procedures whereby the proceeds and/or payments of any accounts
subject to this Agreement shall be paid by the debtors thereof under a lock box
arrangement to Lender, or to Lender's agent, or to one or more financial
institutions designated by Lender. Grantor further agrees that, if no Event of
Default exists under this Agreement, any and all of such funds received under
such a lock box arrangement shall, at Lender's sole election and discretion,
either be: (a) paid and/or turned over to Grantor; (b) deposited into one or
more accounts for the benefit of Grantor (which deposit accounts shall be
subject to collateral assignment end pledge in favor of Lender as provided under
this Agreement); (c) deposited into one or more accounts for the joint benefit
of Grantor and Lender (which deposit accounts shall likewise be subject to
assignment and pledge in favor of Lender as becomes incompetent or revokes or
disputes the validity of, or liability under, any Guaranty of the Indebtedness.
 
 

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  Page 5
COMMERCIAL SECURITY AGREEMENT

 
Loan No: 56-800308-15
(Continued)
 

 
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
 
Insecurity. Lender in good faith believes itself insecure.
 
Cure Provisions. If any default, other than a default In payment Is curable and
If Grantor has not been given a notice of a breach of the same provision of this
Agreement within the preceding twelve (12) months, it may be cured If Grantor,
after Lender sends written notice to Grantor demanding cure of such default: (1)
cures the default within fifteen (16) days; or (2) if the cure requires more
than fifteen (15) days, immediately initiates steps which Lender deems In
Lender's sole discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary, steps sufficient to
produce compliance as soon as reasonably practical.
 
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. in addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
 
Accelerate Indebtedness. Lender may declare the entire indebtedness, Including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice of any kind to Grantor.
 
Assemble Collateral. Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
 
Sell the Collateral. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in Lender's own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale, Unless the Collateral threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will give Grantor, and
other persons as required by law. reasonable notice of the time and place of any
public sale, or the time after which any private sale or any other disposition
of the Collateral la to be made. However, no notice need be provided to any
person who, after Event of Default occurs, enters into and authenticates an
agreement waiving that person's right to notification of sale. The requirements
of reasonable notice shall be met if such notice is given at least ten (10) days
before the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses of
retaking, holding, insuring, preparing for sale and selling the Collateral,
shall become a part of the Indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of expenditure until
repaid.
 
Appoint Receiver. Lender shall have the right to have a receiver appointed to
take possession of all or any part of the Collateral, with the power to protect
and preserve the Collateral, to operate the Collateral preceding foreclosure or
sale, and to collect the Leases and Rents from the Collateral and apply the
proceeds, over and above the cost of the receivership, against the Indebtedness.
The receiver may serve without bond if permitted by law. Lender's right to the
appointment of a receiver shall exist whether or not the apparent value of the
Collateral exceeds the Indebtedness by a substantial amount. Employment by
Lender shall not disqualify a person from serving as a receiver.
 
Collect Revenues. Apply Accounts. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in Lender's discretion transfer any Collateral Into
Lender's own name or that of Lender's nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
eccounts, general intangibles, insurance policies, instruments, chattel paper,
climes In action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of Grantor, receive,
open and dispose of mail addressed to Grantor; change any address to which mail
and payments are to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
 
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.
 
Other Rights and Remedies. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. in addition, Lender shall have and may exercise any
or all other rights and remedies It may have available at law, In equity, or
otherwise.
 
Election of Remedies. Except as may be prohibited by applicable law, all of
Lender's rights and remedies, whether evidenced by this Agreement, the Related
Documents, or by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantor's failure to perform, shall not affect Lender's right to declare a
default and exercise its remedies.
 
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
 
Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
 
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including Lender's attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement. Lender
may hire or pay someone else to help enforce this Agreement, and Grantor shell
pay the costs and expenses of such enforcement. Costs and expenses Include
Lender's attorneys' fees and legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or Injunction),
appeals, and any anticipated post judgment collection services. Grantor also
shall pay all court costs and such additional fees as may be directed by the
court.
 
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
 
Governing Law. This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
California without regard to its conflicts of law provisions. This Agreement has
been accepted by Lender in the State of California.
 

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  Page 6
COMMERCIAL SECURITY AGREEMENT

 
Loan No: 56-800308-15
(Continued)
 

 
 
Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's request to
submit to the jurisdiction of the courts of Orange County, State of California.
 
Non-Liability of Lender. The relationship between Grantor and Lender created by
this Agreement is strictly a debtor arid creditor relationship and not fiduciary
in nature, nor is the relationship to be construed as creating any partnership
or joint venture between Lender and Grantor. Grantor is exercising Grantor's own
judgment with respect to Grantor's business. All information supplied to Lander
is for Lender's protection only and no other party is entitled to rely on such
information. There is no duty for Lender to review, inspect, supervise or Inform
Grantor of any matter with respect to Grantor's business_ Lender and Grantor
intend that Lender may reasonably rely on all information supplied by Grantor to
Lender, together with all representations and warranties given by Grantor to
Lender, without investigation or confirmation by Lender and that any
investigation or failure to Investigate will not diminish Lender's right to so
rely.
 
Notice of Lender's Breach. Grantor must notify Lender in writing of any breach
of this Agreement or the Related Documents by Lender and any other claim, cause
of action or offset against Lender within thirty (30) days after the occurrence
of such breach or after the accrual of such claim, cause of action or offset.
Grantor waives any claim, cause of action or offset for which notice is not
given in accordance with this paragraph. Lender is entitled to rely on any
failure to give such notice.
 
Indemnification of Lender. Grantor agrees to indemnify, to defend and to save
and hold Lender hornless from any and all claims, suits, obligations, damages,
losses, costs and expenses (including, withobt limitation, Lender's attorneys'
fees), demands, liabilities, penalties, fines and forfeitures of any nature
whatsoever that may be asserted against or incurred by Lender, its officers,
directors, employees, and agents arising out of, relating to, or in any manner
occasioned by this Agreement and the exercise of the rights and remedies granted
Lender under this, as well as by: (1) the ownership, use, operation,
construction, renovation, demolition, preservation, management, repair,
condition, or maintenance of any part of the Collateral; (2) the exercise of any
of Grantor's rights collaterally assigned and pledged to Lender hereunder; (3)
any failure of Grantor to perform any of its obligations hereunder; and/or (4)
any failure of Grantor to comply with the environmental and ERISA obligations,
representations and warranties set forth herein. The foregoing indemnity
provisions shall survive the cancellation of this Agreement as to all matters
arising or accruing prior to such cancellation and the foregoing indemnity shall
survive In the event that Lender elects to exercise any of the remedies as
provided under this Agreement following default hereunder. Grantor's Indemnity
obligations under this section shall not in any way be affected by the presence
or absence of covering insurance, or by the amount of such insurance or by the
failure or refusal of any insurance carrier to perform any obligation on its
part under any Insurance policy or policies affecting the Collateral and/or
Grantor's business activities. Should any claim, action or proceeding be made or
brought against Lender by reason of any event as to which Grantor's
indemnification obligations apply, then, upon Lender's demand, Grantor, at its
sole cost and expense, shall defend such claim, action or proceeding in
Grantor's name, If necessary, by the attorneys for Grantor's insurance carrier
(if such claim, action or proceeding is covered by Insurance), or otherwise by
such attorneys as Lender shall approve. Lender may also engage its own attorneys
at its reasonable discretion to defend Grantor and to assist in its defense and
Grantor agrees to pay the fees and disbursements of such attorneys.
 
Preference Payments. Any monies Lander pays because of an asserted preference
claim in Grantor's bankruptcy will become a part of the indebtedness and, at
Lender's option, shall be payable by Grantor as provided in this Agreement.
 
No Waiver by Lender. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lander. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
 
Notices. Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, If mailed, when deposited in the
United States mail, as first class, certified or registered mall postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party's address. For notice purposes, Grantor agrees to
keep Lender Informed et all times of Grantor's current address. Unless otherwise
provided or required by law, if there is more than one Grantor, any notice given
by Lender to any Grantor is deemed to be notice given to all Grantors.
 
Power of Attorney. Grantor hereby appoints Lender as Grantor's irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect, amend, or to continue the security interest granted in this Agreement
or to demand termination of filings of other secured parties. Lender may at any
time, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will reimburse Lender for
all expenses for the perfection and the continuation of the perfection of
Lender's security Interest in the Collateral.
 
Waiver of Co-Obligor's Rights. if more than one person is obligated far the
Indebtedness, Grantor irrevocably waives, disclaims and relinquishes all claims
against such other person which Grantor has or would otherwise have by virtue of
payment of the Indebtedness or any part thereof, specifically including but not
limited to all rights of Indemnity, contribution or exoneration.
 
Severability. if a court of competent jurisdiction finds any provision of this
Agreement to be illegal, Invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. If feasible, the offending provision
shall be considered modified so that it becomes legal, valid and enforceable. If
the offending provision cannot be so modified, it shall be considered deleted
from this Agreement. Unless otherwise required by law, the Illegality,
invalidity, or unenforceability of any provision of this Agreement shall not
affect the legality, validity or enforceability of any other provision of this
Agreement.
 
Sole Discretion of Lender. Whenever Lender's consent or approval Is required
under this Agreement, the decision as to whether or not to consent or approve
shall be in the sole and exclusive discretion of Lender and Lender's decision
shell be final and conclusive.
 
Successors and Assigns. Subject to any limitations stated in this Agreement on
transfer of Grantor's interest, this Agreement shall be binding upon and Inure
to the benefit of the parties, their successors and assigns. If ownership of the
Collateral becomes vested in a person other than Grantor, Lender, without notice
to Grantor, may deal with Grantor's successors with reference to this Agreement
and the Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Agreement or liability under the
Indebtedness.
 
Survival of Representations and Warranties. All representations, warranties, and
agreements made by Grantor In this Agreement shall survive the execution and
delivery of this Agreement, shall be continuing In nature, and shall remain In
full force and effect until such time as Grantor's indebtedness shall be paid In
full.
 
 

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  Page 7
COMMERCIAL SECURITY AGREEMENT

 
Loan No: 56-800308-15
(Continued)
 

 
Time Is of the Essence. Time Is of the essence In the performance of this
Agreement.
 
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shell include the singular, as the context rosy
require. Wards and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:
 
Agreement. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.
 
Borrower. The word "Borrower" means Greenkraft Inc., a California corporation
and includes ail co-signers and co-makers signing the Note and all their
successors and assigns.
 
Collateral. The word "Collateral" means all of Grantor's right, title and
interest in and to all the Collateral as described in the Collateral Description
section of this Agreement.
 
Default. The word "Default" means the Default set forth in this Agreement in the
section titled "Default".
 
Encumbrance. The word "Encumbrance" means any and all presently existing or
future mortgages, liens, privileges and other contractual and statutory security
interests and rights, of every nature and kind, whether in admiralty, at law, or
in equity, that now and/or in the future may affect the Collateral or any part
or parts thereof.
 
Environmental Laws. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C, Section 9601, et seq. ("CERCLA"), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 8.3
through 7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or federal laws, rules, or regulations
adopted pursuant thereto.
 
Event of Default. The words "Event of Default" mean individually, collectively,
and Interchangeably any of the events of default set forth In this Agreement In
the default section of this Agreement.
 
GAAP. The word "GAAP" means generally accepted accounting principles. Grantor.
The word "Grantor" means Greenkraft Inc., a California corporation.
 
Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation
party of any or all of the Indebtedness, and, In each case, Grantor's
successors, assigns, heirs, personal representatives, executors and
administrators of any guarantor, surety, or accommodation party.
 
Guaranty. The word "Guaranty" means the guaranty from Guarantor, or any other
guarantor, endorser, surety, or accommodation party to Lender, including without
limitation a guaranty of all or part of the Note.
 
Hazardous Substances. The words "Hazardous Substances" mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words "Hazardous
Substances" are used in their very broadest sense and include without limitation
any and ail hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term "Hazardous Substances" also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.
 
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with an
other indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents.
 
Lender. The word "Lender" means Pacific Premier Bank, its successors and
assigns.
 
Note. The word "Note" means the Note executed by Greenkraft Inc., a California
corporation in the principal amount of $3,500,000.00 dated March 13, 2012,
together with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit agreement.
 
Property. The word "Property" means all of Grantor's right, title and interest
in and to all the Property as described in the "Collateral Description" section
of this Agreement.
 
Related Documents. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, security
agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and
all other instruments, agreements and documents, whether now or hereafter
existing, executed in connection with the indebtedness.
 
Rights. The word 'Rights" means Individually, collectively and interchangeably
any and all of Grantor's additional rights granted and pledged to Lender as
provided under this Agreement.
 
GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 13, 2012.
 
GRANTOR:
 
GREENKRAFT INC., A CALIFORNIA CORPORATION
 

By:
/s/ George Gernayel
 
By:
/s/ Sosi Bardakjian
   
George Gernayel, Secretary of Greenkraft Inc.,
a California corporation
   
Sosi Bardakjian, Secretary of Greenkraft Inc.,
a California corporation
 

 

  LASER PRO Lending Ver. 5.59.00.003 Corp. Harland Financial Solutions, inc.
1997, 2012. All Rights Reserved. Ca P:\LPL\CFI\LPL\D20.FC TR-1940 PR-67