Exhibit 10.2

 

SECURITY AGREEMENT

 

This Security Agreement dated August 23,2005, is executed by Tri-Western
Resources, LLC ('Debtor") whose principal office (or residence) address is 220
Industrial Street, Bakersfield, CA, 93307 in favor of Financial Federal Credit
Inc. ("Secured Party") whose address is 7 Corporate Park Suite 240, Irvine, CA,
92606.

 

          1.      To secure the payment and performance of all indebtedness,
obligations and liabilities of Debtor to Secured Party of whatever kind, whether
previously, contemporaneously, or subsequently incurred or created, whether
direct or acquired from third parties, whether contingent or fixed, and whether
of the same or different classes (including, without limiting the generality of
the foregoing, ail indebtedness, obligations and liabilities arising out of or
relating to (i) advances, payments, loans, endorsements guaranties, extensions
of credit financial accommodations and/or benefits granted or extended by
Secured Party to or for the account of Debtor, (ii) notes, security agreements,
lease agreements, rental agreements, installment sale contracts, bailment
agreements, guaranties, and/or any other present or future agreements between
Debtor and Secured Party, and/or (iii) expenses, charges, commissions and/or
interest owing by Debtor to Secured Party or chargeable to Debtor by Secured
Party) and all extensions, renewals and/or modifications of the foregoing
(collectively, the "Obligations"), Debtor does hereby assign, transfer, pledge
and grant to Secured Party a security interest/lien in/upon all property fisted
on any Schedule to this Agreement (the "Property"), and in all goods, inventory,
equipment accounts, accounts receivable, documents; instruments, chattel paper,
contract rights, general intangibles, investment property, securities
entitlements, deposit accounts, fixtures and other property, wherever located,
now or hereafter belonging to Debtor or in which Debtor has any Interest, and in
all proceeds, insurance proceeds, substitutions, replacement parts, additions
and accessions of and/or to all of the foregoing (collectively, including the
Property, the "Collateral"). Debtor and Secured Party acknowledge that Secured
Party may (but shall lot be obligated to) make future loans or extensions of
credit to or guaranteed by Debtor, refinance existing Obligations of or
guaranteed by Debtor. or purchase from third parties loans or Indebtedness of or
guaranteed by Debtor, and Secured Party and Debtor agree that the Collateral
shall be security for any and all such indebtedness.

 

          2.      Debtor hereby represents end warrants to Secured Party and
covenants and agrees with Secured Party as follows: (a) All information supplied
and statements made to Secured Party by or an behalf of Debtor relating to the
Obligations or the Collateral are and shall be true, complete and accurate,
whether supplied or made prior to, contemporaneously with or subsequent to the
execution of this Agreement (b) Debtor has good and marketable title to the
Collateral, free and clear of any liens, security interests or encumbrances of
any kind or nature whatsoever (except any claimed by Secured Party) and Debtor
will warrant and defend the Collateral against all claims; (c) all Collateral
listed on any Schedule to this Agreement is in Debtor's possession at the
location shown above, unless a different location is disclosed on such Schedule
for a particular item, and shall at all times remain in Debtor's possession and
control; (d) Debtor shall not change (i) its name, (ii) the location of any
Collateral, or (iii) the location of (as applicable) Debtor s residence,
principal place of business, executive office or the place where Debtor keeps
its business records, without thirty (30) days prior written notice to Secured
Party; (e) Debtor has full, unrestricted and lawful power and authority to sell
and assign the Collateral, to grant Secured Party a security interest/lien
therein/thereto as herein provided and to execute and perform this Agreement and
off other instruments and agreements executed by Debtor in favor of Secured
Party, (f) if a corporation, a partnership, or a limited liability company,
Debtor is (as applicable): (i) duly farmed, organized, validly existing and in
good standing in the state of is incorporation or organization, (ii) duly
qualified and in good standing in every jurisdiction where the nature of its
business requires it to be so qualified, and (iii) authorized by all requisite
action of its stockholders and directors, partners or managers to execute,
deliver and perform this Agreement (g) Debtor shall cause Secured Party to have
a security interest and lien in/upon the Collateral which at all times shall be
duly perfected, enforceable and superior to any leans, encumbrances and
interests other than Secured Party's, and Debtor shall not permit the Collateral
or any portion thereof to be removed from the Continental United States, nor to
be or become subject to any lien or encumbrance of any kind or nature whatsoever
(except in favor of Secured Party), nor shall Debtor sell, pledge, grant arty
security interest in, encumber, assign, rent lease, lend, destroy or otherwise
transfer or dispose of, or permit the filing of a financing statement with
respect to (except in favor of Secured Party) any Collateral, nor shall Debtor
guarantee an obligation of any other person or entity except in favor of Secured
Party, without the prior written consent of Secured Party in each instance; (h)
Debtor shall comply (to the extent necessary to protect the Collateral and
Secured Party's interest therein) with the provisions of all leases, mortgages,
deeds of trust or other contracts affecting any premises where any Collateral is
or may be located and with any rules, laws, orders, ordinances or statutes of
any state, county, municipality or other authority having jurisdiction relating
to such premises and/or the conduct of business thereon and/or use thereof (i)
Debtor shall, at Debtor's solo cost and expense, keep and maintain all
Collateral in good condition and repair, and shall use and maintain the
Collateral in accordance with all applicable manufacturer's specifications and
warranties; (j) all Collateral shall at all times remain personalty and shall
not become part of any realty to which it may be attached so that Secured Party
shall have the unrestricted right (subject only to the terms of this Agreement)
to remove ail at any portion thereof from any premises where it may be located,
and Debtor will obtain and deliver to Secured Party (in a form acceptable to
Secured Patty) waivers from all landlords, mortgagees an owners of such
premises; (k) Debtor shall (at Debtor's expense) upon request by Secured Party
obtain, execute and deliver all assignments, certificates, financing statements
or other documents, give further assurances and do all other acts and things as
may be necessary to fully perfect Secured Party's Interest in the Collateral and
to protect; enforce or otherwise effectuate the terms of this Agreement and (1)
Secured Party has no obligation to lend or advance funds unless end until all
representations, warranties, conditions and requirements contained herein have
been satisfied including without limitation receipt by Secured Party of proof of
ownership of the Collateral satisfactory to Secured Party in its sole
discretion, and any applicable subordinations and/or lien releases maybe
required by, and in a form acceptable to, Secured Party in its sole discretion.
Debtor hereby irrevocably designates and appoints Secured Party as Debtor's
agent end attorney-in-fact to sign and deliver all such assignments,
certificates, financing statements and other documents necessary to perfect
protect continue and/or enforce Secured Party's interest in the Collateral and
to file same with the appropriate office(s). Debtor hereby authorizes Secured
Party to file one or more financing statements in all appropriate locations.

 

          3.      Debtor hereby acknowledges the validity of and affirms all of
the Obligations, agrees that they are and shall be secured by this Agreement and
absolutely and unconditional) promises and agrees to punctually end fully pay
and perform all Obligations. Debtor shall pay to Secured Party an demand, on any
installment of the Obligations net fully paid prior to the fifth day (or such
longer period as required by law) after its due date, a late charge equal to the
maximum percentage of such overdue installment legally permitted as a late
charge, not in exceed fire percent (5%); and after maturity of the entire unpaid
indebtedness (whether by acceleration or otherwise) of any one or mote of the
Obligations, Debtor shall pay, an demand, interest an such matured indebtedness
(excluding unpaid late charges) at the maximum lawful daily rate, but not to
exceed .0666% per day, until paid in full.

 

          4.      Debtor all insure the Collateral against all risks of loss or
damage from every cause (including without limitation fire, theft, vandalism,
accident, flood, earthquake and extended coverage) for not less than the full
replacement value as determined by Secured Party in its sole discretion, and
shall carry liability and property damage insurance covering the Collateral. All
insurance shall be inform and amount and with licensed, solvent companies
approved by Secured Party, and shall name Secured Party as sole loss payee.
Debtor shall pay the premiums therefor and deliver said policies or duplicates
to Secured Party. Each Insurer shall agree by endorsement upon the policy or
policies issued by it or by independent instrument furnished to Secured Party to
give Secured Party 30 days prior written notice before the policy shall be
modified or canceled and that Secured Party's coverage shall not be diminished
or invalidated by any negligence, actor omission of Debtor. The proceeds of such
insurance, at the option of Secured Party, shall be applied toward the
replacement or repair of the Collateral or toward payment of the Obligations.
Debtor hereby irrevocably appoints Secured Party as its attorney-in-fact and
agent to make claim for, adjust compromise, settle, receive payment of, and to
sign all documents, chocks and/or drafts in payment of or relating to any claim
for roes of or damage to the Collateral and for any returned premiums. If any
required insurance expires, is canceled or modified, or is otherwise not in full
force and effect Secured Party may but need not obtain replacement insurance.
Secured Party may but need nut pay the premiums for insurance and/or replacement
insurance an the amount of all premiums so paid by Secured Party shall be added
to Debtors obligations hereunder and shall be reimbursed to Secured Party on
demand together with interest thereon at the maximum lawful daily rate, not to
exceed 0.0656% per day (but only to the extent permitted bylaw) from tie date
paid by Secured Party until fully reimbursed by Debtor.

 

          5.      Secured Party shall have the right, at any reasonable time, to
inspect all or any portion of the Collateral and/or Debtor's books and records.
Debtor shall assist Secured Party in making any such inspection and Debtor shall
reimburse Secured Party for its costs and expenses of making up to four such
inspections per year. Upon request, Debtor shall, from time to time, furnish a
current financial statement to Secured Party in form and content satisfactory to
Secured Party, and shall provide annual certified financial statements within
five (5) days of Secured Party's request therefor.

 

          6.      If Debtor shell fail to fully and timely pay, perform and
fulfill any of its Obligations, covenants at agreements to or with Secured Party
and/or if Debtor shall breach any of its warranties to Secured Party under this
Agreement or otherwise, Secured Party shall have the option, in its sole
discretion and without any obligation, to pay, perform, fulfill or cause the
payment, performance or fulfillment of same on behalf of Debtor, and all costs
and expenses incurred by Secured Party in connection therewith (including but
not limited to attorneys' fees, bond premiums, court costs, costs of retaking,
storing, preserving, selling and/or realizing on airy Collateral) shall be added
to the Obligations hereby secured and shall be payable by Debtor to Secured
Party upon demand together with interest thereon at the maximum lawful daily
rate, not to exceed 0.0666% per day (but only to the extent permitted by law),
from the date advanced by Secured Party until fully repaid. Secured Pa shall
have no obligation to make any demand upon or give any notice to Debtor prior to
the exercise of any of its rights under this paragraph; and neither the exercise
nor the failure to exercise any such rights by Secured Party shall relieve
Debtor of any default or constitute a waiver of Secured Party's right to enforce
strict compliance with the terms of this Agreement at any time.

 

          7.      Debtor assumes all liability and risk of loss and agrees to
defend, indemnify and hold Secured Party harmless from and against all claims,
liabilities, causes of action and damages of any kind, including but not limited
to injury to or death of any person(s) and for loss, damage or destruction of
any property and for any fines, penalties, costs, expenses and, charges in any
way arising out of or related to the Obligations, this Agreement, the Collateral
or its use, possession, storage, maintenance, repair, transportation or
operation (including without limitation all costs and expenses of investigation,
all attorneys' fees, court costs, arbitration expenses and costs, and all
special, consequential, compensating and punitive damages). Debtor, at its own
cost and expense, shall use, operate, maintain, repair, transport and store the
Collateral in a safe and careful manner in compliance with all applicable laws,
rules and regulations (including without limitation those regulating hazardous
substances, the environment and public health or safely), industry standards,
insurance requirements and manufacturer's specifications and service bulletins.
Debtor also assumes and agrees to indemnify, pay and hold harmless Secured Party
and its directors, officers, employees and agents from all expenses, losses,
costs, claims, actions, causes of action, damages of any kind, liabilities,
expenses and attorneys' fees that Secured Party may incur or sustain In
obtaining or enforcing payment or performance of any of the Obligations or
exercising its' rights and remedies under this Agreement or in connection with
any action, proceeding or appeal arising out of or related to this Agreement,
the Obligations and/or the Collateral, whether brought by Debtor or any third
party. The obligations Debtor under this paragraph shall survive termination of
this Agreement.

 

          8.      If any Event of Default exists, Secured Party without notice
or demand may do one or more of the following, in any order, and such remedies
shall be cumulative (none of which shall be exclusive but each is In addition to
any other remedy available to Secured Party): (a) Secured Party may accelerate
the maturity of the Obligations and declare same to beat once due end payable
whereupon they shall be immediately due and payable; (b) Secured Party may
require Debtor to pay all accrued interest, late charges, collection charges,
reimbursement for any and all expenses incurred by Secured Party in enforcing
any of the Obligations or this Agreement and reasonable attorneys' fees; (c)
Secured Party may require Debtor to deliver any or all of the Collateral at
Debtor's expense to such place or places as Secured Party may designate; (d)
Secured arty may repossess/take possession of any or all of the Collateral
wherever found, voluntarily or involuntarily, without notice, demand or legal
process (Debtor, if permitted by applicable law, hereby waiving any right to
notice or a hearing), and Secured Party may enter the premises where any or all
Collateral are located and disconnect, render unusable, and remove any or all
Collateral without liability to Defter arising out such entry, taking of
possession or removal, and may use such premises w out charge to store or show
the Collateral for sale or other disposition; (a) Secured Party may sell the
Collateral by public or private sale, hold, retain the Collateral in It or
partial satisfaction of the indebtedness due to Secured Party, or otherwise
dispose of the Collateral in any manner it chooses, free and clear of any claims
or rig to of Debtor, and/or (f) Secured Party may sue to enforce Debtor's
performance hereof, or may exercise any other right or remedy then available to
Secured Party permitted at law or in equity whether or not stated herein.
Failure or delay an the part of Secured Party to exercise any right or remedy
hereunder shall not operate as a waiver thereof. Debtor agrees that any public
or private sale shall be deemed commercially reasonable (i) if notice of any
such sale is mailed to Debtor (at the address for debtor specified herein) at
least ion (10) days prior to the date of any public sale or after which any
private sale will occur; (ii) if notice of any public sale is published in
newspaper of general circulation in the county where the sale will occur at
least once within the ten (10) days prior to the sale; (iii) whether the items
are sold in

   

 

DEBTOR:    Tri-Western Resources, LLC

     

By:     /s/ Marshall W. Pettit    

 

           Managing Director

     

By:     /s/ Henry J. Noyes       

 

           Executive Director