Exhibit 10.59

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Security Agreement”), dated as of September 7,
2010, is made between Clean Energy Compression Corp., a British Columbia
corporation (“Canadian OpCo”) as debtor and I.M.W. Industries Ltd., a British
Columbia corporation (“Company”) as secured party.

 

FOR VALUE RECEIVED, Canadian OpCo hereby covenants, agrees, warrants,
represents, acknowledges and confirms to and with Company and creates and grants
the mortgages, charges and security interests hereinafter set forth, as
follows::

 

Section 1.               Definitions; Interpretation.

 

(a)           All capitalized terms used in this Security Agreement and not
otherwise defined herein shall have the meanings assigned to them in the Notes
and the Asset Purchase Agreement.  Words and expressions used herein that have
been defined in the Act shall be interpreted in accordance with their respective
meanings given in the Act whether expressed herein with or without initial
capital letters and whether in the singular or the plural unless otherwise
defined herein or unless the context otherwise requires, and wherever the
context so requires in this Security Agreement the singular shall be read as if
the plural were expressed, and vice-versa, and the provisions hereof shall be
read with all grammatical changes necessary dependent upon the person referred
to being a male, female, firm or corporation.

 

(b)           As used in this Security Agreement, the following terms shall have
the following meanings:

 

“Act” means the Personal Property Security Act of British Columbia and all
regulations thereunder as the same may be amended from time to time.

 

“Asset Purchase Agreement” means the Asset Purchase Agreement dated July 1, 2010
by and among Clean Energy, a California corporation, 0884808 B.C. Ltd., a
British Columbia corporation and a wholly-owned subsidiary of Clean Energy, and
Canadian OpCo, on the one hand, and Company, 652322 B.C. Ltd., a British
Columbia corporation, Miller Family Trust and Bradley N. Miller, on the other
hand.

 

“Collateral” has the meaning set forth in Section 2.

 

“Event of Default” has the meaning set forth in Section 6.

 

“Lien” means any mortgage, deed of trust, pledge, security interest, assignment,
deposit arrangement, charge or encumbrance, lien, or other type of preferential
arrangement.

 

“Notes” means, collectively, the Year 1 Promissory Note, Future Payment Note #1,
Future Payment Note #2 and Future Payment Note #3.

 

“Obligations” means the indebtedness, liabilities and other obligations of
Canadian OpCo to Company from time to time (i) under or in connection with the
Notes and (ii) 

 

1

--------------------------------------------------------------------------------

 

with respect to any liability of Canadian OpCo transferred by Company to
Canadian OpCo pursuant to the Agreement in respect of which Company has
continued to provide a guarantee, indemnity or other obligation to a third party
on behalf of Canadian OpCo.

 

“Senior Event of Default” means any default in the performance of any term,
covenant or condition contained in the agreement or instrument under which any
Senior Indebtedness is issued, or any other default thereunder, in each case
permitting the Senior Lender to accelerate or demand repayment of, or to put or
cause the redemption or prepayment of, such Senior Indebtedness.

 

“Senior Indebtedness” means any indebtedness, liabilities and other obligations
of Canadian OpCo to any Senior Lender with respect to any working capital,
revolving credit or other line of credit facility, any term loan facility, or
any other extension of credit to Canadian OpCo by a Senior Lender, including
reimbursement obligations under letters of credit (or guaranties, as applicable)
and obligations in respect of bankers’ acceptances, obligations in respect of
interest rate protection agreements and other derivative products and in respect
of currency exchange and purchase agreements, and renewals, extensions,
refinancings, deferrals, amendments and modifications of the items described
above.

 

“Senior Lender” means a bank, insurance company or financial institution engaged
in the business of lending money or other institutional lender.

 

(c)           Where applicable and except as otherwise defined herein, terms
used in this Security Agreement shall have the meanings assigned to them in the
Act.

 

(d)           In this Security Agreement, (i) the meaning of defined terms shall
be equally applicable to both the singular and plural forms of the terms
defined; and (ii) the captions and headings are for convenience of reference
only and shall not affect the construction of this Security Agreement.

 

Section 2.               Security Interest.

 

(a)           For the consideration aforesaid and as security for the payment
and performance of the Obligations (as hereinafter defined), Canadian OpCo,
subject to the exceptions set out in subsection (b) hereof, does hereby:

 

(i)                                     mortgage and charge as and by way of a
fixed and specific charge to and in favour of Company and assign and transfer to
Company and grant to Company, by way of mortgage, charge, assignment and
transfer, a security interest in all Company’s right, title and interest, both
present and future, in and to all of its presently owned or held and after
acquired or held personal property, of whatever nature or kind and wheresoever
situate and all proceeds and renewals thereof and therefrom, accretions thereto
and substitutions therefor, including, without limitation, all of the following
now owned or hereafter owned or acquired by or on behalf of Canadian OpCo:

 

a.                                       all inventory of whatever kind and
wherever situate, including, without limitation, goods acquired or held for sale
or lease or furnished or to be

 

2

--------------------------------------------------------------------------------

 

furnished under contracts of rental or service, all raw materials, work in
process, finished goods, returned goods, repossessed goods, and all packaging
materials, supplies and containers relating to or used or consumed in connection
with any of the foregoing (all of which is hereinafter collectively called the
“Inventory”);

 

b.                                      all equipment (other than Inventory) of
whatever kind and wherever situate, including, without limitation, all
machinery, tools, apparatus, plant, fixtures, furniture, furnishings, chattels,
motor vehicles, vessels and other tangible personal property of whatsoever
nature or kind that is not Inventory, and all parts, components, attachments,
accessories, accessions, replacements, substitutions, additions and improvements
to any of the foregoing (all of which is hereinafter collectively called the
“Equipment”);

 

c.                                       all book accounts and book debts and
generally all accounts, debts, dues, claims, choses in action and demands of
every nature and kind howsoever arising or secured including letters of credit
and advices of credit, which are now due, owing or accruing or growing due to or
owned by or which may hereafter become due, owing or accruing or growing due to
or owned by Company (all of which is hereinafter collectively called the
“Accounts”);

 

d.                                      All deeds, documents, writings, papers,
books of account and other books and electronically recorded data relating to or
being records of Accounts, Chattel Paper or Documents of Title or by which such
are or may hereafter be secured, evidenced, acknowledged or made payable;

 

e.                                       all contractual rights, insurance
claims, licences, goodwill, patents, trademarks, trade names, copyrights and
other industrial or intellectual property of Canadian OpCo, all other choses in
action of Canadian OpCo of every kind which now are, or which may at any time
hereafter be, due or owing to or owned by Canadian OpCo, and all other
intangible property of Canadian OpCo which is not Accounts, Chattel
Paper, Instruments, Documents of Title, Securities or Money;

 

f.                                         all Money;

 

g.                                      the undertaking of Canadian OpCo; and

 

h.                                      all Chattel Paper, Documents of Title
(whether negotiable or not), Instruments, Intangibles and Securities now owned
or hereafter owned or acquired by or on behalf of Canadian OpCo (including such
as may be returned to or repossessed by Canadian OpCo), and all other goods of
Canadian OpCo which are not Equipment, Inventory or Accounts; and

 

(ii)                                  charge as and by way of a floating charge
to and in favour of Company, and grant to Company a security interest in and to:

 

3

--------------------------------------------------------------------------------

 

a.                                       all Canadian OpCo’s right, title and
interest in and to all its presently owned or held and after acquired or held
real, immovable and leasehold property and all interests therein, and all
easements, rights-of-way, privileges, benefits, licences, improvements and
rights whether connected therewith or appurtenant thereto or separately owned or
held, including all structures, plant and other fixtures (all of which is
hereinafter collectively called “Real Property”); and

 

b.                                      all property, assets and undertakings of
Canadian OpCo, both present and future, of whatsoever nature or kind and
wheresoever situate, and all Proceeds thereof and therefrom, other than such of
its property, assets and undertakings as are otherwise validly and effectively
subject to the charges and security interests in favour of Company created
pursuant to section 1.1(a) hereof; and

 

(iii)                               mortgage and charge as and by way of a fixed
and specific charge to and in favour of Company, and assign and transfer to
Company and grant to Company, by way of mortgage, charge, assignment and
transfer, a security interest in all of Canadian OpCo’s right, title and
interest, both present and future, in and to all of its presently owned or held
and after acquired or held property which:

 

a.                                       is or hereafter becomes a fixture, or

 

b.                                      constitutes a licence, quota, permit or
other similar right or benefit or crops.

 

The mortgages, charges, assignments and transfers and security interests created
or granted pursuant to Sections 1.1 (a), (b) and (c) hereof are hereinafter
collectively called the “Security Interest”, and all property, assets, interests
and undertakings (including Proceeds) subject to the Security Interest or
otherwise charged or secured hereby or expressed to be charged, assigned or
transferred or secured by any instruments supplemental hereto or in
implementation hereof are hereinafter collectively called the “Collateral”.

 

(b)           The Security Interest granted hereby shall not extend or apply to
and the Collateral shall not extend to or include:

 

(i)                                     Consumer Goods, or

 

(ii)                                  any intangibles of Canadian OpCo to the
extent that (A) such general intangibles are not assignable or capable of being
encumbered as a matter of law or under the terms of the license, lease or other
agreement applicable thereto, without the consent of the licensor or lessor
thereof or other applicable party thereto and (B) such consent has not been
obtained.

 

4

--------------------------------------------------------------------------------

 

(iii)                               the last day of the term of any lease or
agreement therefor but upon the enforcement of the Security Interest Company
shall stand possessed of such last day in trust to assign and dispose thereof as
Company shall direct.

 

(c)           This Security Agreement shall create a continuing security
interest in the Collateral which shall remain in effect until terminated in
accordance with Section 18 hereof.

 

(d)           Company agrees that while no Event of Default exists (i) nothing
in this Security Agreement shall impair Canadian OpCo’s control, use and
disposition of its assets, including the Collateral, and (ii) Canadian OpCo may
possess, operate, collect, lease, sell, license, consign, use and enjoy and deal
with the Collateral in the course of its business.

 

(e)           Canadian OpCo acknowledges that the Security Interest attaches
upon the execution of this Security Agreement (or in the case of any after
acquired property, at the time of acquisition thereof), that value has been
given, and that Canadian OpCo has, or in the case of after acquired property
will have at the time of acquisition, rights in the Collateral.

 

Section 3.               Subordination.  All Liens and security interests now or
hereafter existing of Company in any property or assets of Canadian OpCo
(including any Liens and security interests under this Security Agreement) shall
be subject, subordinate and junior in all respects and at all times to the Liens
and security interests now or hereafter existing of the Senior Lenders therein,
regardless of the time or order of attachment or perfection of such Liens and
security interests, the time or order of filing of financing statements, the
acquisition of purchase money or other Liens and security interests, the time of
giving or failure to give notice of the acquisition or expected acquisition of
any purchase money or other Liens and security interests, or any other
circumstances whatsoever.  Company will execute and deliver to any Senior Lender
such subordination agreement as may be reasonably requested by such Senior
Lender, and execute, acknowledge, deliver, file, notarize and register all such
further agreements, instruments, certificates, documents and assurances, and
perform such acts as such Senior Lender shall, acting reasonably, deem necessary
or appropriate in connection with any Senior Indebtedness.  Company waives any
and all notice of the incurrence of the Senior Indebtedness or any part thereof
and any amendment to or extension of any Senior Indebtedness.  Company will not
(i) at any time contest the validity, perfection, priority or enforceability of
any Liens and security interests of any Senior Lender in any collateral, or
(ii) interfere with or in any manner oppose a disposition of any collateral by
any Senior Lender in accordance with applicable law.

 

Section 4.               Financing Statements, Etc.  Canadian OpCo hereby
authorizes Company to file at any time and from time to time any financing
statements describing the Collateral, and Canadian OpCo shall execute and
deliver to Company, and Canadian OpCo hereby authorizes Company to file, at any
time and from time to time, all amendments to financing statements, assignments,
continuation financing statements and termination statements, in form reasonably
satisfactory to Company, as Company may reasonably request, to perfect and
continue perfected or provide notice of the security interest of Company in the
Collateral and to accomplish the purposes of this Agreement.  Company hereby:

 

5

--------------------------------------------------------------------------------

 

(i)                                     acknowledges receiving a copy of this
Security Agreement, and

 

(ii)                                  waives all rights to receive from Canadian
OpCo a copy of any financing statement, financing change statement or
verification statement filed, issued or obtained at any time in respect of this
Security Agreement.

 

Section 5.               Representations and Warranties.  Canadian OpCo
represents and warrants to Company that the execution, delivery and performance
by Canadian OpCo of this Security Agreement have been duly authorized by all
necessary action of Canadian OpCo, and this Security Agreement constitutes the
legal, valid and binding obligation of Canadian OpCo, enforceable against
Canadian OpCo in accordance with its terms.

 

Section 6.               Events of Default.  For purposes of this Security
Agreement, any of the following events which shall occur and be continuing shall
constitute an “Event of Default”:

 

(a)           Any indebtedness under the Notes is not paid when and as the same
shall become due and payable, whether at maturity, by acceleration or otherwise,
(regardless of whether any such failure to pay any indebtedness under the Notes
is due to the existence of a Senior Event of Default or as a result of the
restricting of payments under the Notes by any Senior Lender), and any such
amount shall remain unpaid for a period of thirty (30) days following delivery
of notice thereof by Company;

 

(b)           Canadian OpCo shall (A) apply for or consent to the appointment of
a receiver, trustee, custodian or liquidator of itself or any part of its
property, (B) become subject to the appointment of a receiver, trustee,
custodian or liquidator for itself or any part of its property if such
appointment is not terminated or dismissed within thirty (30) days, (C) make an
assignment for the benefit of creditors, (D) fail generally or admit in writing
to its inability to pay its debts as they become due, (E) institute any
proceedings under any bankruptcy, reorganization, receivership, insolvency or
other similar law affecting the rights of creditors generally, or file a
petition or answer seeking reorganization or an arrangement with creditors to
take advantage of any insolvency law, or file an answer admitting the material
allegations of a bankruptcy, reorganization or insolvency petition filed against
it, or (F) become subject to any involuntary proceedings under any bankruptcy,
reorganization, receivership, insolvency or other similar law affecting the
rights of creditors generally, which proceeding is not dismissed within thirty
(30) days of filing; or

 

(c)           Canadian OpCo shall liquidate, wind-up or dissolve (or suffer any
liquidation, wind-up or dissolution), except that an amalgamation or other
combination with an Affiliate of Canadian OpCo, where the surviving or
continuing Entity remains obligated to perform the Obligations, shall not
constitute an Event of Default hereunder.

 

6

--------------------------------------------------------------------------------

 

For all purposes, including without limitation any application to register a
crystallized floating charge under the Land Title Act (British Columbia) against
any Real Property, the floating charge created by this Security Agreement shall
be crystallized and become a fixed charge upon the earliest of:

 

(i)                                     the occurrence of an Event of Default;
or

 

(ii)                                  Canadian OpCo taking any action pursuant
to Section 7 hereof to enforce and realize upon any or all of the Security
Interest created by this Security Agreement,

 

and in any event upon the appointment by Canadian OpCo of a Receiver pursuant to
Section 8 hereof

 

Section 7.               Remedies.

 

(a)           Upon the occurrence and continuance of any Event of Default,
Company may declare any of the Obligations to be immediately due and payable and
shall have, in addition to all other rights and remedies granted to it in this
Agreement, all rights and remedies of a secured party under applicable laws. 
Without limiting the generality of the foregoing, to enforce and realize on the
security constituted by this Security Agreement Company may take any action
permitted by law or in equity, as it may deem expedient, and in particular, but
without limiting the generality of the foregoing, Company may do any of the
following upon the occurrence and continuance of any Event of Default:

 

(i)                                     appoint by instrument a receiver,
receiver and manager or receiver-manager (the person so appointed is hereinafter
called the “Receiver”) of the Collateral, with or without bond as Company may
determine, and from time to time in its absolute discretion remove such Receiver
and appoint another in its stead;

 

(ii)                                  enter upon any premises of Canadian OpCo
and take possession of the Collateral with power to exclude Canadian OpCo, its
agents and its servants therefrom, without becoming liable as a mortgagee in
possession;

 

(iii)                               preserve, protect and maintain the
Collateral and make such replacements thereof and repairs and additions thereto
as Company may deem advisable;

 

(iv)                              sell, lease or otherwise dispose of all or any
part of the Collateral, whether by public or private sale or lease or otherwise,
in such manner, at such price as can be reasonably obtained therefor and on such
terms as to credit and with such conditions of sale and stipulations as to title
or conveyance or evidence of title or otherwise as Companyh may seem reasonable,
provided that if any sale, lease or other disposition is on credit Canadian OpCo
will not be entitled to be credited with the proceeds of any such sale, lease or
other disposition until the monies therefor are actually received; and

 

(v)                                 exercise all of the rights and remedies of a
secured party under the Act.

 

7

--------------------------------------------------------------------------------

 

Canadian OpCo agrees that Company may exercise its rights and remedies hereunder
immediately upon default, except as may be otherwise provided in the Act, and
Canadian OpCo hereby expressly confirms that except as may be otherwise provided
herein or in the Act, Company has not given any covenant, express or implied,
and is under no obligation to allow Company any period of time to remedy any
default prior to Company exercising its rights and remedies hereunder.  All
monies or other forms of payment received by Canadian OpCo in payment of any
Account, after default under this Security Agreement has occurred, will be
received and held by Canadian OpCo in trust for Company.  In accordance with the
Property Law Act (British Columbia), the doctrine of consolidation applies to
this Security Agreement.

 

(b)           The cash proceeds actually received from the sale or other
disposition or collection of Collateral, and any other amounts received in
respect of the Collateral the application of which is not otherwise provided for
herein, shall be applied to the payment of the Obligations.  Any surplus thereof
which exists after payment and performance in full of the Obligations shall be
promptly paid over to Canadian OpCo or otherwise disposed of in accordance with
applicable law.  Canadian OpCo shall remain liable to Company for any deficiency
which exists after any sale or other disposition or collection of Collateral.

 

Section 8.               Receiver.  A Receiver appointed pursuant to this
Security Agreement shall be the agent of Canadian OpCo and not of Company and
Company shall not be in any way responsible for any misconduct, negligence or
non-feasance on the part of any Receiver, its servants, agents or employees.  A
Receiver shall, to the extent permitted by law or to such lesser extent
permitted by its appointment, have all the powers of Company hereunder, and in
addition shall have power to carry on the business of Canadian OpCo and for such
purpose to enter upon, use and occupy all premises owned or occupied by Canadian
OpCo wherein Collateral may be situate, maintain Collateral upon such premises,
use Collateral directly or indirectly in carrying on Canadian OpCo’s business
and from time to time to borrow money either unsecured or secured by a security
interest in any of the Collateral.  Company shall not be responsible or liable
for any debts contracted by it, for damages to persons or property or for
salaries or non-fulfilment of contracts during any period when Company shall
manage the Collateral upon entry, as herein provided, nor shall Company be
liable to account as mortgagee in possession or for anything except actual
receipts or be liable for any loss on realization or for any default or omission
for which a mortgagee in possession may be liable.  Company shall not be bound
to do, observe or perform or to see to the observance or performance by Canadian
OpCo of any obligations or covenants imposed upon Canadian OpCo nor shall
Company, in the case of Securities, Instruments or Chattel Paper, be obliged to
preserve rights against other persons, nor shall Company be obliged to keep any
of the Collateral identifiable.  Canadian OpCo hereby waives any applicable
provision of law permitted to be waived by it which imposes higher or greater
obligations upon Company than aforesaid.

 

Section 9.               Notices.  Except as may be otherwise provided herein,
all notices, requests, waivers and other communications made pursuant to this
Security Agreement shall be made in accordance with the Asset Purchase
Agreement.

 

Section 10.             No Waiver; Cumulative Remedies.  No failure on the part
of Company to exercise, and no delay in exercising, any right, remedy,

 

8

--------------------------------------------------------------------------------

 

power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.  Company may grant extensions of time and
other indulgences, take and give up security, accept compositions, compound,
compromise, settle, grant releases and discharges, refrain from perfecting or
maintaining perfection of the Security Interest, and otherwise deal with
Canadian OpCo, account debtors of Canadian OpCo, sureties and others and with
the Collateral, the Security Interest  and other security interests as Company
may see fit without prejudice to the liability of Canadian OpCo or Company’s
right to hold and realize on the security constituted by this Security
Agreement. The rights and remedies under this Security Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to Company.

 

Section 11.             Binding Effect.  This Security Agreement shall be
binding upon, inure to the benefit of and be enforceable by Canadian OpCo,
Company and their respective successors and assigns.

 

Section 12.             Governing Law.  This Security Agreement shall be
governed by, and construed in accordance with, the law of British Columbia,
except as required by mandatory provisions of law and to the extent the validity
or perfection of the security interests hereunder, or the remedies hereunder, in
respect of any Collateral are governed by the law of a jurisdiction other than
British Columbia.

 

Section 13.             Entire Agreement; Amendment .  This Agreement contains
the entire agreement of the parties with respect to the subject matter hereof
and shall not be amended except by the written agreement of the parties.

 

Section 14.             Assignment.  Company may, with notice to Canadian OpCo,
at any time assign, transfer or grant a security interest in this Security
Agreement and the Security Interest.  Canadian OpCo expressly agrees that the
assignee, transferee or secured party, as the case may be, shall have all of
Company’s rights and remedies under this Security Agreement and Canadian OpCo
will pay the Obligations to the assignee, transferee or secured party, as the
case may be, as the Obligations become due.

 

Section 15.             Severability.  Whenever possible, each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under all applicable laws and regulations.  If, however, any provision of
this Security Agreement shall be prohibited by or invalid under any such law or
regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or regulation, or,
if for any reason it is not deemed so modified, it shall be ineffective and
invalid only to the extent of such prohibition or invalidity without affecting
the remaining provisions of this Security Agreement, or the validity or
effectiveness of such provision in any other jurisdiction.

 

Section 16.             Amalgamation.  Canadian OpCo acknowledges and agrees
that in the event it amalgamates with any other company or companies it is the
intention of the parties hereto that the term “Debtor” when used herein shall
apply to each of the amalgamating companies and to the amalgamated company, such
that the Security Interest granted hereby:

 

9

--------------------------------------------------------------------------------

 

(i)                                     shall extend to “Collateral” (as that
term is herein defined) owned by each of the amalgamating companies and the
amalgamated company at the time of amalgamation and to any “Collateral”
thereafter owned or acquired by the amalgamated company, and

 

(ii)                                  shall secure the “Obligations” (as that
term is herein defined) of each of the amalgamating companies and the
amalgamated company to Company at the time of amalgamation and any “Obligations”
of the amalgamated company to Company thereafter arising.  The Security Interest
shall attach to “Collateral” owned by each company amalgamating with Canadian
OpCo, and by the amalgamated company, at the time of amalgamation, and shall
attach to any “Collateral” thereafter owned or acquired by the amalgamated
company when such becomes owned or is acquired.

 

Section 17.             Counterparts.  This Security Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.

 

Section 18.             Termination.  Upon payment and performance in full of
all Obligations, the security interest created under this Security Agreement
shall terminate and Company shall promptly execute and deliver to Canadian OpCo
such documents and instruments reasonably requested by Canadian OpCo as shall be
necessary to evidence termination of all security interests given by Canadian
OpCo to Company hereunder.  Any partial payment or satisfaction of the
Obligations shall be deemed not to be a redemption or discharge of this Security
Agreement.  Canadian OpCo shall be entitled to a release and discharge of this
Security Agreement upon full payment and satisfaction of all Obligations

 

[remainder of page intentionally left blank]

 

10

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement, as of the date first above written.

 

 

Clean Energy Compression Corp.

 

 

 

 

By

 

 

 

Title:

 

 

 

 

 

 

 

I.M.W. Industries Ltd.

 

 

 

 

By

 

 

 

Title:

 

11

--------------------------------------------------------------------------------