Blueprint





  Exhibit 10.1








STOCK PURCHASE AGREEMENT


 


This
Stock Purchase Agreement (the “Agreement”) is entered into as of
December 15, 2016, by and among Carlos Carrillo, an individual
(“Purchaser”),
Control Engineering, Inc., a Delaware corporation
(“CEI”), and
Greenhouse Holdings, Inc., a Nevada corporation
(“Seller”).


 



RECITALS:


 




A.

Seller owns all of the issued and outstanding
capital stock of CEI (the “Stock”).






 

B. Purchaser
is the Senior Vice President of Engineering and Operations of CEI
and is responsible for running the day-to-day business of
CEI.


 

C. Purchaser
desires to purchase from Seller, and Seller desires to sell to
Purchaser, the Stock, on the terms and conditions set forth
below.


 

D. All
annexes, schedules, exhibits and other attachments hereto are
incorporated herein by reference, and, taken together with this
Agreement, shall constitute a single Agreement.


 



AGREEMENT:


 


Now,
therefore, in consideration of the Recitals and of the agreements
and covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:


 

1.            
PURCHASE AND SALE OF
STOCK                                                                                                




 


1.1           Purchase
and Sale of Shares.


 


(A)           Subject
to the terms and conditions of this Agreement, and on the basis of
the representations, warranties, covenants and agreements contained
herein, Seller shall sell to Purchaser, and Purchaser shall
purchase from Seller, the Stock, free and clear of all liens (other
than those created by this Agreement), for a purchase price equal
to the Accounts Receivable Balance, less the Accounts Payable
Balance, less $60,000.00 (the “Purchase Price”). The
“Accounts Receivable
Balance” shall be equal to the amount of all accounts
receivable of CEI outstanding on December 31, 2016 (the
“Closing Date”)
(the “Accounts
Receivable”), determined in accordance with GAAP, and
identified as “Accounts Receivable” on Schedule I hereto, which
Schedule shall be updated as of the Closing Date, less the Bad Debt Allowance. The
“Bad Debt
Allowance” shall be equal to the amount of those
certain accounts receivable of CEI outstanding on the Closing Date,
determined in accordance with GAAP, and identified as “Bad
Debt” on Schedule
I hereto (the “Bad
Debt”), which Schedule shall be updated as of the
Closing Date. The “Accounts
Payable Balance” shall be equal to the amount of all
accounts payable of CEI outstanding on the Closing Date (the
“Accounts
Payable”), determined in accordance with GAAP, and
identified as “Accounts Payable” on Schedule I hereto, which
Schedule shall be updated as of the Closing Date.


 



 

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(B)           Form
of Payment. In the event that the Purchase Price is
positive, the Purchase Price shall be payable by Purchaser to
Seller by the execution and delivery by Purchaser of a promissory
note in the original principal amount equal to such Purchase Price,
substantially in the form attached hereto as Exhibit A (the
“Note”). In the
event that the Purchase Price is negative, Seller shall pay the
absolute value of the Purchase Price in cash or immediately
available funds to the Purchaser not later than January 31, 2017;
provided, that in
the event that the absolute value of the Purchase Price exceeds
$60,000, any amount in excess of $60,000 shall be paid by Seller
directly to certain creditors to which the Accounts Payable relate,
instead of to Purchaser.


 


(C)           Reimbursement.
In the event that CEI collects any funds with respect to the Bad
Debt on or prior to December 31, 2017, CEI shall, within three (3)
business days of such collection, pay the amount of such collection
in full in cash or immediately available funds to
Seller.


 


1.2           Fair
Market Value. The
parties hereby acknowledge and agree that the Purchase Price has
been negotiated on an arm’s length basis, and the parties
believe that the Purchase Price reflects the fair market value of
the Stock; provided, however, that neither
the Seller nor CEI is making any representation as to the fair
market value of the Stock.


 


1.3           Closing.
Subject to the terms and conditions of this Agreement, the closing
of the sale and purchase of the Stock (the “Closing”) shall take place on the
Closing Date at the office of Purchaser or such other place as the
parties may mutually agree at such time and date as the parties may
mutually select.


 

(A) Deliveries by
Seller.


 




a.

Stock Certificates. At the
Closing, Seller shall deliver to Purchaser stock certificates evidencing the Stock, free and clear
of all claims, liens and encumbrances (other than those created by
this Agreement and securities laws), duly endorsed in blank or
accompanied by duly executed instruments of transfer duly endorsed
in blank.






 




b.

Consents.
Seller and CEI shall have obtained all consents required for the
consummation of the transactions contemplated
hereby.






 

(B) Deliveries
by Purchaser.


 




a.

Note.
In the event that the Purchase Price is positive, at the Closing,
Purchaser shall deliver the executed Note in accordance with
Section 1.1 above.






 

(C) Deliveries
by CEI.


 




a.

Continuing
Guaranty. In the event that the
Purchase Price is positive, at the Closing, CEI shall deliver the
executed Continuing Guaranty, substantially in the form attached
hereto as Exhibit B
(“Guaranty”).






 



 

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b.

Security
Agreement. In the event that
the Purchase Price is positive, at the Closing, CEI shall deliver
the executed Security Agreement, substantially in the form attached
hereto as Exhibit C
(“Security
Agreement”).






 

(D) Other
Closing Deliveries. At the
Closing, each party will deliver to the other party such other
documents as may be reasonably requested by the other
party.


 

(E) Stock
Power. Each of the parties agrees that this Agreement shall
constitute a stock power or other necessary authorization to
transfer, as the case may be, authorizing CEI to record on its
books and records the transfer of the Stock from the Seller to the
Purchaser.


 



2. 


REPRESENTATIONS AND WARRANTIES BY SELLER.






 


Seller hereby represents and
warrants to Purchaser, as follows:


 


2.1               Seller
has good and marketable title to the Stock, free and clear of all claims,
liens, and encumbrances, other than those imposed by this Agreement
or securities laws.


2.2               Seller
has the requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. Seller has taken
all action necessary for the authorization, execution and delivery
of this Agreement. This Agreement has been duly and validly
executed and delivered by Seller and constitutes the legal and
binding obligation of Seller, enforceable against Seller in
accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’
rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other
equitable remedies.


2.3               The
execution and delivery of this Agreement by Seller, the performance
by Seller of its obligations pursuant to this Agreement, and the
consummation of the transactions contemplated hereby will not
result in a breach by Seller of, violate the terms or conditions
of, or constitute a default by Seller under, any agreement,
instrument, decree, law, judgment or order to which Seller is a
party, to which the properties of Seller may be subject, or by
which Seller may be bound, result in the creation of any claims,
liens or encumbrances on the Stock, other than those that have been
created by Purchaser or restrictions imposed by securities
laws.



3.            


REPRESENTATIONS AND WARRANTIES BY PURCHASER.4.REPRESENTATIONS AND WARRANTIES BY
PURCHASER






 


Purchaser hereby
represents and warrants to Seller and CEI as follows:


 


3.1           It
has the requisite power and authority to execute, deliver and
perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes the legal and
binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’
rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other
equitable remedies.



 

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3.2           It
is acquiring the Stock for its own account for investment purposes
only and not with a view to, or for the resale in connection with,
any “distribution” thereof for purposes of the
Securities Act of 1933, as amended (the “Securities
Act”), in violation of securities laws. Purchaser has
no present intention of selling or otherwise disposing of all or
any portion of the Stock.


3.3           It
is fully aware of: (i) the highly speculative nature of an
investment in the Stock; (ii) the potential financial hazards
involved; and (iii) the lack of liquidity of the Stock and the
restrictions on transferability of the Stock (e.g., that Purchaser
may not be able to sell or dispose of the Stock or use them as
collateral for loans).


3.4           Neither
CEI, nor the Seller, nor any of their respective officers or
directors have made any representations to Purchaser regarding the
advisability of the transaction described herein.


 


3.5           He
understands that the shares of Stock he is purchasing are
characterized as “restricted securities” under the
federal securities laws and that under such laws and applicable
regulations such securities may be resold without registration
under the Securities Act, only in certain limited circumstances. It
understands that the Stock must be held indefinitely unless
subsequently registered under the Securities Act or unless an
exemption from registration is otherwise available. In this
connection, the Purchaser represents that it is familiar with
Securities and Exchange Commission Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and
by the Securities Act. In addition, Purchaser understands that the
certificate evidencing the Stock, as applicable, will be imprinted
with a legend which prohibits the transfer of the Stock unless
registered or such registration is not required in an opinion of
counsel reasonably acceptable to CEI.


3.6           At
no time was it presented with or solicited by any publicly issued
or circulated newspaper, mail, radio, television or other form of
general advertising or solicitation in connection with the
Stock.


3.7           By
reason of its business or financial experience, he is capable of
evaluating the merits and risks of this purchase, has the ability
to protect Purchaser’s own interests in this transaction and
is financially capable of bearing a total loss of the Stock. He is
an “accredited investor” as such term is defined in
Regulation D promulgated under the Securities Act.


3.8           Purchaser
has been given the opportunity to consult with independent legal
counsel regarding its rights and obligations under this Agreement
and has consulted with such independent legal counsel regarding the
foregoing, fully understands the terms and conditions contained
herein, and intends for such terms to be binding upon and
enforceable against Purchaser.



4.            


INTERIM OPERATING COVENANTS.







 

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4.1           
Conduct
of Business of CEI.
Purchaser, in his capacity as an officer of CEI, shall cause CEI,
during the period from the date of this Agreement until the Closing
Date, except as expressly contemplated by this Agreement or as
required by applicable law or with the written consent of Seller,
to conduct its business in the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, between
the date of this Agreement and the Closing Date, except as
otherwise expressly contemplated by this Agreement or as required
by applicable law, Purchaser, in his capacity as an officer of CEI,
shall not permit CEI to, without the prior written consent of the
Seller:



(A)           

Incur any financial
obligation, except in the ordinary course of business consistent
with past practice;







(B)           

Incur any financial
obligation of more than $5,000;







(C)           

Fail to satisfy any
outstanding financial obligation as required under the agreement
relating to that particular financial obligation and in the
ordinary course of business;







(D)           

Make any material
change in any method of financial accounting principles or
practices, in each case except for any such change required by a
change in GAAP or applicable law;







(E)           

Except as required
by applicable law or by any CEI employee benefit plan or other
contract in effect as of the date of this Agreement, (i) increase
the compensation payable or that could become payable by CEI to
directors, officers or employees (including without limitation any
promises of severance payments in the event that such
employees’ employment with CEI is terminated), other than
increases in compensation made to non-officer employees in the
ordinary course of business consistent with past practice, or (ii)
terminate any CEI employees, except in the ordinary course of
business consistent with past practice; or







(F)           

Agree or commit to
do any of the foregoing.







4.2           

Other
Actions. From the
date of this Agreement until the Closing, Seller shall not, and
Purchaser shall not permit CEI to, take, or agree or commit to
take, any action (except as otherwise expressly permitted by this
Agreement) that would reasonably be expected to, individually or in
the aggregate, prevent, materially delay or materially impede the
consummation of the transactions contemplated by this
Agreement.







4.2           

Accounts
Receivable. From the
date of this Agreement until the Closing, Purchaser shall use his
best efforts and shall cause CEI and its employees to use their
best efforts to collect all outstanding Accounts Receivable,
including without limitation, the Bad Debt.





5.            
POST-CLOSING
COVENANTS.                                                                         




 


Purchaser and
Seller agree as follows with respect to the period following the
Closing Date:


5.1           Further
Cooperation. In case
at any time after the Closing Date any further actions are
necessary to carry out the purposes of this Agreement, each of the
parties will take such further actions (including the execution and
delivery of such further instruments and documents) as the other
party reasonably may request, all at the sole cost and expense of
the requesting party (unless the requesting party is entitled to
indemnification therefor under Section 6 below).



 

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5.2           Confidentiality.
Seller agrees that for a period of two
(2) years from the Closing Date, it will not (a) divulge any
Confidential Information to third parties or (b) use or permit to
be used any Confidential Information for its own benefit. For this
purpose, “Confidential
Information” shall mean
all confidential and proprietary information relating to CEI, this
Agreement, and the transactions contemplated hereby.
“Confidential Information” shall not include any
information that: (y) is now
available to third parties who are not under a duty of
confidentiality or, through no fault of Seller, subsequently
becomes available to third parties who are not under a duty of
confidentiality; or (z) is released or approved for release by
Purchaser without restriction. Notwithstanding the foregoing, Seller may disclose
Confidential Information (i) to the extent required by a court of
competent jurisdiction or other governmental authority or otherwise
as required by applicable law, rule or regulation, (ii) on a
“need-to-know” basis under an obligation of
confidentiality to its legal counsel, accountants, banks and other
financing sources and their advisors, or (iii) in any legal
proceedings that arise in connection with this Agreement or
the transactions contemplated
herein and
therein.


5.3
Employees.


 

(A) Effective
as of the Closing Date, Purchaser shall assume the employment of
all employees of CEI, subject to any employment agreements, if
applicable. Purchaser shall assume and perform, pay or otherwise
discharge all liabilities and benefit obligations accruing or
occurring from and after the Closing Date with respect to all CEI
employees. With respect to CEI employees and in connection with
administering Purchaser’s employee benefits plans, Purchaser
shall recognize all service with CEI for purposes of vesting and
eligibility, as applicable under such employee benefit plans, and
for purposes of paid time off, vacation, sick and leave
entitlements and seniority.


 

(B) Purchaser
shall be responsible for any legally mandated continuation of
health care coverage for such employees and/or their dependents who
have a loss of health care coverage due to a qualifying event after
the Closing Date, and for satisfaction of any related notice
requirements with respect to such employees and other dependents
who have a loss of coverage due to a qualifying event after the
Closing Date.


 


5.4           Bad
Debt.
From the Closing until December 31, 2017, Purchaser shall use his
best efforts and shall cause CEI and its employees to use their
best efforts to collect the Bad Debt.


 

6.            
INDEMNIFICATION.



 


6.1           Indemnification.


 


(A)           Purchaser
shall indemnify, defend and hold Seller harmless from and against
any and all damages, liabilities, losses, claims, obligations,
liens, assessments, judgments, taxes, fines, penalties, reasonable
costs and expenses (including without limitation reasonable fees of
counsel) (collectively, “Losses”) suffered or incurred by
Seller, or its successors and assigns (i) proximately caused by any
breach of any representation, warranty, covenant or other
undertaking made by the Purchaser in this Agreement, and (ii) the
ownership or operation of CEI by the Purchaser. Seller shall notify
the Purchaser promptly of any written actions, claims or demands
against Seller of which the Purchaser is responsible hereunder
specifying the basis and amount thereof in reasonable
detail.


 



 

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(B)           Seller
shall indemnify, defend and hold Purchaser harmless from and
against any and all Losses suffered or incurred by Purchaser, or
its successors and assigns, proximately caused by any breach of any
representation, warranty, covenant or other undertaking made by the
Seller in this Agreement. Purchaser shall notify the Seller
promptly of any written actions, claims or demands against
Purchaser of which the Seller is responsible hereunder specifying
the basis and amount thereof in reasonable detail; provided, however, that the
aggregate amount of all Losses for which Seller shall be liable
pursuant to this Section 6.1(B) shall not exceed the Purchase
Price.


 


(C)           If
any third party notifies any party (the “Indemnified Party”) with respect
to any matter (a “Third-Party
Claim”) that may give rise to a claim for
indemnification against the other party (the “Indemnifying Party”) under this
Section 6, then the Indemnified Party shall promptly (and in any
event within ten (10) business days after receiving notice of the
Third-Party Claim) notify the Indemnifying Party thereof in writing
specifying the claimed basis and amount thereof in reasonable
detail. Failure to so notify shall not be deemed a waiver of, or
otherwise affect, the Indemnifying Party’s obligations unless
the Indemnifying Party is materially harmed or prejudiced by such
failure to notify.


 


The
Indemnifying Party will have the right at any time to assume and
thereafter conduct the defense of the Third-Party Claim with
counsel of its choice; provided, however, that the Indemnifying
Party will not consent to the entry of any judgment on or enter
into any settlement with respect to the Third-Party Claim without
the prior written consent of the Indemnified Party (not to be
unreasonably withheld) unless the judgment or proposed settlement
involves only the payment of money damages and does not impose an
injunction or other equitable relief upon the Indemnified
Party.


 


Unless
and until the Indemnifying Party assumes the defense of the
Third-Party Claim as provided in above, however, the Indemnified
Party may defend against the Third-Party Claim in any manner it may
reasonably deem appropriate. In no event will the Indemnified Party
consent to the entry of any judgment on or enter into any
settlement with respect to the Third-Party Claim without the prior
written consent of the Indemnifying Party (not to be unreasonably
withheld).


 


(D)           Notwithstanding
anything in this Agreement to the contrary, the amount of any
Losses for which indemnification is provided under this Section 6
shall be reduced by (i) any amounts actually recovered by an
Indemnified Party pursuant to any indemnification by or
indemnification agreement with any third party (net of any costs
incurred to obtain such recovered amounts) and (ii) any insurance
proceeds or other cash receipts or sources of reimbursement
actually received as an offset against such Losses (net of any
costs incurred to obtain such proceeds or reimbursement and all
related deductions and adjustments to premiums); and no right of
subrogation shall accrue to any insurer or third-party indemnitor
hereunder. If the amount of the reduction contemplated above is
determined or paid to an Indemnified Party after payment by any
Indemnifying Party of any amount otherwise required to be paid to
an Indemnified Party pursuant to this Section 6, the Indemnified
Party shall either repay the Indemnifying Party, promptly after
such determination or payment, any amount that should not have been
paid pursuant to this Section 6 had such determination or payment
been made at the time of such payment by the Indemnifying Party or
permit the Indemnifying Party to reduce any other payment then
required to be made by such Indemnifying Party, if
any.


 



 

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(E)           For
the avoidance of doubt, all indemnification and similar payments
made pursuant to this Agreement shall be treated for tax purposes
as an adjustment to the Purchase Price, and each party will report
such payments consistently with such treatment for all Tax
purposes.


 


(F)           Parties
shall be able to make claims under more than one provision of this
Agreement, but no party shall be entitled to recover more than once
in respect of the same Losses. For purposes of illustration only,
if there is a $100 fine levied for noncompliance with law and such
noncompliance is covered by two sections of this Agreement, then
Purchaser may make a claim under both sections but shall only be
permitted to recover once even if Purchaser prevails under both
sections.


 


(G)           For
all purposes hereunder, the Indemnifying Parties shall not be
liable for any incidental, special, punitive or consequential
(including lost profits) Losses, unless such Losses relate to a
Third-Party Claim.


 


(H)           The
parties acknowledge and agree that, other than with respect to any
breach by Purchaser of its agreements or obligations under the Note
or any breach by CEI of its agreements or obligations under the
Guaranty or Security Agreement, the parties’ sole and
exclusive remedy with respect to any and all claims for any breach
of any representation, warranty, covenant, agreement or
obligation set forth herein or otherwise relating to the subject
matter of this Agreement, shall be pursuant to the
indemnification provisions set forth in this Section 6. In furtherance of the foregoing,
each party hereby waives, to the fullest extent permitted under
law, any and all rights, claims and causes of action for any breach
of any representation, warranty, covenant, agreement or
obligation set forth herein or otherwise relating to the subject
matter of this Agreement (other than with respect to any
breach by Purchaser of its agreements or obligations under the Note
or any breach by CEI of its agreements or obligations under the
Guaranty or Security Agreement) it may have against the other
parties hereto and their affiliates and each of their respective
representatives arising under or based upon any law, except
pursuant to the indemnification provisions set forth in this
Section 6.


 



7.            


CONDITIONS TO CLOSING; FAILURE TO CLOSE.






 

7.1 Conditions
to Purchaser’s Obligations at Closing. All of
the obligations of the Purchaser under this Agreement are subject
to the fulfillment at or before the Closing of each of the
following conditions, any of which may be waived in writing by
Purchaser:


 


(A)           Representations
and Warranties. The
representations and warranties of Seller contained herein shall be
true and correct on and as of the Closing Date.


 



 

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(B)           Performance.
Seller shall have performed or fulfilled all agreements,
obligations and conditions contained herein and shall have obtained
all consents, waivers and approvals necessary to transfer the
Stock.


 


(C)           Closing
Deliverables. The closing
deliverables identified in Section 1.3(A) shall have been delivered
by Seller, and the closing deliverables identified in Section
1.3(C) shall have been delivered by CEI.


 


In the
event this Agreement is executed but the transactions described in
this Section 7.1 are not either consummated or waived in writing by
Purchaser on or prior to the Closing Date, Purchaser may terminate
this Agreement effective immediately upon written notice to
Seller.


 


7.2           Conditions
to Seller’s
Obligations at Closing. The obligations of Seller under this Agreement are
subject to the fulfillment at or before the Closing of each of the
following conditions, any of which may be waived in writing by
Seller:


 

(A) Representations
and Warranties. The
representations and warranties of the Purchaser contained herein
shall be true and correct on and as of the Closing Date with the
same effect as if made on and as of the Closing
Date.


 

(B) Performance.
The Purchaser shall have performed or fulfilled all agreements,
obligations and conditions contained herein and shall have obtained
all consents, waivers and approvals necessary to acquire the Stock
from Seller.


 


(C)           Closing
Deliverables. The closing
deliverables identified in Section 1.3(B) shall have been delivered
by Purchaser, and the closing deliverables identified in Section
1.3(C) shall have been delivered by CEI.


 


In the
event this Agreement is executed but the transactions described in
this Section 7.2 are not either consummated or waived in writing by
Shareholders on or prior to the Closing Date, Seller may terminate
this Agreement effective immediately upon written notice to
Purchaser.


 


8.           GENERAL
PROVISIONS8.                                                           



 


8.1           
No
Waivers. None of the
parties shall be deemed to waive any of its rights, powers or
remedies hereunder unless such waiver is in writing and signed by
said party. No delay or omission by any party in exercising any of
said rights, powers or remedies shall operate as a waiver thereof,
nor shall a waiver signed by any party of any breach of the
covenants, conditions or agreements binding on the other parties on
one occasion be construed as a waiver or consent to such breach on
any future occasion or a waiver of any other covenant, condition,
or agreement herein contained.


 


8.2           Expenses. None
of the parties hereto shall have any obligation to pay any of the
fees and expenses of any other party incident to the negotiation,
preparation and execution of this Agreement, including, but not
limited to, the fees and expenses of legal counsel, accountants,
investment bankers, consultants and other experts.


 



 

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8.3           Publicity.
A party must obtain the other party’s written consent prior
to any publication, presentation, public announcement or press
release concerning the relationship between the parties or the
existence or terms of this Agreement, except as may
otherwise be required by law. In addition, the parties agree not to
make any disparaging or derogatory comments regarding the other
parties to any third party.


 


8.4           Assignment.
No party may assign any portion of this Agreement, voluntarily or
involuntarily, including without limitation by operation of law,
without the prior written consent of the other party, which shall
not be unreasonably withheld, conditioned or delayed. Any
attempt to otherwise assign this Agreement
shall be null and void. No
person or entity not a party hereto shall have any interest herein
or be deemed a third party beneficiary hereof, and nothing
contained herein shall be construed to create any rights
enforceable by any other person or third party.


 


8.5           Partnership.
Nothing herein contained shall be construed as creating a
partnership or joint venture by or between the
parties.


 


8.6           Binding
Agreement. This
Agreement shall be binding upon and inure to the benefit of the
parties and their respective permitted successors and
assigns.


 


8.7           Severability.
Any provision of this Agreement held or determined by a court (or
other legal authority) of competent jurisdiction to be illegal,
invalid, or unenforceable in any jurisdiction shall be deemed
separate, distinct and independent, and shall be ineffective to the
extent of such holding or determination without (i) invalidating
the remaining provisions of this Agreement in that jurisdiction or
(ii) affecting the legality, validity or enforceability of such
provision in any other jurisdiction.


 


8.8           Captions
Headings. Captions
and paragraph headings used in this Agreement are for convenience
only and shall not be used to interpret any provision
hereof.


 


8.9           Entire
Agreement. This
Agreement, together with the Exhibits and Schedules, which
documents are incorporated herein by reference, constitutes the
entire agreement and understanding of the parties with respect to
the subject matter hereof, and is intended as the parties’
final expression and complete and exclusive statement of the terms
thereof, superseding all prior or contemporaneous agreements,
representations, promises and understandings, whether written or
oral, between the parties, and may be amended or modified only by
an instrument in writing signed by all parties.


 


8.10           Notices.
Any notice required or permitted to be given hereunder shall be (a)
in writing, (b) effective on the first business day following the
date of receipt, and (c) delivered by one of the following means:
(i) by personal delivery; (ii) by prepaid, overnight package
delivery or courier service; or (iii) by the United States Postal
Service, first class, certified mail, return receipt requested,
postage prepaid.


 


All
notices given under this Agreement shall be addressed, in the case
of Seller, to:


 


Greenhouse
Holdings, Inc.


_____________________


_____________________


 


All
notices given under this Agreement shall be addressed, in the case
of Purchaser, as follows:


 


Carlos
Carrillo


_____________________


_____________________


 



 

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or to
such other addresses of which the parties have been advised in
writing by any of the above-described means. Personal delivery to a
party or to any officer, partner, agent, or employee of such party
at its address herein shall constitute receipt. The following shall
also constitute receipt: (i) a party’s rejection or other
refusal to accept notice, and (ii) the inability to deliver to a
party because of a changed address of which no notice has been
received by the other party. Notwithstanding the foregoing, no
notice of change of address shall be effective until ten (10) days
after the date of receipt thereof. This Section shall not be
construed in any way to affect or impair any waiver of notice or
demand herein provided.


 


8.11           Governing
Law. This Agreement
shall be governed by and construed in accordance with the laws of
the State of Delaware, without giving effect to any principles of
conflicts of law. With respect to any litigation arising out of or
relating to this Agreement, the parties agree that it shall be
exclusively filed in and heard by the state or federal courts with
jurisdiction to hear such suits located in the State of Delaware,
and each party hereby submits to the exclusive jurisdiction of such
courts.


 


8.12           Counterparts.
This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which taken together
shall constitute one and the same Agreement. Execution and delivery
of this Agreement by exchange of facsimile copies bearing the
facsimile signature of a party hereto shall constitute a valid and
binding execution and delivery of this Agreement by such party.
Such facsimile copies shall constitute enforceable original
documents.


 


8.13           Specific
Performance. Without
limiting or waiving in any respect any rights or remedies of the
parties to this Agreement now or hereinafter existing at law or
equity or by statute, each of the parties hereto shall be entitled
to seek specific performance of the obligations to be performed by
the other in accordance with the provisions of this
Agreement.


 


8.14           Professional
Fees. In the event of
any litigation involving this Agreement or any of the ancillary
documents, the prevailing party in such litigation shall be
entitled to recover reasonable attorney fees and costs in addition
to any other remedy to which it is entitled.


 


 


[SIGNATURES
ON FOLLOWING PAGE]


 







11








 






 


IN WITNESS WHEREOF, each party has
executed or caused its duly authorized officer to execute this
Agreement the day and year first above written.


 


 


“PURCHASER”:


 


 

/s/ Carlos
Carrillo                                               
Date: 12/13/2016


Carlos
Carrillo


 


 


“CEI”:


 


Control
Engineering, Inc.


 

By:/s/Dan
Wachtler                                               
Date: 12/14/16


Name:
Dan Wachtler


Its:
President & COO


 


 


“SELLER”:


 


Greenhouse
Holdings, Inc.


 

By:/s/ Brian
King                                               
Date: 12/14/16


Name:
Brian King


Its:


 


 














 






 



Schedule I


 


On file
with the Greenhouse Holdings, Inc.


 


 


 


 














 






 



Exhibit A


 


(see
attached)


 


 


 


 


 














 






 



PROMISSORY NOTE


 


	


$_____________  





	
 Costa Mesa,
California






December 31,
2016


 


FOR
VALUE RECEIVED, Carlos Carrillo (the “Maker”) promises
to pay to Greenhouse Holdings, Inc., a Nevada corporation (the
“Holder”), the principal sum of [___________________
($________)]together with interest thereon at the rate of 1.00% per
annum, compounded annually, upon the following terms and
conditions. Interest on this Note shall be computed on the basis of
a year of 365 days for the actual number of days
elapsed.


Unless
there shall occur an Event of Default (as defined below), the
principal amount of this Note and all accrued but unpaid interest
thereon shall be due and payable as follows:


(a) On April 1, 2017,
an amount equal to the cash receipts collected by Control
Engineering, Inc. (“CEI”) between January 1, 2017 and
March 30, 2017 in respect of accounts receivable of CEI outstanding
on December 31, 2016 (the “Accounts Receivable”) in
excess of $60,000.00 shall be due and payable by Maker to the
Holder; and


(b) On the first day of
each calendar month thereafter until the earlier of the Maturity
Date or the date on which all principal and accrued but unpaid
interest under this Note has been repaid in full, an amount equal
to the cash receipts collected by CEI in respect of the Accounts
Receivable during the month immediately preceding the applicable
payment date shall be due and payable by Maker to the Holder;
and


(c) Any remaining
unpaid principal hereunder together with all accrued but unpaid
interest thereon shall be due and payable on the twelve (12) month
anniversary of the date of this Note (the “Maturity
Date”), unless such Maturity Date is extended by the Holder
in the Holder’s sole and absolute discretion.


For
purposes of clarity, no payments shall be due under this Note prior
to April 1, 2017.


All
payments by Maker under this Note shall be in immediately available
funds. Principal and accrued interest on this Note may be prepaid
at any time by Maker without notice, premium or penalty and without
the written consent of Holder.


This
Note shall be guaranteed by CEI pursuant to that certain Continuing
Guaranty of even date herewith issued by CEI in favor of the
Holder, and the obligations pursuant to such Continuing Guaranty
shall be secured by a blanket lien on all assets of CEI pursuant to
that certain Security Agreement of even date herewith issued by CEI
in favor of the Holder.


This
Note shall become immediately due and payable without notice or
demand upon the occurrence at any time of any of the following
events of default (individually, “an Event of Default”
and collectively, “Events of Default”): (1) the
liquidation, termination of existence, dissolution, winding down,
cessation of business or insolvency of CEI, or the appointment of a
receiver or custodian for Maker or any part of its property, as
applicable; (2) the institution by or against Maker of any
proceedings under the United States Bankruptcy Code or any other
federal or state bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors
generally; or (3) the failure by Maker to pay any principal or
accrued interest when due hereunder. Upon the occurrence of an
Event of Default, the Holder shall have then, or at any time
thereafter, all of the rights and remedies afforded by the Uniform
Commercial Code as from time to time in effect in the State of
[California] or afforded by other applicable law. All rights and
remedies of the Holder shall be cumulative, and the Holder shall be
entitled to all the rights of a holder in due course of a
negotiable instrument.



 

1







 






All
payments by Maker under this Note shall be applied first to the
cost of collection, if any, second to accrued but unpaid interest,
and third to unpaid principal. All payments by Maker under this
Note shall be made without set-off or counterclaim and be free and
clear and without any deduction or withholding for any taxes or
fees of any nature whatever, unless the obligation to make such
deduction or withholding is imposed by law. If this Note is not
paid in accordance with its terms, Maker shall pay to the Holder,
in addition to principal and accrued interest thereon, all costs of
collection of the principal and accrued interest, including, but
not limited to, reasonable attorneys’ fees, court costs and
other costs for the enforcement of payment of this Note. No delay
or omission on the part of the Holder in exercising any right under
this Note shall operate as a waiver of such right or of any other
right of the Holder, nor shall any delay, omission or waiver on any
one occasion be deemed a bar to or waiver of the same or any other
right on any future occasion. None of the terms or provisions of
this Note may be excluded, modified or amended except by a written
instrument duly executed on behalf of the Holder expressly
referring to this Note and setting forth the provision so excluded,
modified or amended.


In the
event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, in whole or
in part or in any respect, or in the event that any one or more of
the provisions of this Note operate or would prospectively operate
to invalidate this Note, then and in any such event, such
provision(s) only shall be deemed null and void and shall not
affect any other provision of this Note and the remaining
provisions of this Note shall remain operative and in full force
and effect and in no way shall be affected, prejudiced, or
disturbed thereby.


In the
event any interest is paid on this Note that is deemed to be in
excess of the then legal maximum rate, then that portion of the
interest payment representing an
amount in excess of the then legal maximum rate shall be deemed a
payment of principal and applied against the principal of this
Note.


Maker
and any others who may become liable for the payment hereof jointly
and severally:


a. waive presentment
for payment, demand, notice of demand, notice of non-payment or
dishonor, protest and notice of protest of this Note and all other
notices in connection with the delivery, acceptance, performance,
default, or enforcement of the payment of this Note;


b. consent to all
extensions of time, renewals, postponements of time of payment of
this Note or other modifications hereof from time to time, whether
by acceleration or in due course, without notice, consent or
consideration to any of the foregoing;


c. agree to any
addition or release of any party or person primarily or secondarily
liable hereon;


d. agree that the
Holder shall not be required first to institute any suit, or to
exhaust its remedies, against Maker or any other person or party
liable hereunder in order to enforce the payment of this Note;
and


e. agree that,
notwithstanding the occurrence of any of the foregoing (except by
the express written release by the Holder of any such person),
Maker shall be and remain directly and primarily liable for all
sums due under this Note.


All
rights and obligations hereunder shall be governed by the laws of
the State of [California], without regard to the conflicts of law
provisions of the State of [California] or any other
state.



 

2







 






 


MAKER:


 


 


___________________________


Carlos
Carrillo


 


 


 


 



Acknowledged and agreed:


 



GREENHOUSE HOLDINGS, INC.


 


___________________________


By:
________________________


Its:
________________________


 







3








 






 



Exhibit B


 


(see
attached)


 


 














 






 



CONTINUING GUARANTY


TO:
Greenhouse Holdings, Inc.


1. For valuable
consideration, the undersigned (hereinafter the
“Guarantor”), jointly and severally with all other
guarantors, unconditionally guarantees and promises to pay to
Greenhouse Holdings, Inc. (hereinafter the “Lender”),
or order, on demand, in lawful money of the United States, any and
all indebtedness and other obligations of Carlos Carillo
(hereinafter the “Borrower”) to Lender under that
certain Secured Promissory Note in the principal amount of
[___________________ ($________)]1 (the “Note”) dated on or
about December 31, 2016, as may be amended (such indebtedness
referred to hereinafter as the “Obligations”).
Guarantor is a related and affiliated entity of the Borrower and
will derive substantial and direct benefit from the extension and
availability of the loan evidenced by the Note. The terms and
conditions of each Note are hereby incorporated herein. Should
there be any conflict between the terms hereof and the terms of the
Note, the terms hereof shall control.


2. This is a
continuing guaranty relating to the Obligations, including that
arising under any renewal, modification, or extension of the
Note.


3. The obligations of
the Guarantor hereunder are independent of the Obligations of the
Borrower, and a separate action or actions may be brought and
prosecuted against Guarantor, whether action is brought against the
Borrower, or whether the Borrower be joined in any such action or
actions; and Guarantor expressly waives any rights which Guarantor
may have under California Civil Code sections 2809, 2810, 2819,
2839, 2845 through 2847, 2849, 2850, 2899 and 3433, and California
Code of Civil Procedure Sections 580(a), 580(b), 580(d) and 726.
Guarantor expressly waives the benefit of any statute of
limitations affecting his liability hereunder or the enforcement
thereof. Lender’s rights hereunder shall not be exhausted by
its exercise of any one of its rights or remedies or by any such
action or by any number of successive actions until and unless all
indebtedness and Obligations have been paid and fully
performed.


4. Guarantor
authorizes Lender, without notice or demand and without affecting
their liability hereunder, from time to time to (a) renew,
compromise, extend, accelerate or otherwise change the time for
payment of, or otherwise change the terms of the Obligations or any
part thereof, including increase or decrease of the rate of
interest thereon; (b) take and hold additional security for the
payment of this Guaranty or the Obligations guaranteed, and
exchange, enforce, waive, subordinate and release any such
security; (c) apply such security and direct the order or manner of
sale thereof as Lender in its discretion may determine; and (d)
release or substitute any one or more of any other Guarantor, or
add one or more Guarantor or endorsers. Lender may without notice
assign this Guaranty in whole or in part.


5. Guarantor waives
any right to require Lender to (a) proceed against the Borrower;
(b) proceed against or exhaust any security held from the Borrower;
or, (c) pursue any other remedy in Lender’s power whatsoever.
Guarantor waives any defense arising by reason of any disability or
other defense of the Borrower or by reason of the cessation from
any cause whatsoever of the liability of the Borrower. Until all of
the Obligations of the Borrower to Lender shall have been paid in
full, Guarantor shall have no right of subrogation, and waives any
right to enforce any remedy which Lender now has or may hereafter
have against the Borrower, and waives any benefit of, and any right
to participate in any security now or hereafter held by Lender.
Guarantor waives all presentments, demands for performance, notices
of nonperformance, protests, notices of protest, notices of
dishonor, and notices of acceptance of this Guaranty and of the
existence, creation, or incurring of new or additional
indebtedness.

 1NTD: to be equal to
purchase price under stock purchase agreement.




 

1







 






6. Guarantor waives
and agrees not to assert any duty on the part of Lender to disclose
to Guarantor any facts that Lender may now or hereafter know about
the Borrower. Guarantor is fully responsible for being and keeping
informed of the financial condition of the Borrower and all
circumstances bearing on the risk of non-payment of the Obligations
guaranteed hereby.


7. Guarantor will file
all claims against the Borrower in any bankruptcy or other
proceeding in which the filing of claims is required by law upon
any indebtedness of the Borrower to Guarantor and shall
concurrently assign to Lender all of Guarantor’s rights
thereunder. If Guarantor does not file any such claim, Lender, as
Guarantor’s attorney in fact, is hereby authorized to do so
in Guarantor’s name or, in Lender’s discretion, to
assign the claim and to cause proof of claim to be filed in the
name of Lender’s nominee. In all such cases, whether in
administration, bankruptcy or otherwise, the person or persons
authorized to pay such claim shall pay to Lender the full amount
thereof and, to the full extent necessary, Guarantor hereby assigns
to Lender all of Guarantor’s rights to any and all such
payments or distributions to which Guarantor would otherwise be
entitled. If the amount so paid is greater than the Obligations
then outstanding, Lender will pay the amount of the excess to the
person entitled thereto.


8. The amount of
Guarantor’s liability and all rights, powers, and remedies of
Lender hereunder and under the Loan Documents and any other
agreement now or at any time hereafter in force between Lender and
Guarantor shall be cumulative and not alternative, and such rights,
powers, and remedies shall be in addition to all rights, powers,
and remedies given to Lender by law.


9. This Guaranty shall
benefit Lender, its successors and assigns, including the assignees
of any indebtedness hereby guaranteed, and binds Guarantor’s
successors and assigns. This Guaranty is assignable by Lender with
respect to all or any portion of the indebtedness and obligations
guaranteed hereunder, and when so assigned Guarantor shall be
liable to the assignees under this Guaranty without in any manner
affecting Guarantor’s liability hereunder with respect to any
indebtedness or obligations retained by Lender. No delegation or
assignment of this Guaranty by any Guarantor shall be of any force
or effect or release Guarantor from any obligations
hereunder.


11. Except as provided
in any other written agreement now or at any time hereafter in
force between Lender and Guarantor, this Guaranty shall constitute
the entire agreement of Guarantor with Lender with respect to the
subject matter hereof and supersedes all prior representations,
understandings, promises, and agreements.


12. No provision of
this Guaranty or right of Lender hereunder can be waived nor can
Guarantor be released from his obligations hereunder except by a
writing duly executed by an authorized officer of
Lender.


13. Lender shall have a
lien upon and a right of set-off against all money, securities and
other property of Guarantor now or hereafter in the possession of
or on deposit with Lender, and every such lien and right of set-off
may be exercised without demand upon or notice to Guarantor. No
lien or right of set-off shall be deemed to have been waived by any
act of Lender or any failure to exercise such right of set-off, and
every right of set-off and lien shall continue in full force and
effect until such right of set-off or lien is specifically waived
or released by an instrument in writing executed by
Lender.


14. Any indebtedness of
the Borrower now or hereafter held by Guarantor is hereby
subordinated to the indebtedness of the Borrower to Lender; and
such indebtedness of the Borrower to Guarantor if Lender so
requests shall be collected, enforced and received by Guarantor as
trustee for Lender and be paid over to Lender on account of the
Obligations of the Borrower to Lender but without reducing or
affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.



 

2







 






15. Guarantor agrees to
pay to Lender without demand reasonable attorneys’ fees and
accountants’ fees and all other costs and expenses which may
be incurred by Lender in the enforcement of this Guaranty or in
collecting or compromising the Obligations; whether or not suit is
filed. Time is of the essence of each term and condition
hereof.


16. Except where
preempted by the laws of the United States or the rules or
regulations of any agency or instrumentality thereof, this Guaranty
is to be governed by the laws of the State of [California], and the
parties agree that this Guaranty is, except where preempted by the
laws, rules or regulations of the United States to be interpreted,
construed and governed by the laws of the State of [California].
Guarantor irrevocably and unconditionally submits to the
jurisdiction of the Superior Court of the State of [California] in
connection with any legal action or proceeding arising out of or
relating to this Guaranty and Guarantor waives any objection
relating to the basis for personal or in rem jurisdiction or to venue
which they may now or hereafter have in any such suit, action or
proceeding. If any paragraph, clause or provision hereof is
construed or interpreted by a court of competent jurisdiction to be
void, invalid, or unenforceable, such decision shall affect only
those paragraphs, clauses or provisions and shall not affect the
remainder hereof.


17. PDF or facsimile
signatures hereunder shall be deemed originals.


18. This Guaranty
(including all of Guarantor’s Obligations hereunder) is
secured by a lien and security interest granted to Lender in, to
and upon all of Guarantor’s right title and interest in to
all of Guarantor’s property as set forth in that certain
Security Agreement made by Guarantor in favor of Lender and dated
as of the date of this Guaranty.


[NO
FURTHER TEXT ON THIS PAGE]


 


 










3








 






IN WITNESS WHEREOF, the undersigned
Guarantor has executed this Continuing Guaranty this 31st day of December,
2016.


	
 

	


CONTROL
ENGINGEERING, INC., a Delaware corporation


 


 

By:                                                      

Name:
________________________


Its:
___________________________

 












 


 


 














 






 



Exhibit C


 


(see
attached)


 


 


 


 














 






 



SECURITY AGREEMENT


 


THIS SECURITY AGREEMENT (hereinafter
called “Agreement”) is made and entered into as of
December 31, 2016 by Control Engineering, Inc., a Delaware
corporation (hereinafter, collectively, called
“Debtor”), in favor of Greenhouse Holdings, Inc., a
Nevada corporation, whose address is ____________________
(hereinafter called “Secured Party”).


1. RECITALS.


1.1           On
December 31, 2016, Carlos Carillo, an individual (the
“Borrower”) issued that certain Promissory Note in
favor of Secured Party in the principal amount of
[___________________ ($________)] (the “Note”);
and


1.2           Debtor
is a related and affiliated entity of the Borrower and will derive
substantial and direct benefit from the extension and availability
of the loan evidenced by the Note, and, in connection therewith,
has issued that certain Continuing Guaranty in favor of Secured
Party of even date herewith guaranteeing the obligations of the
Borrower under the Note (the “Guaranty”).


2. SECURITY
INTEREST.


2.1           In
consideration of the loan evidenced by the Note, Debtor hereby
grants to Secured Party a lien and security interest (hereinafter
called the “Security Interest”) in and to all of right,
title and interest in and to Debtor’s assets, including
without limitation, Debtor’s intellectual property (the
“Collateral”).


2.2           This
Security Interest is given for the purpose of securing the
Obligations, in such order of priority as Lender may
elect:


(a) Payment and
performance of all obligations under the Guaranty including,
without limitation, any and all interest thereon, extension and
other fees, late charges, prepayment premiums and attorneys’
fees;


(b) Payment,
performance and observance by Debtor of each agreement, term,
provision and condition contained herein and of all moneys expended
or advanced by Secured Party pursuant to the terms hereof, or to
preserve any right of Secured Party hereunder, or to protect or
preserve the Collateral or any part thereof; and


(c) Payment and
performance of any and all other indebtedness, obligations and
liabilities of Debtor to Secured Party of every kind and character,
direct or indirect, absolute or contingent, due or to become due,
not existing or hereafter incurred, whether such indebtedness is
from time to time reduced and thereafter increased or entirely
extinguished and thereafter re-incurred.


All of
the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the
“Obligation”.



 

1







 







3.            

WARRANTIES,
COVENANTS AND AGREEMENTS OF DEBTOR. Debtor hereby warrants, covenants
and agrees that:







3.1            

Debtor represents
and warrants that:






(a) Debtor is the true
and lawful owner of the Collateral and has full power, right and
authority to deliver the Collateral to Secured Party and to execute
and deliver this Agreement;


(b) No defense, setoff,
claim or counterclaim exists against Debtor that could be asserted
against Secured Party, whether in any proceeding to enforce Secured
Party’s interest in the Collateral or otherwise:


(c) Debtor has not
conveyed, transferred or assigned the Collateral or any of its
rights or interest therein and has not executed any other document
or instrument that might prevent or limit Secured Party from
operating under the terms and conditions of this Agreement;
and


(d) Debtor has not made
any pledge or assignment or of the Collateral and there are no
other liens, encumbrances or claims made, placed upon or filed or
recorded against the Collateral, and Debtor will make no other
assignment (and will allow no other assignment to be made) of the
Collateral or of any right or interest therein.


3.2           Debtor
does hereby make, constitute and appoint Secured Party, its
successors and assigns, Debtor’s true and lawful attorney in
fact, in Debtor’s name, place and stead, or
otherwise:


(a) To do all acts,
including taking possession of the Collateral, the filing of any
UCC Financing Statement (including continuation statements and
amendments) with the appropriate filing office, and upon the
occurrence of an Event of Default to execute, acknowledge, obtain
and deliver any and all instruments, documents, items or things
necessary, proper or required as a term, condition or provision of
the Collateral or in order to exercise any rights of Debtor under
the Collateral or to receive and enforce any performance due Debtor
under the Collateral;


(b) Upon the occurrence
of an Event of Default to give any notices, instructions, or other
communications to any other parties related to the Collateral or to
any person or entity in connection therewith;


(c) Upon the occurrence
of an Event of Default to demand and receive all performances due
under or with respect to the Collateral and to take all lawful ways
and means for the enforcement thereof and to compromise and settle
any claim or cause of action in Debtor arising from or related to
the Collateral and give acquittances and other sufficient
discharges relating thereto; and



 

2







 






(d) To file any claim
or to take any other action or proceeding, either in its own name
or in that of its nominee, or in the name of Debtor or otherwise,
to enforce performances due under or related to the Collateral or
to protect and preserve the right, title and interest of Secured
Party hereunder.


The
power of attorney given herein is a power coupled with an interest
and shall be irrevocable so long as any part of the Obligation
remains unpaid or unperformed. Secured Party shall have no
obligation to exercise any of the foregoing rights and powers in
any event.


3.3           No
change, amendment or modification shall be made to the Collateral
or to the instructions of Debtor contained herein without the prior
written approval of Secured Party.


3.4.           Debtor
shall provide any and all documentation and take any and all action
as may be necessary to perfect Secured Party’s lien and
security interest in, to and upon the Collateral.


3.5           Debtor
shall promptly notify Secured Party of any default or breach of or
under the Agreement or of any failure of performance or other
condition that with the giving of notice or the passage of time, or
both, could become a default or breach under the
Agreement.


3.6           Debtor
shall pay all taxes, assessments and other charges that may be
levied or assessed against the Collateral.


3.7           Debtor
shall immediately give Secured Party written notice of any change
in Debtor’s location.


3.8           Debtor,
at its cost and expense, shall protect and defend this Agreement,
all of the rights of Secured Party hereunder and the Collateral
against all claims and demands of other parties. Debtor shall pay
all claims and charges that in the reasonable opinion of Secured
Party might prejudice, imperil or otherwise affect the Collateral
or the Security Interest. Debtor shall promptly notify Secured
Party of any levy, distraint or other seizure by legal process or
otherwise of any part of the Collateral and of any threatened or
filed claims or proceedings that might in any way affect or impair
the terms of this Agreement.


3.9           The
Security Interest, at all times, shall be perfected and shall be
prior to any other interest in the Collateral. Debtor, on demand,
shall promptly pay all costs and expenses of filing and recording,
including the costs of any searches, reasonably deemed necessary by
Secured Party from time to time to establish and determine the
validity and the continuing priority of the Security
Interest.


3.10           If
Debtor shall fail to pay any expenses or charges to keep all of the
Collateral free from other security interests, encumbrances or
claims, or to perform otherwise as required herein, Secured Party
may advance the moneys necessary to pay the same.


3.11           All
rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and
protection of Secured Party, and Secured Party may exercise any
such right, power or remedy at its option and in its sole and
absolute discretion without any obligation to do so. In addition,
if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any
alternative or combination of alternatives at its option and in its
sole and absolute discretion. All monies advanced by Secured Party
under the terms hereof and all amounts paid, suffered or incurred
by Secured Party in exercising any authority granted herein,
including reasonable attorneys’ fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear
interest at the highest rate payable on any of the Obligation until
paid, and shall be due and payable by Debtor to Secured Party
immediately upon written demand by Secured Party, and upon failure
of Debtor to do so, Secured Party may declare all sums secured
hereby immediately due and payable.



 

3







 






3.12           Debtor
shall furnish to Secured Party or any assignee thereof within
fifteen (15) days after request therefor, a written statement in
form satisfactory to Secured Party, duly acknowledged, certifying
the amount of the principal and interest then owing under the Note,
and whether any claims, offsets or defenses exist against this
Agreement or any of the terms and provisions of any other agreement
securing the Obligation.



4.            


EVENTS OF DEFAULT; REMEDIES.






4.1           The
occurrence of any of the following events or conditions shall
constitute and is hereby defined to be an “Event of
Default”:


(a) Any Event of
Default under the Note or the Guaranty;


(b) Any warranty,
representation or statement contained in this Agreement or any
other document or instrument executed or delivered in connection
with the Obligation, or made or furnished to Secured Party by or on
behalf of Debtor, that shall be or shall prove to have been
materially false when made or furnished;


(c) The filing by
Debtor (or against Debtor) in which Debtor acquiesces or which is
not dismissed within ninety (90) days after the filing thereof of
any proceeding under the federal bankruptcy laws now or hereafter
existing or any other similar statute now or hereafter in effect;
the entry of an order for relief under such laws with respect to
Debtor or the appointment of a receiver, trustee, custodian or
conservator of all or any part of the assets of
Debtor;


(d) The insolvency of
Debtor, or the execution by Debtor, of an assignment for the
benefit of creditors; or the convening by Debtor of a meeting of
its creditors, or any class thereof, for purposes of effecting a
moratorium upon or extension or composition of its debts; or the
failure of Debtor to pay its debts as they mature; or if Debtor is
generally not paying its debts as they mature;


(e) The admission in
writing by Debtor that it is unable to pay its debts as they mature
or that it is generally not paying its debts as they
mature;


(f) The liquidation,
termination or dissolution of Debtor, if a corporation, limited
liability company, partnership or joint venture, if Secured Party
is not reasonably reassured of timely payment and performance
hereunder and under the Note and the Guaranty;


(g) Any attachment,
garnishment, levy or execution upon, or judicial seizure of, any
portion of the Collateral;



 

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(h) The existence or
the filing of any lien or encumbrance against any portion of the
Collateral which may impair the first lien position of Secured
Party;


(i) The institution of
any legal action or proceedings to enforce a lien or security
interest in any portion of the Collateral;


(j) The occurrence of
any event of default under any other document or instrument
executed or delivered in connection with the
Obligation;


(k) The occurrence of
any event of default under any document or instrument given by
Debtor in connection with any other indebtedness of Debtor to
Secured Party.


4.2           Upon
the occurrence of any Event of Default and at any time and from
time to time thereafter while such Event of Default is continuing,
Secured Party shall have the following rights and remedies and may
do one or more of the following:


(a) Declare all or any
part of the Obligation immediately due and payable, and the same,
with all costs and charges, shall be collectible thereupon by
action at law.


(b) Pursue any legal
remedy available to collect the Obligation, to enforce its title in
and right to possession of the Collateral and to enforce any and
all other rights or remedies available to it.


(c) Apply any funds in
any impound accounts held by Secured Party for the benefit of
Debtor to the Obligation in any manner as Secured Party
elects.


(d) Apply all or any
portion of the Collateral funds to the Obligation in any manner as
Secured Party elects.


4.3           Secured
Party shall give Debtor reasonable notice of any sale or other
disposition of all or any part of the Collateral made under the UCC
or otherwise. Debtor agrees that notice and demand shall be deemed
to be commercially reasonable and effective if such notice is given
to Debtor at least ten (10) days prior to such sale or other
disposition in the manner provided herein for the giving of
notices.


4.4           Debtor
shall and does hereby indemnify and hold Secured Party harmless
from any and all damages and losses arising as a result of or
related to the Collateral, this Agreement or the exercise by
Secured Party of any of its rights under this Agreement, including,
without limitation, any judgment, amounts paid in settlement, and
all costs and expenses, including reasonable attorneys’ fees,
incurred in defending or settling any action, suit or proceeding in
connection with the foregoing.


4.5           All
sums advanced or paid by Secured Party under the terms hereof, all
amounts paid, suffered or incurred by Secured Party in exercising
any authority granted herein, including reasonable attorneys’
fees, and all other amounts due Secured Party from Debtor in
connection with this Agreement shall be added to the Obligation,
shall be secured by all deeds of trust and other lien and security
documents securing the Obligation, shall bear interest at the
highest rate payable on any of the Obligation until paid, and shall
be due and payable by Debtor to Secured Party immediately upon
written demand by Secured Party, and upon failure of Debtor to do
so, Secured Party may declare all sums secured hereby immediately
due and payable.



 

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4.6           Debtor
shall pay all costs and expenses, including without limitation
costs of Uniform Commercial Code searches, court costs and
reasonable attorneys’ fees, incurred in enforcing payment and
performance of the Obligation or in exercising the right and
remedies of Secured Party hereunder whether in civil, probate,
bankruptcy or appellate courts. Such court costs and
attorneys’ fees shall be set by the court and not by jury,
shall be included in any judgment obtained by Secured Party, shall
be added to the Obligation and shall be secured by this
Agreement.


4.7           In
addition to the remedies provided herein for an Event of Default,
Secured Party shall have all the rights and remedies afforded a
secured party under the Uniform Commercial Code and all other legal
and equitable remedies allowed under applicable law. No failure on
the part of Secured Party to exercise any of its rights hereunder
arising upon any Event of Default shall be construed to prejudice
its rights upon the occurrence of any other or subsequent Event of
Default. No delay on the part of Secured Party in exercising any
such rights shall be construed to preclude it from the exercise
thereof any time during the continuance of that Event of Default.
Secured Party may enforce any one or more remedies or rights
hereunder successively or concurrently. By accepting payment or
performance of any of the Obligation after its due date, Secured
Party shall not thereby waive the agreement contained herein that
time is of the essence, nor shall Secured Party waive either its
right to require prompt payment or performance when due of the
remainder of the Obligation or its right to consider the failure to
so pay or perform an Event of Default.



5.           


MISCELLANEOUS PROVISIONS.






5.1           The
acceptance of this Agreement by Secured Party shall not be
considered a waiver of, or in any way to affect or impair any other
security that Secured Party may have, acquire simultaneously
herewith, or hereafter acquire for the payment or performance of
the Obligation, nor shall the taking by Secured Party at any time
of any such additional security be construed as a waiver of, or in
any way to affect or impair, the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to
its various securities therefor in such order and manner as it may
determine.


5.2           Secured
Party, by accepting this Agreement, shall not be subject to any
obligation or liability under this Agreement or with respect to any
of the Collateral, including without limitation, any duty to
perform any of the terms, conditions, provisions or agreements
thereof, and any and all such obligations and liabilities shall
continue to remain with Debtor as though this Agreement had not
been made; Secured Party may hold the Collateral in any account
including its general account and may commingle the Collateral with
other funds.


5.3           Without
notice or demand, without affecting the obligations of Debtor
hereunder or the personal liability of any person for payment or
performance of the Obligation, and without affecting the Security
Interest or the priority thereof, Secured Party, from time to time,
may: (i) extend the time for payment of all or any part of the
Obligation, accept a renewal note therefor, reduce the payments
thereon, release any person liable for all or any part thereof, or
otherwise change the terms of all or any part of the Obligation;
(ii) take and hold other security for the payment or performance of
the Obligation and enforce, exchange, substitute, subordinate,
waive or release any such security; (iii) join in any extension or
subordination agreement; or (iv) release any part of the Collateral
from the Security Interest.



 

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5.4           Debtor
waives and agrees not to assert: (i) any right to require Secured
Party to proceed against the Borrower or guarantor, to proceed
against or exhaust any other security for the Obligation, to pursue
any other remedy available to Secured Party, or to pursue any
remedy in any particular order or manner; (ii) the benefits of any
statute of limitations affecting the enforcement hereof; (iii)
demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment,
relating to the Obligation; and (iv) any benefit of, and any right
to participate in, any other security or hereafter held by Secured
Party except as otherwise provided in any Continuing Guaranty or
this Agreement.


5.5           No
failure or delay on the part of Secured Party in exercising any
right, power, or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right,
power, or privilege hereunder preclude any other or further
exercise or the exercise of any other right, power, or privilege.
The rights, powers and remedies hereunder are cumulative and may be
exercised by Secured Party either independently of or concurrently
with any other right, power, or remedy contained herein or in any
instrument executed in connection with the Obligation.


5.6           The
terms herein shall have the meanings in and be construed under the
Uniform Commercial Code. This Agreement shall be governed by and
construed in accordance with the laws of the State of [California].
Each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if
any provision of this Agreement is held to be void or invalid, the
same shall not affect the remainder hereof which shall be effective
as though the void or invalid provision had not been contained
herein.


5.7           No
modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written
agreement executed by Debtor and a duly authorized officer of
Secured Party.


5.8           This
Agreement shall remain in full force and effect until all of the
Obligation shall have been paid and performed in full.


5.9           No
offset or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or
performing the Obligation.


5.10           Time
is of the essence hereof. This Agreement applies to, inures to the
benefit of, and binds all parties hereto, their heirs, personal and
legal representatives, successors and assigns. The term
“Secured Party” shall include not only the original
Secured Party hereunder but also any future owner and holder,
including pledgees, of the Note. The provisions hereof shall apply
to the parties according to the context thereof and without regard
to the number or gender of words or expressions used.


5.11           All
notices required or permitted to be given hereunder shall be in
writing, and shall be delivered and become effective on delivery.
The address for any notices required or permitted to be given to
Debtor hereunder shall be the same notice address as set forth in
the Continuing Guaranty executed by such Debtor, as
applicable.



 

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5.12           A
carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient
for filing and/or recording as a financing statement.


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IN WITNESS WHEREOF, this Security
Agreement has been executed and delivered on behalf of and in the
name of Debtor on the date indicated above.


	
 

	
 

DEBTOR:


 


CONTROL
ENGINGEERING, INC., a Delaware corporation


 

By:                                                       

Name:
________________________


Its:
___________________________









 


 




 





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