**Exhibit4.2**

Security Agreementfor Sausalito Capital Partners I, LLC

# **SECURITYAGREEMENT**

This SECURITY AGREEMENT (“Security Agreement”)is dated as of July 5, 2006 (the “Effective Date”), by and betweenDomestic Energy Partners, LLC., a Utah limited liability company (the “Company”),and****Sausalito Capital Partners I, LLC, aNevada limited liability company****(the “Lender”).

WHEREAS, on the Effective Date, the Company issued a10% Convertible Promissory Note (“Note”) to the Lender, attached hereto as ExhibitA, to evidence a loan made to the Company in the amount of $500,000.00 (the“Loan”); and

WHEREAS, in order to induce Lender to make the Loan tothe Company, the Company has agreed to grant to the Lender a security interestin all of the Company’s assets to secure the amounts currently owing, and anyadditional amounts which may be owing, by the Company pursuant to the LoanAgreement and the terms hereof.

NOW, THEREFORE, for good and valuable consideration,the receipt of which is hereby acknowledged, the parties hereto hereby agree asfollows:

1.             DefinedTerms.  The following terms shallhave the following meanings, unless the context otherwise requires:

“Code” shall mean the Uniform Commercial Codeas in effect in the State of Washington on the Closing Date.

“Collateral” shall have the meaning givensuch term in Section 2.

“Event of Default” shall have the meaninggiven such term in the Note(s).

“Obligations” shall mean the unpaid Loan andall Interest thereon (as such terms are defined in the Loan Agreement) pursuantto the Loan Agreement and the Note(s), including all costs of collection.

All of other capitalized terms used but not definedherein shall have the meanings assigned to such terms in the Loan Agreement.

2.             Grant of Security Interest.  As collateral security for the prompt andcomplete payment and performance when due of all the Obligations, the Companyhereby grants to the Lender a security interest in all of the Company’s right,title and interest in, to and under the following, whether now existing orhereafter acquired (all of which collateral being hereinafter collectivelycalled the “Collateral”):

## **ACCOUNTS**

Allpresent and future accounts owned by the Company, including and together withany and all contract rights, accounts receivable, security deposits (where nototherwise prohibited by law or agreement), and other rights of any kind toreceive payments for services rendered and goods supplied by the Company,together with agreements, customer lists, client lists, and accounts, invoices,agings, verification reports and other records relating in any way to suchaccounts.

## **CONTRACTS**

Allcontracts, contract rights, royalties, license rights, leases, instruments,undertakings, documents or other agreements in or under which the Company maynow or hereafter have any right, title or interest whether now existing orhereinafter created and all forms of obligations owing to the Company arisingout of the sale or lease of goods, the licensing of technology or the renderingof services by the Company, whether or not earned by 

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performance,and any and all credit insurance, guaranties, and other security therefor, aswell as all merchandise returned to or reclaimed by the Company.

## **EQUIPMENT,FURNISHINGS AND MISCELLANEOUS PERSONAL PROPERTY**

Allpresently owned and hereafter acquired furniture, furnishings, equipment,machinery, vehicles (including motor vehicles and trailers) computer hardwareand software, accounting or bookkeeping systems, client or customer lists andinformation, data sheets and other records of any kind, wherever located,stored or inventoried, which are used or which may be used in the Company’sbusiness;

## **FIXTURES**

Allmaterials used by the Company in connection with its business operations,including, but not limited to, supplies, trade equipment, appliances, apparatusand any other items, now owned or hereafter acquired by the Company, and now orhereafter attached to, or installed in (temporarily or permanently) any realproperty now or in the future owned or leased by the Company;

## **GENERALINTANGIBLES**

Allgeneral intangibles and other personal property of the Company, now owned orhereinafter acquired, including, without limitation, the following:  (a) permits, authorizations and approvalspresently and hereafter issued by any federal, state, municipal or localgovernmental or regulatory authority in favor of the Company; (b) all plans,specifications, renderings and other similar materials presently owned orhereafter acquired by the Company; (c) all presently existing and hereaftercreated contracts, leases, licenses and agreements to which the Company is aparty; (d) all presently and hereafter existing policies and agreements ofinsurance in favor of the Company; (e) all presently and hereafter existingequity contribution agreements and other equity financing arrangements in favorof the Company; (f) all copyrights, chattel paper, electronic chattel paper,licenses, money, insurance proceeds, contract rights, subscription lists,mailing lists, licensing agreements, patents, trademarks, service marks, tradestyles, patents, patent applications, franchise agreements, blueprints,drawings, purchase orders, customer lists, route lists, infringements, claims,computer programs, computer discs, computer tapes, literature, reports,catalogs, design rights, income tax refunds, payments of insurance and rightsto payment of any kinds, trade names, refundable, returnable or reimbursablefees, deposits or other funds or evidences of credit or indebtedness depositedby or on behalf of the Company with any governmental agencies, boards,corporations, providers of utility services, public or private; (g) allpresently existing and hereafter acquired computer programs, computer softwareand other electronic systems and materials of any kind of the Company; (h)goodwill; and (i) all other presently existing and hereafter acquireddocuments, accounts, general intangibles and intangible personal property ofany kind.

## **DOCUMENTS**

Alldocuments, cash, deposit accounts, securities, securities entitlements, securitiesaccounts, investment property, financial assets, letters of credit,certificates of deposit, instruments, chattel paper, and electronic chattelpaper now owned or hereafter acquired and the Company’s books relating to theforegoing.

## **COPYRIGHTS**

Allcopyright rights, copyright applications, copyright registrations and likeprotections in each work of authorship and derivative work thereof, whetherpublished or unpublished, now owned or hereafter acquired; all trade secretrights, including all rights to unpatented inventions, know-how,operating manuals, license rights and agreements and confidential information,now owned or hereafter acquired; all mask work or similar rights available forthe protection of semiconductor chips, now owned or hereafter acquired; allclaims for damages by way of any past, present and future infringement of anyof the foregoing.

## **PROCEEDS**

Allof the Company’s books and records relating to the foregoing and any and allpresent and future accounts, general intangibles, chattel paper, electronicchattel paper, products, accessions, replacements, betterments andsubstitutions for any of the foregoing described property, and all proceedsarising from or by virtue of, or from the sale or disposition of, orcollections with respect to, or insurance proceeds payable with respect to, orclaims against any other persons, corporations or other entities with respectto, all or any part of the foregoing described property and interests.

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3.             Rightsof Lender; Limitations on Lender’s Obligations.  It is expressly agreed by the Company that,anything herein to the contrary notwithstanding, the Company shall remainliable under each of its contracts and documents to observe and perform all theconditions and obligations to be observed and performed by it thereunder, allin accordance with and pursuant to the terms and provisions of its contractsand documents.  Lender shall have noobligation or liability under any of the Company’s contracts and documents by reasonof or arising out of this Security Agreement or the granting to Lender of asecurity interest therein or the receipt by Lender of any payment relating toany of its contracts and documents pursuant hereto, nor shall Lender berequired or obligated in any manner to perform or fulfill any of theobligations of the Company under or pursuant to any of its contracts anddocuments, or to make any payment, or to make any inquiry as to the nature orthe sufficiency of any payment received by it or the sufficiency of anyperformance by any party under any of its contracts and documents, or topresent or file any claim, or to take any action to collect or enforce anyperformance or the payment of any amounts which may have been assigned to it orto which it may be entitled at any time or times.

4.             Representationsand Warranties.  The Company herebyrepresents and warrants that the chief executive office and chief place ofbusiness of the Company is 1200 West 400 North, Orem, UT 84660, and the Companywill not change such chief executive office and chief place of business orremove such records unless the Company shall have given the Lender at least 10days’ prior written notice thereof.

5.             Covenants. The Company covenants and agrees with the Lender that from and after thedate of this Security Agreement and until the Obligations are fully satisfied:

(a)           Further Documentation.  At any time and from time to time, upon thewritten request of the Lender, and at the sole expense of the Company, theCompany will promptly and duly execute and deliver any and all such furtherdocuments and take such further action as Lender may reasonably request incarrying out the terms and conditions of this Security Agreement and the rightsand powers herein granted, including, without limitation, the filing of anyfinancing or continuation statements under the Uniform Commercial Code ineffect in any jurisdiction with respect to the security interests grantedhereby.

(b)           Continuous Perfection.  The Company will not change its name,identity or corporate structure in any manner unless the Company shall havegiven the Lender at least 10 days’ prior written notice thereof and shall havetaken all action (or made arrangements to take such action substantiallysimultaneously with such change if it is impossible to take such action inadvance) necessary or reasonably requested by the Lender to amend any financingstatement or continuation statement filed with respect to the Collateral sothat it is not misleading.

(c)           Insurance. The Company will insure the Collateral against such risks and hazards asother companies similarly situated insure against, in amounts and underpolicies which it currently holds and under such additional or substitutedamounts or policies as it may from time to time determine, which shall bereasonably acceptable to the Lender (providing that no cancellation of suchinsurance shall be effective without 30 days written notice to the Lender andcontaining loss payable clauses to the Lender as its interest may appear) andall premiums thereon shall be paid by the Company.

6.             Remedies, Rights Upon Default.  (a)  Inaddition to any other rights given to the Lender hereunder, if an Event ofDefault shall occur and be continuing and the Lender shall have declared theamounts owing under the Note(s) to be due and payable (or such amounts shallhave automatically, become due and payable), all payments received by theCompany under or in connection with any of the Collateral shall be held by theCompany in trust for the Lender, shall be segregated from other funds of theCompany and shall, if requested by the Lender forthwith upon receipt by theCompany be turned over to the Lender, in the same form as received by theCompany (duly endorsed by the Company to the Lender, if required).

(b)           Ifany Event of Default shall occur and be continuing the Lender may exercise inaddition to all other rights and remedies granted to it in this SecurityAgreement and in any other instrument or agreement securing, evidencing orrelating to the Obligations, all rights and remedies of a secured party underthe Code.  Without limiting thegenerality of the foregoing, the Company expressly agrees that in any suchevent, the Lender, without demand of performance or other demand, (except thenotice specified below of time and place of public or 

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private sale) to or upon the Company or any other person may forthwithcollect, receive, appropriate and realize upon the Collateral, or any partthereof, and/or may forthwith sell, lease, assign, give option or options topurchase, or sell or otherwise dispose of and deliver said Collateral (orcontract to do so), or any part thereof, in one or more parcels at public orprivate sale or sales, at any exchange broker’s board or at any of the Lender’soffices or elsewhere at such prices as it may deem best, for cash or on creditor for future delivery without assumption of any credit risk.  The Lender shall have the right upon any suchpublic sale or sales, and, to the extent permitted by law, upon any suchprivate sale or sales, to purchase the whole or any part of said Collateral sosold, free of any right or equity of redemption, which equity of redemption theCompany hereby releases.  The Companyfurther agrees, at the Lender’s request, to assemble the Collateral, make itavailable to the Lender at places which the Lender shall reasonably select,whether at the Company’s premises or elsewhere. The Lender shall apply the net proceeds of any such collection,recovery, receipt, appropriation, realization or sale, after deducting allreasonable costs and expenses of every kind incurred therein or incidental tothe care, safe keeping or otherwise of any or all of the Collateral or in anyway relating to the rights of the Lender hereunder, including reasonableattorneys’ fees and legal expenses, to the payment in whole or in part of theObligations, the Company remaining liable for any deficiency remaining unpaidafter the application, and only after so paying over such net proceeds andafter the payment by the Lender of any other amount required by any provisionof law.  To the extent permitted byapplicable law, the Company waives all claims, damages, and demands against theLender arising out of the repossession, retention or sale of the Collateral.  The Company agrees that the Lender need notgive more than 10 days notice of the time and place of any public sale or ofthe time after which a private sale may take place and that such notice isreasonable notification of such matters. The Company shall remain liable for any deficiency if the proceeds ofany sale or disposition of the Collateral are insufficient to pay all amountsto which Lender is entitled.

(c)           TheCompany hereby waives presentment, demand, protest or any notice (to the extentpermitted by applicable law) of any kind in connection with this SecurityAgreement or any Collateral.

7.             Application of Proceeds.  The Proceeds of all sales and collections inrespect of any Collateral shall be applied as follows:

(a)           First, to the payment of the costs and expenses of suchsales and collections, the expenses of Lender and the reasonable fees andexpenses of its counsel;

(b)           Second, any surplus then remaining to the payment of theObligations in such order and manner as the Lender may in its sole discretiondetermine; and

(c)           Third, any surplus then remaining shall be paid to theCompany.

8.             Limitationon Lender’s Duty in Respect of Collateral. Beyond the use of reasonable care in the custody thereof, the Lendershall not have any duty as to any Collateral in its possession or control or inthe possession or control of any agent or nominee of it or any income thereonor as to the preservation of rights against prior parties or any other rightspertaining thereto.

9.             Notices.  Any notice, request or other communicationrequired or permitted hereunder shall be in writing and shall be deliveredpersonally or by facsimile (receipt confirmed electronically) or shall be sentby a reputable express delivery service or by certified mail, postage prepaidwith return receipt requested, addressed as follows:
| if to the Company, to:          |   |
|---------------------------------|--------|
|                            |
| Domestic Energy  Partners, LLC. |
| 1200 West 400  North            |
| Orem, UT 84660                  |
| Attn:  Ron Crafts          |
| Fax:  (801) 225-8635       |

 

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| if to Lender, to:                           |   |
|---------------------------------------------|--------|
|                                        |   |
| Sausalito Capital Partners  I, LLC          |   |
| 369B Third  Street, #269                    |
| San Rafael, CA  94901                       |
| Attn:     Don Lew       |
| Fax:     (415) 454-2046 |
|                                        |
| with a copy to:                             |
|                                        |
| The Otto Law  Group, PLLC                   |
| 601 Union  Street, Suite 4500               |
| Seattle, WA  98101                          |
| Attn:    David M. Otto       |
| Fax:     (206) 262-9513 |

 

Either party hereto may change the above specifiedrecipient or mailing address by notice to the other party given in the mannerherein prescribed.  All notices shall bedeemed given on the day when actually delivered as provided above (if deliveredpersonally or by facsimile, provided that any such facsimile is received duringregular business hours at the recipient’s location) or on the day shown on thereturn receipt (if delivered by mail or delivery service).

10.           Severability. Any provision of this Security Agreement which is prohibited orunenforceable in any jurisdiction shall, as to such jurisdiction, beineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability in any jurisdiction shall not invalidate or renderunenforceable such provision in any other jurisdiction.

11.           No Waiver; Cumulative Remedies.  The Lender shall not by any act, delay,omission or otherwise be deemed to have waived any of its rights or remedieshereunder and no waiver shall be valid unless in writing, signed by the Lender,and then only to the extent therein set forth. A waiver by the Lender of any right or remedy hereunder on any one occasionshall not be construed as a bar to any right or remedy which the Lender wouldotherwise have had on any future occasion. No failure to exercise nor any delay in exercising on the part of theLender, any right, power or privilege hereunder, shall operate as a waiverthereof, nor shall any single or partial exercise of any right, power orprivilege hereunder preclude any other or future exercise thereof or theexercise or any other right, power or privilege.  The rights and remedies hereunder providedare cumulative and may be exercised singly or concurrently, and are notexclusive of any rights and remedies provided by law.  None of the terms or provisions of thisSecurity Agreement may be waived, altered, modified or amended except by aninstrument in writing, duly executed by the Company and the Lender.

12.           Successors and Assigns.  This Security Agreement and all obligationsof the Company hereunder shall be binding upon the successors and permittedassigns of the Company, and shall, together with the rights and remedies of theLender hereunder, inure to the benefit of the Lender and its successors andpermitted assigns; provided that the Company may not assign any of its rightsor obligations hereunder without the prior written consent of the Lender.  This Security Agreement may beassigned by the Lender without the consent of the Company.

13.           GoverningLaw.  This Security Agreement shallbe governed by and construed in accordance with the domestic laws of the Stateof Washington without giving effect to any choice of law or conflict of lawprovision or rule (whether of the State of Washington or any otherjurisdiction) that would cause the application of the laws of any jurisdictionother than the State of Washington.

14.           Counterparts. This Security Agreement may beexecuted in separate counterparts each of which will be an original and all ofwhich taken together will constitute one and the same agreement.

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15.           Facsimile. This Security Agreementmay be executed using facsimiles of signatures, and a facsimile of a signatureshall be deemed to be the same, and equally enforceable, as an original of suchsignature.

16.           Termination. At such time as the Obligations have been fully paid in cash, thesecurity interest created hereby shall automatically terminate, the Lendershall take all such actions as may be requested by the Company to evidence suchtermination and to release the liens created hereby, at the Company’s expense.

* * * * * *

 

INWITNESS WHEREOF, each of the parties hereto has caused this Security Agreementto be executed and delivered by its duly authorized officer as of EffectiveDate.
|        | DOMESTIC ENERGY PARTNERS, LLC.    |
|--------|-----------------------------------|
|   |                              |
|   | By:                               | /s/ Ron Crafts |
|   |                              | Ron Crafts |
|   |                              | Chairman and Chief Executive Officer |
|   |                              |
|   |                              |
|   | SAUSALITO CAPITAL PARTNERS I, LLC |
|   |                              |
|   | By:                               | /s/ Donald Lew |
|   |                              | Don Lew |
|   |                              | Managing Member |

 

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