Document:

EX-10.4 SECURITIES PURCHASE AGREEMENT

          THIS SECURITIES PURCHASE AGREEMENT (this “
Agreement”), dated as of July 21, 2008, by and among National Automation Services, Inc. a Nevada corporation, with headquarters located at 2053 Pabco Road, Henderson, NV 89011 (the “
Company”), and the Buyers listed on Schedule I attached hereto (individually, a “
Buyer” or collectively “Buyers”).
 
WITNESSETH:
           WHEREAS, the Company and the Buyer(s) are executing and delivering this Agreement in reliance upon an exemption from securities registration pursuant to Section 4(2) and/or Rule 506 of Regulation D (“
Regulation D”) as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “
1933 Act”);
           WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Buyer(s), as provided herein, and the Buyer(s) shall purchase Seven Hundred Fifty Thousand U.S. Dollars (US$750,000) of secured redeemable debentures (the “
Redeemable Debentures”), all of which shall be funded on the date hereof (the “Closing”) for a total purchase price of Seven Hundred Fifty Thousand U.S. Dollars (US$750,000), (the “Purchase Price”); and

          WHEREAS, the aggregate proceeds of the sale of the Redeemable Debentures contemplated hereby shall be held in escrow pursuant to the terms of an escrow agreement substantially in the form of the Escrow Agreement attached hereto as Exhibit B (the “
Escrow Agreement”); and
           WHEREAS, contemporaneously with the execution and delivery of this Agreement, Bob Chance, President of the Company is executing and delivering a Personal Guaranty substantially in the form attached hereto as
Exhibit C (the “Personal Guaranty”) pursuant to which Mr. Chance is guaranteeing the repayment of the Redeemable Debentures, including principal, interest and any fees owed thereon and in connection therewith; and

          WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Security Agreement substantially in the form attached hereto as
Exhibit D (the “Security Agreement”) pursuant to which the Company has agreed to provide the Buyer a security interest in Pledged Property (as this term is defined in the Security Agreement dated the date hereof) to secure Company’s obligations under this Agreement, the Redeemable Debenture, the Security Agreement, and the Escrow Agreement (collectively, together with the Personal Guaranty, the “
Transaction Documents”) or any other obligations of the Company to the Buyer; 

          NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement, the Company and the Buyer(s) hereby agree as follows:

 
 
1. PURCHASE AND SALE OF REDEEMABLE DEBENTURES.
                     (a) Purchase of Redeemable Debentures. Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement, the Buyer agrees to purchase on the date hereof (the “
Closing”), and the Company agrees to sell and issue to Buyer, at such Closing, Redeemable Debentures in an aggregate principal amount of Seven Hundred Fifty Thousand U.S. Dollars (US$750,000.00) for a total purchase price of Seven Hundred Fifty Thousand U.S. Dollars (US$750,000) (the “Purchase Price”). The Redeemable Debentures purchased by the Buyer shall have a maturity date of eighteen (18) months from the Closing. 

                    (b) Closing Date. The Closing of the purchase and sale of the Redeemable Debentures shall take place at 10:00 a.m. Eastern Standard Time on
the date of this Agreement, subject to notification of satisfaction of the conditions to the Closing set forth in Sections 6 and 7 below, (or such later date as is mutually agreed to by the Company and the Buyer(s)) (the “
Closing Date”). The Closing shall occur on the Closing Date at the offices of James G. Dodrill II, P.A., 5800 Hamilton Way, Boca Raton, FL 33496 (or such other place as is mutually agreed to by the Company and the Buyer(s)). 

                    (c) Closing Deliveries. Upon Closing, (i) the Buyer shall deliver to the Company
the Purchase Price (minus the fees and expenses as set forth herein which shall be paid directly at the Closing
) by wire transfer of immediately available funds delivered by James G. Dodrill II, P.A. (the “
Escrow Agent”) and (ii) the Company and Buyer, as applicable, shall deliver to each other executed copies of the Transaction Documents.

                    (d) The Redeemable Debentures shall contain provisions that provide that in the event the Euro strengthens against the U.S. Dollar during the life of the Redeemable Debenture, the Buyer shall be afforded an adjustment to compensate for any such movement in either conversions or redemptions. 

2. BUYER’S REPRESENTATIONS AND WARRANTIES.
           Each Buyer represents and warrants, severally and not jointly, that:

                    (a)
Investment Purpose. Each Buyer is acquiring the Redeemable Debentures for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act.

                    (b)
Accredited Investor Status. Each Buyer is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation D.

                    (c)
Reliance on Exemptions. Each Buyer understands that the Redeemable Debentures are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire such securities.

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                    (d)
Information. Each Buyer and its advisors (and his or, its counsel), if any, have been furnished with all materials relating to the business, finances and operations of the Company and information deemed material by the Buyer to making an informed investment decision regarding the Buyer’s purchase of the Redeemable Debentures, which have been requested by such Buyer. Each Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. Each Buyer understands that its investment in the Redeemable Debentures involves a high degree of risk. Each Buyer is in a position regarding the Company, which, based upon employment, family relationship or economic bargaining power, enabled and enables such Buyer to obtain information from the Company in order to evaluate the merits and risks of this investment. Each Buyer has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to its acquisition of the Redeemable Debentures.

                    (e)
No Governmental Review. Each Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Redeemable Debentures, or the fairness or suitability of the investment in the Redeemable Debentures, nor have such authorities passed upon or endorsed the merits of the offering of the Redeemable Debentures.

                    (f)
Transfer or Resale. Each Buyer understands that: (i) the Redeemable Debentures have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, or (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration requirements; (ii) any sale of such securities made in reliance on Rule 144 under the 1933 Act (or a successor rule thereto) (“
Rule 144”) may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of such securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. 

                    (g)
Legends. Each Buyer understands that the certificates or other instruments representing the Redeemable Debentures shall bear a restrictive legend in substantially the following form (and a stop ­transfer order may be placed against transfer of such certificates):

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	 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, GENERALLY ACCEPTABLE TO COMPANY’S COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS. 
	  

 The legend set forth above shall be removed and the Company within three (3) business days shall issue a certificate without such legend to the holder of the security upon which it is stamped, if, unless otherwise required by state securities laws, (i) in connection with a sale transaction, provided the securities are registered under the 1933 Act or (ii) in connection with a sale transaction, after such holder provides the Company with an opinion of counsel, which opinion shall be in form, substance and scope reasonably acceptable to counsel for the Company, to the effect that a public sale, assignment or transfer of the securities may be made without registration under the 1933 Act. 

                    (h)
Authorization, Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

                    (i)
Receipt of Documents. Each Buyer and his or its counsel has received and read in their entirety: (i) this Agreement and each representation, warranty and covenant set forth herein, and the Transaction Documents; (ii) all due diligence and other information necessary to verify the accuracy and completeness of such representations, warranties and covenants; and (iii) answers to all questions each Buyer submitted to the Company regarding an investment in the Company; and each Buyer has relied on the information contained therein and has not been furnished any other documents, literature, memorandum or prospectus.

                    (j)
Due Formation of Corporate and Other Buyers. If the Buyer(s) is a corporation, trust, partnership or other entity that is not an individual person, it has been formed and validly exists and has not been organized for the specific purpose of purchasing the Redeemable Debentures and is not prohibited from doing so.

                    (k)
No Legal Advice From the Company. Each Buyer acknowledges, that it had the opportunity to review this Agreement and the transactions contemplated by this Agreement with his or its own legal counsel and investment and tax advisors. Each Buyer is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction. 

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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
           Except as otherwise provided in the Company Disclosure Schedule delivered herewith, the Company represents and warrants as of the date hereof and as of the Closing Date to each of the Buyers that:

                    (a)
Organization and Qualification. The Company and its subsidiaries are corporations duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate power to own their properties and to carry on their business as now being conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole.

                    (b)
Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Transaction Documents, and any related agreements, and to issue the Redeemable Debentures in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Transaction Documents and any related agreements by the Company and the consummation by it of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Redeemable Debentures, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) this Agreement, the Transaction Documents and any related agreements have been duly executed and delivered by the Company, (iv) this Agreement, the Transaction Documents and any related agreements constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies. The Company knows of no reason why the Company cannot perform any of the Company’s obligations under this Agreement or the Transaction Documents. 

                    (c)
Capitalization. The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.001 per share (“
Common Stock”) and no shares of Preferred Stock. As of the date hereof, the Company has 46,406,247 shares of Common Stock and no shares of Preferred Stock issued and outstanding. All of such outstanding shares have been validly issued and are fully paid and nonassessable. No shares of Common Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. As of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the 

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Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt securities other than existing credit lines and (iii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the 1933 Act and (iv) there are no outstanding registration statements and there are no outstanding comment letters from the SEC or any other regulatory agency. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Redeemable Debentures as described in this Agreement. The Company has furnished to the Buyer true and correct copies of the Company’s Articles of Incorporation, as amended and as in effect on the date hereof (the “
Articles of Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto other than stock options issued to employees and consultants. 

                    (d)
Issuance of Securities. The Redeemable Debentures are duly authorized and, upon issuance in accordance with the terms hereof, shall be duly issued, fully paid and nonassessable, are free from all taxes, liens and charges with respect to the issue thereof. 

                    (e)
No Conflicts. The execution, delivery and performance of this Agreement, the Transaction Documents and any related agreements by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Articles of Incorporation or the By-laws or (ii), to the best knowledge of the Company, conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and the rules and regulations of The National Association of Securities Dealers Inc.’s OTC Bulletin Board on which the Common Shares are quoted) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected. To the best knowledge of the Company, neither the Company nor its subsidiaries is in violation of any term of or in default under its Articles of Incorporation or By-laws or their organizational charter or by-laws, respectively, or,any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its subsidiaries. The business of the Company and its subsidiaries is not being conducted, and shall not be conducted in violation of any material law, ordinance, or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement in accordance with the terms hereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof, except for any required post-Closing notice filings under applicable United States federal or state securities laws, if any.

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                    (f)
Intentionally Omitted. 
                     (g)
No Material Misstatement or Omission. None of the materials provided to the Buyer(s) by the Company and none of the representation and warranties made in this Agreement or any of the other Transaction Documents include any untrue statements of material fact, nor do the materials provided to the Buyer(s) by the Company and the representations and warranties made in this Agreement or any of the other Transaction Documents omit to state any material fact required to be stated therein necessary to make the statements made, in light of the circumstances under which they were made, not misleading.

                    (h)
Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have a material adverse effect on the transactions contemplated hereby or (ii) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the Transaction Documents have a material adverse effect on the business, operations, properties, financial condition or results of operations of the Company and its subsidiaries taken as a whole.

                    (i)
Acknowledgment Regarding Buyer’s Purchase of the Redeemable Debentures. The Company acknowledges and agrees that the Buyer(s) is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by the Buyer(s) or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Buyer’s purchase of the Redeemable Debentures. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.

                    (j)
No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Redeemable Debentures.

                    (k)
No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the Redeemable Debentures under the 1933 Act or cause this offering of the Redeemable Debentures to be integrated with prior offerings by the Company for purposes of the 1933 Act.

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                    (l)
Employee Relations. Neither the Company nor any of its subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened. None of the Company’s or its subsidiaries’ employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good.

                    (m)
Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. The Company and its subsidiaries do not have any knowledge of any infringement by the Company or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and, to the knowledge of the Company there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

                    (n)
Environmental Laws. The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval.

                    (o)
Title. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries.

                    (p)
Insurance. The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole.

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                    (q)
Regulatory Permits. The Company and its subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

                    (r)
Internal Accounting Controls. The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, and (iii) the recorded amounts for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

                    (s)
No Material Adverse Breaches, etc. Neither the Company nor any of its subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a material adverse effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries. Neither the Company nor any of its subsidiaries is in breach of any contract or agreement which breach, in the judgment of the Company’s officers, has or is expected to have a material adverse effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries.

                    (t)
Tax Status. The Company and each of its subsidiaries has made and filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

                    (u)
Certain Transactions. Except for arm’s length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from third parties and other than the grant of stock options disclosed to the Buyer, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

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                    (v)
Fees and Rights of First Refusal. The Company is not obligated to offer the securities offered hereunder on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties.

4.COVENANTS.
                     (a)
Best Efforts. Each party shall use its best efforts timely to satisfy each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement.

                    (b)
Form D. The Company agrees to file a Form D with respect to the Redeemable Debentures as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Redeemable Debentures, or obtain an exemption for the Redeemable Debentures for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date.

                    (c)
Reporting Status. Until the date on which none of the Redeemable Debentures are outstanding, the Company, upon becoming a reporting company under Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “
1934 Act”), shall file in a timely manner all reports required to be filed with the SEC pursuant to the 1934 Act and the regulations of the SEC thereunder, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination. 

                    (d)
Use of Proceeds. The Company will use the proceeds from the sale of the Redeemable Debentures for the purposes of completing acquisitions and for working capital. No proceeds from this or any funding received from the Buyer shall be used to retire debt.

                    (e)
Intentionally omitted.
                     (f)
Fees and Expenses. 
 	  
	  

	
 
	                (i) Except as otherwise provided herein, each of the Company and the Buyer(s) shall pay all costs and expenses incurred by such party in connection with the negotiation, investigation, preparation, execution and delivery of this Agreement, the Transaction Documents and any other documents relating to this transaction. 

	  
	  

	  
	                (ii) The Company has agreed to pay a Legal and Documentation Review Fee to the Buyer of Seventeen Thousand Five Hundred Dollars ($17,500), of which Ten Thousand Dollars ($10,000) remains outstanding and shall be paid directly from the proceeds of the Closing or by September 24, 2008 if the Closing has not occurred by such date.

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	                (iii) The Company has agreed to pay a Due Diligence Fee to the Buyer of Fifteen Thousand Dollars ($15,000), one-half of which has been paid prior to this date and one-half of which shall be paid directly from the proceeds of the Closing or by July 26, 2008 if the Closing has not occurred by such date.

	  
	  

	  
	                (iv) The Company shall issue to the Buyer on the Closing Date Two Million (2,000,000) restricted shares of Common Stock. The Company shall also exchange the Buyer’s presently held warrants for One Hundred Fifty Thousand (150,000) restricted shares of Common Stock.

	  
	  

	  
	                (v) The Company shall pay to the Buyer a Commitment Fee equal to six percent (6%) of the principal amount of the Redeemable Debenture which shall be paid directly from the proceeds of the Closing. The total cost of capital to the Company shall not exceed fourteen percent (14%).

	  
	  

	  
	                (vi) The Company shall pay to the Buyer a Loan Commitment Fee equal to two percent (2%) of the principal amount of the Redeemable Debenture which shall be paid directly from the proceeds of the Closing.

                    (g)
Corporate Existence. So long as any of the Redeemable Debentures remain outstanding, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, reverse stock split consolidation, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, an “
Organizational Change”) unless, prior to the consummation an Organizational Change, the Company obtains the written consent of each Buyer. In any such case, the Company will make appropriate provision with respect to such holders’ rights and interests to insure that the provisions of this Section 4(g) will thereafter be applicable to the Redeemable Debentures. 

                    (h)
Transactions With Affiliates. So long as any Redeemable Debentures are outstanding, the Company shall not, and shall cause each of its subsidiaries not to, enter into, amend, modify or supplement, or permit any subsidiary to enter into, amend, modify or supplement any agreement, transaction, commitment, or arrangement with any of its or any subsidiary’s officers, directors, persons who were officers or directors at any time during the previous two (2) years, stockholders who beneficially own five percent (5%) or more of the Common Stock, or Affiliates (as defined below) or with any individual related by blood, marriage, or adoption to any such individual or with any entity in which any such entity or individual owns a five percent (5%) or more beneficial interest (each a “
Related Party”), except for (a) customary employment arrangements and benefit programs on reasonable terms, (b) any investment in an Affiliate of the Company, (c) any agreement, transaction, commitment, or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a person other than such Related Party, (d) any agreement transaction, commitment, or arrangement which is approved by a majority of the disinterested directors of the Company, for purposes hereof, any director who is also an officer of the Company or any subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment, or arrangement. “
Affiliate” for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (i) has a ten percent (10%) or more equity interest in that person or entity, (ii) has ten percent (10%) or 

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more common ownership with that person or entity, (iii) controls that person or entity, or (iv) shares common control with that person or entity. “Control” or “controls” for purposes hereof means that a person or entity has the power, direct or indirect, to conduct or govern the policies of another person or entity.

                    (i)
Transfer Agent. The Company covenants and agrees that, in the event that the Company’s agency relationship with the transfer agent should be terminated for any reason prior to a date which is two (2) years after the Closing Date, the Company shall immediately appoint a new transfer agent.

                    (j)
Restriction on Issuance of the Capital Stock. So long as any Redeemable Debentures are outstanding, the Company shall not, without the prior written consent of the Buyer(s), (i) issue or sell shares of Common Stock or Preferred Stock without consideration or for a consideration per share less than the bid price of the Common Stock determined immediately prior to its issuance except for issuances to Richardson & Patel, LLP, (ii) issue any Preferred Stock, warrant, option, right, contract, call, or other security instrument granting the holder thereof, the right to acquire Common Stock without consideration or for a consideration less than such Common Stock’s bid price value determined immediately prior to it’s issuance, (iii) enter into any security instrument granting the holder a security interest in any and all assets of the Company, or (iv) file any registration statement on Form S-8 other than on behalf of Richardson & Patel, LLP. 

                    (k)
Restriction on “Short” Position. Neither the Buyer nor any of its affiliates have an open short position in the Common Stock of the Company, and the Buyer agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales with respect to the Common Stock as long as any Redeemable Debentures shall remain outstanding.

                    (l)
Restriction on Incurring Additional Debt. The Company shall not incur any additional debt without the prior written approval of the Buyer with the exception of equipment purchases and real estate acquisitions used in the normal course of business.

5.Intentionally Omitted.
 6.
CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
           The obligation of the Company hereunder to issue and sell the Redeemable Debentures to the Buyer(s) at the Closings is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

                    (a) Each Buyer shall have executed this Agreement, the Transaction Documents and any other documents relating to this transaction and delivered the same to the Company.

12
 
 

                    (b) The Buyer(s) shall have delivered to the Escrow Agent the Purchase Price for Redeemable Debentures in respective amounts as set forth next to each Buyer as outlined on Schedule I attached hereto and the Escrow Agent shall have delivered the net proceeds to the Company by wire transfer of immediately available U.S. funds pursuant to the wire instructions provided by the Company.

                    (c) The representations and warranties of the Buyer(s) shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer(s) shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer(s) at or prior to such Closing Date.

                    (d) The Company shall have filed a form UCC-1 with regard to the Pledged Property as detailed in the Security Agreement dated as of the date hereof and provided proof of such filing to the Buyer(s).

                    (e) The Buyer shall have delivered to the Company its originally executed warrants in order to be exchanged for One Hundred Fifty Thousand (150,000) restricted shares of Common Stock, as contemplated by Section 4(g)(iv) above. 

7.CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.

          The obligation of the Buyer(s) hereunder to purchase the Redeemable Debentures at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions:

                    (a) The Company shall have executed this Agreement, the Transaction Documents and any other documents relating to this transaction and delivered the same to the Buyer(s). 

                    (b) The trading in the Common Stock on the pink sheets shall not have been suspended for any reason.

                    (c) The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. If requested by the Buyer, the Buyer shall have received a certificate, executed by the President of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, without limitation, an update as of the Closing Date regarding the representation contained in Section 3(c) above.

13
 
 

                    (d) The Company shall have executed and delivered to the Buyer(s) the Redeemable Debentures in the respective amounts set forth opposite each Buyer(s) name on Schedule I attached hereto.

                    (e) The Buyer(s) shall have received an opinion of counsel from counsel to the Company in a form satisfactory to the Buyer(s).

                    (f) The Company shall have provided to the Buyer(s) a certificate of good standing from the secretary of state from the state in which the Company is incorporated.

                    (g) Intentionally omitted.

                    (h) Intentionally omitted. 

                    (i) Upon issuance of the Company’s audits, and prior to the Company filing a Form 10 or other registration statement with the Securities and Exchange Commission, the Company shall provide to the Buyer an acknowledgement, to the satisfaction of the Buyer, from the Company’s independent certified public accountants as to its ability to provide all consents required in order to file a registration statement in connection with this transaction.

                    (j) The Company shall file a form UCC-1 or such other forms as may be required to perfect the Buyer’s interest in the Pledged Property as detailed in the Security Agreement dated as of the date hereof, providing the Buyer with a senior lien on the Pledged Property, and provide proof of such filing to the Buyer(s). 

                    (k) The satisfactorily completion of all due diligence including evidence that cash flows are sufficient to service the debt.

                    (l) The Company shall have delivered certificates representing the Shares to the Buyer(s) within five (5) business days after the Closing.

8. INDEMNIFICATION.
                     (a) In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Redeemable Debentures hereunder, and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Buyer(s) and each other holder of the Redeemable Debentures, and all of their officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “
Buyer Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Buyer Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “
Indemnified Liabilities”), incurred by the Buyer Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement, or the Transaction 

14
 
 

Documents or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Indemnities, any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Redeemable Debentures or the status of the Buyer or holder of the Redeemable Debentures, as a Buyer of Redeemable Debentures in the Company. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.

                    (b) In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of the Buyer’s other obligations under this Agreement, the Buyer shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “
Company Indemnitees”) from and against any and all Indemnified Liabilities incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Buyer(s) in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby executed by the Buyer, (b) any breach of any covenant, agreement or obligation of the Buyer(s) contained in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby executed by the Buyer, or (c) any cause of action, suit or claim brought or made against such Company Indemnitee based on material misrepresentations or due to a material breach and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement, the Transaction Documents or any other certificate instrument, document or agreement executed pursuant hereto by any of the Company Indemnities. To the extent that the foregoing undertaking by each Buyer may be unenforceable for any reason, each Buyer shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law. 

9. GOVERNING LAW: MISCELLANEOUS.
                     (a)
Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida without regard to the principles of conflict of laws. The parties further agree that any action between them shall be heard in Broward County, Florida and expressly consent to the jurisdiction and venue of the State Court sitting in Broward County, Florida and the United States District Court for the Southern District of Florida for the adjudication of any civil action asserted pursuant to this Paragraph. 

                    (b)
Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. 

                    (c)
Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. 

15
 
 

                    (d)
Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. 

                    (e)
Entire Agreement, Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyer(s), the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. 

                    (f)
Notices. Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii) three (3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 

	
 
	  
	  

	 If to the Company, to:
	  
	 National Automation Services, Inc.

	
 
	  
	
2053 Pabco Road

	  
	  
	 Henderson, NV 89011

	  
	  
	 Attention: Mr. Bob Chance, President

	
 
	  
	
Telephone: (702) 642-7720

	  
	  
	 Facsimile: (702) 564-5411

	  
	  
	  

	 With a copy to (which shall not constitute notice):
	  
	 Richardson & Patel, LLP

	  
	  
	 10900 Wilshire Boulevard, Suite 500

	
 
	  
	
Los Angeles, CA 90024

	  
	  
	 Attention: Peter Hogan, Esq.

	  
	  
	 Telephone: (310) 208-1182

	 
 
	  
	
Facsimile: (310) 208-1154

	  
	  
	  

	 If to the Buyer:
	  
	 Trafalgar Capital Specialized 

	
 
	  
	
Investment Fund, Luxembourg

	  
	  
	 8-10 Rue Mathias Hardt

	  
	  
	 BP 3023

	  
	  
	 L-1030 Luxembourg

	  
	  
	 Attention: Andrew Garai

	 
 
	  
	
Facsimile:

	  
	  
	 011-44-207-405-0161

	  
	  
	 and

	  
	  
	 001-786-323-1651

 	
 
	  
	  

	 With a copy to (which shall not constitute notice):
	  
	 James G. Dodrill II, P.A.

	  
	  
	 5800 Hamilton Way

	  
	  
	 Boca Raton, FL 33496

	  
	  
	 Attention: Jim Dodrill, Esq.

	
 
	  
	
Telephone: (561) 862-0529

	  
	  
	 Facsimile: (561) 892-7787

	  
	  
	  

 16

 
           Each party shall provide five (5) days’ prior written notice to the other party of any change in address or facsimile number.

                    (g)
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Neither the Company nor any Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party hereto.

                    (h)
No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

                    (i)
Survival. Unless this Agreement is terminated under Section 9(l), the representations and warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8, shall survive the Closing for a period of two (2) years following the date on which the Redeemable Debentures are redeemed in full. The Buyer(s) shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

                    (j)
Publicity. The Company and the Buyer(s) shall have the right to approve, before issuance any press release or any other public statement with respect to the transactions contemplated hereby made by any party; provided, however, that the Company shall be entitled, without the prior approval of the Buyer(s), to issue any press release or other public disclosure with respect to such transactions required under applicable securities or other laws or regulations (the Company shall use its best efforts to consult the Buyer(s) in connection with any such press release or other public disclosure prior to its release and Buyer(s) shall be provided with a copy thereof upon release thereof).

                    (k)
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

17
 
 

                    (l)
Termination. In the event that the Closing shall not have occurred with respect to the Buyers on or before five (5) business days from the date hereof due to the Company’s or the Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above (and the non-breaching party’s failure to waive such unsatisfied condition(s)), the non-breaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party; provided, however, that if this Agreement is terminated by the Company pursuant to this Section 9(l), the Company shall remain obligated to pay the Buyer(s) for the Legal and Documentation Review Fee and Due Diligence Fee described in Sections 4(f)(ii) and 4(f)(iii), respectively, above.

                    (m)
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
18
 
 

          IN WITNESS WHEREOF
, the Buyers and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first written above.

	
 
	  
	  

	  
	 
COMPANY:

	  
	
NATIONAL AUTOMATION SERVICES, INC.

	 
 
	  

	  
	 By:
	  /s/ Bob Chance

	  
	  
	 
 
	  
	 Name: Bob Chance 

	
 
	 Title: President

	  
	  

	  
	 
BUYER:

	  
	
TRAFALGAR CAPITAL SPECIALIZED

	  
	 INVESTMENT FUND, LUXEMBOURG

	  
	 By:   Trafalgar Capital Sarl

	  
	 
Its:   General Partner

	  
	  

	  
	 By:       /s/ Andrew Garai

	  
	  
	 
 
	  
	 Name: Andrew Garai

	
 
	 Title: Chairman of the Board

19
 
 

EXHIBIT A
 [RESERVED]

20
 
 

EXHIBIT B
 FORM OF ESCROW AGREEMENT 

 
 
EXHIBIT C
 FORM OF PERSONAL GUARANTY 

 
 
EXHIBIT D
 FORM OF SECURITY AGREEMENT 

 
 
SCHEDULE I 
 SCHEDULE OF BUYERS 

	
 
	  
	
 
	  
	
 
	  
	
 
	  
	
 
	  

	
Name
	  
	  
	 
Signature
	  
	  
	 
Address/Facsimile 
Number of Buyer
	  
	  
	 
Amount of
Subscription

	 
 	  
	  
	 
 	 
 
	  
	 
 	 
 
	 
 
	  
	  
	  
	  
	  
	  
	 8-10 Rue Mathias Hardt
	  
	  
	  

	 Trafalgar Capital Specialized
	 
 
	  
	
By: Trafalgar Capital Sarl
	  
	  
	 BP 3023
	  
	 $
	 750,000

	 Investment Fund, Luxembourg
	  
	  
	 Its: General Partner
	  
	  
	 L-1030 Luxembourg
	  
	  
	  

	  
	  
	  
	  
	  
	  
	 Facsimile:
	  
	  
	  

	  
	  
	  
	  
	  
	  
	 011-44-207-405-0161
	  
	  
	  

	  
	  
	  
	 By:
	  
	  
	 and
	  
	  
	  

	  
	  
	  
	 
 	  
	  
	 001-786-323-1651
	  
	  
	  

	  
	  
	  
	 Name: Andrew Garai
	  
	  
	  
	  
	  
	  

	  
	  
	  
	 Its: Chairman of the Board
	  
	  
	  
	  
	  
	  

 Buyer’s Counsel:

James G. Dodrill II, P.A.
5800 Hamilton Way
Boca Raton, FL 33496
Telephone: (561) 862-0529

Facsimile: (561) 892-7787EX-10.5 SECURITY AGREEMENT

          THIS SECURITY AGREEMENT (the “
Agreement”), is entered into and made effective as of July 21, 2008, by and between NATIONAL AUTOMATION SERVICES, INC. (the “
Company”), and the BUYER(S) listed on Schedule I attached to the Securities Purchase Agreement dated as of the date hereof (the “
Secured Party”). 
           
WHEREAS, the Company shall issue and sell to the Secured Party, as provided in the Securities Purchase Agreement dated the date hereof, and the Secured Party shall purchase up to Seven Hundred Fifty Thousand U.S. Dollars (U.S.$750,000) of secured redeemable debentures (the “
Secured Redeemable Debentures”); 
           
WHEREAS, to induce the Secured Party to enter into the transaction contemplated by this Agreement, the Securities Purchase Agreement, the Secured Redeemable Debenture, the Personal Guaranty and the Escrow Agreement dated as of the date hereof (collectively referred to as the “
Transaction Documents”), the Company hereby grants to the Secured Party a first priority security interest in and to the pledged property identified on
Exhibit “A” hereto (collectively referred to as the “Pledged Property”) until the satisfaction of the Obligations, as defined herein below. 

          NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: 

ARTICLE 1.
 DEFINITIONS AND INTERPRETATIONS

	
 
	  
	  

	  
	 Section 1.1.
Recitals.

           The above recitals are true and correct and are incorporated herein, in their entirety, by this reference. 

	
 
	  
	  

	  
	 Section 1.2.
Interpretations.

           Nothing herein expressed or implied is intended or shall be construed to confer upon any person other than the Secured Party any right, remedy or claim under or by reason hereof. 

	
 
	  
	  

	  
	 Section 1.3.
Obligations Secured.

           The obligations secured hereby are any and all obligations of the Company to the Secured Party now existing or hereinafter incurred to the Secured Party, whether oral or written and whether arising before, on or after the date hereof including, without limitation, those obligations of the Company to the Secured Party under the Securities Purchase Agreement and the Secured Redeemable Debenture and any other amounts now or hereafter owed to the Secured Party by the Company thereunder or hereunder (collectively, the “
Obligations”). 
 
 

ARTICLE 2.
 PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL

AND TERMINATION OF SECURITY INTEREST
           Section 2.1.
Grant of Security Interest.
           1. Company hereby pledges to the Secured Party and creates in the Secured Party for its benefit a security interest for such time until the Obligations are paid in full, in and to all of in the property described in “
Exhibit A” hereto, whether now existing or hereafter from time to time acquired (collectively, the “
Pledged Property.”). 
                     (a) Simultaneously with the execution and delivery of this Agreement, the Company shall make, execute, acknowledge, file, record and deliver to the Secured Party any documents reasonably requested by the Secured Party to perfect its security interest in the Pledged Property. Simultaneously with the execution and delivery of this Agreement, the Company shall make, execute, acknowledge and deliver to the Secured Party such documents and instruments, including, without limitation, financing statements, certificates, affidavits and forms as may, in the Secured Party’s reasonable judgment, be necessary to effectuate, complete or perfect, or to continue and preserve, the security interest of the Secured Party in the Pledged Property, and the Secured Party shall hold such documents and instruments as secured party, subject to the terms and conditions contained herein. 

          Section 2.2. Rights; Interests; Etc. 

                    (a) So long as no Event of Default (as hereinafter defined) shall have occurred and be continuing: 

                               (i) the Company shall be entitled to exercise any and all rights pertaining to the Pledged Property or any part thereof for any purpose not inconsistent with the terms hereof; and 

                               (ii) the Company shall be entitled to receive and retain any and all payments paid or made in respect of the Pledged Property. 

                    (b) Upon the occurrence and during the continuance of an Event of Default: 

                               (i) All rights of the Company to exercise the rights which it would otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and to receive payments which it would otherwise be authorized to receive and retain pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such rights shall thereupon become vested in the Secured Party who shall thereupon have the sole right to exercise such rights and to receive and hold as Pledged Property such payments;
provided, however, that if the Secured Party shall become entitled and shall elect to exercise its right to realize on the Pledged Property pursuant to Article 5 hereof, then all cash sums received by the Secured Party, or held by Company for the benefit of the Secured Party and paid over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any outstanding Obligations; and 

2
 
 

                               (ii) All interest, dividends, income and other payments and distributions which are received by the Company contrary to the provisions of Section 2.2(b)(i) hereof shall be received in trust for the benefit of the Secured Party, shall be segregated from other property of the Company and shall be forthwith paid over to the Secured Party; or 

                               (iii) The Secured Party in its sole discretion shall be authorized to sell any or all of the Pledged Property at public or private sale in order to recoup all of the outstanding principal plus accrued interest owed pursuant to the Redeemable Debenture as described herein 

                    (c) Each of the following events, subject to the lapse of applicable cure periods, shall constitute a default under this Agreement (each an “
Event of Default”): 
                                (i) any default, whether in whole or in part, shall occur in the payment to the Secured Party of principal, interest or other item comprising the Obligations as and when due or with respect to any other debt or obligation of the Company to a party other than the Secured Party; 

                               (ii) any default, whether in whole or in part, shall occur in the due observance or performance of any obligations or other covenants, terms or provisions to be performed under this Agreement or the Transaction Documents; 

                               (iii) the Company shall: (1) make a general assignment for the benefit of its creditors; (2) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or any of its assets and properties; (3) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code; (4) file with or otherwise submit to any governmental authority any petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (5) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any of the proceedings set forth in this Section 2.2(c)(iii) under any such applicable law, or (6) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction; or 

                               (iv) any case, proceeding or other action shall be commenced against the Company for the purpose of effecting, or an order, judgment or decree shall be entered by any court of competent jurisdiction approving (in whole or in part) anything specified in Section 2.2(c)(iii) hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect to the Company, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of the assets and properties of the Company, and any of the foregoing shall continue unstayed and in effect for any period of thirty (30) days. 

3
 
 

ARTICLE 3.
 ATTORNEY-IN-FACT; PERFORMANCE

          Section 3.1. Secured Party Appointed Attorney-In-Fact. 

          Upon the occurrence of an Event of Default, the Company hereby appoints the Secured Party as its attorney-in-fact, with full authority in the place and stead of the Company and in the name of the Company or otherwise, from time to time in the Secured Party’s discretion to take any action and to execute any instrument which the Secured Party may reasonably deem necessary to accomplish the purposes of this Agreement, including, without limitation, to receive and collect all instruments made payable to the Company representing any payments in respect of the Pledged Property or any part thereof and to give full discharge for the same. The Secured Party may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the Pledged Property as and when the Secured Party may determine. To facilitate collection, the Secured Party may notify account debtors and obligors on any Pledged Property or Pledged Property to make payments directly to the Secured Party. 

          Section 3.2. Secured Party May Perform. 

          If the Company fails to perform any agreement contained herein, the Secured Party, at its option, may itself perform, or cause performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be included in the Obligations secured hereby and payable by the Company under Section 8.3. 

ARTICLE 4.
 REPRESENTATIONS AND WARRANTIES

          Section 4.1. Authorization; Enforceability. 

          Each of the parties hereto represents and warrants that it has taken all action necessary to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby; and upon execution and delivery, this Agreement shall constitute a valid and binding obligation of the respective party, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights or by the principles governing the availability of equitable remedies. 

          Section 4.2. Ownership of Pledged Property. 

          The Company warrants and represents that it is the legal and beneficial owner of the Pledged Property free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement and for the Permitted Liens. For purposes hereof, “
Permitted Liens” shall mean (i) liens for taxes or other governmental charges which are not yet delinquent or are being contested in good faith by appropriate proceedings, (ii) liens for carriers, contractors, warehousemen, mechanics, materialmen, laborers, employees, suppliers or other similar persons arising by operation of law and incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, (iii) liens relating to deposits made in the ordinary course of business in connection 

4
 
 

with workers’ compensation, unemployment insurance and other types of social security or to secure the performance of leases, trade contracts or other similar agreements; and (iv) in the case of real property, any matters, restrictions, covenants, conditions, limitations, rights, rights of way, encumbrances, encroachments, reservations, easements, agreements and other matters of record, such state of facts of which an accurate survey or inspection of the property would reveal and do not materially interfere with the use or value of the property. 

ARTICLE 5.
 DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL

          Section 5.1. Default and Remedies. 

                    (a) If an Event of Default described in Section 2.2(c)(i) or (ii) occurs, then in each such case the Secured Party may declare the Obligations to be due and payable immediately, by a notice in writing to the Company, and upon any such declaration, the Obligations shall become immediately due and payable. If an Event of Default described in Sections 2.2(c)(iii) or (iv) occurs and is continuing for the period set forth therein, then the Obligations shall automatically become immediately due and payable without declaration or other act on the part of the Secured Party. 

                    (b) Upon the occurrence of an Event of Default, the Secured Party shall: (i) be entitled to receive all distributions with respect to the Pledged Collateral, (ii) to cause the Pledged Property to be transferred into the name of the Secured Party or its nominee, (iii) to dispose of the Pledged Property, and (iv) to realize upon any and all rights in the Pledged Property then held by the Secured Party as provided herein. 

          Section 5.2. Method of Realizing Upon the Pledged Property: Other Remedies. 

          Upon the occurrence of an Event of Default, in addition to any rights and remedies available at law or in equity, the following provisions shall govern the Secured Party’s right to realize upon the Pledged Property: 

                    (a) Any item of the Pledged Property may be sold for cash or other value in any number of lots at brokers board, public auction or private sale and may be sold without demand, advertisement or notice (except that the Secured Party shall give the Company ten (10) days’ prior written notice of the time and place or of the time after which a private sale may be made (the “
Sale Notice”)), which notice period is hereby agreed to be commercially reasonable. At any sale or sales of the Pledged Property, the Company may bid for and purchase the whole or any part of the Pledged Property and, upon compliance with the terms of such sale, may hold, exploit and dispose of the same without further accountability to the Secured Party. The Company will execute and deliver, or cause to be executed and delivered, such instruments, documents, assignments, waivers, certificates, and affidavits and supply or cause to be supplied such further information and take such further action as the Secured Party reasonably shall require in connection with any such sale. 

5
 
 

                    (b) Any cash being held by the Secured Party as Pledged Property and all cash proceeds received by the Secured Party in respect of, sale of, collection from, or other realization upon all or any part of the Pledged Property shall be applied as follows: 

                              (i) to the payment of all amounts due the Secured Party for the expenses reimbursable to it hereunder or owed to it pursuant to Section 8.3 hereof; 

                              (ii) to the payment of the Obligations then due and unpaid. 

                              (iii) the balance, if any, to the person or persons entitled thereto, including, without limitation, the Company. 

                    (c) In addition to all of the rights and remedies which the Secured Party may have pursuant to this Agreement, the Secured Party shall have all of the rights and remedies provided by law, including, without limitation, those under the Uniform Commercial Code. 

                    (d) If the Company fails to pay such amounts due upon the occurrence of an Event of Default which is continuing, then the Secured Party may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the monies adjudged or decreed to be payable in the manner provided by law out of the property of Company, wherever situated. 

                    (e) The Company agrees that it shall be liable for any reasonable fees, expenses and costs incurred by the Secured Party in connection with enforcement, collection and preservation of the Transaction Documents, including, without limitation, reasonable legal fees and expenses, and such amounts shall be deemed included as Obligations secured hereby and payable as set forth in Section 8.3 hereof. 

          Section 5.3. Proofs of Claim. 

                    In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relating to the Company or the property of the Company or of such other obligor or its creditors, the Secured Party (irrespective of whether the Obligations shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Secured Party shall have made any demand on the Company for the payment of the Obligations), shall be entitled and empowered, by intervention in such proceeding or otherwise: 

                              (i) to file and prove a claim for the whole amount of the Obligations and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Secured Party (including any claim for the reasonable legal fees and expenses and other expenses paid or incurred by the Secured Party permitted hereunder and of the Secured Party allowed in such judicial proceeding), and 

                              (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by the Secured Party to make such payments to the Secured Party and, in the event that the Secured Party shall consent to the making of such payments directed to the Secured Party, to pay to the Secured Party any amounts for expenses due it hereunder.

6
 
 

          Section 5.4. Duties Regarding Pledged Property. 

          The Secured Party shall have no duty as to the collection or protection of the Pledged Property or any income thereon or as to the preservation of any rights pertaining thereto, beyond the safe custody and reasonable care of any of the Pledged Property actually in the Secured Party’s possession. 

ARTICLE 6.
 AFFIRMATIVE COVENANTS

          The Company covenants and agrees that, from the date hereof and until the Obligations have been fully paid and satisfied, unless the Secured Party shall consent otherwise in writing (as provided in Section 8.4 hereof): 

          Section 6.1. Existence, Properties, Etc.

                    (a) The Company shall do, or cause to be done, all things, or proceed with due diligence with any actions or courses of action, that may be reasonably necessary (i) to maintain Company’s due organization, valid existence and good standing under the laws of its state of incorporation, and (ii) to preserve and keep in full force and effect all qualifications, licenses and registrations in those jurisdictions in which the failure to do so could have a Material Adverse Effect (as defined below); and (b) the Company shall not do, or cause to be done, any act impairing the Company’s corporate power or authority (i) to carry on the Company’s business as now conducted, and (ii) to execute or deliver this Agreement or any other document delivered in connection herewith, including, without limitation, any UCC-1 Financing Statements required by the Secured Party to which it is or will be a party, or perform any of its obligations hereunder or thereunder. For purpose of this Agreement, the term “
Material Adverse Effect” shall mean any material and adverse affect, whether individually or in the aggregate, upon (a) the Company’s assets, business, operations, properties or condition, financial or otherwise or results of operations of the Company, taken as a whole, excluding any change, event, circumstance or effect that is caused by changes in general economic conditions or changes generally affecting the industry in which the Company operates (provided that such changes do not affect the Company in a materially disproportionate manner); or (b) the Company’s ability to make payment as and when due of all or any part of the Obligations; or (c) the Pledged Property. 

          Section 6.2. Accounts and Reports. 

          The Company shall maintain a standard system of accounting in accordance with generally accepted accounting principles consistently applied and provide, at its sole expense, to the Secured Party the following: 

7
 
 

                    (b) as soon as available, a copy of any notice or other communication alleging any nonpayment or other material breach or default, or any foreclosure or other action respecting any material portion of its assets and properties, received respecting any of the indebtedness of the Company in excess of $25,000 (other than the Obligations), or any demand or other request for payment under any guaranty, assumption, purchase agreement or similar agreement or arrangement respecting the indebtedness or obligations of others in excess of $25,000, including any received from any person acting on behalf of the Secured Party or beneficiary thereof, except for supplier requests in the normal course of business for payment of past due accounts payable invoices so long as such past due amounts do not exceed in the aggregate $50,000 at any time; and 

                    (c) within fifteen (15) days after the making of each submission or filing, a copy of any report, financial statement, notice or other document, whether periodic or otherwise, submitted to the shareholders of the Company, or submitted to or filed by the Company with any governmental authority involving or affecting (i) the Company that could have a Material Adverse Effect; (ii) the Obligations; or (iii) any part of the Pledged Property. 

          Section 6.2. Maintenance of Books and Records; Inspection. 

          The Company shall maintain its books, accounts and records in accordance with United States generally accepted accounting principles consistently applied, and permit the Secured Party, its officers and employees and any professionals designated by the Secured Party in writing, during business hours and upon reasonable notice to visit and inspect any of its properties (including but not limited to the Pledged Property), corporate books and financial records, and to discuss its accounts, affairs and finances with any employee, officer or director thereof. 

          Section 6.3. Maintenance and Insurance. 

                    (a) The Company shall maintain or cause to be maintained, at its own expense, all of its assets and properties in good working order and condition, making all necessary repairs thereto and renewals and replacements thereof. 

                    (b) The Company shall maintain or cause to be maintained, at its own expense, insurance in form, substance and amounts (including deductibles), which the Company deems reasonably necessary to the Company’s business, (i) adequate to insure all assets and properties of the Company, which assets and properties are of a character usually insured by persons engaged in the same or similar business against loss or damage resulting from fire or other risks included in an extended coverage policy; (ii) against public liability and other tort claims that may be incurred by the Company; (iii) as may be required by the Transaction Documents and/or applicable law and (iv) as may be reasonably requested by Secured Party, all with adequate, financially sound and reputable insurers. 

          Section 6.4. Contracts and Other Collateral. 

          The Company shall perform all of its obligations under or with respect to each instrument, receivable, contract and other intangible included in the Pledged Property to which the Company is now or hereafter will be party on a timely basis and in the manner therein required, including, without limitation, this Agreement. 

8
 
 

          Section 6.5. Defense of Collateral, Etc.

          The Company shall defend and enforce its right, title and interest in and to any part of: (a) the Pledged Property; and (b) if not included within the Pledged Property, those assets and properties whose loss could have a Material Adverse Effect, the Company shall defend the Secured Party’s right, title and interest in and to each and every part of the Pledged Property, each against all manner of claims and demands on a timely basis to the full extent permitted by applicable law. 

          Section 6.6. Payment of Debts, Taxes, Etc.

          The Company shall pay, or cause to be paid, all of its indebtedness and other liabilities and perform, or cause to be performed, all of its obligations in accordance with the respective terms thereof, and pay and discharge, or cause to be paid or discharged, all taxes, assessments and other governmental charges and levies imposed upon it (other than those being contested by the Company in good faith), upon any of its assets and properties on or before the last day on which the same may be paid without penalty, as well as pay all other lawful claims (whether for services, labor, materials, supplies or otherwise) as and when due 

          Section 6.7. Taxes and Assessments; Tax Indemnity. 

          The Company shall (a) file all tax returns and appropriate schedules thereto that are required to be filed under applicable law, prior to the date of delinquency, (b) pay and discharge all taxes, assessments and governmental charges or levies imposed upon the Company, upon its income and profits or upon any properties belonging to it, prior to the date on which penalties attach thereto, and (c) pay all taxes, assessments and governmental charges or levies that, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that the Company in good faith may contest any such tax, assessment, governmental charge or levy described in the foregoing clauses (b) and (c) so long as appropriate reserves are maintained with respect thereto. 

          Section 6.8. Compliance with Law and Other Agreements. 

          The Company shall maintain its business operations and property owned or used in connection therewith in compliance with (a) all applicable federal, state and local laws, regulations and ordinances governing such business operations and the use and ownership of such property, and (b) all agreements, licenses, franchises, indentures and mortgages to which the Company is a party or by which the Company or any of its properties is bound. Without limiting the foregoing, the Company shall pay all of its indebtedness promptly in accordance with the terms thereof. 

          Section 6.9. Notice of Default.

          The Company shall give written notice to the Secured Party of the occurrence of any default or Event of Default under this Agreement or the Transaction Documents, promptly upon the occurrence thereof. 

9
 
 

          Section 6.10. Notice of Litigation. 

          The Company shall give notice, in writing, to the Secured Party of (a) any actions, suits or proceedings wherein the amount at issue is in excess of $50,000, instituted by any persons against the Company, or affecting any of the assets of the Company, and (b) any dispute, not resolved within fifteen (15) days of the commencement thereof, between the Company on the one hand and any governmental or regulatory body on the other hand, which might reasonably be expected to have a Material Adverse Effect on the business operations or financial condition of the Company. 

ARTICLE 7.
 NEGATIVE COVENANTS

          The Company covenants and agrees that, from the date hereof until the Obligations have been fully paid and satisfied, the Company shall not, unless the Secured Party shall consent otherwise in writing: 

          Section 7.1. Indebtedness. 

          Other than in the ordinary course of business consistent with past practice and Section 7.7 below, the Company shall not directly or indirectly permit, create, incur, assume, permit to exist, increase, renew or extend on or after the date hereof any indebtedness on its part, including commitments, contingencies and credit availabilities, or apply for or offer or agree to do any of the foregoing. 

          Section 7.2. Liens and Encumbrances. 

          Except for Permitted Liens and for transfers in the ordinary course of business, and except for such assignment, transfer, pledge, mortgage, security interest or other lien or encumbrance as is outstanding on the date of this Agreement, the Company shall not directly or indirectly make, create, incur, assume or permit to exist any assignment, transfer, pledge, mortgage, security interest or other lien or encumbrance of any nature in, to or against any part of the Pledged Property or of the Company’s capital stock, or offer or agree to do so, or own or acquire or agree to acquire any asset or property of any character subject to any of the foregoing encumbrances (including any conditional sale contract or other title retention agreement), or assign, pledge or in any way transfer or encumber its right to receive any income or other distribution or proceeds from any part of the Pledged Property; or enter into any sale-leaseback financing respecting any part of the Pledged Property as lessee, or cause or assist the inception or continuation of any of the foregoing. 

10
 
 

          Section 7.3. Certificate of Incorporation, By-Laws, Mergers, Consolidations, Acquisitions and Sales. 

          Other than in the ordinary course of business, without the prior express written consent of the Secured Party, the Company shall not: (a) Amend its Articles of Incorporation or By-Laws; (b) issue or sell its stock, stock options, bonds, notes or other corporate securities or obligations; (c) be a party to any merger, consolidation or corporate reorganization, (d) purchase or otherwise acquire all or substantially all of the assets or stock of, or any partnership or joint venture interest in, any other person, firm or entity, (e) sell, transfer, convey, grant a security interest in (except for Permitted Liens) or lease all or any substantial part of its assets, nor (f) create any new subsidiaries nor convey any of its assets to any subsidiary. In accordance with this Section 7.3, the Secured Party hereby expressly consents to the Company’s currently proposed acquisition of Summit Controls, LLC, an Arizona limited liability company. 

          Section 7.4. Management, Ownership. 

          The Company shall not materially change its ownership, executive staff or management without the prior written consent of the Secured Party. The ownership, executive staff and management of the Company are material factors in the Secured Party’s willingness to institute and maintain a lending relationship with the Company. 

          Section 7.5. Dividends, Etc. 

          The Company shall not declare or pay any dividend of any kind, in cash or in property, on any class of its capital stock, nor purchase, redeem, retire or otherwise acquire for value any shares of such stock, nor make any distribution of any kind in respect thereof, nor make any return of capital to shareholders, nor make any payments in respect of any pension, profit sharing, retirement, stock option, stock bonus, incentive compensation or similar plan (except as required or permitted hereunder), without the prior written consent of the Secured Party. 

          Section 7.6. Guaranties; Loans. 

          Other than in the ordinary course of business, and except for such guarantees or liabilities as are outstanding on the date of this Agreement, the Company shall not guarantee nor be liable in any manner, whether directly or indirectly, or become contingently liable after the date of this Agreement in connection with the obligations or indebtedness of any person or persons, except for (i) the indebtedness currently secured by the liens identified on the Pledged Property identified on Exhibit A hereto and (ii) the endorsement of negotiable instruments payable to the Company for deposit or collection in the ordinary course of business. The Company shall not make any loan, advance or extension of credit to any person other than in the normal course of its business. 

          Section 7.7. Debt. 

          Other than in the ordinary course of business, and except for such indebtedness as is outstanding on the date of this Agreement, without the prior written approval of the Secured Party, the Company shall not create, incur, assume or suffer to exist any additional indebtedness of any description whatsoever in an aggregate amount in excess of $50,000 (excluding any indebtedness of the Company to the Secured Party, trade accounts payable and accrued expenses incurred in the ordinary course of business, equipment purchases and real estate acquisitions used in the ordinary course of business, and the endorsement of negotiable instruments payable to the Company, respectively for deposit or collection in the ordinary course of business). 

11
 
 

          Section 7.8. Conduct of Business. 

          The Company will continue to engage in a business of the general type as conducted by it on the date of this Agreement. 

          Section 7.9. Places of Business. 

          The location of the Company’s chief place of business is at the address set forth in Section 8.1 hereof. The Company shall not change the location of its chief place of business, chief executive office or any place of business disclosed to the Secured Party or move any of the Pledged Property from its current location without thirty (30) days’ prior written notice to the Secured Party in each instance. 

ARTICLE 8.
 MISCELLANEOUS

          Section 8.1. Notices. 

          All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as duly given on: (a) the date of delivery, if delivered in person, by nationally recognized overnight delivery service or (b) five (5) days after mailing if mailed from within the continental United States by certified mail, return receipt requested to the party entitled to receive the same: 

 	
 
	  
	  
	  
	  

	
 
	 If to the Secured Party:
	  
	 Trafalgar Capital Specialized Investment Fund

	  
	  
	  
	 8-10 Rue Mathias Hardt

	  
	  
	  
	 BP 3023

	  
	  
	  
	 L-1030 Luxembourg

	  
	  
	  
	 Attention: Andrew Garai, Chairman of the Board of

	  
	  
	  
	 Trafalgar Capital Sarl, General Partner

	  
	  
	  
	 Facsimile: 
	 011-44-207-405-0161 and

	 
 
	  
	
 
	  
	
001-786-323-1651

	  
	  
	  
	  
	  

	  
	 With a copy to (which shall not constitute notice):
	  
	 James G. Dodrill II, P.A.

	  
	  
	  
	 5800 Hamilton Way

	  
	  
	  
	 Boca Raton, FL 33496 

	  
	  
	  
	 Attention:. 
	 James Dodrill, Esq

	  
	  
	  
	 Telephone: 
	 (561) 862-0529

	  
	  
	  
	 Facsimile:
	 (561) 892-7787 

 12

 
 	  
	  
	  
	  
	
 

	  
	 
And if to the Company:
	  
	 National Automation Services, Inc.
2053 Pabco Road
Henderson, NV 89011

Attention: Mr. Bob Chance, President

	  
	  
	  
	 Telephone;
	 (702) 642-7720

	  
	  
	  
	 Facsimile:
	 (702) 564-5411

	  
	  
	  
	  
	  

	  
	 With a copy to (which shall not constitute notice):
	  
	 Richardson & Patel, LLP

10900 Wilshire Boulevard, Suite 500 
Los Angeles, CA 90024 
Attn: Peter Hogan, Esq.

	  
	  
	  
	 Telephone:
	 (310) 208-1181

	  
	  
	  
	 Facsimile:
	 (310) 208-1154

          Any party may change its address by giving notice to the other party stating its new address. Commencing on the tenth (10
th) day after the giving of such notice, such newly designated address shall be such party’s address for the purpose of all notices or other communications required or permitted to be given pursuant to this Agreement. 

          Section 8.2. Severability. 

          If any provision of this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other severable provision of this Agreement, and this Agreement shall be carried out as if any such invalid or unenforceable provision were not contained herein. 

          Section 8.3. Expenses. 

          In the event of an Event of Default, the Company will pay to the Secured Party the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel, which the Secured Party may incur in connection with: (i) the custody or preservation of, or the sale, collection from, or other realization upon, any of the Pledged Property; (ii) the exercise or enforcement of any of the rights of the Secured Party hereunder or (iii) the failure by the Company to perform or observe any of the provisions hereof. 

          Section 8.4. Waivers, Amendments, Etc.

          The Secured Party’s delay or failure at any time or times hereafter to require strict performance by Company of any undertakings, agreements or covenants shall not waiver, affect, or diminish any right of the Secured Party under this Agreement to demand strict compliance and performance herewith. Any waiver by the Secured Party of any Event of Default shall not waive or affect any other Event of Default, whether such Event of Default is prior or subsequent thereto and whether of the same or a different type. None of the undertakings, agreements and covenants of the Company contained in this Agreement, and no Event of Default, shall be deemed to have been waived by the Secured Party, nor may this Agreement be amended, changed or modified, unless such waiver, amendment, change or modification is evidenced by an instrument in writing specifying such waiver, amendment, change or modification and signed by the Secured Party. 

13
 
 

          Section 8.5. Continuing Security Interest. 

          This Agreement shall create a continuing security interest in the Pledged Property and shall: (i) remain in full force and effect until payment in full of the Obligations (whether by payment of cash, redemption or conversion); and (ii) be binding upon the Company and its successors and heirs and (iii) inure to the benefit of the Secured Party and its successors and assigns. Upon the payment or satisfaction in full of the Obligations, the Company shall be entitled to the return, at its expense, of such of the Pledged Property as shall not have been sold in accordance with Section 5.2 hereof or otherwise applied pursuant to the terms hereof. Upon payment in full of all Obligations, the Secured Party shall execute and deliver to the Company all instruments and other documents as may be necessary or proper to release the lien on and security interest in the Pledged Property which has been granted hereunder. 

          Section 8.6. Independent Representation. 

          Each party hereto acknowledges and agrees that it has received or has had the opportunity to receive independent legal counsel of its own choice and that it has been sufficiently apprised of its rights and responsibilities with regard to the substance of this Agreement. 

          Section 8.7. Applicable Law: Jurisdiction. 

          This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida without regard to the principles of conflict of laws. The parties further agree that any action between them shall be heard in Florida and expressly consent to the jurisdiction and venue of the Florida State Court sitting in Broward County, Florida or the United States District Court for the Southern District of Florida, for the adjudication of any civil action asserted pursuant to this Paragraph. 

          Section 8.8. Waiver of Jury Trial. 

          AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION. 

          Section 8.9. Entire Agreement. 

          This Agreement constitutes the entire agreement among the parties and supersedes any prior agreement or understanding among them with respect to the subject matter hereof. 

14
 
 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. 

	
 
	  
	  

	  
	 
COMPANY:

	  
	
NATIONAL AUTOMATION SERVICES, INC.

	
 
	  
	
 

	  
	 By:
	  /s/ Bob Chance

	  
	  
	 
 
	
 
	 Name: 
	
Bob Chance

	  
	 Title:
	 President

	  
	  
	  

	  
	  
	  

	  
	 
SECURED PARTY:

	  
	 TRAFALGAR CAPITAL SPECIALIZED

	  
	 
INVESTMENT FUND, LUXEMBOURG

	  
	 By:
	 Trafalgar Capital Sarl

	  
	 Its:
	 General Partner

	
 
	  
	
 

	  
	 By:
	  

	  
	  
	 
 
	
 
	 Name:
	
 

	  
	 Title:
	 Portfolio Manager

15
 
 

EXHIBIT A
 DEFINITION OF PLEDGED PROPERTY

          For the purpose of securing prompt and complete payment and performance by the Company of all of the Obligations, the Company unconditionally and irrevocably hereby grants to the Secured Party a continuing security interest in and to, and lien upon, all of the Company’s and its current and future acquired subsidiaries’ assets (including specifically those of Summit Controls, LLC, an Arizona limited liability company), and including specifically the following Pledged Property of the Company and such subsidiaries: 

                    (a) all goods of the Company and/or such subsidiaries, including, without limitation, machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools, parts, supplies and motor vehicles of every kind and description, now or hereafter owned by the Company and/or such subsidiaries or in which the Company and/or such subsidiaries may have or may hereafter acquire any interest, and all replacements, additions, accessions, substitutions and proceeds thereof, arising from the sale or disposition thereof, and where applicable, the proceeds of insurance and of any tort claims involving any of the foregoing; 

                    (b) all inventory of the Company and/or such subsidiaries, including, but not limited to, all goods, wares, merchandise, parts, supplies, finished products, other tangible personal property, including such inventory as is temporarily out of Company’s and/or such subsidiaries’ custody or possession and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing;

                    (c) all contract rights and general intangibles of the Company and/or such subsidiaries, including, without limitation, goodwill, trademarks, trade styles, trade names, leasehold interests, partnership or joint venture interests, patents and patent applications, copyrights, deposit accounts whether now owned or hereafter created;

                    (d) all documents, warehouse receipts, instruments and chattel paper of the Company and/or such subsidiaries whether now owned or hereafter created;

                    (e) all accounts and other receivables, instruments or other forms of obligations and rights to payment of the Company and/or such subsidiaries (herein collectively referred to as “
Accounts”), together with the proceeds thereof, all goods represented by such Accounts and all such goods that may be returned by the Company’s and/or such subsidiaries’ customers, and all proceeds of any insurance thereon, and all guarantees, securities and liens which the Company and/or such subsidiaries may hold for the payment of any such Accounts including, without limitation, all rights of stoppage in transit, replevin and reclamation and as an unpaid vendor and/or lienor, all of which the Company and such subsidiaries represent and warrant will be bona fide and existing obligations of its respective customers, arising out of the sale of goods by the Company and/or such subsidiary in the ordinary course of business;

                    (f) to the extent assignable, all of the Company’s and/or such subsidiaries rights under all present and future authorizations, permits, licenses and franchises issued or granted in connection with the operations of any of its facilities;

                    (g) all products and proceeds (including, without limitation, insurance proceeds) from the above-described Pledged Property; and

                    (h) all equity interests, securities or other instruments in other companies, including, without limitation, any subsidiaries, investments or other entities (whether or not controlled).

A-1

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