Security Agreement dated for reference March 25, 2013 between Victory Electronic Cigarettes, Inc. as debtor and our company as secured party

THIS SECURITY AGREEMENT is dated March 25, 2013 but effective as of January 31, 2013, by and between VICTORY ELECTRONIC CIGARETTES, INC., a Nevada corporation (the “Debtor”); and TECKMINE INDUSTRIES, INC., a Nevada corporation (the “Secured Party”).

 

WITNESSETH THAT:

 

A. WHEREAS the Debtor has executed a debenture in favor of the Secured Party in the principal amount of USD$200,000 (the “Debenture”).

 

B. WHEREAS, the Debtor has agreed to enter into this Security Agreement in order to secure its obligations to the Secured Party under the Debenture.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

 

1.1 In order (i) to secure the due and punctual payment of the Debenture; (ii) to secure the due and punctual payment and performance of all obligations of the Debtor contained herein; (iii) to secure the due and punctual payment and performance of all indebtedness, obligations and liabilities of the Debtor in all other agreements executed or delivered by the Debtor in connection with the Debenture; and (iv) to secure the payment and performance of all other indebtedness, liabilities and obligations of the Debtor to the Secured Party of every kind and description, whether direct, indirect or contingent, whether now existing or hereafter arising or incurred, due or to become due, whether otherwise secured or unsecured and howsoever evidenced, incurred or arising, including all future advances to the Debtor (all of the foregoing indebtedness, obligations and liabilities described in this paragraph are hereinafter collectively called the “Obligations”), the Debtor hereby grants to the Secured Party, and its respective successors and assigns, a continuing security interest in, and hereby collaterally assigns to the Secured Party, the following described fixtures, personal property and intangible property (hereinafter collectively called the “Collateral”) whether now owned or hereafter acquired; whether existing or hereafter arising and wherever located:

1.2 The security interests granted pursuant to this Section 1 (the “Security Interests”) are granted as security only and shall not subject the Secured Party, to, or transfer to the Secured Party, or in any way affect or modify, any obligation or liability of the Debtor under any of the Collateral or any transaction which gave rise thereto.

 

1.3 In addition to the Debenture, this Agreement secures all obligations, debts and liabilities, plus interest thereon of the Debtor to the Secured Party, or any one or more of them, as well as all claims by the Secured Party against the Debtor or any one or more of them, whether now existing or hereafter arising, whether related or unrelated to the purpose of the Debenture, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated whether the Debtor may be liable individually or jointly with others, whether obligated as guarantor, surety, accommodation party or otherwise, and whether recovery upon such amounts may be or hereafter may become barred by any statute of limitations, and whether the obligation to repay such amounts may be or hereafter may become other wise unenforceable.

 

 

2.1 The Debtor authorizes the Secured Party to file and record, any financing statements, any carbon, photographic or other reproduction of a financing statement or this Security Agreement (which the parties hereto agree shall be sufficient as a financing statement hereunder), any specific assignments or other paper that may be reasonably necessary or desirable, or that the Secured Party may request, in order to create, confirm, preserve, perfect or validate any Security Interest or to enable the Secured Party to exercise and enforce its rights and remedies hereunder or under applicable law with respect to any of the Collateral.

 

 

The Debtor hereby represents and warrants to the Secured Party as follows:

 

3.1 The Debtor is, or to the extent that certain Collateral is to be acquired after the date hereof, will be, the owner of the Collateral free from any adverse lien, security interest or encumbrance.

 

3.2 No financing statement covering the Collateral is on file in any public office.

3.3 The Collateral is used solely for commercial purposes and is not used or bought for personal, family or household purposes.

4.1 The Debtor will use all commercially reasonable efforts to defend the Collateral against all claims and demands of all persons at any time claiming any interest therein.

 

4.2 The Debtor will provide the Secured Party, at least fifteen (15) business days prior to occurrence, with written notice of (i) any change in the registered office of the Debtor or the office where the Debtor maintains its books and records pertaining to the Collateral, or (ii) the movement or location of Collateral to or at any address other than its current location.

 

4.3 The Debtor will promptly pay any and all taxes, assessments and governmental charges upon the Collateral prior to the date penalties are attached thereto, except to the extent that such taxes, assessments and charges shall be contested in good faith by the Debtor and adequate reserves have been set aside therefor.

 

4.4 The Debtor will immediately notify the Secured Party of any event causing a substantial loss or diminution in the value of all or any material part of the Collateral and the amount or an estimate of the amount of such loss or diminution.

 

4.5 Except for the sale of Collateral as inventory in the normal course of business, the Debtor will not sell or offer to sell or otherwise assign, transfer or dispose of the Collateral or any interest therein, without the prior written consent of the Secured Party.

 

4.6 The Debtor will keep the Collateral free from any adverse lien or security interest.

 

4.7 The Debtor will not knowingly use the Collateral in violation of any statute or ordinance.

 

4.8 The Debtor will not change its name, identity or structure, without the prior written consent of the Secured Party, which consent shall not be unreasonably withheld.

 

4.9 The Debtor will keep its records concerning the Collateral, at the Debtor’s executive office or at such other place or places of business as the Secured Party may approve in writing. The Debtor will hold and preserve such records and will permit representatives of the Secured Party at any time during normal business hours to examine and inspect the Collateral and to make abstracts from such records, and will furnish to the Secured Party such information and reports regarding the Collateral as the Secured Party may from time to time reasonably request.

5.1 The Debtor hereby appoints the Secured Party the Debtor’s true and lawful attorney, with full power of substitution, in the name of the Debtor, the Secured Party or otherwise, for the sole use and benefit of the Secured Party, but at the Debtor’s expense, to the extent permitted by law to exercise, at any time and from time to time after any Event of Default has occurred, all or any of the following powers with respect to all or any of the Collateral (which power shall be in addition and supplemental to any powers, rights and remedies of the Secured Party described herein or otherwise available to the Secured Party under applicable law):

5.2 The Secured Party agrees to notify the Debtor within 3 days of exercising any of the powers granted to it under this Section 5.

6.1 The Debtor shall be in default under this Security Agreement upon the occurrence of any one or more of the following events (each such event is herein referred to as an “Event of Default”):

7.1 If an Event of Default shall have occurred and be continuing, the Secured Party may take any of the following actions:

8.1 Upon the occurrence and during the continuance of an Event of Default, to the extent permitted by law, the Secured Party shall have the right and power to take possession of all or any part of the Collateral, and to exclude the Debtor and all persons claiming under the Debtor wholly or partly therefrom, and thereafter to hold, store, and/or use, operate, manage and control the same. Upon any such taking of possession, the Secured Party may, from time to time, at the expense of the Debtor, make all such repairs, replacements, alterations, additions and improvements to and of the Collateral as the Secured Party may deem proper. In such case, the Secured Party shall have the right to manage and control the Collateral and to carry on the business and to exercise all rights and powers of the Debtor in respect thereto as the Secured Party shall deem best, including the right to enter into any and all such agreements with respect to the leasing and/or operation of the Collateral or any part thereof as the Secured Party may deem fit; and the Secured Party shall be entitled to collect and receive all rents, issues, profits, fees, revenues and other income of the same and every part thereof. Such rents, issues, profits, fees, revenues and other income shall be applied to pay the expenses of holding and operating the Collateral and of conducting the business thereof, and of all maintenance, repairs, replacements, alterations, additions and improvements, and to make all payments which the Secured Party may be required or may elect to make, if any, for taxes, assessments, insurance and other charges upon the Collateral or any part thereof, and all other payments which the Secured Party may be required or authorized to make under any provision of this Security Agreement (including legal costs and attorney’s fees). The remainder of such rents, issues, profits, fees, revenues and other income shall be applied to the payment of the Obligations in such order or priority as the Secured Party shall determine (subject to the provisions of Section 9 hereof) and, unless otherwise provided by law or by a court of competent jurisdiction, any surplus shall be paid over to the Debtor.

9.1 The proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied in the following order of priorities:

 

11.1 Upon the repayment and performance in full of all the Obligations, the Security Interests and the General Authority and powers granted in Section 5 shall terminate and all rights to the Collateral shall revert to the Debtor. Upon any such termination of the Security Interests or release of Collateral, the Secured Party will, at the Debtor’s expense to the extent permitted by law, execute and deliver to the Debtor such documents as the Debtor shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be.

 

 

12.1 All notices, requests, demands and other communications provided for hereunder shall be in writing and either mailed, sent by nationally recognized overnight courier service, or delivered in person to the applicable party.

 

 

13.1 No failure on the part of the Secured Party to exercise, and no delay in exercising, and no course of dealing with respect to, any right, power or remedy under this Security Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Secured Party of any right, power or remedy under this Security Agreement preclude any other right, power or remedy. The remedies in this Security Agreement are cumulative and are not exclusive of any other remedies provided by law. The Debtor, to the extent it may lawfully do so, hereby consents to the jurisdiction of the courts of British Columbia having jurisdiction in Idaho for the purpose of any suit or proceeding brought in connection with or with respect to this Security Agreement.

 

 

14.1 THE DEBTOR EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH. NEITHER THE DEBTOR NOR ANY ASSIGNEE OF OR SUCCESSOR TO THE DEBTOR, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION OR PROCEDURE BASED UPON, OR ARISING OUT OF, THIS SECURITY AGREEMENT OR ANY OF THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES HERETO, OR ANY OF THEM.

 

 

15.1 Neither this Security Agreement nor any provision hereof may be changed, waived, discharged or terminated orally but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought.

 

16.1 THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEVADA AND APPLICABLE FEDERAL LAWS THEREOF, except to the extent that remedies provided by the laws of any state other than Nevada are governed by the laws of said state. Unless otherwise defined herein, or unless the context otherwise requires, all terms used herein which are defined in the Nevada Uniform Commercial Code have the meanings therein stated.

 

 

17.1 If any provision hereof is invalid or unenforceable in any jurisdiction, the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Secured Party.

 

 

18.1 This Security Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, including, without limitation, any subsequent holders of the Debenture or any of the Obligations, each of whom shall, without further act, become a party hereto by becoming a holder of a Debenture or such Obligations.

 

 

19.1 The headings in this Security Agreement are for the purposes of reference only and shall not limit or otherwise affect the meaning hereof.

 

 

20.1 This Security Agreement may be executed by the parties hereto in several counterparts hereof and by different parties hereto on separate counterparts hereof, each of which shall be an original and all of which counterparts shall together constitute one and the same agreement. Delivery of an executed signature page of this Security Agreement by facsimile transmission shall be effective as an in-hand delivery of an original executed counterpart thereof.

 

IN WITNESS WHEREOF, this Security Agreement has been executed by the parties hereto all as of the day and year first above written.