Exhibit 10.3
SECURITY AGREEMENT
THIS SECURITY
AGREEMENT (the
"Security Agreement") is made and entered into as of March
1, 2009 by
Lumea, Inc.,
a Nevada corporation
("Lumea"), with its principal place of business at 7430 E.
Butherus Dr., Suite C, Scottsdale, Arizona 85260,
for the benefit of
Easy Staffing Services,
Inc., a Delaware
corporation ("Secured Party"), with its principal place of
business at 33747 N. Scottsdale Rd., Suite 135., Scottsdale, AZ
85266.
RECITALS
Lumea has contemporaneously herewith
executed in favor of Secured Party a Promissory Note in the
principal amount of Five Million Seven Hundred Fifty Thousand
Dollars ($5,750,000) (the "Promissory Note").
As security for the Promissory Note,
Lumea has agreed to give Secured Party a security interest (the
"Security Interest") in the property described on Exhibit
"A" attached hereto and incorporated herein by reference
(hereinafter called the "Collateral").
1.
Security Interest
.
1.1 For
good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, Lumea hereby grants to Secured Party
a security interest (hereinafter called the "Security
Interest") in the property described on Exhibit "A".
1.2 This
Security Agreement is given for the purpose of securing, in such
order of priority as Secured Party may elect:
(a) Payment
of the amount of Five Million Seven Hundred Fifty Thousand
Dollars ($5,750,000) with interest thereon, extension and other
fees, late charges and attorney's fees, according to the terms of
the Promissory Note, and all extensions, modifications, renewals or
replacements thereof; and
(b) Payment,
performance and observance by Lumea of each agreement, term,
provision and condition contained herein, or to preserve any right
of Secured Party hereunder, or to protect or preserve the
Collateral or any part thereof.
1.3 All
of the indebtedness and obligations secured by this Security
Agreement are hereinafter collectively called the
"Obligation".
2.
Warranties, Covenants And Agreements of
Lumea . Lumea represents and warrants that:
(a) Lumea
is the true and lawful owner of the Collateral and has full power,
right and authority to execute and deliver this Security
Agreement;
(b) No
defense, setoff, claim or counterclaim exists against Secured Party
that could be asserted against Secured Party, whether in any
proceeding to enforce Secured Party's interest in the Collateral or
otherwise; and
(c) Lumea
has not conveyed, transferred, or assigned the Collateral or any of
its rights or interest therein and has not executed any other
document or ins trument that might prevent or limit Secured Party
from operating under the terms and conditions of this Security
Agreement.
2.2 Except
as set forth in Section 2.7, Lumea will make no other assignment
(and will allow no other assignment to be made) of the Collateral
or of any right or interest therein without the prior written
consent of Easy.
2.3 Lumea
does hereby make, constitute and appoint Secured Party, its
successors and assigns, Lumea's true and lawful attorney in fact,
in Lumea's name, place and stead, or otherwise:
(a) To
do all acts, including the filing of a UCC Financing Statement
(including continuation statements and amendments) with the
appropriate filing office, and to execute, acknowledge, obtain and
deliver any and all instruments, documents, items or things
necessary, proper or required as a term, condition or provision of
the Collateral or in order to exercise any rights of Lumea under
the Collateral or to receive and enforce any performance due Lumea
under the Collateral;
(b) To
demand and receive all performances due under or with respect to
the Collateral and to take all lawful ways and means for the
enforcement thereof and to compromise and settle any claim or cause
of action in Lumea arising from or related to the Collateral and
give acquittances and other sufficient discharges relating thereto;
and
(c) To
file any claim or to take any other action or proceeding, either in
its own name or in that of its nominee, or in the name of Lumea or
otherwise, to enforce performances due under or related to the
Collateral or to protect and preserve the right, title and interest
of Secured Party hereunder.
2.4 The
power of attorney given herein is a power coupled with an interest
and shall be irrevocable so long as any part of the Obligation
remains unpaid or unperformed. Secured Party shall have no
obligation to exercise any of the foregoing rights and powers in
any event.
2.5 No
change, amendment or modification shall be made to the Collateral
or to the instructions of Lumea contained herein without the prior
written approval of Secured Party.
2.6 Lumea,
at its cost and expense, shall protect and defend this Security
Agreement, all of the rights of Secured Party hereunder and the
Collateral against all claims and demands of other parties. Lumea
shall pay a11 claims and charges that in the opinion of Secured
Party might prejudice, imperil or otherwise affect the Collateral
or the Security Interest. Lumea shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or
otherwise of any part of the Collateral and of any threatened or
filed claims or proceedings that might in any way affect or impair
the terms of this Security Agreement.
2.7 The
Security Interest, at all times, shall be perfected and shall be
prior to any other interest in the Collateral other than a security
interest granted to Porter Capital for factoring receivables, and
any replacement factoring or lending institution. Lumea, on demand,
shall promptly pay all costs and expenses of filing and recording,
including the costs of any searches, deemed necessary by Secured
Party from time to time to establish and determine the validity and
the continuing priority of the Security Interest.
2.8 If
Lumea shall fail to pay any expenses or charges, to keep all of the
Collateral free from other security interests, encumbrances or
claims or to perform otherwise as required herein, Secured Party
may advance the moneys necessary to pay the same.
3.
EVENTS OF DEFAULT; REMEDIES .
3.1 The
occurrence of any of the following events or conditions shall
constitute and is hereby defined to be an "Event of Default" under
this Security Agreement, the Promissory Note and the Asset Purchase
Agreement:
(a) Any
failure to pay any principal or interest or any other part of the
Obligation pursuant to the provisions contained in the Promissory
Note, when due, and such failure is not remedied within thirty (30)
days after receipt by Lumea of written notice of default given by
Secured Party to Lumea.
(b) Any
warranty, representation or statement contained in this Security
Agreement, the Promissory Note, or any other document or instrument
executed or delivered in connection with the Obligation, or made or
furnished to Secured Party by or on behalf of Lumea, that shall be
or shall prove to have been materially false when made or
furnished.
(c) The
filing by Lumea, (or against Lumea) in which Lumea acquiesces or
which is not dismissed within sixty (60) days after the filing
thereof) of any proceeding under the federal bankruptcy laws now or
hereafter existing or any other similar statute now or hereafter in
effect; the entry of an order for relief under such laws with
respect to Lumea or the appointment of a receiver, trustee,
custodian or conservator of all or any part of the assets of
Lumea.
(d) The
insolvency of Lumea, or the execution by Lumea, of an assignment
for the benefit of creditors; or the convening by Lumea of a
meeting of its creditors, or any class thereof, for purposes of
effecting a moratorium upon or extension or composition of its
debts; or the failure of Lumea to pay its debts as they mature; or
if Lumea is generally not paying its debts as they
mature.
(e) The
liquidation, termination or dissolution of Lumea if Secured Party
is not reasonably reassured of timely payment and performance
hereunder and under the Promissory Note.
(f) Any
attachment, garnishment, levy or execution upon, or judicial
seizure of, any portion of the Collateral that is not released
within thirty (30) days of its execution.
(g) Subject
to Section 2.7, the existence or the filing of any lien or
encumbrance against any portion of the Collateral which may impair
the first lien position of Secured Party that is not released
within thirty (30) days of its attachment.
(h) The
institution of any legal action or proceedings to enforce a lien or
security interest in any portion of the Collateral that is not
dismissed within thirty (30) days of its institution.
(i)
The abandonment by Lumea of all or any part of the Collateral that
is not recovered or otherwise replaced within thirty (30) days of
its abandonment.
(j) The
loss, theft or destruction of, or any substantial damage to, any
portion of the Collateral that is not replaced, restored or
returned within thirty (30) days.
(k) Lumea's
abandonment or cessation of the business of providing Professional
Employer Organization or employee staffing services.
3.2 Upon
the occurrence of any Event of Default and at any time thereafter
while such Event of Default is continuing, Secured Party shall have
the following rights and remedies and may do one or more of the
following:
(a)
Declare all or any part of the Obligation, including any or all of
the Promissory Note, immediately due and payable, and the same,
with all costs and charges, shall be collectible thereupon by
action at law.
(b) Pursue
any legal remedy available to collect the Obligation, to enforce
its title in and right to possession of the Collateral and to
enforce any and all other rights or remedies available to
it.
(c) After
notice to Lumea, sell such Collateral at public or private sale
either with or without having such Collateral at the place of sale.
The proceeds of such sale, after deducting therefrom all expenses
of Secured Party in collecting and selling the Collateral
(including reasonable attorneys' fees) shall be applied to the
payment of the Obligation, and any surplus thereafter remaining
shall be paid to Lumea or any other person that may be legally
entitled thereto. In the event of a deficiency between such net
proceeds from the same of the Collateral and the total amount of
the Obligation, Lumea, upon demand, shall promptly pay the amount
of such deficiency to Secured Party. Secured Party, so far as may
be lawful, may purchase all or any part of the Collateral offered
at any public or private sale made in the enforcement of Secured
Party's rights and remedies hereunder.
3.3 Secured
Party shall give Lumea reasonable notice of any sale or other
disposition of all or any part of the Collateral. Lumea agrees that
notice and demand shall be deemed to be commercially reasonable and
effective if such notice is given to Lumea at least ten (10) days
prior to such sale or other disposition in the manner provided
herein for the giving of notices.
3.4 Lumea
shall and does hereby indemnify and hold Secured Party harmless
from any and all damages and losses arising as a result of or
related to the Collateral, this Security Agreement or the exercise
by Secured Party of any of its rights under this Security
Agreement, including, without limitation, any judgment, amounts
paid in settlement, and all costs and expenses, including
reasonable attorneys' fees, incurred in defending or settling any
action, suit or proceeding in connection with the foregoing, but
excluding damages and losses arising out of or resulting from or
relating to the gross negligence or intentional act of Secured
Party or its agents or employees.
3.5 All
sums advanced or paid by Secured Party under the terms hereof, all
amounts paid, suffered or incurred by Secured Party in exercising
any authority granted herein, including reasonable attorneys' fees,
and all other amounts due Secured Party from Lumea in connection
with this Security Agreement shall be added to the Obligation,
shall be secured by all deeds of trust and other lien and security
documents securing the Obligation, shall bear interest at the
highest rate payable on any of the Obligation until paid, and shall
be due and payable by Lumea to Secured Party immediately without
demand.
3.6 Lumea
shall pay all costs and expenses, including, without limitation,
costs of Arizona Uniform Commercial Code searches, court costs and
reasonable attorneys' fees, incurred in enforcing payment and
performance of the Obligation or in exercising the right and
remedies of Secured Party hereunder whether in civil, probate,
bankruptcy or appellate courts. Such court costs and attorneys'
fees shall be set by the court and not by jury, shall be included
in any judgment obtained by Secured Party, shall be added to the
Obligation and shall be secured by this Security
Agreement.
3.7 In
addition to the remedies provided herein for an Event of Default,
Secured Party shall have all the rights and remedies afforded a
secured party under the Arizona Uniform Commercial Code and all
other legal and equitable remedies allowed under applicable law. No
failure on the part of Secured Party to exercise any of its rights
hereunder arising upon any Event of Default shall be construed to
prejudice its rights upon the occurrence of any other or subsequent
Event of Default. No delay on the part of Secured Party in
exercising any such rights shall be construed to preclude it from
the exercise thereof any time during the continuance of that Event
of Default. Secured Party may enforce any one or more remedies or
rights hereunder successively or concurrently. By accepting payment
or performance of any of the Obligation after its due date, Secured
Party shall not thereby waive the agreement contained herein that
time is of the essence, nor shall Secured Party waive either its
right to require prompt payment or performance when due of the
remainder of the Obligation or its right to consider the failure to
so pay or perform an Event of Default.
4.
MISCELLANEOUS PROVISIONS .
4.1
Other Security . The acceptance of this Security Agreement
by Secured Party shall not be considered a waiver of or in any way
to affect or impair any other security that Secured Party may have,
acquire simultaneously herewith, or hereafter acquire for the
payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be
construed as a waiver of, or in any way to affect or impair, the
Security Interest; Secured Party may resort, for the payment or
performance of the Obligation, to its several securities therefor
in such order and manner as it may determine.
4.2
No Obligations to Collateral . Secured Party, by accepting
this Security Agreement, shall not be subject to any obligation or
liability under the Collateral, including without limitation, any
duty to perform any of the terms, conditions, provisions or
agreements thereof, but any and all such obligations and
liabilities shall continue to rest upon Lumea as though this
Security Agreement had not been made.
4.3
Modifications . Without notice of demand, without affecting
the obligations of Lumea hereunder or the personal liability of any
person for payment or performance of the Obligation, and without
affecting the Security Interest or the priority thereof, Secured
Party, from time to time, may: (i) extend the time for payment of
all or any part of the Obligation, accept a renewal Promissory Note
therefor, reduce the payments thereon, release any person liable
for all or any part thereof, or otherwise change the terms of all
or any part of the Obligation; (ii) take and hold other security
for the payment or performance of the Obligation and enforce,
exchange, substitute, subordinate, waive or release any such
security; (iii) join in any extension or subordination agreement;
or (iv) release any part of the Collateral from the Security
Interest.
4.4
Waiver . Lumea waives and agrees not to assert: (i) any
right to require Secured Party to proceed against any guarantor, to
proceed against or exhaust any other security for the Obligation,
to pursue any other remedy available to Secured Party, or to pursue
any remedy in any particular order or manner; (ii) the benefits of
any statute of limitations affecting the enforcement hereof; (iii)
demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment,
relating to the Obligation; and (iv) any benefit of, and any right
to participate in, any other security now or hereafter held by
Secured Party.
4.5
Assignment; Delegation . No party may assign any of its
rights under this Security Agreement, or delegate any performance
under this Security Agreement, in whole or in part, whether they
are voluntary, involuntary, by merger, consolidation, dissolution,
operation of law, or any other manner, except with the prior
written consent of the other party, which consent may be withheld
for any reason or no reason. For purpose of this Section: (i) a
change of control or a change of ownership is deemed an assignment
of rights; and (ii) "merger" refers to any merger in which a party
participates, regardless of whether it is the surviving or
disappearing corporation. Any purported assignment of rights or
delegation of performance in violation of this Section is null and
void.
4.6
Successors and Assigns . This Security Agreement shall inure
to the benefit of, and be binding upon, the parties hereto and
their respective successors, heirs, representatives and assigns, as
the case may be; provided, however, that no party shall assign or
delegate this Security Agreement or any of the rights or
obligations created hereunder without the prior written consent of
the other party. This Security Agreement shall not confer upon any
person not a party to this Security Agreement, or the legal
representative of such person any rights or remedies of any nature
or kind whatsoever under or by reason of this Security
Agreement.
4.7
Expenses . Except as otherwise expressly provided in this
Security Agreement, the parties hereto shall bear their respective
expenses incurred in connection with the preparation, execution and
performance of this Security Agreement and the transactions
contemplated hereby, including, without limitation, all fees and
expenses of agents, representatives, counsel and
accountants.
4.8
Notices . All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have
been given or made, if delivered personally or transmitted by
telex, telecopy or telegram, on the date so delivered or
transmitted, if sent by Federal Express or other reputable national
overnight carrier, on the next business day after the date so sent,
or if mailed by registered or certified mail (postage prepaid,
return receipt requested), on the fifth business day after the date
so mailed, to the parties at the following addresses.
if
to Sellers, to: Easy
Staffing Services, Inc.
Attention:
Cliff Blake, President
if
to Lumea, to: Lumea,
Inc
7430 E.
Butherus Dr., Suite C
Scottsdale,
Arizona 85260
Attention: Mr.
Edmond L. Lonergan
or to such other person or at such other
addresses as shall be furnished by any party by like notice to the
other, and such notice or communication shall be deemed to have
been given or made as of the date so delivered or transmitted, on
the next business day after the date so sent by overnight courier
or on the fifth business day after the date so mailed.
4.9
Entire Agreement . This Security Agreement, together with
the Annexes and Exhibits attached he reto, r epresents t he e ntire
agreement a nd unde rstanding o f the p arties h ereto w ith
reference to the transactions set forth herein, and no
representations, warranties or covenants have been made in
connection with this Security Agreement, either express or implied,
other than those expressly set forth herein, in the Annexes or in
the certificates, agreements and other documents delivered in
connection with the transactions contemplated hereby. This Security
Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements
between the parties relating to the subject matter of this Security
Agreement and all prior drafts of this Security Agreement, all of
which are merged into this Security Agreement.
4.10
Third Parties . No term or provision of this Security
Agreement is for the benefit of