GENERAL SECURITY AGREEMENT
(Commercial Lending)
THIS AGREEMENT made the ________ day of ______________________, 2002
BETWEEN: DUMEX MEDICAL CANADA INC., having its chief executive office and chief
place of business at 000 Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx, Fax No. (416)
000-0000
(hereinafter called the "Company")
AND: CAPITALSOURCE FINANCE LLC, having an office at 0000 Xxxxxxx Xxxxxx, 00xx
Xxxxx, Xxxxx Xxxxx, Xxxxxxxx 00000, Fax No. (000) 000-0000
(hereinafter called the "Lender")
In consideration of the sum of One Dollar ($1.00) now paid to it by the
Lender (receipt of which is hereby acknowledged), and to secure the due payment
and performance of all Obligations (hereinafter defined), the Company hereby
agrees with the Lender and provides as follows:
Article 1
INTERPRETATION
1.1 Definitions
As used herein the following expressions shall have the
following meanings:
"Affiliate" has the meaning ascribed to such term in the Business Corporations
Act, the Company Act or the Corporations Act, as the case may be, of the
Applicable Province (and if such Act does not define such term, Affiliate shall
have the meaning ascribed to such term in the Business Corporations Act
(Ontario)), including the corporations (if any) referred to as Affiliates in
Schedule "E" hereto;
"Applicable Province" means the province where the office of the Lender referred
to herein is located;
"Asset Purchase Agreement" means the Asset Purchase Agreement dated as of June
28, 2002 between Dumex Medical Inc., Dumex Medical Surgical Products Limited,
1013172 Ontario Limited and Dumex Quebec Inc. and the Company, as amended by
Amendment No. 1 and Amendment No. 2 and as adopted by the Interim Receiver
pursuant to the Adoption Agreement dated July 25, 2003;
"Bank" means Laurentian Bank of Canada.
"Business Day" means any day except Saturday, Sunday or a statutory holiday;
"Capital Expenditure" means any expenditure which would be chargeable to capital
or fixed asset accounts and includes the total of all instalments of rental
expressed to be payable during the whole term of each lease of personal property
which would be classified as a capital lease;
"Collateral" means all present and future property and assets of the Company
whether now or hereafter specifically charged or subjected to the floating
charge under Section 2.1 (except as excluded pursuant to Section 2.2);
"Encumbrance" means any mortgage, lien, pledge, assignment, charge, security
interest, title retention agreement, hypothec, levy, execution, seizure,
attachment, garnishment, right of distress or other claim in respect of property
of any nature or kind whatsoever howsoever arising (whether consensual,
statutory or arising by operation of law or otherwise) and includes arrangements
known as sale and lease-back, sale and buy-back and sale with option to
buy-back;
"Environmental Assessment" means any inquiry, investigation or report of the
environmental condition of the Premises;
"Environmental Laws" means all applicable federal, provincial, regional, state,
municipal or local laws, common law, statutes, regulations, ordinances, codes,
rules, guidelines, requirements, certificates of approval, licences or permits
relating to Hazardous Substances or the use, consumption, handling,
transportation, storage or Release thereof including without limitation (and in
addition to any such laws relating to the environment generally) any such laws
relating to public health, occupational health and safety, product liability or
transportation;
"Environmental Order" means any prosecution, order, decision, notice, direction,
report, recommendation or request issued, rendered or made by any Governmental
Authority in connection with Environmental Laws or Environmental Orders;
"Event of Default" means any one or more of the events set out or referred to in
Section 5.1;
"Financial Indebtedness" of the Company means the aggregate (without
duplication) of the following amounts:
(a) money borrowed, indebtedness represented by notes payable, and
drafts accepted representing extensions of credit (including,
as regards any note or draft issued at a discount, any amount
that could reasonably be regarded as being the amortized
portion of such discount as at the date of determination);
(b) all obligations (whether or not with respect to the borrowing
of money) which are evidenced by bonds, debentures, notes or
other similar instruments or not so evidenced but which would
be considered to be indebtedness for borrowed money;
(c) all indebtedness upon which interest charges are customarily paid;
(d) net amounts payable pursuant to interest swap arrangements;
(e) capital lease obligations and all other indebtedness issued or assumed as
full or partial payment for property or services or by way of capital
contribution;
(f) all letters of credit and letters of guarantee issued by a financial
institution at the request of or for the benefit of the Company;
(g) any guarantee (other than by endorsement of negotiable
instruments for collection or deposit in the ordinary course
of business) in any manner, directly or indirectly, of any
part or all of any obligation of a type referred to in any of
paragraphs (a) to (e) above; and
(h) any of the foregoing amounts in respect of any Subsidiary of
the Company whose accounts are not required under generally
accepted accounting principles to be consolidated with the
accounts of the Company;
including (without limitation) all Obligations but excluding:
(i) trade payables, expenses accrued in the ordinary course of
business, customer advance payments and deposits received in
the ordinary course of business unless the time for due
payment of which extends, or is intended to extend, more than
twelve months from the date as of which the determination of
Financial Indebtedness is being made; and
(j) indebtedness of the Company which is effectively postponed in favour of the
Lender.
"Governmental Authority" means any nation, government, province, state, region,
municipality or other political subdivision or any governmental department,
ministry, commission, board, agency or instrumentality or other public authority
or person, domestic or foreign, exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, government, and any
corporation or other entity owned or controlled (through stock or capital
ownership or otherwise) by any of the foregoing and includes any court of
competent jurisdiction;
"Guarantee" means that certain Guarantee, dated as of the date hereof, made by
the Company in favour of the Lender, as amended, restated, supplemented or
otherwise modified.
"Guarantor" means any person who has guaranteed the indebtedness of the Company
in favour of the Lender;
"Hazardous Substance" means any substance, combination of substances or
by-product of any substance which is or may become hazardous, toxic, injurious
or dangerous to any person, property, air, land, water, flora, fauna or
wildlife; and includes but is not limited to contaminants, pollutants, wastes
and dangerous, toxic, deleterious or designated substances as defined in or
pursuant to any Environmental Laws or Environmental Orders;
"Indebtedness" of the Company means Financial Indebtedness, other than that
advanced by the Lender, of the Company plus the amounts referred to in clause
(i) of the definition "Financial Indebtedness" in Section 1.1;
"Lease" means any lease (whether now existing, presently arising or created in
future) whereby the Premises or any part thereof are demised and leased to the
Company;
"Loan Agreement" means the Amended and Restated Revolving Credit and Security
Agreement, dated as of the date hereof, among the Lender, Derma Sciences, Inc.
and Sunshine Products, Inc., as amended, restated, supplemented or otherwise
modified;
"Loan Document" means the Guarantee, the Loan Agreement, any of the other
Security Documents or any other agreement or instrument (whether now existing,
presently arising or created in future) delivered by the Company or by any
Guarantor to the Lender;
"Management Group" means the directors and officers of the Company from time to
time, including the individuals (if any) referred to as the Management Group in
Schedule "E" hereto;
"Normal Business" has the meaning ascribed thereto in Schedule "E" hereof;
"Obligations" means all monies now or at any time and from time to time
hereafter owing or payable by the Company to the Lender and all other
obligations (whether now existing, presently arising or created in the future)
of the Company in favour of the Lender, and whether direct or indirect, absolute
or contingent, matured or not, whether arising from agreement or dealings
between the Lender and the Company or from any agreement or dealings with any
third person if such agreement or dealings with a third person are permitted by
the Guarantee and other Loan Documents by which the Lender may be or become in
any manner whatsoever a creditor or other obligee of the Company or however
otherwise arising and whether the Company be bound alone or with another or
others and whether as principal or surety, including, without limitation, monies
payable or obligations arising in connection with the Guarantee; for certainty,
the Obligations include all Obligations recorded at any branch or other office
of the Lender, wherever located, and are not restricted to those Obligations
recorded at the office of the Lender set out herein;
"Occupants" means the Company, its tenants and other occupants of any Premises;
"Offer of Finance" means at any time the prevailing agreement between the
Company and the Bank setting out the terms and conditions applicable to the
borrowings by the Company from the Bank, and for the time being means the letter
specified as the Offer of Finance in Schedule "E" hereto;
"Permitted Encumbrances" means the following:
(a) liens for taxes, assessments, governmental charges or levies not for the
time being due and delinquent;
(b) easements, rights of way or other similar rights in land
existing at the date of this Agreement which individually or
in the aggregate do not in the Lender's opinion materially
detract from the value of the property concerned or materially
impair its use in the operation of the business of the
Company;
(c) rights reserved to or vested in any Governmental Authority by
the terms of any lease, licence, franchise, grant or permit,
or by any statutory provision, to terminate the same or to
require annual or other periodic payments as a condition of
the continuance thereof;
(d) any Encumbrance the validity of which is being contested by the Company in
good faith by appropriate legal proceedings and in respect of which either
(i) security adequate in the opinion of the Lender has been provided to it to
ensure payment of such liens
or
(ii) the Lender is of the opinion that such liens are not materially prejudicial
to the security hereof;
(e) any reservations, limitations, provisos and conditions
expressed in any original grant from any Governmental
Authority which do not in the Lender's opinion materially
detract from the value of the property concerned or materially
impair its use in the operation of the business of the
Company;
(f) title defects or irregularities which, in the opinion of
counsel to the Lender, are of a minor nature and in the
aggregate will not in the Lender's opinion materially detract
from the value of the property concerned or materially impair
its use in the operation of the business of the Company;
(g) Purchase Money Securities; and
(h) the Encumbrances set out in Schedule "C" hereto;
"Permitted Substances" means, in respect of each Occupant, those substances
necessary to the carrying on of the Normal Business of such Occupant; "Premises"
means all lands and premises owned or occupied by the Company from time to time
(including without limitation the lands and premises referred to in Schedule "A"
hereto);
"Purchase Money Security" means any Encumbrance given, reserved, created,
assumed or arising by operation of law, whether or not in favour of the
transferor, after the date hereof to provide or secure, or to provide the
Company with funds to pay the whole or any part of, the consideration for the
acquisition of tangible personal property other than Inventory where:
(a) the principal amount of such Encumbrance is originally at least 75% but not
greater than 100% of the cost to the Company of all of the property
encumbered thereby, and
(b) the Encumbrance only covers the property being acquired by the Company
and includes the renewal, extension or refunding of any such Encumbrance and of
the indebtedness represented thereby upon the same property provided that the
indebtedness secured thereby and the security therefor are not increased
thereby;
"Receiver" shall include one or more of a receiver, receiver-manager or receiver
and manager of all or a portion of the undertaking, property and assets of the
Company appointed by the Lender pursuant to this Agreement or by or under any
judgment or order of a court;
"Release" includes abandon, add, deposit, discharge, disperse, dispose, dump,
emit, empty, escape, leach, leak, migrate, pour, pump, release or spill;
"Restricted Lease" means any lease of real or personal property other than a
lease which would be classified as a capital lease;
"Security Documents" means, collectively, this Agreement and all other
agreements and other instruments delivered to the Lender by the Company (whether
now existing or presently arising) for the purpose of establishing, perfecting,
preserving or protecting any security held by the Lender in respect of any
Obligations;
"Shareholder Ownership" has the meaning ascribed to such term in Schedule "E"
hereto;
"Subsidiary" means a corporation in which the Company owns, directly and/or
indirectly through one or more Subsidiaries, a majority of shares carrying the
right to elect at least a majority of the members of the board of directors;
"Voting Control" means the direct or indirect ownership or control of a
sufficient number of outstanding shares of a corporation to elect a majority of
its directors; and "Voting Control of the Company" means the Voting Control of
the Company constated by the Shareholder Ownership set forth in Schedule "E"
hereto or such different Voting Control as shall have been effected with the
prior written consent of the Lender; and
1.2 Interpretation
1.2.1 "This Agreement", "hereto", "hereby", "hereunder", "herein",
and similar expressions refer to the whole of this Agreement
and not to any particular Article, Section, subsection,
paragraph, clause, subdivision or other portion hereof.
1.2.2 The expression "not dealing at arm's length" has the meaning
ascribed to it by the Income Tax Act (Canada).
1.2.3 Except as expressly provided herein, terms which are defined
in the Personal Property Security Act of the Applicable
Province shall have the same meaning where used herein.
1.2.4 Words importing the singular number only include the plural
and vice versa and words importing gender shall include all
genders and words importing persons include individuals,
partnerships, corporations, trusts, unincorporated
associations, joint ventures, Governmental Authorities and
other entities.
1.2.5 All financial or accounting determinations, reports and
statements provided for in this Agreement shall be made or
prepared in accordance with generally accepted accounting
principles applied in a consistent manner and shall, unless
otherwise indicated in the Offer of Finance, be made and
prepared on a consolidated basis.
1.2.6 The headings of the Articles and Sections are inserted for
convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.3 Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of the Applicable Province and the federal laws of
Canada applicable therein.
Article 2
SECURITY
2.1 Charge
For the purpose set out in Section 2.5 but subject to the
exceptions set forth in Section 2.2, the Company hereby:
2.1.1 grants, sells, assigns, conveys, transfers, mortgages, pledges
and charges, as and by way of fixed and specific mortgage,
pledge and charge to and in favour of the Lender, and grants
to the Lender a security interest in, all personal property of
every nature and kind whatsoever and wheresoever situate now
or at any time and from time to time owned by the Company or
in which or in respect of which the Company has any interest
or rights of any kind together with all Proceeds thereof and
therefrom, renewals thereof, Accessions thereto and
substitutions therefor, including, without limiting the
generality of the foregoing, the following described property:
(a) All inventory of whatsoever kind (including vehicles) and wheresoever
situate now owned or hereafter acquired by the Company including without
limiting the generality of the foregoing, goods for sale or lease or that
have been leased; goods furnished or to be furnished under a contract of
service; goods which are raw materials, work in process or materials used
or consumed in a business or profession of the Company; goods used or
procured for packing; finished goods; industrial growing crops, oil, gas
and other minerals to be extracted; timber to be cut; and the young of
animals after conception ("Inventory");
(b) All book accounts and book debts and generally all
accounts, debts, dues, claims, choses in action and
demands of every nature and kind howsoever arising or
secured including letters of credit, and advices of
credit, which are now due, owing or accruing or
growing due to or owned by or which may hereafter
become due, owing or accruing or growing due or owned
by the Company including but not limited to claims
against any Governmental Authority and claims under
insurance policies ("Accounts");
(c) All machinery, equipment, tools, apparatus, plants,
fixtures, furniture, vehicles, goods and other
tangible personal property of whatsoever nature and
kind, now owned or hereafter acquired by the Company
other than Inventory ("Equipment");
(d) All chattel paper now owned or hereafter acquired by the Company ("Chattel
Paper");
(e) All warehouse receipts, bills of lading and other
documents of title, whether negotiable or otherwise,
now owned or hereafter acquired by the Company
("Documents of Title");
(f) All instruments now owned or hereafter acquired by the Company
("Instruments");
(g) All deeds, documents, writings, papers, books of
accounts and other books and records, whether or not
in computerized form, evidencing or relating to
Accounts, Chattel Paper, Instruments or Documents of
Title or by which such are or may hereafter be
secured, evidenced, acknowledged or made payable; and
all contracts, securities, instruments and other
rights and benefits in respect thereof;
(h) All shares, securities, stocks, warrants, bonds, debentures, debenture
stock or the like now owned or hereafter acquired by the Company;
(i) All intangible property and intangibles now owned or
hereafter acquired by the Company including, but not
limited to, choses in action, goodwill, patents,
trademarks, copyrights and other industrial property
("Intangibles");
(j) All monies other than trust monies lawfully belonging to others;
(k) Any property in any form (including fixtures) derived
directly or indirectly from any dealings with any
property herein described (including all products and
cash and non-cash proceeds thereof); indemnification
or compensation for any such property lost,
destroyed, damaged or lawfully or unlawfully taken or
injuriously affected; all increases, additions and
accessions thereto and substitutions and replacements
thereof;
(l) All personal property, if any, described in Schedule "B" hereto; and
2.1.2 charges with payment and performance of the Obligations to and
in favour of the Lender as set out in Section 2.5 as and by
way of a floating charge the whole of the undertaking of the
Company and all of its property and assets, real and personal,
movable and immovable, tangible and intangible, of every
nature and kind whatsoever and wheresoever situate, both
present and future (other than property and assets from time
to time effectively subjected to the fixed and specific
mortgages, charges and security interests created hereby or by
any instrument supplemental hereto or as set forth in Section
2.2).
2.2 Exceptions
2.2.1 Exception as to Leases
The last day of any term of years reserved by any lease,
verbal or written, or any agreement therefor, now held or
hereafter acquired by the Company is excepted out of the
Collateral, but the Company shall stand possessed of any such
reversion upon trust to assign and dispose thereof as the
Lender may direct. Where the giving of a fixed and specific
mortgage and charge on any real or personal property held by
the Company under lease requires the consent of the lessor of
such property, the giving of the fixed and specific mortgage
and charge hereunder on such property shall not take effect
until such consent is obtained or legally dispensed with but
the suspension of the effect of the fixed and specific
mortgage and charge on such property shall not affect the
fixed and specific mortgage and charge on any other property
of the Company.
2.2.2 Exception as to Consumer Goods
Consumer Goods now held or hereafter acquired by the Company
are excepted out of the Collateral.
2.3 Charge Valid Irrespective of Advance of Money
The mortgages, pledges and charges hereby created shall have
effect and be deemed to be effective whether or not the monies or obligations
hereby secured or any part thereof shall be advanced or owing or in existence
before or after or upon the date of this Agreement and neither the giving of
this Agreement nor any advance of funds shall oblige the Lender to advance any
funds or any additional funds. The Company acknowledges that the parties have
not agreed to postpone the time for attachment of any of the charges created
hereby, including the floating charge created hereby, all of which shall attach
upon the execution hereof or, in the case of after-acquired Collateral, as soon
as the Company acquires rights therein. The Company acknowledges that value has
been given.
2.4 Supplemental Indentures
The Company shall from time to time on demand by the Lender
execute and deliver such further deeds or indentures supplemental hereto, which
shall thereafter form part hereof, for the purpose of mortgaging to the Lender
any property now owned or hereafter acquired by the Company and falling within
the description of the Collateral, for correcting or amplifying the description
of any property hereby mortgaged or intended so to be, or for any other purpose
not inconsistent with the terms of this Agreement.
2.5 Continuing Security
This Agreement and any other security given with the Lender's
consent in replacement thereof, substitution therefor or in addition thereto
shall be held by the Lender as general and continuing security for due payment
and performance of all Obligations, including without limitation all costs and
amounts payable pursuant hereto and interest on the Obligations at the rate or
rates applicable thereto in accordance with the Guarantee or the prevailing
agreement between the Lender and the Company.
2.6 Application of Payments
Any and all payments made at any time in respect of the
Obligations and the proceeds realized from any securities held therefor
(including moneys realized from the enforcement of this Agreement) may be
applied (and reapplied from time to time notwithstanding any previous
application) to such part or parts of the Obligations as the Lender sees fit.
The Lender may hold as additional security hereunder any increase or profits or
other proceeds realized from the Collateral (including money) for such period of
time as the Lender sees fit or the Lender may hold such monies unappropriated in
a collateral account to apply against the Obligations when and how the Lender
sees fit. The Company shall be accountable for any deficiency and the Lender
shall distribute any surplus as required by law.
Article 3
REPRESENTATIONS AND WARRANTIES
3.1 General Representations and Warranties
The Company represents, warrants and covenants to and with the
Lender as follows:
3.1.1 Incorporation and Status
The Company is duly incorporated and validly subsisting under
the laws of its jurisdiction of incorporation or continuance
and has the corporate power and capacity to own its properties
and assets and to carry on its business as presently carried
on by it or as contemplated in the Offer of Finance to be
carried on by it and holds all material licences, permits and
assets as are required to own its properties and assets and to
carry on business in each jurisdiction in which it does so.
The Company's chief executive office is located at 000
Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx, X0X 0X0.
3.1.2 Power and Capacity
The Company has the corporate power and capacity to enter into
each of the Security Documents to which it is a party and to
do all acts and things as are required or contemplated
hereunder or thereunder to be done, observed and performed by
it.
3.1.3 Due Authorization and Enforceability
The Company has taken all necessary corporate action to
authorize the execution, delivery and performance of each of
the Security Documents to which it is a party and each such
document constitutes, or upon execution and delivery will
constitute, a valid and binding obligation of the Company
enforceable against it in accordance with its terms, subject
only to the following qualifications:
(a) an order of specific performance and an injunction are discretionary
remedies, and in particular, may not be available where damages are
considered an adequate remedy; and
(b) enforcement may be limited by bankruptcy, insolvency,
liquidation, reorganization, reconstruction and other
similar laws generally affecting enforceability of
creditors' rights.
3.1.4 No Contravention
The execution and delivery of this Agreement and the other
Security Documents and the performance by the Company of its
obligations thereunder (i) does not and will not violate any
law or any provision of the articles, by-laws, constating
documents or other organizational documents of the Company or
constitute a breach of any existing contractual or other
obligation of the Company or contravene any licence or permit
to which the Company is subject, (ii) will not result in the
creation of, or require the Company to create, any Encumbrance
in favour any person other than the Lender and the Bank
provided however that any Encumbrance in favour of CSF will be
subject to the Priorities Agreement to be entered into among
the Company, Derma Sciences, Inc., the Lender and the Bank
(the "Priorities Agreement"), and (iii) will not result in or
permit the acceleration of the maturity of any indebtedness or
other obligation of the Company.
3.1.5 No Consents Required
No authorization, consent or approval of, or filing with or
notice to, any person is required in connection with the
execution, delivery or performance of this Agreement or any of
the other Security Documents by the Company, except from the
Bank which has already been obtained.
3.1.6 Leases
With respect to each Lease now existing:
(a) the copy of the Lease provided to the Bank contains
the entire agreement between the Company, the lessee
and any guarantor, surety or indemnitor respecting
the subject matter and there have been no
modifications, amendments or extensions thereto or
thereof; and
(b) the Lease is in full force and effect and in good standing.
3.1.7 Financial Statements
The financial statements of the Company in the form delivered
by the Company to the Bank in connection with the Offer of
Finance have been prepared in accordance with generally
accepted accounting principles and fairly, completely and
accurately present the financial condition of the Company and
the financial information presented therein for the period and
as at the date thereof. Since the date of the last financial
statements delivered to the Lender there has been no
development which has had or is reasonably expected to have a
material adverse effect upon the business, property, financial
condition or prospects of the Company or upon the ability of
the Company to perform its obligations under any of the
Security Documents.
3.1.8 Solvency
The Company is not an insolvent person within the meaning of
the Bankruptcy and Insolvency Act (Canada).
3.1.9 No Litigation
There are no actions, suits, judgments, awards or proceedings
pending or, to the knowledge of the Company, threatened
against the Company before any Governmental Authority or
before any other authority, or before any arbitrator of any
kind, which would, if determined adversely to the Company,
materially adversely affect its business, property, financial
condition or prospects or its ability to perform any of the
provisions of any Security Document to which it is a party or
which purports to affect the legality, validity or
enforceability of any Security Document, and the Company is
not in default with respect to any judgment, order, writ,
injunction, award, rule or regulation of any Governmental
Authority or any arbitrator, which individually or in the
aggregate results in any such material adverse effect.
3.1.10 No Default
The Company is not in default or breach under any material
commitment or obligation (including, without limitation,
obligations in relation to Financial Indebtedness) or under
any order, writ, decree or demand of any Governmental
Authority or with respect to any leases, licences or permits
to own and/or operate material properties and assets or to
carry on business and, to the Company's knowledge, there
exists no state of facts which, after notice or the passage of
time or both, would constitute such a default or breach; and
there are not any proceedings in progress, pending or, to the
Company's knowledge, threatened, which may result in the
revocation, cancellation, suspension or any adverse
modification of any such leases, licences or permits.
3.1.11 All Material Information Supplied
The Company has provided to the Lender all material
information relating to the financial condition, business and
prospects of the Company and the Guarantors (if any) and all
such information is true, accurate and complete in all
material respects.
3.1.12 Serial Numbered Goods and Fixtures
Full particulars (including serial number, year, make and
model) of each motor vehicle, trailer, mobile home, boat,
outboard motor and aircraft in which the Company has rights
and which is not Inventory are set out in Schedule "B" hereto.
None of the goods comprised in the Collateral are fixtures
except any fixtures that are described so that they may be
readily identified in Schedule "B" hereto and that are affixed
or attached to the Premises described in Schedule "A" hereto.
3.1.13 Consumer Goods
None of the Collateral now owned or hereafter acquired is now
or shall at any time be Consumer Goods of the Company.
3.1.14 Place of Business
The location of the Company's place(s) of business are
specified on Schedule A hereto.
3.1.15 Corporate Names or Styles
Except as may be specified on Schedule A, the Company does not
carry on business under or use any name or style other than
the name(s) specified on the first page of this Agreement
including, without limitation, any names in the French
language or any other language.
3.2 Environmental Representations and Warranties
The Company represents, warrants and covenants to and with the
Lender as follows:
3.2.1 The Collateral and the operations of the Occupants now and
will at all times in future comply in all material respects
with all Environmental Laws and Environmental Orders.
3.2.2 After due and diligent inquiry, it has been found that, except
for Permitted Substances necessary to the carrying on of the
Normal Business of the Company, there is no Hazardous
Substance on or in any of the Premises, no Hazardous Substance
has ever been used, stored, located or Released on or in any
of the Premises, no part of the Premises is or has ever been
contaminated by any Hazardous Substance.
3.2.3 After due and diligent inquiry and except as approved by the
Lender in writing, it has been found that there are no:
(a) underground or above-ground storage tanks;
(b) asbestos or material containing asbestos;
(c) urea formaldehyde or material containing urea formaldehyde;
at, on or under the Premises and none of the foregoing will at
any time in future be placed, installed or Released at, on or
under the Premises without the prior written consent of the
Lender.
3.2.4 Any underground or above-ground storage tanks located at, on
or under the Premises which have been approved by the Lender
have been identified, registered, constructed, operated and
maintained as required by Environmental Laws and Environmental
Orders and they are presently in a state of good condition and
repair, have not leaked and are not presently leaking any of
their contents.
3.2.5 There is no judicial or administrative proceeding or
investigation pending and no Environmental Order has been
issued or, to the best of the Company's knowledge, threatened
concerning the possible violation of any Environmental Laws or
Environmental Orders by any of the Occupants, by any of the
operations of the Occupants or otherwise in relation to the
Collateral.
3.2.6 To the best of the Company's knowledge (after due and diligent
inquiry), no condition exists as to any parcel of real
property contiguous to or in close proximity with the Premises
which would require a qualification to any of the
representations or warranties in this Section 3.2 if such
condition applied to the Premises.
3.2.7 Except for Permitted Substances necessary to the carrying on of the Normal
Business of the Company, no Hazardous Substance shall be brought onto or
used on or in any part of the Premises without the prior written consent of
the Lender and any Hazardous Substance brought onto or into any part of the
Premises or used by any person on or in any part of the Premises shall be
transported, used and stored only in accordance with all Environmental
Laws, other lawful requirements, prudent industrial standards (including
without limitation any published environmental standards of any applicable
industry association) and any requirements of applicable insurance
policies.
3.2.8 The Company has created, properly organized and maintained all
documentation and records concerning environmental matters as
required by any Environmental Laws or Environmental Orders and
will maintain such documentation and records at all times in
future as aforesaid.
3.2.9 The Company has provided to the Lender any Environmental
Assessment and related documentation concerning any of the
Premises in its possession or control and shall promptly
provide to the Lender any such material as the Company may
obtain in future.
3.2.10 The Company shall promptly notify the Lender if it:
(a) receives notice from any Governmental Authority of
any violation or potential violation of any
Environmental Laws or Environmental Orders, including
the Release of a Hazardous Substance, which may have
occurred or been committed or is about to occur or be
committed;
(b) receives notice that any administrative or judicial
complaint or Environmental Order has been issued or
filed or is about to be issued or filed against any
of the Occupants or their representatives alleging
violations of any Environmental Laws or Environmental
Orders or requiring the taking of any action in
connection with any Hazardous Substance;
(c) learns of the enactment of any Environmental Laws or
the issuance of any Environmental Orders which may
have a material adverse effect on the Premises or the
operations or the condition, financial or otherwise,
of any of the Occupants; or
(d) knows of or suspects that any Hazardous Substance
(other than a Permitted Substance) has been brought
onto any part of the Premises or that there is any
actual, threatened or potential Release of any
Hazardous Substance (whether or not a Permitted
Substance) on, from, in or under any part of the
Premises.
3.2.11 The Company hereby grants to the Lender and its employees and
agents an irrevocable and non-exclusive licence, subject to
the rights of tenants, to enter any of the Premises to conduct
testing and monitoring with respect to Hazardous Substances
and to remove and analyze any Hazardous Substance at the cost
and expense of the Company (which cost and expense shall be
secured hereby).
3.2.12 The Company shall indemnify the Lender and hold the Lender
harmless against and from all loss, costs, damages and
expenses which the Lender may sustain, incur or be or become
liable for by reason of or arising from the presence,
clean-up, removal or disposal of any Hazardous Substance
referred to in this section or compliance with Environmental
Laws or Environmental Orders relating thereto, including any
clean-up, decommissioning, restoration or remediation of the
Premises and other affected lands or property (and this
indemnification shall survive the satisfaction, release or
extinguishment of the indebtedness secured hereby).
3.3 Title
The Company covenants with the Lender that, subject only to
Permitted Encumbrances, it lawfully owns, as legal and beneficial owner, and is
lawfully possessed of the Collateral and all property and assets indicated by
the financial statements which it has delivered to the Lender to be owned by it
and has good right and authority to mortgage and charge the same as provided for
herein, free and clear of all Encumbrances (other than Permitted Encumbrances),
and it will warrant and defend the title thereto as well as to any other
property, rights and interests hereafter acquired by the Company. No person has
any agreement or right or option to acquire any of such property (except under
unfilled purchase orders accepted in the ordinary course of business for the
sale of Inventory).
Article 4
COVENANTS OF THE COMPANY
4.1 General Covenants
So long as this Agreement remains outstanding, the Company
covenants and agrees as follows:
4.1.1 To Pay Costs
The Company shall pay all reasonable costs, charges and
expenses of or incurred by the Lender (a) incidental to the
preparation, execution and filing of any supplemental security
or any instrument amending any of the Security Documents, (b)
in inspecting the Collateral or in or about taking, recovering
or keeping possession of any of the Collateral or in any other
proceedings taken in enforcing the remedies provided herein or
otherwise in relation to this Agreement or the Collateral, or
by reason of non-payment of the moneys hereby secured, (c) the
costs of any sale proceedings hereunder, whether such sale
proves abortive or not, and (d) the costs of any Receiver with
respect to, and all expenditures made by the Lender or any
Receiver in the course of, doing anything hereby permitted to
be done by the Lender or such Receiver (including without
limitation any costs and expenditures relating to compliance
with the Bankruptcy and Insolvency Act (Canada)). All such
costs and expenses and other monies payable hereunder,
together with interest at the highest rate applicable to any
Obligations, shall be payable on demand and shall constitute a
charge on the Collateral. Without limiting the generality of
the foregoing, such costs shall extend to and include any
legal costs incurred by or on behalf of the Lender as between
solicitor and own client.
4.1.2 To Pay Certain Debts
The Company shall punctually pay and discharge every
obligation, the failure to pay or discharge of which might
result in any lien or charge or right of distress, forfeiture,
termination or sale or any other remedy being enforced against
the Collateral and provide to the Lender when required
satisfactory evidence of such payment and discharge, but the
Company may on giving the Lender such security (if any) as the
Lender may require refrain from paying or discharging any
obligation so long as it contests in good faith its liability
therefor.
4.1.3 To Maintain Corporate Existence and Security
The Company shall:
(a) maintain its corporate existence;
(b) diligently preserve all its rights, licences, powers, privileges,
franchises and goodwill;
(c) observe and perform all of its obligations and comply
with all conditions under leases, licences and other
agreements to which it is a party or upon or under
which any of the Collateral is held;
(d) carry on and conduct its business in a proper and efficient manner so as to
preserve and protect the Collateral and income therefrom;
(e) keep proper books of account with correct entries of all transactions in
relation to its business;
(f) observe and conform to all valid requirements of law and of any
Governmental Authority relative to the Collateral or the carrying on by the
Company of its business;
(g) repair and keep in repair and good order and condition all property,
including the Collateral, the use of which is necessary or advantageous in
connection with its business;
(h) immediately notify the Lender in writing of any proposed change of name of
the Company or of the Company's chief place of business or chief executive
office;
(i) keep the Lender constantly informed in writing as to the location of the
Collateral and the books of account and other records of the Company;
(j) immediately deliver to the Lender any negotiable instrument forming part of
the Collateral;
(k) effect such registrations as may be reasonably required by the Lender from
time to time to protect the security hereof; and
(l) prevent the Collateral from being or becoming an
accession to property not charged hereby or becoming
affixed to any real property other than real property
in respect of which the Lender holds a registered
mortgage.
4.1.4 Leases
(a) The Company shall at all times perform and discharge all of the lessee's
covenants and obligations under any Lease.
(b) The Company will not without the written consent of
the Lender terminate, surrender, amend, alter or vary
the terms and conditions of the any Lease. Nor shall
the Company, without the written consent of the
Lender, waive performance by the landlord under any
of the Leases or release any of the said landlords
from any obligations under their respective Leases.
4.1.5 To Insure
The Company shall keep the Collateral and the operations of
the Company insured in such amounts as the Bank may reasonably
require against loss or damage by fire and such other risks as
the Bank may from time to time specify, with insurers approved
by the Bank. The Company shall whenever from time to time
requested by the Lender provide the Lender with satisfactory
evidence of such insurance and any renewal thereof which shall
at all times be subject to mortgage clauses in a form approved
by the Lender, and shall at the request of the Lender
forthwith name the Lender as second loss payee and deliver
unto the Lender the policy or policies of such insurance.
Evidence satisfactory to the Lender of the renewal of every
policy of insurance shall be provided to the Lender at least
seven (7) days before the termination thereof.
4.1.6 To Furnish Proofs
The Company shall forthwith on the happening of any loss or
damage furnish at its own expense all necessary proofs and do
all necessary acts to enable the Lender to obtain payment of
the insurance monies, which, in the sole discretion of the
Lender, may be applied in reinstating the insured property or
be paid to the Company or be applied in payment of the monies
owing hereunder, whether due or not then due, or paid partly
in one way and partly in another.
4.1.7 Inspection by the Lender
The Company shall allow any employees or authorized agents of
the Lender at any reasonable time to enter the premises of the
Company in order to inspect the Collateral and to inspect the
books and records of the Company and make extracts therefrom,
and shall permit the Lender prompt access to such other
persons as the Lender may deem necessary or desirable for the
purposes of inspecting or verifying any matters relating to
any part of the Collateral or the books and records of the
Company, provided that any information so obtained shall be
kept confidential, save as required by the Lender in
exercising its rights hereunder.
4.1.8 Accounts
Subject to any Permitted Encumbrances thereon, Accounts shall
be received by the Company in trust for the Lender; provided
that as long as an Event of Default has not occurred the
Company may collect and use the Accounts in the ordinary
course of business.
4.1.9 Deliver Information
The Company shall deliver to the Bank at the close of each
financial year of the Company one copy of its annual financial
statements, which unless otherwise indicated in the Offer of
Finance shall be prepared on an audited basis by independent
auditors of the Company, qualified and entitled to carry on in
the Applicable Province the practice of public accounting and
auditing, including the balance sheet and statements of
income, retained earnings and changes in financial position,
together with all supporting schedules. Such financial
statements shall be signed by an authorized officer of the
Company and shall be accompanied by a detailed report of the
auditors (which report shall not be qualified in any material
respect). The Company shall deliver such financial statements
to the Lender, together with such other statements and reports
as may be required pursuant to the Offer of Finance, within
the time periods stipulated therein. The Company shall provide
to the Lender any other information concerning its financial
position and business operations which the Lender may from
time to time reasonably request.
4.1.10 Notice of Litigation and Damage
The Company will promptly give written notice to the Lender of
(a) all claims or proceedings pending or threatened against
the Company which may give rise to uninsured liability in
excess of $25,000.00 or which may have a material adverse
affect on the business or operations of the Company, (b) all
damage to or loss or destruction of any property comprising
part of the Collateral which may give rise to an insurance
claim in excess of $25,000 and (c) all uninsured damage to or
loss or destruction of property comprising part of the
Collateral in excess of $25,000; and will supply the Lender
with all information reasonably requested in respect of any
such matters.
4.1.11 Notice of Default
The Company will promptly give written notice to the Lender of
the occurrence of any Event of Default or of any event which
after notice or lapse of time would constitute an Event of
Default.
4.1.12 Representations and Warranties
The representations and warranties made by the Company in
Article 4 shall be true and correct on each day that this
Agreement or any of the Security Documents remains in force,
with the same effect as if such representations and warranties
had been made and given on and as of such day (except to the
extent any such representation and warranty is expressly
limited to a particular date or particular period or time),
notwithstanding any investigation made at any time by or on
behalf of the Lender.
4.1.13 Not to Create Certain Charges
The Company shall not, without the prior written consent of
the Lender, create or permit to arise any Encumbrance on any
of the Collateral (other than Permitted Encumbrances), and
will not permit any Subsidiary to do the same (except in
favour of the Company). Nothing herein contained shall be
construed as subordinating the Lender's interest in the
Collateral in favour of any third party who claims the
Collateral by virtue of a Permitted Encumbrance.
4.1.14 Not to Sell
The Company shall not, except as otherwise permitted
hereunder, remove, destroy, lease, sell or otherwise dispose
of any of the Collateral; provided that the Company may sell,
lease or otherwise dispose of Equipment which has become worn
out or damaged or otherwise unsuitable for their purposes on
condition that it shall substitute therefor, subject to the
lien hereof and free from prior liens or charges, property of
at least equal value so that the security hereby constituted
shall not thereby be in any way reduced or impaired; and
provided further that the Company may sell Inventory in the
ordinary course of business and for the purpose of carrying on
the same.
4.1.15 Not to Make Certain Changes
The Company shall not without the prior written consent of the
Lender:
(a) change its financial year end;
(b) purchase, establish or acquire in any manner any new business undertaking;
(c) materially change the nature of the Company's business as presently carried
on;
(d) amalgamate, consolidate or merge or enter into a partnership, joint venture
or syndicate with any other person, or acquire or establish any Subsidiary;
(e) enter into any transaction, or permit any Subsidiary to do so, outside the
ordinary active business operations of the Company and its Subsidiaries;
(f) acquire or invest in any securities except
instruments or securities issued by a financial
institution or liquid securities traded on a
recognized public securities exchange and acquired
only for the Company's cash management purposes or
permit any Subsidiary to do so;
(g) remove any of the Collateral or any of the books of
account or other records of the Company from the
jurisdiction where presently located except as
otherwise permitted by this Agreement; or
(h) change its name in which case the consent of the Lender shall not be
unreasonably withheld.
4.1.16 Serial Numbered Goods and Fixtures
Upon the acquisition by the Company from time to time of
rights in any motor vehicles, trailers, mobile homes, boats,
outboard motors or aircraft which are not Inventory and which
are not fully described in Schedule "B" hereto, or upon
repossession by or return to the Company of any such goods,
the Company will forthwith give written notice to the Lender
of full particulars (including the serial number) of the same.
The Company will not permit goods now or hereafter comprised
in the Collateral to become fixtures unless they are, or are
to be, affixed or attached to the Premises described in
Schedule "A" hereto and unless the goods are described in
Schedule "A" hereto so that they may be readily identified.
Article 5
EVENTS OF DEFAULT AND REMEDIES
5.1 Events of Default
The occurrence of any of the following events shall constitute
an Event of Default under this Agreement:
5.1.1 If a default occurs in payment of any Obligation (whether arising herein
or otherwise);
5.1.2 if a Default or an Event of Default occurs under any Loan
Document or any representation or warranty made by the Company
or Derma Sciences, Inc. herein or in any other Loan Document
or in any certificate, statement or report furnished in
connection with or pursuant to the Guarantee, the Loan
Agreement or any other Loan Document is found to be false or
incorrect in any way so as to make it materially misleading
when made or when deemed to have been made;
5.1.3 if default occurs in payment or performance of any obligation
in favour of any person to whom the Company is indebted and
the default continues for five (5) Business Days after notice
by the Lender to the Company specifying such default except
obligations: (i) to trade creditors incurred in the ordinary
course of business; (ii) which do not materially and adversely
affect the financial condition of the Company; and (iii) which
are contested actively and in good faith by appropriate and
timely proceedings which are dismissed, vacated, stayed or the
like within a period of 45 days of default;
5.1.4 if default occurs in payment or performance of any obligation
(whether now existing, presently arising or created in future)
of any Affiliate of the Company in favour of the Lender and
the default continues for five (5) Business Days after notice
by the Lender to the Company specifying such default;
5.1.5 if the Company commits an act of bankruptcy or becomes
insolvent within the meaning of any bankruptcy or insolvency
legislation applicable to it or a petition or other process
for the bankruptcy of the Company is filed or instituted
unless the same is contested actively and in good faith by
appropriate and timely proceedings and is dismissed, vacated,
stayed or the like within a period of 45 days thereof;
5.1.6 if any act, matter or thing is done toward, or any action or
proceeding is launched, had or taken for, terminating the
corporate existence of the Company, whether by winding-up,
surrender of charter or otherwise unless the same is contested
actively and in good faith by appropriate and timely
proceedings and is dismissed, vacated, stayed or the like
within a period of 45 days thereof;
5.1.7 if the Company ceases to carry on its business or makes or
proposes to make any sale of its assets in bulk or any sale of
its assets out of the usual course of its business;
5.1.8 if any proposal is made or any petition is filed by the
Company under any law having for its purpose the extension of
time for payment, composition or compromise of the liabilities
of the Company or other reorganization or arrangement
respecting its liabilities or if the Company gives notice of
its intention to make or file any such proposal or petition
including without limitation an application to any court for
an order to stay or suspend any proceedings of creditors
pending the making or filing of any such proposal or petition;
5.1.9 if any receiver, administrator or manager of the property,
assets or undertaking of the Company or a substantial part
thereof is appointed pursuant to the terms of any trust deed,
trust indenture, debenture or similar instrument or by or
under any judgment or order of any court unless the same is
contested actively and in good faith by appropriate and timely
proceedings and is dismissed, vacated, stayed or the like
within a period of 45 days thereof;
5.1.10 if any balance sheet or other financial statement provided by
the Company to the Lender pursuant to the provisions hereof is
false or misleading in any material respect;
5.1.11 if the Company permits any sum which has been admitted as due
by it or is not disputed to be due by it and which forms, or
is capable of being made, an Encumbrance upon any of the
Collateral in priority to, or pari passu with, the charge
created by this Agreement to remain unpaid for forty-five (45)
days after proceedings have been taken to enforce the same as
such charge;
5.1.12 if any proceedings are taken to enforce any Encumbrance
affecting any of the Collateral unless the same is contested
actively and in good faith by appropriate and timely
proceedings and is dismissed, vacated, stayed or the like
within a period of 45 days thereof;
5.1.13 if the validity of any Loan Document is brought into question
or disputed in whole or in part where the effect of any such
invalidity would materially adversely affect the interests of
the Lender hereunder or in connection with the Guarantee;
5.1.14 if any action is taken or power or right be exercised by any
Governmental Authority or if any claim or proceeding is
pending or threatened by any person which may have a material
adverse effect on the Company, its business or operations, its
properties or its prospects unless the same is contested
actively and in good faith by appropriate and timely
proceedings and is dismissed, vacated, stayed or the like
within a period of 45 days thereof;
5.1.15 if in the reasonable opinion of the Lender a material adverse
change has occurred in the financial condition or business of
the Company which may impair the ability or willingness of the
Company to perform its obligations hereunder, under the Offer
of Finance or under any other Loan Document or if the Lender
considers that the Collateral is in jeopardy or that the
Lender is insecure;
5.1.16 if any event occurs with respect to Derma Sciences, Inc. or
any Guarantor which if a like event had occurred with respect
to the Company would have constituted an Event of Default
(subject to any applicable cure period);
5.1.17 if the Company is declared to be in default by the Bank or an
Event of Default or Default occurs under the terms of the
Offer of Finance or any other material agreement delivered by
the Company to the Bank in connection with the Offer of
Finance, as each may be amended, renewed, restated or
substituted for from time to time;
5.1.18 if there is any default or failure in the observance or
performance of any Obligation (whether arising herein or
otherwise) other than as specified elsewhere in this Section
5.1 and the default or failure continues for five (5) Business
Days after notice by the Lender to the Company specifying such
default or failure;
5.1.19 if Derma Sciences, Inc. ceases to own directly or indirectly 100% of all
issued and outstanding shares in the capital stock of the Company; and
5.1.20 if any insurance on a material amount of the Collateral lapses
and the insurance is not reinstated or replaced within five
(5) Business Days after such lapse.
5.2 Consequences of an Event of Default
Upon the occurrence and continuance of an Event of Default,
any obligation of the Lender to make further loans or advances or extend other
credit to the Company shall immediately terminate and all Obligations and all
monies secured hereby shall at the option of the Lender become forthwith due and
payable whereupon the floating charge hereby created shall crystallize, all of
the rights and remedies hereby conferred in respect of the Collateral shall
become immediately enforceable and any and all additional and collateral
securities for payment of this Agreement shall become immediately enforceable.
5.3 Enforcement
Upon the happening and continuance of any Event of Default the
Lender shall have the following rights and powers:
5.3.1 to enter into possession of all or any part of the Collateral;
5.3.2 to preserve and maintain the Collateral and make such replacements thereof
and additions thereto as it deems advisable;
5.3.3 to borrow money in the Company's name or in the Lender's name,
to borrow money on the security of the Collateral or to
advance the Lender's own money to the Company, in any case
upon such terms as the Lender may deem reasonable and upon the
security hereof;
5.3.4 to pay or otherwise satisfy in whole or in part any Encumbrances which, in
the Lender's opinion, rank in priority to the security hereof;
5.3.5 after entry by its officers or agents or without entry to
sell, lease or otherwise dispose in any way whatsoever of all
or any part of the Collateral either en bloc or separately at
public auction or by tender or by private agreement and at
such time or times and on such terms and conditions as the
Lender in its discretion may determine and without any notice
to or concurrence of the Company except as may be required by
applicable law;
5.3.6 by instrument in writing to appoint any person or persons
(whether an officer or officers of the Lender or not) (herein
called the "Receiver") as receiver or receiver-manager of all
or any part of the Collateral and to remove any Receiver so
appointed and appoint another or others in his stead;
5.3.7 to exercise any of the rights of a secured party under the
Personal Property Security Act of the Applicable Province or
any other rights available at law or equity;
5.3.8 to transfer or require the transfer of any securities forming
part of the Collateral to the Lender and to exercise all
rights, including, without limitation, voting rights attached
to such securities; and
5.3.9 to bring proceedings in any court of competent jurisdiction
for the appointment of a receiver or a receiver-manager of all
or any portion of the Collateral.
The security of this Agreement may be realized and the rights
enforced by any remedy or in any manner authorized or permitted by this
Agreement or by law or equity and no remedy for the realization of the security
hereof shall be exclusive of or dependent upon any other remedy and all or any
remedies may from time to time be exercised independently or in any combination.
5.4 Disposition
Without limiting the generality of the foregoing, upon the
occurrence and continuance of an Event of Default, it shall be lawful for the
Lender:
5.4.1 to make any sale, lease or other disposition of the Collateral
either for cash or upon credit or partly for one and partly
for the other upon such conditions as to terms of payment as
it in its absolute discretion may deem proper;
5.4.2 to rescind or vary any contract for sale, lease or other
disposition that the Lender may have entered into pursuant
hereto and resell, release or redispose of the Collateral with
or under any of the powers conferred herein; and
5.4.3 to stop, suspend or adjourn any sale, lease or other
disposition from time to time and to hold the same as
adjourned without further notice.
Upon any such sale, lease or other disposition the Lender
shall be accountable only for money actually received by it. The Company shall
be accountable for any deficiency and the Lender shall distribute any surplus as
required by law. The Lender may deliver to the purchaser or purchasers of the
Collateral or any part thereof good and sufficient conveyances or deeds for the
same free and clear of any claim by the Company. The purchaser or lessee
receiving any disposition of the Collateral or any part thereof need not inquire
whether default under this Agreement has actually occurred but may as to this
and all other matters rely upon a statutory declaration of an officer of the
Lender, which declaration shall be conclusive evidence as between the Company
and any such purchaser or lessee, and the purchaser or lessee need not look to
the application of the purchase money, rent or other consideration given upon
such sale, lease or other disposition, which shall not be affected by any
irregularity of any nature or kind relating to the crystallizing or enforcing of
the security hereof or the taking of possession of the Collateral or the sale,
lease or other disposition thereof.
5.5 Powers of Receiver
Any Receiver appointed as aforesaid shall have the power
without legal process:
5.5.1 to take possession of the Collateral or any part thereof wherever the same
may be found;
5.5.2 to carry on the business of the Company or any part thereof in the name of
the Company or of the Receiver; and
5.5.3 to exercise on behalf of the Lender all of the rights and remedies herein
granted to the Lender,
and without in any way limiting the foregoing the Receiver shall have all the
powers of a receiver appointed by a court of competent jurisdiction. Any
Receiver shall, so far as concerns responsibility for his acts, be deemed the
agent of the Company, and the Lender shall not be in any way responsible for any
misconduct or negligence on the part of any Receiver or any loss resulting
therefrom.
5.6 Application of Moneys
All moneys actually received by the Lender or by the Receiver
in enforcing the security of this Agreement shall be applied, subject to the
proper claims of any other person:
5.6.1 first, to pay or reimburse the Lender and any Receiver the costs, charges,
expenses and advances payable by the Company in accordance herewith;
5.6.2 second, in or toward the payment to the Lender of all other
moneys owing hereunder or secured hereby in such order as the
Lender in its sole discretion may determine; and
5.6.3 third, any surplus shall be distributed as required by law.
5.7 Powers of Directors and Officers
Upon the Lender declaring as aforesaid that the security
hereof has become enforceable and crystallized or the Company receiving notice
from the Lender of the taking of possession of any of the Collateral or of the
appointment of a Receiver, all the powers, functions, rights and privileges of
the directors and officers of the Company with respect to the property, business
and undertaking of the Company shall cease except to the extent specifically
continued at any time by the Lender in writing, the whole to the extent
permitted by law.
5.8 Limitations on Liability
Neither the provisions of this Agreement nor anything done
under or pursuant to the rights, remedies and powers conferred upon the Lender
and the Receiver, whether hereunder or otherwise, will render the Lender a
mortgagee in possession. Neither the Lender nor any Receiver will be bound to
collect, dispose of, realize, enforce or sell any securities, Instruments,
Chattel Paper or Intangibles (including any Accounts) comprised in the
Collateral or to allow any such Collateral to be sold or disposed of, nor will
it be responsible for any loss occasioned by any such sale or other dealing or
for any failure to sell or so act, nor will it be responsible for any failure to
take necessary steps to preserve rights against others in respect of such
Collateral, nor will it be responsible for any loss occasioned by the failure to
exercise any rights in respect of Collateral within the time limited for the
exercise thereof, except to the extent such constitutes gross negligence or
wilful misconduct. Neither the Lender nor the Receiver will be obligated to keep
Collateral separate or identifiable.
Article 6
GENERAL
6.1 Waiver
No act or omission by the Lender in any manner whatever in the
premises shall extend to or be taken to affect any provision hereof save only
express waiver in writing. A waiver of default shall not extend to, or be taken
in any manner whatsoever to affect the rights of the Lender with respect to, any
subsequent default, whether similar or not. The Company waives every defence
based upon any or all indulgences that may be granted by the Lender.
6.2 Other Securities
The rights of the Lender hereunder shall not be prejudiced nor
shall the liabilities of the Company or of any other person be reduced in any
way by the taking of any other security of any nature or kind whatsoever whether
in addition to, or in substitution for, existing security either at the time of
execution of this Agreement or at any time hereafter.
6.3 No Merger or Novation
Neither the taking of any judgment nor the exercise of any
power of seizure or sale shall operate to extinguish the liability of the
Company to pay the moneys hereby secured nor shall the same operate as a merger
of any covenant herein contained or of any other Obligation, nor shall the
acceptance of any payment or other security constitute or create any novation.
6.4 Amalgamation
The Company acknowledges that if it amalgamates with any other
corporation or corporations (a) the Collateral and the lien created hereby shall
extend to and include all the property and assets of each of the amalgamating
corporations and the amalgamated corporation and to any property or assets of
the amalgamated corporation thereafter owned or acquired, (b) the term,
"Company", where used herein shall extend to and include each of the
amalgamating corporations and the amalgamated corporation, and (c) the term,
"Obligations", where used herein shall extend to and include the Obligations of
each of the amalgamating corporations and the amalgamated corporation. Nothing
in this Section 6.4 shall be interpreted as permitting the Company to amalgamate
in violation of any covenant of the Company contained herein or in any other
agreement binding the Company.
6.5 Power of Attorney
The Company for valuable consideration irrevocably appoints
the Lender and its officers from time to time or any of them to be the attorneys
of the Company in the name of and on behalf of the Company to execute and do any
deeds, transfers, conveyances, assignments, assurances and things which the
Company ought to execute and do under the covenants and provisions herein
contained and generally to use the name of the Company in the exercise of all or
any of the powers hereby conferred on the Lender.
6.6 The Lender May Remedy Default
If the Company fails to do anything hereby required to be done
by it, the Lender may, but shall not be obliged to, do such thing and all sums
thereby expended by the Lender shall be payable forthwith by the Company, shall
be secured hereby and shall have the benefit of the lien hereby created, but no
such performance by the Lender shall be deemed to relieve the Company from any
default hereunder.
6.7 Purchase Money Security Interest
The Company acknowledges that the security interest in any
item of Collateral and its proceeds shall constitute a purchase-money security
interest to the extent it secures Obligations incurred by the Company to enable
the Company to acquire rights in such Collateral. The Lender hereby reserves
title to any item of Collateral which may be sold by the Lender to the Company
until satisfaction of the Obligations as aforesaid.
6.8 Taxes and Reserve Requirements
In case the Lender is or becomes subject to any tax with
respect to payments of principal, interest or other amounts by the Company
hereunder or in respect of any of the Obligations (except for taxes on the
overall net income of the Lender) or to any reserve or similar requirement
against assets held by, or deposits in or for the account of, or loans by, an
office of the Lender, or to any other condition with respect to this Agreement,
and the result of any of the foregoing is to increase the cost to the Lender of
making or maintaining any Obligation or to reduce the income receivable by the
Lender in respect of any Obligation, then the Company shall pay to the Lender on
demand that amount which shall compensate the Lender for such additional cost or
reduction in income. A certificate of the Lender setting forth the amount of
such additional compensation and the basis therefor shall be submitted by the
Lender to the Company and shall be conclusive evidence, in the absence of
manifest error, of such amount.
6.9 Additional Provisions
Any provisions set forth in Schedule "D" hereto form part
hereof to the same extent and effect as if set forth in the body hereof.
6.10 Notices
Any notice or written communication given pursuant to or in
connection with this Agreement shall be in writing and shall be given by
delivering the same personally or by prepaid courier, prepaid registered mail or
facsimile, addressed to the party to be notified at the address of such party
set out herein (and in the case of the Borrower shall also include the address
of 000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, X.X. 00000, Attention: X. Xxxxxx)
or at such other address of which such party has given notice to the other
parties hereto. Any such notice shall be conclusively deemed to have been given
and received on the day of actual receipt by the addressee or, if given by
prepaid registered mail, on the third Business Day following the mailing date
(absent a general disruption in postal service.)
6.11 Offer of Finance
This Agreement is being issued by the Company to the Lender
pursuant to the terms of the Guarantee. All terms and conditions of the
Guarantee shall remain in full force and effect. In the event of any express
inconsistency between the terms and provisions of the Guarantee and the terms
and provisions of this Agreement, the terms and provisions of the Guarantee
shall prevail.
6.12 Receipt
The Company hereby acknowledges receipt of a true copy of this
Agreement and, to the extent permitted by law, waives any right it may have to
receive a copy of any financing statement, financing change statement and
verification statement filed from time to time in respect of the security
created hereby.
6.13 Successors and Assigns, etc.
This Agreement and all its provisions shall enure to the
benefit of the Lender, its successors and assigns and shall be binding upon the
Company, its successors and assigns, and every reference herein to a party
hereto shall include such party's successors and assigns as if specifically
named. Time shall be in all respects of the essence hereof.
IN WITNESS WHEREOF the Company has hereunto affixed its
Corporate Seal attested by the hands of its proper officers duly authorized in
that behalf the ____ day of _________________, 2002.
DUMEX MEDICAL CANADA INC.
per:
-----------------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman c/s
per:
-----------------------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President and Chief Executive Officer
Schedule "A"
Premises
Municipal Address
Xxxxx 000, 000, 000, 000 and 000
00 -000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Unit 3
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxx X0X 0X0
0000 Xxxx Xxxxxxxxxxxxx Xxxxx, Xxxxx X
Xxxxxxxx, Xxxxxxx 00000
000 Xxxxxxxxx Xxxx-Xxxxxx Xxxx
Xxxxxxxxxxxxx, Xxxxxx
Direct Distribution Centre Branch
00 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx
Advance Kamak Distribution Center
000 Xxxxxxxx Xxx
Xxx Xxxxxxxxxxx, Xxxxxxx Xxxxxxxx
00 XxxxXxxx Xxxx, 0xx Xxxxx
Xxxxxxx Economic & Technological Development Zone
Nantong City, Jiangsu, Peoples Republic of China
Corporate Names or Styles
1. Dumex
2. Dumex Medical
3. Wound Care Direct
4. Health Direct
Schedule "B"
PERSONAL PROPERTY
(Section 2.1.1..(l))
1) The following goods owned by the Company now located at 00-000 Xxxxxxxx
Xxxxx, Xxxxxxx and 0000 Xxxxxx Xxxxx Xxxx, Xxxxxxxxx,Xxxxxxx.
See Dumex Machinery and Equipment Schedule as attached to the Asset Purchase
Agreement, as amended.
2) Contract dated November 1, 2000 between Dumex Medical Surgical Products
Ltd. and BDH Inc.
Schedule "C"
Permitted Encumbrances
(Section 1.1)
Personal Property Security Act (Ontario) Registrations:
PPSA reports of the Company and Dumex Medical Inc. attached hereto.
The Encumbrances of CSF and Laurentian Bank upon the undertaking, assets and
property of the Company which Encumbrance shall be subject to the Priorities
Agreement.
..
3.
Schedule "D"
ADDITIONAL PROVISIONS
WAIVED BY SECURED PARTY.
..
Schedule "E"
MISCELLANEOUS PARTICULARS
1.1 "Affiliate" includes the following corporations:
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Derma Sciences, Inc.
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Sunshine Products, Inc.
--------------------------------------------------------------------------------
Dumex Medical Holding Corp.
--------------------------------------------------------------------------------
Dumex Medical Corp.
--------------------------------------------------------------------------------
Nantong Dumex Medical Products Company
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1.2 "Management Group" includes the following persons:
Xxxxxx X. Xxxxxx, Xxxx X. Xxxxxx, Xxxxxxx Xxxxxxx
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1.3 "Normal Business" means the following activities:
manufacture, sale and distribution of surgical and wound care products
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1.4 "Offer of Finance" for the time being means the letter of the Bank to the
Company dated the 23rd day of July, 2002 , as accepted by the Company;
1.5 "Shareholder Ownership" means the direct or indirect beneficial ownership
of shares of the Company as follows:
Owner Class of Shares Number of Shares
----- --------------- ----------------
Derma Sciences, Inc. common 100
