GUARANTY
Greystone
Business Credit II LLC
|
Borrower:
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Pneutech
Inc., a
corporation organized under the laws of Canada
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|
Borrower:
|
Hydramen
Fluid Power Limited, a
corporation organized under the laws of Ontario
|
|
Guarantor:
|
Xxxxxxxx
Controls Inc., a
corporation organized under the laws of
Canada
|
Each
Borrower, as a debtor under an insolvency proceeding commenced in the Commercial
Division of the Superior Court of the Province of Quebec, District of Montreal,
under the Companies' Creditors Arrangement Act R.S.C. 1985, c. C-36 (the
"CCAA"),
and
each of which is continuing to operate its business and manage its properties
pursuant to the provisions of the CCAA, has requested that GREYSTONE
BUSINESS CREDIT II LLC ("Lender")
provide certain financial accommodations to such Borrower pursuant to the terms
of a Loan and Security Agreement between such Borrower and Lender, each dated
of
even date herewith (as amended from time to time, the "Loan
Agreements"
and
each individually a "Loan
Agreement").
As
one of the conditions to providing financing to each Borrower, Lender has
required that Guarantor, also a debtor under an insolvency proceeding commenced
in the Commercial Division of the Superior Court of the Province of Quebec,
District of Montreal, under the CCAA and continuing to operate its business
and manage its properties pursuant to the provisions of the CCAA, guaranty
all
obligations of each Borrower to Lender.
For
value
received and in consideration of any loan, advance or financial accommodation
of
any kind whatsoever heretofore, now or hereafter made, given or granted to
each
Borrower by Lender pursuant to the Loan Agreements, Guarantor unconditionally
jointly
and severally (solidarily) guaranties
the full and prompt payment when due, whether at maturity or earlier, by reason
of acceleration or otherwise, and at all times thereafter, of the indebtedness,
liabilities and obligations of every kind and nature of each Borrower to Lender
(including, without limitation, all interest accruing after the filing of a
proceeding under the Bankruptcy Code (as defined in the Loan Agreements) whether
or not allowed by the court in such proceeding, and all other indebtedness,
liabilities and obligations arising after the filing of any proceeding under
the
Bankruptcy Code), howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, joint or several, now or hereafter existing,
or due or to become due, in each case arising under the Loan Agreements or
the
other Loan Documents (as defined in the Loan Agreements), plus all costs and
expenses (including, without limitation, all court costs and reasonable
attorneys' and paralegals' fees and expenses) paid or incurred by Lender in
endeavoring to collect all or any part of such indebtedness, liabilities and
obligations from, or in prosecuting any action against, Guarantor or any other
guarantor of all or any part of such indebtedness, liabilities and obligations
(all such indebtedness, liabilities, obligations, costs and expenses being
hereinafter referred to as "Borrower's
Obligations"
for
each individual Borrower and "Borrowers'
Obligations"
for all
Borrowers). All sums becoming due under this Guaranty shall bear interest from
the due date thereof until paid at the highest rate charged with respect to
any
of any Borrowers' Obligations under the Loan Agreements. Guarantor
expressly renounces to the benefits of division and discussion.
Guarantor
agrees that its obligations under this Guaranty are unconditional, irrespective
of (i) the validity or enforceability of Borrowers' Obligations or any note
or
other instrument evidencing Borrowers' Obligations, (ii) the absence of any
attempt by Lender to collect any of Borrowers' Obligations from any Borrower
or
any other guarantor, (iii) Lender's waiver or consent with respect to any
provision of the Loan Documents, (iv) Lender's failure to perfect or maintain
its security interests in, or to preserve its rights with respect to, any of
the
Collateral (as defined in the Loan Agreements), (v) Lender's election, in any
proceeding under Chapter 11 of the Bankruptcy Code or other applicable
insolvency law, of the application of Section 1111(b)(2) of the Bankruptcy
Code
or similar provision of any other applicable insolvency law, (vi) any borrowing
or grant of a security interest by any Borrower as debtor-in-possession under
Section 364 of the Bankruptcy Code or similar provision of any other applicable
insolvency law, (vii) the disallowance, under Section 502 of the Bankruptcy
Code
or similar provision of any other applicable insolvency law, of all or any
of
Lender's claims for repayment of Borrowers' Obligations, (viii)
any lack or limitation of power, incapacity or disability on the part of either
Borrower or of the directors, partners or agents thereof, (ix) any change or
changes in the name, corporate existence or structure of either Borrower or
the
link or relationship between Guarantor and either Borrower, or (ix)
any
other circumstance that might constitute a legal or equitable discharge or
defense of any Borrower or any guarantor.
No
payment made by or for the account or benefit of Guarantor (including, without
limitation, (i) a payment made by any Borrower in respect of any such Borrower's
Obligations, (ii) a payment made by any person under any other guaranty of
any
of Borrowers' Obligations or (iii) a payment made by means of set off,
compensation or other application of funds by Lender) shall entitle Guarantor,
by subrogation or otherwise, to any payment by any Borrower or from or out
of
any property of any such Borrower, and Guarantor shall not exercise any rights
or remedies against any Borrower or any property of any such Borrower including,
without limitation, any right of contribution, indemnity or reimbursement by
reason of any performance by Guarantor under this Guaranty, all of such rights
of subrogation, contribution, indemnity and reimbursement being hereby waived
by
Guarantor. The provisions of this paragraph shall survive the termination of
this Guaranty or the release or discharge of Guarantor from liability hereunder.
Each Borrower is a third party beneficiary of the provisions of this
paragraph.
Guarantor
hereby waives diligence, presentment, demand for payment, filing of claims
with
a court in the event of receivership or bankruptcy of any Borrower, protest
or
notice with respect to Borrowers' Obligations and all demands whatsoever, and
covenants that this Guaranty will not be discharged, except by complete and
irrevocable payment and performance of the obligations and liabilities contained
herein. No notice to any party, including Guarantor, shall be required for
Lender to make demand hereunder. Such demand shall constitute a mature and
liquidated claim against Guarantor. At any time after maturity of any Borrower's
Obligations, whether by acceleration or otherwise, Lender may, at its sole
election, proceed directly and at once, without notice, against Guarantor to
collect and recover the full amount or any portion of any such Borrower's
Obligations, without first proceeding against any such Borrower or any other
person or against any of the Collateral. Lender shall have the exclusive right
to determine the application of payments and credits, if any, from Guarantor,
any Borrower or any other person, on account of any such Borrower's
Obligations.
-2-
Lender
is
hereby authorized, without notice or demand to Guarantor and without affecting
or impairing the liability of Guarantor hereunder, to from time to time (i)
renew, extend, accelerate or otherwise change the time for payment of, or other
terms relating to, any Borrower's Obligations or otherwise modify, amend or
change the terms of any promissory note or other agreement, document or
instrument now or hereafter executed by any Borrower and delivered to Lender;
(ii) accept partial payments on any Borrower's Obligations; (iii) take and
hold
Collateral for the payment of any Borrower's Obligations, or for the payment
of
this Guaranty, or for the payment of any other guaranties of any Borrower's
Obligations or other liabilities of any Borrower, and exchange, enforce, waive
and release any Collateral; (iv) apply Collateral and direct the order or manner
of sale thereof as it may determine in its sole discretion; and (v) settle,
release, compromise, collect or otherwise liquidate any Borrower's Obligations
and any Collateral in any manner.
At
any
time after maturity of any Borrower's Obligations, Lender may, in its sole
discretion, without notice to Guarantor and regardless of the acceptance of
any
Collateral for the payment hereof, appropriate and apply toward payments of
any
such Borrower's Obligations, (i) any indebtedness due or to become due from
Lender to Guarantor and (ii) any moneys, credits or other property belonging
to
Guarantor at any time held by or coming into the possession of Lender or any
affiliates of Lender, whether for deposit or otherwise.
Guarantor
assumes responsibility for keeping itself informed of the financial condition
of
each Borrower and all other guarantors of all or any of Borrowers' Obligations,
and of all other circumstances bearing upon the risk of nonpayment of any
Borrowers' Obligations or any part thereof that diligent inquiry might reveal,
and Guarantor agrees that Lender shall have no duty to advise Guarantor of
information known to Lender regarding any of the foregoing. Guarantor
acknowledges familiarity with each Borrower's financial condition and represents
that it has not relied on any statements made, or information furnished, by
Lender or its agents in obtaining such familiarity. If Lender provides any
such
information to Guarantor, Lender shall be under no obligation to (i) undertake
any investigation not a part of its regular business routine, (ii) disclose
any
information which, pursuant to accepted or reasonable commercial finance
practices, Lender wishes to maintain confidential or (iii) make any other or
future disclosures of any information to Guarantor.
Notwithstanding
any contrary provision of this Guaranty, it is intended that neither this
Guaranty nor any liens, hypothecs or security interests securing this Guaranty
constitute a "Fraudulent
Conveyance"
(as
defined below). Consequently, Guarantor agrees that if this Guaranty or any
liens, hypothecs or security interests securing this Guaranty would, but for
the
application of this sentence, constitute a Fraudulent Conveyance, this Guaranty
and each such lien and security interest shall be valid and enforceable only
to
the maximum extent that would not cause this Guaranty or such lien or security
interest to constitute a Fraudulent Conveyance, and this Guaranty shall
automatically be deemed to have been amended accordingly at all relevant times.
For purposes hereof, a "Fraudulent
Conveyance"
means a
fraudulent conveyance under Section 548 of the Bankruptcy Code or a fraudulent
conveyance or fraudulent transfer under any applicable fraudulent conveyance
or
fraudulent transfer law or similar law of any state or other governmental unit
as in effect from time to time or similar provision of any other applicable
insolvency law,
including the Bankruptcy and Insolvency Act (Canada).
-3-
Guarantor
waives the right to assert the doctrine of marshaling with respect to any of
the
Collateral securing any Borrower's Obligations. Guarantor further agrees that,
to the extent any Borrower makes one or more payments to Lender, or Lender
receives any proceeds of Collateral, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to
any such Borrower, its estate, trustee, receiver or any other party under the
Bankruptcy Code or other law, that portion of any such Borrower's Obligations
which has been paid, reduced or satisfied by such payment or proceeds shall
be
reinstated and continued in full force and effect as of the date such initial
payment, reduction or satisfaction occurred and this Guaranty shall continue
to
be in existence and in full force and effect, irrespective of whether any
evidence of indebtedness or this Guaranty has been surrendered or
canceled.
Guarantor
agrees that all payments hereunder shall be made without setoff, compensation
or
counterclaims and Guarantor waives all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor
and
notices of acceptance of this Guaranty. Guarantor further waives all notices
of
the existence, creation or incurring of new or additional indebtedness, arising
either from additional loans extended to any Borrower or otherwise, and also
waives all notices that the principal amount, or any portion thereof, or any
interest on any instrument or document evidencing all or any part of any
Borrowers' Obligations is due, notices of any and all proceedings to collect
from the maker, any endorser or any other guarantor of all or any part of any
Borrowers' Obligations, or from anyone else, and, to the extent permitted by
law, notices of exchange, sale, foreclosure, realization, surrender or other
handling of any Collateral securing any Borrower's Obligations.
No
delay
on the part of Lender in the exercise of any right or remedy shall operate
as a
waiver thereof, and no single or partial exercise by Lender of any right or
remedy shall preclude any further exercise thereof except as expressly set
forth
in a writing duly signed and delivered on Lender's behalf by an authorized
officer or agent of Lender; nor shall any modification or waiver of any of
the
provisions of this Guaranty be binding upon Lender, except as expressly set
forth in a writing duly signed and delivered on Lender's behalf by an authorized
officer or agent of Lender. Lender's failure at any time or times hereafter
to
require strict performance by any Borrower or Guarantor of any of the
provisions, warranties, terms and conditions contained in any promissory note,
security agreement, deed of hypothec, agreement, guaranty, instrument or
document now or at any time or times hereafter executed by any Borrower or
Guarantor and delivered to Lender, shall not waive, affect or diminish any
right
of Lender at any time or times hereafter to demand strict performance thereof
and such right shall not be deemed to have been waived by any act or knowledge
of Lender, or its respective agents, officers or employees, unless such waiver
is contained in an instrument in writing signed by an officer or agent of
Lender, and directed to any such Borrower or Guarantor, as applicable,
specifying such waiver. No waiver by Lender of any default shall operate as
a
waiver of any other default or the same default on a future occasion, and no
action by Lender permitted hereunder shall in any way affect or impair Lender's
rights or the obligations of Guarantor under this Guaranty. Any determination
by
a court of competent jurisdiction of the amount of any principal or interest
owing by any Borrower to Lender shall be conclusive and binding on Guarantor
irrespective of whether Guarantor was a party to the suit or action in which
such determination was made.
-4-
Guarantor
hereby represents and warrants that (i) it is in Guarantor's direct
interest to assist each Borrower in procuring credit, because any such Borrower
is an affiliate of Guarantor, furnishes goods or services to Guarantor,
purchases or acquires goods or services from Guarantor, and/or otherwise has
a
direct or indirect corporate or business relationship with Guarantor,
(ii) this Guaranty has been duly and validly authorized, executed and
delivered and constitutes the valid and binding obligation of Guarantor,
enforceable in accordance with its terms, and (iii) the execution and
delivery of this Guaranty does not violate or constitute a default under (with
or without the giving of notice, the passage of time, or both) any order,
judgment, decree, instrument or agreement to which Guarantor is a party or
by
which it or its assets are affected or bound.
Each
payment to be made under this Guaranty will be made in US dollars (the
"Specified
Currency").
To
the fullest extent permitted by applicable law, any obligation of Guarantor
to
make payments under this Guaranty in the Specified Currency will not be
discharged or satisfied by any tender in any currency other than the Specified
Currency. To the fullest extent permitted by applicable law, if any judgment
or
order expressed in a currency other than the Specified Currency is rendered
for
any payment of any amount owing in respect of this Guaranty, Lender, after
recovery in full of the aggregate amount to which it is entitled pursuant to
the
judgment or order, will be entitled to receive immediately from Guarantor the
amount of any shortfall of the Specified Currency received by Lender as a
consequence of sums paid in such other currency and will refund promptly to
Guarantor any excess of the Specified Currency received by Lender as a
consequence of sums paid in such other currency if such shortfall or such excess
arises or results from any variation between the rate of exchange at which
the
Specified Currency are converted into the currency of the judgment or order
for
the purposes of such judgment or order and the rate of exchange at which Lender
is able, acting in a reasonable manner and in good faith, in converting the
currency received into the Specified Currency, to purchase the Specified
Currency with the amount of the currency of the judgment or order actually
received by Lender. The term "rate of exchange" includes, without limitation,
any premiums and costs of exchange payable in connection with the purchase
of or
conversion into the Specified Currency.
-5-
All
payments to be made hereunder by Guarantor shall be made free and clear of
deduction for any present or future tax, levy, impost, duty, charge,
withholding, assessment or fee of any nature (including interest, penalties
and
additions thereto) that is imposed by any government or other taxing authority,
but excluding, (i) taxes imposed on or measured by Lender's capital, net income
and franchise taxes or any other tax imposed on Lender for the privilege of
doing business, (ii) any taxes (other than withholding taxes) that would not
be
imposed but for a connection between Lender and the jurisdiction imposing such
taxes (other than a connection arising solely by virtue of the activities of
Lender pursuant to or in respect of this Guaranty or any Loan Document), (iii)
any taxes imposed on Lender as a result of its voluntary transfer of the Loans
or any interest therein, (iv) any taxes imposed on or measured by Lender's
assets, gross or net income, gross or net receipts, branch profits, capital
gains, excess profits, minimum taxes from tax preferences, alternative minimum
taxes or accumulated earnings taxes and (v) any taxes for which Lender is
actually reimbursed pursuant to any other provisions of this Guaranty (all
such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being collectively referred to herein as "Taxes"). If any Taxes
are
imposed and required to be withheld from any payment hereunder, Guarantor shall
(a) increase the amount of such payment so that Lender will receive a net amount
(after deduction of all Taxes, including any Taxes on the amount of any such
increase) equal to the amount due hereunder, (b) pay such Taxes to the
appropriate taxing authority for the account of Lender and (c) as promptly
as
possible thereafter, send Lender an original receipt showing payment thereof,
together with such additional documentary evidence as Lender may from time
to
time reasonably require. If Guarantor fails to perform its obligations under
parts (b) or (c) of the preceding sentence, Guarantor shall indemnify Lender
for
any incremental Taxes, interest or penalties that may become payable by Lender
as a consequence of such failure.
This
Guaranty shall be binding upon Guarantor and upon the successors and permitted
assigns of Guarantor and shall inure to the benefit of Lender and its successors
and assigns. All references herein to any Borrower shall be deemed to include
its successors and permitted assigns and all references herein to Lender shall
be deemed to include its successors and assigns. Each Borrower's and Guarantor's
successors and permitted assigns shall include a receiver, trustee, custodian
of
or for any such Borrower or Guarantor or any of their respective assets and
any
such Borrower or Guarantor as debtor-in-possession. All references to the
singular shall be deemed to include the plural where the context so
requires.
-6-
GUARANTOR
HEREBY CONSENTS AND AGREES THAT THE STATE AND FEDERAL COURTS IN NEW YORK COUNTY,
NEW YORK SHALL HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES WITH RESPECT TO THIS GUARANTY AND WAIVES ANY OBJECTION WHICH IT
MAY
HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS
TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND CONSENTS THAT ALL SERVICE
OF PROCESS UPON GUARANTOR BE MADE BY REGISTERED MAIL OR MESSENGER DIRECTED
TO
GUARANTOR AT THE ADDRESS SET FORTH BELOW GUARANTOR'S SIGNATURE AND THAT SERVICE
SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. GUARANTOR
HEREBY AGREES THAT ANY CLAIM OR DISPUTE BROUGHT BY GUARANTOR AGAINST LENDER
OR
ANY MATTER ARISING OUT OF THIS GUARANTY SHALL BE BROUGHT EXCLUSIVELY IN THE
STATE AND FEDERAL COURTS IN NEW YORK COUNTY, NEW YORK. GUARANTOR HEREBY WAIVES,
TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY. NOTHING CONTAINED HEREIN SHALL
AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST
GUARANTOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
THIS
GUARANTY SHALL BE GOVERNED IN ALL RESPECTS BY THE INTERNAL LAWS OF THE STATE
OF
NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAWS.
Wherever
possible each provision of this Guaranty shall be interpreted in such manner
as
to be effective and valid under applicable law, but if any provision of this
Guaranty shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this
Guaranty.
[Signature
page follows]
-7-
IN
WITNESS WHEREOF, this Guaranty has been duly executed by Guarantor this
7th
day of
September, 2006.
| XXXXXXXX CONTROLS INC. | ||
| |
|
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| By: | /s/ Xxxxx Xxxxx | |
| Its Chairman | ||
| [Address] | ||
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