Exhibit 2.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT made the 13th day of May, 2004 FROM:
FALLS MOUNTAIN COAL INC.,
a company incorporated under the laws of British Columbia
and having its head office at
Suite 501 - 000 Xxxxxxx , Xxxxxxxxx, Xxxxxxx Xxxxxxxx,
X0X 0X0
("Falls Mountain")
AND
PINE VALLEY COAL LTD.
a corporation incorporated under the laws of Alberta
and its head office in British Columbia at
Suite 501 - 000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx,
X0X 0X0
("Pine Valley")
(Falls Mountain and Pine Valley are collectively referred to herein as the
"Debtor")
TO:
MARUBENI CORPORATION
having an address at Suite 000, Xxx Xxxxxx Xxxxxx 1
000 0xx Xxxxxx, X.X. Xxxxxxx, Xxxxxxx, X0X 0X0
(the "Secured Party")
FOR VALUE RECEIVED, the Debtor covenants, agrees, warrants, represents,
acknowledges, and confirms to and with the Secured Party and creates and grants
the mortgages, charges, transfers, assignments and security interests as
follows:
1. SECURITY INTEREST
As security for the payment and performance of the Obligations (as defined in
paragraph 3), the Debtor, subject to the exceptions set out in paragraph 2,
does:
1.1 Grant to the Secured Party a security interest in, and mortgages,
charges, transfers and assigns absolutely, all of the Debtor's present. and
after acquired personal property, and all personal property in which the Debtor
has rights, of whatever nature or kind and wherever situate, including, without
limitation, all of the following now owned or in future owned or acquired by or
on behalf of the Debtor:
(a) all goods, including:
(i) all inventory of whatever kind and wherever situate,
including, without limitation, goods acquired or held for sale
or lease or furnished or to be furnished under contracts of
rental or
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service, all raw materials, work in progress, finished goods,
returned goods, repossessed goods, and all packaging
materials, supplies, and containers relating to or used or
consumed in connection with any of the foregoing (collectively
the "Inventory");
(ii) all equipment of whatever kind and wherever situate,
including, without limitation, all machinery, tools,
apparatus, plant, fixtures, furniture, furnishings, chattels,
motor vehicles, vessels, and other tangible personal property
of whatever nature or kind (collectively the "Equipment")
(b) all book accounts and book debts and generally all accounts, debts,
dues, claims, choses in action, and demands of every nature and
kind however 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 in future become due,
owing, or accruing, or growing due to, or owned by the Debtor (the
"Accounts");
(c) all contractual rights, equipment leases, insurance claims,
licences, goodwill, patents, trademarks, trade names, copyrights,
and other industrial or intellectual property of the Debtor or in
which the Debtor has an interest, all other choses in action of the
Debtor of every kind which now are, or which may in future be, due
or owing to or owned by the Debtor, and all other intangible
property of the Debtor which is not Accounts, Chattel Paper,
Instruments, Documents of Title, Securities, or Money;
(d) all Money;
(e) all property described in Schedule A to this Agreement, or in any
schedule now or at any time in future annexed to this Agreement or
agreed to form part of this Agreement;
(f) the undertaking of the Debtor;
(g) all Chattel Paper, Documents of Title (whether negotiable or not),
Instruments, Intangibles, and Securities now owned or in future
owned or acquired by or on behalf of the Debtor (including those
returned to or repossessed by the Debtor) and all other goods of
the Debtor that are not Equipment, Inventory, or Accounts;
(h) all proceeds, renewals and accretions and substitutions of any of
the foregoing; and
(i) all deeds, documents, writings, papers, books of account and other
books and electronically recorded data relating to any of the
foregoing or by which any of the foregoing is or may in future be
secured, evidenced, acknowledged or made payable;
1.2 Charge as and by way of a floating charge to and in favour of the
Secured Party, and grant to the Secured Party a security interest, mortgage, and
charge in and to:
(a) all the Debtor's right, title, and interest in and to all its
presently owned or held and after acquired or held real, immovable,
and leasehold property and all interests therein, and all
easements, rights-of-way, privileges, benefits, licences,
improvements, and rights whether connected therewith or appurtenant
thereto or separately owned or
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held, including all structures, plant, and. other fixtures,
including without limitation the Coal Licenses and Coal Leases
(collectively "Real Property"); and
(b) all property, assets and undertakings of the Debtor, both present
and future, of whatever nature or kind and wherever situate, and
all Proceeds thereof and therefrom,
other than any of its property, assets, and undertakings otherwise validly and
effectively subject to the charges and security interests in favour of the
Secured Party created under paragraph 1.1 of this Agreement. This charge
attaches immediately upon the Debtor acquiring any rights in any of that
property.
1.3 Mortgage and charge as and by way of a fixed and specific charge to and
in favour of the Secured Party, and assign and transfer to the Secured Party and
grant to the Secured Party, by way of mortgage, charge, assignment, and
transfer, a security interest in all of the Debtor's right, title, and interest,
both present and future, in and to all of its presently owned or held and after
acquired or held:
(a) coal leases, including, without limitation, the coal leases listed
in Schedule B hereto, together with any renewals and replacements
thereof (the "Coal Leases");
(b) coal licenses, including, without limitation, the coal licenses
listed in Schedule B hereto, together with any renewals and
replacements thereof (the "Coal Licenses");
(c) property which is or in future becomes a fixture, or
(d) property which constitutes a licence, quota, permit or other
similar right or benefit, or crops.
1.4 The mortgages, charges, assignments, transfers, and security interests
created or granted under paragraphs 1.1, 1.2, and 1.3 of this Agreement are
collectively called the "Security Interest", and all property, assets,
interests, and undertakings (including Proceeds) subject to the Security
Interest or otherwise charged or secured by this Agreement or expressed to be
charged, assigned or transferred, or secured by any instruments supplemental to
this Agreement or in implementation of this Agreement are collectively called
the "Collateral".
2. EXCEPTIONS AND DEFINITIONS
The Security Interest granted by this Agreement shall not extend or apply to and
the Collateral shall not extend to the last day of the term of any lease or
agreement to lease real property, but upon the enforcement of the Security
Interest the Debtor shall stand possessed of such last day in trust to assign
and dispose thereof as the Secured Party shall direct.
The terms "Chattel Paper", "Document of Title", "Equipment", "Consumer Goods",
"Instrument", "Intangible", "Security", "Proceeds", "Inventory", "Accessions",
"Money", "financing statement", "financing change statement" and "verification
statement" shall, unless otherwise defined in this Agreement or otherwise
required by the context, be interpreted according to their respective meanings
as set out in the British Columbia Personal Property Security Act, as amended.
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Any reference in this Agreement to "Collateral" shall, unless the context
otherwise requires, be deemed a reference to "Collateral or any part thereof".
The Collateral shall not include consumer, goods of the Debtor.
The term "Proceeds", whenever used and interpreted as above, shall by way of
example include trade-ins, equipment, cash, bank accounts, notes, chattel paper,
goods, contract rights, accounts, and any other personal property or obligation
received when such collateral or proceeds are sold, exchanged, collected, or
otherwise disposed of. The term "licence" means any licence or similar right at
any time owned or held by the Debtor including without limitation a "licence" as
defined in the Act, and the meaning of the term "crops" whenever used in this
Agreement includes but is not limited to "crops" as defined in the Act.
"Lien" whenever used in this Agreement means any mortgage, consensual or
non-consensual lien, charge, pledge, hypothecation, security interest or other.
encumbrance or title retention agreement and any other agreement or arrangement
having substantially the same economic effect.
"Permitted Encumbrances" whenever used in this Agreement means:
(a) restrictions, easements, rights-of way, servitudes or other similar
rights in land granted to or reserved by an persons or minor
defects or irregularities of title;
(b) security given to a public utility (other than a rail
transportation utility or an electrical utility) in connection with
the operations of the Debtor in the ordinary course of its
business;
(c) the reservations, limitations, provisos and conditions, if any,
expressed in any original grants from the Crown;
(d) Purchase Money Obligations, including without limitation equipment,
leases;
(e) the charges or security interests, if any, shown in any Schedule to
this Agreement;
(f) Liens in favour of the British Columbia Ministry of Energy and
Mines (the "Ministry") over reclamation security deposits held on
deposit with HSBC Mortgage Corporation or other deposit
institutions from time to time pursuant to the requirements of
Reclamation Permit C-153.
"Purchase Money Obligations" whenever used in this Agreement means:
(a) any Lien existing and assumed at the time of acquisition by the
Debtor on any property acquired in an arm's. length transaction;
(b) any Lien on any property acquired by the Debtor in an arm's length
transaction to secure the whole or any part of the purchase price
of such property or monies borrowed to pay such purchase price;
(c) any extensions, renewals, replacements or substitutions of any Lien
or other security interest described in (a) and (b) above provided
that the principal amount of the indebtedness secured thereby
outstanding on the date of the extension, renewal, replacement or
substitution is not increased to an amount greater than the
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amount outstanding on the date the mortgage, lien, charge or other
encumbrance was first granted or assumed on the property,
provided that the aggregate amounts due under any Lien referred to above do not
exceed the cost of the asset encumbered by any such Lien and any such Liens are
secured only by the property so owned or acquired and not by any other assets
and may be discharged or caused to be discharged upon payment in full of the
amount permitted to be secured under (a) to (c) inclusive above.
3. OBLIGATIONS SECURED
This Agreement and the Security Interest are in addition to and not in
substitution for any other security interest now or in future held by the
Secured Party from the Debtor or from any other person and shall be general and
continuing security for the payment of all indebtedness and liability of the
Debtor to the Secured Party (including interest thereon), present or future,
absolute or contingent, joint or several, direct or indirect, matured or not,
extended or renewed, wherever and however incurred, and any ultimate balance
thereof, and whether the Debtor be bound alone or with another or others, and
whether as principal, trustee, or surety, and for the performance and
satisfaction of all obligations of the Debtor to the Secured Party, whether or
not contained in this Agreement, and whether the Debtor be bound alone or with
another or others .(all of which indebtedness, liability, and obligations are
collectively the "Obligations").
4. PROHIBITIONS
Without the prior written consent of the Secured Party, the Debtor shall not and
shall not have power to:
(a) grant, create, or permit to be created any security interest in,
charge, encumbrance, or lien over, or claim against, any of its
property, assets, or undertakings that ranks or could rank in
priority to or pari passu with the Security Interest other than
Permitted Encumbrances; or
(b) grant, sell, or otherwise assign its Chattel Paper.
5. ATTACHMENT
The Debtor acknowledges and confirms that:
(a) there is no intention to delay the time of attachment of the
Security Interest created by this Agreement, and the Security
Interest shall attach at the earliest time permissible under the
laws governing this Agreement;
(b) that value has been given; and
(c) that the Debtor has (or in the case of any after acquired property,
will have at the time of acquisition) rights in the Collateral.
6. REPRESENTATIONS AND WARRANTIES
6.1 The Debtor represents and warrants to the Secured Party, and so long as
this Security Agreement remains in effect shall be deemed to continuously
represent and warrant, that:
(a) if the Debtor is a company or a partnership, this Agreement is
granted in accordance with resolutions of the directors (and of the
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shareholders as applicable) or of the partners, as the case may be,
of the Debtor, and that all other matters and things have been done
and performed so as to authorize and make the execution and
delivery of this Agreement, and the performance of the Debtor's
obligations hereunder, legal, valid, and binding;
(b) the Debtor lawfully owns and possesses all presently held
Collateral and has good title thereto, free from all security
interests, charges, encumbrances, liens, and claims, save only
Permitted Encumbrances and those consented to in writing by the.
Secured Party, and the Debtor has good right and lawful authority
to grant a security interest in the Collateral as provided by this
Agreement; and
(c) for goods constituting Collateral, the Debtor has in this Agreement
or elsewhere fully and accurately disclosed to the Secured Party
the locations thereof and of the business operations and records of
the Debtor.
7. COVENANTS OF THE DEBTOR
7.1 The Debtor covenants with the Secured Party that at all times while
this Agreement remains in effect the Debtor shall:
(a) defend the title to the Collateral for the benefit of the Secured
Party against the claims and demands of all persons, other than
holders of the Permitted Encumbrances;
(b) fully and effectually maintain and keep maintained the validity and
effectiveness of the Security Interest;
(c) maintain the Collateral in good order and repair taking into
account its age and condition;
(d) forthwith pay:
(i) all taxes, assessments, rates, duties, levies, government
fees, claims, dues, and other charges of every nature that may
be lawfully levied, assessed, or imposed upon it or the
Collateral when due, unless the Debtor shall in good faith
contest its obligations so to pay and shall furnish such
security as the Secured Party may require; and
(ii) all security interests, charges, encumbrances, liens and
claims that rank or could in any event rank in priority to the
Security Interest, other than Permitted Encumbrances and those
consented to in writing by the Secured Party;
(e) forthwith reimburse and indemnify the Secured Party for all costs,
charges, expenses, and legal fees and disbursements that may be
incurred by the Secured Party in:
(i) taking, recovering, keeping possession of, and insuring the
Collateral; and
(ii) all other actions and proceedings taken in connection with the
preservation of the Collateral and the enforcement of this
Agreement and of any other Security Interest held by the
Secured Party as security for the Obligations;
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(f) at the Secured Party's request at any time and from time to time,
execute and deliver such further and other documents and
instruments and do all acts and things as the Secured Party
reasonably requires in order to confirm and perfect, and maintain
perfection of, the Security Interest in favour of the Secured Party
upon any of the Collateral;
(g) notify the Secured Party promptly of:
(i) any change in the information contained in this Agreement
relating to the Debtor, its address, its business, or the
Collateral, including without limitation any change of name
or address of the Debtor and any change in location of any
Collateral;
(ii) the details of any material acquisition of Collateral;
(iii) any material loss or damage to the Collateral;
(iv) any material default by any account debtor in payment or
other performance of his or her obligations to the Debtor
with respect to any Accounts;
(v) the return to or repossession by the Debtor of the
Collateral where such return or repossession of the
Collateral is material in relation to the business of the
Debtor; and.
(vi) the details of any claims or litigation affecting the Debtor
or the Collateral;
(h) prevent the Collateral, other than Inventory sold, leased, or
otherwise disposed of as permitted by this Agreement, from being or
becoming an accession to other property not covered by this
Agreement;
(i) permit the Secured Party and its representatives, at all reasonable
times, access to all its property, assets, and undertakings and to
all its books of account and records reasonably required for the
purpose of inspection, and render all assistance necessary for such
inspection; and
(j) deliver to the Secured Party from time to time promptly upon
request:
(i) all policies and certificates of insurance relating to the
Collateral; and
(ii) any information concerning the Collateral, the Debtor, and
the Debtor's business and affairs as the Secured Party may
reasonably require; and
(k) carry on and conduct the business of the Debtor in a proper and
efficient manner and so as to protect and preserve the Collateral
and to keep, in accordance with generally accepted accounting
principles, consistently applied, proper books of account for the
Debtor's business as well as accurate and complete records
concerning the Collateral;
7.2 The Debtor covenants that at all times while this Agreement remains in
effect, without the prior written consent of the Secured Party, it shall not
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(a) declare or pay any dividends;
(b) purchase or redeem any of its shares or otherwise reduce its share
capital;
(c) become guarantor of any obligation other than with respect to
obligations of affiliates of the Debtor;
(d) become an endorser of any obligation or otherwise become liable
upon any note or other obligation other than bills of exchange
deposited to any bank accounts of the Debtor; or
(e) become involved in or undertake any business or undertaking other
than the development and operation of the Willow Creek Coal
Project.
7.3 Except as provided in this Agreement, without the prior written consent
of the Secured Party, the Debtor Shall not:
(a) sell, lease, or otherwise dispose of the Collateral;
(b) release, surrender, or abandon possession of the Collateral; or
(c) move or transfer the Collateral from the jurisdiction or
jurisdictions in which the Security Interest has been perfected.
7.4 Provided that the Debtor is not in default under this Agreement, at any
time without the consent of the Secured Party the Debtor may lease, sell,
license, consign, or otherwise deal with items of Inventory in the ordinary
course of its business and for the purposes of carrying on its business.
7.5 The Debtor covenants that to the extent that any monies, credit, or
other consideration provided by, the Secured Party has enabled the Debtor to
purchase or acquire rights in any personal property or assets, the Security
Interest is and shall remain a purchase money security interest.
8. INSURANCE
8.1 The Debtor covenants that at all times while this Agreement is in effect
the Debtor shall:
(a) maintain or cause to be maintained insurance on the Collateral with
an insurer, of the kinds, for amounts and payable to such person or
persons, all as the Secured Party may require acting reasonably,
and in particular but without limitation maintain insurance on the
Collateral to its full insurable value against loss or damage by
fire including extended coverage endorsement, and in the case of
motor vehicles and other mobile Collateral, maintain insurance
against theft;
(b) cause the insurance policy or policies required under this
Agreement to HAVE as part thereof a mortgage clause showing the
Secured Party as a first loss payee (together with a secured lender
ranking pari passu with the Secured Party, if applicable); and
(c) pay all premiums in connection with such insurance, and deliver all
such policies to the Secured Party, if it so requires.
8.2 If proceeds of any insurance required under this Agreement become
payable, the Secured Party shall release any such insurance proceeds to the
Debtor for the purpose of repairing, replacing, or rebuilding, but any release
of insurance proceeds to the Debtor shall not operate as a payment on account of
the Obligations or in any
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way affect this Agreement. If the Debtor does not intend to repair, replace or
rebuild with the insurance proceeds, then the Secured Party may, in its absolute
discretion, apply those proceeds to such part or parts of the Obligations as the
Secured Party may see fit.
8.3 The Debtor shall forthwith, on the happening of loss or damage to the
Collateral, notify the Secured Party thereof and furnish to the insurer at the
Debtor's expense any necessary proof and do any necessary act to obtain payment
of the insurance proceeds, but nothing contained in this Agreement shall limit
the Secured Party's right after default by the Debtor, to submit to the insurer
a proof of loss on its own behalf.
8.4 The Debtor irrevocably authorizes and directs the insurer under any
policy of insurance required under this Agreement to include the name of the
Secured Party as a loss payee on any cheque or draft that may be issued with
respect to a claim under and by virtue of such insurance, and the production by
the Secured Party to any insurer of a certified copy of this Agreement shall be
its full and complete authority for so doing.
8.5 If the Debtor fails to maintain insurance as required by this Agreement,
the Secured Party may, but shall not be, obliged to, maintain or effect such
insurance coverage, or so much thereof as the Secured Party considers necessary
for its protection.
9. USE AND VERIFICATION OF COLLATERAL
Subject to compliance with the Debtor's covenants contained in this Agreement
and compliance with paragraph 11 of this Agreement, the Debtor may, until
default, possess, operate, collect, use and enjoy, and* deal with the Collateral
in the ordinary course of the Debtor's business in any manner not inconsistent
with the provisions of this Agreement; provided always that the Secured Party
shall have the right at any time and from time to time to verify the existence
and state of the Collateral in any manner the Secured Party may consider
appropriate. The Debtor agrees to furnish all assistance and information and to
perform all such acts as the Secured Party may reasonably request in connection
therewith, and for such purpose to grant to the Secured Party or its agents
access to all places where the Collateral may be located and to all premises
occupied by the Debtor.
10. SECURITIES
If Collateral at any time includes Securities, then upon a default, the Debtor
authorizes the Secured Party to transfer the same or any part of them into its
own name or that of its nominee(s) so that the Secured Party or its nominee(s)
may appear on record as the sole owner of them. After default, the Debtor waives
all rights to receive any notices or communications received by the Secured
Party or its nominee(s) as such registered owner and agrees that no proxy issued
by the Secured Party to the Debtor or its order as aforesaid shall thereafter be
effective.
11. COLLECTION OF DEBTS
After default under this Agreement, without notice to the Debtor, the Secured
Party may notify all or any account debtors of the Debtor of the Security
Interest and may also direct such account debtors to make all payments on
Collateral to the Secured Party. The Debtor acknowledges that after default
under this Agreement, any payments on or other proceeds of Collateral received
by the Debtor from account
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debtors, whether before or after notification of this Security Interest to
account debtors, shall be received and held by the Debtor in trust for the
Secured Party and shall be turned over to the Secured Party upon request. This
includes interest on deferred payment contracts, and the payments themselves,
and lease payments, if any.
12. INCOME FROM AND INTEREST ON COLLATERAL
12.1 Until default, the Debtor reserves the right to receive any money
constituting income from or interest on Collateral and if the Secured Party
receives any such money before default, the Secured Party shall pay it promptly
to the Debtor.
12.2 After default, the Debtor shall not request or receive any money
constituting income from or interest on Collateral and if the Debtor receives
any such money in any event, the Debtor. shall hold that money in trust for the
Secured Party and shall pay it promptly to the Secured Party.
13. INCREASES, PROFITS, PAYMENTS, OR DISTRIBUTIONS
13.1 After a default has occurred, the Debtor authorizes the Secured Party:
(a) to receive any increase in or profits on the Collateral (other
than money) and to hold the same as part of the Collateral. Money
so received shall be treated as income for the purposes of
paragraph 12 of this Agreement and dealt with accordingly, and
(b) to receive any payment or distribution upon redemption or
retirement or upon dissolution and liquidation of the issuer of
Collateral; to surrender such Collateral in exchange therefor; and
to hold any such payment or distribution as part of Collateral.
13.2 If the Debtor receives any such increase or profits (other than money)
or payments or distributions after a default under this Agreement, the Debtor
shall deliver the same promptly to the Secured Party to be held by the Secured
Party as provided in this Agreement.
14. DISPOSITION OF MONEYS
Subject to any applicable requirements of the Act, all monies collected or
received by the Secured Party under. or in exercise of any right it possesses
with respect to Collateral shall be applied on account of the Obligations in
such manner as the Secured Party deems best, without prejudice to the liability
of the Debtor or the rights of the Secured Party under this Agreement, and any
surplus shall be accounted for as required by law.
15. PERFORMANCE OF OBLIGATIONS
If the Debtor fails to perform any of its obligations under this Agreement, the
Secured Party may, but shall not be obliged to, perform any or all of those
obligations without prejudice to any other rights and remedies of the Secured
Party under this Agreement, and any payments made and any costs, charges,
expenses, and legal fees and disbursements (on a solicitor and own client basis)
incurred in connection therewith shall be payable by the Debtor to the Secured
Party forthwith with interest until paid at the highest rate borne by any of the
Obligations and such amounts shall be secured by this Agreement and rank prior
to all claims subsequent to this Agreement.
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16. DEFAULT
16.1 Unless waived by the Secured Party, it shall be an event of default
("default") under this Agreement and the security constituted by this Agreement
shall immediately become enforceable if:
(a) any material term, covenant, or representation of this Agreement
or the Coal Purchase and Financing Agreement, entitled as such,
among, inter alia, the Debtor and the Secured Party, is breached,
unless such default is remedied within 14 days of receipt of
notice thereof by the Debtor; or
(b) any amount owed to the Secured Party is not paid when due unless
such default is remedied within 14 days of receipt of notice
thereof by the Debtor; or
(c) the Debtor defaults or threatens to default in payment when due or
performance of any of the Obligations unless such default is
remedied within 14 days of receipt of notice thereof by the
Debtor; or
(d) the Debtor or any guarantor of the Debtor declares itself to be
insolvent, makes an assignment for the benefit of its creditors,
is declared bankrupt, declares bankruptcy, makes a proposal, or
otherwise takes advantage of provisions under the Bankruptcy and
Insolvency Act, the Companies' Creditors Arrangement Act, or
similar legislation in any jurisdiction, or fails to pay its debts
generally as they become due; or
(e) a receiver or receiver-manager is appointed; or
(f) the Debtor ceases to carry on all or a substantial part of its
business; or
(g) distress, execution, or seizure of any of the Collateral occurs
unless the Debtor is in good faith contesting such distress,
execution, or seizure and the Debtor has provided security in
respect thereof satisfactory to the Secured Party; or
(h) if the Debtor is a corporation, there is a change of voting
control without the Secured Party's consent; or
(i) the Debtor changes its name or amalgamates or merges without the
Secured Party's consent; or
(j) the Debtor allows any hazardous materials to be brought upon any
lands or premises occupied by the Debtor other than in the normal
course of business or does not deal with such materials in
accordance with applicable laws;
16.2 In accordance with the British Columbia Property Law Act, the
doctrine of consolidation applies to this Agreement.
16.3 It shall be an event of default under this Agreement and the security
constituted by this Agreement shall immediately become enforceable if
any material term, covenant, or representation in any other agreement,
contract, or other commitment of the Debtor to the Secured Party or to
Mitsui Matsushima Canada Ltd. is breached or if default should occur
under the same.
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17. ACCELERATION
The Secured Party, in its sole discretion, may declare all or any part of the
Obligations that are not by their terms payable on demand to be immediately due
and payable in the event of any default. The provisions of this paragraph do not
and are not intended to affect in any way any rights of the Secured Party with
respect to any Obligations that may now or in future be payable on demand.
18. ENFORCEMENT
18.1 Upon any default under this Agreement, the security constituted by this
Agreement shall immediately become enforceable, and any floating charge will
immediately attach the Real Property and Collateral. To enforce and realize on
the security constituted by this Agreement, the Secured Party may take any
action permitted by law or in equity, as it may deem expedient, and in
particular, but without limiting the generality of the foregoing, the Secured
Party may do any of the following:
(a) appoint by instrument a receiver, receiver and manager, or
receiver-manager (the person so appointed is called the
"Receiver") of the Collateral, with or without bond as the Secured
Party may determine, and from time to time in its absolute
discretion remove such ch Receiver and appoint another in its
stead;
(b) enter upon any premises of the Debtor and take possession of the
Collateral with power to exclude the Debtor, its agents, and its
servants from those premises, without becoming liable as a
mortgagee in possession;
(c) preserve, protect, and maintain the Collateral and make such
replacements and repairs and additions as the Secured Party may,
deem advisable;
(d) sell, lease, or otherwise dispose of all or any part of the
Collateral, whether by public or private sale or lease or
otherwise, in such manner, at such price as can be reasonably
obtained, and on such terms as to credit and with such conditions
of sale and stipulations as to title or conveyance or evidence of
title or otherwise as to the Secured Party may seem reasonable,
provided that if any sale, lease, or other -disposition is on
credit, the Debtor shall not be entitled to be credited with the
proceeds of any such sale, lease, or other disposition until the
monies therefor are actually received; and
(e) exercise all of the rights and remedies of a secured party under
the Act.
18.2 A Receiver appointed under this Agreement shall be the agent of the
Debtor and not of the Secured Party, and the Secured Party shall not be in any
way responsible for any misconduct, negligence or nonfeasance on the part of any
Receiver, its servants, agents, or employees. A Receiver shall, to the extent
permitted by law or to such lesser extent permitted by its appointment, have all
the powers of the Secured Party under this Agreement, and in addition shall have
power to carry on the business of the Debtor and for such purpose to enter upon,
use, and occupy all premises owned or occupied by the Debtor in which Collateral
may be situate, maintain Collateral upon such premises, use, Collateral directly
or
13
indirectly in carrying on the Debtor's business, and from time to time borrow
money either unsecured or secured by a security interest in any of the
Collateral.
18.3 Subject to the claims, if any, of the creditors of the Debtor ranking
in priority to this Agreement, all amounts realized from the disposition of
Collateral under this Agreement shall be applied as the Secured Party, in its
absolute discretion, may direct or as follows:
(a) in payment of all costs, charges, and expenses (including legal
fees and disbursements on a solicitor and own client basis)
incurred by the Secured Party in connection with or incidental to:
(i) the exercise by the Secured Party of all or any of the
powers granted to it under the Agreement; and
(ii) the appointment of the Receiver and the exercise by the
Receiver of all or any of the powers granted to it under
this Agreement, including the Receiver's reasonable
remuneration and all outgoings properly payable by the
Receiver excluding the Receiver's borrowings;
(b) in payment of any sum or sums borrowed by the Receiver from the
Secured Party and interest thereon if such sum or sums are secured
by the Collateral;
(c) in or toward payment to the Secured Party of all principal and
other monies (except interest) due in respect of the Obligations;
(d) in or toward payment to the Secured Party of all interest
remaining unpaid in respect of the Obligations; and
(e) in or toward payment of any sum or sums borrowed by the Receiver
from any financial institution, corporation, or person other than
the Secured Party, and interest thereon if such sum or sums are
secured by the Collateral.
Subject to applicable law and the claims, if any, of other creditors of the
Debtor, any surplus shall be paid to the Debtor.
18.4 The Debtor agrees that the Secured Party may exercise its rights and
remedies under this Agreement immediately upon default, except as may be
otherwise provided in the Act, and the Debtor expressly confirms that, except as
may be otherwise provided in this Agreement or in the Act, the Secured Party has
not given any covenant, express or implied, and is under no obligation to allow
the Debtor any period of time to remedy any default before the Secured Party
exercises its rights and remedies under this Agreement.
19. DEFICIENCY
If the amounts realized from the disposition of the Collateral are not
sufficient to pay the Obligations in full, the Debtor shall pay to the Secured
Party the amount of such deficiency immediately upon demand for the same.
20. RIGHTS CUMULATIVE
All rights and remedies of the Secured Party set, out in this Agreement are
cumulative, and no right or remedy contained in this Agreement is intended to be
exclusive but each shall be in addition to every other right or remedy contained
in this Agreement or in any existing or future security agreement or, now or in
future
14
existing at law, in equity or by statute, or under any other agreement between
the Debtor and the Secured Party that may be in effect from time to time.
21. LIABILITY OF SECURED PARTY
The Secured Party shall not be responsible or liable for any debts contracted by
it, for damages to persons or property or for salaries or non-fulfilment of
contracts during any period when the Secured Party shall manage the Collateral
upon entry, as provided in this Agreement, nor shall the Secured Party be liable
to account as mortgagee in possession or for anything except actual receipts or
be liable for any loss on realization or for any default or omission for which a
mortgagee in possession may be liable, other than as, a result of the Secured
Party's misconduct or gross negligence. The Secured Party shall not be bound to
do, observe, or perform or to see to the observance or performance by the Debtor
of any obligations or covenants imposed upon the Debtor, nor shall the Secured
Party, in the case of Securities, Instruments, or Chattel Paper, be obliged to
preserve rights against other persons, nor shall the Secured Party be obliged to
keep any of the Collateral identifiable.
22. APPOINTMENT OF ATTORNEY AND DEED
22.1 The Debtor irrevocably appoints the Secured, Party or the Receiver, as
the case may be, with full power of substitution, to be the attorney of the
Debtor for and in the name of the Debtor to sign, endorse, or execute under seal
or otherwise any deeds, documents, transfers, cheques, instruments, demands,
assignments, assurances, or consents that the Debtor is obliged to sign,
endorse, or execute, and generally to use the name of the Debtor and to do all
things as may be necessary or incidental to the exercise of all or any of the
powers conferred on the Secured Party or the Receiver after a default under this
Agreement, as the case may be, under this Agreement.
22.2 Whether or not the Debtor attaches its corporate seal, if a
corporation, this Agreement is intended to be and is deemed to be a deed given
under seal.
23. ACCOUNTS
Notwithstanding any other provision of this Agreement, the Secured Party may
collect, realize, sell, or otherwise deal with the Accounts or any part of them
in such manner, upon such terms and conditions, and at such time or times, after
default, as may seem to it advisable, and without notice to the Debtor, except
in the case of disposition after default and then subject to the provisions of
Part 5 of the Act. All monies or other forms of payment received by the Debtor
in payment of any Account shall be received and held by the Debtor in trust for
the Secured Party.
24. APPROPRIATION OF PAYMENTS
Any and all payments made in respect of the Obligations from time to time and
monies realized from any security interests held therefor (including monies
collected in accordance with or realized on any enforcement of this Agreement)
may be applied to such part or parts of the Obligations as the Secured Party may
see fit, and the Secured Party may at all times and from time to time change any
appropriation as the Secured Party may see fit.
25. LIABILITY TO ADVANCE
None of the preparation, execution, perfection, and registration of this
Agreement or notice of this Agreement or the advance of any monies shall bind
the Secured Party to make any advance or loan or further advance or loan, or
renew any note
15
or extend any time for payment of any indebtedness or liability of the Debtor to
the Secured Party.
26. WAIVER
The Secured Party may from time to time and at any time waive in whole or in
part any right, benefit, or default under any paragraph of this Agreement but
any such waiver shall only be effective if made in writing and such waiver of
any right, benefit, or default on any occasion shall be deemed not to be a
waiver of any such right, benefit, or default thereafter, or of any other
right,, benefit or default, as the case may be, and no delay or omission by the
Secured Party in exercising any right or remedy under this Agreement or with
respect to any default shall operate as a waiver thereof or of any other right
or remedy.
27. NOTICE
Any notice, demand, or other communication required or permitted to be given
under this Agreement shall be effectually made or given if delivered by prepaid
private courier or by facsimile transmission to the address of each party set
out below:
TO THE DEBTOR:
Falls Mountain Coal Inc. and Pine Valley Coal Ltd.
Xxxxx 000 - 000 Xxxxxxx Xxxxxx
Xxxxxxxxx XX, X0X 0X0
Facsimile: 000-000-0000
TO THE SECURED PARTY:
Marubeni Corporation
c/o 000 Xxx Xxxxxx Xxxxxx 0
#000 - 0xx Xxxxxx X.X.
Xxxxxxx, XX X0X 0X0
Facsimile: 403-263-8100
or to such other address or facsimile number as either party may designate in
the manner set out above. Any notice, demand, or other communication shall be
deemed to have been given and received on the day of prepaid private courier
delivery or facsimile transmission.
16
28. EXTENSIONS
The Secured Party may grant extensions of time and other indulgences, take and
give up security, accept compositions, compound, compromise, settle, grant
releases and discharges, refrain from perfecting or maintaining perfection of
the Security Interest, and otherwise deal with the Debtor, account debtors of
the Debtor, sureties, and others and with the Collateral, the Security Interest,
and other security interests as the Secured Party sees fit without prejudice to
the liability of the Debtor or the Secured Party's right to hold and realize on
the security constituted by this Agreement.
29. NO MERGER
This Agreement shall not operate to create any merger or discharge of any of the
Obligations, or of any assignment, transfer, guarantee, lien, mortgage,
contract, promissory note, xxxx of exchange, or security interest of any form
held or which may in future be held by the Secured Party from the Debtor or from
any other person. The taking of a judgment with respect to any of the
Obligations shall not operate as a merger of any of the covenants contained in
this Agreement.
30. ASSIGNMENT
The Secured Party may, upon giving prior notice to the Debtor, assign, transfer,
or grant a security interest in this Agreement and the Security Interest. The
Debtor expressly agrees that the assignee, transferee, or secured party, as the
case may be, shall have all of the Secured Party's rights and remedies under
this Agreement.
31. SATISFACTION AND DISCHARGE
Any partial payment or satisfaction of the Obligations, or any ceasing by the
Debtor to be indebted to the Secured Party, shall be deemed not to be a
redemption or discharge of this Agreement. The Debtor shall be entitled to a
release and discharge of this Agreement upon full payment and satisfaction of
all Obligations and upon written request by the Debtor and payment to the
Secured Party of all costs, charges, expenses, and legal fees and disbursements
(on a solicitor and own client basis) incurred by the Secured Party in
connection with the Obligations and such release and discharge.
The Secured Party agrees that if the Debtor arranges for a irrevocable letter of
credit or letter of guarantee on terms and from an issuer acceptable to the
Secured Party, to be issued in favour of the Secured Party in an amount
sufficient to satisfy the Obligations and on terms that provide for the complete
discharge of the Obligations, the Secured Party will, at the Debtor's expense,
release and discharge the Security Interest.
32. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the parties and
their respective heirs, executors, personal representatives, successors, and
permitted assigns.
33. INTERPRETATION
33.1 In this Agreement:
(a) "Debtor" and the personal pronoun "it" or "its" and any verb
relating thereto and used therewith shall be read and construed as
required by and in accordance with the context in which such words
are used,
17
depending upon whether the Debtor is one or more individuals,
corporations, or partnerships and, if more than one, shall apply
to and be binding upon each of them jointly and severally;
(b) "Act" means the British Columbia Personal Property Security Act
and all regulations thereunder as amended;
33.2 Words and expressions used in this Agreement that have been defined in
the Act shall be interpreted in accordance with their respective meanings given
in the Act, whether expressed in this Agreement with or without initial capital
letters and whether in the singular or the plural, unless otherwise defined in
this Agreement or unless the context otherwise requires, and, wherever the
context so requires, in this Agreement the singular shall be read as if the
plural were expressed, and vice-versa, and the provisions of this Agreement
shall be read with all grammatical changes necessary dependent upon the person
referred to being a male, female, firm, or corporation.
33.3 Should any provision of this Agreement be declared or held invalid or
unenforceable in whole or in part or against or, with respect to the Debtor by a
court of competent jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of any or all of the remaining provisions
of this Agreement, which shall continue in full force and effect and be
construed as if this Agreement had been executed without the invalid or
unenforceable provision.
33.4 The headings of the paragraphs of this Agreement have, been inserted
for reference only and do not define, limit, alter, or. enlarge the meaning of
any provision of this Agreement.
33.5 This Agreement shall be governed by the laws of British Columbia.
34. MISCELLANEOUS
34.1 The Debtor authorizes the Secured Party to file such financing
statements, financing change statements, and other documents, and do such acts,
matters, and things as the Secured Party may deem appropriate, to perfect on an
ongoing basis and continue the Security Interest, to protect and preserve the
Collateral, and to realize upon the Security Interest.
34.2 The Debtor waives protest of any Instrument constituting Collateral at
anytime held by the Secured Party on which the Debtor is any way liable and,
subject to the provisions of the Act, notice of any other action taken by the
Secured Party.
34.3 The Debtor covenants that it shall not amalgamate with any other
company or entity without first obtaining the written consent of the Secured
Party. The Debtor acknowledges and agrees that if it amalgamates with any other
company or companies, then it is the intention of the parties that the term
"Debtor" when used in this Agreement shall apply to each of the amalgamating
companies and to the amalgamated company, so that the Security Interest granted
by this Agreement:
(a) shall extend to "Collateral" (as that term is defined in this
Agreement) owned by each of the amalgamating companies and the
amalgamated company at the time of amalgamation and to any "Collateral"
owned or acquired by the amalgamated company thereafter, and
(b) shall secure the "Obligations" (as that term is defined in this
Agreement) of each of the amalgamating companies and the amalgamated
company to the Secured Party at the time of
18
amalgamation and any "Obligations" of the amalgamated company to the
Secured Party arising thereafter. The Security Interest shall attach to
"Collateral" owned by each company amalgamating with the Debtor, and by
the amalgamated company, at the time of amalgamation, and shall attach
to any "Collateral" thereafter owned or acquired by the amalgamated
company when that Collateral becomes owned or is acquired.
34.4 The Debtor authorizes the Secured Party to provide a copy of this
Agreement and such other information and documents specified under the Act to
any person entitled under the Act to demand and receive them.
35. COPY OF AGREEMENT AND FINANCING STATEMENT
The Debtor:
(a) acknowledges receiving a copy of this Agreement, and
(b) waives all rights to receive from the Secured Party a copy of any
financing statement, financing change statement, or verification
statement filed, issued, or obtained at any time in respect of
this Agreement.
IN WITNESS WHEREOF the Debtor has executed this Security Agreement on the date
indicated below.
EXECUTION DATE
------------------
Officer Signature(s) | Y M D | FALLS MOUNTAIN COAL INC.
| | by its authorized
| | signatory(ies)
| |
| |
------------------------ | | ------------------------
Name: | 04 | Name:
| |
| |
| | PINE VALLEY COAL LTD.
| | by its authorized
| | signatory(ies)
| |
| |
------------------------ | 04 | ------------------------
Name: | | Name:
------------------
OFFICER CERTIFICATION:
Your signature constitutes a representation that you are a solicitor, notary
public or other person authorized by the Evidence Act, R.S.B.C. 1979, c. 116, to
take affidavits for use in British Columbia and certifies the matters set out in
Part 5 of the Land Title Act as they pertain to the execution of this
instrument.
SCHEDULE A
Description and Serial Numbers for Equipment and Location of Goods
NIL
SCHEDULE "B"
Coal Licenses and Coal Leases
Licensor: Provincial Crown
Tenure Holder: Pine Valley Coal Ltd. ("PVC") or Falls Mountain Coal Inc. ("FMC")
COAL TENURE NO. OWNER MAP NUMBER WORK STATUS AREA
LICENSE NO./ RECORDED TO (G.S. - GOOD (HA)
TENURE NUMBER STANDING)
1. 8574 327312 PVC 093O09W 2005.03.31 G.S. 2005.03.31 293
2. 8575 327313 PVC 093O09W 2005.03.31 G.S. 2005.03.31 293
3. 8576 327314 PVC 093O09E 2005.03.31 G.S. 2005.03.31 293
4. 8577 327316 PVC 093O09W 2005.03.31 G.S. 2005.03.31 293
5. 8578 327318 PVC 093O09W 2005.03.31 G.S. 2005.03.31 293
6. 8579 327320 PVC 093O09W 2005.03.31 G.S. 2005.03.31 293
7. 8580 327321 PVC 093O09W 2005.03.31 G.S. 2005.03.31 293
8. 347214 347214 PVC 093O09W 2005.03.31 G.S. 2005.03.31 292
9. 347215 347215 PVC 093O09E 2005.03.31 G.S. 2005.03.31 293
10. 347216 347216 PVC 093O09E 2005.03.31 G.S. 2005.03.31 293
11. 347217 347217 PVC 093O09E 2005.03.31 G.S. 2005.03.31 293
12. 347218 347218 PVC 093O09E 2005.03.31 G.S. 2005.03.31 293
13. 389294 389294 PVC 093O09E 2005.03.31 G.S. 2005.03.31 6151
14. 409343 409343 FMC 093O09W 2005.04.07 G.S. 2005.04.07 293
15. 409344 409344 FMC 093O09W 2005.04.07 G.S. 2005.04.07 293
16. 409345 409345 FMC 093O09W 2005.04.07 G.S. 2005.04.07 293
17. 409346 409346 FMC 093O09W 2005.04.07 G.S. 2005.04.07 293
18. 409347 409347 FMC 093O09W 2005.04.07 G.S. 2005.04.07 293
19. 409348 409348 FMC 093O09W 2005.04.07 G.S. 2005.04.07 293
20. 409349 409349 FMC 093O09W 2005.04.07 G.S. 2005.04.07 293
21. 409350 409350 FMC 093O09W 2005.04.07 G.S. 2005.04.07 293
22. 409351 409351 FMC 093O09W 2005.04.07 G.S. 2005.04.07 293
23. 409352 409352 FMC 093O09W 2005.04.07 G.S. 2005.04.07 292
Together with any other coal licenses and coal leases acquired after the date
hereof by Pine Valley Coal Ltd. or Falls Mountain Coal Inc.
