EXHIBIT 10.17
GENERAL SECURITY AGREEMENT
THIS AGREEMENT is made on the 15th day of April, 2003
BETWEEN:
IMAGIS TECHNOLOGIES INC., a company incorporated under the laws of the
Province of British Columbia, Canada and having an office at 1630 -
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, X.X. X0X 0X0
(the "Debtor")
AND:
XXXXX XXXXXXXX, businessman, of 1300 - 0000 Xxxx Xxxxxxx Xxxxxx,
Xxxxxxxxx, X.X. X0X 0X0
(the "Secured Party")
WHEREAS:
(A) The Debtor and the Secured Party entered into a loan agreement dated
February 21, 2003 (the "Loan Agreement") providing for the terms and conditions
under which the Secured Party provided a line of credit in the maximum amount of
Cdn. $200,000 (the "Line of Credit") to assist in the Debtor's cash flow
management;
(B) The Debtor entered into a security agreement dated February 21, 2003
granting security over its trade account receivables to the Secured Party as
security for the Debtor's obligation to the Secured Party in connection with the
Line of Credit;
(C) The Debtor and the Secured Party have further entered into an amended and
restated loan agreement dated April 15, 2003 (the "Amended and Restated Loan
Agreement") providing for the terms and conditions under which the Secured Party
has agreed to extend the line of credit from the maximum amount of Cdn. $200,000
to Cdn. $500,000 (the "Extended Line of Credit") to assist in the Debtor's cash
flow management and general working capital;
(D) As a condition of entering into the Amended and Restated Loan Agreement, the
Secured Party requires that the Debtor execute and deliver this Agreement;
(E) The Debtor and the Secured Party have further entered into an escrow
agreement dated April 15, 2003 (the "Source Code Escrow Agreement") providing
for the terms and conditions under which the Debtor will deposit the source
codes for CABS, ID-2000 and the Intacta Technology as defined therein
(collectively, the "Source Codes") in escrow and will release the Source Codes
to the Secured Party, together with an automatic grant from the Debtor to the
Secured Party of a non-exclusive licence, under the terms and conditions set out
in the Amended and Restated Loan Agreement and the Source Code Escrow Agreement;
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1. Consideration
1.1 NOW THEREFORE for valuable consideration, the receipt and sufficiency of
which is acknowledged by the Debtor, the Debtor and the Secured Party enter into
this security agreement.
2. Obligation
2.1 The Security Interest (as hereinafter defined) is granted to the Secured
Party by the Debtor as continuing security for the payment of all present and
future debts and liabilities of the Debtor under the Extended Line of Credit or
the Amended and Restated Loan Agreement including principal, interest and other
monies (together the "Obligation").
3. Creation of Security Interest
3.1 The Debtor hereby grants, mortgages, charges, transfers, assigns, pledges
and creates in favour of the Secured Party and grants to the Secured Party a
security interest in:
Equipment
(a) all present and after-acquired equipment of the Debtor, including all
machinery, fixtures, plant, tools, furniture, vehicles of any kind or
description, all spare parts, accessories installed in or affixed or
attached to any of the foregoing, and all drawings, specifications, plans
and manuals relating thereto (the "Equipment"),
Inventory
(b) all present and after-acquired inventory of the Debtor, including all
raw materials, materials used or consumed in the business or profession of
the Debtor, work-in-progress, finished goods, goods used for packing,
materials used in the business of the Debtor not intended for sale, and
goods acquired or held for sale or lease, or that have been leased by the
Debtor as lessor or furnished or to be furnished under contracts of rental
or service (the "Inventory"),
Accounts
(c) all present and after-acquired debts, demands and amounts due or
accruing due to the Debtor whether or not earned by performance, including
its book debts, accounts receivable, and claims under policies of
insurance; and all contracts, security interests and other rights and
benefits in respect thereof (the "Accounts"),
Intangibles
(d) all present and after-acquired intangibles of the Debtor, including all
contract rights, goodwill, patents, trade marks, copyrights and other
intellectual property, licences, and all other choses in action of the
Debtor of every kind, whether due at the present time or hereafter to
become due or owing (the "Intangibles"),
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Documents of Title
(e) all present and after-acquired documents of title of the Debtor,
whether negotiable or otherwise including all warehouse receipts and bills
of lading (the "Documents of Title"),
Chattel Paper
(f) all present and after-acquired writings in favour of the Debtor as
secured party which evidence both a monetary obligation and a security
interest in, or a lease of, specific goods or specific goods and accessions
(the "Chattel Paper"),
Instruments
(g) all present and after-acquired bills, notes and cheques (as such are
defined pursuant to the Bills of Exchange Act (Canada)), all other writings
that evidence a right to payment of money and are of a type that in the
ordinary course of business are transferred by delivery without any
necessary endorsement or assignment and all letters of credit or advices of
credit which state thereon that the letter of credit or advice of credit
must be surrendered on claiming payment thereunder (the "Instruments"),
Money
(h) all present and after-acquired money whether authorized as a medium of
exchange by the Parliament of Canada or authorized or adopted by any
foreign government as part of its currency (the "Money"),
Securities
(i) all present and after-acquired securities held by the Debtor, including
shares, options, rights, warrants, joint venture interests, interests in
limited partnerships, bonds, debentures and all other documents that are
recognized in the jurisdiction in which issued or dealt with as evidencing
a share, participation or other interest in property or in an enterprise or
that evidence an obligation of the issuer (the "Securities"),
Documents
(j) all books, accounts, financial statements, invoices, letters, papers,
documents and other records in any form (the "Documents"),
Undertaking
(k) as and by way of a floating charge all present and after-acquired
personal property, business, and undertaking of the Debtor not being
Inventory, Equipment, Accounts, Intangibles, Documents of Title, Chattel
Paper, Instruments, Money, Securities or Documents (the "Undertaking"),
Proceeds
(l) all personal property and fixtures in any form derived directly or
indirectly from any dealing with Collateral (as hereinafter defined) or
proceeds therefrom, including
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rights to insurance payments and any other payments representing indemnity
or compensation for loss of or damage to Collateral or proceeds therefrom
(the "Proceeds"), and
Real Property
(m) as and by way of a floating charge, all of 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, licenses,
improvements and rights whether connected therewith or appurtenant thereto
or separately owned or held, including all structures, plant and other
fixtures.
3.2 All present and after-acquired real and personal property of the Debtor,
including Equipment, Inventory, Accounts, Intangibles, Documents of Title,
Chattel Paper, Instruments, Money, Securities, Documents, Undertaking, Proceeds
and Real Property are, or any part thereof, collectively referred to in this
Agreement as the "Collateral" unless the context otherwise requires.
3.3 The grants, mortgages, charges, transfers, assignments and security
interests herein created are collectively referred to in this Agreement as the
"Security Interest".
3.4 The terms "equipment", "inventory", "accounts", "intangibles", "documents of
title" and "securities", as used in this ss.3 have the meanings specified in the
Personal Property Security Act (British Columbia) (the "PPSA").
4. Further Description of Collateral
4.1 Without limiting the generality of the description of Collateral as set out
in ss.3, for greater certainty the Collateral includes all present and future
personal property of the Debtor located on or about or in transit to or from the
real property described in Schedule "A" hereto. The Debtor agrees to promptly
inform the Secured Party in writing of the acquisition by the Debtor of any
personal property which is not of the nature or type described herein, and the
Debtor agrees to execute and deliver at its own expense from time to time
amendments to this Agreement or additional security agreements as may be
reasonably required by the Secured Party in order that the Security Interest
shall attach to all of the personal property of the Debtor.
5. Attachment
5.1 The Debtor acknowledges that:
(a) value has been given,
(b) the Debtor has rights in the Collateral (other than after-acquired
property), and
(c) the parties have not agreed to postpone the time for attachment of the
Security Interest.
6. Dealings with Collateral
6.1 Until the occurrence of an Event of Default (hereinafter defined), the
Debtor may sell or lease the Inventory and collect the Accounts in the ordinary
course of its business.
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7. Notification to Account Debtors Before Demand
7.1 The Secured Party may, before as well as after the occurrence of an Event of
Default,
Notify Debtors
--------------
(a) notify any person obligated to the Debtor in respect of an Account,
Intangible, Chattel Paper or Instrument to make payment to the Secured
Party of all such present and future amounts due or to become due under any
Account, Intangible, Chattel Paper or Instrument;
Control of Proceeds
-------------------
(b) take control of the Proceeds; and
Apply Money
-----------
(c) apply any money taken as Collateral to the satisfaction of the
Obligation.
8. Exceptions
8.1 The last day of the term of any lease, sublease or agreement therefor is
specifically excepted from the Security Interest, but the Debtor agrees to stand
possessed of such last day in trust to assign and dispose of as the Secured
Party shall direct.
8.2 All Consumer Goods (as defined in the PPSA) are excepted from the Security
Interest.
8.3 To the extent that the creation of the Security Interest over any particular
item would constitute a breach or default under, or permit the forfeiture of,
any agreement, right, licence or permit creating or defining that item or the
interest of the Debtor therein, the Security Interest will not attach thereto
until all acts and things have been done and all consents and approvals have
been obtained to permit the creation of the Security Interest over that item,
but the Debtor will hold its interest therein in trust for the Secured Party,
and will assign such agreement, right, license or permit to the Secured Party
forthwith upon obtaining the consent of the other party thereto.
9. Representations of Debtor
9.1 The Debtor represents and warrants that:
(a) this Agreement is granted in accordance with resolutions of the
directors (and of the shareholders as applicable) of the Debtor and 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 obligation of the Debtor hereunder legal, valid and binding; and
(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 and except the security interests held
by Royal Bank of Canada as security for
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corporate Visa credit cards to a maximum credit amount of $56,000 (the
"Permitted Encumbrances") and the security agreement made February 21, 2003
between the Debtor, as debtor, and the Secured Party as secured party, and
the Debtor has good right and lawful authority to grant the Security
Interest.
10. Covenants of Debtor
10.1 The Debtor covenants and agrees:
Disposition of Collateral
-------------------------
(a) not to sell, exchange, transfer, assign, lease or otherwise dispose of
or deal in any way with Collateral or release, surrender or abandon
possession of Collateral or move or transfer Collateral from British
Columbia, or enter into any agreement or undertaking to do any of the
foregoing except as may be permitted in this Agreement;
Other Security Interests
------------------------
(b) except for the Security Interest hereof and the Permitted Encumbrances
and the Source Code Escrow Agreement, not to create or permit to exist any
encumbrance or security interest in, charge, encumbrance or lien over, or
claim against any of its property, assets or undertaking;
Defend Title
------------
(c) to defend the title to the Collateral for the benefit of the Secured
Party against all claims and demands, other than claims under the Permitted
Encumbrances;
Repair
------
(d) to keep the Collateral in good order and repair;
Insurance
---------
(e) to obtain from insurers acceptable to the Secured Party and maintain:
(i) public liability insurance;
(ii) all risks property insurance in respect of the Collateral on a
replacement cost basis;
(iii) business interruption insurance; and
(iv) insurance in respect of such other risks as the Secured Party may
reasonably require from time to time,
all of which policies of insurance shall be in such amounts as may be
reasonably required by the Secured Party and shall include a standard
mortgage clause approved by the Insurance Bureau of Canada, and the Debtor
agrees to cause the interest of the Secured Party to be noted as a loss
payee as its interest may appear on such policies of insurance
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(except public liability insurance), and to furnish the Secured Party with
certificates of insurance and certified copies of such policies;
Taxes and Charges
-----------------
(f) to promptly pay all taxes, assessments, rates, levies, payroll
deductions, workers' compensation assessments, and any other charges which
could result in the creation of a statutory lien or deemed trust in respect
of the Collateral;
Further Assurances
------------------
(g) to do, make, execute and deliver such further and other assignments,
transfers, deeds, security agreements and other documents as may be
required by the Secured Party to establish in favour of the Secured Party
and perfect the Security Interest intended to be created hereby and to
accomplish the intention of this Agreement; and
Payment of Expenses
-------------------
(h) to pay all expenses, including solicitors' fees and disbursements (on a
solicitor and own client basis) and receivers' fees and disbursements,
incurred by the Secured Party or its agents or any Receiver, as hereinafter
defined, in connection with inspecting the Collateral, investigating title
to the Collateral, the preparation, perfection, preservation, and
enforcement of this Agreement, including taking, recovering and keeping
possession of the Collateral and all expenses incurred by the Secured Party
or such agents in dealing with other creditors of the Debtor in connection
with the establishment and confirmation of the priority of the Security
Interest; all of which expenses shall be payable forthwith upon demand.
11. Events of Default
11.1 The following shall be events of default (the "Events of Default") under
this Agreement:
(a) if the Debtor fails to satisfy or perform the Obligation when due;
(b) if any representation or warranty made by or on behalf of the Debtor to
the Secured Party in this Agreement is or becomes incorrect or untrue;
(c) if the Debtor breaches or fails to comply with any term of this
Agreement or the Note;
(d) if the Debtor becomes insolvent or bankrupt or makes a proposal under
the Bankruptcy and Insolvency Act (Canada) or similar legislation in any
jurisdiction, a petition in bankruptcy is filed against the Debtor, the
Debtor makes an assignment for the benefit of creditors, a trustee,
receiver, receiver-manager or similar procedure is appointed in respect of
the Debtor or any of its assets, proceedings under the Companies' Creditors
Arrangement Act (Canada) are commenced with respect to the Debtor, or steps
are taken by or against the Debtor for any other formal or informal type of
proceeding for the settlement of claims against the Debtor, or for the
dissolution, liquidation, or winding-up of the affairs of the Debtor;
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(e) if the Debtor ceases or threatens to cease to carry on its business or
any material part thereof as presently carried on, or makes or agrees to
make a bulk sale of its assets;
(f) if an execution or any similar process of any court becomes enforceable
against the Debtor, or a distress or any similar process is levied upon any
property of the Debtor; and
(g) if the Secured Party in good faith believes and has commercially
reasonable grounds to believe that the prospect of payment or performance
of the Obligation is or is about to be impaired or that the Collateral is
in jeopardy or is about to be placed in jeopardy.
11.2 The floating charge on real property created by ss.3.1(m) hereof shall
crystallize upon occurrence of an Event of Default.
12. Enforcement and Remedies
12.1 Upon the occurrence of one or more Events of Default, the Debtor shall be
in default under this Agreement, the Obligation shall, at the option of the
Secured Party, be immediately due and payable, the Security Interest shall
become enforceable at the option of the Secured Party. Upon the Security
Interest becoming enforceable, the Secured Party shall have the following
remedies in addition to any other remedies available under the PPSA or otherwise
at law or in equity or contained in any other agreement between the Debtor and
the Secured Party, all of which remedies shall be independent and cumulative:
(a) entry of any premises where Collateral may be located;
(b) possession of Collateral by any method permitted by law;
(c) the sale or lease of Collateral;
(d) demand delivery of the Source Codes;
(e) the collection of any rents, income, and profits received in connection
with the business of the Debtor or the Collateral;
(f) the collection, realization, sale or other dealing with any Accounts of
the Debtor;
(g) the appointment by instrument in writing of a receiver, or a
receiver-manager (each of which is herein called a "Receiver") of the
Collateral;
(h) the exercise by the Secured Party of any of the powers set out in
ss.13, without the appointment of a Receiver;
(i) proceedings in any court of competent jurisdiction for the appointment
of a Receiver or for the sale of the Collateral; and
(j) the filing of proofs of claim and other documents in order to have the
claims of the Secured Party lodged in any bankruptcy, winding-up, or other
judicial proceeding relating to the Debtor.
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13. Powers of Receiver
13.1 Any Receiver appointed by the Secured Party may be any person licensed as a
trustee under the Bankruptcy and Insolvency Act (Canada), and the Secured Party
may remove any Receiver so appointed and appoint another or others instead. Any
Receiver appointed shall (except as provided below) act as agent for the Debtor
for all purposes, including the occupation of any premises of the Debtor and in
carrying on the Debtor's business. For the purposes of realizing upon the
Security Interest, the Receiver may sell, lease, or otherwise dispose of
Collateral as agent for the Debtor or as agent for the Secured Party as it may
determine in its discretion. The Debtor agrees to ratify and confirm all actions
of the Receiver acting as agent for the Debtor, and to release and indemnify the
Receiver in respect of all such actions. Any Receiver so appointed shall have
the power:
(a) to enter upon, use, and occupy all premises owned or occupied by the
Debtor;
(b) to take possession of the Collateral;
(c) to carry on the business of the Debtor;
(d) to borrow money required for the maintenance, preservation or
protection of the Collateral or for the carrying on of the business of the
Debtor, and in the discretion of such Receiver, to charge and grant further
security interests in the Collateral in priority to the Security Interest,
as security for the money so borrowed;
(e) to sell, lease, or otherwise dispose of the Collateral in whole or in
part and for cash or credit, or part cash and part credit on such terms and
conditions and in such manner as the Receiver shall determine in its
discretion;
(f) to demand, commence, continue or defend any judicial or administrative
proceedings for the purpose of protecting, seizing, collecting, realizing
or obtaining possession or payment of the Collateral, and to give valid and
effectual receipts and discharges therefor and to compromise or give time
for the payment or performance of all or any part of the Accounts or any
other obligation of any third party to the Debtor; and
(g) to exercise any rights or remedies which could have been exercised by
the Secured Party against the Debtor or the Collateral.
14. Performance of Obligation
14.1 If the Debtor fails to perform its obligation hereunder, the Secured Party
may, but shall not be obliged to, perform such obligation without prejudice to
any other rights and remedies of the Secured Party hereunder, 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 upon demand with interest
at the Interest Rate (as defined in the Amended and Restated Loan Agreement
dated April 15, 2003).
15. Failure to Exercise Remedies
15.1 The Secured Party shall not be liable for any delay or failure to enforce
any remedies available to it or to institute any proceedings for such purposes.
The Secured Party
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may waive any Event of Default, provided that no such waiver shall be binding
upon the Secured Party unless in writing nor shall it affect the rights of the
Secured Party in connection with any other or subsequent Event of Default.
16. Application of Payments
16.1 All payments made in respect of the Obligation and all monies received by
the Secured Party or any Receiver appointed by the Secured Party in respect of
the enforcement of the Security Interest (including the receipt of any Money)
may be held as security for the Obligation or applied in such manner as may be
determined in the discretion of the Secured Party and the Secured Party may at
any time apply or change any such appropriation of such payments or monies to
such part or parts of the Obligation as the Secured Party may determine in its
discretion. The Debtor shall remain liable to the Secured Party for any
deficiency and any surplus funds realized after the satisfaction of the
Obligation shall be paid in accordance with applicable law.
17. Dealings by Secured Party
17.1 The Secured Party may grant extensions of time and other indulgences, take
and give up securities, accept compositions, grant releases and discharges, and
otherwise deal with the Collateral, the Debtor, debtors of the Debtor, sureties
of the Debtor, and others as the Secured Party may see fit, without prejudice to
the Obligation and the rights of the Secured Party to hold and realize upon the
Security Interest. The Secured Party has no obligation to keep Collateral
identifiable, or to preserve rights against other persons in respect of any
Collateral.
18. Amalgamation by Debtor
18.1 The Debtor hereby acknowledges and agrees that in the event it amalgamates
with any other corporation or corporations, it is the intention of the parties
hereto that the term Debtor, when used herein, shall apply to the Debtor and to
the amalgamated corporation, such that the Security Interest granted hereby:
(a) shall extend to Collateral (as the term is herein defined) owned by the
Debtor at the time of amalgamation and to any Collateral thereafter owned
or acquired by the amalgamated corporation;
(b) shall secure the Obligation (as the term is herein defined) of the
Debtor at the time of amalgamation and any Obligation of the amalgamated
corporation to the Secured Party arising after the amalgamation; and
(c) shall attach to Collateral owned by the Debtor at the time of
amalgamation, and shall attach to any Collateral thereafter owned or
acquired by the amalgamated corporation when such becomes owned or is
acquired.
19. Notice
19.1 Without prejudice to any other method of giving notice, any notice required
or permitted to be given hereunder to any party shall be conclusively deemed to
have been received by such party on the date following the sending thereof by
prepaid private courier to such party at its address noted on the first page of
this Agreement.
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20. Separate Security
20.1 This Agreement and the Security Interest are in addition to and not in
substitution for any other security now or hereafter held by the Secured Party
in respect of the Debtor, the Obligation or the Collateral.
21. Secured Party Not Obliged to Advance
21.1 Nothing in this Agreement shall obligate the Secured Party to make any loan
or accommodation to the Debtor, or extend the time for payment or satisfaction
of any Obligation.
22. Severability
22.1 If any provision of this Agreement is be deemed by any court of competent
jurisdiction to be invalid or void, the remaining provisions shall remain in
full force and effect.
23. Time of Essence
23.1 Time is of the essence of this Agreement.
24. Grammatical Changes
24.1 This Agreement is to be read as if all changes in grammar, number and
gender rendered necessary by the context had been made, specifically including a
reference to a person as a corporation and vice-versa.
25. Including
25.1 The word "including", when following any word or words is not to be
construed as limiting the preceding word or words but the preceding word or
words are to be construed as referring to all items or matters that could fall
within the broadest possible interpretation of the preceding word or words.
26. Agreement Unconditional
26.1 There are no representations, warranties or collateral agreements by the
Secured Party to the Debtor relating to the subject-matter hereof and possession
of an executed copy of this Agreement by the Secured Party constitutes
conclusive evidence that it was executed and delivered by the Debtor free of all
conditions.
27. Governing Law; Attornment
27.1 This Agreement shall be interpreted in accordance with the laws of British
Columbia, and, without prejudice to the ability of the Secured Party to enforce
this Agreement in any other proper jurisdiction, the Debtor hereby irrevocably
submits and attorns to the jurisdiction of the courts of British Columbia.
28. Successors and Assigns
28.1 This Agreement and the Obligation may be assigned in whole or in part by
the Secured Party to any person, firm or corporation subject to the equities
between the Secured
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Party and the Debtor. This Agreement may not be assigned by the Debtor without
the prior written consent of the Secured Party. This Agreement is binding upon
the parties hereto, and their respective heirs, executors, administrators, legal
personal representatives, successors and permitted assigns; "successors"
includes any corporation resulting from the amalgamation of any corporation with
another corporation.
29. Copy of Agreement
29.1 The Debtor acknowledges receipt of an executed copy of this Agreement.
30. Verification Statements; Financing Statements
30.1 The Debtor waives the right to receive any verification statement,
financing statement or financing change statement related to this Agreement or
related to any other security agreement in respect of the Obligation.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the Debtor
on the day and year first above written.
Execution Date
-----------------------
Officer Signature(s) | Y | M | D | Party(ies) Signature(s)
| | | |
| | | | IMAGIS TECHNOLOGIES INC. by its
| | | | authorized signatory(ies):
Signed "Xxxxxx Xxxx" | 03 | | |
----------------------- | | | | Signed "Xxxxx Xxxxx"
| | | | -------------------------------
| | | | Name:
| | | |
| | | |
| | | | Signed "Xxxx Xxxxxxxx"
| | | | -------------------------------
| | | | 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. 1996, c.124, 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"
LOCATIONS OF COLLATERAL
1. 1630 - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
2. 0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
