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DEBT RESTRUCTURING AGREEMENT
THIS AGREEMENT is made this 30th day of August, 1999,
AMONG:
MFC BANCORP LTD., a company continued under the laws of the Yukon
Territory
("MFC")
AND:
XXXXXXXX FINANCIAL CORPORATION, a company
incorporated under the laws of the State of Delaware
("Xxxxxxxx")
WHEREAS Xxxxxxxx is indebted to MFC and MFC has agreed to reduce the interest
rate applicable to that indebtedness in exchange for a general security
interest over the property, assets, effects and undertakings of Xxxxxxxx, all
as hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises
and the mutual covenants and agreements hereinafter contained and the sum of
$1.00 paid by each party to the other (the receipt and sufficiency of which
are hereby acknowledged by each party) the parties hereto warrant, represent,
covenant and agree as follows:
1. INTERPRETATION
1.1 In this Agreement and the recitals hereto the following words have the
following meanings:
(a) "Agreement" means this agreement between MFC and Xxxxxxxx;
(b) "Closing Date" means August 30, 1999 or such other date as the
parties hereto may agree; and
(c) "Indebtedness" means the indebtedness of US$21,515,000 bearing
interest at 8.75% owed by Xxxxxxxx to MFC which is evidenced by
a promissory note due July 31, 2008.
1.2 The division of this Agreement into articles, sections and subsections
and the insertion of headings are for reference purposes only and
shall not effect the interpretation of the Agreement. Unless
otherwise indicated, the reference to a particular article, section,
subsection or Schedule refers to a specified article, section,
subsection or Schedule of this Agreement.
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1.3 This Agreement shall be construed in accordance with the laws of the
Province of British Columbia. All references to sums of money shall
be deemed to refer to the legal tender of Canada unless otherwise
stated.
2. RESTRUCTURING OF INDEBTEDNESS
2.1 Subject to and in accordance with the terms and conditions of this
Agreement, MFC and Xxxxxxxx hereby covenant and agree with each other
to reduce the interest rate payable on the Indebtedness from 8.75% per
annum to 5.00% per annum and MFC and Xxxxxxxx further covenant and
agree to secure the Indebtedness by way of a general security
agreement and securities pledge agreement.
3. REPRESENTATIONS AND WARRANTIES
3.1 MFC represents and warrants to Xxxxxxxx that:
(a) it is a company duly continued and validly existing under the
laws of the Yukon Territory;
(b) it has all necessary corporate authority, power and capacity to
enter into this Agreement and to carry out its terms and
conditions to the full extent; and
(c) the acceptance of the general security interest in exchange
for the reduction of the interest rate applicable to the
Indebtedness has been validly authorized by all necessary
corporate acts.
3.2 Xxxxxxxx represents and warrants to MFC that:
(a) it is a company duly incorporated and validly existing under
the laws of the State of Delaware;
(b) it has all necessary corporate authority, power and capacity to
enter into this Agreement and to carry out its terms and
conditions to the full extent; and
(c) the reduction of the interest rate applicable to the
Indebtedness as consideration for the granting of the general
security interest has been validly authorized by all necessary
corporate acts.
4. COMPLETION
4.1 On or before the Closing Date, MFC shall deliver, or cause to be
delivered to Xxxxxxxx, the following:
(a) the promissory note due July 31, 2008 in the principal amount
of US$21,515,000 bearing interest at 8.75% per annum evidencing
the Indebtedness surrendered for cancellation; and
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(b) such other documents as may be required in order to carry out
the terms of this Agreement.
4.2 On or before the Closing Date, Xxxxxxxx shall deliver, or cause to be
delivered to MFC, the following:
(a) a certified copy of a directors' resolution authorizing the
entering into, the execution and delivery of this Agreement by
Xxxxxxxx and the consummation of the transactions contemplated
hereby;
(b) a promissory note substantially in the form attached hereto as
Schedule A due July 31, 2008 in the principal amount of
US$21,515,000 bearing interest at 5.00% per annum;
(c) a general security agreement substantially in the form attached
hereto as Schedule B;
(d) a securities pledge agreement substantially in the form
attached hereto as Schedule C; and
(e) such other documents as may be required in order to carry out
the terms of this Agreement.
5. GENERAL
5.1 Time is of the essence of this Agreement.
5.2 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
5.3 The parties hereto agree to execute such further and other agreements
as may be necessary to give effect to the meaning and intent of this
Agreement.
5.4 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter of this Agreement and supersedes
every previous agreement, communication, expectation, negotiation,
representation or understanding whether oral or written, express or
implied, statutory or otherwise among the parties with respect to the
subject matter of this Agreement except as specifically set out
herein.
5.5 No director, officer, employee or agent of any party has any authority
to make any representation, warranty or covenant not contained in this
Agreement and each party agrees that it has executed this Agreement
without reliance upon any such representation or promise.
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5.6 This Agreement may be executed in several parts and in the same form
and by facsimile and such parts so executed shall together constitute
one original document, and such parts, if more than one, shall be read
together and construed as if all the signing parties had executed one
copy of the said agreement.
IN WITNESS WHEREOF the parties hereto have hereunto executed this Agreement
as of the day and year first above written.
MFC BANCORP LTD.
Per: /s/Xxx Xxxxxxx
-----------------------------
Authorized Signatory
Per:
-----------------------------
Authorized Signatory
XXXXXXXX FINANCIAL CORPORATION
Per: /s/ Xxxxxxx X. Xxxxx
------------------------------
Authorized Signatory
Per:
------------------------------
Authorized Signatory
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SCHEDULE A
PROMISSORY NOTE
---------------
AUGUST 30, 1999
PRINCIPAL AMOUNT: $21,515,000 (U.S.) DUE: JULY 31, 2008
FOR VALUE RECEIVED, the undersigned XXXXXXXX FINANCIAL CORPORATION
("Xxxxxxxx") hereby promises to pay to MFC BANCORP LTD. ("MFC"), of 0 Xxx
Xxxxxxx-Xxxxxx, 0000 Xxxxxx, Xxxxxxxxxxx, on July 31, 2008, at such address
or at such other place as MFC may from time to time designate by written
notice to Xxxxxxxx, the principal amount of TWENTY-ONE MILLION FIVE HUNDRED
AND FIFTEEN THOUSAND DOLLARS (U.S.) ($21,515,000), together with interest
thereon at the rate of 5.00% per annum compounded semi-annually as well after
as before maturity and judgment and both before and after default, such
interest payable semi-annually on the 25th day of January and the 25th day of
July in each year until payment in full.
The payment of the principal and the interest thereon is secured by way of a
general security agreement and a securities pledge agreement issued and
delivered by Xxxxxxxx to MFC and each dated August 30, 1999.
Presentment for payment, demand, protest and notice of dishonour and protest
hereof are hereby waived. This note shall be governed by and construed in
accordance with the laws of the Province of British Columbia.
XXXXXXXX FINANCIAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: c/s
----------------------------------
Title:
---------------------------------
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XXXXXXXX X
GENERAL SECURITY AGREEMENT
--------------------------
THIS GENERAL SECURITY AGREEMENT is dated for reference the 30th day of
August, 1999,
BETWEEN:
XXXXXXXX FINANCIAL CORPORATION, a company
incorporated under the laws of the State of Delaware
("Xxxxxxxx")
AND:
MFC BANCORP LTD., a company incorporated under the laws
of the Yukon Territory
("MFC")
WHEREAS Xxxxxxxx has executed a promissory note dated the 30th day of August,
1999 in favour of MFC (the "Note") in the principal amount of US$21,515,000
due July 31, 2008 and MFC has requested that Xxxxxxxx secure the payment of
the principal and interest by way of a general security agreement;
NOW THEREFORE for good and valuable consideration, receipt and adequacy of
which is acknowledged by the parties, the parties agree that:
1. DEFINITIONS
1.1 In this general security agreement:
(a) the terms "Goods", "Chattel paper", "Documents of Title",
"Equipment", "Accounts", "Consumer Goods", "Instruments",
"Intangibles", "Licenses", "Money", "Securities", "Proceeds",
"Inventory" and "Accessions" and other words and expressions
which have been defined in the Personal Property Security Act
(British Columbia) (the "PPSA") shall be interpreted in
accordance with their respective meanings given in the PPSA
unless otherwise defined herein or unless the context otherwise
requires and specifically;
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(b) "Indebtedness" means all liabilities of every kind and
description of Xxxxxxxx to MFC, whether now or hereafter owed
or any future advance, whether direct, indirect, contingent,
and whether Xxxxxxxx be bound alone or with others and whether
as principal or surety and including, but not limited to, the
principal amount of the Note and any interest accruing thereon;
(c) "PPSA" means the Personal Property Security Act (British
Columbia); and
(d) "Related Documents" means the Note and any other documentation
in connection with this general security agreement or the
Indebtedness or related to its operation or administration,
whether already existing or executed now or later.
2. GENERAL SECURITY INTEREST
2.1 For value received and as a general and continuing security for the
payment of the Indebtedness including any ultimate unpaid balance
thereof, owed to MFC and to secure the payment of the Indebtedness
under this general security agreement or any Related Documents,
Xxxxxxxx hereby:
(a) grants to and in favour of MFC by way of mortgage, charge,
assignment and transfer, a general security interest in all
presently owned and hereafter acquired personal property of
Xxxxxxxx of whatsoever nature and kind and wheresoever situate
and all Proceeds thereof and therefrom, renewals thereof,
Accessions thereto and substitutions therefor including,
without limiting the generality of the foregoing, all the
presently owned or held and hereafter acquired right, title,
and interest in and to all Goods (including all accessories,
attachments, additions, and Accessions thereto), Chattel Paper,
Documents of Title (whether negotiable or not), Instruments,
Intangibles, Licenses, Money (including, without limitation,
the principal), Securities, and all:
(i) Inventory of whatsoever nature and kind and wheresoever
situate;
(ii) Equipment (other than Inventory) of whatsoever nature
and kind and wheresoever situate, including, without
limitation, all machinery, tools, apparatus, plant,
furniture, fixtures, and vehicles of whatsoever nature
and kind;
(iii) book accounts and book debts and generally all Accounts,
debts, dues, claims, choses in action and demands of
every nature and kind howsoever arising or secured
including letters of credit, letters of guarantee and
advices of credit, which are now due, owing or accruing
or growing due to or owned by or which may hereafter
become due, owing or accruing or growing due to or owned
by Xxxxxxxx (all of which are herein collectively called
the "Debts");
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(iv) deeds, documents, writings, paper, books of account and
other books relating to or being records of Debts,
Chattel paper or Documents of Title or by which such are
or may hereafter be secured, evidenced, acknowledges or
made payable;
(v) contractual rights including rents, revenues and
incomes, and insurance claims and policies, and all
goodwill, patents, trademarks, copyrights, and other
industrial property;
(vi) monies (including, without limitation, the principal)
other than trust monies lawfully belonging to others;
and
(vii) personal property described in any schedule now or
hereafter annexed hereto;
(all of which are herein collectively called the "Specifically
Charged Property").
(b) charge as and by way of a floating charge in favour of MFC all
the presently owned or held and hereafter acquired property,
assets, effects and undertakings of Xxxxxxxx of whatsoever
nature and kind and wheresoever situate, other than such of the
property, assets, effects and undertakings of Xxxxxxxx as are
validly and effectively subjected to the grant, mortgage,
pledge and charge, and the general security interest granted to
MFC pursuant to subsection 2.1(a) including, without limiting
the generality of the foregoing, all presently owned or held
and hereafter acquired:
(i) right, title and interest of Xxxxxxxx in and to real and
immovable and leasehold property and rights whether in
fee or of a less estate and all interest in and rights
relating to lands and all easements, rights of way,
privilege, benefits, licenses, improvements and rights
whether connected therewith or appurtenant thereto or
separately owned or held and all structures, buildings,
plant, machinery, fixtures, apparatus and fixed assets;
and
(ii) businesses, goodwill and uncalled capital of Xxxxxxxx;
and the Specifically Charged Property and the property charged
by this subsection 2.1(b) and all property and assets expressed
to be charged by any instruments supplemental hereto or in
implementation hereof are collectively referred to as the
"Collateral".
2.2 TO HAVE AND TO HOLD unto and in favour of MFC on the terms and
conditions herein set out, PROVIDED THAT Xxxxxxxx shall not have the
power without the prior written consent of MFC to:
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(a) grant or allow any lien, charge or other encumbrance, whether
fixed or floating, to be registered against or exist on any
part of the Collateral, which ranks or could in any event rank
to be enforced in priority to or pari passu with the security
constituted by this general security agreement, save for:
(i) mortgages and charges and any other encumbrances, if
any, previously disclosed by Xxxxxxxx;
(ii) mortgages and charges, and any other encumbrances to
MFC; and
(iii) encumbrances approved in writing by MFC prior to their
creation or assumption; and
(b) grant, sell, exchange, transfer, assign, lease or otherwise
dispose of any of its properties, assets, effects, and
undertakings.
3. RIGHTS AND OBLIGATIONS OF XXXXXXXX
3.1 Xxxxxxxx warrants and covenants that it holds title or has rights in
the Collateral sufficient for a general security interest to attach to
the Collateral and that there are no existing encumbrances on this
Collateral, except as previously disclosed to MFC by Xxxxxxxx.
3.2 Until default, or unless otherwise agreed with MFC, Xxxxxxxx may deal
with the Collateral in the ordinary course of Xxxxxxxx'x business.
3.3 Xxxxxxxx shall defend its own and MFC's rights in the Collateral
against the claims and demands of all persons.
3.4 Xxxxxxxx will conduct its business and affairs in a proper and
efficient manner, in accordance with applicable law and keep records
in accordance with generally accepted accounting principles. Xxxxxxxx
shall pay all charges, such as taxes, assessments, claims, liens and
encumbrances relating to the Collateral or Xxxxxxxx'x business and
affairs when the same become due. Xxxxxxxx will deliver to MFC,
promptly, such information concerning the Collateral, Xxxxxxxx and
Drummond's business and affairs, as MFC may reasonably request.
3.5 Xxxxxxxx waives protest and notice of any instrument constituting
Collateral at any time held by MFC on which Xxxxxxxx is in any way
liable, and subject to the notice requirements of the PPSA, notice of
any other action taken by MFC.
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4. DEFAULT
4.1 The Indebtedness hereby secured shall become immediately due and
payable, unless waived in writing by MFC, in any of the following
events:
(a) if Xxxxxxxx should make default in the payment when due of the
Indebtedness, or any part thereof, hereby secured; or
(b) if Xxxxxxxx should commit any breach of any term, condition,
proviso, agreement, obligation or covenant to MFC, or any
representation or warranty given by Xxxxxxxx to MFC is untrue,
whether or not any such term, condition, proviso, agreement or
covenant, representation or warranty is contained in this
general security agreement; or
(c) if an order be made or an effective resolution be passed for
the winding up of Xxxxxxxx or there is instituted by or against
Xxxxxxxx of any type of insolvency proceeding or creditor
arrangement, any formal of informal proceeding for the
dissolution or liquidation of, settlement of claims against, or
winding up of affairs of Xxxxxxxx; or
(d) if Xxxxxxxx should make an assignment for the benefit of its
creditors or be declared bankrupt or makes a proposal or an
authorized assignment or otherwise takes advantage of
provisions for relief under the Bankruptcy Act (Canada), the
Company's Creditors Arrangement Act (Canada) or similar
legislation in any jurisdiction; or
(e) if Xxxxxxxx ceases or threatens to cease to carry on business
or makes or agrees to make a bulk sale of assets or commits or
threatens to commit an act of bankruptcy; or
(f) a receiver, receiver and manager or receiver/manager of all or
any part of the Collateral, or of any other property, assets or
undertakings of Xxxxxxxx is appointed; or
(g) any execution, sequestration, extent or other process of any
court becomes enforceable against Xxxxxxxx or a distress or
analogous process is levied upon the Collateral or any part
thereof; or
(h) if, without the prior written consent of MFC, Xxxxxxxx creates
or permits to exist any encumbrance against any of the
Collateral which ranks or could in any event rank in priority
to or pari passu with the security constituted by this general
security agreement; or
(i) Xxxxxxxx enters into any reconstruction, reorganization,
amalgamation, merger or other similar arrangement with any
other person; or
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(j) any certificate, statement, representation, warranty or audit
report herewith, heretofore or hereafter furnished by or on
behalf of Xxxxxxxx to MFC, whether in connection with this
general security agreement or otherwise, and whether furnished
as to an inducement to MFC to extend any credit to or to enter
into this or any other agreement with Xxxxxxxx, or not:
(i) proves to have been false in any material respect at
the time as of which the facts therein set forth were
stated or certified; or
(ii) proves to have omitted any substantial, contingent or
unliquidated liability or claim against Xxxxxxxx;
or, if upon the date of execution of this general security
agreement, there shall have been any material adverse change in
any of the facts disclosed by any such certificate, statement,
representation, warranty or audit report, which change shall
not have been disclosed to MFC at or prior to the time of such
execution.
4.2 All amounts payable to MFC shall be made without deduction,
compensation, set-off, or counterclaim. A written statement of an
officer of MFC as to the amount remaining unpaid to MFC at any time by
Xxxxxxxx shall be conclusive evidence and shall in any event be prima
facie evidence against Xxxxxxxx as to the amount remaining unpaid to
MFC at such time by Xxxxxxxx.
5. RIGHTS AND OBLIGATIONS OF MFC
5.1 In addition to the rights granted herein, MFC may enforce any other
rights and remedies it may have at law or in equity and specifically
shall have all rights and remedies of a secured party under the PPSA.
All rights and remedies of MFC are cumulative and one or more of these
rights may be exercised independently or in combination from time to
time including marshalling.
5.2 MFC may direct account debtors of Xxxxxxxx to make all payments owing
to Xxxxxxxx on Collateral subject to the security interest directly to
MFC, by notifying such account debtors of MFC's interest, either
before or after default.
5.3 MFC shall have the right at any time to confirm the existence and
state of the Collateral in any manner MFC may consider appropriate and
Xxxxxxxx agrees to furnish all assistance as MFC may reasonably
request in connection therewith. Xxxxxxxx grants to MFC or its agents
access to all places where Collateral may be located and to all
premises occupied by Xxxxxxxx for the purposes of inspection or
obtaining possession.
5.4 MFC may appoint by instrument or by application to a court of
competent jurisdiction a receiver or other person to act on its
behalf, before or after default, or in any insolvency or like pro-
ceeding (receiver includes a receiver-manager). The appointee has all the
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powers of MFC under this general security agreement. In addition, on
instructions from MFC, the receiver shall be entitled to carry on the
business of Xxxxxxxx with all the powers Xxxxxxxx would have to operate
its business, for such time as the receiver determines it advisable and
in the best interest of MFC. MFC is not liable for any act or omission
by any receiver appointed or selected by a court.
5.5 MFC may take possession or constructive possession of, collect, `
demand, xxx on, enforce, recover and receive both Collateral and
proceeds and give binding receipts and discharges therefor. MFC in
possession may use Collateral as it sees fit, providing such use is
reasonable. Any income from or money that is Collateral shall be
applied to Xxxxxxxx'x account. Upon default, MFC may also sell, lease
or otherwise dispose of Collateral in any commercially reasonable
manner. MFC reserves the right to repair or restore Collateral prior
to sale and to add any costs incurred to the Indebtedness.
5.6 MFC may declare all or any part of the Indebtedness which is not by
its terms payable on demand to be immediately due and payable on the
occurrence of any default.
5.7 Xxxxxxxx agrees to pay all charges, including solicitors', auditors',
receivers' or like persons' costs and remuneration or other expenses
reasonably incurred by MFC or other party appointed by MFC in
operating Xxxxxxxx'x accounts and in preparing or enforcing this
general security agreement. Such sums shall constitute a future
advance increasing the Indebtedness hereunder.
5.8 The failure of MFC to receive full payment or satisfaction of the
Indebtedness through its rights and remedies herein provided shall not
in any way release Xxxxxxxx from the obligation to satisfy any
deficiency, including any costs of realization.
5.9 No variation, amendment (except for any schedules which may be added
hereto pursuant to the provisions of this general security agreement)
or waiver of any provision of this general security agreement shall be
effective unless made by written agreement executed by the parties to
this general security agreement.
5.10 No delay or omission by MFC in exercising any right or remedy
hereunder or with respect to any Indebtedness shall operate as a
waiver of that right or remedy and no single or partial exercise of
any right or remedy shall preclude any other exercise of cumulative
rights and remedies.
5.11 MFC may remedy any default or perform any duty of Xxxxxxxx hereunder
or with respect to any Indebtedness in any reasonable manner without
waiving the default remedied and without waiving any other prior or
subsequent default by Xxxxxxxx.
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6. GENERAL
6.1 This general security agreement shall enure to the benefit of and be
binding on the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
6.2 This general security agreement and the related documents shall be
governed by the laws of the Province of British Columbia.
6.3 No action by MFC shall constitute a subordination of its general
security interest to any other interest in the Collateral unless such
subordination is effected by an agreement in writing, titled
"Subordination Agreement", signed by MFC.
6.4 This general security agreement shall remain in full force and effect
until the Collateral has been paid and written notice of discharge by
MFC is received by Xxxxxxxx.
6.5 Xxxxxxxx hereby acknowledges receipt of a copy of this general
security agreement.
IN WITNESS WHEREOF this general security agreement is executed and delivered
on August 30, 1999.
XXXXXXXX FINANCIAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Authorized Signatory
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SCHEDULE C
SECURITIES PLEDGE AGREEMENT
---------------------------
THIS AGREEMENT is dated for reference the 30th day of August, 1999, and is
made by XXXXXXXX FINANCIAL CORPORATION of 1250 - 000 Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0 ("Xxxxxxxx") in favour of MFC BANCORP
LTD. of 0 Xxx Xxxxxxx-Xxxxxx, 0000 Xxxxxx, Xxxxxxxxxxx ("MFC");
WHEREAS Xxxxxxxx has executed a promissory note dated the 30th day of August,
1999 in favour of MFC (the "Note") in the principal amount of US $21,515,000
due July 31, 2008;
AND WHEREAS in order to secure the performance of its obligations under, in
connection with or relating to the Note, Xxxxxxxx has agreed to pledge the
Securities (as hereinafter defined) to MFC;
NOW THEREFORE, this Agreement witnesses that in consideration of the
covenants and agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
---------
ASSIGNMENT, PLEDGE AND HYPOTHECATION
1.1 COLLATERAL
Xxxxxxxx hereby pledges to MFC all of the issued and outstanding
shares in the capital of CVD Financial Corporation (British Columbia)
and CVD Financial Corporation (Washington) and any and all accretions,
additions, accessions, substitutions and replacements thereto or
therefor (such shares, accretions, additions, accessions,
substitutions and replacements collectively hereinafter referred to as
the "Securities"), together with all money, income, proceeds and
benefits, of every nature and kind whatsoever, now or at any time
hereafter due, owing, payable or accruing on, under or in respect of
the Securities or otherwise attributable or accruing thereto,
including, without limitation, all distributions of earnings or
capital (including, without limitation, all dividends in cash and
dividends in kind, liquidating dividends, stock dividends, new
security or other properties or benefits to which Xxxxxxxx is or may
hereafter become entitled to receive on account of the Securities and
all payments by way of reduction of capital) (the Securities together
with all such money, income, proceeds and benefits are collectively
hereinafter referred to as the "Collateral").
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1.2 INDEBTEDNESS SECURED
The Collateral will be held by MFC as general and continuing security
in favour of and as a fixed and specific assignment, pledge and
hypothecation unto MFC to secure performance of the obligations of
Xxxxxxxx under the Note (the "Obligations").
1.3 ADDITIONAL SECURITY
If Xxxxxxxx becomes entitled to receive or receives any certificate
(including, without limitation, any certificate representing a stock
dividend or a distribution in connection with any reclassification,
increase or reduction of capital), bond, note or other instrument, or
any option or right, whether as an addition to or in substitution or
exchange for, any of the Securities, Xxxxxxxx will accept such
certificate, bond, note, instrument, option or right in trust for MFC
and will deliver such certificate, bond, note, instrument, option or
right forthwith to MFC in the exact form received by Xxxxxxxx, with
Xxxxxxxx'x endorsement when necessary, to be held by MFC, subject to
the terms hereof, as general and continuing security and as a fixed
and specific assignment, pledge and hypothecation unto MFC to secure
payment of the Obligations.
1.4 AMOUNTS HELD IN TRUST
If any money, income, proceed or other benefit, of any nature or kind
whatsoever, is received by Xxxxxxxx in respect of any of the
Collateral, Xxxxxxxx will receive such money, income, proceed or other
benefit in trust for MFC, will segregate such money, income, proceed
or other benefit from its other property or funds and will forthwith
upon receipt thereof assign, transfer, set over and deliver the same
to MFC to be held by MFC hereunder as general and continuing security
to secure payment of the Obligations in accordance with the terms
hereof and MFC, as MFC in its uncontrolled discretion may determine,
may deal with such amounts or benefits in accordance with the
provisions hereof.
1.5 RESPONSIBILITY OF MFC
It is agreed that the responsibility of MFC in regard to the
Collateral will be limited to exercising the same degree of care which
it gives to its own valuable property.
1.6 VOTING RIGHTS PRIOR TO DEFAULT
So long as no Event of Default (as hereinafter defined) or event
which, with the giving of notice or lapse of time, or both, would
become an Event of Default has occurred and is continuing Xxxxxxxx
will be entitled to vote or refrain from voting the Securities at any
meeting, whether special or general, at which the holder of the
Securities is entitled to vote and will be entitled to take part in or
consent to or refrain from taking part in or consenting to any
corporate or shareholders' action which the holder of the Securities
is entitled to take part in or consent to, provided that:
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(a) Xxxxxxxx has given MFC at its address set forth above not less
than 15 days' written notice of the manner in which it intends
to exercise, or the reasons for refraining from exercising, any
such right to vote or to take part in or consent to any such
corporate or shareholders' action;
(b) the exercise of such right to vote or to take part in or
consent to any such corporate or shareholders' action would not
result in a contravention of any covenant or agreement of
Xxxxxxxx to MFC hereunder or under any other agreement
evidencing or securing any of the Obligations and if so,
Xxxxxxxx should not vote in such a manner; and
(c) Xxxxxxxx has not received from MFC notice that, in the
judgment of MFC, the exercise of such right to vote or to take
part in or consent to any such corporate or shareholders'
action would have a material adverse effect on the value of
the Collateral or any part thereof.
1.7 VOTING RIGHTS AFTER DEFAULT
Upon the occurrence and during the continuance of any Event of Default
or event which, with the giving of notice or lapse of time, or both,
would become an Event of Default all rights of Xxxxxxxx pursuant to
subsection 1.6 shall cease and MFC will be entitled (whether or not
the Securities are registered in the name of MFC or its nominee) to
vote or refrain from voting or direct Xxxxxxxx or any other person as
MFC may appoint to vote or refrain from voting the Securities at any
meeting, whether special or general, at which the holder of the
Securities is entitled to vote and will be entitled to take part in or
consent to or refrain from taking part in or consenting to or direct
Xxxxxxxx or any other person as MFC may appoint to take part in or
consent to or refrain from taking part in or consenting to any
corporate or shareholders' action which the holder of the Securities
is entitled to take part in or consent to and Xxxxxxxx hereby
irrevocably constitutes and appoints MFC and any other person
appointed by MFC as its true and lawful attorney-in-fact and agent
for, in the name of and on behalf of Xxxxxxxx, to act and vote and
otherwise exercise all powers exercisable with respect to the
Securities or to take part in or consent to any such corporate or
shareholders' action, and when so acting or refraining from acting,
neither MFC nor any person appointed by MFC will incur any liability
or responsibility of any kind whatsoever to Xxxxxxxx.
1.8 ENTITLEMENT TO DIVIDENDS
MFC will be entitled to receive and retain any dividends or
distributions paid in respect of the Securities and any such dividends
or distributions shall be held as Collateral hereunder.
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ARTICLE II
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WARRANTIES AND COVENANTS OF XXXXXXXX
2.1 WARRANTIES AND COVENANTS
Xxxxxxxx hereby warrants, covenants and agrees with MFC that:
(a) the Securities have been duly authorized and validly issued and
are outstanding as fully paid and non-assessable and were
issued in compliance with all applicable corporate and
securities laws;
(b) Xxxxxxxx authorizes MFC to file, in jurisdictions where this
authorization will be given effect, a financing statement or
other statement disclosing the security interest created
herein signed only by MFC covering the Collateral; and, at the
request of MFC, Xxxxxxxx will join MFC in executing one or
more financing or other such statements, in form satisfactory
to MFC, and will pay the cost of filing the same or filing or
recording this Agreement in all public offices wherever filing
or recording is deemed by MFC to be necessary or desirable, it
being further stipulated in this regard that MFC may also at
any time or times sign any counterpart of this Agreement
signed by Xxxxxxxx and file same as a financing statement if
MFC shall elect to do so;
(c) Xxxxxxxx will not sell, assign, transfer or otherwise dispose
of the Collateral or any interest therein or agree to sell,
assign, transfer or otherwise dispose of the Collateral or any
interest therein without the prior written consent of MFC;
(d) Xxxxxxxx will not create, incur or permit to exist any adverse
claim, mortgage, assignment, pledge, hypothecation, lien,
charge or other encumbrance or security interest whatsoever
with respect to any of the Collateral (other than pursuant to
this agreement) without the prior written consent of MFC; and
(e) Xxxxxxxx will pay to MFC on demand all expenses and
expenditures, including, without limitation, legal fees and
disbursements, incurred or paid by MFC in connection with
confirming, perfecting and preserving of the assignment, pledge
and hypothecation constituted hereby, in connection with
protecting MFC against the claims or interests of any third
person against the Collateral and in connection with the
exercise by MFC of any right, power or remedy conferred by this
agreement or by law.
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ARTICLE III
-----------
GENERAL COVENANTS
3.1 CONTINUING SECURITY
This shall be a continuing agreement and the Collateral is in addition
to and not in substitution for any other security held now or
hereafter by MFC and shall not operate as a merger of any simple
contract debt or suspend the fulfillment of, or affect the rights,
remedies and powers of MFC in respect of the Obligations or the
Collateral and this Agreement and the assignment, pledge and
hypothecation constituted hereby shall continue in full force and
effect in accordance with the terms hereof until all of the
Obligations have been fully paid and satisfied by Xxxxxxxx and
discharged by MFC. All claims, present and future, of Xxxxxxxx
against any person liable upon or for payment of any of the Securities
are hereby assigned to MFC.
3.2 FUTURE SECURITIES
Any and all securities and other properties heretofore, now or
hereafter delivered by Xxxxxxxx to MFC, or in MFC's possession, shall
also secure payment of the Obligations and shall be held and construed
to be a part of the Collateral hereunder to the same extent as fully
described herein.
3.3 APPOINTMENT AS ATTORNEY
Xxxxxxxx hereby irrevocably constitutes and appoints MFC and any other
person appointed by MFC as its true and lawful attorney-in-fact and
agent for, in the name of and on behalf of Xxxxxxxx, to execute and
deliver, and to receive delivery of, all such assignments, transfers,
deeds, assurances and instruments as may be necessary to transfer all
or any of the Collateral (including, without limitation, to fill in
all blanks in any transfers of stocks or any powers of attorney or
other documents delivered to MFC) and when so acting neither MFC nor
any person appointed by MFC will incur any liability or responsibility
of any kind whatsoever to Xxxxxxxx.
3.4 RECORDS OF MFC
The records of MFC as to the occurrence of any Event of Default (as
hereinafter defined), as to the obligations secured hereby or as to
any demand having been made on Xxxxxxxx will be prima facie evidence
of such default, obligation or demand.
3.5 NO OBLIGATION TO COLLECT
MFC will not be bound or obliged, at any time or under any
circumstances, to collect or see to the payment of any interest,
dividends or other income of, on or from any of the Collateral, or to
sell, transfer or otherwise realize upon any of the Collateral and MFC
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will not be responsible for any loss occasioned by any sale of any of
the Collateral or by the retention of or refusal to sell the same.
3.6 NO OBLIGATION TO RELEASE
If any payment on account of the Obligations is made MFC will not by
reason thereof be required to surrender any of the Collateral;
provided that MFC will, at the request of Xxxxxxxx, surrender the
Collateral to Xxxxxxxx upon the earlier of the date on which:
(a) all indebtedness and liability of Xxxxxxxx under the Note has
been fully paid and satisfied and MFC has been released from
all of its obligations to make any further advances to
Xxxxxxxx; and
(b) MFC has released Xxxxxxxx from the Obligations.
ARTICLE IV
----------
EVENTS OF DEFAULT
4.1 EVENTS OF DEFAULT
Xxxxxxxx shall be in default under this Agreement upon the occurrence
of any of the following events or conditions (each an "Event of
Default"):
(a) default in the payment or performance of any liability or
obligation of Xxxxxxxx or of any maker, endorser or guarantor
of any liability or obligation of Xxxxxxxx to MFC, including,
without limitation, default in connection with the Obligations
when due;
(b) default in the performance of any covenant or agreement of
Xxxxxxxx to MFC, whether under this Agreement or any other
agreement evidencing or securing any of the Obligations or
otherwise;
(c) any representation or warranty by Xxxxxxxx herein or in any
other agreement or instrument of which MFC has the benefit, or
any certificate of Xxxxxxxx or any shareholder, director or
officer of Xxxxxxxx delivered in connection herewith or
pursuant hereto, being or becoming untrue or incorrect in whole
or in part and the same not being remedied within 10 days after
written notice thereof is given to Xxxxxxxx;
(d) the levy of any attachment, execution, or other process against
Xxxxxxxx or any of the Collateral;
(e) the dissolution, termination of existence, insolvency or
business failure of Xxxxxxxx or any endorser, guarantor or
surety of any of the Obligations, or the
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commission of an act of bankruptcy by, or by the appointment of
receiver or other legal representative for any part of the
property of, assignment for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy or
insolvency law by or against, Xxxxxxxx or any endorser,
guarantor or surety for any of the Obligations;
(f) the occurrence of any event which under the terms of any
evidence of indebtedness, indenture, loan agreement, security
agreement or similar instrument permits the acceleration of
maturity of any indebtedness of Xxxxxxxx to MFC;
(g) the receipt by MFC of notification that another person has or
expects to acquire a security interest in the Collateral or any
part thereof; or
(h) a change in the beneficial ownership or control of Xxxxxxxx or
the entering into of any agreement pursuant to which a right,
agreement or option, present or future, contingent or absolute,
or any right capable of becoming a right, agreement or option:
(i) to require Xxxxxxxx to issue any further or other
shares or securities in its capital or to convert any
securities of Xxxxxxxx into voting shares in its
capital; or
(ii) to purchase or otherwise acquire any shares in the
capital of Xxxxxxxx from Xxxxxxxx or the Borrower.
ARTICLE V
---------
POWERS AND REMEDIES
5.1 SALE
Upon the occurrence of an Event of Default and at any time thereafter,
at the option of MFC, the Obligations shall become immediately due and
payable without presentment or demand or any notice to Xxxxxxxx or any
other person obligated thereon and MFC shall have and may exercise
with reference to the Collateral and the Obligations any and all of
the rights and remedies of MFC under this Agreement and such other
rights and remedies as are provided by law or by equity or by statute,
including, without limitation, the right and power to sell on any
recognized exchange dealing in such securities or by public or private
sale or sales, or otherwise dispose of or utilize, the Collateral and
any part or parts thereof as fully and effectually as if MFC were the
absolute owner thereof, and to apply the proceeds thereof toward
payment of any costs and expenses (including, without limitation,
legal fees and disbursements) thereby incurred by MFC and toward
payment of the Obligations, in such order, manner and priority as MFC
in its uncontrolled discretion may see fit. To the extent permitted
by law, Xxxxxxxx expressly waives any notice of sale or other
disposition of the Collateral and any other rights or remedies of
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Xxxxxxxx or formalities prescribed by law or by equity or by statute
relative to the sale or other disposition of the Collateral or
exercise of any other right or remedy of MFC; and to the extent any
such notice is required and cannot be waived, Xxxxxxxx agrees that if
such notice is mailed, postage prepaid, to Xxxxxxxx at the address
shown above at least five days before the time of the sale or
disposition, such notice shall be deemed reasonable and shall fully
satisfy any requirement for giving of said notice. Xxxxxxxx expressly
acknowledges and agrees that at any sale or realization of the
Securities under this section, MFC may purchase the Securities or any
part thereof, free from any right of redemption on the part of
Xxxxxxxx or anyone claiming through Xxxxxxxx, which right is, to the
extent permitted by law, hereby waived and released.
5.2 TRANSFER OF SECURITIES
MFC is hereby granted the right, at its option, either before or after
the occurrence of an Event of Default, to transfer at any time to
itself or its nominee the Securities or any part thereof and to have
the Securities or any part thereof registered in its name or in the
name of its nominee.
5.3 RIGHT TO EXERCISE OPTION
Upon the occurrence and during the continuance of any Event of Default
or event which, with the giving of notice or lapse of time, or both,
would become an Event of Default, MFC will have the right but will not
be bound nor required to exercise any option or right which the holder
of any of the Collateral may at any time have, and any and all costs,
charges, expenses, fees, outlays and premiums incurred by MFC in
connection with the exercise of any such option or right will be added
to and form part of the Obligations and be secured hereby.
5.4 COMPROMISE AND RELEASE
MFC will not be obliged to exhaust its recourse against Xxxxxxxx or
any other person or against any other security or securities which it
may hold before realizing on or otherwise dealing with the Collateral,
and MFC may grant time, renewals, extensions, indulgences, releases
and discharges to, may take securities from and give the same and any
and all securities up to, may abstain from taking securities from, or
from perfecting securities of, may accept compositions from, and may
otherwise deal with, Xxxxxxxx and all other persons as MFC may see
fit, without prejudice to the right of MFC to hold, deal with, sell,
transfer and otherwise realize on the Securities in accordance with
the terms of this Agreement.
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5.5 COOPERATION WITH LENDER
Xxxxxxxx hereby agrees to cooperate fully with MFC in order to permit
MFC to sell, transfer or otherwise realize on the Collateral in
accordance with the terms hereof. Specifically, Xxxxxxxx agrees to
fully comply with the securities laws of the Province of British
Columbia and any other province having jurisdiction, and the rules,
bylaws and regulations of any stock exchange on which the Securities
may be traded, and to take such action as may be necessary to permit
MFC to sell, transfer or otherwise realize on the Securities in
compliance with such laws.
5.6 APPLICATION OF COLLATERAL
MFC may, at its option, hold any and all proceeds, payments, monies,
income or benefits attributable or accruing to the Collateral which is
received by MFC as security for the Obligations, or, apply any or all
of such proceeds, payments, monies, income or benefits to the
Obligations, whether or not then due, in such order manner or priority
as MFC may, in its uncontrolled discretion, determine.
ARTICLE VI
----------
MISCELLANEOUS
6.1 FURTHER ASSURANCES
At the request of MFC Xxxxxxxx will, at its own expense, execute all
such transfers, stock powers, proxies and other documents as may be
required by MFC, with all such powers of sale and other necessary
powers as may be expedient for vesting in MFC or such person or person
as MFC may appoint, the Securities and to otherwise carry into effect
the intent and purposes of this Agreement.
6.2 NO REVOCATION
The appointment and power of attorney contained in sections 1.7 and
3.3, respectively, will be deemed to be coupled with an interest and
will not be revoked by the bankruptcy, insolvency, winding-up,
liquidation or dissolution of Xxxxxxxx and Xxxxxxxx hereby ratifies
and confirms and agrees to ratify and confirm all that MFC or any
person appointed by MFC, as attorney-in-fact and agent for, in the
name of and on behalf of Xxxxxxxx, may lawfully do or cause to be done
by virtue of sections 1.7 and 3.3, respectively.
6.3 WAIVER
No delay or omission on the part of MFC in exercising any rights
hereunder shall operate as a waiver of any such right or any other
right. A waiver on any one or more occasions shall not be construed
as a bar to or waiver of any right or remedy on any future occasion.
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6.4 SEIZURE OF COLLATERAL
Upon the occurrence of an Event of Default MFC shall have the absolute
and unconditional right, without prior notice or any prior hearing of
any kind whatsoever, to seize and take possession of the Collateral,
and Xxxxxxxx does hereby expressly waive any right to any prior notice
or any prior hearing prior to seizure and taking possession of the
Collateral by MFC.
6.5 SUCCESSORS AND ASSIGNS
This Agreement shall be binding on Xxxxxxxx, and its successors and
assigns, and shall enure to the benefit of MFC, and its successors and
assigns.
6.6 RIGHTS CUMULATIVE
The rights and remedies of MFC hereunder are cumulative and the
exercise of any one or more of the remedies provided herein shall not
be construed as a waiver of any of the other remedies of MFC.
6.7 SEVERABILITY
If any provision of this Agreement shall be found or determined to be
invalid, illegal or unenforceable it shall be severable from this
Agreement and the remainder of this Agreement shall be read and
construed as if such invalid, illegal or unenforceable provision or
part had been deleted herefrom.
6.8 APPLICABLE LAW
This Agreement and the rights and obligations of the parties hereunder
shall be governed and construed according to the laws of the Province
of British Columbia.
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6.9 OWNERSHIP CERTIFICATES
In connection with the Securities MFC is hereby authorized to sign on
behalf of and as agent for Xxxxxxxx such income tax ownership
certificates as may be required.
EXECUTED as of the 30th day of August, 1999.
SIGNED, SEALED and DELIVERED by )
XXXXXXXX FINANCIAL )
CORPORATION in the presence of: ) By:
)
-------------------------------- ) /s/ Xxxxxxx X. Xxxxx
Witness ) ------------------------------
-------------------------------- ) Authorized Signatory
Address )
-------------------------------- )
) ------------------------------
-------------------------------- ) Authorized Signatory
Occupation
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