SECURED TERM NOTE
FOR
VALUE
RECEIVED, each of PNEUTECH INC., a corporation organized under the laws of
Canada (“Pneutech”),
XXXXXXXX CONTROLS INC., a corporation organized under the laws of Canada
(“Xxxxxxxx”),
and
HYDRAMEN FLUID POWER LIMITED, a corporation organized under the laws of Ontario
(“Hydramen”
together with Pneutech and Xxxxxxxx, each a “Company”
and
collectively, the “Companies”),
jointly and severally (solidarily), promises to pay to FEDERAL
PARTNERS, L.P., a Delaware limited partnership
(the
“Holder”)
or its
registered assigns or successors in interest, the sum of Two Million Dollars
(Cnd.$2,000,000), together with any accrued and unpaid interest hereon, on
May
9, 2007 (the “Maturity
Date”)
if not
sooner indefeasibly paid in full.
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in those certain General Security Agreements and Deeds of Hypothec, as
the
case may be, dated as of the date hereof by and between each of the Companies
and the Holder (as amended, restated, modified and/or supplemented from time
to
time, collectively, the “Security
Agreements”).
The
following terms shall apply to this Secured Term Note (this “Note”):
ARTICLE
I
INTEREST
AND REDEMPTION
1.1 Contract
Rate.
Subject
to Sections 2.2 and 3.10, interest payable on the outstanding principal amount
of this Note (the “Principal
Amount”)
shall
accrue at a rate per annum equal to the sum of (i) the “prime rate” published in
The Wall Street Journal from time to time (the “Prime
Rate”),
plus
two percent (2%) (the “Cash
Contract Rate”),
plus
(ii) five percent (5%) (the “PIK
Contract Rate”)
(the
sum of (i) and (ii) shall be referred to as the “Contract
Rate”).
The
Cash Contract Rate shall be increased or decreased as the case may be for each
increase or decrease in the Prime Rate in an amount equal to such increase
or
decrease in the Prime Rate; each change to be effective as of the day of the
change in the Prime Rate. Interest shall be (i) calculated on the basis of
a 360
day year, and (ii) payable monthly, in arrears, commencing on December 1, 2006,
on the first business day of each consecutive calendar month thereafter through
and including the Maturity Date, and on the Maturity Date, whether by
acceleration or otherwise (each date upon which interest shall be so payable,
an
“Interest
Payment Date”).
Through any Interest Payment Date, interest on the Principal Amount that shall
have accrued at the Cash Contract Rate and shall remain unpaid as of such
Interest Payment Date (for any Interest Payment Date, a “Cash
Interest Amount”)
shall
be paid in immediately available funds by the Companies to the Holder on such
Interest Payment Date. Through any Interest Payment Date, interest on the
Principal Amount that shall have accrued at the PIK Interest Rate and shall
remain unpaid as of such Interest Payment Date (for any Interest Payment Date,
a
“PIK
Interest Amount”)
shall
not be paid on such Interest Payment Date. All outstanding PIK Interest Amounts
shall be due and payable on the Maturity Date. Notwithstanding any other
provision of this Note, the Companies may, in their sole discretion, pay any
PIK
Interest Amount on any Interest Payment Date in immediately available funds
without any premium or penalty.
1.2 Optional
Redemption in Cash.
The
Companies may prepay this Note (“Optional
Redemption”)
by
paying to the Holder a sum of money equal to one hundred percent (100%) of
the
Principal Amount outstanding at such time together with accrued but unpaid
Cash
Interest Amounts and PIK Interest Amounts and any and all other sums due,
accrued or payable to the Holder arising under this Note, the Security
Agreements or any Ancillary Agreement (the “Redemption
Amount”)
outstanding on the Redemption Payment Date (as defined below). The Companies
shall deliver to the Holder a written notice of redemption (the “Notice
of Redemption”)
specifying the date for such Optional Redemption (the “Redemption
Payment Date”),
which
date shall be within seven (7) business days after the date of the Notice of
Redemption (the “Redemption
Period”).
On
the Redemption Payment Date, the Redemption Amount must be paid in good funds
to
the Holder. In the event the Companies fail to pay the Redemption Amount on
the
Redemption Payment Date as set forth herein, then such Redemption Notice will
be
null and void. For purposes hereof, the term “Ancillary
Agreement”
means
all documents, agreements, instruments, security agreements, mortgages and
deeds
of hypothecs executed by or on behalf of any Company to Holder, relating to
this
Note or to the transactions contemplated by this Note or otherwise relating
to
the relationship between or among any Company and Holder, as each of the same
may be amended, supplemented, restated or otherwise modified from time to
time.
1.3 Canada
Interest Act.
For the
purpose of complying with the Interest Act (Canada), it is expressly stated
that
where interest is calculated pursuant hereto at a rate based upon a 360-day
period (for the purposes of this Section, the “first rate”), the yearly rate or
percentage of interest to which the first rate is equivalent is the first rate
multiplied by the actual number of days in the calendar year in which the same
is to be ascertained and divided by 360, and the parties hereto acknowledge
that
there is a material distinction between the nominal and effective rates of
interest and that they are capable of making the calculations necessary to
compare such rates and that the calculations herein are to be made using the
nominal rate method and not on any basis that gives effect to the principle
of
deemed reinvestment of interest.
ARTICLE
II
EVENTS
OF DEFAULT
2.1 Events
of Default.
The
occurrence of any of the following events set forth in this Section 2.1 shall
constitute an event of default (“Event
of Default”)
hereunder:
(a) Failure
to Pay.
The
Companies fail to pay when due any installment of principal, interest or other
fees hereon in accordance herewith, or the Companies fail to pay any of the
other Obligations when due, and, in any such case, such failure shall continue
for a period of three (3) days following the date upon which any such payment
was due.
(b) Breach
of Covenant.
Any
Company breaches any covenant or any other term or condition of this Note in
any
material respect and such breach, if subject to cure, continues for a period
of
fifteen (15) days after the occurrence thereof.
(c) Breach
of Representations and Warranties.
Any
representation, warranty or statement made or furnished by any Company in this
Note, the Security Agreements or any Ancillary Agreement shall at any time
be
false or misleading in any material respect on the date as of which made or
deemed made.
2
(d) Default
Under Other Agreements.
The
occurrence of any default (or similar term) in the observance or performance
of
any agreement or condition relating to any indebtedness for borrowed money,
including indebtedness owing by any Company to Greystone Business Credit II
LLC
and/or Laurus Master Fund, Ltd. beyond the period of grace (if any), the effect
of which default is to cause, or permit the holder or holders of such
indebtedness or beneficiary or beneficiaries of such contingent obligation
to
cause, such indebtedness to become due prior to its stated maturity or such
contingent obligation to become payable.
(e) Material
Adverse Effect.
Any
change or the occurrence of any event which could reasonably be expected to
have
a Material Adverse Effect (as defined below). “Material
Adverse Effect”
shall
mean a material adverse effect on (a) the business, assets, liabilities,
condition (financial or otherwise), properties, operations or prospects of
any
Company individually or the Companies taken as a whole, (b) any Company’s
ability to pay or perform the Obligations in accordance with the terms hereof,
the Security Agreement or any Ancillary Agreement, (c) the value of the
Collateral or the Hypothecated Property, the Liens on the Collateral or the
Hypothecated Property or the priority of any such Lien or (d) the practical
realization of the benefits of the Holder’s rights and remedies under this Note,
the Security Agreements and any Ancillary Agreements.
(f) Bankruptcy.
Any
Company shall (i) apply for, consent to or suffer to exist the appointment
of,
or the taking of possession by, a receiver, interim receiver, custodian, trustee
or liquidator or like official of itself or of all or a substantial part of
its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case or proceeding under applicable federal or foreign
bankruptcy laws (as now or hereafter in effect), save and except for the
proceedings referred to below under Sub-Section 2.1(h), (iv) be adjudicated
a
bankrupt, (v) acquiesce to, without challenge within ten (10) days of the filing
thereof, or failure to have dismissed, within thirty (30) days, any petition
or
proceeding filed against it in any involuntary case or proceeding under such
bankruptcy laws, or (vi) take any action for the purpose of effecting any of
the
foregoing.
(g) Judgments.
Attachments or levies in excess of $50,000 in the aggregate are made upon any
Company’s assets or a judgment is rendered against any Company’s property
involving a liability of more than $50,000 which shall not have been vacated,
discharged, stayed or bonded within thirty (30) days from the entry
thereof.
(h) Insolvency/CCAA
Proceedings.
Any
Company shall (i) cease operations of its present business or (ii) fail to
file
a plan of arrangement pursuant to the Companies’ Creditors Arrangement Act
(Canada) in the court file bearing number 000-00-000000-000 of the Quebec
Superior Court, District of Montreal by December 5, 2006 and such plan of
arrangement is not approved by the requisite majority of its creditors and
sanctioned by such Court on or before February 5, 2007.
(i) Change
of Control.
A
Change of Control (as defined below) shall occur with respect to any Company,
unless the Holder shall have expressly consented to such Change of Control
in
writing. A “Change
of Control”
shall
mean any event or circumstance as a result of any Company merging or
consolidating with, or selling all or substantially all of its assets to, any
other person or entity.
3
(i) Indictment;
Proceedings.
The
indictment or threatened indictment of any Company or any executive officer
of
any Company under any criminal statute, or commencement or threatened
commencement of criminal or civil proceeding against any Company or any
executive officer of any Company pursuant to which statute or proceeding
penalties or remedies sought or available include forfeiture of any of the
property of any Company.
(j) Default
Under Other Agreements.
(i) An
Event of Default shall occur under and as defined in any Security Agreement
or
any Ancillary Agreement, (ii) any Company shall breach any term or provision
of
any other agreement in any material respect and such breach, if capable of
cure,
continues unremedied for a period of fifteen (15) days after the occurrence
thereof, (iii) any Company attempts to terminate, challenges the validity of,
or
its liability under, any other agreement, (iv) any proceeding shall be brought
to challenge the validity, binding effect of any other agreement or (v) any
other agreement ceases to be a valid, binding and enforceable obligation of
any
Company (to the extent such Company is a party thereto).
(k) Use
of
Proceeds.
Any
Company shall use the proceeds of this Note for any purpose other than as
permitted under Section 3.12 hereof.
2.2 Default
Interest.
Following the occurrence and during the continuance of an Event of Default,
the
Companies shall, jointly and severally, pay additional interest on the
outstanding principal balance of this Note in an amount equal to two percent
(2%) per month, and all outstanding obligations under this Note, the Security
Agreements and each Ancillary Agreement, including unpaid interest, shall
continue to accrue interest at such additional interest rate from the date
of
such Event of Default until the date such Event of Default is cured or
waived.
2.3 Default
Payment.
Following the occurrence and during the continuance of an Event of Default,
the
Holder, at its option, may demand repayment in full of all obligations and
liabilities owing by Companies to the Holder under this Note, the Security
Agreements and/or any Ancillary Agreement and/or may elect, in addition to
all
rights and remedies of the Holder under the Security Agreements and any
Ancillary Agreement and all obligations and liabilities of the Companies under
the Debtor Agreements, to require the Companies to make a default payment
(“Default
Payment”).
The
Default Payment shall be one hundred thirty percent (130%) of the outstanding
principal amount of this Note, plus accrued but unpaid interest, all other
fees
then remaining unpaid, and all other amounts payable hereunder. The Default
Payment shall be applied first to any fees due and payable to the Holder
pursuant to this Note, the Security Agreements and/or the Ancillary Agreements,
then to accrued and unpaid interest due on this Note and then to the outstanding
principal balance of this Note. The Default Payment shall be due and payable
immediately on the date that the Holder has demanded payment of the Default
Payment pursuant to this Section 2.3.
4
ARTICLE
III
MISCELLANEOUS
3.1 Issuance
of New Note.
Upon
any partial redemption of this Note, a new Note containing the same date and
provisions of this Note shall, at the request of the Holder, be issued by the
Companies to the Holder for the principal balance of this Note and interest
which shall not have been paid as of such date. Subject to the provisions of
Article III of this Note, the Companies shall not pay any costs, fees or any
other consideration to the Holder for the production and issuance of a new
Note.
3.2 Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
3.3 Failure
or Indulgence Not Waiver.
No
failure or delay on the part of the Holder hereof in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing hereunder are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
3.4 Notices.
Any
notice herein required or permitted to be given shall be in writing and shall
be
deemed effectively given: (a) upon personal delivery to the party notified,
(b)
when sent by confirmed telex or facsimile if sent during normal business hours
of the recipient, if not, then on the next business day, (c) five days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (d) one day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification
of
receipt. All communications shall be sent to the Companies at the address set
forth below the signature of the Companies hereto, and to the Holder at the
following address: Federal
Partners, L.P. c/o The Xxxxx Estates, Inc., 0 Xxxxxxxxxxx Xxxxx, 00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Xxxx: Xxxxxxx X. Xxxx, facsimile number (000)
000-0000,
or at
such other address as the Companies or the Holder may designate by ten days
advance written notice to the other parties hereto.
3.5 Amendment
Provision.
The
term “Note” and all references thereto, as used throughout this instrument,
shall mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented, and any successor instrument
as such successor instrument may be amended or supplemented.
3.6 Assignability.
This
Note shall be binding upon each Company and their respective successors and
assigns, and shall inure to the benefit of the Holder and its successors and
assigns. No Company may assign any of its obligations under this Note without
the prior written consent of the Holder, any such purported assignment without
such consent being null and void.
3.7 Cost
of Collection.
In case
of any Event of Default under this Note, the Companies shall, jointly and
severally, pay the Holder the Holder’s reasonable costs of collection, including
reasonable attorneys’ fees.
5
3.8 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS
NOTE
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
(b) EACH
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK OR THE QUEBEC SUPERIOR COURT, FOR
THE
DISTRICT OF MONTREAL SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY
CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND, AND THE HOLDER, ON
THE
OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS
OR TO
ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENTS
OR
ANY ANCILLARY AGREEMENTS; PROVIDED, THAT EACH COMPANY ACKNOWLEDGES THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
THE
COUNTY OF NEW YORK, STATE OF NEW YORK OR THE QUEBEC SUPERIOR COURT, FOR THE
DISTRICT OF MONTREAL; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL
BE
DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE
ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. EACH COMPANY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES ANY OBJECTION WHICH
IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS. EACH COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO SUCH COMPANY AT THE ADDRESS SET FORTH BENEATH
THE
SIGNATURE OF SUCH COMPANY HERETO AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE U.S. OR CANADIAN MAILS, PROPER POSTAGE
PREPAID.
(c) EACH
COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS
TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER AND/OR ANY
COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY
AGREEMENTS OR ANY ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
THERETO.
6
3.9 Judgment
Currency.
If for
the purpose of obtaining judgment in any court it is necessary to convert an
amount due hereunder in the currency in which it is due (the “Original
Currency”)
into
another currency (the “Second
Currency”),
the
rate of exchange applied shall be that at which, in accordance with normal
banking procedures, the Holder could purchase in the New York foreign exchange
market, the Original Currency with the Second Currency on the date two (2)
business days preceding that on which judgment is given. Each Company agrees
that its obligation in respect of any Original Currency due from it hereunder
shall, notwithstanding any judgment or payment in such other currency, be
discharged only to the extent that, on the business day following the date
the
Holder receives payment of any sum so adjudged to be due hereunder in the Second
Currency, the Holder may, in accordance with normal banking procedures,
purchase, in the New York foreign exchange market, the Original Currency with
the amount of the Second Currency so paid; and if the amount of the Original
Currency so purchased or could have been so purchased is less than the amount
originally due in the Original Currency, each Company agrees as a separate
obligation and notwithstanding any such payment or judgment to indemnify the
Holder against such loss. The term “rate of exchange” in this Section 3.9 means
the spot rate at which the Holder, in accordance with normal practices, is
able
on the relevant date to purchase the Original Currency with the Second Currency,
and includes any premium and costs of exchange payable in connection with such
purchase.
3.10 Severability.
In the
event that any provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Note.
3.11 Maximum
Payments.
Nothing
contained herein shall be deemed to establish or require the payment of a rate
of interest or other charges in excess of the maximum permitted by applicable
law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum rate permitted by such law, any payments in excess
of such maximum rate shall be credited against amounts owed by the Companies
to
the Holder and thus refunded to the Companies.
3.12 Use
of
Proceeds.
The
Companies shall use the proceeds of the loans made under this Note solely to
(a)
purchase inventory in the ordinary course of their business, (b) make the
Closing Payment (as defined in Section 3.13 hereof), (c) pay a portion of the
fees and expenses of the Companies incurred in connection with the transactions
contemplated under this Note in the amount of $50,000 and (d) pay a portion
of
the fees and expenses of the Holder incurred in connection with the transactions
contemplated under this Note in the amount of $50,000.
3.13 Payment.
Upon
execution of this Note by each Company and the Holder, the Companies shall
jointly and severally (solidarily) pay to the Holder, a non-refundable payment
in an amount equal to three and one-half percent (3.50%) of the original
principal amount of this Note (the “Closing
Payment”).
Such
payment shall be deemed fully earned on the date hereof and shall not be subject
to rebate or proration for any reason.
7
3.14 Taxes.
The
Companies shall, jointly and severally (solidarily), pay principal, interest
and
all other amounts payable hereunder, or under the Security Agreements or any
Ancillary Agreement, without any deduction whatsoever, including any deduction
for any set-off or counterclaim or deduction or withholding for any taxes,
levies, imposts, deductions, charges or withholdings of whatever kind or nature.
The
Companies agree to indemnify and hold harmless the Holder for the full amount
of
taxes (including any taxes imposed or assessed by any jurisdiction on amounts
payable under the Note and any withholdings or remittances required by law
to be
made by the Holder on any payments made by the Companies thereunder, but
excluding other taxes that are imposed on or measured solely by net income
or
profits) paid by the Holder as a result of the transactions contemplated by
this
Note or any other Ancillary Agreements and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such taxes were correctly or legally asserted. Payment
under this indemnification shall be made within five (5) business days after
the
date the Holder makes written demand therefor to the Companies.
If
any
Company shall be required by law to deduct or withhold any taxes from or in
respect of any sum payable hereunder to the Holder, then:
(a) the
sum
payable to the Holder shall be increased as necessary so that after making
all
required deductions and withholdings, the Holder receives an amount equal to
the
sum it would have received had no such deductions or withholdings been
made;
(b) such
Company shall make such deductions and withholdings;
(c) such
Company shall pay the full amount deducted or withheld to the relevant taxing
authority or other authority in accordance with applicable law;
(d) without
duplication of amounts paid under clause (a) above, each Company shall also
pay
to the Holder for the account of the Holder, at the time interest is paid,
all
additional amounts which the Holder specifies as necessary to preserve the
after-tax yield the Holder would have received if such taxes had not been
imposed; and
(e) without
duplication of amounts paid under clauses (a) and (d), the applicable Company
shall indemnify and save harmless the Holder from and in respect of any taxes
required by them to be paid, deducted or withheld and remitted.
Each
Company shall file when due all tax returns and other reports which it is
required to file, pay or provide for the payment, on or prior to the time when
due or delinquent, of all taxes, fees, assessments, and other governmental
charges against it or upon its property, income and franchises, make all
required withholding and other tax remittances and deposits, and establish
adequate reserves for the payment of all such items, and shall provide to the
Holder, upon request, satisfactory evidence of its timely compliance with the
foregoing.
8
Notwithstanding
anything contained herein to the contrary, the provisions of this Section 3.14
shall survive the expiration or termination of this Note and the other Ancillary
Agreements.
3.15 Joint
and Several Liability.
(a) All
obligations and liabilities under this Note (the “Obligations”)
shall
be joint and several (solidary), and the Companies shall make payment upon
the
maturity of the Obligations by acceleration or otherwise, and the Obligations
on
the part of the Companies shall in no way be affected by any extensions,
renewals and forbearance granted by the Holder to any Company, failure of the
Holder to give any Company any notice, any failure of the Holder to pursue
to
preserve its rights against any Company, the release by the Holder of any
collateral now or hereafter acquired by any Company, and such agreement by
any
Company to pay upon any notice issued pursuant hereto is unconditional and
unaffected by prior recourse by the Holder to any Company or any collateral
for
such Company’s Obligations or the lack thereof.
(b) Each
Company expressly waives any and all rights of subrogation, reimbursement,
indemnity, exoneration, contribution or any other claim which such Company
may
now or hereafter have against the other or other person or entity directly
or
contingently liable for the Obligations, or against or with respect to any
other’s property (including, without limitation, any property which is
collateral for the Obligations), arising from the existence or performance
of
this Note, until all Obligations have been indefeasibly paid in full and this
Note and the Ancillary Agreements have been irrevocably terminated.
(c) Each
Company represents and warrants to the Holder that (i) Companies have one or
more common shareholders, directors and officers, (ii) the businesses and
corporate activities of Companies are closely related to, and substantially
benefit, the business and corporate activities of Companies, (iii) the financial
and other operations of Companies are performed on a combined basis as if
Companies constituted a consolidated corporate group, (iv) Companies will
receive a substantial economic benefit from entering into this Note and will
receive a substantial economic benefit from the application of each amount
hereunder, in each case, whether or not such amount is used directly by any
Company and (v) all loans hereunder are for the exclusive and indivisible
benefit of the Companies as though, for purposes of this Note, the Companies
constituted a single entity.
3.16 Security
Interest/Hypothec.
The
Holder has been granted (i) a security interest in certain assets of each
Company and (ii) a hypothec on certain assets of Pneutech and Xxxxxxxx as more
fully described in the Security Agreements to secure, inter
alia,
each of
the Companies’ joint and several (solidary) obligations under this
Note.
3.17 Construction.
Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the
other.
3.18 Registered
Obligation.
This
Note is intended to be a registered obligation within the meaning of Treasury
Regulation Section 1.871-14(c)(1)(i) and each Company (or its agent) shall
register this Note (and thereafter shall maintain such registration) as to
both
principal and any stated interest. Notwithstanding any document, instrument
or
agreement relating to this Note to the contrary, transfer of this Note (or
the
right to any payments of principal or stated interest thereunder) may only
be
effected by (i) surrender of this Note and either the reissuance by the
Companies of this Note to the new holder or the issuance by the Companies of
a
new instrument to the new holder, or (ii) transfer through a book entry system
maintained by each Company (or its agent), within the meaning of Treasury
Regulation Section 1.871-14(c)(1)(i)(B).
9
3.19 Language.
The
parties have requested that this Note and the other documents contemplated
hereby or relating hereto be drawn up in the English language. Les parties
ont
requis que cette convention ainsi que tous les documents qui y sont envisagés ou
qui s’y rapportent soient rédigés en langue anglaise.
[Balance
of page intentionally left blank; signature page follows]
10
IN
WITNESS WHEREOF,
each
Company has caused this Secured Term Note to be signed in its name effective
as
of this 8th day of November, 2006.
|
PNEUTECH
INC.
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| By: |
/s/
XXXXXXX XXXXXX
|
|
|
Name:
Xxxxxxx Xxxxxx
|
||
|
Title:
CEO
|
||
|
XXXXXXXX
CONTROLS INC.
|
||
| |
|
|
| By: |
/s/
XXXXXXX XXXXXX
|
|
|
Name:
Xxxxxxx Xxxxxx
|
||
|
Title:
CEO
|
||
|
HYDRAMEN
FLUID POWER LIMITED
|
||
| |
|
|
| By: |
/s/
XXXXXXX XXXXXX
|
|
|
Name:
Xxxxxxx Xxxxxx
|
||
|
Title:
CEO
|
||
11
