EXHIBIT 10.7
GENERAL SECURITY AGREEMENT
This Agreement dated May 14, 2004 made by Steelbank Inc. (the
"CORPORATION") to and in favour of Xxxxx Xxxxxx, Xxxxxxx Xxxxxxxxx and Xxxx
Xxxxxxx (each a "VENDOR", and collectively, the "VENDORS").
RECITALS:
(a) The Vendors, BST Acquisition Ltd. ("BST") and Tarpon Industries,
Inc. (the "PRINCIPAL") have entered into a share purchase agreement
dated April 2, 2004 as amended by the amending agreement dated May
5, 2004 (collectively, the "PURCHASE AGREEMENT") providing for the
purchase by BST from the Vendors of all of the issued and
outstanding shares in the capital of the Corporation (the "PURCHASED
SHARES");
(b) As part of the consideration for such purchase, BST has (i) issued
to the Vendors a promissory note dated the date hereof in the
principal amount of $800,000.00 ("NOTE A"); (ii) issued to each of
the Vendors respectively a further promissory note, each dated the
date hereof and each in the principal amount of $135,000.00
(collectively, the "NOTES B"); and (iii) agreed to pay to the
Vendors an amount equal to $375,000.00 of the purchase price for the
Purchased Shares in the form of common shares in the capital of the
Principal pursuant to and in accordance with the provisions of
Section 2.3(d) of the Purchase Agreement (the "COVENANT");
(c) In order to guarantee the obligations of BST in respect of (i) the
Covenant, and (ii) the payment of the monies owing to the Vendors
under Note A and Notes B, the Corporation has executed a guarantee
of even date herewith (the "GUARANTEE") to and in favour of the
Vendors;
(d) The Corporation has agreed to execute and deliver this Agreement to
and in favour of the Vendors as security for the payment and
performance of the Corporation's obligations to the Vendors under
the Guarantee (collectively, the "GUARANTEED OBLIGATIONS"); and
(e) In addition to this Agreement, BST's obligations under Note A, the
Notes B and the Covenant are secured by a share pledge of all of the
Purchased Shares (signed by BST and the Corporation) in favour of
the Vendors, by share pledge agreement dated the date hereof (the
"SHARE PLEDGE").
For valuable consideration received, and as continuing security for the payment
and performance of the Guaranteed Obligations as and when due (sometimes
hereinafter collectively called the "OBLIGATIONS"), the Corporation hereby
covenants and agrees as follows:
1. The Corporation hereby grants, assigns, conveys, mortgages, transfers,
charges and sets over as and by way of a fixed and specific mortgage and
charge to and in favour of the Vendors, and grants to the Vendors a
security interest in, all of the Corporation's right, title and interest
in and to all personal property of every nature and kind whatsoever and
wheresoever situate now or at any time and from time to time owned by the
Corporation, including, without limiting the generality of the foregoing,
the following:
(a) All inventory of whatsoever kind and wheresoever situate now owned
or hereafter acquired by the Corporation including, without
limitation, goods for sale ("INVENTORY");
(b) All book accounts and book debts and generally all accounts, debts,
dues, claims, choses in action, rights under contracts and demands
of every nature and kind howsoever arising or secured including, but
not limited to letters of credit, 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 or owned
by the Corporation including but not limited to claims against the
Crown and claims under insurance policies ("RECEIVABLES");
(c) All machinery, equipment, tools, apparatus, plants, fixtures,
furniture, vehicles, goods and other tangible personal property of
whatsoever nature and kind, now owned or hereafter acquired by the
Corporation other than Inventory ("EQUIPMENT");
(d) All chattel paper now owned or hereafter acquired by the Corporation
("CHATTEL PAPER");
(e) All warehouse receipts, bills of lading and other documents of
title, whether negotiable or otherwise, now owned or hereafter
acquired by the Corporation ("DOCUMENTS OF TITLE");
(f) All instruments now owned or hereafter acquired by the Corporation
("INSTRUMENTS");
(g) All deeds, documents, writings, papers, books of accounts and other
books evidencing or relating to Receivables, Chattel Paper,
Instruments or Documents of Title or by which such are or may
hereafter be secured, evidenced, acknowledged or made payable; and
all contracts, securities, instruments and other rights and benefits
in respect thereof;
(h) All shares, stocks, warrants, bonds, debentures, debenture stock or
the like now owned or hereafter acquired by the Corporation;
(i) All intangible property now owned or hereafter acquired by the
Corporation including, but not limited to, choses in action,
goodwill, patents, trademarks, copyrights and other industrial
property ("INTANGIBLES");
(j) All monies other than trust monies lawfully belonging to others; and
(k) Any property in any form (including but not limited to fixtures)
derived directly or indirectly from any dealings with any property
herein described (including but not limited to all products and cash
and non-cash proceeds thereof); indemnification or compensation for
any such property lost, destroyed, damaged or lawfully or unlawfully
taken or injuriously affected; all increases, additions and
accessions thereto and substitutions and replacements thereof.
2. To the extent that the creation of the security interest would constitute
a breach or permit the acceleration or termination of any existing
agreement, right, licence or permit of the Corporation (each, a
"RESTRICTED ASSET"), the security interest created hereby shall not attach
to the Restricted Asset but the Corporation shall hold its interest in the
Restricted Asset in trust for the Vendors.
3. The Corporation acknowledges that the parties intend the security interest
hereunder to attach upon the execution of this Agreement, that value has
been given and that the Corporation has rights in the Collateral (other
than after acquired Collateral).
4. Provided that the last day of any term of years reserved by any lease,
verbal or written, or any agreement therefor now held or hereafter
acquired by the Corporation, is hereby and shall be excepted out of the
security interest hereby or by any other instrument supplemental hereto
created and does not and shall not form part of the Collateral but the
Corporation shall stand possessed of the reversion remaining in the
Corporation of any leasehold interest forming part of the Collateral upon
trust to assign and dispose thereof as the Vendors may after default
hereunder direct.
5. So long as any of the Guaranteed Obligations remain outstanding, the
Corporation shall not without the prior written consent of the Vendors:
(a) create or permit to arise or exist any Encumbrance over the
Collateral ranking prior to the security interest created hereby
other than (i) Permitted Encumbrances, (ii) purchase-money security
interests (as such term is defined in the Personal Property Security
Act (Ontario)) created from time to time, and (iii) any Encumbrance
created in favour of the Corporation's and/or the Principal's
primary lender; or
(b) sell, exchange, lease, release or abandon or otherwise dispose of
any of the Collateral except for (i) bona fide sales, exchanges,
leases, abandonments or other dispositions in the ordinary course of
business for the purpose of carrying on the Corporation's business
and at fair market value, (ii) Collateral which has no material
economic value in the Corporation's business or are obsolete.
6. The Corporation covenants, represents and warrants to the Vendors that the
Corporation shall:
(a) maintain adequate insurance upon the Collateral at all times with
responsible insurance carriers and in such amounts and covering such
risks as are usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas
in which the Corporation operates, and deliver to the Vendors, from
time to time upon written request of the Vendors, evidence of the
maintenance of all insurance required to be maintained;
(b) take all reasonable steps to maintain approvals to carry on its
business or to own or lease its property and assets, and comply in
all material respects with all applicable laws, rules, regulations
and orders;
(c) maintain all property and assets that are not obsolete or redundant
in good condition and repair (normal wear and tear excepted) and pay
and discharge or cause to be paid and discharged when due the cost
of repairs to or maintenance of the same; and
(d) upon the request of the Vendors, duly execute and deliver, or cause
to be duly executed and delivered, to the Vendors such further
instruments and documents and cause to be done such further acts and
things as may be necessary or proper in the reasonable opinion of
the Vendors to carry out more effectively the provisions and
purposes of this Agreement.
7. Unless such event of default is waived by the Vendors in writing, all of
the rights and remedies hereby conferred in respect of the Collateral
shall become immediately enforceable upon the happening of any of the
following events ("EVENTS OF DEFAULT"):
(a) a default occurs under the Guarantee;
(b) the Corporation (i) becomes insolvent or generally not able to pay
its debts as they become due, (ii) admits in writing its inability
to pay its debts generally or makes a general assignment for the
benefit of creditors, (iii) institutes or has instituted against it
any proceeding seeking (a) to adjudicate it a bankrupt or insolvent,
(b) liquidation, winding-up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors including, but not
limited to, any plan of compromise or arrangement or other corporate
proceeding involving its creditors, or (c) the entry of an order for
relief or the appointment of a receiver, receiver-manager,
custodian, trustee or other similar official for it or for any
substantial part of its properties and/or assets, and in the case of
any such proceeding instituted against it (but not instituted by
it), either the proceeding remains undismissed or unstayed for a
period of 30 calendar days or more, or any of the actions sought in
such proceeding (including, but not limited to, the entry of an
order for relief against it or the appointment of a receiver,
receiver-manager, trustee, custodian or other similar official for
it or for any substantial part of its properties and assets) occurs,
or (iv) takes any corporate action to authorize any of the above
actions;
(c) the Corporation fails to perform, observe or comply with any of its
obligations under this Agreement; or
(d) the Corporation fails to pay the principal of, or premium or
interest on, any of its debt which is outstanding in an aggregate
principal amount exceeding $50,000.00 when such amount becomes due
and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure continues after
the applicable grace period, if any, specified in the agreement or
instrument relating to the debt; or any other event occurs or
condition exists and continues after the applicable grace period, if
any, specified in any agreement or instrument relating to any such
debt, if its effect is to accelerate, or permit the acceleration of
the debt; or any such debt shall be declared to be due and payable
prior to its stated maturity.
8. (a) Upon the happening of any of the events of default, the Vendors may
by instrument in writing declare that the security hereof has become
enforceable and the Vendors shall have the following rights and powers:
(i) to enter into possession of all or any part of the Collateral
by any method permitted by law;
(ii) by instrument in writing to appoint any person (whether an
officer or employee of the Vendors or not), firm or
corporation to be a receiver or receivers (hereinafter called
the "RECEIVER") of the Collateral and to remove any Receiver
so appointed and appoint another or others in his stead.
The security of this Agreement may be realized and the rights enforced by
any remedy or in any manner authorized or permitted by this Agreement and
by law and no remedy for the realization of the security hereof shall be
exclusive of or dependent upon any other remedy and all or any remedies
may from time to time be exercised independently or in any combination.
(b) Without limiting the generality of the foregoing it shall be lawful
for the Vendors:
(i) to make any sale, lease or other disposition of the Collateral
either for cash or upon credit or partly for one and partly
for the other upon such conditions as to terms of payment as
the Vendors in their absolute discretion may deem proper;
(ii) to rescind or vary any contract for sale, lease or other
disposition that the Vendors may have entered into pursuant
hereto and resell, release or redispose of the Collateral with
or under any of the powers conferred herein; and
(iii) to stop, suspend or adjourn any sale, lease or other
disposition from time to time and to hold the same as
adjourned without further notice.
Except as otherwise provided by law or this Agreement, upon any such
sale, lease or other disposition the Vendors shall be accountable
only for money actually received by it. The Vendors may deliver to
the purchaser or purchasers of the Collateral or any part thereof
good and sufficient conveyances or deeds for the same free and clear
of any claim by the Corporation. The purchaser or lessee receiving
any disposition of the Collateral or any part thereof need not
inquire whether default under this Agreement has actually occurred
but may as to this and all other matters rely upon a statutory
declaration of a Vendor, which declaration shall be conclusive
evidence as between the Corporation and any such purchaser or
lessee, and need not look to the application of the purchase money,
rent or other consideration given upon such sale, lease or other
disposition, which shall not be affected by any irregularity of any
nature or kind relating to the enforcing of the security hereof or
the taking of possession of the Collateral or the sale, lease or
other disposition thereof.
(c) Any Receiver appointed as aforesaid shall have the power without
legal process:
(i) to take possession of the Collateral or any part thereof
wherever the same may be found;
(ii) to carry on the business of the Corporation or any part
thereof in the name of the Corporation or of the Receiver;
(iii) to exercise on behalf of the Vendors all of the rights and
remedies herein granted to the Vendors,
and without in any way limiting the foregoing the Receiver shall
have all the powers of a receiver appointed by a court of competent
jurisdiction. Any Receiver shall, so far as concerns responsibility
for his acts, be deemed the agent of the Corporation, and the
Vendors shall not be in any way responsible for any misconduct or
negligence on the part of any Receiver or any loss resulting
therefrom.
(d) Upon the Vendors declaring as aforesaid that the security hereof has
become enforceable or the Corporation receiving notice from the
Vendors of the taking of possession of any of the Collateral or of
the appointment of a Receiver, all the powers, functions, rights and
privileges of the directors and officers of the Corporation with
respect to the property, business and undertaking of the Corporation
shall cease except to the extent specifically continued at any time
by the Vendors in writing.
9. The costs of any Receiver with respect to, and all expenditures made by
the Vendors or any Receiver in the course of, doing anything hereby
permitted to be done by the Vendors or such Receiver, and the costs of any
sale proceedings hereunder, or in or about taking, recovering or keeping
possession of any of the Collateral or in enforcing any of the remedies
hereunder shall be payable forthwith by the Corporation, shall be secured
hereby and shall have the benefit of the lien hereby created. Without
limiting the generality of the foregoing, such costs shall extend to and
include any reasonable legal costs incurred by or on behalf of the
Vendors.
10. (a) In this Agreement unless there is something in the subject matter or
context inconsistent therewith:
(i) "THIS AGREEMENT", "HERETO", "HEREIN", "HEREOF", "HEREBY",
"HEREUNDER", and similar expressions refer to the whole of
this Agreement and not to any particular article, section or
other portion thereof and extend to and include any and every
instrument supplemental or ancillary hereto or in implement
hereof;
(ii) "COLLATERAL" means all property and assets expressed herein to
be now, or which may hereafter become, subject to the fixed
and specific charge of this Agreement;
(iii) "ENCUMBRANCES" means security interests, mortgages, hypothecs,
pledges, liens, distress, charges or other claims or
encumbrances of every nature or kind whatsoever;
(iv) "PERMITTED ENCUMBRANCES" means, collectively, the following:
(1) any and all Permitted Liens, as such term is defined in
the Purchase Agreement; and
(2) Encumbrances approved in writing by the Vendors;
(v) words importing the singular number only include the plural
and vice versa and words importing the masculine gender
include the feminine gender and words importing persons
include firms and corporations and vice versa.
(b) The rights of the Vendors hereunder shall not be prejudiced nor
shall the liabilities of the Corporation or of any other person be
reduced in any way by the taking of any other security of any nature
or kind whatsoever either at the time of execution of this Agreement
or at any time hereafter.
(c) The Corporation for valuable consideration irrevocably appoints the
Vendors to be the attorneys of the Corporation in the name of and on
behalf of the Corporation, upon the occurrence and during the
continuance of an event of default, to execute and do any deeds,
transfers, conveyances, assignments, assurances and things which the
Vendors may deem necessary or advisable to execute and do under the
covenants and provisions herein contained.
(d) The Vendors may, after the security interest created hereby become
enforceable, (i) notify any account debtor or any obligor on an
Instrument to make payment to the Vendors whether or not the
Corporation was theretofore making collections on such accounts,
chattel paper or instruments, and (ii) assume control of an proceeds
arising from the Collateral.
(e) No act or omission by the Vendors in any manner whatever in the
premises shall extend to or be taken to affect any provision hereof
or any subsequent breach or default or the rights resulting
therefrom save only express waiver by the Vendors in writing to the
Corporation.
(f) If the Corporation fails to do anything hereby required to be done
by it, the Vendors may, but shall not be obliged to, do such thing
and all sums thereby expended by the Vendors shall be payable
forthwith by the Corporation, shall be secured hereby and shall have
the benefit of the lien
hereby created, but no such performance by the Vendors shall be
deemed to relieve the Corporation from any default hereunder.
(g) Except in the event of a disruption in postal service, any notice
given hereunder to the Corporation shall be conclusively deemed to
have been given and received by the Corporation three (3) business
days next following the day upon which it is mailed in Ontario by
prepaid registered post. Notice may also be given to the Corporation
by fax transmission and shall be deemed received on the day of
transmission if such transmission occurs before 5:00pm Toronto time
on a business day, failing which such transmission shall be deemed
received on the next following business day.
11. The security interest created hereby shall be discharged upon, but only
upon, full payment and performance of the Obligations without cost to the
Vendors or the termination of the Guarantee in accordance with the terms
thereof. Upon discharge of the security interest created hereby, and at
the request of the Corporation, the Vendors shall execute and deliver to
the Corporation, at the Corporation's cost, such releases and discharges
of the security interest hereunder as the Corporation may reasonably
require.
12. Time shall be in all respects of the essence hereof.
13. Terms which are defined in the Personal Property Security Act (Ontario) as
amended shall have the same meaning where used herein, save and except
where the context otherwise requires.
14. This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the federal laws of Canada applicable
therein and, for the purpose of legal proceedings, the courts of that
Province shall have jurisdiction over all disputes which may arise under
this Agreement and the Corporation hereby irrevocably and unconditionally
submits to the non-exclusive jurisdiction of such courts, provided that
nothing herein contained shall prevent the Vendors from proceeding at
their election against the Corporation in the courts of any other
jurisdiction.
15. If any provision herein shall be duly held by a court of competent
jurisdiction to invalid, illegal or unenforceable at law, then such
provision shall be deemed severed from this Agreement and the remaining
provisions shall remain in full force and effect and binding upon the
Corporation.
16. This Agreement and all its provisions shall enure to the benefit of the
Vendors and their respective heirs, executors, administrators, successors
and assigns, and shall be binding on the Corporation and its successors
and assigns.
IN WITNESS WHEREOF the Corporation has duly executed this Agreement.
STEELBANK INC.
By: /s/ XXXXX XXXXXXXX
------------------------------
Name : XXXXX XXXXXXXX
Title: DIRECTOR
I have the authority to bind the
Corporation
