MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman, Cayman Islands
Date: July 14, 2005
To Whom It May Concern:
1. Defined Terms:
Any reference herein to "Collateral" shall, unless the context
otherwise requires, be deemed a reference to "Collateral or any part
thereof". The term "Proceeds", whenever used herein shall, by way of
example, include trade-ins, equipment, money, bank accounts, notes,
chattel paper, goods, contracts rights, accounts and any other personal
property or obligation received when such Collateral or Proceeds are
sold, exchanged, collected or otherwise disposed of or dealt with.
2. To secure the payment of all Obligations (as hereafter defined), The
International Mount Company Ltd., an Ontario corporation and each other
entity that is required to enter into this Master Security Agreement
(each an "Assignor" and, collectively, the "Assignors") hereby assigns
and grants to Laurus Master Fund, Ltd. ("Laurus") a continuing security
interest in all of the following property now owned or at any time
hereafter acquired by any Assignor, or in which any Assignor now have
or at any time in the future may acquire any right, title or interest
(the "Collateral"): all cash, cash equivalents, accounts, accounts
receivable, deposit accounts, and Lockbox Deposit Accounts (as
hereinafter defined), inventory, equipment, goods, documents of title,
instruments (including, without limitation, promissory notes), contract
rights, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less
favorable than those current in effect among Assignors' affiliates),
supporting obligations, chattel paper, investment property (including,
without limitation, all equity interests owned by any Assignor), letter
of credit rights, trademarks, trademark applications, tradestyles,
patents, patent applications, copyrights, copyright applications and
other intellectual property in which any Assignor now have or hereafter
may acquire any right, title or interest, all Proceeds and products
thereof (including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefore. In the
event any Assignor wishes to finance an acquisition in the ordinary
course of business of any hereafter acquired equipment and have
obtained a commitment from a financing source to finance such equipment
from an unrelated third party, Laurus agrees to release its security
interest on such hereafter acquired equipment so financed by such third
party financing source. Except as otherwise defined herein, all
capitalized terms used herein shall have the meaning provided such
terms in the Security and Purchase Agreement referred to below.
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3. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by each Assignor to Laurus arising
under, out of, or in connection with: (i) that certain Security and
Purchase Agreement dated as of the date hereof by and between On The Go
Healthcare, Inc. (the "Company") and Laurus (the "Security and Purchase
Agreement"), (ii) that certain Subsidiary Guaranty dated as of the date
hereof executed by the Assignors in favour of Laurus (the "Guaranty")
and (iii) the Ancillary Agreements referred to in the Security and
Purchase Agreement (the Security and Purchase Agreement, the Guaranty
and each Ancillary Agreement, as each may be amended, modified,
restated or supplemented from time to time, are collectively referred
to herein as the "Documents") and in connection with any documents,
instruments or agreements relating to or executed in connection with
the Documents or any documents, instruments or agreements referred to
therein or otherwise, and in connection with any other indebtedness,
obligations or liabilities of any Assignor to Laurus, whether now
existing or hereafter arising, direct or indirect, liquidated or
unliquidated, absolute or contingent, due or not due and whether
under, pursuant to or evidenced by a note, agreement, guaranty,
instrument or otherwise, in each case, irrespective of the genuineness,
validity, regularity or enforceability of such Obligations, or of any
instrument evidencing any of the Obligations or of any collateral
therefor or of the existence or extent of such collateral, and
irrespective of the allowability, allowance or disallowance of any
or all of the Obligations, in any case commenced by or against any
Assignor under Xxxxx 00, Xxxxxx Xxxxxx Code, the Bankruptcy and
Insolvency Act (Canada) and the Companies' Creditors Arrangement Act
(Canada), including, without limitation, obligations or indebtedness
of the Company and each Assignor for post-petition interest, fees,
costs and charges that would have accrued or been added to the
Obligations but for the commencement of such case.
4. The Assignors acknowledge and agree that: (i) value has been given,
or will be given upon the making of payment under the Security and
Purchase Agreement by Laurus; (ii) the Assignors have rights in the
Collateral; and (iii) the Assignors and Laurus have not agreed to
postpone the time for attachment of the security interest granted
hereunder which shall attach upon the execution of this Master
Security Agreement and, in the case of Collateral acquired after
the date hereof, when such Assignor has rights therein.
5. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:
(a) it is a corporation validly existing, in good standing and
organized under the respective laws of its jurisdiction of
organization set forth on Schedule A, and each Assignor will
provide Laurus thirty (30) days' prior written notice of any
change in any of its respective jurisdiction of organization;
(b) its legal name is as set forth in its respective Certificate of
Incorporation or other organizational document (as applicable)
as amended through the date hereof and as set forth on Schedule A,
and it will provide Laurus thirty (30) days' prior written notice
of any change in its legal name;
(c) its organizational corporate identification number (if applicable)
is as set forth on Schedule A hereto, and it will provide Laurus
thirty (30) days' prior written notice of any change in any of
its organizational identification number;
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(d) it is the lawful owner of its respective Collateral and it has
the sole right to grant a security interest therein and will defend
the Collateral against all claims and demands of all persons and
entities;
(e) it will keep its respective Collateral free and clear of all
attachments, levies, taxes, liens, security interests and
encumbrances of every kind and nature ("Encumbrances"), except
(i) Encumbrances securing the Obligations (ii) to the extent
said Encumbrance does not secure indebtedness in excess of
US$50,000 and such Encumbrance is removed or otherwise released
within ten (10) days of the creation thereof and (iii)
Encumbrances set forth on Schedule B;
(f) it will, at its and the other Assignors joint and several cost
and expense keep the Collateral in good state of repair (ordinary
wear and tear excepted) and will not waste or destroy the same or
any part thereof other than ordinary course discarding of items
no longer used or useful in its or such other Assignors' business;
(g) it will not without Laurus' prior written consent, sell, exchange,
lease or otherwise dispose of the Collateral, whether by sale,
lease or otherwise, except in the ordinary course of business and
for the disposition or transfer in the ordinary course of business
during any fiscal year of obsolete and worn-out equipment or
equipment no longer necessary for its ongoing needs, or equipment
that is replaced by more economical or functional equipment having
an aggregate fair market value of not more than US$75,000 and only
to the extent that:
(i) the Proceeds of any such disposition are used to acquire
replacement Collateral which is subject to Laurus' first priority
perfected security interest, or are used to repay Obligations or to
pay general corporate expenses; and
(ii)following the occurrence of an Event of Default which continues to
exist the proceeds of which are remitted to Laurus to be held as
cash collateral for the Obligations;
(h) it will insure or cause the Collateral to be insured against loss
or damage by fire, theft, burglary, pilferage, loss in transit and
such other hazards as Laurus shall specify in amounts and under
policies by insurers acceptable to Laurus. Laurus shall either be
named as loss payee or additional insured as its interest may
appear in all of the Assignors' policies of insurance. Each
insurance policy shall include an endorsement whereby the insurers
agree to give Laurus not less than thirty (30) days notice of the
cancellation of the policy of insurance and permit Laurus to cure
any default which may exist under the policy. All premiums on each
Assignor's insurance policies shall be paid by such Assignor and
the policies shall be delivered to Laurus. If any such Assignor
fails to do so, Laurus may procure such insurance and the cost
thereof shall be promptly reimbursed by the Assignors, jointly and
severally, and shall constitute Obligations;
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(i) it will acting reasonable prior to an Event of Default, at all
reasonable times allow Laurus or Laurus' representatives free
access to and the right of inspection of the Collateral; and
(j) such Assignor (jointly and severally with each other Assignor)
hereby indemnifies and saves Laurus harmless from all loss, costs,
damage, liability and/or expense, including reasonable legal fees,
that Laurus may sustain or incur to enforce payment, performance or
fulfillment of any of the Obligations and/or in the enforcement of
this Master Security Agreement or in the prosecution or defense of
any action or proceeding either against Laurus or any Assignor
concerning any matter growing out of or in connection with this
Master Security Agreement, and/or any of the Obligations and/or
any of the Collateral except to the extent caused by Laurus' own
gross negligence or willful misconduct (as determined by a court
of competent jurisdiction in a final and nonappealable decision);
and
(k) Each Assignor will irrevocably direct all of its present and future
Account Debtors and other Persons obligated to make payments
constituting Collateral to make such payments directly to the
lockboxes maintained by such Assignor (the "Canadian Lockboxes")
with The Toronto-Dominion Bank or such other financial institution
accepted by Laurus in writing as may be selected by such Assignor
(the "Canadian Lockbox Bank") pursuant to the terms of the certain
agreements among, inter alia one or more Assignors, Laurus and/or
the Canadian Lockbox Bank dated as of July 14, 2005. On or prior
to the Closing Date, each Assignor shall and shall cause the
Canadian Lockbox Bank to enter into all such documentation
acceptable to Laurus pursuant to which, among other things, the
Canadian Lockbox Bank agrees to: (a) sweep the Canadian Lockbox
as required to pay amounts due and payable on the Notes, as
provided therein, and deposit all checks received therein to
lockboxes maintained by such Assignor (the "US Lockboxes") with
The Toronto-Dominion Bank or such other financial institution
accepted by Laurus in writing as may be selected by such Assignor
(the "US Lockbox Bank") pursuant to the terms of the certain
agreements among, inter alia, one or more Assignor, Laurus and/or
the US Lockbox Bank dated as of July 14, 2005, and (b) comply only
with the instructions or other directions of Laurus concerning the
Canadian Lockbox. On or prior to the Closing Date, each Assignor
shall and shall cause the US Lockbox Bank to enter into all such
documentation acceptable to Laurus pursuant to which, among other
things, the US Lockbox Bank agrees to: (a) sweep the US Lockbox
as required to pay amounts due and payable on the Notes, as
provided therein, and deposit all checks received therein to an
account designated by Laurus in writing and (b) comply only with
the instructions or other directions of Laurus concerning the
US Lockbox. All of each Assignor's invoices, account statements
and other written or oral communications directing, instructing,
demanding or requesting payment of any Account of any Assignor or
any other amount constituting Collateral shall conspicuously
direct that all payments be made to the Canadian Lockbox or such
other address as Laurus may direct in writing. If,
notwithstanding the instructions to Account Debtors, any
Assignor receives any payments, such Assignor shall immediately
remit such payments to Laurus in their original form with all
necessary endorsements. Until so remitted, such Assignor shall
hold all such payments in trust for and as the property of Laurus
and shall not commingle such payments with any of its other funds
or property.
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6. The occurrence of any "Event of Default" under and as defined in the
Security and Purchase Agreement which shall have occurred and be
continuing beyond any applicable cure period, shall constitute an
Event of Default under this Master Security Agreement:
7. Upon the occurrence of any Event of Default and at any time thereafter,
Laurus may declare all Obligations immediately due and payable. To
the extent applicable, both before and after the occurrence of an Event
of Default, Laurus shall have all rights and remedies of a secured
party under the PPSA, the Uniform Commercial Code (as in effect in the
State of New York), this Agreement and other applicable law. Upon the
occurrence of any Event of Default and at any time thereafter, Laurus
will have the right to take possession of, collect, demand, xxx on,
enforce, recover and receive the Collateral and give valid and binding
receipts and discharges therefore and in respect thereof. Laurus will
also have the right to maintain possession of the Collateral on each
Assignor's premises or to remove the Collateral or any part thereof to
such other premises as Laurus may desire. Upon Laurus' request, after
the occurrence of any Event of Default, each of the Assignors shall
assemble or cause the Collateral to be assembled and make it available
to Laurus at a place designated by Laurus. If any notification of
intended disposition of any Collateral is required by law, such
notification, if mailed, shall be deemed commercially reasonable if
mailed at least ten (10) days before such disposition, postage prepaid,
addressed to any Assignor either at such Assignor's address shown
herein or at any address appearing on Laurus' records for such
Assignor. Any proceeds of any disposition of any of the Collateral
shall be applied by Laurus to the payment of all expenses in connection
with the sale of the Collateral, including operating any Assignor's
accounts, preparing and enforcing this Agreement, taking and
maintaining custody of, preserving, repairing, possessing, preparing
for disposition and disposing of Collateral and in enforcing or
collecting indebtedness and all such costs, charges and expenses,
including reasonable legal fees, expenses and disbursements and any
balance of such proceeds may be applied by Laurus toward the payment
of the Obligations in such order of application as Laurus may elect,
and each Assignor shall be liable for any deficiency.
8. Upon the occurrence of and during the continuance of any Event of
Default, Laurus may appoint or reappoint by instrument in writing, any
person or persons, whether an officer or officers or an employee or
employees of Laurus or not, to be an interim receiver, receiver or
receivers (hereinafter called a "Receiver", which term when used
herein shall include a receiver and manager) of any Collateral of
the Assignors (including any interest, income or profits therefrom)
and may remove any Receiver so appointed and appoint another in
his/her/its stead. Any such Receiver shall, so far as concerns
responsibility for his/her/its acts, be deemed the agent of each
Assignor and not Laurus, and Laurus shall not be in any way
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responsible for any misconduct, negligence or non-feasance on the
part of any such Receiver or his/her/its servants, agents or employees.
Subject to the provisions of the instrument appointing him/her/it,
any such Receiver shall have power to take possession of Collateral,
to preserve Collateral or its value, to carry on or concur in carrying
on all or any part of the business of each Assignor and to sell,
lease, license or otherwise dispose of or concur in selling, leasing,
licensing or otherwise disposing of Collateral. To facilitate the
foregoing powers, any such Receiver may, to the exclusion of all
others, including any Assignor, enter upon, use and occupy all
premises owned or occupied by each Assignor wherein Collateral may
be situate, maintain Collateral upon such premises, borrow money on
a secured or unsecured basis and use Collateral directly in carrying
on each Assignor's business or as security for loans or advances to
enable the Receiver to carry on each Assignor's business or otherwise,
as such Receiver shall, in its discretion, determine. Except as may
be otherwise directed by Laurus, all money received from time to time
by such Receiver in carrying out his/her/its appointment shall be
received in trust for and be paid over to Laurus. Every such Receiver
may, in the discretion of Laurus, be vested with all or any of the
rights and powers of Laurus.
9. Upon and during the continuance of any Event of Default, Laurus may,
either directly or through its agents or nominees, exercise any or all
of the powers and rights given to a Receiver by virtue of Section 8.
10. Laurus shall use reasonable care with respect to the Collateral in
its possession or under its control. Laurus shall not have any other
duty as to any collateral in its possession or control or in the
possession or control of any agent or nominee of Laurus, or any income
thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto.
11. If any Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties
on such Assignor's part to be performed or fulfilled under or pursuant
to this Master Security Agreement, Laurus may, at its option without
waiving its right to enforce this Master Security Agreement according
to its terms, immediately or at any time thereafter and without notice
to any Assignor, perform or fulfill the same or cause the performance
or fulfillment of the same for each Assignor's joint and several
account and at each Assignor's joint and several cost and expense,
and the cost and expense thereof (including reasonable legal fees)
shall be added to the Obligations and shall be payable on demand with
interest thereon at the highest rate permitted by law.
12. Each Assignor appoints Laurus, any of Laurus' officers, employees or
any other person or entity whom Laurus may designate as such Assignor's
attorney, with power to execute such documents on each of such
Assignor's behalf and to supply any omitted information and correct
patent errors in any documents executed by any Assignor or on any
Assignor's behalf; to file financing statements against such Assignor
covering the Collateral (and, in connection with the filing of any such
financing statements or financing change statements, describe the
Collateral as "all assets and all personal property, whether now owned
and/or hereafter acquired" (or any substantially similar variation
thereof)); to sign such Assignor's name on public records; and to do
all other things Laurus deems necessary to carry out this Master
Security Agreement. Each Assignor hereby ratifies and approves all
acts of the attorney and neither Laurus nor the attorney will be liable
for any acts of commission or omission, nor for any error of judgment
or mistake of fact or law other than gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision). This power being coupled with an
interest, is irrevocable so long as any Obligations remains unpaid.
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13. No delay or failure on Laurus' part in exercising any right, privilege
or option hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatever shall be
valid unless in writing, signed by Laurus and then only to the extent
therein set forth, and no waiver by Laurus of any default shall operate
as a waiver of any other default or of the same default on a future
occasion. Laurus' books and records containing entries with respect
to the Obligations shall be admissible in evidence in any action or
proceeding, shall be binding upon each Assignor for the purpose of
establishing the items therein set forth and shall constitute prima
facie proof thereof. Laurus shall have the right to enforce any one
or more of the remedies available to Laurus, successively, alternately
or concurrently. However, Laurus shall not be liable or accountable
for any failure to exercise its remedies, take possession of, collect,
enforce, realize, sell, lease, license or otherwise dispose of
Collateral or to institute any proceeding for such purposes. Each
Assignor agrees to join with Laurus in executing financing statements
or other instruments to the extent required by the Uniform Commercial
Code or the PPSA in form satisfactory to Laurus and in executing such
other documents or instruments as may be required or deemed necessary
by Laurus for purposes of affecting or continuing Laurus' security
interest in the Collateral.
14. This Master Security Agreement shall be governed by and construed
in accordance with the laws of the Province of Ontario and the federal
laws of Canada, and cannot be terminated orally. All of the rights,
remedies, options, privileges and elections given to Laurus hereunder
shall inure to the benefit of Laurus' successors and assigns. The term
"Laurus" as herein used shall include Laurus, any parent of Laurus',
any of Laurus' subsidiaries and any co-subsidiaries of Laurus' parent,
whether now existing or hereafter created or acquired, and all of the
terms, conditions, promises, covenants, provisions and warranties of
this Agreement shall inure to the benefit of each of the foregoing,
and shall bind the representatives, successors and assigns of each
Assignor. Laurus and each Assignor hereby (a) waive any and all right
to trial by jury in litigation relating to this Agreement and the
transactions contemplated hereby and each Assignor agrees not to
assert any counterclaim in such litigation, (b) submit to the
nonexclusive jurisdiction of any New York State court sitting in the
borough of Manhattan, the city of New York and (c) waive any objection
Laurus or each Assignor may have as to the bringing or maintaining of
such action with any such court.
15. Each Assignor hereby acknowledges receipt of a copy of this Master
Security Agreement.
16. This Master Security Agreement may be executed in any number of
counterparts which shall, collectively and separately constitute one
agreement. Any signature delivered by a party by facsimile
transmission or by sending a scanned copy by electronic mail shall
be deemed an original signature hereto.
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17. It is understood and agreed that any person or entity that desires to
become an Assignor hereunder, or is required to execute a counterpart
of this Master Security Agreement after the date hereof pursuant to the
requirements of any Document, shall become an Assignor hereunder by (x)
executing a joinder agreement in form and substance satisfactory to
Laurus, (y) delivering supplements to such exhibits and annexes to such
Documents as Laurus shall reasonably request and (z) taking all actions
as specified in this Agreement as would have been taken by such
Assignor had it been an original party to this Agreement, in each case
with all documents required above to be delivered to Laurus and with
all documents and actions required above to be taken to the reasonable
satisfaction of Laurus.
18. All notices from Laurus to any Assignor shall be sufficiently given if
mailed or delivered to such Assignor's address set forth below.
19. If there is any inconsistency between the provisions hereof and the
provisions of the Security and Purchase Agreement, the provisions of
the Security and Purchase Agreement shall prevail.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Very truly yours,
THE INTERNATIONAL MOUNT COMPANY LTD.
By:/s/Xxxxxx Xxxx
------------------------
Name: Xxxxxx Xxxx
Title:CEO
Address 00 Xxxxxxxx Xxx
Xxxx #0
Xxxxxxx, Xxxxxxx
X0X 0X0
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:/s/Xxxxx Grin
-------------------------
Name:Xxxxx Grin
Title: Director
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SCHEDULE A
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ENTITY JURISDICTION OF ORGANIZATION
ORGANIZATION IDENTIFICATION
NUMBER
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The International Mount
Company Ltd. Ontario 1040071
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SCHEDULE B
ENCUMBRANCES
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Reference File No. &
Registration Number Collateral
Secured Party(ies) Debtor (s) (Registration Period) Classification
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1. Xxxxxx Micro The International 605160036 - Inventory,
Mount Company Ltd. 200405031958 6076 0679 Equipment,
(5 years) Accounts, Other
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2. The Toronto- The International 876616839 - Inventory,
Dominion Mount Company Ltd. 200109271757 1531 8131 equipment,
Bank - Xxxxxx (5 years) Accounts, Other
& Xxxxx On The Go Motor Vehicle
12142 CAS 3472
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