SECURITY AGREEMENT
THIS SECURITY AGREEMENT made this 23rd day of May, 2005.
BETWEEN:
IDENTICA CORP. a body corporate duly incorporated pursuant to the laws of
the Province of Ontario, Canada (the "Debtor")
OF THE FIRST PART
eRoomSystem Technologies, Inc., a body corporate duly incorporated
pursuant to the laws of the State of Nevada, U.S.A.(the "Secured Party")
OF THE SECOND PART
WHEREAS the Secured Party has agreed to provide the Debtor with loans and
advances in cash or in kind and provide credit to the Debtor in the maximum
amount of ONE HUNDRED FIFTY THOUSAND (150,000) US DOLLARS.
AND WHEREAS the Debtor is desirous of providing security to the Secured Party
over all of the present and after-acquired property of the Debtor including all
of the assets, both real and personal as hereinafter described, of the Debtor,
as security for the said loans, advances, credit, all existing and future
indebtedness, any prior advances or loans and any future loans which may be made
by the Secured Party to the Debtor.
THEREFORE, IN CONSIDERATION OF THE COVENANTS HEREIN CONTAINED, AND FOR VALUE
RECEIVED, THE PARTIES HERETO AGREE AS FOLLOWS:
SECURITY INTEREST
1. The Debtor hereby grants to the Secured Party by way of mortgage, charge,
assignment and transfer, a security interest (the "Security Interest") in all
the assets and undertaking of the Debtor and in all the Debtor's present and
after acquired personal property including, without limitation, in all Goods
(including all parts, accessories, attachments, special tools, additions and
accessions thereto), Chattel Paper, Documents of Title (whether negotiable or
not), Instruments, Intangibles, Money and Securities now owned or hereafter
owned or acquired by or on behalf of the Debtor (including such as may be
returned to or repossessed by the Debtor) and in all proceeds and renewals
thereof, accretions thereto and substitutions therefor (hereinafter collectively
called "Collateral"), and including, without limitation, all of the following
now owned or hereafter owned or acquired by or on behalf of the Debtor:
(a) all Inventory of whatever kind and wherever situate;
(b) all equipment (other than Inventory) of whatever kind and wherever
situate, including, without limitation, all machinery, tools, apparatus,
plant, furniture, fixtures and vehicles of whatsoever nature or kind;
(c) all accounts and book debts and generally all debts, dues, claims, choses
in action and demands of every nature and kind howsoever arising or
secured including 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 to or owned by the
Debtor ("Debts");
(d) all deeds, documents, writings, papers, 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, acknowledged
or made payable;
(e) all contractual rights and insurance claims and all goodwill, patents,
trademarks, copyrights, and other industrial property;
(f) without in any way limiting the generality of the foregoing, any motor
vehicles, trailers, mobile homes and airplanes
2. The Security Interest granted hereby shall not extend or apply to and
Collateral shall not include:
(a) any personal property held in trust by the Debtor and lawfully belonging
to others; or
(b) the last day of the term of any lease or agreement therefor but upon the
enforcement of the Security Interest the Debtor shall stand possessed of
such last day in trust to assign the same to any person acquiring such
term.
3. The terms "Goods", "Chattel Paper", "Documents of Title", "Instruments",
"Intangibles", "Securities", "proceeds", "Inventory", "accessions", "Money",
"Accounts", "financing statements" and "financing change statements" whenever
used herein shall be interpreted pursuant to their respective meanings when used
in the Personal Property Security Act of Ontario as amended from time to time,
which Act, including amendments thereto and any Act substituted therefor and
amendments thereto is herein referred to as the "PPSA". Provided always that the
term "Goods" when used herein shall not include "consumer goods" of the Debtor
as that term is defined in the PPSA, and the term "Inventory" when used herein
shall include livestock and the young thereof after conception and crops that
become such within one year of execution of this Security Agreement. Any
reference herein to "Collateral" shall, unless the context otherwise requires,
be deemed a reference to "Collateral or any part thereof".
INDEBTEDNESS SECURED
4. The Security Interest granted hereby secures payment and performance of
any and all obligations, indebtedness and liability of the Debtor to the Secured
Party (including interest thereon) present or future, direct or indirect,
absolute or contingent, matured or not, extended or renewed, wheresoever and
howsoever incurred and any ultimate unpaid balance thereof and whether the same
is from time to time reduced and thereafter increased or entirely extinguished
and thereafter incurred again and whether the Debtor be bound alone or with
another or others and whether as principal or surety (hereinafter collectively
called the "Indebtedness"). If the Security Interest in the Collateral is not
sufficient, in the event of default, to satisfy all Indebtedness of the Debtor,
the Debtor acknowledges and agrees that the Debtor shall continue to be liable
for any Indebtedness remaining outstanding and the Secured Party shall be
entitled to pursue full payment thereof.
5. Without limiting the generality of the foregoing, this Security Agreement,
further secures any money spent by the Secured Party in acquiring, perfecting,
defending or enforcing the Security Interest, liens, or charges provided for
herein and in ensuring or otherwise perfecting the Secured Party's interest in
the Collateral.
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6. This Security Agreement and the Security constituted herein shall not be
deemed to be released or discharged, in whole or in part, by the payment or
liquidation, at any time or times, of any sum or sums of money for the time
being due or remaining unpaid by the Debtor to the Secured Party and the Debtor
shall have no right whatsoever to claim any release or discharge of this
Security Agreement or the security hereby constituted, unless and until the
Secured Party shall have first received, and in writing acknowledged, the
payment in full of all of the Indebtedness.
7. The Security Interest created by this Agreement attaches when the Debtor
has executed this Agreement.
8. Except to the extent of any specifically mortgaged and charged assets
referred to in paragraph 1(f) hereof, the Debtor may, in the ordinary course of
its business and before demand is made by the Secured Party for payment of any
Indebtedness owed to the Secured Party, process, sell or lease or otherwise for
value deal with its property, including the right to use or consume any raw
materials or supplies, so long as the use or consumption is in the ordinary
course of the Debtor's business on commercially reasonable terms, pay its
creditors and sell instruments and securities. The Debtor acknowledges that a
"use or consumption" in the ordinary course of the Debtor's business does not
include a transfer in partial or total satisfaction of a debt or any bulk sale.
REPRESENTATIONS AND WARRANTIES OF DEBTOR
9. The Debtor represents and warrants and so long as this Security Agreement
remains in effect shall be deemed to continuously represent and warrant to the
Secured Party that:
(a) the Collateral is genuine and owned by the Debtor free of all security
interests, mortgages, liens, claims, charges or other encumbrances
(hereinafter collectively called "Encumbrances"), save for the Security
Interest and those Encumbrances hereafter approved in writing by the
Secured Party, prior to their creation or assumption;
(b) each Debt, Chattel Paper and Instrument constituting Collateral is
enforceable in accordance with its terms against the party obligated to
pay the same (the "Account Debtor"), and the amount represented by the
Debtor to the Secured Party from time to time as owing by each Account
Debtor or by all Account Debtors will be the correct amount actually and
unconditionally owing by such Account Debtor or Account Debtors, except
for normal cash discounts where applicable and no Account Debtor will have
any defence, set off, claim or counterclaim against the Debtor which can
be asserted against the Secured Party, whether in any proceeding to
enforce Collateral or otherwise; and
(c) the location specified as 000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx , Xxxxxx X0X 0X0 as the location of business operations and
records are accurate and complete and with respect to Goods (including
Inventory) constituting Collateral, the location specified herein are
accurate and complete save for Goods in transit to such location and
Inventory on lease or consignment, and all fixtures or Goods about to
become fixtures and all crops and all oil, gas or other minerals to be
extracted and all timber to be cut which forms part of the Collateral will
be situate at the location.
COVENANTS OF THE DEBTOR
10. So long as this Security Agreement remains in effect the Debtor covenants
and agrees with the Secured Party:
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(a) to defend the Collateral against the claims and demands of all other
parties claiming the same or an interest therein; to keep the Collateral
free from all Encumbrances, hereafter approved in writing by the Secured
Party, prior to their creation or assumption; and not to sell, exchange,
transfer, assign, lease, or otherwise dispose of Collateral or any
interest therein without the prior written consent of the Secured Party,
provided always that, until default, the Debtor may, in the ordinary
course of the Debtor's business, sell or lease Inventory and, subject to
paragraph 8 hereof, use Money available to the Debtor;
(b) to notify Secured Party promptly of:
(i) any change in the information contained herein or in the Schedules
hereto relating to the Debtor, the Debtor's business or Collateral;
(ii) the details of any significant acquisition of Collateral by the
Debtor;
(iii) the debts or any claims or litigation affecting the Debtor or
Collateral;
(iv) any loss or damage to Collateral;
(v) any default by any Account Debtor in payment or other performance of
its obligations with respect to Collateral; and
(vi) the return to or repossession by the Debtor of Collateral;
(c) to keep the Collateral in good order, condition and repair and not to use
Collateral in violation of the provisions of this Security Agreement or
any other agreement relating to Collateral or any policy insuring
Collateral or any applicable statute, law, by-law, rule, regulation or
ordinance;
(d) to do, execute, acknowledge and deliver such financing statements,
financing change statements and further assignments, transfers, documents,
acts, matters and things (including further schedules hereto) as may be
reasonably requested by the Secured Party of or with respect to Collateral
in order to give effect to these presents and to pay all costs for
searches and filings in connection therewith;
(e) to pay all taxes, rates, levies, assessments and other charges of every
nature which may be lawfully levied, assessed or imposed against or in
respect of the Debtor or Collateral as and when the same become due and
payable;
(f) to keep all of its property of an insurable nature insured in favour of
the Secured Party to the full value thereof, with a reputable insurance
company, against all risks, including loss or damage by fire, lightning,
burglary, vandalism or theft and such other risks as the Secured Party may
from time to time reasonably specify with the Secured Party named as first
loss payee, and the Debtor will produce the last receipts for such
insurance and a photocopy of the insurance policy to the Secured Party for
inspection on demand;
(g) to prevent Collateral, save Inventory sold or leased as permitted hereby,
from being or becoming an accession to other property not covered by this
Security Agreement;
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(h) to carry on and conduct the business of the Debtor in a proper and
efficient manner and so as to protect and preserve the Collateral and to
keep, in accordance with generally accepted accounting principles,
consistently applied, proper books of account for Debtor's business as
well as accurate and complete records concerning Collateral, and xxxx any
and all such records and Collateral at the Secured Party's request so as
to indicate the Security Interest;
(i) to deliver to the Secured Party from time to time promptly upon request:
(i) copies of any Documents of Title, Instruments, Securities and
Chattel Paper constituting, representing or relating to Collateral;
(ii) copies of all books of account and all records, ledgers, reports,
correspondence, schedules, documents, statements, lists and other
writings relating to Collateral for the purpose of inspecting,
auditing or copying the same;
(iii) copies of all financial statements prepared by or for the Debtor
regarding the Debtor's business;
(iv) copies of all policies and certificates of insurance relating to
Collateral; and
(v) copies of such information concerning Collateral, the Debtor and the
Debtor's business and affairs as the Secured Party may reasonably
request.
(j) that the Debtor will not, without the prior written consent of the Secured
Party:
(i) make capital expenditures or pay on capital account any amount at
all if the Debtor is in default under this Security Agreement;
(ii) become guarantor of any obligation or become endorser in respect of
any obligation or otherwise become liable upon any note or
obligation, other than in the ordinary course of the Debtor's
business, unless the obligation or note is in favour of the Secured
Party;
(iii) lend any amount to shareholders, directors, or any other persons,
firms or corporations;
(iv) repay any loans or advances received by it from any shareholder or
director of the company whether or not the same has matured or pay
any interest, bonus or other sum in consideration of the obtaining
or extension of such loan or other obligation;
(k) to permit the Secured Party, by its officers or authorized agents at any
time and from time to time during normal business hours, to enter the
Debtor's premises and to inspect the plant, machinery, equipment, goods
and chattels and the operation thereof; and
(l) to assume and pay when rendered, all reasonable fees and disbursements of
the solicitors for the Secured Party in connection with the preparation
and registration of this Security Agreement and of all other securities
executed and delivered to the Secured Party in connection with any
agreement between the parties and other work relevant hereto.
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11. The Debtor shall not, except with the prior written consent of the Secured
Party, create, grant or allow the taking of any other security interest in the
Collateral or mortgaged property ranking in priority to or pari passu with the
Security Interest, except that on the purchase after the date hereof of any
property the Debtor may, at the time of purchase, allow the taking of or grant a
security interest in the property purchased for the purpose of raising or
securing the whole or part of the purchase money. The Debtor shall not, except
with the prior written consent of the Secured Party, grant, sell or otherwise
assign its Chattel Paper, however, the Creditor shall subordinate its position
to any other asset-based lenders of Debtor.
USE AND VERIFICATION OF COLLATERAL
12. Subject to compliance with the Debtor's covenants contained herein and
specifically including paragraphs 10 and 11 hereof, the Debtor may, until
default, possess, operate, collect, use and enjoy and deal with Collateral in
the ordinary course of the Debtor's business in any manner not inconsistent with
the provisions hereof; provided always that the Secured Party shall have the
right at any time during normal business hours and from time to time to verify
the existence and state of the Collateral in any manner the Secured Party may
consider appropriate and the Debtor agrees to furnish all assistance and
information and to perform all such acts as the Secured Party may reasonably
request in connection therewith and for such purpose to grant to Secured Party
or its agents access to all places where Collateral may be located and to all
premises occupied by the Debtor.
13. The Debtor also covenants with the Secured Party that:
(a) all necessary corporate proceedings of the Debtor and all other things
necessary have been done to authorize and make the creation and issue of
this Security Agreement and its execution and delivery legal and valid;
(b) neither the Debtor nor any subsidiary of the Debtor is subject to any
litigation or proceedings before any court, administrative board or other
tribunal which, if decided against the Debtor, would materially adversely
affect its business, or financial status or the Collateral, and all
material claims against and contingent liabilities of the Debtor have been
disclosed to the Secured Party;
(c) the Debtor is not a party to or bound by any contract or agreement which
will materially adversely affect the business, properties, operations, or
financial conditions, the Collateral of the Debtor;
(d) the Debtor will forthwith on the happening of any loss or damage to the
Collateral, furnish at its expense all necessary proofs and do all
necessary acts to enable the Secured Party to obtain payment of insurance
monies and that any insurance monies received may at the option of the
Secured Party be applied to rebuilding, reinstating or repairing the
Collateral or repairing or purchasing additional chattels or be paid to
the Debtor or be applied or paid partly in one way and partly in another,
or it may be applied in whole or in part on the monies from time to time
owing hereunder or any part thereof whether then due or not;
(e) the Debtor will observe and perform all its obligations and all matters
and things necessary or expedient to be observed or performed under or by
virtue of any lease, license, concession, agreement of any kind, or
franchise whatsoever in order to preserve, protect and maintain all the
rights of the Debtor thereunder;
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(f) the Debtor will duly exercise every right of renewal of any lease,
license, concession and franchise and will obtain new leases, licenses,
concessions or franchises for the longest time or times, if advantageous,
and upon the most favourable terms obtainable, including all rights of
further renewal, and will forthwith assign to the Secured Party any new or
renewal lease, license, concession or franchise which forms part of the
Collateral;
(g) the Debtor will not, without the prior written consent of the Secured
Party, remove any goods or chattels forming part of the Collateral from
Ontario. If any goods or chattels are removed from Ontario, except in the
ordinary course of the Debtor's business, the Debtor will forthwith notify
the Secured Party and will effect the further registrations that are
required to protect and maintain the mortgage and charge of this Security
Agreement;
(h) the Debtor will not sell, transfer, dispose or part with possession of or
agree or attempt to sell, transfer, dispose or part with possession of the
Collateral or any part thereof without the agreement of the Secured Party;
(i) the Debtor will, at all times, maintain its corporate existence and will
diligently conduct its business in a proper and efficient manner so as to
preserve and protect the Collateral and will keep, or cause to be kept,
proper books of account and make or cause to be made therein future
entries of all dealings and transactions in relation to its business and
will at reasonable times furnish or cause to be furnished to the Secured
Party or its duly authorized agent any information relating to its
business that the Secured Party reasonably requires; and
(j) the Debtor shall from time to time, on request by the Secured Party,
execute and deliver or cause to be executed and delivered to the Secured
Party such further and other assurances, conveyances, mortgages,
assignments, pledges and documents as the Secured Party may require for
the purpose of perfecting the Secured Party's security on all or any part
of the Collateral, including after-acquired property other than Inventory,
whether real property or chattels, and whether or not now charged by this
Security Agreement.
14. If the Debtor is in default, and at the option of the Secured Party and at
any time without notice, the Secured Party may, but shall not be obligated to:
(a) discharge taxes, liens or interest on Collateral or pay taxes on any real
property or other Collateral;
(b) perform or cause to be performed for and on behalf of the Debtor any
action, condition, obligation or covenant that the Debtor fails or refuses
to perform;
(c) pay for repair, maintenance and preservation of Collateral or any real
property;
(d) collect by legal proceedings or otherwise endorse, receive and give
receipts for all dividends, interest, principal payments and other sums
now or hereafter payable on or on account of Collateral;
(e) enter into any extension, reorganization, deposit, merger or consolidation
agreement, or any agreement in any way relating to or affecting Collateral
and in connection therewith may deposit or surrender control of such
Collateral thereunder, accept other property in exchange for Collateral
and duly perform such acts as it may deem proper; any money or property,
including real property, received in exchange for Collateral shall be
applied to the Indebtedness or thereafter held by the Secured Party
pursuant to the provisions of this Security Agreement;
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(f) make any compromise or settlement it deems desirable or proper with
reference to Collateral;
(g) insure, process and preserve Collateral;
(h) cause Collateral to be transferred to its name or the name of its nominee;
(i) exercise as to Collateral all the rights, powers and remedies of an owner.
All advances, charges and expenses, including all solicitors' fees on a
solicitor and his client basis, incurred or paid by the Secured Party in
exercising any right, power or remedy conferred by this Security
Agreement, or any enforcement thereof, shall become a part of the
Indebtedness secured by this Security Agreement and shall be paid to the
Secured Party by the Debtor immediately and until repaid, shall be charged
upon the security and shall bear interest at the same rate from the date
of such payment.
15. The last day of the term of a lease which forms part of the Collateral is
excepted out of the mortgage and charge of this Security Agreement but the
Debtor shall stand possessed of the reversion remaining in the Debtor of any
leasehold premises for the time being charged as aforesaid in trust for the
Secured Party for the purpose of this Security Agreement and shall assign and
dispose of it as the Secured Party directs.
SECURITIES
16. If Collateral at any time includes Securities, and after default under
this Security Agreement, the Debtor authorizes the Secured Party to transfer the
same or any part thereof into its own name or that of its nominee(s) so that the
Secured Party or its nominee(s) may appear on record as the sole owner thereof;
provided that, until default, the Secured Party shall deliver promptly to the
Debtor all notices or other communications received by it or its nominee(s) as
such registered owner and, upon demand and receipt of payment of any necessary
expenses thereof, shall issue to the Debtor or its order a proxy to vote and
take all action with respect to such Securities. After default, the Debtor
waives all right to receive any notices or communications received by the
Secured Party or its nominee(s) as such registered owner and agrees that no
proxy issued by the Secured Party to the Debtor or its order as aforesaid shall
thereafter be effective.
COLLECTION OF DEBTS
17. After default under this Security Agreement, the Secured Party may notify
all or any Account Debtors of the Security Interest and may also direct such
Account Debtors to make all payments on Collateral to the Secured Party. The
Debtor acknowledges that any payments on or other proceeds of Collateral
received by the Debtor from Account Debtors, whether before or after
notification of this Security Interest to Account Debtors and whether before or
after default under this Security Agreement, shall be received and held by the
Debtor in trust for the Secured Party and shall, on default by Debtor and on
demand by the Secured Party, be forthwith turned over to the Secured Party.
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INCOME FROM AND INTEREST ON COLLATERAL
18.
(a) Until default, the Debtor reserves the right to receive any Money
constituting income from or interest on Collateral and if the Secured
Party receives any such Money prior to default, the Secured Party shall
either credit the same against the Indebtedness or pay the same promptly
to the Debtor.
(b) After default, the Debtor will not request or receive any Money
constituting income from or interest on Collateral and if the Debtor
receives any such Money without any request by it, the Debtor will pay the
same promptly to the Secured Party.
INCREASES, PROFITS, PAYMENTS OR DISTRIBUTIONS
19.
(a) If default has occurred, the Debtor authorizes Secured Party:
(i) to receive any increase in or profits on Collateral (other than
Money) and to hold the same as part of Collateral. Money so received
shall be treated as income for the purposes of paragraph 18 hereof
and dealt with accordingly;
(ii) to receive any payment or distribution upon redemption or retirement
or upon dissolution and liquidation of the issuer of Collateral; to
surrender such Collateral in exchange therefor and to hold any such
payment or distribution as part of Collateral;
(b) If the Debtor receives any such increase or profits (other than Money) or
payments or distributions, the Debtor will deliver the same promptly to
the Secured Party to be held by the Secured Party as herein provided.
DISPOSITION OF MONEY
20. Subject to any applicable requirements of the PPSA, all Money collected or
received by the Secured Party pursuant to or in exercise of any right it
possesses with respect to Collateral shall be applied on account of Indebtedness
in such manner as the Secured Party deems best or, at the option of the Secured
Party, may be held unappropriated in a collateral account or released to the
Debtor, all without prejudice to the liability of the Debtor or the rights of
the Secured Party hereunder, and any surplus shall be accounted for as required
by law.
EVENTS OF DEFAULT
21. The happening of any of the following events or conditions shall
constitute default hereunder (any one of which is herein referred to as
"default"):
(a) the nonpayment when due, whether by demand, acceleration or otherwise, of
any principal or interest forming part of Indebtedness or the failure of
the Debtor to observe or perform any obligation, covenant, term, provision
or condition contained in this Security Agreement or any other agreement
between the Debtor and the Secured Party;
(b) the bankruptcy or insolvency of the Debtor; the filing against the Debtor
of a petition in bankruptcy; the making of an authorized assignment for
the benefit of creditors by the Debtor; the appointment of a receiver or
trustee for the Debtor or for any assets of the Debtor or the institution
by or against the Debtor of any other type of insolvency proceeding under
the Bankruptcy Act (Canada) or the Bankruptcy and Insolvency Act (Canada)
or otherwise;
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(c) the institution by or against the Debtor of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims
against or winding up of affairs of the Debtor;
(d) if any Encumbrance affecting Collateral becomes enforceable against
Collateral;
(e) it the Debtor ceases or threatens to cease to carry on business or makes
or agrees to make a bulk sale of assets without complying with applicable
law or commits or threatens to commit an act of bankruptcy;
(f) if any execution, sequestration or other process of any court becomes
enforceable against the Debtor or if a distress or analogous process is
levied upon the assets of the Debtor or any part thereof;
(g) if any certificate, statement, representation, warranty or audit report
heretofore or hereafter furnished by or on behalf of the Debtor pursuant
to or in connection with this Security Agreement or otherwise (including,
without limitation, the representations and warranties contained herein)
or as an inducement to the Secured Party to extend any credit to or to
enter into this or any other agreement with the Debtor, 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 proves to have omitted any
substantial contingent or unliquidated liability or claim against the
Debtor or if upon the date of execution of this Security Agreement, there
shall have been any material adverse change in any of the facts disclosed
by any such certificate, representation, statement, warranty or audit
report, which change shall not have been disclosed to the Secured Party at
or prior to the time of such execution;
(h) if there is a default, in any manner whatsoever by the Debtor under any
loan agreement, security agreement, or any other agreement whatsoever,
including any promissory note, with or payable to any other creditor of
Debtor their respective agents, successors or assigns, or any other party.
ACCELERATION
22. The Secured Party, in its sole discretion, may, in the event of default,
declare all or any part of Indebtedness which is not by its terms payable on
demand to be immediately due and payable, without demand or notice of any kind;
or, if Secured Party in its discretion considers itself insecure or that the
Collateral, or any part thereof, is in jeopardy, or that it believes that the
prospect of payment is or is about to be impaired or that the Collateral, or any
part thereof, is or is about to be placed in jeopardy. The provisions of this
paragraph are not intended in any way to affect any rights of the Secured Party
with respect to any Indebtedness which may now or hereafter be payable on
demand.
REMEDIES
23. Upon default, and at any time thereafter:
(a) all Indebtedness and obligations due or payable by the Debtor to the
Secured Party secured hereby shall immediately become fully due and
payable all without prior demand therefor;
(b) the Secured Party may appoint or re-appoint by instrument in writing, any
person or persons, whether an officer or officers or an employee or
employees of the Secured Party or not, to be a receiver or receivers
(hereinafter called a "Receiver", which term when used herein shall
include a receiver and manager) of Collateral (including any interest,
income, profits or proceeds therefrom) and may remove any Receiver so
appointed and appoint another in its stead. Any such Receiver shall, so
far as concerns responsibility for its acts, be deemed the agent of the
Debtor and not the Secured Party, and the Secured Party shall not be in
any way responsible for any misconduct, negligence, or non-feasance on the
part of any such Receiver, its servants, agents or employees. Subject to
the provisions of the instrument appointing the Receiver, 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 the Debtor and to sell, lease or otherwise dispose
of or concur in selling, leasing or otherwise disposing of Collateral. To
facilitate the foregoing powers, any such Receiver may, to the exclusion
of all others, including the Debtor, enter upon, use and occupy all
premises owned or occupied by the Debtor 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 the Debtor's
business or as security for loans or advances to enable the Receiver to
carry on the Debtor's business or otherwise, as such Receiver shall, in
its discretion, determine. Except as may be otherwise directed by the
Secured Party, all Money received from time to time by such Receiver in
carrying out his appointment shall be received in trust for and paid over
to the Secured Party. Every such Receiver may, in the discretion of the
Secured Party, be vested with all or any of the rights and powers of the
Secured Party;
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(c) the Secured Party 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 the foregoing sub-paragraph (b);
(d) the Secured Party may take possession of, collect, demand, xxx on,
enforce, recover and receive Collateral and give valid and binding
receipts and discharges therefor and in respect thereof and, upon default,
the Secured Party may sell, lease or otherwise dispose of Collateral in
such manner, at such time or times and place or places, for such
consideration and upon such terms and conditions as to the Secured Party
may seem reasonable;
(e) in addition to those rights granted herein and in any other agreement now
or hereafter in effect between the Debtor and the Secured Party and in
addition to any other rights the Secured Party may have at law or in
equity, the Secured Party shall have, both before and after default, all
rights and remedies of a secured party under the PPSA and the Business
Corporations Act of Ontario; provided always, that the Secured Party shall
not be liable or accountable for any failure to exercise its remedies,
take possession of, collect, enforce, realize, sell, lease or otherwise
dispose of Collateral or to institute any proceedings for such purposes.
Furthermore, the Secured Party shall have no obligation to take any steps
to preserve rights against prior parties to any Instrument or Chattel
Paper whether Collateral or proceeds and whether or not in the Secured
Party's possession and shall not be liable or accountable for failure to
do so;
(f) the Debtor acknowledges that the Secured Party or any Receiver appointed
by it may take possession of Collateral wherever it may be located and by
any method permitted by law and the Debtor agrees upon request from the
Secured Party or any such Receiver, to assemble and deliver possession of
Collateral at such place or places as directed;
(g) the Debtor agrees to pay all costs, charges and expenses reasonably
incurred by the Secured Party or any Receiver appointed by it, whether
directly or for services rendered (including reasonable solicitors and
auditors costs and other legal expenses and Receiver remuneration), in
operating the Debtor's business, in preparing or enforcing this Security
Agreement, taking and maintaining custody of, preserving, repairing,
processing, preparing for disposition and disposing of Collateral and in
enforcing or collecting Indebtedness and all such costs, charges and
expenses, together with any amounts owing as a result of any borrowing by
the Secured Party or any Receiver appointed by it, as permitted hereby,
shall be a first charge on the proceeds of realization, collection or
disposition of Collateral and shall be secured hereby;
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(h) the Secured Party will give the Debtor such notice, if any, of the date,
time and place of any public sale or of the date after which any private
disposition of Collateral is to be made, as may be required by the PPSA;
(i) for purposes of removal and possession of the Collateral, the Secured
Party or its representatives may enter any premises of the Debtor at any
time without legal process or any other premises where Collateral or real
property are located, and the Debtor hereby waives and releases the
Secured Party of and from any and all claims in connection therewith or
arising therefrom; and
(j) the Receiver shall be entitled to borrow money on the Collateral; but
nothing done under or pursuant to the powers herein shall render the
Secured Party a mortgagee in possession.
24. Without in any way limiting the generality of paragraph 23 hereof, a
Receiver appointed pursuant to this Security Agreement or pursuant to court
order shall be entitled to exercise all rights conferred by the Business
Corporations Act of Ontario and the PPSA and by way of addition to and without
limiting those rights, such Receiver shall have the right and power:
(a) to take possession of and realize on all Collateral and substitutions and
proceeds therefrom;
(b) to make and effect all such repairs, improvements and insurances as it
shall think fit, and renew such of the plant, machinery and any other
assets of the Debtor whatsoever as shall be worn out, lost or otherwise
become unserviceable;
(c) to appoint managers, accountants, lawyers, employees, workmen and agents,
for the aforesaid purpose upon such terms as to remuneration or otherwise
as the Receiver may determine and the Secured Party authorize;
(d) to carry on or concur in carrying on the business of the Debtor or any
part thereof and may exercise all powers herein conferred upon the Secured
Party and for this purpose, to borrow money on the Collateral, with the
written consent of the Secured Party, in priority to this Security
Agreement or otherwise;
(e) to make any arrangement or compromise which it shall think expedient in
the interests of the Secured Party;
(f) to exercise any powers conferred or delegated by the Secured Party; and
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(g) to do all such other acts and things as may be considered to be incidental
or conducive to any of the matters and powers aforesaid and which the
Receiver may or can lawfully do as agent for the Debtor.
25. The Receiver shall not be liable for any loss of any kind whatsoever
unless it is caused by the Receiver's own negligence or willful default. The
Receiver shall be considered to be the agent of the Debtor and the Debtor shall
be solely responsible for the Receiver's acts, defaults and remuneration.
MISCELLANEOUS
26. This Security Agreement, in addition to being a security agreement for the
purposes of the PPSA, is a debenture for the purposes of the Business
Corporations Act of Ontario and is a negotiable instrument. For the purpose of
registering or filing this Security Agreement in any registry office or any
other governmental office or public record, this Security Agreement may be made
in two or more counterparts and any counterpart so registered or filed shall be
deemed to be a negotiable instrument.
27. The Debtor hereby authorizes the Secured Party to file such financing
statements, financing change statements and other documents and do such acts,
matters and things (including completing and adding schedules hereto identifying
Collateral or any permitted Encumbrances affecting Collateral or identifying the
locations at which the Debtor's business is carried on and Collateral and
records relating thereto are situate) as the Secured Party may deem appropriate
to perfect on an ongoing basis and continue the Security Interest, to protect
and preserve Collateral and to realize upon the Security Interest and the Debtor
hereby irrevocably constitutes and appoints the Secured Party, if the Secured
Party is an individual, or the President of the Secured Party, if the Secured
Party is a corporation, the true and lawful attorney of the Debtor, with full
power of substitution, to do any of the foregoing in the name of the Debtor
whenever and wherever it may be deemed necessary or expedient.
28. Without limiting any other right of the Secured Party, whenever
Indebtedness is immediately due and payable or the Secured Party has the right
to declare Indebtedness to be immediately due and payable (whether or not it has
so declared), Secured Party may, in its sole discretion, set off against
Indebtedness any and all accounts then owed to the Debtor by the Secured Party
in any capacity, whether or not due, and the Secured Party shall be deemed to
have exercised such right to set off immediately at the time of making its
decision to do so even though any charge therefor is made or entered on the
Secured Party's records subsequent thereto.
29. Upon the Debtor's failure to perform any of its duties hereunder, the
Secured Party may, but shall not be obligated to, perform any or all of such
duties, and the Debtor shall pay to the Secured Party, forthwith upon written
demand therefor, an amount equal to the expense incurred by the Secured Party in
so doing plus interest thereon from the date such expense is incurred until it
is paid at the rate of the Bank of Montreal prime commercial lending rate plus
five per cent (5%) per annum.
30. The Secured Party may grant extensions of time and other indulgences, take
and give up security, accept compositions, compound, compromise, settle, grant
releases and discharges and otherwise deal with the Debtor, debtors of the
Debtor, sureties and others and with Collateral and other security as the
Secured Party may see fit without prejudice to the liability of the Debtor or
the Secured Party's right to hold and realize the Security Interest.
Furthermore, the Secured Party may demand, collect and xxx on Collateral in
either the Debtor's or the Secured Party's name, at the Secured Party's option,
and may endorse the Debtor's name on any and all cheques, commercial paper, and
any other Instruments pertaining to or constituting Collateral.
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31. No delay or omission by the Secured Party in exercising any right or
remedy hereunder or with respect to any Indebtedness shall operate as a waiver
thereof or of any other right or remedy, and no single or partial exercise
thereof shall preclude any other or further exercise thereof or the exercise of
any other right or remedy. Furthermore, the Secured Party may remedy any default
by the Debtor 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 the Debtor. All rights and remedies of Secured Party
granted or recognized herein are cumulative and may be exercised at any time and
from time to time independently or in combination.
32. The Debtor waives presentment, protest and notice of protest of any
Instrument constituting Collateral at any time held by the Secured Party on
which the Debtor is in any way liable and, subject to paragraph 23(h) hereof,
notice of any other action taken by the Secured Party.
33. This Security Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns. In any action brought by an assignee of this Security
Agreement and the Security Interest or any part thereof to enforce any rights
hereunder, the Debtor shall not assert against the assignee any claim or defence
which the Debtor now has or hereafter may have against the Secured Party. If
more than one Debtor executes this Security Agreement the obligations of such
Debtors hereunder shall be joint and several.
34. Save for any schedules which may be added hereto pursuant to the
provisions hereof, no modification, variation or amendment of any provision of
this Security Agreement shall be made except by a written agreement, executed by
the parties hereto and no waiver of any provision hereof shall be effective
unless in writing.
35. Subject to the requirements of paragraph 23(h) hereof, whenever either
party hereto is required or entitled to notify or direct the other or to make a
demand or request upon the other, such notice, direction, demand or request
shall be in writing and shall be sufficiently given, in the case of the Secured
Party, if delivered to it or sent by prepaid registered mail addressed to it at
its address herein set forth or as changed pursuant hereto and, in the case of
the Debtor, if delivered to it or if sent by prepaid registered mail addressed
to it at its last address known to the Secured Party. Either party may notify
the other pursuant hereto of any change in such party's principal address to be
used for the purposes hereof.
36. This Security Agreement and the security afforded hereby is in addition to
and not in substitution for any other security now or hereafter held by the
Secured Party and is, and is intended to be a continuing Security Agreement and
shall remain in full force and effect until the Secured Party, if the Secured
Party is an individual, or the President of the Secured Party, if the Secured
Party is a corporation, shall actually receive written notice of its
discontinuance and, not withstanding such notice, shall remain in full force and
effect thereafter until all Indebtedness contracted for or created before the
receipt of such notice by the Secured Party, and any extensions or renewals
thereof (whether made before or after receipt of such notice) together with
interest accruing thereon after such notice and all amounts otherwise secured by
this Security Agreement, shall be paid in full.
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37. The headings used in this Security Agreement are for convenience only and
are not to be considered a part of this Security Agreement and do not in any way
limit or amplify the terms and provisions of this Security Agreement.
38. When the context so requires, the singular number shall be read as if the
plural were expressed and the provisions hereof shall be read with all
grammatical changes necessary depending upon the person referred to being a
male, female, firm or corporation.
39. In the event any provision of this Security Agreement, as amended from
time to time, shall be deemed invalid or void, in whole or in part, by any Court
of competent jurisdiction, the remaining terms and provisions of this Security
Agreement to the maximum extent possible shall remain in full force and effect.
40. Nothing herein contained shall in any way obligate the Secured Party to
grant, continue, renew, extend time for payment of or accept anything which
constitutes or would constitute Indebtedness.
41. The Debtor acknowledges and agrees that in the event it amalgamates with
any other corporation or corporations it is the intention of the parties hereto
that the term the "Debtor" when used herein shall apply to each of the
amalgamating corporations and to the amalgamated corporation, such that the
Security Interest granted hereby
(a) shall extend to "Collateral" (as that term is herein defined) owned by
each of the amalgamating corporations and the amalgamated corporation at
the time of amalgamation and to any "Collateral" thereafter owned or
acquired by the amalgamated corporation; and
(b) shall secure the "Indebtedness" (as that term is herein defined) of each
of the amalgamating corporations and the amalgamated corporation to the
Secured Party at the time of amalgamation and any Indebtedness of the
amalgamated corporation to the Secured Party thereafter arising. The
Security Interest shall attach to Collateral owned by each corporation
amalgamating with the Debtor, and by the amalgamated corporation, at the
time of amalgamation, and shall attach to any "Collateral" thereafter
owned or acquired by the amalgamated corporation when such becomes owned
or is acquired.
42. The definitions of terms in this Agreement which are defined in the PPSA
have the meaning respectively ascribed to them in that Act and in this
Agreement, expressly or by implication. This Security Agreement shall be
governed by the laws of [province]. Any reference to this "Security Agreement"
shall be a reference to this agreement reflected on this and the preceding
fifteen (15) pages and any paragraph reference, unless otherwise stated, is a
reference to the corresponding paragraph of this Security Agreement.
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COPY OF AGREEMENT
43. The Debtor hereby acknowledges receipt of a copy of this Security
Agreement.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement, duly
attested by their respective and proper signing officers duly authorized in that
behalf, effective the day and year first above written.
IDENTICA CORP.
Per: /s/ Xxxxx Xxxxxxx
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Per: /s/ Xxxxxxxx Xxxxxx
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EROOMSYSTEM TECHNOLOGIES, INC.
Per: /s/ Xxxxx X. Xxxxxxxxx
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