EXHIBIT 4.39
GENERAL SECURITY AGREEMENT
TO: FCC, LLC, d/b/a First Capital
000 XxxxXxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
(hereinafter the "Lender")
GRANTED BY: XXXXXXX XXXXX INTERNATIONAL INSURANCE
BROKERS LTD.
having its principal office or place of business at:
Xxxxx 000, 00000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
(hereinafter the "Grantor")
SECTION 1 - DEFINITIONS
1.1. Defined Terms
(a) As used herein:
"Accounts", "Inventory", "Equipment", "Intangibles", "Chattel Paper",
"Goods", "Instruments", and "Proceeds" shall mean all of Grantor's
such property within the meanings ascribed to such terms in the PPSA.
"Collateral" shall mean all of the Grantor's property or rights in
which a security interest is granted hereunder.
"Deposit Accounts" shall mean any and all demand, time, savings,
passbook, or similar accounts maintained with a bank or similar
institution, but shall not include investment property or accounts
evidenced by an instrument.
"Documents" shall mean all books, records, accounts, invoices,
letters, papers, documents and other records in any form or medium
evidencing or relating to the Collateral.
"Documents of Title" shall mean all present and future documents of
title of the Grantor, whether negotiable or otherwise, including all
warehouse receipts and bills of lading.
"Encumbrance" shall include, without limitation, a security interest,
lien, hypothecation, claim, charge, deemed trust or encumbrance of any
kind whatsoever.
"Fixture" shall include articles of personal property annexed to the
Grantor's owned or leased real property so as to be regarded as a part
thereof.
2
"Guarantee" shall mean the Guarantee dated as of even date, made by
the Grantor in favor of the Lender with respect to the debts and
obligations of Addison York Insurance Brokers Ltd. as Borrower to the
Lender, as same may be amended, supplemented, revised, restated or
replaced from time to time.
"Intellectual Property" shall mean all intellectual property of the
Grantor, including, without limitation, (a) all patents, patent
applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (b) all
trademarks, service marks, trade dress, trade names, and corporate
names and all the goodwill and quality control standards associated
therewith; (c) all registered and unregistered statutory and common
law copyrights; (d) all registrations, applications and renewals for
any of the foregoing; (e) all trade secrets, confidential information,
ideas, formulae, compositions, know-how, manufacturing and production
processes and techniques, research and development information,
drawings, specifications, designs, plans, improvements, proposals,
technical and computer data, financial, business and marketing plans,
and customer and supplier lists and related information; (f) all other
proprietary rights (including, without limitation, all computer
software and documentation and all license agreements and sublicense
agreements to and from third parties relating to any of the
foregoing); (g) all copies and tangible embodiments of the foregoing
in whatever form or medium; (h) all damages and payments for past,
present and future infringements of the foregoing; (i) all royalties
and income due with respect to the foregoing; and (j) the right to xxx
and recover for past, present and future infringements of the
foregoing.
"Investment Property" shall mean any property of the Grantor, the
primary purpose of which is the earning of profit by the Grantor.
"Liabilities" shall mean (a) all of the obligations of Grantor in
favor of Lender arising under, pursuant to, or in connection with that
certain continuing Guarantee dated as of the date hereof from Grantor
to Lender, (b) all other obligations of Grantor to the Lender from
time to time of every type and description, direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter arising, and whether or not contemplated by the Grantor or
the Lender as of the date of this Security Agreement, including,
without limitation, any modification, extension, or addition to or of
the Liabilities and any overlying advances, out of formula advances
and overdrafts made or permitted in connection with the Liabilities or
other Liabilities; and (c) any duty of the Grantor to act or to
refrain from acting in connection with any Liability.
"Loan Agreement" shall mean the Loan and Security Agreement executed
between Addison York Insurance Brokers Ltd. (the "Borrower") and the
Lender of even date, as amended and/or restated from time to time.
"Material Adverse Effect" means any event, circumstance or condition
that could reasonably be expected to have a material adverse effect on
(a) the business, operations, financial condition, properties or
prospects of Addison York Insurance
3
Brokers Ltd., as Borrower, the Grantor or the Grantor and the Borrower
on a consolidated basis, (b) the ability of Addison York Insurance
Brokers Ltd. or the Grantor or the Grantor and the Borrower on a
consolidated basis to perform all Obligations, (c) the validity or
enforceability of any of the Loan Documents, or any material provision
thereof or any material transaction contemplated thereby, or (d) the
rights and remedies of Lender under any of the Loan Documents.
"Money" shall mean all present and future money of the Grantor,
whether authorized or adopted by the Parliament of Canada as part of
its currency or any foreign government as part of its currency.
"PPSA" shall mean the Personal Property Security Act (Alberta), as the
same may be amended, supplemented or replaced from time to time.
"Subsidiaries" means, as to the Grantor, (a) a corporation of which
shares of stock having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect
a majority of the Board of Directors or other managers of such
corporation are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by the Grantor, and (b) any partnership,
association, joint venture or other entity in which the Grantor and/or
one or more Subsidiaries of the Grantor has more than a Fifty Percent
(50%) equity interest.
(b) Other capitalized terms used herein and not specifically herein
defined shall have the meanings ascribed to them in the Loan
Agreement.
(c) The term "security interest" shall include, without limitation, a
fixed mortgage, hypothecation, pledge, charge and assignment, and the
grant of the security interest herein provided for shall include,
without limitation, a fixed mortgage, hypothecation, pledge, charge
and assignment of the Collateral in favor of the Lender.
1.2. Security Interest
As a general and continuing security for the payment and performance of any and
all Liabilities, present or future, direct or indirect, absolute or contingent,
matured or not, at any time owing by the Grantor to the Lender or remaining
unpaid by the Grantor to the Lender wheresoever and howsoever incurred and
howsoever evidenced, whether arising from dealings between the Lender and the
Grantor or from other dealings or proceedings by which the Grantor may be or
become in any manner indebted, obligated or liable to the Lender, including,
without limitation, under the Guarantee, and wherever incurred and in any
currency and whether incurred by the Grantor alone or with another or others and
whether as principal, guarantor or surety including expenses under Sections 3.5
and 3.12 of this Agreement and all interest, commissions, cost of realization,
legal and other costs, charges and expenses the Grantor, IN CONSIDERATION OF THE
LIABILITIES and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, does hereby grant to the Lender, a
continuing security interest in all present and after-acquired personal property
of the Grantor, including without limitation the following Collateral:
4
(a) All Accounts, Deposit Accounts, Intangibles, Documents, Documents of
Title, Instruments, Investment Property, Money, Chattel Paper and any
other similar rights of the Grantor however created or evidenced,
whether now existing or hereafter owned, acquired, created, used, or
arising, specifically including, without limitation, claims, leases,
agreements, license agreements, licensing fees, royalties, policies,
insurance commissions, credit insurance, guaranties, letters of
credit, advices of credit, binders or certificates of insurance,
deposits, documents of title, securities, security interests,
licenses, goodwill, tax refunds (federal, provincial or local),
customer lists, franchises, franchise rights, drawings, designs,
marketing rights, computer programs, artwork, databases and other like
business property rights, all applications to acquire such rights, for
which application may at any time be made by the Grantor, together
with any and all books and records pertaining thereto and any right,
title or interest in any Inventory which gave rise to an Account, and
all Intellectual Property throughout the world;
(b) All Inventory, whether now existing or hereafter acquired and wherever
located, specifically including, without limitation, all merchandise,
personal property, raw materials, work in process, finished Goods,
materials and supplies of every nature usable or useful in connection
with the manufacturing, packing, shipping, advertising, selling,
leasing or furnishing of any of such Inventory and all materials of
the Grantor used or consumed or to be used or consumed in the
Grantor's business, together with any and all books and records
pertaining thereto;
(c) All Equipment, Fixtures, Goods and all other tangible personal
property of the Grantor of every kind or nature which are not
inventory or consumer goods as defined in the PPSA, whether now owned
or hereafter acquired, wherever located, specifically including,
without limitation, all machinery, trucks, boats, barges, on and off
the road vehicles, forklifts, tools, dies, jigs, presses, appliances,
implements, improvements, accessories, attachments, parts, components,
partitions, systems, carpeting, draperies and apparatus;
(d) All products and Proceeds of each of the foregoing, specifically
including, without limitation, (i) any and all Proceeds of any
insurance, indemnity, warranty or Guarantee payable to the Grantor
from time to time, (ii) any and all payments of any form whatsoever
made or due and payable to the Grantor from time to time in connection
with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the foregoing by any governmental
authority or any Person acting under color of governmental authority,
(iii) to the extent of the value of Collateral, claims arising out of
the loss, nonconformity, or interference with the use of, defects or
infringement of rights in, or damage to, the Collateral, and (iv) any
and all other amounts from time to time paid or payable under or in
connection with any of the foregoing, whether or not in lieu thereof;
(e) All renewals, extensions, replacements, modifications, additions,
improvements, accretions, accessions, betterments, substitutions,
replacements, annexations, tools, accessories, parts and the like now
in, attached to or which may hereafter at any time be placed in or
added to any Collateral, whether or not of like kind; and
5
(f) All rights, remedies, claims and demands under or in connection with
each of the foregoing.
1.3. Leases
The last day of the term of any lease, oral or written, or any agreement
therefor, now held or hereafter acquired by the Grantor, shall be excepted from
the security interest hereby granted and shall not form part of the Collateral,
but the Grantor shall stand possessed of such one day remaining, upon trust to
assign and dispose of the same as the Lender or any assignee of such lease or
agreement shall direct. If any such lease or agreement therefor contains a
provision which provides in effect that such lease or agreement may not be
assigned, sub-leased, charged or encumbered without the leave, license, consent
or approval of the lessor, the application of the security interest created
hereby to any such lease or agreement shall be conditional upon such leave,
license, consent or approval having been obtained.
1.4. Grantor Remains Liable Notwithstanding anything herein to the contrary:
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform
all its duties and obligations thereunder to the same extent as if
this Security Agreement had not been executed;
(b) the exercise by the Lender of any of the rights or remedies hereunder
shall not release the Grantor from any of its duties or obligations
under the contracts and agreements included in the Collateral; and
(c) the Lender shall not have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Lender be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
1.5. Attachment
The Grantor acknowledges and agrees that: (i) value has been given; (ii) the
Grantor has rights in the Collateral; and (iii) the security interest created
hereunder shall attach to existing Collateral upon execution of this Agreement
by the Grantor and to each item of after-acquired Collateral at the time that
the Grantor acquires any rights therein.
1.6. Subordination
Notwithstanding anything herein contained, the Lender hereby acknowledges that
its security interest in Collateral is subject and subordinate to any security
interests which exist as of the date hereof granted by Grantor to an insurance
carrier, wholesaler, provider or company (together referred to herein as the
"Insurance Carriers") in any agency or similar agreement between Grantor and
such Insurance Carrier and the Lender, at any time and from time to time, does
6
hereby agree, at the request of the Grantor, to enter into a subordination and
postponement agreement in favor of such Insurance Carriers and file all
necessary documents under applicable public registries, including without
limitation, the Personal Property Security Act (Alberta), to give effect to the
subordination and postponement of its security interests to any security
interest existing as of the date hereof granted by the Grantor in favor of such
Insurance Carrier.
SECTION 2 - REPRESENTATIONS AND WARRANTIES
The Grantor represents and warrants to and in favor of the Lender as follows.
2.1. Incorporation
The Grantor is validly amalgamated and organized, is up to date in filing its
corporate returns (including annual returns and financial statements) and is a
subsisting corporation in good standing under the laws of its jurisdiction of
incorporation and the Grantor has all necessary power and authority to own its
property and assets, to carry on its business as at present carried on by it or
as contemplated hereunder to be carried on by it and holds all necessary
licenses, permits and consents as are required so to own its property and assets
and so to carry on business in each jurisdiction in which it does so without any
violation of law or the rights of others.
2.2. Corporate Power
The Grantor has the power, capacity, full legal right and the corporate
authority to enter into this Security Agreement and the Guarantee, to grant the
security interest contained herein and to do all acts and things as are required
or contemplated hereunder to be done, observed and performed by it.
2.3. Corporate Authorization
The Grantor has taken all necessary corporate action to authorize the creation,
execution, delivery and performance of this Security Agreement and the
Guarantee.
2.4. Non-Conflict
None of the execution of the Guarantee, this Security Agreement, the grant of
the security interests hereunder and the performance and observance of the terms
hereof requires the approval of any regulatory agency having jurisdiction over
the Grantor, results in the grant or creation of any Encumbrance on the property
of assets of the Grantor other than in favor of the Lender or is in
contravention of or in conflict with the articles, by-laws or resolutions of
directors or shareholders of the Grantor or the provisions of any indenture,
instrument, agreement or undertaking to which the Grantor is a party or by which
all or any part of its property or assets may be bound, any statute, regulation,
by-law, ordinance or other law, or any judgment, decree, ruling or order to
which the Grantor or its property and assets may be subject.
2.5. No Default
The Grantor is not in default in the performance or observance of any of the
obligations, covenants or conditions contained in any material contract,
agreement or other instrument to
7
which it is a party or by which it is bound. At the date hereof, no Default
exists and no event or condition has occurred or exists which with the passage
of time or the giving of notice, or both, would constitute a Default.
2.6. Title
Subject only to the security interests in favor of the Lender, the Grantor has
good and marketable title to the Collateral free and clear of all Encumbrances
whatsoever except as are described in the attached Schedule "B".
2.7. Enforceability
The Guarantee and this Security Agreement constitute a valid and legally binding
obligation of the Grantor enforceable against the Grantor in accordance with
their terms.
2.8. Information
The information, representations and warranties made by the Grantor to the
Lender in respect of the Grantor's assets, operations or otherwise including,
without limitation, the information contained in any financial statements and in
the Schedules attached hereto, are true and accurate in all material respects
and are not misleading in light of the circumstances existing when made or
delivered or in present circumstances. There are no facts or circumstances not
disclosed in writing to the Lender relating to the business, properties,
prospects or financial condition of the Grantor or its ability to perform its
obligations hereunder which may, in the Lender's discretion, be considered
material, including without limitation, with respect to the existence of any
contract, agreement or instrument or charter or corporate restriction which may,
in the Lender's discretion, materially adversely affect the Grantor's business,
properties, assets, operations, or condition (financial or otherwise).
2.9. Locations of Collateral
The Collateral, except where it is in transit to and from the locations herein
described is located at the location specified above as the Grantor's principal
office or place of business (and its chief place of business and chief executive
office) and at such additional addresses as are listed in Schedule "A" hereto.
The location at which all records of the Grantor pertaining to Accounts (and all
chattel paper which evidences Accounts) and contract rights are kept is the
location specified above unless the contrary is indicated in Schedule "A".
2.10. No Litigation
Other than the litigation or proceedings pending against the Grantor identified
in Schedule "C" hereto, there is no litigation, proceeding or governmental
investigation, administrative or judicial, pending or threatened, against the
Grantor or any of its subsidiaries which, if decided adversely to the Grantor or
such subsidiary(ies) might have a materially adverse effect on the business,
properties or condition (financial or otherwise) of the Grantor or such
subsidiary(ies) or on the ability or the Grantor to perform its obligations
hereunder or under any other agreement between the Grantor and the Lender.
8
2.11. Taxes
The Grantor and each of its subsidiaries has filed all federal, state,
provincial and other tax returns required to be filed, and all taxes,
assessments and other governmental charges (the "Tax Liabilities") due from each
of the Grantor and its subsidiaries have been fully paid. Neither the Grantor
nor any of its subsidiaries has executed any waiver that would have the effect
of extending any applicable statute of limitations in respect of Tax
Liabilities. Each of the Grantor and its subsidiaries has established on its
books reserves adequate for the payment of all Tax Liabilities.
2.12. Survival
All representations and warranties of the Grantor made herein or in any
certificate or other document delivered by or on behalf of the Grantor to the
Lender are material, shall be deemed to have been relied upon by the Lender
notwithstanding any investigation heretofore or hereafter made by or on behalf
of the Lender, shall survive the execution and delivery of this Security
Agreement and shall continue in full force and effect without time limit.
2.13. Financial Statements
All financial statements of Grantor were prepared in accordance with Canadian or
U.S. generally accepted accounting principles (GAAP), consistent with prior
years, unless specifically otherwise noted thereon, and fairly present the
financial condition of Grantor as of the date thereof and the results of its
operations for the period then ended, and no material adverse change in the
financial condition of Grantor has occurred since the date of the financial
statements.
2.14. No Material Adverse Change
The information submitted by Grantor to Lender discloses all known or
anticipated material liabilities, direct or contingent, of Grantor and its
Subsidiaries as of the dates thereof, and, to the best knowledge of Grantor,
since such dates, there has been no material adverse change in Grantor's or its
Subsidiaries' financial condition.
2.15. Indebtedness
Except as shown on the financial statements of Grantor, except as set forth on
Schedule "D" hereto, and except for trade debt incurred in the ordinary course
of business since the date of the financial statements, Grantor has no
outstanding indebtedness.
2.16. Full Disclosure
No information, exhibit, memorandum, or report (excluding estimated future
operating results) furnished by Grantor to Lender in connection with the
negotiation of the Guarantee or this Agreement contains any material
misstatement of fact, or omits to state any fact necessary to make the
statements contained therein not materially misleading in light of the
circumstances when made, and all estimated future operating results, if
furnished, were prepared on the basis of assumptions, data, information, tests
or other conditions believed to be valid or accurate or to exist at the time
such estimates were prepared and furnished. To Grantor's knowledge, there
9
presently exists no fact or circumstance relative to Grantor, whether or not
disclosed, which is presently anticipated to have a Material Adverse Effect.
2.17. Contracts of Surety
Except for: (i) the endorsements of Grantor of negotiable instruments for
deposit or collection in the ordinary course of business; and (ii) a guarantee
made between the Grantor and Oak Street Funding LLC and dated March 19, 2004;
Grantor is not a party to any contract of Guarantee or surety.
2.18. Licenses
Grantor possesses such franchises, licenses, permits, patents, copyrights,
trademarks, and consents of appropriate governmental authorities to own its
property and as are necessary to carry on its business.
2.19. Compliance with Law
Grantor is in compliance with and conformity with all laws, ordinances, rules,
regulations and all other legal requirements applicable to its business and
assets, the violation of which would have a material effect on its business or
financial condition. Grantor has not received nor does it have a reasonable
basis to expect any order or notice of violation or claim of violation of any
law, ordinance, rules or regulation. The properties on which Grantor is
conducting its business are properly zoned for the activities conducted or to be
conducted thereon, and all required variances have been obtained, and are in
full force and effect with no notice or threat of invalidity, expiration or
lapse of any kind.
2.20. Force Majeure
Neither the business nor the properties of Grantor are presently affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty that could reasonably be expected to have a Material Adverse Effect on
its business or financial condition.
2.21. Approvals
No authorization, consent, approval or any form of exemption of any governmental
authority is required in connection with the execution and delivery by Grantor
of the Guarantee or this Agreement or the performance by Grantor thereunder.
2.22. Insolvency
Grantor is not "insolvent" within the meaning of that term as defined under the
Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act
(Canada) or the Winding-Up and Restructuring Act (Canada), and is able to pay
its debts as they mature.
10
2.23. General
All statements contained in any certificate or financial statement delivered by
or on behalf of Grantor to Lender under this Agreement and the Guarantee shall
constitute representations and warranties made by Grantor hereunder.
2.24. Subsidiaries
Each Subsidiary of Grantor is listed on Schedule E hereto. With the exception of
Borrower, no Subsidiary of Grantor has any right, title, or interest in any real
or personal property, whether tangible or intangible, exceeding a value of
$100,000.
SECTION 3 - COVENANTS OF GRANTOR
The Grantor covenants and agrees with the Lender as follows.
3.1. Repair
The Grantor shall diligently repair, maintain, use, care for, protect and
operate the Collateral and shall carry on and conduct its business in a proper
and efficient manner so as to preserve and protect the Collateral and the
earnings, incomes, rents, issues and profits thereof.
3.2. Information
The Grantor shall keep proper books of account in accordance with sound
accounting practice and applicable laws with respect to questionable, improper
or corrupt payments, shall promptly furnish to the Lender such information with
respect to the Collateral and the Grantor and its business including, without
limitation, financial information and statements relating to its business and
the Collateral, as the Lender may from time to time reasonably require and shall
promptly notify the Lender of all proceedings (pending or threatened) before any
court, board, tribunal or similar body or any occurrence, condition or event
which could have a Material Adverse Effect on the business, property, assets or
condition (financial or otherwise) of the Grantor or any of its subsidiaries.
The Grantor shall permit the Lender or its authorized agents, at any times and
at the expense of the Grantor, to audit its Accounts under reasonable procedures
directly with account debtors or by other procedures, to have access to all
premises occupied by the Grantor or any place where the Collateral may be found
in order to discuss the affairs, finances and accounts of the Grantor with
appropriate officers, to inspect the Collateral and to examine the information
contained in any records or other writings of the Grantor including, without
limitation, books of account and other financial records and reports relating to
the Collateral, to have temporary custody thereof and to make copies thereof and
take extracts therefrom and shall, at the reasonable request of the Lender, xxxx
the Collateral to indicate clearly the security interest of the Lender.
3.3. Make Payments
The Grantor shall pay all rents, taxes, rates, levies, assessments and
government fees or dues lawfully levied, assessed or imposed in respect of the
Collateral or any part thereof as and when the same shall become due and payable
except as are being contested in good faith by proper
11
legal proceedings with respect to which adequate reserves have been established
and are being maintained and shall exhibit to the Lender, when required, the
receipts and vouchers evidencing such payments.
3.4. Encumbrances
Except for any Encumbrances in favor of the Lender and those Encumbrances
identified on Schedule B hereto and purchase money security interests in
Equipment, validly created in accordance with the PPSA, on Collateral hereafter
acquired by the Debtor, the Grantor shall keep the Collateral free at all times
from any and all Encumbrances of whatsoever nature, kind or priority other than
those consented to by the Lender or Encumbrances which, in the sole opinion of
counsel to the Lender, are satisfactorily subordinated to Encumbrances in favor
of the Lender, defend the title to the Collateral against all persons, not
permit the Collateral to become an accession to any property not subject to the
security interest granted by this Security Agreement or a security interest
consented to by the Lender that is subordinate to the Lender's security interest
and not to become a fixture unless the security interest of the Lender ranks
prior to the interests of all persons in the realty. The Lender may, at any
time, contest the validity and enforceability against it or the Grantor of any
Encumbrance including, without limitation, any purchase money security interest.
3.5. Insurance
The Grantor shall cause all of the Collateral which is of a character usually
insured by businesses owning or operating Collateral of a similar nature to be
properly insured and kept insured with reputable insurers acceptable to the
Lender, against loss or damage by fire or other risks and hazards usually
insured against by businesses owning or operating Collateral of a similar
nature, in such amounts, containing such terms, in such form and for such
purposes, as may be satisfactory to the Lender. Loss under such insurance shall
be payable to the Lender as its interest may appear and such insurance shall
contain a mortgage clause acceptable to the Lender. The Grantor shall, at the
Lender's request, provide satisfactory evidence that such insurance has been
effected, that loss thereunder is payable to the Lender as its interest may
appear and any other information relating to such insurance as the Lender may
require. If the Grantor fails to maintain satisfactory insurance, the Lender
may, at its option, obtain such insurance at the expense of the Grantor and the
Grantor shall forthwith repay all costs and expenses incurred by the Lender in
connection therewith and all such costs and expenses shall be deemed advanced to
the Grantor by the Lender, shall become part of the Liabilities, shall bear
interest at the highest rate per annum charged by the Lender on the Liabilities
or any part thereof and shall be secured by this Security Agreement.
3.6. Compliance with Governmental Requirements
The Grantor shall duly observe and comply with all requirements of any
governmental authority applicable to the Collateral or its use and operation and
shall observe and comply with all covenants, terms and conditions upon or under
which the Collateral is held.
12
3.7. Permitted Disposals
The Grantor shall not, except as otherwise permitted hereunder, remove, destroy,
lease, sell or otherwise dispose of any of the Collateral except equipment which
has become worn out or damaged or otherwise unsuitable for its purpose, in which
case the Grantor shall substitute for such equipment, subject to the security
interest created hereby and free from any other security interests, property of
equal value such that the security hereby constituted shall not thereby be in
any way reduced or impaired.
3.8. No Change in Business
The Grantor shall not, without the prior written consent of the Lender, which
consent shall be conditional on the receipt by the Lender of all security and
deeds of confirmation as its counsel may consider advisable to protect the
Lender's interest, directly or indirectly: change the nature of its business;
change its fiscal year; otherwise incur any material (determined in the Lender's
reasonable discretion) capital expenditures in excess of, cumulatively, US
$100,000 per annum (including, without limitation, entering into equipment
leases); guarantee, endorse or otherwise become surety for or upon the
obligations of others, except to the Lender, or to others which, in the sole
opinion of counsel to the Lender, creates an Encumbrance which is subordinate to
Encumbrances of the Lender or by endorsement of negotiable instruments for
deposit or collection in the ordinary course of its business; provide financial
assistance (including, without limitation, by way of loans to, investments in
and assumptions of obligations) to any person, corporation, partnership or other
entity other than by way of advances and extensions of credit in the ordinary
course of its business or with the consent of the Lender or which, in the sole
opinion of counsel to the Lender, creates an Encumbrance which is subordinate to
Encumbrances of the Lender; sell, discount or dispose of any note, instrument,
account or other obligation owing to the Grantor; amalgamate, reconstruct,
consolidate or otherwise merge with any person or entity other than with a
wholly owned subsidiary of the Grantor; enter into an arrangement or agreement
for the sale of any substantial portion of the Collateral other than in the
ordinary course of business; permit all or a substantial portion of the
Collateral to become the property of any other person or entity, whether in one
or a series of transactions; otherwise cease to carry on business as a going
concern; do or omit to do any other act or thing that could materially adversely
affect its business, financial condition, assets or position or its ability to
carry on the business as now conducted by it; or allow, permit or authorize any
such change in business, acquisition, extension of financial assistance, merger,
reconstruction, consolidation, carrying on of business, arrangement or cessation
of business of any of its subsidiaries except a merger contemplated herein.
3.9. Dividends, etc.
The Grantor shall not pay, make or declare any cash or other dividend or
distribution to any person who holds an equity interest in the Grantor, whether
evidenced by a security or not, without the prior written consent of the Lender.
13
3.10. No Further Indebtedness
The Grantor shall not incur, assume or suffer to exist or in any manner become
liable, directly or indirectly, for any further or additional indebtedness or
liabilities other than:
(a) To the Lender or Oak Street Funding LLC;
(b) Any other debt which, in the sole opinion of counsel to the Lender, is
satisfactorily subordinated to all indebtedness contingent or
otherwise owing to the Lender by the Grantor;
(c) For taxes, assessments or governmental charges to the extent that
payment therefore shall not, at the time, be required to be made
hereunder;
(d) On open account for the purchase price of services, materials or
supplies incurred by the Grantor in the ordinary course of business
and not as a result of borrowing and provided that such indebtedness
shall be promptly paid and discharged when due in conformity with
ordinary trade terms, except for any such indebtedness which is being
contested in good faith by the Grantor by appropriate proceedings and
adequate reserves for which have been established and are being
maintained and in connection with which no Encumbrance has been placed
on the property of the Grantor; and
(e) For the purchase price of capital assets incurred in the ordinary
course of business and as expressly permitted hereunder.
3.11. Notice Regarding Change of Address, etc.
The Grantor shall notify the Lender in writing:
(a) At least 20 days prior to any change of name of the Grantor;
(b) At least 20 days prior to any transfer of the Grantor's interest in
any part of the Collateral, not expressly permitted hereunder;
(c) Promptly of any significant loss of or damage to Collateral;
(d) At least 20 days prior to any change in the location(s) of the
Collateral and any records relating thereto; and
(e) Forthwith upon becoming aware of the existence of any condition or
event which could cause or which, with the passage of time or notice,
or both, constitute a Default, give the Lender written notice thereof
specifying the nature and duration thereof and the action being taken
or proposed to be taken with respect thereto.
14
3.12. Protective Disbursements - Legal Fees
If the Grantor fails to pay any amounts required to be paid by it under this
Security Agreement or to observe or perform any of the covenants and obligations
set forth in this Security Agreement to be observed or performed by it, the
Lender may, but shall be under no obligation to, pay such amounts or observe and
perform any of such covenants and obligations in any manner deemed proper by the
Lender, without waiving any of its rights under this Security Agreement. No such
payment or performance by the Lender shall relieve the Grantor from any default
under this Security Agreement or the consequences of such default. The
reasonable expenses, including the cost of any insurance, payment of taxes or
other charges and legal fees and expenses on a solicitor and his own client
scale, paid by the Lender in respect of the custody, preservation, use or
operation of the Collateral shall be deemed advanced to the Grantor by the
Lender, shall become part of the Liabilities, shall bear interest at the highest
rate per annum charged by the Lender on the Liabilities or any part thereof and
shall be secured by this Security Agreement. In addition, the Grantor shall pay
all reasonable costs, claims, damages and expenses including, without
limitation, legal fees and expenses on a solicitor and his own client scale,
incurred by the Lender in connection with the preparation, perfection,
execution, protection, enforcement of and advice with respect to this Security
Agreement, the realization, disposing of, retaining, protecting or collecting of
the Collateral or any part thereof and the protection and enforcement of the
rights of the Lender hereunder, and all such costs and expenses shall be deemed
advanced to the Grantor by the Lender, shall become part of the Liabilities,
shall bear interest at such highest rate per annum charged by the Lender on the
Liabilities or any part thereof and shall be secured by this Security Agreement.
3.13. Post-Default Payments
Upon the occurrence and during the continuance of a Default, the Grantor shall
not pay to or compensate any officer, director or employee, or any member of
such person's family, any additional cash compensation in the form of a cash
bonus, or other similar cash incentive compensation.
3.14. Capital Stock
Without the prior written consent of Lender, Grantor shall not directly or
indirectly redeem or acquire any of its own capital stock, or any options,
warrants or any securities in respect of its capital stock prior to March 19,
2009.
3.15. Financial Reporting
Grantor shall furnish or caused to be furnished to Lender:
(a) as soon as practicable, but in any event within ninety (90) days after
the end of each fiscal year, financial statements of each of the Grantor
and its Subsidiaries (on a consolidated basis) audited by independent
certified public accountants acceptable to Lender, including a balance
sheet, statement of income and retained earnings and a statement of cash
flows, with accompanying notes to financial statements, all prepared in
accordance with GAAP (with all amounts denominated in Dollars) on a basis
consistent with prior years unless specifically
15
noted thereon, accompanied by the unqualified report of such auditors
thereon, and further accompanied by the certificate of the chief executive
officer or chief financial officer of Grantor that there exists no Default
under this Agreement or the Guarantee, or if any Default exists, stating
the nature and status thereof;
(b) As soon as possible, but in any event within fifteen (15) days after
the end of each month, similar consolidated financial statements of the
Grantor and its Subsidiaries (on a consolidated basis) as of the end of
such month and the results of its operations for the portion of the fiscal
year then elapsed, prepared and signed by the chief financial officers of
the Grantor and its Subsidiaries, all prepared in accordance with GAAP
(with all amounts denominated in Dollars) on a basis consistent with prior
periods, unless specifically otherwise noted thereon, and accompanied by
the certificate of the chief executive officer or chief financial officer
of the Grantor that there exists no Default under the Loan Documents or if
any Default exists, stating the nature and status thereof;
(c) as soon as possible, but in any event within three (3) days after the
Grantor becomes aware thereof, a written statement signed by the chief
executive or chief financial officer of Grantor as to the occurrence of any
Default stating the specific nature thereof, Grantor's intended action to
cure the same and the time period in which such cure is to occur;
(d) as soon as possible, but in any event within twenty (20) days after the
commencement thereof, a written statement describing any litigation
instituted by or against the Grantor, or any Affiliate which, if adversely
determined, may have a Material Adverse Effect;
(e) promptly upon the filing thereof, copies of all filed prospectuses and
annual, quarterly, monthly, or other regular reports which the Grantor
files with any securities commission or other governmental authority;
(f) such other information as Lender may from time to time reasonably
request.
3.16. Reports
The Grantor shall file, as appropriate, on a timely basis, annual reports,
operating records and any other reports or filings required to be made with any
governmental authority.
3.17. Licenses
The Grantor shall maintain in full force and effect all material operating
permits, licenses, franchises, and rights used by it in the ordinary course of
business.
3.18. Notice of Material Adverse Effect
The Grantor shall give prompt notice in writing to Lender of the occurrence of
any development, financial or otherwise, including pending or threatened
litigation, which might have a Material Adverse Effect.
16
3.19. Compliance with Law
The Grantor shall comply with all material laws, ordinances, rules, regulations
and other legal requirements applicable to it, except where the failure to do so
could not be reasonably expected to result in a Material Adverse Effect.
3.20. Financial Condition
The Grantor shall maintain its financial condition and management (including,
without limitation, insurance agents) of such skill and experience as is
currently in place and necessary to support fully its business.
3.21. Subsidiaries
Except for the Subsidiaries listed in Schedule E hereto, the Grantor shall not
create or acquire any additional Subsidiaries without the prior consent of the
Lender. In the event that any Subsidiaries of the Grantor have right, title, or
interest in any real or personal property, whether tangible or intangible,
exceeding a value of $100,000, the Grantor shall cause each Subsidiary to
deliver to the Lender an executed Guarantee and appropriate corporate
resolutions, opinions and other documentation in form and substance reasonably
satisfactory to the Lender, such Guarantee and other documentation to be
delivered to Lender as promptly as possible but in any event within thirty (30)
days of determination that a Subsidiary needs to be added as a Guarantor.
Simultaneously with any such Subsidiary becoming a Guarantor, the Grantor shall
also cause such Subsidiary to (i) execute and deliver a Subsidiary Security
Agreement (and deliver the other documents required thereby, including, without
limitation, restricted account agreements), if applicable, and such other
collateral documents as the Lender may require its sole and reasonable
discretion; and (ii) deliver such other documentation as the Lender may
reasonably require in connection with the foregoing, including, without
limitation, appropriate financing statements, certified resolutions and other
organizational and authorizing documents of such Subsidiary, favorable opinions
of counsel to such Subsidiary (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the documentation
referred to above and the perfection of the Lender's liens thereunder).
SECTION 4 - COLLECTION OF PROCEEDS
4.1. Payments to Lender
The Grantor shall:
(a) Collect and enforce payment of all Accounts (except as provided for in
Section 4.2) and shall dispose of and receive payment for all
Inventory which is ordinarily disposed of in the Grantor's business;
(b) Receive and hold in trust for the Lender, all payments on or
instruments received in respect of the Collateral, all rights by way
of suretyship or guarantee which the Grantor now has or may hereafter
acquire to enforce payment of Collateral and all rights in the nature
of a security interest whereby the Grantor may satisfy any Collateral
out of property, and all non-cash proceeds of any such collection,
17
disposition or realization of any of the Collateral shall be subject
to the security interest hereby created;
(c) Endorse to the Lender and forthwith deliver to it all such payments
and instruments in the form received by the Grantor; and
(d) Forthwith deliver to the Lender all property in the Grantor's
possession or hereafter coming into its possession through enforcement
of any such rights.
SECTION 5 - DEFAULT
5.1. Defaults
Without in any way limiting or restricting the demand nature of any of the
Liabilities and the Lender's rights to demand, at any time, payment of any or
all of the Liabilities payable on demand, the Liabilities secured by this
Security Agreement shall be immediately due and payable in full and the security
hereby constituted shall become enforceable without the need for any action or
notice on the part of the Lender upon the happening of any of the following
events (herein called a "Default"):
(a) If the Grantor shall fail to make any payment of any of the
Liabilities when due;
(b) If the Grantor commits a material breach of or fails to observe or
perform any of the covenants, terms or conditions contained in this
Security Agreement or in any other agreement or instrument from time
to time in effect between the Grantor and the Lender, whether relating
to the Liabilities or not, or if any representation or warranty of the
Grantor made to the Lender or otherwise contained herein or in any
other agreement or instrument from time to time in effect between the
Grantor and the Lender, whether relating to the Liabilities or not,
shall be established by the Lender to have been incorrect in any
material (determined in the Lender's sole discretion, acting
reasonably) respect;
(c) If any guarantor (individually a "Guarantor" and collectively
`Guarantors") of the Liabilities commits a breach of or fails to
observe or perform any covenant, term or condition contained in any
agreement or writing to which the Guarantor and the Lender are
parties;
(d) If the Grantor shall default under any instrument or agreement with
respect to any indebtedness or other obligation of it to the Lender or
to any creditor or other person, provided that such default has
resulted in, or may result in, with notice or lapse of time, or both,
the acceleration of any such indebtedness or obligation in favor of
such person, in excess of $25,000, or the right of such person to
realize upon the Collateral;
(e) If the Grantor or any Guarantor ceases paying its debts as they
mature, ceases or threatens to cease to carry on its business, makes
an assignment for the benefit of creditors, commits any act or does
any thing constituting or being an event of bankruptcy or insolvency
(as defined or provided for in any applicable statute),
18
fails to defend in good faith any action, suit or proceeding commenced
against it, fails to discharge or appeal forthwith any judgment for
the payment of money rendered against it, fails to pay any taxes,
rates or charges when due, in consequence of which any lien or other
Encumbrance, inchoate or otherwise, upon the Collateral arises or
could arise thereby, applies to any tribunal or similar body for the
appointment or authorization of any receiver, trustee, liquidator or
sequestrator or otherwise commences any proceedings relating to any
substantial portion of its property under any reorganization,
arrangement or readjustment of debt, dissolution, winding-up,
adjustment, composition or liquidation law or statute of any
jurisdiction including, without limitation, under the Companies'
Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act
(Canada) or the Winding-Up and Restructuring Act (Canada), whether now
or hereafter in effect (each of the foregoing herein referred to as a
"Proceeding");
(f) If there is commenced against the Grantor or any Guarantor any
Proceeding and an order approving the petition or dissolution,
liquidation or winding up is entered, or such Proceeding remains
undismissed for a period of 30 days, any receiver, trustee,
liquidator, sequestrator or similar official of or for the Grantor or
any Guarantor or any substantial portion of the property of the
Grantor or any Guarantor is appointed, the Grantor or any Guarantor by
any act indicates consent to or approval of or acquiescence in any
Proceeding or the appointment of any receiver, trustee, liquidator,
sequestrator or similar official of or for the Grantor or any
Guarantor or any substantial portion of the property of the Grantor or
any Guarantor or if any writ of seizure and sale, distress or similar
process is levied or enforced against a substantial portion of the
property and assets of the Grantor or any Guarantor or otherwise
remains undischarged or not defended or appealed forthwith; or
(g) If the Lender, in its absolute discretion acting reasonably, concludes
as the result of the occurrence of any material change in the
condition or affairs (financial or otherwise) of the Grantor or any
Guarantor, that the essential basis of the Liabilities or security
hereby constituted has been impaired or otherwise altered.
SECTION 6 - REMEDIES ON DEFAULT
If the security hereby constituted becomes enforceable, the Lender shall have,
in addition to any other rights, remedies and powers which it may have at law,
in equity or under the PPSA, the following rights, remedies and powers:
6.1. Power of Entry
The Grantor shall forthwith upon demand assemble and deliver to the Lender
possession of all of the Collateral at such place as may be specified by the
Lender. The Lender may take such steps as it considers necessary or desirable to
obtain possession of all or any part of the Collateral and, to that end, the
Grantor agrees that the Lender, its servants or agents or Receiver may, at any
time, during the day or night, enter upon lands and premises where the
Collateral may be found for the purpose of taking possession of and/or removing
the Collateral or any part thereof. In the
19
event of the Lender taking possession of the Collateral, or any part thereof,
the Lender shall have the right to maintain the same upon the premises on which
the Collateral may then be situate. The Lender may, in a reasonable manner, take
such action or do such things as to render any Equipment unusable.
6.2. Power of Sale
The Lender may sell, lease or otherwise dispose of all or any part of the
Collateral, as a whole or in separate parcels, by public auction, private tender
or by private contract, with or without notice, except as otherwise required by
applicable law, with or without advertising and without any other formality, all
of which are hereby waived by the Grantor. Such sale, lease or disposition shall
be on such terms and conditions as to credit and otherwise and as to upset or
reserve bid or price as to the Lender, in its sole discretion, may seem
advantageous. If such sale, transfer or disposition is made on credit or part
cash and part credit, the Lender need only credit against the Liabilities the
actual cash received at the time of the sale. Any payments made pursuant to any
credit granted at the time of the sale shall be credited against the Liabilities
as they are received. The Lender may buy in or rescind or vary any contract for
sale of all or any of the Collateral and may resell without being answerable for
any loss occasioned thereby. Any such sale, lease or disposition may take place
whether or not the Lender has taken possession of the Collateral. The Lender
may, before any such sale, lease or disposition, perform any commercially
reasonable repair, processing or preparation for disposition and the amount so
paid or expended shall be deemed advanced to the Grantor by the Lender, shall
become part of the Liabilities, shall bear interest at the highest rate per
annum charged by the Lender on the Liabilities or any part thereof and shall be
secured by this Security Agreement.
6.3. Validity of Sale
No person dealing with the Lender or its servants or agents shall be concerned
to inquire whether the security hereby constituted has become enforceable,
whether the powers that the Lender is purporting to exercise have become
exercisable, whether any money remains due on the security of the Collateral, as
to the necessity or expedience of the stipulations and conditions subject to
which any sale, lease or disposition shall be made, otherwise as to the
propriety or regularity of any sale or any other dealing by the Lender with the
Collateral or to see to the application of any money paid to the Lender. In the
absence of fraud on the part of such persons, such dealings shall be deemed, so
far as regards the safety and protection of such person, to be within the powers
hereby conferred and to be valid and effective accordingly.
6.4. Receiver-Manager
The Lender may, in addition to any other rights it may have, appoint by
instrument in writing a receiver or receiver and manager (both of which are
herein called a "Receiver") of all or any part of the Collateral or may
institute proceedings in any court of competent jurisdiction for the appointment
of such a Receiver. Any such Receiver is hereby given and shall have the same
powers and rights and exclusions and limitations of liability as the Lender has
under this Security Agreement, at law or in equity. In exercising any such
powers, any such Receiver shall, to the extent permitted by law, act as and for
all purposes shall be deemed to be the agent of the Grantor and the Lender shall
not be responsible for any act or default of any such Receiver. The
20
Lender may appoint one or more Receivers hereunder and may remove any such
Receiver or Receivers and appoint another or others in his or their stead from
time to time. Any Receiver so appointed may be an officer or employee of the
Lender. A court need not appoint, ratify the appointment by the Lender of or
otherwise supervise in any manner the actions of any Receiver. Upon the Grantor
receiving notice from the Lender of the taking of possession of the Collateral
or the appointment of a Receiver, all powers, functions, rights and privileges
of each of the directors and officers of the Grantor with respect to the
Collateral shall cease, unless specifically continued by the written consent of
the Lender.
6.5. Carrying on Business
The Lender may carry on, or concur in the carrying on of, all or any part of the
business or undertaking of the Grantor, may, to the exclusion of all others,
including the Grantor, enter upon, occupy and use all or any of the premises,
buildings, plant and undertaking of or occupied or used by the Grantor and may
use all or any of the tools, machinery, equipment and intangibles of the Grantor
for such time as the Lender sees fit, free of charge, to carry on the business
of the Grantor and, if applicable, to manufacture or complete the manufacture of
any Inventory and to pack and ship the finished product.
6.6. Dealing with Collateral
The Lender may seize, collect, realize, dispose of, enforce, release to third
parties or otherwise deal with the Collateral or any part thereof in such
manner, upon such terms and conditions and at such time or times as may seem to
it advisable, all of which without notice to the Grantor except as otherwise
required by any applicable law. The Lender may demand, xxx for and receive any
Accounts with or without notice to the Grantor, give such receipts, discharges
and extensions of time and make such compromises in respect of any Accounts
which may, in the Lender's absolute discretion, seem bad or doubtful. The Lender
may charge on its own behalf and pay to others, sums for costs and expenses
incurred including, without limitation, legal fees and expenses on a solicitor
and his own client scale and Receivers' and accounting fees, in or in connection
with seizing, collecting, realizing, disposing, enforcing or otherwise dealing
with the Collateral and in connection with the protection and enforcement of the
rights of the Lender hereunder including, without limitation, in connection with
advice with respect to any of the foregoing. The amount of such sums shall be
deemed advanced to the Grantor by the Lender, shall become part of the
Liabilities, shall bear interest at the highest rate per annum charged by the
Lender on the Liabilities or any part thereof and shall be secured by this
Security Agreement.
6.7. Retention of Collateral
Upon notice to the Grantor and subject to any obligation to dispose of any of
the Collateral, as provided in the PPSA, the Lender may elect to retain all or
any part of the Collateral in satisfaction of the Liabilities or any of them.
6.8. Pay Encumbrances
The Lender may pay any Encumbrance that may exist or be threatened against the
Collateral. In addition, the Lender may borrow money required for the
maintenance, preservation or protection of the Collateral or for the carrying on
of the business or undertaking of the Grantor and may
21
grant further security interests in the Collateral in priority to the security
interest created hereby as security for the money so borrowed. In every such
case the amounts so paid or borrowed together with costs, charges and expenses
incurred in connection therewith shall be deemed to have been advanced to the
Grantor by the Lender, shall become part of the Liabilities, shall bear interest
at the highest rate per annum charged by the Lender on the Liabilities or any
part thereof and shall be secured by this Security Agreement.
6.9. Application of Payments Against Liabilities
Any and all payments made in respect of the Liabilities from time to time and
moneys realized on the Collateral may be applied to such part or parts of the
Liabilities as the Lender may see fit. The Lender shall, at all times and from
time to time, have the right to change any appropriation as it may see fit. Any
insurance moneys received by the Lender pursuant to this Security Agreement may,
at the option of the Lender, be applied to rebuilding or repairing the
Collateral or be applied against the Liabilities in accordance with the
provisions of this Section.
6.10. Set-Off
The Liabilities will be paid by the Grantor without regard to any equities
between the Grantor and the Lender or any right of set-off or cross-claim. Any
indebtedness owing by the Lender to the Grantor may be set off and applied by
the Lender against the Liabilities at any time or from time to time either
before or after maturity, without demand upon or notice to anyone.
6.11. Deficiency
If the proceeds of the realization of the Collateral are insufficient to repay
the Lender all moneys due to it, the Grantor shall forthwith pay or cause to be
paid to the Lender such deficiency.
6.12. Lender Not Liable
The Lender shall not be liable or accountable for any failure to seize, collect,
realize, dispose of, enforce or otherwise deal with the Collateral, shall not be
bound to institute proceedings for any such purposes or for the purpose of
preserving any rights of the Lender, the Grantor or any other person, firm or
corporation in respect of the Collateral and shall not be liable or responsible
for any loss, cost or damage whatsoever which may arise in respect of any such
failure including, without limitation, resulting from the negligence of the
Lender or any of its officers, servants, agents, solicitors, attorneys,
Receivers or otherwise. Neither the Lender nor its officers, servants, agents or
Receivers shall be liable by reason of any entry into possession of the
Collateral or any part thereof, to account as a mortgagee in possession, for
anything except actual receipts, for any loss on realization, for any act or
omission for which a mortgagee in possession might be liable, for any negligence
in the carrying on or occupation of the business or undertaking of the Grantor
as provided in Section 6.5 or for any loss, cost, damage or expense whatsoever
which may arise in respect of any such actions, omissions or negligence.
6.13. Extensions of Time
The Lender may grant renewals, extensions of time and other indulgences, take
and give up securities, accept compositions, grant releases and discharges,
perfect or fail to perfect any
22
securities, release any part of the Collateral to third parties and otherwise
deal or fail to deal with the Grantor, debtors of the Grantor, Guarantors,
sureties and others and with the Collateral and other securities as the Lender
may see fit, all without prejudice to the liability of the Grantor to the Lender
or the Lenders rights and powers under this Security Agreement.
6.14. Rights in Addition
The rights and powers conferred by this Section 6 are in supplement of and in
addition to and not in substitution for any other rights or powers the Lender
may have from time to time under this Security Agreement or under applicable
law. The Lender may proceed by way of any action, suit, remedy or other
proceeding at law or in equity and no such remedy for the enforcement of the
rights of the Lender shall be exclusive of or dependent on any other such
remedy. Any one or more of such remedies may from time to time be exercised
separately or in combination.
SECTION 7 - DEALING WITH COLLATERAL BY THE GRANTOR
7.1. Sale of Inventory
Prior to the occurrence of a Default, the Grantor may, in the ordinary course of
its business and on customary trade terms, lease or sell items of inventory, so
that the purchaser thereof takes title clear of the security interest hereby
created. If such sale or lease results in an Account, such Account shall be
subject to the security interest hereby created.
SECTION 8 - GENERAL
8.1. Security in Addition
The security hereby constituted is not in substitution for any other security
for the Liabilities or for any other agreement between the parties creating a
security interest in all or part of the Collateral, whether heretofore or
hereafter made, and such security and such agreements shall be deemed to be
continued and not affected hereby unless expressly provided to the contrary in
writing and signed by the Lender and the Grantor. The taking of any action or
proceedings or refraining from so doing, or any other dealing with any other
security for the Liabilities or any part thereof, shall not release or affect
the security interest created by this Security Agreement and the taking of the
security interest hereby created or any proceedings hereunder for the
realization of the security interest hereby created shall not release or affect
any other security held by the Lender for the repayment of or performance of the
Liabilities.
8.2. Waiver
Any waiver of a breach by the Grantor of any of the terms or provisions of this
Security Agreement or of a Default under Section 5.1 must be in writing to be
effective against and bind the Lender. No such waiver by the Lender shall extend
to or be taken in any manner to affect any subsequent breach or Default or the
rights of the Lender arising therefrom.
23
8.3. Further Assurances
The Grantor shall at all times do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged or delivered all and singular every such further
acts, deeds, conveyances, instruments, transfers, assignments, security
agreements and assurances as the Lender may reasonably require in order to give
effect to the provisions and purposes of this Security Agreement including,
without limitation, in respect of the Lender's enforcement of the security and
its realization on the Collateral, and for the better granting, transferring,
assigning, charging, setting over, assuring, confirming and/or perfecting the
security interest of the Lender in the Collateral pursuant to this Security
Agreement. The Grantor hereby constitutes and appoints the Manager or acting
Manager of the Lender at its above address, or any Receiver appointed by the
Court or the Lender as provided herein, the true and lawful attorney of the
Grantor irrevocably with full power of substitution to do, make and execute all
such assignments, documents, acts, matters or things with the right to use the
name of the Grantor whenever and wherever it may be deemed necessary or
expedient. The Grantor hereby authorizes the Lender to file such proofs of claim
and other documents as may be necessary or advisable in order to prove its claim
in any bankruptcy, proposed winding-up or other proceeding relating to the
Grantor.
Without limiting the generality of the foregoing, the Grantor:
(a) shall xxxx conspicuously each chattel paper evidencing or relating to
an Account and each related contract and, at the request of the
Lender, each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Lender, indicating
that such chattel paper, related contract or Collateral is subject to
the security interests granted hereby;
(b) shall, if any Accounts shall be evidenced by a promissory note or
other instrument or chattel paper, deliver and pledge to the Lender
hereunder such note, instrument or chattel paper duly endorsed and
accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Lender;
(c) shall execute such other instruments or notices, as may be necessary
or desirable, or as the Lender may request, in order to perfect and
preserve the security interests granted or purported to be granted
hereby;
(d) hereby authorizes the Lender to file one or more financing or renewal
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of the Grantor, where permitted by
law; and
(e) shall furnish to the Lender from time to time statements and schedules
further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Lender may request,
all in reasonable detail.
8.4. No Merger
Neither the taking of any judgment nor the exercise of any power of seizure or
sale shall operate to extinguish the liability of the Grantor to make payment of
or satisfy the Liabilities. The acceptance of any payment or alternate security
shall not constitute or create any novation and
24
the taking of a judgment or judgments under any of the covenants herein
contained shall not operate as a merger of such covenants.
8.5. Notices
Subject to Section 8.7 hereof, any notice required to be given to the Grantor or
the Lender may be delivered to such party or a responsible officer thereof or
may be sent by prepaid registered mail addressed to the appropriate party at the
address above shown, or such further or other address as such party may notify
to the other in writing from time to time, and if so given the notice shall be
deemed to have been given on the day of delivery or the day when it is deemed or
otherwise considered to have been received for the purposes of the PPSA, as the
case may be.
8.6. Continuing Security Interest and Discharge
This Security Agreement shall create a continuing security interest in the
Collateral and shall remain in full force and effect until payment and
performance in full of the Liabilities, notwithstanding any dealing between the
Lender and the Grantor or any Guarantor in respect of the Liabilities or any
release, exchange, non-perfection, amendment, waiver, consent or departure from
or in respect of any or all of the terms or provision of any security held for
the Liabilities.
If the Grantor pays to the Lender and fully discharges the Liabilities secured
by this Security Agreement and otherwise observes and performs the terms and
conditions hereof, then the Lender shall at the request and at the expense of
the Grantor release and discharge the security interest created hereby and
execute and deliver to the Grantor such deeds and other instruments as shall be
requisite therefor.
8.7. Governing Law and Waiver
The provisions of this Security Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Alberta and the federal laws of
Canada applicable therein, without reference to applicable conflict of law
principles. Grantor consents to the non-exclusive jurisdiction of the courts of
the Province of Alberta in connection with the resolution of any disputes
relating to this Security Agreement or any other Agreement or document executed
or delivered hereunder. Grantor irrevocably waives any objection, including any
objection to the laying of venue based on the grounds of forum non conveniens,
which it may now or hereafter have to the bringing of any action or proceeding
with respect to this Agreement.
Grantor hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to the Grantor and service so made shall be deemed
to be completed five (5) days after the same shall have been mailed. Nothing
contained herein shall affect the right of lender to serve legal process by any
other manner permitted by law.
The parties hereto hereby waive trial by jury (if applicable) in any action,
proceeding, claim or counterclaim, whether in contract or tort, at law or in
equity with respect to, in connection with, or arising out of this Security
Agreement, other financing agreements, the obligations of Grantor and Grantor,
the collateral, or any instrument, document or guarantee delivered pursuant
hereto
25
or to any of the foregoing, or the validity, protection, interpretation,
administration, collection or enforcement hereof or thereof, or any other claim
or dispute hereunder or thereunder. Grantor agrees that it will not assert
against lender any claim for consequential, incidental, special, or punitive
damages in connection with this Security Agreement or the transactions
contemplated hereby or thereby. No officer of lender has authority to waive,
condition, or modify this provision.
8.8. Security Interest Effective Immediately
Neither the execution nor registration of this Security Agreement nor any
partial advances by the Lender shall bind the Lender to advance any other
amounts to the Grantor. The parties intend the security interest created hereby
to attach and take effect forthwith upon execution of this Security Agreement by
the Grantor and the Grantor acknowledges that value has been given and that the
Grantor has rights in the Collateral.
8.9. No Collateral Warranties
There is no representation, warranty or collateral agreement affecting this
Security Agreement or the Collateral, other than as expressed herein in writing.
8.10. Joint and Several Liability
If more than one person executes this Security Agreement as Grantor, their
obligations under this Security Agreement shall be joint and several.
8.11. Provisions Reasonable
The Grantor expressly acknowledges and agrees that the provisions of this
Security Agreement and, in particular, those respecting remedies and powers of
the Lender against the Grantor, its business and the Collateral upon default,
are commercially reasonable and not manifestly unreasonable.
8.12. Number and Gender
In this Security Agreement, words importing the singular number include the
plural and vice-versa and words importing gender include all genders.
8.13. Invalidity
In the event that any term or provision of this Security Agreement shall, to any
extent, be invalid or unenforceable, the remaining terms and provisions of this
Security Agreement shall be unaffected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
8.14. Indemnity and Expenses
(a) The Grantor agrees to indemnify and save harmless the Lender from and
against any and all claims, losses and liabilities rising out of or
resulting out of or resulting from this Security Agreement (including,
without limitation,
26
enforcement of this Security Agreement), except claims, losses or
liabilities resulting from the Lender's gross negligence or willful
misconduct.
(b) The Grantor will upon demand pay to the Lender the amount of any and
all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the
Lender may incur in connection with (i) the administration of this
Security Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights
or remedies of the Lender hereunder or (iv) the failure by the Grantor
to perform or observe any of the provisions hereunder.
8.15. Judgment Currency
If for the purpose of obtaining judgment in any court or for the purpose of
determining, pursuant to the obligations of the undersigned, the amounts owing
hereunder, it is necessary to convert an amount due hereunder in the currency in
which it is due (the "Original Currency") into another currency (the "Second
Currency"), the rate of exchange applied shall be that at which, in accordance
with normal banking procedures, the Lender could purchase, in The New York
Foreign Exchange Market, the Original Currency with the Second Currency on the
date two (2) Business Days preceding that on which judgment is given or any
other payment is due hereunder. The undersigned and each of them agrees that its
obligation in respect of any Original Currency due from it to the Lender
hereunder shall, notwithstanding any judgment or payment in such other currency,
be discharged only to the extent that, on the Business Day following the date
the Lender receives payment of any sum so adjudged or owing to be due hereunder
in the Second Currency the Lender may, in accordance with normal banking
procedures, purchase, in The New York Foreign Exchange Market the Original
Currency with the amount of the Second Currency so paid; and if the amount of
the Original Currency so purchased or could have been so purchased is less than
the amount originally due in the Original Currency, the undersigned and each of
them agrees as a separate obligation and notwithstanding any such payment or
judgment to indemnify the Lender against such loss. The term "rate of exchange"
in this Section 8.15 means the spot rate at which the Lender, in accordance with
normal practices is able on the relevant date to purchase the Original Currency
with the Second Currency and includes any premium and costs of exchange payable
in connection with such purchase.
8.16. Sections and Headings
The division of this Security Agreement into sections and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation hereof.
8.17. Receipt of Copy
The Grantor acknowledges receipt of an executed copy of this Security Agreement.
27
8.18. Binding Effect
All rights of the Lender hereunder shall enure to the benefit of its successors
and assigns and all obligations of the Grantor hereunder shall bind the Grantor
and its successors and permitted assigns.
IN WITNESS WHEREOF the Grantor has duly executed this Security Agreement
under seal this ____ day of May, 2004.
XXXXXXX XXXXX INTERNATIONAL
INSURANCE BROKERS LTD.
By: /s/ Xxxx Xxxxxxxx
--------------------------------
Name:
Title:
28
Schedule "A"
------------
LOCATIONS
---------
355, 00000 Xxxxxxxxx Xxxx, XX, Xxxxxxx, Xxxxxxx, X0X 0X0
Suite *, 000 Xxxxxxxx Xxxxxx, XX, Xxxxxxx, Xxxxxxx, X0X 0X0
29
Schedule "B"
------------
ENCUMBRANCES
------------
1. Security Agreement registered on June 8, 2000 as registration number
00060815214 in favour of National Leasing Group Inc., expiring on June 8,
2004, with respect to all projectors of every nature or kind described in
Lease #2082693 dated June 6, 2000 between the secured party, as lessor and
the debtor as lessee, as amended from time to time, together with all
attachments, accessories and substitutions.
2. Security Agreement registered on April 4, 2001 as registration number
01040416842 in favour of Ikon Office Solutions, Inc., expiring on April 4,
2005, with respect to a Canon 9000 fax, s/n UFK9741.
3. Security Agreement registered on Nov. 7, 2002 as registration number
02110708837 in favour of Ikon Office Solutions, Inc., expiring on Nov. 7,
2005, with respect to a Canon Laser fax, s/n UFK02422
4. Security Agreement registered on Jan. 25, 2000 as registration number
00012517785 in favour of Newcourt Financial Ltd., expiring on Jan. 25,
2007, with respect to a Minolta EP 6000 Copier System together with all
attachments, accessories, accessions, replacements, substitutions,
additions and improvements. Proceeds: all present and after acquired
personal property.
5. Security Agreement registered on May 10, 2002 as registration number
02051021638 in favour of Citicorp Vendor Finance, Ltd., expiring on May 10,
2005, with respect to a Norstar Solution 19 Telephone System with
attachments, accessories and proceeds thereof.
6. [Security Agreement registered on October 30, 2003 as registration number
03103027748 in favour of Paragon Capital Corporation Ltd. The debtor
pledges, hypothecates, assigns, mortgages, charges, transfers and grants a
security interest in, to and in favour of the secured party the securities
described in schedule "A" of the securities pledge agreement given by the
debtor to the secured party, and all proceeds of any nature, kind or
description whatsoever therefrom.] [TO BE DISCHARGED? Please provide copy
of pledge and Schedule "A"]
7. [Security Agreement registered on October 30, 2003 as registration number
03103028167 in favour of Paragon Capital Corporation Ltd. with respect to
all of the debtor's present and after acquired property, and without
limiting the generality of the foregoing, all proceeds of any nature, kind
or description whatsoever therefrom.] [TO BE DISCHARGED?]
8. Security Agreement registered on March 12, 2004 as registration number
04031220934 in favour of Oak Street Funding LLC with respect to all of the
debtor's present and after-acquired personal property. Proceeds: goods and
accessions thereto, chattel paper, securities, documents of title,
instruments, money, intangibles and accounts and insurance proceeds.
9. Security Agreement registered on March 12, 2004 as registration number
04031220975 in favour of Oak Street Funding LLC with respect to the
securities described in schedule "A" of the securities pledge agreement
granted by the debtor to the secured party. Proceeds: goods and accessions
thereto, chattel paper, securities, documents of title, instruments, money,
intangibles and accounts and insurance proceeds.
30
10. Security Agreement registered on Jan. 22, 2004 as registration number
04012242386 in favour of Ikon Office Solutions, Inc., expiring on Jan. 22,
2007, with respect to a Canon Laser fax, s/n UZS21477.
31
Schedule "C"
------------
LITIGATION
----------
32
Schedule "D"
------------
INDEBTEDNESS
------------
33
Schedule "E"
------------
SUBSIDIARIES
------------
1. Addison York Insurance Brokers Ltd
2. Heritage Hill Insurance Ltd.
