GENERAL SECURITY AGREEMENT
In consideration of Laurentian Bank of Canada, a Canadian Chartered Bank and
having a branch at 000 Xxxxx Xxxx Xxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxx X0X 0X0,
(the "Secured Party") heretofore or hereafter (1) extending or agreeing to
extend any credit or other financial accommodation to or relying on any
guaranty, endorsement or other assurance of payment of Derma Sciences, Inc., a
corporation organized under the law of the State of Pennsylvania and having its
chief executive office at 000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000
(the "Debtor") or (2) agreeing to any direct or indirect extension, renewal,
refinancing or other modification or replacement of or waiving or forbearing
from exercising any right or remedy relating to any obligation heretofore or
hereafter arising or accruing as a result of any such credit or other financial
accommodation, and for other valuable consideration, the receipt of which is
acknowledged, the Debtor agrees with the Secured Party as follows:
1. DEFINITIONS
In this Agreement:
(a) Collateral: The "Collateral" means collectively, wherever located,
whether now owned or hereafter acquired or now existing or hereafter
arising or accruing and whether or not subject to Article 9 of the
Uniform Commercial Code or described in any schedule heretofore or
hereafter delivered to the Secured Party by the Debtor, all right,
title and interest of the Debtor in and to (i) Accounts, (including,
but not limited to, Health-Care-Insurance Receivables), Chattel Paper,
Deposit Accounts, Documents, General Intangibles (including, but not
limited to, Intellectual Property, Payment Intangibles, software,
licenses and franchises), Goods (including, but not limited to,
Equipment, Farm Products, Fixtures and Inventory), Instruments
(including, but not limited to, Promissory Notes), Investment
Property, Letter-of-Credit Rights, letters of credit, money and other
personal property (including, but not limited to, agreements,
instruments and other Records not constituting Chattel Paper or a
Document, General Intangible or Instrument) and (ii) to the extent not
referred to in clause (i) of this sentence, (A) Supporting Obligations
and Incidental Property Rights incident to, arising or accruing
pursuant to or otherwise relating to any of the things referred to in
clause (i) of this sentence, whether arising or accruing from any
action taken by the Debtor or the Secured Party or otherwise, (B)
Proceeds, other proceeds and Products of any of the things referred to
in clauses (i) and (ii)(A) of this sentence and (C) Records relating
to any of the things referred to in clauses (i) and (ii)(A) and (B) of
this sentence.
(b) Control Agreement: "Control Agreement" means an agreement, instrument
or other Record heretofore or hereafter entered into among the Debtor,
the Secured Party and a Bank, Securities Intermediary or Commodity
Intermediary for the purpose of perfecting a security interest of the
Secured Party in any Deposit Account, electronic Chattel Paper,
Investment Property or Letter-of-Credit Right included in the
Collateral.
(c) Event of Default: An "Event of Default" occurs or exists if (i) the
Debtor or any Other Obligor defaults in the payment when due, whether
by acceleration or otherwise, of any of the Obligations or the
performance when due of any other obligation (including, but not
limited to, any obligation to pay any money), whether now existing or
hereafter arising or accruing and whether arising or accruing pursuant
to this Agreement or any Control Agreement or otherwise, to the
Secured Party, subject to any applicable notice and cure periods, the
maturity of any of the Obligations is accelerated or there occurs or
exists any event or condition that, whether immediately or after
notice, lapse of time or both notice and lapse of time and whether or
not waived by any Person other than the Secured Party, would
constitute a default with respect to or permit the acceleration of the
maturity of any of the Obligations, (ii) the Debtor or any Other
Obligor is dissolved, ceases to exist, participates or agrees to
participate in any merger, consolidation or other absorption, assigns
or otherwise transfers all or substantially all of his, her or its
assets, in which it is not the surviving entity, dies, becomes
incompetent or insolvent (however evidenced), generally fails to pay
his, her or its debts as they become due, suspends or ceases his, her
or its present business or has entered, served, filed or recorded
against him, her or it or any of his, her or its assets any judgment
or order of any court, agency or other governmental body resulting in
a lien other than a Permitted Lien as to a material amount of the
collateral which is prior to or parri passu to the lien created by
this Agreement, (iii) the Debtor or any Other Obligor has any
receiver, trustee, custodian or similar Person for him, her or it or
any of his, her or its assets appointed (whether with or without his,
her or its consent) unless the same is contested and is dismissed,
vacated, stayed or the like within a period of 45 days thereof, makes
any assignment for the benefit of creditors or commences or has
commenced against him, her or it any case or other proceeding pursuant
to any bankruptcy, insolvency or similar statute unless the same is
contested and is dismissed, vacated, stayed or the like within a
period of 45 days thereof or any formal or informal proceeding for the
dissolution, liquidation or winding up of his, her or its affairs
unless the same is contested and is dismissed, vacated, stayed or the
like within a period of 45 days thereof, (iv) any representation or
warranty made in this Agreement or any Control Agreement or any other
representation or warranty heretofore or hereafter made, or any
financial statement heretofore or hereafter provided, to the Secured
Party by or on behalf of the Debtor or any Other Obligor proves, as of
the date thereof, to have been incorrect or misleading in any material
respect or before the execution and delivery to the Secured Party by
the Debtor of this Agreement there occurred and was not disclosed to
the Secured Party any material adverse change in any information
disclosed in any such representation or warranty heretofore so made or
any financial statement heretofore so provided, (v) there occurs any
loss, theft or destruction of or damage to any substantial portion of
the Collateral not covered by insurance or any substantial decrease in
the value of the Collateral or (vi) the Secured Party acting
reasonably deems itself insecure with respect to the Obligations or is
of the opinion that the Collateral is or may not be sufficient or has
decreased or may decrease in value, whether or not the Secured Party
has sought any Other Collateral from the Debtor or any Other Obligor.
(d) Intellectual Property: "Intellectual Property" means, regardless of
wherever in the world existing, used, issued or pending, (i) any
patent, (ii) any copyright, copyright registration or tangible
personal property embodying any copyright, (iii) any trademark,
service xxxx or trade dress (including, but not limited to, any trade,
company, fictitious or other business or other name, logo or other
source or business identifier), whether registered in any public
office or not so registered, (iv) any trade secret (including, but not
limited to, any know-how, technology, procedure, product formulation
or other product or manufacturing specification or standard) or other
proprietary information, (v) any unpatented invention, whether or not
patentable, (vi) any industrial design or industrial design
application or (vii) any application for, reissue, renewal or
extension of, goodwill symbolized by, incident to, associated with or
otherwise relating to or Incidental Property Right, Record or license
relating to any of the things referred to in clauses (i) through (vi)
of this sentence.
(e) Incidental Property Right: "Incidental Property Right" means, whether
arising or accruing pursuant to applicable law or any agreement,
instrument or other Record or otherwise, (i) any direct or indirect
addition to, extension, renewal, refinancing or other modification or
replacement of, increase in or earnings, profit, interest, dividend or
distribution of cash or other property or other income or payment on
account of any property, (ii) any direct or indirect Proceeds or other
proceeds of any replacement, release, surrender, discharge, exchange,
conversion, redemption, assignment or other transfer, collection or
sale, lease or other disposition of any property, whether voluntary or
involuntary or arising or accruing pursuant to any dissolution,
liquidation or merger, consolidation or other absorption or otherwise,
or (iii) any direct or indirect right, privilege, power or claim
relating to any property (including, but not limited to, any right to
any of the things referred to in clauses (i) and (ii) of this
sentence, any option or warrant, any right of subscription,
registration, conversion or redemption, any management right or any
right to vote or give any consent, ratification or other approval or
authorization (including, but not limited to, any right to vote or
give any consent, ratification or other approval or authorization for
any replacement of any of the directors, officers and managers of,
amendment of any certificate or articles of incorporation or
organization, by-laws, operating or partnership agreement or other
charter, organizational or other governing document of, dissolution,
liquidation or merger, consolidation or other absorption of or sale,
lease or other disposition of all or substantially all of the assets
of any Issuer of any Investment Property)).
(f) Obligations: The "Obligations" means collectively all obligations to
the Secured Party in any capacity for (i) the payment of any money,
however evidenced, regardless of kind, class or form, whether for the
payment of any principal, interest, fee, charge, cost or expense or
otherwise, incurred for any business, commercial or agricultural
purpose or otherwise, now existing or hereafter arising or accruing,
created directly or by any assignment or other transfer, direct or
indirect, absolute or contingent (whether pursuant to any guaranty,
endorsement or other assurance of payment or otherwise), similar or
dissimilar or related or unrelated and whether or not arising or
accrued subsequent to any commencement of or made, proved, voted or
allowed as a claim in any case or other proceeding pursuant to any
bankruptcy, insolvency or similar statute, or (ii)the performance of
any obligation other than an obligation to pay any money that have
been heretofore or are hereafter incurred by, in any capacity and
whether alone or otherwise, the Debtor or, if the Debtor is not an
individual, any direct or indirect successor of the Debtor or any
direct or indirect assignee or other transferee of all or
substantially all of the assets of the Debtor (including, but not
limited to, all obligations of the Debtor to the Secured Party
pursuant to Section 8 of this Agreement).
(g) Other Collateral: "Other Collateral" means, other than the Collateral,
(i) any collateral, subordination, guaranty, endorsement or other
security or assurance of payment, whether now existing or hereafter
arising or accruing, that now or hereafter secures the payment of or
is otherwise applicable to any of the Obligations or (ii) any
obligation of the Secured Party, whether pursuant to any Deposit
Account or Instrument or otherwise, that is now or hereafter available
for setoff against any of the Obligations.
(h) Other Obligor: "Other Obligor" means, other than the Debtor, any
Person who or that is now or hereafter liable, whether directly or
indirectly or absolutely or contingently, for the payment of any of
the Obligations.
(i) Permitted Lien: "Permitted Lien" means whether now existing or
hereafter arising or accruing, (i) any security interest in or other
lien on any of the Collateral in favour of the Secured Party or (ii)
any security interest in or other lien on any of the Collateral fully
and accurately described under the heading "Permitted Liens" in
Exhibit "A" A attached to and made a part of this Agreement.
(j) Person: "Person" means (i) any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated
association, government, political subdivision or other taxing
authority, (ii) any court, agency or other governmental body or (iii)
any other entity, body, organization or group.
(k) Security Interest: "Security Interest" means any security interest or
other lien granted or otherwise created pursuant to the first sentence
of Section 2 of this Agreement.
(l) Uniform Commercial Code: "Uniform Commercial Code" means at any time
the Uniform Commercial Code of the State of Pennsylvania as in effect
at such time.
(m) Other Terms: Each of the following terms has at any time (i) if
defined for purposes of Article 9 of the Uniform Commercial Code at
such time, the meaning given it at such time for such purposes or (ii)
if not so defined at such time, the meaning given it at such time for
purposes of the "Uniform Commercial Code, Article 9, 1999 Official
Text" approved by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws as it may be
amended, updated or replaced from time to time: (i) Accession, (ii)
Account, (iii) Account Debtor, (iv) Bank, (v) Certificated Security,
(vi) Chattel Paper, (vii) Commodity Account, (viii) Commodity
Intermediary, (ix) Deposit Account, (x) Document, (xi) Equipment,
(xii) Farm Product, (xiii) Financing Statement, (xiv) Fixture, (xv)
General Intangible, (xvi) Goods, (xvii) Health-Care-Insurance
Receivable, (xviii) Instrument, (xix) Inventory, (xx) Investment
Property, (xxi) Issuer, (xxii) Letter-of-Credit Right, (xxiii) Payment
Intangible, (xxiv) Proceeds, (xxv) Products, (xxvi) Promissory Note,
(xxvii) Record, (xxviii) Registered Organization, (xxix) Security,
(xxx) Securities Account, (xxxi) Securities Intermediary, (xxxii)
Software, (xxxiii) Supporting Obligation and (xxxiv) Tangible Chattel
Paper.
2. GRANT OF SECURITY INTEREST
To secure the payment of the Obligations, the Debtor grants to the Secured
Party a security interest in and assigns, pledges and hypothecates to the
Secured Party the Collateral other than any of the Collateral that would be
rendered void or voidable under applicable law by such grant without the consent
of a Person other than the Debtor that has not been or is not obtained. Each
Security Interest is a continuing, absolute and unconditional security interest
or other lien.
3. REINSTATEMENT OF OBLIGATIONS
Each portion of the Obligations heretofore or hereafter paid or satisfied
by any of the Collateral, or any money or Other Collateral, heretofore or
hereafter received, applied or retained by the Secured Party and later recovered
from the Secured Party as a result of any claim (including, but not limited to,
any claim involving any allegation that any money constituted trust funds or
that the receipt, application or retention of any of the Collateral or any money
or Other Collateral or the grant, perfection or other creation or protection of
any security interest in or other lien on any of the Collateral or any Other
Collateral constituted a preference or fraudulent conveyance or transfer),
however asserted and whether now existing or hereafter arising or accruing,
shall be reinstated as part of the Obligations for purposes of this Agreement as
of the date it originally arose or accrued.
4. COVENANTS
(a) Affirmative Covenants: The Debtor shall (i) maintain complete and
accurate Records relating to the Collateral, (ii) before the end of
any applicable grace period, pay each tax, assessment, fee and charge
imposed by any government, political subdivision or other taxing
authority upon any of the Collateral, any manufacture, purchase or
other acquisition, ownership, possession, control, use, operation or
sale, lease or other disposition of any of the Collateral, this
Agreement or any agreement, instrument or other Record evidencing any
of the Collateral or any of the Obligations except to the extent being
contested in good faith, (iii) obtain and maintain in full force and
effect each material authorization, certification, certificate,
approval, permit, consent, franchise and license necessary for any
manufacture, purchase or other acquisition, ownership, possession,
control, use, operation or sale, lease or other disposition of any of
the Collateral, (iv) defend the Collateral against any material
demand, claim, counterclaim, setoff and defence asserted by any Person
(including, but not limited to, any Account Debtor, Issuer, Bank,
Securities Intermediary or Commodity Intermediary) other than the
Secured Party and except as to Permitted Liens, (v) keep all Goods
included in the Collateral insured against each risk to which any of
such Goods may be subject (including, but not limited to, fire, theft
and risks covered by extended coverage) and maintain insurance against
liability on account of any damage to any Person or property arising
out of any manufacture, purchase or other acquisition, ownership,
possession, control, use, operation or sale, lease or other
disposition of any of such Goods, with all insurance maintained
pursuant to this clause (v) to be issued in such amounts, for such
periods, on such terms, with such special endorsements (including, but
not limited to, an endorsement naming the Secured Party as a
mortgagee, lender loss payee or additional insured) and by such
companies as are reasonable and customary in the Debtor's business and
reasonably satisfactory to the Secured Party, and upon its request
deliver to the Secured Party a copy of each policy providing any such
insurance, (vi) cause all Goods included in the Collateral to be
properly titled and registered to the extent required by applicable
law, cause the interest of the Secured Party to be properly indicated
on any certificate of title relating to any of such Goods and deliver
to the Secured Party each such certificate upon its request, (vii)
maintain all Goods included in the Collateral in good condition to the
extent commercially reasonable except for ordinary wear and tear,
(viii) cultivate, store, preserve and care for all Farm Products and
Inventory included in the Collateral in accordance with commonly
accepted methods, (ix) prosecute each application constituting
Intellectual Property included in the Collateral to the extent
commercially reasonable and not abandon such application before
exhausting all reasonable administrative and judicial remedies, (x)
take each action (including, but not limited to, the filing of any
required application for reissue, renewal or extension and the payment
of any required fee) required to maintain in full force and effect
each material registration of or preserve in full force and effect
each material right of the Debtor in any Intellectual Property
included in the Collateral, (xi) use each item of Intellectual
Property included in the Collateral with appropriate notice of
registration or application for registration, (xii) maintain the
quality of products and services offered under any Intellectual
Property included in the Collateral, (xiii) upon its request provide
to the Secured Party a complete and accurate copy of each statement,
confirmation, notice, proxy statement, proxy and other communication
relating to any Deposit Account or Investment Property included in the
Collateral and received by the Debtor from any Person (including, but
not limited to, any Account Debtor, Issuer, Bank, Securities
Intermediary or Commodity Intermediary) obligated with respect to such
Deposit Account or Investment Property, (xiv) take each action
(including, but not limited to, increasing the value of the Collateral
and reducing the amount of the Obligations) necessary to maintain any
value of any of the Collateral or ratio of the value of any of the
Collateral to the amount of any of the Obligations required by
applicable law or any contract between the Secured Party and the
Debtor or any Other Obligor, (xv) promptly notify the Secured Party if
any of the Collateral arises out of any contract with any government,
political subdivision or other taxing authority, (xvi) promptly notify
the Secured Party if any of the Collateral arises out of any contract
that gives rise to any requirement under applicable law that the
Debtor receive, hold or apply any money advanced by the Secured Party
with respect to any of the Collateral as a trust fund and receive,
hold and apply such money in accordance with such requirement, (xvii)
promptly notify the Secured Party of (A) any Goods included in the
Collateral being affixed to or installed in or on any real property or
any Goods not included in the Collateral, (B) any loss, destruction or
theft of or damage to any material portion of the Collateral, (C) any
threat or commencement of any action or other legal proceeding, any
entry of any judgment or order of any court, agency or other
governmental body, or any assertion by any Person (including, but not
limited to, any Account Debtor, Issuer, Bank, Securities Intermediary
or Commodity Intermediary) other than the Secured Party of any demand,
claim, counterclaim, setoff or defence, relating to any of the
Collateral, (D) any material infringement or other violation of any
material right of the Debtor in any Intellectual Property included in
the Collateral known to the Debtor, (E) any occurrence and continuance
of any Event of Default, any event or condition that, after notice,
lapse of time or both notice and lapse of time, would constitute any
Event of Default or any event or condition that has or will or is
reasonably likely to have any material adverse effect on (I) any
material portion of the Collateral, (II) the Debtor, (III) any Other
Obligor or (IV) the business, operations, assets, affairs or condition
(financial or other) of the Debtor or any Other Obligor, (F) any
change in (I) the location of the residence or chief executive office
of the Debtor, (II) the name, identity or structure of the Debtor or
(III) any company, trade, fictitious or other business or other name
under which the Debtor conducts his, her or its business, operations
or affairs, (G) any change in the location of any of the Collateral
not in the possession or control of or en route to or from the Secured
Party other than in the ordinary course of business or of mobile
Equipment or the addition of any new such location, (H) any change in
the primary location at which any mobile Equipment included in the
Collateral is kept or the addition of any new such location, (I) any
removal of any mobile Equipment included in the Collateral for more
than thirty days at a time from the primary location at which such
mobile Equipment is kept and (J) any claim by any Person that the use
of any Intellectual Property by the Debtor infringes or otherwise
violates any right of such Person in such Intellectual Property or
that any registration of such Intellectual Property is other than in
full force and effect and (xix) to the extent that any portion of the
Collateral would be rendered void or voidable by the grant to the
Secured Party of a security interest in or assignment, pledge or
hypothecation to the Secured Party without the consent of a Person
other than the Debtor that has not been or is not obtained, the Debtor
shall hold such portion of the Collateral in trust for the Secured
Party and take each action (including, but not limited to, assigning
or selling or otherwise disposing of such portion of the Collateral)
reasonably requested by the Secured Party to assure that such portion
of the Collateral inures and is realized upon for the benefit of the
Secured Party.
(b) Negative Covenants: Without the prior written consent of the Secured
Party not to be unreasonably withheld, the Debtor shall not (i) grant
or otherwise create, permit to exist or agree or otherwise incur any
obligation to grant or otherwise create or permit to exist any
security interest in or other lien on any of the Collateral other than
Permitted Liens, (ii) execute or permit to be filed or remain on file
in any public office any Financing Statement, execute any application
for any certificate of title or notice of lien, or permit to exist any
certificate of title, relating to any of the Collateral and naming any
Person other than the Secured Party as a secured party, except for any
Financing Statement, certificate of title or notice of lien heretofore
consented to by the Secured Party in writing or relating solely to any
Permitted Lien, (iii) sell, lease or otherwise dispose of any of the
Collateral or any interest or right in any of the Collateral, except
for, until any occurrence and continuance of any Event of Default and
provided that no Event of Default occurs thereby or exists immediately
thereafter, in the ordinary course of the business of the Debtor, (A)
any sale, lease or other disposition of any Inventory, Goods, Farm
Product or worn-out or obsolete Equipment included in the Collateral,
(B) any sale, lease or other disposition by the Debtor of any
Equipment included in the Collateral in connection with the
acquisition by the Debtor of Equipment of equal or greater value that
is not subject to any security interest or other lien other than
Permitted Liens, (C)any license of any Intellectual Property included
in the Collateral provided that such license does not materially
interfere with the conduct of the business of the Debtor or (D) any
use of any money of the Debtor, funds in any Deposit Account of the
Debtor or funds represented by any certificate of deposit of the
Debtor in partial or complete satisfaction of any obligation of the
Debtor incurred in the ordinary course of the business of the Debtor
or pursuant to contracts or agreements to which Debtor is a party at
the date hereof, (iv) manufacture, use, operate, permit the use or
operation of or sell, lease or otherwise dispose of any of the
Collateral in any manner that would or is reasonably likely to
materially violate or result in any material violation of applicable
law (including, but not limited to, any environmental or criminal
statute) or any policy providing any insurance on any of the
Collateral, (v) change or permit any change in the location of any of
the Collateral not in the possession or control of or en route to or
from the Secured Party other than mobile Equipment except in the
ordinary course of business, (vi) remove or permit any removal of any
mobile Equipment included in the Collateral for more than thirty days
at a time from the primary location at which such mobile Equipment is
kept, (vii) cause or permit any Goods included in the Collateral to
become an Accession to any Goods not included in the Collateral,
(viii) cause or permit any Goods included in the Collateral to be
subject to any negotiable Document, (ix) use any Intellectual Property
included in the Collateral for any use for which registration or
application for registration of such Intellectual Property has not
been made, (x) abandon, permit the abandonment by any licensee of or
take, fail to take or permit any licensee to take or fail to take any
action (including, but not limited to, sufficient use) that would or
is reasonably likely to result in the invalidation or abandonment of
any material Intellectual Property included in the Collateral, (xi)
modify, terminate or attempt or agree or otherwise incur any
obligation to modify or terminate any Control Agreement or any
contract with a Securities Intermediary or Commodity Intermediary
under which any Securities Account or Commodity Account included in
the Collateral is established or maintained, (xii) enter into any
agreement, instrument or other Record with a Bank, Securities
Intermediary or Commodity Intermediary for the purpose of perfecting a
security interest of a Person other than the Secured Party or
Permitted Lien holder in any Deposit Account or Investment Property
included in the Collateral, (xiii) withdraw any money or other
property from any Securities Account or Commodity Account included in
the Collateral except for use in the ordinary course of the business
of the Debtor or pursuant to contracts or agreements to which Debtor
is a party at the date hereof, (xiv) exercise any Incidental Property
Right included in the Collateral, or take any other action (including,
but not limited to, making any change referred to in clause
(xviii)(F), (G) or (H) of Section 4(a) of this Agreement), that would
or is reasonably likely to adversely affect the validity, perfection
or priority of any Security Interest or the value of any significant
portion of the Collateral, cause any Event of Default or any event or
condition that, after notice, lapse of time or both notice and lapse
of time, would constitute any Event of Default, materially adversely
affect any right or remedy of the Secured Party pursuant to this
Agreement or arising or accruing as a result of this Agreement or
authorize the dissolution, liquidation or sale of any Person
(including, but not limited to, any Account Debtor, Issuer, Bank,
Securities Intermediary or Commodity Intermediary) obligated with
respect to any of the Collateral, (xv) provide to the Secured Party or
permit to be provided to the Secured Party on his, her or its behalf
any certificate, financial statement or other Record that contains any
statement of fact that is incorrect or misleading in any material
respect or omits to state any fact necessary to make any statement of
fact contained therein not incorrect or misleading in any material
respect or (xvi) upon or at any time after any occurrence and
continuance of any Event of Default, (A) enforce, extend, renew,
refinance or otherwise modify or replace, request, demand, accept,
collect or otherwise realize upon, compromise, cancel, discharge,
subordinate, accelerate, give any receipt, release or discharge
relating to, commence, prosecute or settle any action or other legal
proceeding relating to, waive or forbear from exercising any right or
remedy relating to or materially adversely affect any obligation of
any Person (including, but not limited to, any Account Debtor, Issuer,
Bank, Securities Intermediary or Commodity Intermediary) obligated
with respect to any of the Collateral relating to any of the
Collateral, (B) agree or otherwise incur any obligation to do anything
described in clause (xvi)(A) of this sentence, (C) make any trade in
any Securities Account or Commodity Account included in the Collateral
or (D) exercise any Incidental Property Right included in the
Collateral.
(c) Additional Covenants Triggered by Request of Secured Party: Promptly
upon the reasonable request of the Secured Party, the Debtor shall (i)
execute and deliver to the Secured Party each Financing Statement,
application for any certificate of title, notice of lien, instrument
of assignment, proxy and other Record, and take each other action
(including, but not limited to, making any endorsement), requested by
the Secured Party to perfect, maintain the validity, perfection or
priority of or enforce any Security Interest (including, but not
limited to, (A) providing to the Secured Party for execution by the
Secured Party a Control Agreement, in form and substance satisfactory
to the Secured Party, that (i) is executed by the Debtor and any Bank,
Securities Intermediary or Commodity Intermediary establishing or
maintaining a Deposit Account included in the Collateral or a
Securities Account or Commodity Account to which any Investment
Property included in the Collateral is credited and (ii) relates to
such Deposit Account or Investment Property and (B) registering with
the appropriate public office or offices any Intellectual Property
included in the Collateral), otherwise protect the interest of the
Secured Party in or collect, or otherwise realize upon any of the
Collateral, whether under applicable law (including, but not limited
to, the Federal Assignment of Claims Act) or otherwise, verify any of
the Collateral or any insurance on any of the Collateral or otherwise
accomplish any purpose of this Agreement, (ii) deliver to the Secured
Party each tangible Chattel Paper, Document, Instrument, Certificated
Security and tangible Record included in the Collateral, together with
each endorsement, instrument of assignment and other Record that the
Secured Party requests to accomplish the assignment or other transfer
of such tangible Chattel Paper, Document, Instrument, Certificated
Security or tangible Record to the Secured Party (with all signatures
guaranteed by such Person and in such manner as are satisfactory to
the Secured Party), and, until such delivery, hold such tangible
Chattel Paper, Document, Instrument, Certificated Security or tangible
Record in trust for the Secured Party, (iii) deliver to any Securities
Intermediary designated by the Secured Party any Certificated Security
included in the Collateral, together with each endorsement, instrument
of assignment and other Record that such Securities Intermediary
requests to accomplish the assignment or other transfer of such
Certificated Security to such Securities Intermediary (with all
signatures guaranteed by such Person and in such manner as are
satisfactory to such Securities Intermediary), instruct such
Securities Intermediary to hold such Certificated Security for the
account of the Secured Party and, until such delivery, hold such
Certificated Security in trust for the Secured Party, (iv) cause any
Security Interest in any Investment Property included in the
Collateral that is not represented by a Certificated Security to be
registered to or otherwise reflected in the name of the Secured Party,
(v) cause a Certificated Security to be issued to represent any
Investment Property included in the Collateral that is not represented
by a Certificated Security, (vi) cause any Person (including, but not
limited to, any Account Debtor, Issuer, Bank, Securities Intermediary
or Commodity Intermediary) obligated with respect to any Deposit
Account or Investment Property included in the Collateral to provide
to the Secured Party a complete and accurate copy of each statement,
confirmation, notice, proxy statement, proxy and other communication
relating to such Deposit Account or Investment Property, (vii) cause
each Instrument representing Proceeds or other proceeds of any of the
Collateral to be made payable, as requested by the Secured Party, to
the Secured Party alone or the Secured Party and the Debtor jointly,
(viii) provide to the Secured Party all information requested by the
Secured Party and relating to (A) any of the Collateral (including,
but not limited to, information requested by the Secured Party to
monitor the market value of any of the Collateral), (B) any Person
(including, but not limited to, any Account Debtor, Issuer, Bank,
Securities Intermediary or Commodity Intermediary) obligated with
respect to any of the Collateral, (C) the Debtor, (D) any Other
Obligor or (E) the business, operations, assets, affairs or condition
(financial or other) of the Debtor or any Other Obligor (including,
but not limited to, financial statements prepared in a form reasonably
satisfactory to the Secured Party and, if reasonably requested by the
Secured Party, audited, reviewed or compiled by an independent
certified public accountant satisfactory to the Secured Party), (ix)
enter into each warehousing, lockbox or other custodial arrangement
with respect to any of the Collateral requested by the Secured Party,
(x) permit each director, officer, employee, accountant, attorney and
other agent of the Secured Party to inspect the Collateral and audit,
copy and extract each Record included in the Collateral during regular
business hours upon reasonable advance notice, (xi) provide to the
Secured Party an agreement, instrument or other Record, in form and
substance reasonably satisfactory to the Secured Party, (A) executed
by each Person having any interest, whether as an owner, mortgagee,
secured party or lessee or otherwise, in any premises, or any Goods
not included in the Collateral, to which is affixed or in or on which
is installed or located any of the Collateral, (B) disclaiming any
interest of such Person in any of the Collateral and (C) authorizing
the Secured Party, upon or at any time after any occurrence and
continuance of any Event of Default, to (I) enter upon any premises of
such Person to which is affixed or in or on which is installed or
located any of the Collateral, (II) take possession of and remove from
any such premises and any Goods of such Person not included in the
Collateral any of the Collateral affixed to or installed or located in
or on any such premises or Goods and (III) remain on and use any such
premises in completing any work in process included in the Collateral
or storing, preparing for any sale, lease or other disposition or
collecting, selling, leasing or otherwise disposing of or otherwise
realizing upon any of the Collateral, without by doing any of the
things described in clauses (xi)(C)(I) through (III) of this sentence
incurring any liability to such Person, except for unreasonable damage
to any such premises or Goods directly resulting from doing so, and
(xii) upon or at any time after any occurrence and continuance of any
Event of Default, assemble and make available to the Secured Party at
any place designated by the Secured Party and reasonably convenient to
the Secured Party and the Debtor (A) all Goods included in the
Collateral other than Fixtures, growing crops and standing timber and
(B) all Chattel Paper and tangible Records included in the Collateral.
(d) Additional Covenants if Collateral Includes Unregistered Security: If
the Collateral includes any Security required to be registered
pursuant to applicable law (including, but not limited to, the
Securities Act of 1933) before being permitted to be sold or otherwise
disposed of, or offered for sale or other disposition, by the Secured
Party, (i) the Debtor shall not (A) take any action to permit the
issuer of such Security to issue any other Security or any Incidental
Property Right relating to any other Security or (B) sell or otherwise
dispose of or take any other action with respect to any other Security
or any Incidental Property Right relating to any other Security if
such sale or other disposition or other action would be required to be
considered in determining whether any sale or other disposition of
such Security would be permissible without registration pursuant to
such law, and (ii) promptly upon the request of the Secured Party, the
Debtor shall (A) execute and deliver to the Secured Party or any other
Person (including, but not limited to, the Securities and Exchange
Commission) each form, schedule and other Record (including, but not
limited to, any form giving a notice of a proposed sale of securities
pursuant to Rule 144 of the Securities and Exchange Commission)
necessary to permit any sale or other disposition of such Security
without registration pursuant to such law, (B) use his, her or its
reasonable business efforts to cause the issuer of such Security to
take each action necessary to (I) permit any sale or other disposition
of such Security without registration pursuant to such law, (II)
register such Security pursuant to such law and (III) permit any
public sale or other disposition of such Security in each jurisdiction
determined by the Secured Party and (C) execute and deliver to the
Secured Party each agreement, instrument and other Record reasonably
requested by the Secured Party and in a reasonable and customary form
to indemnify each Person who or that is an underwriter of such
Security against each liability, cost and expense (including, but not
limited to, if such Person retains counsel for advice, litigation or
any other purpose, reasonable attorneys' fees and disbursements)
incurred by such Person as a result of such sale or other disposition.
5. POWER OF ATTORNEY; IRREVOCABLE PROXY
The Debtor irrevocably and unconditionally appoints the Secured Party as
the attorney-in-fact of the Debtor, with full power of substitution and
revocation, to take, in the name and on behalf of the Debtor or otherwise, each
action relating to any of the Collateral that the Debtor could take (including,
but not limited to, (a) receiving and collecting any mail addressed to the
Debtor, directing the place of delivery of any such mail, opening any such mail
and removing from any such mail and retaining any enclosure evidencing or
relating to any of the Collateral, (b) obtaining, settling and cancelling any
insurance on any of the Collateral and using any payment in connection with any
such insurance to pay any of the Obligations, whether due or not due, and (c)
taking any action described in Section 4 of this Agreement), except that, until
any notice of intention to do so is given by the Secured Party to the Debtor
upon or at any time after any occurrence and continuance of any Event of
Default, the Secured Party may not, as such attorney-in-fact, except as
expressly permitted by this Agreement, take the foregoing actions, exercise or
direct the exercise of any Incidental Property Right relating to any Security
included in the Collateral or sell, lease or otherwise dispose of any of the
Collateral. The power of attorney given pursuant to the preceding sentence is
coupled with an interest in favour of the Secured Party and shall not be
terminated or otherwise affected by the death, disability or incompetence of the
Debtor. In furtherance of, as the attorney-in-fact of the Debtor, the Secured
Party's exercise or direction of the exercise of any Incidental Property Right
relating to any Security included in the Collateral, the Debtor grants to the
Secured Party a proxy, which shall be irrevocable and unlimited in duration, to
exercise such Incidental Property Right.
6. CERTAIN RIGHTS, REMEDIES AND DUTIES
(a) Rights and Remedies Pursuant to Applicable Law: With respect to the
Collateral, the Secured Party shall have each applicable right and
remedy pursuant to applicable law (including, but not limited to, the
Uniform Commercial Code) or this Agreement.
(b) Additional Rights Without Event of Default: The Secured Party shall
have the right to file in any public office, without any signature or
other authorization by the Debtor, each Financing Statement relating
to any of the Collateral that the Secured Party desires to file.
(c) Additional Rights Upon or After Event of Default: Upon or at any time
after any occurrence and continuance of any Event of Default, the
Secured Party shall have the right to, for the purpose of preserving
or enhancing the value of any of the Collateral or exercising any
right or remedy of the Secured Party pursuant to this Agreement or
arising or accruing as a result of this Agreement, (i) perform each
obligation of the Debtor pursuant to this Agreement, (ii) without any
judicial process but without any breach of the peace, (A) enter upon
each premises of the Debtor, (B) store and provide for the guarding
and maintenance in good condition of any of the Collateral located on
such premises, take possession of and remove from each such premises
any of the Collateral and (C) remain on and use each such premises,
and use all Equipment and Fixtures of the Debtor, whether or not
included in the Collateral, in completing any work in process included
in the Collateral or storing, preparing for any sale, lease or other
disposition or collecting, selling, leasing or otherwise disposing of
or otherwise realizing upon any of the Collateral, (iii) exercise any
Incidental Property Right included in the Collateral, (iv) declare all
right, title and interest of the Debtor in and to any Intellectual
Property included in the Collateral to be vested in the Secured Party,
(v) grant any license, whether exclusive or nonexclusive, in any
Intellectual Property included in the Collateral to such Person, for
such period, on such terms and in such manner as is determined by the
Secured Party, (vi) without the payment of any compensation of any
kind, use each General Intangible (including, but not limited to, each
item of Intellectual Property, license and franchise) of the Debtor
included in the Collateral, to the extent of the rights of the Debtor
therein, for the purpose of exercising any right or remedy of the
Secured Party pursuant to this Agreement or arising or accruing as a
result of this Agreement, and, to such extent for such purpose, the
Debtor irrevocably grants the Secured Party a nonexclusive license in
each such General Intangible; and (vii) direct each Person issuing any
insurance on any of the Collateral to make directly and solely to the
Secured Party each payment in connection with any such insurance,
(viii) verify any of the Collateral in any manner or through any
medium, whether directly with any Person (including, but not limited
to, any Account Debtor, Issuer, Bank, Securities Intermediary or
Commodity Intermediary) obligated with respect thereto or otherwise or
in the name of the Debtor or otherwise, (ix) notify each Person
(including, but not limited to, any Account Debtor, Issuer, Bank,
Securities Intermediary or Commodity Intermediary) obligated with
respect to any of the Collateral of the interest of the Secured Party
therein, direct such Person to make each payment with respect thereto
directly and solely to the Secured Party and take control of all
Proceeds and other proceeds thereof, (ix) deliver any notice of
exclusive control pursuant to any Control Agreement, (xi) exchange any
certificate representing any of the Collateral for a certificate of a
larger or smaller denomination and (xii) cause to be transferred to or
registered in the name of the Secured Party or any nominee, Securities
Intermediary, Commodity Intermediary or other agent of the Secured
Party any of the Collateral so that the Secured Party appears as the
sole owner of record thereof, whether such transfer or registration is
made with or without reference to this Agreement or any Security
Interest.
(d) Additional Rights if Collateral Includes Unregistered Security: If the
Collateral includes any Security required to be registered pursuant to
applicable law (including, but not limited to, the Securities Act of
1933) before being permitted to be sold or otherwise disposed of, or
offered for sale or other disposition, by the Secured Party and upon
or at any time after any occurrence and continuance of any Event of
Default the Secured Party opts for any sale or other disposition of
such Security without such registration, (i) the Secured Party shall
not be obligated to delay such sale or other disposition to permit
such registration, and (ii) in order to comply with such law, the
Secured Party shall have the right to restrict the prospective
purchasers in such sale or other disposition (including, but not
limited to, restricting such prospective purchasers to Persons meeting
specified requirements as to financial sophistication or intent to
purchase for investment and not with a view to sale or other
disposition), restrict the terms of such sale or other disposition
(including, but not limited to, restricting future sales and other
dispositions) and impose other restrictions on any aspect of such sale
or other disposition (including, but not limited to, the advertising
or conduct thereof).
(d) (e) Standards for Sale or Other Disposition in Commercially Reasonable
Manner: If upon or at any time after any occurrence and continuance of
any Event of Default the Secured Party opts for any sale or other
disposition of any of the Collateral, (i) no restriction on the
prospective purchasers in such sale or other disposition (including,
but not limited to, a restriction of such prospective purchasers to
Persons meeting specified requirements as to financial sophistication
or intent to purchase for investment and not with a view to sale or
other disposition), restriction on the terms of such sale or other
disposition (including, but not limited to, restricting future sales
and other dispositions) or other restriction on any aspect of such
sale or other disposition (including, but not limited to, the
advertising or conduct thereof) imposed by the Secured Party in order
to comply with applicable law (including, but not limited to, the
Securities Act of 1933 and any banking statute) shall be a factor in
determining such sale or other disposition to have been made in other
than a commercially reasonable manner, and (ii) such sale or other
disposition shall not be determined to have been made in other than a
commercially reasonable manner solely by reason of (A) its not being
made at the time and place therefor specified in any notice thereof
provided that the adjournment thereof is announced at such specified
time and place or a time and place announced at any adjournment
thereof, (B) its being a public sale or other disposition or a private
sale or other disposition, (C) its being made in one parcel, in more
than one parcel, at one time or at different times, or (D) its
involving the sale or other disposition of any of the Collateral
either for future delivery or for future payment without retention by
the Secured Party until such future payment and the failure of such
future delivery or such future payment to occur.
(e) (f) Application of Proceeds: The Secured Party shall apply all
proceeds received by the Secured Party from any collection or sale,
lease or other disposition of or other recovery upon or otherwise on
account of any of the Collateral (including, but not limited to, as
money payable pursuant to any insurance on any of the Collateral)
first to liabilities, costs and expenses described in Section 8 of
this Agreement and then to the remainder of the Obligations, whether
due or not due, in any order reasonably determined by the Secured
Party.
7. STANDARDS OF CARE
(a) Collateral Transferred to or Registered in Name of Secured Party or
Agent of Secured Party: The Secured Party shall be deemed to have
exercised reasonable care in the custody or preservation of any of the
Collateral that is transferred to or registered in the name of the
Secured Party or any nominee, Securities Intermediary, Commodity
Intermediary or other agent of the Secured Party if (a) the treatment
thereof by the Secured Party or such nominee, Securities Intermediary,
Commodity Intermediary or other agent is substantially equal to the
treatment by the Secured Party of assets of the Secured Party of a
similar nature or (b) the Secured Party takes any action in the
custody or preservation thereof reasonably specified by the Debtor in
a written notice received by the Secured Party in a reasonable time to
evaluate and take such action; provided, however, that (i) any failure
to take such action shall not of itself be deemed to be a failure to
exercise such reasonable care, (ii) in no event shall the Secured
Party be obligated to take such action if the Secured Party determines
that doing so would or is reasonably likely to have any material
adverse effect on the value of any significant portion of the
Collateral or otherwise be incompatible with any provision or purpose
of this Agreement and (iii) in no event shall the Secured Party be
obligated to (A) preserve any right or remedy against any prior party
obligated pursuant to any of the Collateral, whether or not in the
possession or under the control of the Secured Party, (B) ascertain or
notify the Debtor of any maturity, call, exchange, conversion,
redemption, offer, tender or similar matter relating to any of the
Collateral, whether or not the Secured Party has knowledge thereof, or
(C) provide to the Debtor any statement, confirmation, notice, proxy
statement, proxy or other communication received by the Secured Party
or any nominee, Securities Intermediary, Commodity Intermediary or
other agent of the Secured Party and relating to any of the
Collateral.
(b) Actions and Omissions by Secured Party or Agent of Secured Party:
Neither the Secured Party nor any director, officer, employee,
accountant, attorney or other agent of the Secured Party shall be
liable for any action taken or not taken, whether in exercising or
refraining from exercising any right or remedy pursuant to this
Agreement or arising or accruing as a result of this Agreement or
otherwise, with respect to any of the Collateral (including, but not
limited to, any liability for loss of, damage to or decrease in the
value of any of the Collateral) except to the extent caused by his,
her or its gross negligence, bad faith or willful misconduct.
8. EXPENSES; INDEMNIFICATION
(a) Expenses: The Debtor shall pay to the Secured Party on demand each
reasonable out-of-pocket cost and expense (including, but not limited
to, if the Secured Party retains counsel for advice, litigation or any
other purpose, reasonable attorneys' fees and disbursements)
heretofore or hereafter incurred by the Secured Party in (i) searching
for, filing or recording or obtaining any information relating to any
Financing Statement, application for any certificate of title, notice
of lien, instrument of assignment or other Record relating to any of
the Collateral or otherwise obtaining any information reasonably
required by it relating to the Debtor or any of the Collateral, (ii)
negotiating the entry into any Control Agreement relating to any
Deposit Account, Electronic Chattel Paper, Investment Property or
Letter-of-Credit Right included in the Collateral, (iii) taking any
action pursuant to this Agreement or in connection with the custody or
preservation of any of the Collateral reasonably required by it or
(iv) endeavouring to (A) enforce any obligation of the Debtor pursuant
to this Agreement or preserve or exercise any right or remedy of the
Secured Party pursuant to this Agreement or arising or accruing as a
result of this Agreement or (B) preserve or exercise any right or
remedy relating to, take possession of, remove from any premises,
store, prepare for any sale, lease or other disposition or collect,
sell, lease or otherwise dispose of or otherwise realize upon any of
the Collateral.
(b) Indemnification: The Debtor shall indemnify the Secured Party and each
director, officer, employee, accountant, attorney and other agent of
the Secured Party on demand, without any limitation as to amount,
against each liability, cost and expense (including, but not limited
to, if the Secured Party retains counsel for advice, litigation or any
other purpose, reasonable attorneys' fees and disbursements)
heretofore or hereafter imposed on, incurred by or asserted against
the Secured Party or such director, officer, employee, accountant,
attorney or other agent as a result of any claim (including, but not
limited to, any claim involving any allegation of any violation of
applicable law (including, but not limited to, any environmental or
criminal statute)), however asserted and whether now existing or
hereafter arising or accruing, arising out of any manufacture,
purchase or other acquisition, ownership, possession, control, use,
operation or sale, lease or other disposition of any of the Collateral
except to the extent caused by the gross negligence, bad faith or
wilful misconduct of the Secured Party or such director, officer,
employee, accountant, attorney or other agent.
9. TERMINATION
This Agreement shall remain in full force and effect until and shall
terminate only upon (a) the actual receipt by an officer of the Secured Party at
the chief executive office of the Secured Party of a written notice of (i) the
termination of this Agreement by the Debtor, (ii) if the Debtor is an
individual, the death of the Debtor or the judicial declaration of the Debtor's
incompetence or (iii) if the Debtor is not an individual, the dissolution or
cessation of existence of the Debtor, (b) the expiration of a reasonable period
of time for the Secured Party to act upon such written notice and (c) the final
and indefeasible payment in full of (i) each portion of the Obligations (A)
arising or accrued before such receipt of such written notice and the expiration
of such period of time, (B) thereafter arising or accruing as a result of any
credit or other financial accommodation theretofore committed or otherwise
agreed to by the Secured Party or (C) thereafter arising or accruing as a result
of any of the Obligations described in clause (c)(i)(A) or (B) of this sentence
(including, but not limited to, (I) all interest, fees, charges, costs and
expenses thereafter arising or accruing with respect to any of the Obligations
described in such clause (c)(i)(A) or (B) and (II) all of the Obligations
thereafter arising or accruing as a result of any direct or indirect extension,
renewal, refinancing or other modification or replacement of any of the
Obligations described in such clause (c)(i)(A) or (B)) and (ii) each liability,
cost and expense that the Debtor is obligated to pay pursuant to Section 8 of
this Agreement, whether theretofore or thereafter arising or accruing.
10. OBLIGATIONS IMMEDIATELY DUE
Upon or at any time after any occurrence and continuance of any Event of
Default other than, with respect to the Debtor, any Event of Default described
in clause (iii) of Section 1(c) of this Agreement, all of the Obligations
remaining unpaid shall, in the sole discretion of the Secured Party become
immediately due, notwithstanding any agreement to the contrary. Upon any
occurrence and continuance of, with respect to the Debtor, any Event of Default
described in such clause (iii), all of the Obligations remaining unpaid shall
automatically, without any notice, demand, presentment or protest of any kind
(each of which is knowingly, voluntarily, intentionally and irrevocably waived
by the Debtor), become immediately due, notwithstanding any agreement to the
contrary. Nothing in this Section 10 shall render any of the Obligations payable
on demand payable otherwise than on demand.
11. TERMINATION OF OBLIGATION TO LEND
Upon any occurrence and continuance of any Event of Default, any obligation
of the Secured Party to extend any credit or other financial accommodation to
the Debtor shall terminate, notwithstanding any commitment or other agreement to
the contrary.
12. REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants to the Secured Party as follows:
(a) Jurisdiction of Organization: If the Debtor is a Registered
Organization, its jurisdiction of organization is as indicated at the
beginning of this Agreement.
(b) Authority: The execution, delivery to the Secured Party and
performance of this Agreement and each Control Agreement, and the
grant or other creation of each Security Interest, by the Debtor (i)
do not and will not violate applicable law, any judgment or order of
any court, agency or other governmental body by which the Debtor is
bound or, if the Debtor is not an individual, any certificate or
articles of incorporation or organization, by-laws, operating or
partnership agreement or other charter, organizational or other
governing document of the Debtor or any resolution or other action of
record of any shareholders, members, directors or managers of the
Debtor, (ii) do not and will not violate or constitute any default
under any material agreement, instrument or other Record by which the
Debtor is bound, (iii) if the Debtor is not an individual, are and
will be in furtherance of the purposes and within the power and
authority of the Debtor and (iv) do not and will not require any
authorization of, notice to or other act by or relating to any Person
(including, but not limited to, if the Debtor is not an individual,
any shareholder, member, director or manager of the Debtor) that has
not been duly obtained, given or done and is not in full force and
effect, subject only to the following qualifications:
(i) an order of specific performance and an injunction are
discretionary remedies, and in particular, may not be available
where damages are considered an adequate remedy; and
(ii) enforcement may be limited by bankruptcy, insolvency,
liquidation, reorganization, reconstruction and other similar
laws generally affecting enforceability of creditor's rights.
(c) Enforceability: This Agreement is, and each Control Agreement is or,
if not now existing, will be enforceable in accordance with its terms
against the Debtor.
(d) Questionnaire: Each answer contained in any questionnaire submitted by
or on behalf of the Debtor to the Secured Party in connection with
this Agreement is complete and accurate.
(e) Rights with Respect to Collateral: Except as heretofore disclosed by
the Debtor to the Secured Party in writing, there exists (i) no
security interest in or other lien on any of the Collateral other than
Permitted Liens, (ii) no presently effective Financing Statement or
certificate of title, and no pending application for any certificate
of title or notice of lien, relating to any of the Collateral and
naming any Person other than the Secured Party as a secured party
other than those relating solely to Permitted Liens, (iii) no
contractual or other restriction on the grant or other creation of any
security interest in or assignment, pledge or hypothecation of any of
the Collateral, (iv) no demand, claim, counterclaim, setoff or
defence, no action or other legal proceeding, and no outstanding
judgment or order of any court, agency or other governmental body,
relating to any of the Collateral and (v) no Control Agreement (A)
that relates to any Deposit Account, Electronic Chattel Paper,
Investment Property or Letter-of-Credit Right included in the
Collateral and (B) to which the Secured Party or a permitted Lien
holder (or its agent or designee) is not a party.
(f) Actions with Respect to Collateral: Except as heretofore disclosed by
the Debtor to the Secured Party in writing, the Debtor has not (i)
sold, leased or otherwise disposed of any of the Collateral or any
interest or right in any of the Collateral or (ii) extended, renewed,
refinanced or otherwise modified or replaced, compromised, canceled,
discharged, subordinated, accelerated, waived, forborne from
exercising any right or remedy relating to or adversely affected any
obligation of any Person (including, but not limited to, any Account
Debtor, Issuer, Bank, Securities Intermediary or Commodity
Intermediary) relating to any of the Collateral.
(g) Accounts, Chattel Paper, Deposit Accounts, Documents, General
Intangibles, Instruments, Investment Property, Letter- of-Credit
Rights and Letters of Credit: Each Account, Chattel Paper, Deposit
Account, Document, General Intangible, Instrument, item of Investment
Property, Letter-of Credit Right and letter of credit included in the
Collateral is or, if not now existing, will be genuine, in all
respects what it purports to be and enforceable in accordance with its
terms against each Person (including, but not limited to, any Account
Debtor, Issuer, Bank, Securities Intermediary or Commodity
Intermediary) obligated with respect thereto, subject to no demand,
claim, counterclaim, setoff or defence.
(h) Intellectual Property: The Debtor (i) duly owns or is duly licensed to
use and is not prohibited from using any Intellectual Property the
Debtor uses and (ii) is not aware of any claim by any Person that the
use of any Intellectual Property the Debtor uses infringes or
otherwise violates any right of such Person in such Intellectual
Property or that any registration of such Intellectual Property is
other than in full force and effect. Each registration of and each
right of the Debtor in any Intellectual Property included in the
Collateral is in full force and effect.
(i) Rights with Respect to Locations of Collateral: The Debtor has and
will have the right to (i) keep all of the Collateral now or hereafter
located at any location at such location and (ii) plant and grow crops
and timber on and harvest and remove crops and timber from any real
property on which any growing crop or standing timber now or hereafter
included in the Collateral is located.
(j) Incorrect or Misleading Information: The Debtor has not provided to
the Secured Party or permitted to be provided to the Secured Party on
his, her or its behalf any certificate, financial statement or other
Record that contains any statement of fact that is incorrect or
misleading in any material respect or omits to state any fact
necessary to make any statement of fact contained therein not
incorrect or misleading in any material respect.
13. CERTAIN CONSENTS AND WAIVERS
(a) Consents: Except to the extent expressly provided in this
Agreement, this Agreement shall not be modified or terminated, no
Security Interest, no obligation of the Debtor pursuant to this
Agreement and no right or remedy of the Secured Party pursuant to
this Agreement or arising or accruing as a result of this
Agreement shall be impaired or otherwise adversely affected, and
no such right or remedy shall be waived, by any act, omission or
other thing, whether heretofore occurred or hereafter occurring.
The Debtor knowingly, voluntarily, intentionally and irrevocably
consents, without any notice, to each act, omission and other
thing, whether heretofore occurred or hereafter occurring, that
would or might, but for such consent, modify or terminate this
Agreement, impair or otherwise adversely affect any Security
Interest or any such obligation, right or remedy or operate as a
waiver of any such right or remedy. Without limiting the
generality of the preceding two sentences, this Agreement shall
not be modified or terminated by, no Security Interest and no
such obligation, right or remedy shall be impaired or otherwise
adversely affected by, no such right or remedy shall be waived
by, and such consent shall apply to, whether heretofore occurred
or hereafter occurring, (i) any direct or indirect extension,
renewal, refinancing or other modification or replacement of, or
any assignment or other transfer, compromise, cancellation,
discharge, invalidity, impairment, unenforceability or change in
any term or condition of, defence with respect to or grant of any
participation in, any of the Obligations or any other obligation
of the Debtor or any Other Obligor or other Person, (ii) any
acceptance of any Other Obligor, (iii) any taking, increase or
decrease in value, impairment or release of, collection or sale,
lease or other disposition of or other realization upon or
failure or delaying to call for, take any property as, hold,
preserve, protect, insure or collect, sell, lease or otherwise
dispose of or otherwise realize upon any of the Collateral or any
Other Collateral, (iv) any failure or delaying to perfect, keep
perfected or maintain the priority of any security interest in or
other lien on any of the Collateral or any Other Collateral, (v)
any exercise or waiver of, failure or delaying to exercise,
forbearance from exercising or failure to give any notice prior
to exercising any right or remedy of the Secured Party or any
other Person relating to any of the Obligations, any of the
Collateral or any Other Collateral or against the Debtor or any
Other Obligor or other Person, (vi) any case or other proceeding
pursuant to any bankruptcy, insolvency or similar statute with
respect to the Debtor or any Other Obligor or other Person, (vii)
any failure of the Secured Party or any other Person to make,
prove or vote any claim relating to any of the Obligations, any
of the Collateral or any Other Collateral, or any failure of any
such claim to be allowed, in any case or other proceeding
pursuant to any bankruptcy, insolvency or similar statute, (viii)
the Obligations being at any time or from time to time paid in
full or reduced and then increased or exceeding any amount, (ix)
any refusal or other failure of the Secured Party or any other
Person to grant any or any additional credit or other financial
accommodation to the Debtor or any Other Obligor or other Person
or provide to the Debtor any or complete and accurate information
relating to any Other Obligor or other Person or the business,
operations, assets, affairs or condition (financial or other) of
any Other Obligor or other Person, (x) any notice to the Secured
Party or any other Person from any Other Obligor or other Person
not to grant any or any additional credit or other financial
accommodation to the Debtor or to take or not to take any other
action, (xi) the acceptance by the Secured Party or any other
Person of any agreement, instrument or other Record intended by
the Debtor or any Other Obligor or other Person but not by the
Secured Party to create an accord and satisfaction with respect
to any of the Obligations or any other obligation of the Debtor
or any Other Obligor or other Person, (xii) the manner or order
of any collection or sale, lease or other disposition of or other
realization upon any of the Collateral or any Other Collateral,
(xiii) the manner or order of application of any money applied in
payment of any of the Obligations, (xiv) any change in the
ownership, membership, location, business, name, identity or
structure of the Debtor or any Other Obligor or other Person or
(xv) the execution and delivery to the Secured Party by any Other
Obligor or other Person of any agreement, instrument or other
Record providing any Other Collateral.
(b) Waivers: The Debtor knowingly, voluntarily, intentionally and
irrevocably waives, without any notice, each act and other thing
upon which, but for such waiver, any Security Interest, any
obligation of the Debtor pursuant to this Agreement or any right
or remedy of the Secured Party pursuant to this Agreement or
arising or accruing as a result of this Agreement would or might
be conditioned. Without limiting the generality of the preceding
sentence, no Security Interest and no such obligation, right or
remedy shall be conditioned upon, and such waiver shall apply to,
(i) the acceptance of this Agreement by the Secured Party, (ii)
any demand upon or presentment or protest to the Debtor or any
Other Obligor or other Person, (iii) any exercise of any right or
remedy of the Secured Party or any other Person relating to any
of the Obligations, any of the Collateral or any Other Collateral
or against the Debtor or any Other Obligor or other Person or
(iv) any notice to the Debtor or any Other Obligor or other
Person of the acceptance of this Agreement by the Secured Party,
any incurring or non-payment of any of the Obligations, any
occurrence and continuance of any Event of Default or any other
event or condition of default relating to any of the Obligations,
any of the Collateral or any Other Collateral, any decrease in
the value of any of the Collateral or any Other Collateral, any
exercise of any right or remedy of the Secured Party or any other
Person relating to any of the Obligations, any of the Collateral
or any Other Collateral or against the Debtor or any Other
Obligor or other Person, any action taken or not taken by the
Secured Party or any other Person or any other matter.
14. NOTICES AND OTHER COMMUNICATIONS
Each notice and other communication relating to this Agreement (i) may be
given in writing or by facsimile, (ii) if given in writing, may be directed to
the last address of the Debtor shown in the Records of the sender relating to
this Agreement, (iii) if sent by mail or overnight courier service, shall be
deemed to have been given when deposited in the mail, first-class or certified
postage prepaid, or accepted by any post office or overnight courier service for
delivery and to have been received upon the earlier of (A) the actual receipt
thereof or (B) three days after being so deposited or accepted and (iv) if given
by facsimile, may be directed to the last telephone number for receipt of
facsimiles shown in the Records of the sender relating to this Agreement. Each
requirement under applicable law of reasonable notice of any event by the
Secured Party to the Debtor shall be deemed to have been met if a notice of such
event is given by the Secured Party to the Debtor at least ten days before the
date on or after which such event is to occur.
15. MISCELLANEOUS
(a) Other Relevant Agreements: This Agreement is subject to the terms and
provisions of the Priority Agreement among Capital Source Finance LLC,
the Secured Party, the Debtor and its affiliated entities named
therein. In the event of any conflict between this Agreement and the
Offer of Finance dated July 23, 2002 among the Secured Party, Derma
Sciences, Inc., Xxxxxxx Xxxxxxx and Dumex Medical Canada Inc., the
terms and provisions of the Offer of Finance and the other Loan
Documents (as defined in the Offer of Finance) shall prevail.
(b) Reliance by Other Persons: Each Person (including, but not limited to,
any Account Debtor, Issuer, Bank, Securities Intermediary or Commodity
Intermediary) obligated with respect to, and each transfer agent,
registrar and trustee of, any of the Collateral may accept without any
question any exercise by the Secured Party of any right or remedy of
the Secured Party pursuant to this Agreement or arising or accruing as
a result of this Agreement.
(c) Limitation on Security Interest: The payment of the Obligations shall
not be secured by any Security Interest to the extent of any amount in
excess of the maximum amount the payment of which can be so secured
without rendering such Security Interest unenforceable under
applicable law as a fraudulent conveyance or transfer.
(d) Obligations Relating to Collateral: The grant or other creation of any
Security Interest shall not constitute any assignment by the Debtor to
the Secured Party of any obligation of the Debtor relating to any of
the Collateral. The Debtor shall remain obligated to perform each such
obligation, and the Secured Party shall not be obligated to perform
any such obligation, whether or not the Secured Party exercises any
right or remedy pursuant to this Agreement or arising or accruing as a
result of this Agreement. The only obligations of the Secured Party
relating to the Collateral shall be, to the extent required by
applicable law, to (i) exercise reasonable care in the custody or
preservation of any of the Collateral that is transferred to or
registered in the name of the Secured Party or any nominee, Securities
Intermediary, Commodity Intermediary or other agent of the Secured
Party and (ii) act in a commercially reasonable manner in exercising
with respect to any of the Collateral any right or remedy pursuant to
this Agreement or arising or accruing as a result of this Agreement.
(e) Liability: If more than one Person executes this Agreement, (i) each
of them shall be jointly and severally liable pursuant to this
Agreement, and (ii) this Agreement shall be construed, interpreted and
enforced, whether in any action or other legal proceeding or
otherwise, as to each of them as though each of them had executed and
delivered to the Secured Party a separate agreement identical to this
Agreement.
(f) Effect on Other Agreements, Instruments and Records: The execution,
delivery to the Secured Party and performance of this Agreement by the
Debtor shall not modify or terminate any other agreement, instrument
or other Record (including, but not limited to, any agreement,
instrument or other Record granting or otherwise creating any security
interest in or other lien on any of the Collateral or providing any
Other Collateral) by which the Debtor or any Other Obligor or other
Person is bound or impair or otherwise adversely affect any obligation
of the Debtor or any Other Obligor or other Person pursuant to any
such other agreement, instrument or other Record.
(g) Right of Setoff: Upon and at any time and from time to time after any
occurrence and continuance of any Event of Default, the Secured Party
shall have the right to place an administrative hold on, and set off
against each obligation of the Debtor pursuant to this Agreement, each
obligation of the Secured Party to, in any capacity and whether alone
or otherwise, the Debtor, whether now existing or hereafter arising or
accruing, whether pursuant to any Deposit Account or certificate of
deposit or otherwise. Such setoff shall become effective at the time
the Secured Party opts therefor even though evidence thereof is not
entered in the Records of the Secured Party until later.
(h) Assignment or Grant of Participation: In conjunction with any
assignment or other transfer of or grant of any participation in any
of the Obligations by the Secured Party, the Secured Party shall have
the right to assign or otherwise transfer or grant any participation
in this Agreement, any Security Interest, any obligation of the Debtor
pursuant to this Agreement or any right or remedy of the Secured Party
pursuant to this Agreement or arising or accruing as a result of this
Agreement.
(i) Binding Effect: This Agreement shall be binding upon the Debtor, each
other Person who or that becomes bound as a debtor by this Agreement
pursuant to Article 9 of the Uniform Commercial Code and each direct
or indirect legal representative, successor and assignee of the Debtor
or any such other Person and shall inure to the benefit of and be
enforceable by the Secured Party and each direct or indirect successor
and assignee of the Secured Party.
(j) Entire Agreement, Modifications and Waivers: This Agreement contains
the entire agreement between the Secured Party and the Debtor with
respect to the subject matter of this Agreement and supersedes each
action heretofore taken or not taken, each course of conduct
heretofore pursued, accepted or acquiesced in, and each oral, written
or other agreement and representation heretofore made, by or on behalf
of the Secured Party with respect thereto. No action heretofore or
hereafter taken or not taken, no course of conduct heretofore or
hereafter pursued, accepted or acquiesced in, no oral, written or
other agreement or representation heretofore made, and no agreement or
representation hereafter made other than in writing, by or on behalf
of the Secured Party shall modify or terminate this Agreement, impair
or otherwise adversely affect any Security Interest, any obligation of
the Debtor pursuant to this Agreement or any right or remedy of the
Secured Party pursuant to this Agreement or arising or accruing as a
result of this Agreement or operate as a waiver of any such right or
remedy. No modification of this Agreement or waiver of any such right
or remedy shall be effective unless made in a writing duly executed by
the Secured Party and specifically referring to such modification or
waiver.
(k) Rights and Remedies Cumulative: All rights and remedies of the Secured
Party pursuant to this Agreement or arising or accruing as a result of
this Agreement shall be cumulative, and no such right or remedy shall
be exclusive of any other such right or remedy.
(l) Extent of Consents and Waivers: Each consent and waiver of the Debtor
contained in this Agreement shall be deemed to have been given to the
extent permitted by applicable law.
(m) Exercise of Rights; Requests: Except as expressly provided in this
Agreement, each right and remedy of the Secured Party pursuant to this
Agreement or arising or accruing as a result of this Agreement may be
exercised (i) at any time and from time to time, (ii) in the sole
discretion of the Secured Party, (iii) without any notice or demand of
any kind and (iv) whether or not any Event of Default or any other
event or condition of default relating to any of the Obligations, any
of the Collateral or any Other Collateral has occurred or existed, but
the Secured Party shall not be obligated to exercise any such right or
remedy. Each such right and remedy may be exercised only to the extent
that the exercise thereof does not violate applicable law. Each
request by the Secured Party pursuant to this Agreement may be made
(i) at any time and from time to time, (ii) in the sole discretion of
the Secured Party and (iii) whether or not any Event of Default or any
other event or condition of default relating to any of the
Obligations, any of the Collateral or any Other Collateral has
occurred or existed.
(n) Severability: Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If, however, any such provision shall be prohibited by
or invalid under such law, it shall be deemed modified to conform to
the minimum requirements of such law, or, if for any reason it is not
deemed so modified, it shall be prohibited or invalid only to the
extent of such prohibition or invalidity without the remainder thereof
or any other such provision being prohibited or invalid.
(o) Governing Law: Except to the extent that the Uniform Commercial Code
provides for the application of the law of any other jurisdiction,
this Agreement shall be governed by and construed, interpreted and
enforced in accordance with the law of the State of Pennsylvania and
the federal law of the United States without regard to the law of any
other jurisdiction.
(p) Headings: In this Agreement, headings of sections are for convenience
of reference only and have no substantive effect.
16. CONSENTS AND WAIVERS RELATING TO LEGAL PROCEEDINGS
(a) JURISDICTIONAL CONSENTS AND WAIVERS. EACH OF THE PARTIES KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY (I) CONSENTS IN EACH ACTION
AND OTHER LEGAL PROCEEDING COMMENCED BY THE SECURED PARTY AND ARISING
OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT, ANY OF THE
OBLIGATIONS, ANY OF THE COLLATERAL OR ANY OTHER COLLATERAL TO THE
NONEXCLUSIVE PERSONAL JURISDICTION OF ANY COURT THAT IS EITHER A COURT
OF RECORD OF THE STATE OF PENNSYLVANIA OR A COURT OF THE UNITED STATES
LOCATED IN THE STATE OF PENNSYLVANIA, (II) WAIVES EACH OBJECTION TO
THE LAYING OF VENUE OF ANY SUCH ACTION OR OTHER LEGAL PROCEEDING,
(III) WAIVES PERSONAL SERVICE OF PROCESS IN EACH SUCH ACTION AND OTHER
LEGAL PROCEEDING, (IV) CONSENTS TO THE MAKING OF SERVICE OF PROCESS IN
EACH SUCH ACTION AND OTHER LEGAL PROCEEDING BY REGISTERED MAIL
DIRECTED TO THE LAST ADDRESS SHOWN IN THE RECORDS RELATING TO THIS
AGREEMENT MAINTAINED BY THE PARTY, WITH SUCH SERVICE OF PROCESS TO BE
DEEMED COMPLETED FIVE DAYS AFTER THE MAILING THEREOF, (V) WAIVES IN
EACH SUCH ACTION AND OTHER LEGAL PROCEEDING EACH RIGHT TO ASSERT ANY
NONMANDATORY COUNTERCLAIM, ANY SETOFF OR ANY DEFENCE BASED UPON ANY
STATUTE OF LIMITATIONS OR CLAIM OF LACHES, (VI) WAIVES EACH RIGHT TO
ATTACK ANY FINAL JUDGMENT THAT IS OBTAINED AS A RESULT OF ANY SUCH
ACTION OR OTHER LEGAL PROCEEDING AND (VII) CONSENTS TO EACH SUCH FINAL
JUDGMENT BEING SUED UPON IN ANY COURT HAVING JURISDICTION WITH RESPECT
THERETO AND ENFORCED IN THE JURISDICTION IN WHICH SUCH COURT IS
LOCATED AS IF ISSUED BY SUCH COURT.
(b) WAIVER OF TRIAL BY JURY AND CLAIMS TO CERTAIN DAMAGES. EACH OF THE
PARTIES (I) KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY
WAIVES EACH RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO, AND
EACH RIGHT TO ASSERT ANY CLAIM FOR DAMAGES (INCLUDING, BUT NOT LIMITED
TO, PUNITIVE DAMAGES) IN ADDITION TO ACTUAL DAMAGES IN, ANY ACTION OR
OTHER LEGAL PROCEEDING, WHETHER BASED ON ANY CONTRACT OR NEGLIGENT,
INTENTIONAL OR OTHER TORT OR OTHERWISE, ARISING OUT OF OR OTHERWISE
RELATING TO (A) THIS AGREEMENT, ANY OF THE OBLIGATIONS, ANY OF THE
COLLATERAL OR ANY OTHER COLLATERAL, (B) ANY TRANSACTION ARISING OUT OF
OR OTHERWISE RELATING TO THIS AGREEMENT, ANY OF THE OBLIGATIONS, ANY
OF THE COLLATERAL OR ANY OTHER COLLATERAL OR (C) ANY NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT, ANY OF
THE OBLIGATIONS, ANY OF THE COLLATERAL OR ANY OTHER COLLATERAL AND
(II) CERTIFIES THAT NEITHER THE PARTY NOR ANY REPRESENTATIVE OF THE
SECURED PARTY HAS REPRESENTED THAT THE SECURED PARTY WILL NOT SEEK TO
ENFORCE THE WAIVER MADE IN THIS SECTION 16(b).
Dated August , 2002.
--------------
DERMA SCIENCES, INC.
By:
--------------------------------------
Title:
ACKNOWLEDGEMENT
PROVINCE OF ONTARIO)
On the day of August in the year 2002 before me, the
undersigned, a Notary Public in and for said Province, personally appeared
_____________________, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
capacity, and that by his signature on the instrument, the individual, or the
person upon behalf of which the individual acted, executed the instrument.
Notary Public
Exhibit "A"
PERMITTED LIENS
(1) general security interest granted in favour of Capital Source Finance LLC.
(2) liens for taxes, assessments, governmental charges or levies not for the
time being due and delinquent;
(3) easements, rights of way or other similar rights in land existing at the
date of this Agreement which individually or in the aggregate do not
materially detract from the value of the property concerned or materially
impair its use in the operation of the business of the Debtor;
(4) rights reserved to or vested in any governmental authority by the terms of
any lease, licence, franchise, grant or permit, or by any statutory
provision, to terminate the same or to require annual or other periodic
payments as a conditions of the continuance thereof;
(5) any lien or encumbrance the validity of which is being contested by the
Debtor in good faith by appropriate legal proceedings and in respect of
which either
(i) security adequate in the opinion of the Secured Party has been
provided to it to ensure payment of such liens
or
(ii) the Secured Party is of the opinion that such liens are not materially
prejudicial to the security hereof;
(6) title defects or irregularities which, in the opinion of counsel to the
Secured Party, are of a minor nature and in the aggregate will not
materially detract from the value of the property concerned or materially
impair its use in the operation of the business of the Debtor;
(7) Purchase Money Securities, as that term is defined in a General Security
Agreement governed by Ontario law issued by the Debtor to the Secured Party
dated the date hereof;
(8) capital lease obligations;
(9) accounts payable to creditors;
(10) current operating expenses;
(11) borrowings in the ordinary course of business not exceeding $10,000 in the
aggregate.
(12) the following debt issued pursuant to the Amended & Restated Revolving
Credit and Security Agreement dated August 26, 2002 and Asset Purchase
Agreement or Offer of Finance and related agreements or documents:
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