PLEDGE AND SECURITY AGREEMENT
THIS AGREEMENT is made as of the 1st day of June, 2002,
BY: BIG FISH LTD.
(the "Corporation")
IN FAVOUR OF: TRILON BANCORP INC.
(the "Lender")
RECITALS:
A. The Lender and M.E.V. (the "Borrower") have entered into an agreement dated
as of July 31, 2001 as amended by an amending agreement dated as of December
31, 2001, an amending agreement dated as of January 7, 2002, an amending
agreement dated as of April 8, 2002 and an amending agreement dated as of June
1, 2002 (together the "Loan Agreement") pursuant to which the Lender has
advanced the Loan to the Borrower;
B. It is a condition of the Loan Agreement that the Corporation enter into the
Guarantee and secure its obligations thereunder by entering into this Agreement.
NOW THEREFORE in consideration of the sum of $1.00 and for other
good and valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the Corporation agrees with the Lender as follows:
ARTICLE 1.
INTERPRETATION
1.1. DEFINITIONS
In this Agreement:
1.1.1. "THIS AGREEMENT", "HERETO", "HEREIN", "HEREOF", "HEREBY",
"HEREUNDER" and any similar expressions refer to this Agreement as it may
be amended or supplemented from time to time, and not to any particular
Article, section or other portion hereof;
1.1.2. "BOTB RECEIVABLE" means all indebtedness and liability of BOTB to
the corporation pursuant to the secured, US$1,000,000 Promissory Note
dated as of June 1, 2002 issued by BOTB Corporation to the Corporation.
1.1.3. "BUSINESS DAY" means any day, other than Saturday, Sunday or any
statutory holiday in the Province of Ontario;
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1.1.4. "CHATTEL PAPER" means one or more than one writing that evidences
both a monetary obligation and a security interest in or a lease of
specific Goods;
1.1.5. "CHELL SHARES" means the 2,310,994 shares of Chell Group Corp.
beneficially owned by the Corporation and held in the investment Account;
1.1.6. "COLLATERAL" means all of the property of the Corporation subject
to, or intended to be subject to, the Security Interest, and any reference
to "Collateral" shall be deemed to be a reference to "Collateral or any
part thereof" except where otherwise specifically provided;
1.1.7. "DOCUMENT OF TITLE" means any writing that purports to be issued by
or addressed to a bailee and purports to cover such Goods in the bailee's
possession as are identified or fungible portions of an identified mass,
and that in the ordinary course of business is treated as establishing
that the Person in possession of it is entitled to receive, hold and
dispose of the document and the Goods it covers;
1.1.8. "EVENT OF DEFAULT" has the meaning attributed to such term in the
Loan Agreement;
1.1.9. "GOODS" means tangible personal property other than Chattel Paper,
Documents of Title, Instruments, Money and Securities, and includes
fixtures, growing crops, the unborn young of animals, timber to be cut,
and minerals and hydrocarbons to be extracted;
1.1.10. "INSTRUMENT" means,
1.1.10.1. a xxxx, note or cheque within the meaning of the Bills of
Exchange Act (Canada) or any other writing that evidences a right to
the payment of Money and is of a type that in the ordinary course of
business is transferred by delivery with any necessary endorsement
or assignment, or
1.1.10.2. a letter of credit and an advice of credit if the letter
or advice states that it must be surrendered upon claiming payment
thereunder,
but does not include a writing that constitutes part of Chattel Paper, a
Document of Title or a Security;
1.1.11. "INTANGIBLE" means all personal property, including choses in
action, that is not Goods, Chattel Paper, Documents of Title, Instruments,
Money or Securities;
1.1.12. "INVESTMENT ACCOUNT" means account numbers 22UHG14 and 321063F in
the name of the Corporation established with Thomson Kernaghan & Co.
Limited;
1.1.13. "LIEN" means any mortgage, pledge, charge, assignment, security
interest, hypothec, lien or other encumbrance, including, without
limitation, any agreement to give any of the foregoing, or any conditional
sale or other title retention agreement;
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1.1.14. "MONEY" means a medium of exchange authorized or adopted by the
Parliament of Canada as part of the currency of Canada or by a foreign
government as part of its currency;
1.1.15. "OBLIGATIONS" means all of the obligations, liabilities and
indebtedness of the Corporation to the Lender from time to time, whether
present or future, absolute or contingent, liquidated or unliquidated, as
principal or as surety, alone or with others, of whatsoever nature or
kind, in any currency or otherwise, under or in respect of agreements or
dealings between the Corporation and the Lender or agreements or dealings
between the Lender and any Person by which the Lender may be or become in
any manner whatsoever a creditor of the Corporation, including without
limitation under the Loan Agreement and this Agreement or any one or more
of the foregoing as the same may be amended or supplemented from time to
time;
1.1.16. "PERSON" means any individual, partnership, limited partnership,
joint venture, syndicate, sole proprietorship, company or corporation with
or without share capital, unincorporated association, trust, trustee,
executor, administrator or other legal personal representative, regulatory
body or agency, government or governmental agency, authority or entity
however designated or constituted;
1.1.17. "PPSA" means the Personal Property Security Act (Ontario) as
amended from time to time and any Act substituted therefor and amendments
thereto;
1.1.18. "PROCEEDS" means identifiable or traceable personal property in
any form derived directly or indirectly from any dealing with Collateral
or the proceeds therefrom, and includes any payment representing indemnity
or compensation for loss of or damage to the Collateral or proceeds
therefrom;
1.1.19. "SECURITY" means a document that is,
1.1.19.1. issued in bearer, order or registered form,
1.1.19.2. of a type commonly dealt in upon securities exchanges or
markets or commonly recognized in any area in which it is issued or
dealt in as a medium for investment,
1.1.19.3. one of a class or series or by its terms is divisible into
a class or series of documents,
1.1.19.4. evidence of a share, participation or other interest in
property or in an enterprise or is evidence of an obligation of the
issuer,
1.1.19.5. and includes an uncertifcated security within the meaning
of Part VI (Investment Securities) of the Business Corporations Act
(Ontario); and
1.1.20. "SECURITY INTEREST" has the meaning attributed to such term in
section 2.1.
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1.2. HEADING
The inclusion of headings in this Agreement is for convenience of
reference only and shall not affect the construction or interpretation hereof.
1.3. REFERENCES TO ARTICLES AND SECTIONS
Whenever in this Agreement a particular Article, section or other
portion thereof is referred to then, unless otherwise indicated, such reference
pertains to the particular Article, section or portion thereof contained herein.
1.4. CURRENCY
Except where otherwise expressly provided, all amounts in this
Agreement are stated and shall be paid in Canadian currency.
1.5. GENDER AND NUMBER
In this Agreement, unless the context otherwise requires, words
importing the singular include the plural and vice versa and words importing
gender include all genders.
1.6. INVALIDITY OF PROVISIONS
Each of the provisions contained in this Agreement is distinct and
severable and a declaration of invalidity or unenforceability of any such
provision or part thereof by a court of competent jurisdiction shall not affect
the validity or enforceability of any other provision hereof. To the extent
permitted by applicable law, the parties waive any provision of law which
renders any provision of this Agreement invalid or unenforceable in any respect.
The parties shall engage in good faith negotiations to replace any provision
which is declared invalid or unenforceable with a valid and enforceable
provision, the economic effect of which comes as close as possible to that of
the invalid or unenforceable provision which it replaces.
1.7. AMENDMENT, WAIVER
No amendment or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any provision
of this Agreement shall constitute a waiver of any other provision nor shall any
waiver of any provision of this Agreement constitute a continuing waiver unless
otherwise expressly provided.
1.8. GOVERNING LAW, ATTORNMENT
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein
and the Corporation hereby irrevocably attorns to the jurisdiction of the courts
of Ontario.
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ARTICLE 2.
SECURITY INTEREST
2.1. CREATION OF SECURITY INTEREST
The Corporation hereby grants to the Lender, by way of security
interest, pledge, charge, assignment and hypothee, a security interest (the
"Security Interest") in:
2.1.1. the Chell Shares;
2.1.2. the BOTB Receivable;
2.1.3. all Securities, Instruments, negotiable Documents of Title and
other personal property of any kind which may hereafter be acquired by the
Corporation in renewal of, substitution for, as owner of, or as a result
of the exercise of any rights relating to, any of the property described
in this section;
2.1.4. all books, statements of account, bills, invoices, letters, papers,
documents and computer records in any way evidencing or relating to the
BOTB Receivable;
2.1.5. all Securities, Instruments, negotiable Documents of Title and
other personal property of any kind which may hereafter be acquired by the
Corporation in renewal of, substitution for, as owner of, or as a result
of the exercise of any rights relating to, any of the property described
in this section;
2.1.6. all dividends, income or other distributions, whether paid or
distributed in cash, Securities or other property, in respect of any of
the property described in this section; and
2.1.7. all Proceeds of any of the property described in this section.
2.2. ATTACHMENT
The attachment of the Security Interest has not been postponed and
the Security Interest shall attach to any particular Collateral as soon. as the
Corporation has rights in such Collateral,
ARTICLE 3.
OBLIGATIONS SECURED
3.1. OBLIGATIONS SECURED
The Security Interest granted hereby secures payment, performance
satisfaction of the Obligations.
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ARTICLE 4.
DEALING WITH COLLATERAL
4.1. RESTRICTIONS ON DEALING WITH COLLATERAL
The Corporation shall not, without the prior consent in writing of
the Lender:
4.1.1. sell, assign, transfer, exchange, or otherwise dispose of the
Collateral except to the extent permitted by section 4.4.1.1; or
4.1.2. create, assume or suffer to exist any Lien upon the Collateral
ranking or purporting to rank in priority to or pari passu with the
Security Interest other than the Security Interest.
No provision hereof shall be construed as a subordination or postponement of the
Security Interest to or in favour of any other Lien, whether or not such Lien is
permitted hereunder or otherwise.
4.2. REGISTRATION OF COLLATERAL IN NAME OF LENDER
At the request of the Lender, the Corporation shall cause such of
the Collateral as is registrable to be registered in the name of the Lender or
its nominee and authorizes the Lender to transfer such Collateral into the name
of the Lender or its nominee, so that the Lender or its nominee may appear as
the sole owner of record of such Collateral. The Corporation shall, at the
request of the Lender, deliver to the Lender appropriate powers of attorney for
transfer in blank, duly executed, in respect of such of the Collateral as is
registrable, At the request of the Lender, the Corporation shall cause the Chell
Shares to be deposited to one or more investment accounts with a registered
dealer in the name of the Lender as may be directed by the Lender from time to
time.
4.3. NOTICES AND OTHER COMMUNICATIONS IN RESPECT OF COLLATERAL
The Corporation shall deliver promptly to the Lender copies of all
notices or other communications received by the Corporation in respect of the
Collateral. Until the occurrence of an Event of Default, the Lender shall
deliver promptly to the Corporation all notices or other communications received
by the Lender or its nominee in respect of the Collateral. After the occurrence
of an Event of Default, the Corporation waives all rights to receive any notices
or communications received by the Lender or its nominee in respect of the
Collateral.
4.4. VOTING AND OTHER RIGHTS
4.4.1. Until the occurrence of an Event of Default:
4.4.1.1. the Corporation may exercise all rights to vote or other
similar rights with respect to any Collateral; and
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4.4.1.2. the Corporation shall be entitled to receive all dividends
(whether paid or distributed in cash, securities or other property)
and interest declared and paid or distributed in respect of the
Collateral.
4.4.2. Upon the occurrence of an Event of Default:
4.4.2.1. the Corporation shall have no rights to vote or take any
other action with respect to any Collateral;
4.4.2.2. the Lender may, but shall not be obliged to, vote and take
all other action with respect to any Collateral; and
4.4.2.3. the Corporation shall cease to be entitled to receive any
dividends or interest, whether declared or payable before or after
the occurrence of the Event of Default, in respect of the
Collateral.
4.5. DELIVERY OF COLLATERAL TO LENDER
Subject to section 4,4.1.2, all Collateral received at any time by
or on behalf of the Corporation, whether before or after the occurrence of an
Event of Default, shall be received and held by or on behalf of the Corporation
in trust, or as agent in the Province of Quebec, for the Lender and shall be
delivered to the Lender immediately upon such receipt.
4.6. FURTHER ASSURANCES
The Corporation shall at its own expense do, execute, acknowledge
and deliver or cause to be done, executed, acknowledged and delivered all such
further acts, security agreements, pledges, charges, assignments, hypothecs,
powers of attorney and assurances (including instruments supplemental or
ancillary hereto) and such financing statements as the Lender may from time to
time request to better assure and perfect its security on the Collateral.
ARTICLE 5.
REMEDIES
5.1. REMEDIES AVAILABLE
Upon the occurrence of an Event of Default, the Lender may, either
directly or through its agents or nominees, sell or otherwise dispose of, or
concur in selling or otherwise disposing of, whether by public sale, private
sale or otherwise, Collateral in such manner and on such terms as it considers
to be commercially reasonable. In addition, the Lender shall have the following
rights, powers and remedies:
5.1.1. to make payments to Persons having prior rights or Liens on the
Collateral; and
5.1.2. to demand, commence, continue or defend proceedings in the name of
the Lender or in the name of the Corporation for the purpose of
protecting, seizing, collecting, realizing
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or obtaining possession or payment of, or otherwise enforcing rights,
powers or remedies with respect to, the Collateral and to give effectual
receipts and discharges therefor.
In addition to the rights granted in this Agreement and in any other
agreement now or hereafter in effect between the Corporation and the Lender and
in addition to any other rights the Lender may have at law or in equity or
otherwise, the Lender shall have, both before and after the occurrence of an
Event of Default, all rights and remedies of a secured party under the PPSA.
The Lender may incur reasonable expenses in the exercise of its
rights, powers and remedies set out in this Agreement.
5.2. POSSESSION OF COLLATERAL
The Corporation acknowledges that the Lender may at any time take
possession of Collateral wherever it may be located and by any method permitted
by law, whether before or after the occurrence of an Event of Default.
5.3. REMEDIES NOT EXCLUSIVE
All rights, powers and remedies of the Lender under this Agreement
may be exercised separately or in combination and shall be in addition to, and
not in substitution for, any other security now or hereafter held by the Lender
and any other rights, powers and remedies of the Lender however created or
arising. No single or partial exercise by the Lender of any of the rights,
powers and remedies under this Agreement or under any other security now or
hereafter held by the Lender shall preclude any other and further exercise of
any other right, power or remedy pursuant to this Agreement or any other
security or at law, in equity or otherwise. The Lender shall at all times have
the right to proceed against Collateral or any other security in such order and
in such manner as it shall determine without waiving any rights, powers or
remedies which the Lender may have with respect to this Agreement or any other
security or at law, in equity or otherwise. No delay or omission by the Lender
in exercising any right, power or remedy hereunder or otherwise shall operate as
a waiver thereof or of any other right, power or remedy.
5.4. CORPORATION LIABLE FOR DEFICIENCY
The Corporation shall remain liable to the Lender for any deficiency
after the proceeds of any sale or other disposition of Collateral are received
by the Lender.
5.5. EXCLUSION OF LIABILITY OF LENDER
The Lender shall not be liable for any exercise or any failure to
exercise its rights, powers or remedies arising hereunder or otherwise,
including, without limitation, taking possession of, collecting, enforcing,
realizing, selling or otherwise disposing of, preserving or protecting the
Collateral, or taking any steps or proceedings for any such purposes or any
failure to do any of the foregoing. The Lender shall not have any obligation to
examine any notices or other communications with respect to the Collateral or to
advise the Corporation of the expiry of
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any warrants, options or other rights in respect of or comprising the Collateral
or to advise the Corporation of any other matter relating to any Persons which
are issuers of any Collateral, and the Lender shall not have any obligation to
take any steps or proceedings to preserve rights against prior parties to or in
respect of the Collateral, whether or not in the Lender's possession Subject to
the foregoing, the Lender shall use reasonable care in the custody and
preservation of the Collateral in its possession.
5.6. NOTICE OF SALE
Unless required by law, the Lender shall not be required to give the
Corporation any notice of any sale or other disposition of the Collateral, the
date, time and place of any public sale of Collateral or the date after which
any private disposition of Collateral is to be made.
ARTICLE 6.
APPLICATION OF PROCEEDS
6.1. APPLICATION OF PROCEEDS
The Proceeds arising from the enforcement of the Security Interest
as a result of the possession by the Lender of the Collateral or from any sale
or other disposition of, or realization of security on, the Collateral (except
following acceptance of Collateral in satisfaction of the Obligations) shall be
applied by the Lender in such order as the Lender may in its discretion
determine (subject to applicable law, including the PPSA).
6.2. PAYMENT INTO COURT
Where there is a question as to who is entitled to receive payment
of any portion of the Proceeds, the Lender may pay the Proceeds referred to
therein into court.
6.3. MONIES ACTUALLY RECEIVED
The Corporation shall be entitled to be credited only with the
actual Proceeds arising from the possession, sale or other disposition of, or
realization of security on, the Collateral when received by the Lender and such
actual Proceeds shall mean all amounts received in cash by the Lender upon such
possession, sale or other disposition of, or realization of security on, the
Collateral.
ARTICLE 7.
GENERAL
7.1. POWER OF ATTORNEY
The Corporation hereby appoints the Lender, as the Corporation's
attorney, with full power of substitution, in the name and on behalf of the
Corporation, to execute, deliver and do all such acts, deeds, documents,
transfers, demands, conveyances, assignments, contracts,
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assurances, consents, financing statements and things as the Corporation has
herein agreed to execute, deliver and do or as may be required by the Lender to
give effect to this Agreement or in the exercise of any rights, powers or
remedies hereby conferred on the Lender, and generally to use the name of the
Corporation in the exercise of all or any of the rights, powers or remedies
hereby conferred on the Lender. This appointment, coupled with an interest,
shall not be revoked by the insolvency, bankruptcy, dissolution, liquidation or
other termination of the existence of the Corporation or for any other reason.
7.2. SET-OFF
The Lender may at any time and from time to time, without notice to
the Corporation or to any other Person, set-off, appropriate and apply any and
all deposits, general or special, matured or unmatured, held by or for the
benefit of the Corporation with the Lender, and any other indebtedness and
liability of the Lender to the Corporation, matured or unmatured, against and on
account of the Obligations when due, in such order of application as the Lender
may from time to time determine.
7.3. DEALINGS WITH OTHERS
The Lender may grant extensions of time and other indulgences, take
and give up security, accept compositions, make settlements, grant releases and
discharges and otherwise deal with the Corporation, debtors of the Corporation,
sureties and other Persons and with Collateral and other security as the Lender
sees fit, without prejudice to the liability of the Corporation to the Lender or
the rights, powers and remedies of the Lender under this Agreement
7.4. NO OBLIGATION TO ADVANCE
Nothing herein contained shall in any way obligate the Lender to
advance any funds, or otherwise make or continue to make any credit available,
to the Corporation.
7.5. PERFECTION OF SECURITY
The Corporation authorizes the Lender to file such financing
statements and other documents and do such acts, matters and things as the
Lender may consider appropriate to perfect and continue the Security Interest,
to protect and preserve the interest of the Lender in Collateral and to realize
upon the Security Interest.
7.6. COMMUNICATION
Any notice or other communication, including a demand or a
direction, required or permitted to be given hereunder shall be effective if
given in accordance with section 10.4 of the Loan Agreement.
Notwithstanding the foregoing, if the PPSA requires that a notice or
other communication be given in a specified manner, then any such notice or
communication shall be given in such manner.
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7.7. SUCCESSORS AND ASSIGNS
This Agreement shall be binding on the Corporation and its
successors and shall enure to the benefit of the Lender and its successors and
assigns. This Agreement shall be assignable by the Lender free of any set-off,
counter-claim or equities between the Corporation and the Lender, and the
Corporation shall not assert against an assignee of the Lender any claim or
defense that the Corporation has against the Lender,
7.8. COPY RECEIVED
The Corporation hereby acknowledges receipt of a copy of this
Agreement.
IN WITNESS WHEREOF the Corporation has executed this Agreement as of
the 1st day of Tune, 2002.
BIG FISH LTD.
by:
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Name:
Title:
