SECURITY AGREEMENT
(XXXXXXX FOOD GROUP INC.)
THIS SECURITY AGREEMENT ("Agreement') is made as of the 9th day of March,
2005, by Xxxxxxx Food Group, Inc., a Delaware corporation, with a mailing
address of 0000 Xxxxxxx Xxxxx, Xxxxxxxxxxx, XX X0X 0X0 ('Debtor"), in favor of
Caithness Financial Services Limited, an Ontario corporation with a mailing
address of 000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, XX X0X 0X0 ("Lender").
1. THE SECURED INDEBTEDNESS. For valuable consideration, Debtor makes this
Agreement to secure the payment of all present and future indebtedness,
liabilities and obligations of Debtor to Lender, however created or arising,
whether under the following:
the Senior Secured Promissory Note of even date hereof in the amount of
Eight Hundred Eighty Thousand ($880,000) Dollars made by Debtor payable
to Lender, arising from the Loan Agreement (the "Loan Agreement') dated
March 8, 2005 between Xxxxxxx Baking Mix Products, Ltd. ("Xxxxxxx') and
Lender, and any other note(s), guaranty(ies), loan and/or letter of
credit agreement(s), indemnity agreement(s) or other evidence(s) of
indebtedness to Lender made as of the date of this Agreement by Xxxxxxx
or Debtor and all extensions, renewals, modifications, substitutions or
replacements;
or under any other present or future instrument or agreement between Xxxxxxx or
Debtor and Lender, or otherwise, and whether direct, indirect, primary,
secondary, fixed, contingent, joint or several, due or to become due, and
including, without limit and any and all renewals, extensions, modifications,
substitutions or replacements of any of them, and the performance of the
covenants and obligations due or to become due to Lender, including, without
limit, those due under this Agreement, and the repayment of all sums expended by
Lender in connection with performance of those covenants and obligations
(individually and collectively, the "Indebtedness").
2. GRANT OF SECURITY INTEREST IN COLLATERAL. To secure payment of the
Indebtedness, Debtor grants Lender a continuing first security interest in all
of the following assets and property of Debtor, wherever located and whether now
owned or existing or hereafter arising or acquired:
All assets of Debtor, (the "Collateral") including, but not limited to:
(a) all equipment in all of its forms, and all fixtures wherever
located, now or hereafter existing, and all parts thereof, and
accessions, accessories, supplies, and operating manuals thereto (the
"Equipment");
(b) all inventory in all of its forms, and all products thereof,
wherever located, now or hereafter existing, including, but not limited
to, (i) all raw materials and work in process therefore, finished goods
thereof, and materials used or consumed in the manufacture or
production thereof, (ii) goods in which the Debtor has an interest in
mass or a joint or other interest or right of any kind, and (iii) goods
which are held for sale or lease, and all accessions thereto and
products thereof (the "Inventory"; Equipment and Inventory are
hereinafter referred to collectively as the "Tangible Collateral");
(c) all accounts, rights arising under contracts, chattel paper,
instruments, rights under letters of credit, documents, general
intangibles, payment intangibles and other obligations of any kind,
whether now owned or hereafter acquired, whether or not arising out of
or in connection with the sale or lease of goods or the rendering of
services, and all rights now or hereafter existing in and to all
security agreements, leases and other contracts securing or otherwise
relating to any of such accounts, rights arising under contracts,
chattel paper, instruments, general intangibles or obligations
(collectively, the "Intangible Collateral");
(d) all interests in equities, debentures, securities and negotiable
instruments including, but limited to, all shares of capital stock
whether voting or non-voting, preferred or common, public or private,
or convertible and including all options, warrants, appreciation rights
and all other forms of ownership for example, but not limited to,
limited partnership interests, limited liability company membership,
real estate investment trusts and the like and the proceeds therefrom
("Securities");
(e) all books and records of the Debtor pertaining to any of the
Collateral; and
(f) all cash and all proceeds of any of the foregoing Collateral
(including, without limitation, proceeds which constitute property of
the types described in clauses (a) through (d) of this Section 1) and,
to the extent not otherwise included, all payments under insurance
(whether or not the Secured Party is loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to
or otherwise with respect to any of the foregoing Collateral.
3. WARRANTIES AND REPRESENTATIONS. Debtor represents and warrants to Lender as
follows:
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3.1 Payment of Indebtedness. Debtor will pay the Indebtedness and perform
all obligations related to the Indebtedness when due, whether by maturity,
acceleration or otherwise.
3.2 Authority. This Agreement is the valid and binding obligation of
Debtor, enforceable in accordance with its terms. Debtor is duly organized and
validly existing and in good standing under the laws of the State of Delaware
and authorized to transact business in all states in which Debtor conducts
business, and the execution, delivery and performance of this Agreement has been
duly authorized by all necessary action of Debtor's governing body and will not
violate Debtor's governing instruments or other agreements.
3.3 Name; Address; Location of Collateral. Debtor's name and mailing
address, chief executive office address, and the location of the Collateral and
all records concerning the Collateral are accurately set forth on the signature
page of this Agreement. Debtor has not conducted business in any other name.
Debtor shall notify Lender in advance of any changes to name, address, or
location of Collateral including the addition of one or more of the foregoing.
3.4 Title to Collateral. Debtor has good and marketable title to the
Collateral, free and clear of any liens, encumbrances or security interests
whatsoever, other than the security interest granted by this Agreement and
existing liens, encumbrances or security interests disclosed to and
affirmatively accepted by Lender in writing. Lender's security interest in the
Collateral has first priority, and Debtor will keep the Collateral free of all
other liens, encumbrances and security interests. Debtor will defend the
Collateral against all claims and demands of all persons at any time claiming
any interest in the Collateral. Debtor will immediately xxxx its records and the
Collateral to clearly indicate the security interest of Lender.
3.5 Nature of Collateral. All of the Collateral is held by Debtor solely
for business purposes, and none of the Collateral constitutes consumer goods. No
part of the Collateral consists of equipment used in farming operations or farm
products or accounts or general intangibles arising from or relating to the sale
of farm products by a xxxxxx. The Collateral was acquired in the ordinary course
of business of Debtor. There are no setoffs, counterclaims or defenses against
the Collateral.
3.6 Financing Statements. No other financing statement covering all or any
part of the Collateral is on file in any public office. Debtor will execute
financing statement(s) in form acceptable to Lender and will pay the cost of
filing financing statement(s) in all public offices wherever filing is deemed
desirable by Lender. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement under the Delaware
Uniform Commercial Code ("UCC") and may be filed by Lender in any filing office.
This Agreement shall be terminated only by Lender's filing of a termination
statement in accordance with the applicable provisions of the UCC. Debtor will
do all other things, execute all documents, and pay all related costs necessary
or requested by Lender to establish, verify or continue the validity and
priority of Lender's security interest.
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4. COVENANTS. Debtor covenants and agrees as follows:
4.1 Payment of Taxes. Debtor shall pay when due and before any interest,
collection fees or penalties accrue, all taxes, expenses, assessments, liens or
other charges which may now or hereafter be levied or assessed against the
Collateral. Debtor shall furnish proof of payment upon request of Lender.
4.2 Insurance.
4.2.1 Debtor shall keep the tangible Collateral insured for the benefit of
Lender against fire and other hazards and risks, including, without limit,
vandalism and malicious mischief, as Lender may require and shall provide public
liability and product liability insurance and any other insurance as Lender may
reasonably require from time to time. All insurance shall be in amounts and in
forms and with companies satisfactory to Lender. Debtor shall deliver to Lender
the policies evidencing the required insurance with premiums fully paid for one
year in advance, and with loss payee clauses making all losses payable to
Lender. Renewals of the required insurance (together with evidence of premium
prepayment for one (1) year in advance) shall be delivered to Lender at least
thirty (30) days before the expiration of any existing policies. All policies
and renewals shall provide that they may not be canceled or amended without
giving Lender thirty (30) days' prior written notice of cancellation or
amendment.
4.3 Maintenance of Collateral. Debtor will maintain the Collateral in good
condition and repair, and will replace any damaged or obsolete Collateral.
Debtor shall not use, or suffer or permit the use of, the Collateral for any
unlawful purpose, and shall use, operate and control the Collateral in
compliance with all applicable law and regulation, including without limitation
those governing protection of the environment and the use and disposal of
hazardous substances, and shall not cause, permit or suffer the presence, use,
storage, disposal, or release on or in any place where the Collateral is located
any toxic or hazardous substance as defined in any federal or state law,
regulation or rule relating to health, safety or environmental protection.
Debtor will promptly inform Lender of any loss or diminution in value of the
Collateral. Debtor shall make or permit no modification, compromise or
substitution for the Collateral without the prior written consent of Lender,
provided that in the ordinary course of business Debtor may (1) grant any person
obligated on any of the Collateral any credits, refunds and adjustments to which
they may be lawfully entitled, and (2) repair and replace Equipment. Debtor
shall maintain its place of incorporation in Delaware and shall maintain the
location where it keeps its Intangible Collateral at the location shown on the
signature page.
4.4 Stock and Equity Covenants. Because Lender believes that Debtor is
essentially a holding company, Debtor further covenants:
4.4.1 Debtor agrees to pledge its Securities to Lender until the
Indebtedness is fully paid with Lender to be a secured creditor under applicable
laws of the United States and Ontario;
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4.4.2 Debtor shall not sell, transfer, redeem, hypothecate, deliver,
encumber, assign, dispose, or abandon ("Disposition") its Securities or
Collateral without thirty (30) days advance written notice to Lender;
4.4.3 Debtor shall not distribute proceeds from any Disposition of
Securities without the prior written consent of Lender, it being understood that
Debtor accepts all proceeds as the Lender's agent in trust for the Lender and
Debtor will not commingle the proceeds with its other Collateral and shall
instead deliver said proceeds to the Lender upon Debtor's receipt or thereafter
if an Event of Default has occurred.
4.4.4 Debtor shall not engage in any financing activity with respect to any
of its subsidiaries or divisions without the advance written notice and consent
of the Lender.
4.5 Leased Facilities. If the Collateral is located at a facility leased by
Debtor, Debtor will obtain from the lessor a consent to the granting of a
security interest in the Collateral and a disclaimer of any interest of the
lessor in the Collateral. The consent and disclaimer shall be in form acceptable
to Lender. Debtor will pay all rents and perform other obligations for any
leased facilities.
4.6 Redelivered Collateral. If Lender redelivers any of the Collateral in
Lender's possession to Debtor or Debtor's designee for the purpose of (1) the
ultimate sale or exchange thereof, (2) presentation, collection, renewal, or
registration of transfer thereof, or (3) loading, unloading, storing, shipping,
transshipping, manufacturing, processing or otherwise dealing therewith
preliminary to sale or exchange, such redelivery shall be in trust for the
benefit of Lender and shall not constitute a release of Lender's security
interest therein or in the proceeds or products thereof unless Lender
specifically so agrees in writing. If Debtor requests any such redelivery,
Debtor will deliver with such request a duly executed financing statement in
form and substance satisfactory to Lender. Any proceeds of Collateral coming
into Debtor's possession as a result of any such redelivery shall be held in
trust for Lender and forthwith delivered to Lender for application on the
Indebtedness. Lender may (if, in its sole discretion, it elects to do so)
deliver the Collateral or any part of the Collateral to Debtor, and such
delivery by Lender shall discharge Lender from any and all liability or
responsibility for such Collateral.
4.7 Prohibition on Transfer or Modification. Debtor shall not transfer,
sell, assign, lease or modify the Collateral or any interest therein, any part
thereof, or any substantial portion of Debtor's other assets or property without
the prior written consent of Lender, except for sales of Inventory and
replacements of Equipment and supplies in the ordinary course of Debtor's
business.
4.8 Prohibition on Change of Name, Organization or Location. Debtor shall
not conduct Debtor's business under any name other than as appears in this
Agreement nor change or reorganize the type of Debtor's business entity, nor
change the location of any of the Collateral without the prior written consent
of Lender.
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4.9 Right of Setoff. Debtor grants Lender the right, exercisable at any
time, whether or not Debtor is then in default, to set off or apply against the
Indebtedness any account or deposit with Lender in which Debtor has an interest
or against any other amounts which may be in the possession of Lender and to the
credit of Debtor. 4.10 Examination of Records and Collateral. Debtor shall keep
full and accurate records of Debtor's business, including, without limit,
records related to the Collateral, and such records shall be open to audit,
inspection and duplication by Lender at all times. Lender may enter upon any
property owned by or in the possession of Debtor to examine and inspect the
Collateral. Debtor shall promptly provide Lender with any information concerning
the Collateral as Lender may request at any time.
4.11 Further Actions. Promptly upon the request of Lender, Debtor shall
execute, acknowledge and deliver any and all further documents, security
agreements, financing statements and assurances, and do or cause to be done all
further acts as Lender may require to confirm and protect the lien of this
Agreement or otherwise to accomplish the purposes of this Agreement.
5. RECEIVABLES. Debtor covenants and agrees as follows:
5.1 Collection. Debtor shall continue to collect and enforce all present
and future payments due to Debtor pursuant to the accounts, leases or any of the
other Collateral (collectively, the "Receivables") until Lender notifies Debtor
and the obligors under the Receivables of Lender's interest under this
Agreement, after which time Debtor shall hold any proceeds collected with
respect to the Receivables in trust for Lender and shall cooperate and assist in
collection and enforcement of the Receivables. Debtor shall not commingle the
proceeds and shall turn the proceeds over to Lender immediately upon receipt.
5.2 Updates. Debtor shall, immediately upon request from Lender, provide
Lender with an updated list of the Receivables, stating the current name and
address of each obligor, the balance due, the amount of any setoffs, defenses,
contras or counterclaims, whether Debtor's performance is complete, and any
other comments required by Lender. Each update list shall be Debtor's warranty
that (i) the Receivables are valid and enforceable and owing, subject only to
reported offsets, (ii) if evidenced by a note, chattel paper, or other
instrument or document, it has been endorsed and delivered to Lender, or
(iii) Debtor does not know of any death, dissolution, liquidation, insolvency,
bankruptcy, appointment of receiver, or similar action by or against any obligor
of the Receivables.
5.3 Notice to Obligors. Lender may notify obligors under the Receivables of
the existence of this Agreement, and Lender may instruct the obligors under the
Receivables to make future payments to Lender (whether before or after default
by Debtor).
5.4 Actions of Lender. Debtor agrees that Lender shall be entitled, in its
own name (or in the name of Debtor, or by receiver, or otherwise) but at the
sole expense of Debtor, to collect, demand, receive, xxx for or compromise any
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and all of the Receivables, to give good and sufficient releases, to endorse any
checks, drafts or other orders for the payment of money payable to Debtor in
payment of the Receivables and, in Lender's discretion, to file any claims or
take any other action or proceeding which Lender deems advisable. Upon the
occurrence of an Event of Default, to establish a United States Post Office Box
in the name of Debtor but under the exclusive custody and control of Lender, to
direct all obligors on any Receivable(s) or other intangible to make all
payments due and to become due thereon to the United States Post Office Box
established by Lender in the name of Debtor or to make said payments directly to
Lender, to direct the Postmaster of the United States Post Office to forward to
Lender all mail addressed to Debtor or to hold all mail addressed to Debtor at
the Post Office until an officer or employee of Lender shall request possession
of same, to open and dispose of all mail, howsoever received by Lender,
addressed to Debtor, and to endorse any item howsoever received by Lender,
representing any payment on or other proceeds or products of the Collateral.
5.5 No Duty. Debtor acknowledges and agrees that Lender shall not be
required or obligated to make any, demand or to make any inquiry as to the
nature or sufficiency of any payment received by Lender with respect to the
Receivables or to present to file any claim or take any other action to collect
or enforce the payment of any amounts with respect to the Receivables assigned
to Lender.
6. REIMBURSEMENT OF EXPENSES. Debtor shall be responsible for and shall
reimburse Lender for all costs and expenses, including attorneys' fees, incurred
by Lender in drafting and enforcing the rights of Lender under this Agreement.
All costs and expenses shall be included in the Indebtedness and shall be
immediately due and payable together with interest at the maximum rate in effect
under the Promissory Note and the Loan Documents. Such costs and expenses shall
include, without limitation, costs or expenses incurred by Lender in any
bankruptcy, reorganization, insolvency or other similar proceeding. Any
reference in this Agreement to attorneys' fees shall mean fees, charges, costs
and expenses of both in house and outside counsel and paralegals, whether or not
a suit or proceeding is instituted, and whether incurred at the trial court
level, on appeal, in a bankruptcy, administrative or probate proceeding, in a
workout, in consultation with counsel, or otherwise. All costs, expenses and
fees of any nature for which Debtor is obligated to reimburse or indemnify
Lender are part of the Indebtedness secured by this Agreement and are payable
upon demand, unless expressly provided otherwise, with interest at the highest
rate charged by Lender on any of the Indebtedness (but not to exceed the maximum
rate permitted by law).
7. RIGHTS AND OBLIGATIONS OF LENDER. In the event that Debtor fails to pay
taxes, maintain insurance or perform any other obligation arising under this
Agreement, Lender may pay or perform such obligation(s) for the account of
Debtor and the same shall be added to the Indebtedness and shall be immediately
due and payable together with interest at the highest rate charged by Lender on
any of the Indebtedness (but not to exceed the maximum rate permitted by law).
Lender shall not be liable for any loss to the Collateral nor shall such loss
reduce the amount of the Indebtedness. Lender will use reasonable care in the
custody and preservation of any Collateral in Lender's possession, but Lender
has no duty to preserve rights against prior parties.
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8. INDEMNIFICATION. Debtor shall indemnify, defend and save Lender harmless from
all claims, liabilities, obligations, damages, fines, costs, and expenses,
including attorneys' fees, incurred by Lender and causes of action or other
rights asserted against Lender and relating to this Agreement or Debtor's
obligations hereunder and/or the Collateral, its ownership, use, collection,
disposition or compliance with applicable law.
9. EVENTS OF DEFAULT AND REMEDIES.
9.1 Events of Default. Any of the following events shall, for purposes of
this Agreement, constitute an "Event of Default":
9.1.1 Failure by Debtor or any co-obligor to pay any payment of principal,
interest, bonus amount or Reserve or any other amount owing on the Indebtedness
when due, whether by maturity, acceleration or otherwise.
9.1.2 Any failure by Debtor, any co-obligor or any guarantor of all or any
part of the Indebtedness to comply with, or breach by Debtor, any co-obligor,
any guarantor or any subordinator of any of the terms, provisions, warranties or
covenants of this Agreement or any of the Loan Documents (as defined in the Loan
Agreement) after the lapse of any period such agreements of documents afford for
remedy of the breach. Notwithstanding any provision to the contrary, in the
event of a non-monetary or non-financial default, Debtor shall have a reasonable
time but not longer than thirty (30) days from the date of Lender's notice to
cure such default if such default is curable, otherwise no cure period shall
apply.
9.1.3 Termination, cancellation, or disclaimer of liability or
enforceability of any guaranty or subordination agreement given in connection
with any of the Indebtedness.
9.1.4 Institution of remedial proceedings or other exercise of rights and
remedies by the holder of any security interest or other lien against any of the
Collateral.
9.1.5 The insolvency of Debtor, any co-obligor or any guarantor or the
admission in writing of Debtor's, any co-obligor's or any guarantor's inability
to pay debts as they mature.
9.1.6 Any statement, representation or information made or furnished by or
on behalf of Debtor, any co-obligor, any guarantor or subordinator to Lender in
connection with or to induce Lender to provide any of the Indebtedness shall
prove to be false or materially misleading when made or furnished.
9.1.7 Institution of bankruptcy, reorganization, insolvency or other
similar proceedings by or against Debtor, any co-obligor or any guarantor or the
appointment of a receiver, custodian or trustee for the Debtor, any co-obligor
or any guarantor or any substantial portion of its assets.
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9.1.8 Any loss, theft, substantial damage or destruction to the Collateral,
unless insured as required by this Agreement or other document; or the entry of
any judgment in an amount greater than Twenty-Five Thousand and 00/100 Dollars
($25,000.00) against Debtor, any co-obligor, or any guarantor, or the issuance
or filing of any judgment, attachment, levy, garnishment or the commencement of
any related proceeding or judicial process upon or in respect to Debtor, any
co-obligor or any guarantor or the Collateral unless such action is stayed by
payment or an appropriate court order within 21 days after filing.
9.1.9 Sale or other disposition by Debtor, any co-obligor or any guarantor
of any substantial portion of assets or property, or equity, or a distribution
to shareholders outside the ordinary course of business, or death, dissolution,
merger, consolidation, termination of existence, insolvency, business failure or
assignment for the benefit of creditors of or by Debtor, any co-obligor or any
guarantor.
9.1.10 If there is any failure by Debtor, any co-obligor or any guarantor
to pay when due any indebtedness, or in the observance or performance of any
term, covenant or condition in any document evidencing, securing or relating to
such indebtedness.
9.1.11 There is a substantial change in the existing or prospective
financial condition of Debtor, any co-obligor, any guarantor or the Collateral,
which Lender in good faith determines to be materially adverse that is not
corrected or resolved to the Lender's satisfaction within thirty (30) days after
notice of the change to Debtor.
9.1.12 Lender in good xxxxx xxxxx itself insecure provided that Lender
notifies Debtor of the related event(s) or condition(s) and Debtor fails to
correct or resolve the same to Lender's reasonable satisfaction within thirty
(30) days afterwards.
9.2 Remedies. Upon the occurrence of any Event of Default which has
occurred and is continuing, Lender shall have the right to do the following:
9.2.1 Declare all or part of the Indebtedness immediately due and payable.
9.2.2 Institute legal proceedings to foreclose the lien and security
interest granted by this Agreement, to recover judgment for all of the
Indebtedness then due and owing, and to collect it out of any of the Collateral
or the proceeds of its sale.
9.2.3 Institute legal proceedings for the sale, under the judgment or
decree of any court of competent jurisdiction, of any or all of the Collateral.
9.2.4 Personally or by agents, attorneys, or appointment of a receiver,
enter upon any premises where any Collateral is located, and take possession of
any of it and all related records and/or render any of it unusable; and without
being responsible for its loss or damage, hold, operate, sell, lease, or dispose
of, all or any of the Collateral at one or more public or private sales,
leasings or other dispositions, at places and times and on terms and conditions
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as Lender may deem fit, without any previous demand or advertisement; and except
as provided in this Agreement, and to the extent permitted by law, Debtor waives
all notice of sale, lease or other disposition, and advertisement, and other
notice or demand, any right or equity of redemption, and any obligation of a
prospective purchaser or lessee to inquire as to the power and authority of
Lender to sell, lease or otherwise dispose of the Collateral or as to the
application by Lender of the proceeds of sale or otherwise, which would
otherwise be required by, or available to Debtor under, applicable law.
9.2.5 Take possession of the Collateral (and any other property then in or
on the Collateral) and all related records, with or without demand, and with or
without process of law; sell and dispose of the Collateral in any amount or
order and to distribute the proceeds according to law. Any statutory requirement
for notice shall be met if Lender shall send notice to Debtor at least five (5)
days prior to the date of sale, disposition or other applicable event. Debtor
shall be liable for any deficiency remaining after disposition of the
Collateral.
9.2.6 Notify all persons obligated under any of the Collateral to make all
payments to Lender and demand, collect, xxx for, receive, receipt for, settle
and compromise, extend or postpone the time for payment of, forbear from
enforcing, and otherwise do all things Debtor could do in connection therewith.
9.2.7 Exercise any one or more of the rights and remedies under the UCC or
at law or equity to enforce the payment of the Indebtedness.
9.3 Remedies Generally.
9.3.1 At any sale pursuant to this Agreement, physical or constructive
possession of the Collateral is not required and any purchaser may conclusively
rely on the recitals in any evidence of conveyance and shall have not obligation
to see to the application of the purchase money. Any sale of any of the
Collateral under this Agreement shall be a perpetual bar against Debtor with
respect to that Collateral.
9.3.2 Debtor agrees, upon request of Lender, to assemble the Collateral and
all related records and make it available to Lender at any place which is
reasonably convenient for Lender. Debtor grants Lender permission to enter upon
any premises owned or occupied by Debtor for the purpose of taking possession of
the Collateral. Debtor agrees to notify all persons obligated under any of the
Collateral to make all payments to Lender.
9.3.3 All remedies provided for under this Agreement shall be available to
the extent not prohibited by law. Each remedy shall be cumulative and additional
to any other remedy of Lender at law, in equity or by statute. No delay or
omission to exercise any right or power accruing upon any default or Event of
Default shall impair any such right or power or shall be construed to be a
waiver of, or acquiescence in, any such default or Event of Default.
9.4 Application of Proceeds. Any proceeds received by Lender from the
exercise of its remedies shall be applied as follows:
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9.4.1 First, to pay all costs and expenses incidental to disposition of the
Collateral, including, without limit, reasonable attorneys fees, any taxes,
assessments, liens and encumbrances prior to the lien of this Agreement. 9.4.2
Second, to the payment of the Indebtedness in the following order: (i) Lender's
expenses made to perform Debtor's obligations, (ii) late charges and interest
accrued and unpaid, (iii) any prepayment premiums and any bonus amounts,
(iv) unpaid fees and other charges, and (v) the outstanding principal balance.
9.4.3 Third, any surplus remaining shall be paid to Debtor or to whosoever
may be lawfully entitled.
10. MISCELLANEOUS.
10.1 Governing Law. This Agreement shall be construed according to the laws
of the State of Michigan.
10.2 Successors and Assigns. Lender shall have the right to assign any of
the Indebtedness and deliver all or any part of the Collateral without Debtor's
consent. This Agreement shall be binding upon the successors and assigns of
Debtor including, without limit, any debtor in possession or trustee in
bankruptcy for Debtor, and the rights and privileges of Lender under this
Agreement shall inure to the benefit of its successors and assigns. This shall
not be deemed a consent by Lender to a conveyance by Debtor of all or any part
of the Collateral or of any ownership interest in Debtor.
10.3 Notices. Notice from one party to another relating to this Agreement,
if required, shall be deemed effective if made in writing (including
telecommunications) and delivered to the recipient's address or telecopier
number set forth by any of the following means: hand delivery, registered or
certified mail, postage prepaid, express mail or other overnight courier service
or telecopy, telex or other wire transmission with request for assurance of
receipt in a manner typical with respect to communications of that type. Notice
made in accordance with these provisions shall be deemed delivered on receipt if
delivered by hand or wire transmission, on the third business day after mailing
if mailed by registered or certified mail, or on the next business day after
mailing or deposit with the postal service or an overnight courier service if
delivered by express mail or overnight courier to the following address or
number:
If to Secured Party:
Caithness Financial Services Limited
000 Xxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX
Xxxxxx X0X 0X0
Attn: Xxxxxxx Xxxxxxxxx
Facsimile No.: 000-000-0000
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If to Debtor:
Xxxxxxx Food Group, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, XX
Xxxxxx X0X 0X0
Attn: Xx Xxxxxx
Facsimile No.: (000) 000-0000
10.3.1 Entire Agreement; Waivers; Amendments. This Agreement and any
agreement to which it refers state all rights and obligations of the parties and
supersede all other agreements (oral or written) with respect to the security
interests granted by this Agreement. Any waiver by Lender of any default or
Event of Default shall be in writing and shall be limited to the particular
default waived and shall not be deemed to waive any other default. Any amendment
of this Agreement shall be in writing and shall require the signature of Debtor
and Lender.
10.4 Partial Invalidity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement.
10.5 Inspections. Any inspection, audit, appraisal or examination by Lender
or its agents of the Collateral or of information or documents pertaining to the
Collateral is for the sole purpose of protecting Lender's interests under this
Agreement and is not for the benefit or protection of Debtor or any third party.
10.6 Joint and Several Liability. In the event that more than one person or
entity executes this Agreement, the obligations of each person or entity shall
be joint and several and may be enforced against any one or more of them in any
order without releasing any of the others.
10.7 Automatic Reinstatement. Notwithstanding any prior revocation,
termination, surrender or discharge of this Agreement, the effectiveness of this
Agreement shall automatically continue or be reinstated, as the case may be, in
the event that any payment received or credit given by Lender in respect of the
Indebtedness is returned, disgorged or rescinded as a preference, impermissible
setoff, fraudulent conveyance, diversion of trust funds, or otherwise under any
applicable state or federal law, including, without limit, laws pertaining to
bankruptcy or insolvency, in which case this Agreement shall be enforceable as
if the returned, disgorged or rescinded payment or credit had not been received
or given, whether or not Lender relied upon this payment or credit or changed
its position as a consequence of it. In the event of continuation or
reinstatement of this Agreement, Debtor agrees upon demand by Lender to execute
and deliver to Lender those documents which Lender determines are appropriate to
further evidence (in the public records or otherwise) this continuation or
reinstatement, although the failure of Debtor to do so shall not affect in any
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way the reinstatement or continuation. If Debtor does not execute and deliver to
Lender such documents upon demand, Lender and each officer of Lender is
irrevocably appointed (which appointment is coupled with an interest) the true
and lawful attorney of Debtor (with full power of substitution) to execute and
deliver such documents in the name and on behalf of Debtor.
10.8 WAIVER OF JURY TRIAL. DEBTOR AND LENDER ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES
ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE
OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
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This Security Agreement is dated and effective on the date first above
written.
DEBTOR:
XXXXXXX FOOD GROUP, INC.,
a Delaware corporation
By:
-----------------------
Xx Xxxxxx
Its: President
Location of the Collateral and all records:
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, XX
Xxxxxx X0X 0X0
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