Exhibit 10.6
SECURITY AGREEMENT
To: Xxxxx Xxxxxxxx, Xxxxx Xxxxxxx and Xxx Xxxxx (the "Vendors")
Address: c/o Xxxxxx, Xxxxxx LLP, 000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxx,
Xxxxxxx X0X 0X0
Facsimile No. (705-792-6911)
Debtor's Name: 1500536 Ontario Inc. (the "Debtor")
Chief Executive Office Address: 00 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxx
X0X 0X0 Facsimile No. (705-725-7045)
27. General Security Interest. As security for the payment and performance of
all present and future indebtedness, liabilities and obligations of the Debtor
to the Vendors arising pursuant to a certain guarantee provided by the Debtor in
favour of the Vendors with respect to the obligations created by a certain
promissory note of even date herewith authorized, executed and delivered in
favour of the Vendors by Teleplus Connect Corp. in the principal amount of Six
Hundred Sixteen Thousand Eight Hundred Twenty Two Dollars ($616,822.) and this
Security Agreement (all such indebtedness, liabilities, obligations,
expenditures, costs and expenses are hereinafter collectively referred to as the
"Obligations"), whether direct or indirect, absolute or contingent, liquidated
or unliquidated, as principal or as surety, alone or with others, of whatsoever
nature or kind, in any currency, the Debtor hereby assigns, charges, pledges,
mortgages and grants to the Vendors a security interest in all of the
undertaking, property and assets of the Debtor, both real and personal,
immoveable and moveable, tangible and intangible, legal and equitable, of
whatsoever nature and kind and wheresoever situate, now owned or hereafter
acquired by or on behalf of the Debtor or in respect of which the Debtor now or
hereafter has any right, title or interest (all of which is hereinafter called
the "Collateral"), including without limitation:
(a) Intangibles - all intangible property including without limitation
book debts and accounts, all contractual rights and insurance
claims, licences, computer software, warranties, ownership
certificates, patents, trademarks, trade names, goodwill, copyrights
and other industrial property of the Debtor;
(b) Books & Records - all of the Debtor's, manuals, publications,
letters, deeds, documents, writings, papers, invoices, books of
account and other books relating to or being records of debts,
chattel paper or documents of title or by which such are or may
hereafter be secured, evidenced, acknowledged or made payable;
(c) Equipment - all of the Debtor's tools, machinery, equipment,
apparatus, furniture, plants, fixtures, vehicles and other tangible
personal property, other than Inventory (as defined below),
(collectively, the "Equipment") including, without limitation, the
Equipment described in Schedule "A" hereto;
(d) Inventory - all of the Debtor's tangible personal property held for
sale or lease or that have been leased or that are to be furnished
or have been furnished under a contract of service, or that are raw
materials, work in process, or materials used or consumed in a
business or profession (collectively, the "Inventory");
(e) Real Property - all of the Debtor's real and immovable property,
both freehold and leasehold, now or hereafter owned, acquired or
occupied by the Debtor, together with all buildings, erections,
improvements and fixtures situate upon or used in connection
therewith, including any lease, verbal or written or any agreement
therefor, (collectively, the "Real Property") provided, however, the
last day of any term of any such lease, verbal or written, or any
agreement therefor now held or hereafter held by the Debtor, is
excepted out of the Real Property charged by this Security
Agreement, but should such charge become enforceable the Debtor
shall thereafter stand possessed of the last day of such leasehold
interest upon trust to assign and dispose thereof as the Vendors may
direct;
(f) Other Property - the Debtor's undertaking and all of the Debtor's
other property and assets including, without limitation, uncalled
capital, judgments, rights, franchises, licenses, chattel paper,
documents of title, goods, instruments, money and securities (as
those terms are defined in the Personal Property Security Act
(Ontario)(the "PPSA") governing this Security Agreement); and
(g) Proceeds - all of the Debtor's property in any form derived directly
or indirectly from any use or dealing with the Collateral or that
indemnifies or compensates for loss of or damage to the Collateral
(collectively, the "Proceeds").
28. Attachment. The security interest given hereunder will attach immediately
upon the execution of this Security Agreement. The security interest granted
hereby has not been postponed and will attach to any particular Collateral as
soon as the Debtor has rights in such Collateral.
29. Dealings with Collateral. Until the security interest hereby created becomes
enforceable, the Debtor may sell its Inventory and collect its book debts in the
ordinary course of its business; provided that after the security interest
becomes enforceable, all book debts collected by the Debtor shall be immediately
remitted to the Vendors. Until remitted, all book debts received by the Debtor
shall be held by the Debtor as agent and in trust for the Vendors.
30. Representations and Warranties of the Debtor. The Debtor represents and
warrants to the Vendors as follows:
(a) The Debtor now owns or will own the Collateral, as the case may be,
free and clear of any prior lien, security interest or encumbrance
save and except for the security interest granted hereby and for
those encumbrances as shown in Schedule "B" which have been validly
perfected ("Permitted Encumbrances");
(b) This Security Agreement has been properly authorized and constitutes
a legally valid and binding obligation of the Debtor;
(c) The authorization, creation, execution and delivery of this Security
Agreement and compliance with its terms
(i) does not and shall not contravene any applicable law,
regulation, rule, order, judgment or injunction or the charter
documents, by-laws or any unanimous shareholders' agreement of
the Debtor; and
(ii) does not and shall not result in a breach of or a default
under any indenture, instrument, lease, agreement or
undertaking to which the Debtor is a party or by which it or
the Collateral is or may become bound.
31. General Covenants. The Debtor hereby declares, covenants and agrees that it:
(a) Pay Costs - shall pay all costs and expenses (including reasonable
legal fees and disbursements on a solicitor and own client basis) of
the Vendors incidental to or which in any way relates to this
Security Agreement or its enforcement, including (i) the
preparation, execution and filing of this Security Agreement and any
instruments postponing, discharging, amending, extending or
supplemental to this Security Agreement ("the Vendors Security");
(ii) perfecting and keeping perfected the Vendors Security; (iii)
maintaining the intended priority of the Vendors Security on all or
any part of the Collateral; (iv) taking, recovering or possessing
the Collateral; (v) taking any actions or other proceedings to
enforce the remedies provided herein or otherwise in relation to
this Security Agreement or the Collateral, or by reason of a default
under the Vendors Security or the non-payment of the moneys hereby
secured; (vi) taking proceedings, giving notices and giving
responses required under any applicable law concerning or relating
to the Vendors Security, including compliance with the provisions of
applicable bankruptcy, insolvency, personal property security and
mortgage enforcement legislation; (vii) responding to or
participating in proceedings in the nature of those described in
sections 14(d), (e) and (f) hereof; and (viii) obtaining the advice
of counsel and other advisors in relation to the foregoing;
all such costs and expenses and other monies payable hereunder, together with
interest at the highest rate chargeable by the Vendors from time to time on the
Obligations, shall form part of the Obligations, shall be payable by the Debtor
on demand and shall be secured hereby; (b) To Pay Rents and Taxes - shall pay
all rents, taxes and assessments lawfully imposed upon the Real Property where
the Collateral is located or any part thereof when the same become due and
payable, and shall show to the Vendors on request receipts for such payment;
(c) To Maintain Corporate Existence and Security - shall maintain its
corporate existence, shall maintain the security hereby created as
valid, effective and perfected security at all times, shall observe
and perform all of its obligations under leases, licences and other
agreements to which it is a party so as to preserve and protect the
Collateral and its value;
(d) Not to Sell - shall not, except for Inventory sold in the ordinary
course of business and except as otherwise permitted hereunder,
remove, destroy, lease, sell or otherwise dispose or part with
possession of any of the Collateral; provided that the Debtor may
sell or otherwise dispose of furniture, machinery, equipment,
vehicles and accessories which have become worn out or damaged or
otherwise unsuitable for their purposes on condition that it shall
substitute therefor, subject to the lien hereof and free from prior
liens, security interests or encumbrances, property of equal value
so that the security hereby constituted shall not thereby be in any
way reduced or impaired;
(e) No Other Liens - shall not create, assume or suffer to exist any
charge, lien, deemed trust, security interest or encumbrance upon
any Collateral ranking or purporting to rank in priority to or pari
passu with the security interest created hereunder, other than
Permitted Encumbrances. No provision hereof shall be construed as a
subordination or postponement of the security interest created
hereunder to or in favour of any other charge, lien, security
interest or encumbrance, whether or not it is a Permitted
Encumbrance;
(f) To Hold Proceeds of Unauthorized Sale in Trust - in the event the
Collateral or any part thereof is sold or disposed of prior to the
full discharge of this Security Agreement by the Vendors, in any
manner not authorized by this Security Agreement, the Debtor shall
hold all proceeds of such sale or disposition received by the Debtor
as trustee for the Vendors until the Debtor has been fully released
from this Security Agreement by the Vendors;
(g) To Insure - shall keep insured the Collateral to its full insurable
value or in such amounts as the Vendors may reasonably require
against all risks, with insurers approved by the Vendors and will
pay all premiums necessary for such purposes as the same shall
become due; the proceeds under all policies of insurance are hereby
assigned to the Vendors subject to Permitted Encumbrances as further
security hereunder and shall be payable to the Vendors as their
interest may appear and contain such mortgage clauses as the Vendors
may require; such policies or contracts shall be in terms reasonably
satisfactory to the Vendors and at the request of the Vendors shall
be delivered to and held by the Vendors subject to the rights of the
holders of Permitted Encumbrances;
(h) To Furnish Proofs - shall forthwith on the happening of any loss or
damage furnish at its expense all necessary proofs and do all
necessary acts to enable the Vendors to obtain payment of the
insurance moneys subject to the rights of the holders of Permitted
Encumbrances;
(i) Inspection by the Vendors - shall allow any employees or third
parties retained by the Vendors at any reasonable time and with
reasonable prior notice to the Debtor to enter the premises of the
Debtor or others to inspect the Collateral and to inspect the books
and records of the Debtor relating to the Collateral and make
extracts therefrom, and shall permit the Vendors prompt access to
such other persons as the Vendors may deem necessary or desirable
for the purposes of inspecting or verifying any matters relating to
any part of the Collateral or the books and records of the Debtor
relating to the Collateral, provided that any information so
obtained shall be kept confidential, save as required by the Vendors
in exercising their rights hereunder or pursuant to any applicable
law or court order;
(j) Use and Maintenance - shall cause the Equipment and Inventory to be
operated in accordance with any applicable manufacturer's manuals or
instructions, by competent and duly qualified personnel. Any and all
additions and accessions to and parts and replacements for the
Equipment or Inventory shall immediately become subject to the
security interest created hereby. The Debtor shall not change the
intended use of the Collateral without the prior written consent of
the Vendors which will not be unreasonably withheld or delayed;
(k) Location of Collateral - shall keep the Collateral at the location
set forth in Schedule "B" hereto, except for goods in transit to
such locations, or Inventory on lease or consignment, or with the
prior written consent of the Vendors;
(l) No Affixation - shall not permit the Collateral to be attached to or
affixed to real or other personal property without the prior written
consent of the Vendors, which will not be unreasonably withheld or
delayed. The Debtor shall obtain and deliver to the Vendors such
waivers as the Vendors may reasonably request from any owner,
landlord or mortgagee of premises on which the Collateral is located
or to which the Collateral may become affixed or attached. The
Debtor shall promptly do, execute and deliver all such further acts,
documents, agreements or assurances as the Vendors may reasonably
require for giving effect to the intent of this Security Agreement
and shall register such notice or documents against the title to
such premises as the Vendors may reasonably request to protect its
interests hereunder and shall maintain plates or marks showing the
name of the Vendors upon the Collateral as requested;
(m) Not to Remove - prior to moving any of the Collateral from the
location indicated in Schedule "B" hereto, or to leasehold property,
the Debtor shall effect such further registrations and make such
reasonable effort to obtain such other consents and give such other
security, at the sole cost and expense of the Debtor, as may be
required or desirable to protect or preserve the security hereby
created and to maintain the priority intended to be granted to the
Vendors hereunder as against all others including landlords, and the
Debtor shall forthwith notify the Vendors of the intended removal
and the action proposed to be taken;
(n) Compliance with Environmental Laws
(i) shall conduct and maintain its business, operations, Real
Property and the Collateral so as to comply in all material
respects with all applicable Environmental Laws, including
obtaining all necessary material licenses, permits, consents
and approvals required to own or operate the Collateral and
the business carried out on, at or from the Real Property;
(ii) except as specifically permitted by the Vendors in writing, it
shall not permit or suffer to exist, Contaminants or dangerous
or potentially dangerous conditions in, on or below the Real
Property including, without limitation, any polychlorinated
biphenyls, radio-active substances, underground storage tanks,
asbestos or urea formaldehyde foam insulation;
(iii) has no knowledge of the existence of Contaminants or dangerous
or potentially dangerous conditions at, on or under the Real
Property or any properties in the vicinity of the Real
Property which could affect the Real Property or the market
value thereof or in levels that exceed the standards in
Environmental Laws;
(iv) has no knowledge of the Real Property, or any portion thereof,
having been used for the disposal of waste;
(v) has not given or received, nor does it have an obligation to
give, any notice, claim, communication or information
regarding any past, present, planned or threatened treatment,
storage, disposal, presence, release or spill of any
Contaminant at, on, under or from the Real Property or any
property in the vicinity of the Real Property, including any
notice pursuant to any Environmental Laws or any environmental
report or audit. The Debtor shall notify the Vendors promptly
and in reasonable detail upon receipt of any such claim,
notice, communication or information or if the Debtor becomes
aware of any violation or potential violation of the Debtor of
any Environmental Laws and shall describe therein the action
which the Debtor intends to take with respect to such matter;
(vi) shall at the Debtor's expense promptly take or cause to be
taken any and all necessary remedial or clean-up action in
response to the presence, storage, use, disposal,
transportation, release or discharge of any Contaminant in,
on, under or about any of the Real Property, or used by the
Debtor, in compliance with all material laws including,
without limitation, Environmental Laws, and in accordance with
the orders and directions of all applicable federal, state,
provincial, municipal and local governmental authorities;
(vii) shall deliver to the Vendors, upon request, a true and
complete copy of all environmental audits, evaluations,
assessments, studies or tests relating to the Real Property,
the Collateral or the Debtor now in its possession or control
or forthwith after the completion thereof, or upon such
materials coming into the Debtor's possession or control;
(viii) shall indemnify and save harmless the Vendors, and its agents
from and against all losses, liabilities, damages or costs
(including reasonable legal fees and disbursements) suffered
including, without limitation, the cost or expense of any
environmental investigation, the preparation of any
environmental or similar report, and the costs of any
remediation arising from or relating to any breach of the
foregoing covenants of this section 4(n), any breach by the
Debtor or any other person now or hereafter having an interest
in the Collateral or the Real Property which is asserted or
claimed against the Vendors; the presence, in any form, of any
Contaminant on or under the Real Property, or the discharge,
release, spill or disposal of any contaminant by the Debtor,
which is asserted or claimed against any of these indemnified
persons. This indemnity shall survive the payment in full of
all amounts secured hereby and the discharge of this Security
Agreement. The Vendors shall hold the benefit of this
indemnity in trust for those indemnified persons who are not
parties to this Security Agreement.
(ix) For the purposes hereof:
a. "Contaminant" means any solid, liquid, gas, odour, heat,
sound, smoke, waste, vibration, radiation or combination
of any of them resulting directly or indirectly from
human activities that may cause: (i) impairment of the
quality of the natural environment for any use that can
be made of it, (ii) injury or damage to property or to
plant or animal life, (iii) harm or material discomfort
to any person, (iv) an adverse affect on the health of
any person, (v) impairment of the safety of any person,
(vi) rendering any property or plant or animal life
unfit for use by man, (vii) loss of enjoyment of normal
use of property, or (viii) interference with the normal
conduct of business, and includes any pollutant or
contaminant as defined in any applicable Environmental
Laws and any biological, chemical or physical agent
which is regulated, prohibited, restricted or
controlled; and
b. "Environmental Laws" means the common law and all
applicable federal, provincial, local, municipal,
governmental or quasi-governmental laws, rules,
regulations, policies, guidelines, licences, orders,
permits, decisions or requirements concerning
Contaminants, occupational or public health and safety
or the environment and any other order, injunction,
judgment, declaration, notice or demand issued
thereunder.
32. Collection of Debts. Upon the occurrence of an Event of Default, hereunder,
the Vendors may, without exercising any of their other rights or remedies
hereunder, give notice of the security interest in, and the assignment to, the
Vendors of any debt or liability forming part of the Collateral and may direct
such person to make all payments on account of any such debt or liability to the
Vendors.
33. Waiver of Covenants. The Vendors may waive in writing any breach by the
Debtor of any of the provisions contained in this Security Agreement or any
default by the Debtor in the observance or performance of any covenant or
condition required to be observed or performed by the Debtor hereunder, provided
that no such waiver or any other act, failure to act or omission by the Vendors
shall extend to or be taken in any manner to affect any subsequent breach or
default or the rights of the Vendors resulting therefrom.
34. Performance of Covenants by the Vendors. If the Debtor shall fail to perform
any covenant on its part herein contained, the Vendors may in its absolute
discretion perform any such covenant capable of being performed by it, but the
Vendors shall be under no obligation to do so. If any such covenant requires the
payment of money or if the Collateral or any part thereof shall become subject
to any charge, lien, security interest or encumbrance ranking in priority to the
security interest created hereby, the Vendors may in its absolute discretion
make such payment and/or pay or discharge such charge, lien, security interest
or encumbrance, but the Vendors shall be under no obligation to do so. All sums
so paid by the Vendors, together with interest at the highest rate chargeable by
the Vendors from time to time on the Obligations, shall be payable by the Debtor
on demand and shall constitute a charge upon the Collateral. No such performance
or payment shall relieve the Debtor from any default hereunder or any
consequences of such default.
35. Application of Insurance Proceeds. Any insurance moneys received by the
Vendors may at the option of the Vendors be applied to rebuilding or repairing
the Collateral, or be paid to the Debtor, or any such moneys may be applied in
the sole discretion of the Vendors, in whole or in part, to the repayment of the
Obligations or any part thereof whether then due or not, with any partial
payments to be credited against principal instalments payable thereunder in
inverse order of their maturity dates.
36. No Merger or Novation. The taking of any judgment or the exercise of any
power of seizure or sale shall not operate to extinguish the liability of the
Debtor to perform its obligations hereunder or to pay the Obligations hereby
secured, shall not operate as a merger of any covenant herein contained or
affect the right of the Vendors to interest in effect from time to time
hereunder and the acceptance of any payment or other security shall not
constitute or create any novation. The execution and delivery of this Security
Agreement or of any instruments or documents supplemental hereto shall not
operate as a merger of any representation, warranty, term, condition or other
provision contained in any other obligation or indebtedness of the Debtor to the
Vendors.
37. Security in Addition. The security hereby constituted is in addition to any
other security now or hereafter held by the Vendors. The taking of any action or
proceedings or refraining from so doing, or any other dealings with any other
security for the moneys secured hereby, shall not release or affect the security
created hereby.
38. Partial Discharges. The Vendors may in its sole discretion grant partial
discharges or releases of security in respect of any of the Collateral on such
terms and conditions as it shall deem fit and no such partial discharges or
releases shall affect the remainder of the security created hereby nor shall it
alter the obligations of the Debtor under the Obligations or hereunder.
39. Notice of Change. The Debtor shall immediately notify the Vendors in writing
of any proposed change and any actual change in the Debtor's name or address or
the location of the Collateral. The Debtor agrees to execute at the Debtor's
expense, any instruments, notices or other documents required to effect any
registration which the Vendors deems necessary to protect its interest in the
Collateral in any jurisdiction.
40. Events of Default. Each of the following events shall constitute an "Event
of Default":
(a) the Debtor does not pay any of the Obligations when due and such
default shall continue for five (5) business days after written
notice thereof to the Debtor by the Vendors;
(b) the Debtor fails to perform or observe any other covenants contained
in this Security Agreement and such default shall continue for five
(5) business days after written notice thereof to the Debtor by the
Vendors;
(c) the Debtor ceases or threatens to cease to carry on its business;
(d) the Debtor becomes bankrupt or insolvent or commits an act of
bankruptcy, or any proceeding is commenced against, by or affecting
the Debtor when, if capable, is not stayed within five (5) business
days of the commencement of same:
(i) seeking to adjudicate it a bankrupt or insolvent;
(ii) seeking liquidation, dissolution, winding up, restructuring,
reorganization, arrangement, protection, relief or composition
of it or any of its property or debt or making a proposal with
respect to it under any law relating to bankruptcy,
insolvency, reorganization or compromise of debts or other
similar laws (including, without limitation, any
reorganization, arrangement or compromise of debt under the
laws of its jurisdiction of incorporation or organization); or
(iii) seeking appointment of a receiver, receiver and manager,
liquidator, trustee, agent, custodian or other similar
official for it or for any part of its properties and assets,
including the Collateral or any part thereof;
(e) any order or judgment is issued by a court granting any of the
relief referred to in section 14(d) hereof;
(f) if an encumbrancer or secured creditor shall appoint a receiver or
agent or other similar official over any part of the Collateral, or
take possession of any part of the Collateral or if any execution,
distress or other process of any court becomes enforceable against
any Collateral, or a distress or like process is levied upon any of
such Collateral;
(g) if the Debtor takes any proceedings for its dissolution, liquidation
or amalgamation with another company or if the legal or corporate
existence of the Debtor shall be terminated by expiration,
forfeiture or otherwise;
(h) if there is any material misrepresentation or misstatement contained
in any certificate or document delivered by an officer or director
of the Debtor in connection with this Security Agreement; and
(i) if a default occurs under any agreement supplemental hereto or any
other security previously now or hereafter granted to the Vendors by
the Debtor or any guarantor of the obligations of the Debtor or
should any party to any agreement supplemental or collateral hereto
fail to carry out or observe any covenant or condition on its part
to be observed or performed and such default continues for five (5)
business days after written notice thereof to the Debtor by the
Vendors.
41. Enforcement. Upon the happening of any Event of Default, the security
granted herein shall become immediately enforceable and the Vendors may at its
option declare this Security Agreement to be in default and may exercise any
rights, powers or remedies available to the Vendors at law or in equity or under
the PPSA or other applicable legislation and, in addition, may exercise one or
more of the following rights, powers or remedies, which rights, powers and
remedies are cumulative:
(a) to declare the full amount of the Obligations to be immediately due
and payable;
(b) to terminate the Debtor's right to possession of the Collateral,
cause the Debtor to immediately assemble and deliver the Collateral
at such place or places as may be specified by the Vendors, and
enter upon the premises where the Collateral is located and take
immediate possession thereof, whether it is affixed to the realty or
not, and remove the Collateral without liability to the Vendors for
or by reason of such entry or taking of possession, whether for
damage to property caused by taking such or otherwise;
(c) to enter upon and hold, possess, use, repair, preserve and maintain
all or any part of the Collateral and make such replacements thereof
and additions thereto as the Vendors shall deem advisable;
(d) to sell, for cash or credit or part cash and part credit, lease or
dispose of or otherwise realize upon the whole of any part of the
Collateral whether by public or private sale as the Vendors in its
absolute discretion may determine, in accordance with applicable
law, without notice to the Debtor or advertisement and after
deducting from the proceeds of sale (including reasonable legal fees
and disbursements) incurred in the repossession, sale, lease or
other disposition of the Collateral apply the proceeds thereof to
the Obligations in the manner and order to be determined by the
Vendors, provided however that the Vendors shall only be liable to
account to the Debtor, any subsequent encumbrancers and others for
money actually received by the Vendors and provided that the Debtor
shall pay any deficiency forthwith;
(e) to appoint by instrument in writing any person or persons to be a
receiver or receiver and manager of all or any portion of the
Collateral, to fix the receiver's remuneration and to remove any
receiver so appointed and appoint another or others in its stead;
(f) to apply to any court of competent jurisdiction for the appointment
of a receiver or receiver and manager for all or any portion of the
Collateral;
(g) to retain the Collateral in satisfaction of the Obligations.
42. Powers of Receiver.
(a) Any receiver (which term includes a receiver and manager) shall have
all of the powers of the Vendors set forth in this Security
Agreement and, in addition, shall have the following powers:
(i) to lease all or any portion of the Collateral and for this
purpose execute contracts in the name of the Debtor, which
contracts shall be binding upon the Debtor and the Debtor,
upon an Event of Default that is continuing, hereby
irrevocably constitutes such receiver as its attorney for such
purposes;
(ii) to take possession of the Collateral, collect all rents,
issues, incomes and profits derived therefrom and realize upon
any additional or collateral security granted by the Debtor to
the Vendors and for that purpose may take any proceedings in
the name of the Debtor or otherwise; and
to carry on or concur in carrying on the business which the Debtor
is conducting and for that purpose the receiver may borrow money on
the security of the Collateral in priority to this Security
Agreement; (b) Any receiver appointed pursuant to the provisions
hereof shall be deemed to be the agent of the Debtor, to the extent
permitted by applicable law, for the purposes of:
(i) carrying on and managing the business and affairs of the
Debtor, and
(ii) establishing liability for all of the acts or omissions of the
receiver while acting in any capacity hereunder and the
Vendors shall not be liable for such acts or omissions,
provided that, without restricting the generality of the foregoing,
the Debtor irrevocably authorizes the Vendors to give instructions
to the receiver relating to the performance of its duties as set out
herein.
43. Application of Moneys. All moneys actually received by the Vendors or by the
receiver pursuant to Sections 15 and 16 of this Security Agreement shall be
applied:
(a) first, in payment of those claims, if any, of secured creditors of
the Debtor (including any claims of the receiver pursuant to section
16(a)), ranking in priority to the charges created by this Security
Agreement as directed by the Vendors or the receiver;
(b) second, in payment of all costs, charges and expenses of and
incidental to the appointment of the receiver (including reasonable
legal fees and disbursements) and the exercise by the receiver or
the Vendors of all or any of the powers granted to them under this
Security Agreement, including the reasonable remuneration of the
Receiver or any agent or employee of the receiver or any agent of
the Vendors and all outgoings properly paid by the receiver or the
Vendors in exercising their powers as aforesaid;
(c) third, in or towards the payment to the Vendors of all other
obligations due to it by the Debtor in such order as the Vendors in
its sole discretion may determine;
(d) fourth, in or towards the payment of the obligation of the Debtor to
persons if any, with security interests against Collateral ranking
subsequent to those in favour of the Vendors; and
(e) fifth, subject to applicable law any surplus shall be paid to the
Debtor.
44. Possession of Collateral. The Debtor acknowledges that the Vendors or any
receiver appointed by it may take possession of Collateral wherever it may be
located and by any method permitted by law and the Debtor agrees upon request
from the Vendors or any such Receiver to assemble and deliver possession of the
Collateral at such place or places as directed.
45. Deficiency. The Debtor shall remain liable to the Vendors for any deficiency
after the proceeds of any sale, lease or disposition of Collateral are received
by the Vendors and applied is accordance with the provisions of section 17(c)
hereof.
46. Assignment. This Security Agreement may be assigned by the Vendors to any
other person and, if so assigned, the assignee shall have and be entitled to
exercise any and all discretions, rights and powers of the Vendors hereunder,
and all references herein to the Vendors shall include such assignee. The Debtor
may not assign this Security Agreement or any of its rights or obligations
hereunder. This Security Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns. In any action brought by an assignee of this
Security Agreement and the security interest or any part thereof to enforce any
rights hereunder, the Debtor shall not assert against the assignee any claim or
defence which the Debtor now has or hereafter may have against the Vendors.
47. Limited Power of Attorney. The Debtor hereby appoints the Vendors, upon an
Event of Default that is continuing, as the Debtor's attorney, with full power
of substitution, in the name and on behalf of the Debtor, to execute, deliver
and do all such acts, deeds, leases, documents, transfers, demands, conveyances,
assignments, contracts, assurances, consents, financing statements and things as
the Debtor has agreed to execute, deliver and do hereunder, or as may be
required by the Vendors or any receiver to give effect to this Security
Agreement or in the exercise of any rights, powers or remedies hereby conferred
on the Vendors or any receiver, and generally to use the name of the Debtor in
the exercise of all or any of the rights, powers or remedies hereby conferred on
the Vendors or any receiver. This appointment, being coupled with an interest,
shall not be revoked by the insolvency, bankruptcy, dissolution, liquidation or
other termination of the existence of the Debtor or for any other reason.
48. Severability. Each of the provisions contained in this Security Agreement is
distinct and severable and a declaration of invalidity, illegality 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 of this Security Agreement.
49. Notices. Any notice required or desired to be given hereunder or under any
instrument supplemental hereto shall be in writing and may be given by personal
delivery, by facsimile or other means of electronic communication or by sending
the same by registered mail, postage prepaid, to the Vendors or to the Debtor at
their respective addresses set out above and, in the case of electronic
communication, to the facsimile numbers set out above. Any notice so delivered
shall be conclusively deemed given when personally delivered and any notice sent
by facsimile or other means of electronic transmission shall be deemed to have
been delivered on the Business Day following the sending of the notice, and any
notice so mailed shall be conclusively deemed given on the third Business Day
following the day of mailing, provided that in the event of a known disruption
of postal service, notice shall not be given by mail. Any address for notice or
payments herein referred to may be changed by notice in writing given pursuant
hereto.
Notwithstanding the foregoing, if the PPSA requires that notice be given
in a special manner, then such notice or communication shall be given in such
manner.
50. General.
(i) The Debtor authorizes the Vendors to file such financing
statements, notices of security interest, caveats and other
documents and do such acts and things as the Vendors may
consider appropriate to perfect their security in the
Collateral, to protect and preserve their interest in the
Collateral and to realize upon the Collateral.
(ii) The division of this Security Agreement into sections and the
insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of
this Security Agreement.
(iii) When the context so requires, the singular shall include the
plural and vice versa and words importing gender include all
genders; all rights, advantages, privileges, immunities,
powers and things hereby secured to the Debtor shall be
equally secured to and exercised by its successors and
assigns.
(iv) Time is of the essence in this Security Agreement.
51. Receipt. The Debtor acknowledges that it has received an executed copy of
this Security Agreement and, to the extent permitted by law, waives all rights
to receive from the Vendors a copy of any financing statement or financing
change statement filed, or any verification statement received, at any time in
respect of this Security Agreement or any supplemental or collateral security
granted to the Vendors.
52. Governing Law. This Security Agreement or any amendment or renewal thereof
will be governed by and construed in accordance with the laws of the Province
Ontario and the federal laws of Canada applicable therein and the Debtor hereby
irrevocably attorns to the jurisdiction of the courts of such province.
The Debtor has duly executed this Security Agreement on July , 2005.
1500536 Ontario Inc.
Per:/s/ Marius Silvasan
-------------------------------(seal)
Name: Marius Silvasan
Title: President
Per:
-------------------------------
Name:
Title:
SCHEDULE "B"
------------
PERMITTED ENCUMBRANCES
----------------------
(iv) liens for taxes, assessments, governmental charges or levies not at the
time due; and
(v) (purchase money security interests) any mortgage, lien, charge, security
interest, conditional sales agreement, lease intended as security or other
form of encumbrance or any property or asset created, issued or assumed to
secure the unpaid purchase price in respect of such property or asset;
provided that such encumbrance is restricted to such property or asset
acquired and secures an amount not in excess of the purchase price
thereof.
SCHEDULE "A"
Description and Location of Collateral
Location of Collateral:
-----------------------
00 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxx X0X 0X0
Description of Collateral: (include equipment by item or kind and, where
applicable, the make, model and serial number and, in the case of motor
vehicles, the Vehicle Identification numbers.)
