Exhibit 10.05
GENERAL SECURITY AGREEMENT
(Commercial Lending)
THIS AGREEMENT made the 22nd day of February, 2002
BETWEEN: CABLETEC COMMUNICATIONS INC., having its chief executive office and
chief place of business at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
(hereinafter called the "COMPANY")
AND: LAURENTIAN BANK OF CANADA, having an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇, Fax No. (905)
564-7796
(hereinafter called the "BANK")
In consideration of the sum of One Dollar ($1.00) now paid to it by
the Bank (receipt of which is hereby acknowledged), and to secure the due
payment and performance of all Obligations (hereinafter defined), the Company
hereby agrees with the Bank and provides as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
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As used herein the following expressions shall have the following
meanings:
"ADJUSTED PRE-TAX EARNINGS" of the Company means the sum of (a) the net income
of the Company for the period in question, after extraordinary items, capital
gains and capital losses but before provision for taxes respecting such income,
and (b) amounts paid to the Management Group and deducted from income of the
Company for the period in question, to the extent such amounts have been either
(i) applied to subscribe for share capital of the Company, or (ii) advanced to
the Company and effectively postponed in favour of the Bank;
"AFFILIATE" has the meaning ascribed to such term in the Business Corporations
Act, the Companies Act or the Corporations Act, as the case may be, of the
Applicable Province (and if such Act does not define such term, Affiliate shall
have the meaning ascribed to such term in the Business Corporations Act
(Ontario)), including the corporations (if any) referred to as Affiliates in
Schedule "E" hereto;
"ANNUALIZED CASH FLOW" means the Cash Flow for the period in question, divided
by the proportion which the period in question is of the financial year in which
the period occurs;
"APPLICABLE PROVINCE" means the province where the office of the Bank referred
to herein is located;
"BUSINESS DAY" means any day except Saturday, Sunday or a statutory holiday;
"CAPITAL EXPENDITURE" means any expenditure which would be chargeable to capital
or fixed asset accounts and includes the total of all instalments of rental
expressed to be payable during the whole term of each lease of personal property
which would be classified as a capital lease;
"CASH FLOW" of the Company for any period means the after-tax profit of the
Company for the period:
(a) plus depreciation and amortization;
(b) less profit or plus loss resulting from the recognition of the
Company's minority interest in investments;
(c) plus deferred income tax;
(d) less capitalized expenses;
(e) plus after-tax portion of management bonuses;
(f) less gain or plus loss on the sale of fixed assets; and
(g) less the minority shareholders' share of losses or plus the
minority shareholders' share of profits from consolidated
Subsidiaries
as have been deducted or added in determining such profit;
"COLLATERAL" means all property and assets of the Company whether specifically
charged or subjected to the floating charge under Section 0 (except as excluded
pursuant to Section 0);
"CURRENT RATIO" means the ratio of Current Assets to Current Liabilities;
"CURRENT ASSETS" of the Company means the aggregate current assets but excluding
amounts owing to the Company by any person not dealing at arm's length with the
Company except in respect of credit extended on normal trade terms arising on
the sale of Inventory in the ordinary course of business;
"CURRENT LIABILITIES" of the Company means the aggregate liabilities which are
payable within twelve months from the date as of which the determination of such
liabilities is being made, including the portion of Financial Indebtedness which
is due within twelve months from such date, but excluding any amounts
effectively postponed in favour of the Bank, and in the case of Long Term Debt
which matures during such period the payments scheduled to be due shall be
deemed to be the amount of principal that would have been amortized over that
period in accordance with the amortization schedule applicable to the debt if
the debt had not matured;
"DEBT SERVICE" of the Company for any period means the aggregate principal
payments on Long Term Debt (including, without limitation, the principal
component of capital lease obligations) due and payable, or scheduled to be due,
during such period;
"ENCUMBRANCE" means any mortgage, lien, pledge, assignment, charge, security
interest, title retention agreement, hypothec, levy, execution, seizure,
attachment, garnishment, right of distress or other claim in respect of property
of any nature or kind whatsoever howsoever arising (whether consensual,
statutory or arising by operation of law or otherwise) and includes arrangements
known as sale and lease-back, sale and buy-back and sale with option to
buy-back;
"ENVIRONMENTAL ASSESSMENT" means any inquiry, investigation or report of the
environmental condition of the Premises;
"ENVIRONMENTAL LAWS" means all applicable federal, provincial, regional, state,
municipal or local laws, common law, statutes, regulations, ordinances, codes,
rules, guidelines, requirements, certificates of approval, licences or permits
relating to Hazardous Substances or the use, consumption, handling,
transportation, storage or Release thereof including without limitation (and in
addition to any such laws relating to the environment generally) any such laws
relating to public health, occupational health and safety, product liability or
transportation;
"ENVIRONMENTAL ORDER" means any prosecution, order, decision, notice, direction,
report, recommendation or request issued, rendered or made by any Governmental
Authority in connection with Environmental Laws or Environmental Orders;
"EVENT OF DEFAULT" means any one or more of the events set out or referred to in
Section 0;
"FINANCIAL INDEBTEDNESS" of the Company means the aggregate (without
duplication) of the following amounts:
(a) money borrowed, indebtedness represented by notes payable, and
drafts accepted representing extensions of credit (including, as regards any
note or draft issued at a discount, any amount that could reasonably be regarded
as being the amortized portion of such discount as at the date of
determination);
(b) all obligations (whether or not with respect to the borrowing of
money) which are evidenced by bonds, debentures, notes or other similar
instruments or not so evidenced but which would be considered to be indebtedness
for borrowed money;
(c) all indebtedness upon which interest charges are customarily paid;
(d) net amounts payable pursuant to interest swap arrangements;
(e) capital lease obligations and all other indebtedness issued or
assumed as full or partial payment for property or services or by way of capital
contribution;
(f) all letters of credit and letters of guarantee issued by a
financial institution at the request of or for the benefit of the Company;
(g) any guarantee (other than by endorsement of negotiable instruments
for collection or deposit in the ordinary course of business) in any manner,
directly or indirectly, of any part or all of any obligation of a type referred
to in any of paragraphs (a) to (e) above; and
(h) any of the foregoing amounts in respect of any Subsidiary of the
Company whose accounts are not required under generally accepted accounting
principles to be consolidated with the accounts of the Company;
including (without limitation) all Obligations BUT EXCLUDING:
(i) trade payables, expenses accrued in the ordinary course of
business, customer advance payments and deposits received in the ordinary course
of business unless the time for due payment of which extends, or is intended to
extend, more than twelve months from the date as of which the determination of
Financial Indebtedness is being made; and
(j) indebtedness of the Company which is effectively postponed in
favour of the Bank.
"FUTURE DEBT SERVICE" of the Company for any period means the aggregate
principal payments on Long Term Debt (including, without limitation, the
principal component of capital lease obligations) scheduled to be due during
such period, but in the case of Long Term Debt which matures during such period
the payments scheduled to be due shall be deemed to be the amount of principal
that would have been amortized over that period in accordance with the
amortization schedule applicable to the debt if the debt had not matured;
"GOVERNMENTAL AUTHORITY" means any nation, government, province, state, region,
municipality or other political subdivision or any governmental department,
ministry, commission, board, agency or instrumentality or other public authority
or person, domestic or foreign, exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, government, and any
corporation or other entity owned or controlled (through stock or capital
ownership or otherwise) by any of the foregoing and includes any court of
competent jurisdiction;
"GUARANTOR" means any person who has guaranteed the indebtedness of the Company
in favour of the Bank;
"HAZARDOUS SUBSTANCE" means any substance, combination of substances or
by-product of any substance which is or may become hazardous, toxic, injurious
or dangerous to any person, property, air, land, water, flora, fauna or
wildlife; and includes but is not limited to contaminants, pollutants, wastes
and dangerous, toxic, deleterious or designated substances as defined in or
pursuant to any Environmental Laws or Environmental Orders;
"INTEREST COVERAGE" means the ratio of (a) the sum of (i) Adjusted Pre-tax
Earnings and (ii) Interest Expense to (b) Interest Expense in respect of any
period, excluding from Interest Expense for the purpose of clause (b) interest
incurred in respect of indebtedness which is effectively postponed in favour of
the Bank;
"INTEREST EXPENSE" means the expense for interest and all other charges incurred
in respect of all indebtedness of the Company in respect of any period,
including all rental expense under each lease which would be classified as a
capital lease (other than the principal component thereof);
"LEASE" means any lease (whether now existing, presently arising or created in
future) whereby the Premises or any part thereof are demised and leased to the
Company;
"LOAN DOCUMENT" means this Agreement, any of the Security Documents or any other
agreement or instrument (whether now existing, presently arising or created in
future) delivered by the Company or by any Guarantor to the Bank;
"LONG TERM DEBT" of the Company means that part of the aggregate liabilities,
including Financial Indebtedness, which matures by its terms on, or is renewable
at the sole option of the Company to, a date more than 12 months from the date
as of which the determination of such liabilities is being made, excluding the
portion thereof that is included in Current Liabilities (other than the final
payment due in respect of any Long Term Debt);
"MANAGEMENT GROUP" means the directors and officers of the Company from time to
time, including the individuals (if any) referred to as the Management Group in
Schedule "E" hereto;
"NORMAL BUSINESS" has the meaning ascribed thereto in Schedule "E" hereof;
"OBLIGATIONS" means all monies now or at any time and from time to time
hereafter owing or payable by the Company to the Bank and all other obligations
(whether now existing, presently arising or created in the future) of the
Company in favour of the Bank, and whether direct or indirect, absolute or
contingent, matured or not, whether arising from agreement or dealings between
the Bank and the Company or from any agreement or dealings with any third person
by which the Bank may be or become in any manner whatsoever a creditor or other
obligee of the Company or however otherwise arising and whether the Company be
bound alone or with another or others and whether as principal or surety,
including, without limitation, monies payable or obligations arising in
connection with the Offer of Finance;
"OCCUPANTS" means the Company, its tenants and other occupants of any Premises;
"OFFER OF FINANCE" means at any time the prevailing agreement between the
Company and the Bank setting out the terms and conditions applicable to the
borrowings by the Company from the Bank, and for the time being means the letter
specified as the Offer of Finance in Schedule "E" hereto;
"PERMITTED ENCUMBRANCES" means the following:
(a) liens for taxes, assessments, governmental charges or levies not
for the time being due and delinquent;
(b) easements, rights of way or other similar rights in land existing
at the date of this Agreement which individually or in the aggregate do not in
the Bank's opinion materially detract from the value of the property concerned
or materially impair its use in the operation of the business of the Company;
(c) rights reserved to or vested in any Governmental Authority by the
terms of any lease, licence, franchise, grant or permit, or by any statutory
provision, to terminate the same or to require annual or other periodic payments
as a condition of the continuance thereof;
(d) any Encumbrance the validity of which is being contested by the
Company in good faith by appropriate legal proceedings and in respect of which
either
(i) security adequate in the opinion of the Bank has been provided
to it to ensure payment of such liens
or
(ii) the Bank is of the opinion that such liens are not materially
prejudicial to the security hereof;
(e) any reservations, limitations, provisos and conditions expressed in
any original grant from the Crown which do not in the Bank's opinion materially
detract from the value of the property concerned or materially impair its use in
the operation of the business of the Company;
(f) title defects or irregularities which, in the opinion of counsel to
the Bank, are of a minor nature and in the aggregate will not in the Bank's
opinion materially detract from the value of the property concerned or
materially impair its use in the operation of the business of the Company;
(g) Purchase Money Securities; and
(h) the Encumbrances set out in Schedule "C" hereto;
"PREMISES" means all lands and premises owned or occupied by the Company from
time to time (including without limitation the lands and premises referred to in
Schedule "A" hereto);
"PURCHASE MONEY SECURITY" means any Encumbrance given, reserved, created,
assumed or arising by operation of law, whether or not in favour of the
transferor, after the date hereof to provide or secure, or to provide the
Company with funds to pay the whole or any part of, the consideration for the
acquisition of tangible personal property other than Inventory where:
(a) the principal amount of such Encumbrance is originally at least
75% but not greater than 100% of the cost to the Company of all
of the property encumbered thereby, and
(b) the Encumbrance only covers the property being acquired by the
Company
and includes the renewal, extension or refunding of any such Encumbrance and of
the indebtedness represented thereby upon the same property provided that the
indebtedness secured thereby and the security therefor are not increased
thereby;
"RECEIVER" shall include one or more of a receiver, receiver-manager or receiver
and manager of all or a portion of the undertaking, property and assets of the
Company appointed by the Bank pursuant to this Agreement or by or under any
judgment or order of a court;
"RELEASE" includes abandon, add, deposit, discharge, disperse, dispose, dump,
emit, empty, escape, leach, leak, migrate, pour, pump, release or spill;
"RESTRICTED LEASE" means any lease of real or personal property other than a
lease which would be classified as a capital lease;
"SECURITY DOCUMENTS" means, collectively, this Agreement and all other
agreements and other instruments delivered to the Bank by the Company (whether
now existing or presently arising) for the purpose of establishing, perfecting,
preserving or protecting any security held by the Bank in respect of any
Obligations;
"SHAREHOLDER OWNERSHIP" has the meaning ascribed to such term in Schedule "E"
hereto;
"SUBSIDIARY" means a corporation in which the Company owns, directly and/or
indirectly through one or more Subsidiaries, a majority of shares carrying the
right to elect at least a majority of the members of the board of directors;
"TANGIBLE NET WORTH" of the Company means the aggregate of share capital, earned
and contributed surplus (or less any deficit), plus any indebtedness of the
Company which is effectively postponed in favour of the Bank, less the aggregate
of (a) any amount due from its directors, officers, shareholders and Affiliates,
(b) the amount of any investments in its Affiliates, (c) intangible assets
including (without limitation) goodwill, franchises, copyrights, trademarks and
patents, and (d) any appraisal increase credit;
"VOTING CONTROL" means the direct or indirect ownership or control of a
sufficient number of outstanding shares of a corporation to elect a majority of
its directors; and "Voting Control of the Company" means the Voting Control of
the Company stated in the Offer of Finance or such different Voting Control as
shall have been effected with the prior written consent of the Bank; and
"WORKING CAPITAL" means the amount (if any) by which Current Assets exceed
Current Liabilities.
1.2 INTERPRETATION
--------------
1.2.1 "THIS AGREEMENT", "HERETO", "HEREBY", "HEREUNDER", "HEREIN", and
similar expressions refer to the whole of this Agreement and not to any
particular Article, Section, subsection, paragraph, clause, subdivision or other
portion hereof.
1.2.2 The expression "NOT DEALING AT ARM'S LENGTH" has the meaning
ascribed to it by the Income Tax Act (Canada).
1.2.3 Except as expressly provided herein, terms which are defined in
the Personal Property Security Act of the Applicable Province shall have the
same meaning where used herein.
1.2.4 Words importing the singular number only include the plural and
vice versa and words importing gender shall include all genders and words
importing persons include individuals, partnerships, corporations, trusts,
unincorporated associations, joint ventures, Governmental Authorities and other
entities.
1.2.5 All financial or accounting determinations, reports and
statements provided for in this Agreement shall be made or prepared in
accordance with generally accepted accounting principles applied in a consistent
manner and shall, unless otherwise indicated in the Offer of Finance, be made
and prepared on a consolidated basis.
1.2.6 The headings of the Articles and Sections are inserted for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.3 GOVERNING LAW
--------------
This Agreement shall be governed by and construed in accordance with
the laws of the Applicable Province.
ARTICLE 2
SECURITY
2.1 CHARGE
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Subject to the exceptions set forth in Section 0, the Company hereby:
2.1.1 grants, sells, assigns, conveys, transfers, mortgages, pledges
and charges, as and by way of fixed and specific mortgage, pledge and charge to
and in favour of the Bank, and grants to the Bank a security interest in, all
personal property of every nature and kind whatsoever and wheresoever situate
now or at any time and from time to time owned by the Company or in which or in
respect of which the Company has any interest or rights of any kind together
with all Proceeds thereof and therefrom, renewals thereof, Accessions thereto
and substitutions therefor, including, without limiting the generality of the
foregoing, the following described property:
(a) All inventory of whatsoever kind (INCLUDING VEHICLES) and
wheresoever situate now owned or hereafter acquired by the Company including
without limiting the generality of the foregoing, goods for sale or lease or
that have been leased; goods furnished or to be furnished under a contract of
service; goods which are raw materials, work in process or materials used or
consumed in a business or profession of the Company; goods used or procured for
packing; finished goods; industrial growing crops, oil, gas and other minerals
to be extracted; timber to be cut; and the young of animals after conception
("INVENTORY");
(b) All book accounts and book debts and generally all accounts,
debts, dues, claims, choses in action and demands of every nature and kind
howsoever arising or secured including letters of credit, and advices of credit,
which are now due, owing or accruing or growing due to or owned by or which may
hereafter become due, owing or accruing or growing due or owned by the Company
including but not limited to claims against the Crown and claims under insurance
policies ("ACCOUNTS");
(c) All machinery, equipment, tools, apparatus, plants, fixtures,
furniture, vehicles, goods and other tangible personal property of whatsoever
nature and kind, now owned or hereafter acquired by the Company other than
Inventory ("EQUIPMENT");
(d) All chattel paper now owned or hereafter acquired by the
Company ("CHATTEL PAPER");
(e) All warehouse receipts, bills of lading and other documents of
title, whether negotiable or otherwise, now owned or hereafter acquired by the
Company ("DOCUMENTS OF TITLE");
(f) All instruments now owned or hereafter acquired by the Company
("INSTRUMENTS");
(g) All deeds, documents, writings, papers, books of accounts and
other books and records, whether or not in computerized form, evidencing or
relating to Accounts, Chattel Paper, Instruments or Documents of Title or by
which such are or may hereafter be secured, evidenced, acknowledged or made
payable; and all contracts, securities, instruments and other rights and
benefits in respect thereof;
(h) All shares, securities, stocks, warrants, bonds, debentures,
debenture stock or the like now owned or hereafter acquired by the Company;
(i) All intangible property and intangibles now owned or hereafter
acquired by the Company including, but not limited to, choses in action,
goodwill, patents, trademarks, copyrights and other industrial property
("INTANGIBLES");
(j) All monies other than trust monies lawfully belonging to
others;
(k) Any property in any form (including fixtures) derived directly
or indirectly from any dealings with any property herein described (including
all products and cash and non-cash proceeds thereof); indemnification or
compensation for any such property lost, destroyed, damaged or lawfully or
unlawfully taken or injuriously affected; all increases, additions and
accessions thereto and substitutions and replacements thereof;
(l) All personal property, if any, described in Schedule "B"
hereto; and
2.1.2 charges as and by way of a floating charge the whole of the
undertaking of the Company and all of its property and assets, real and
personal, movable and immovable, tangible and intangible, of every nature and
kind whatsoever and wheresoever situate, both present and future (other than
property and assets from time to time effectively subjected to the fixed and
specific mortgages, charges and security interests created hereby or by any
instrument supplemental hereto).
2.2 EXCEPTIONS
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2.2.1 Exception as to Leases
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The last day of any term of years reserved by any lease, verbal or
written, or any agreement therefor, now held or hereafter acquired by the
Company is excepted out of the Collateral, but the Company shall stand possessed
of any such reversion upon trust to assign and dispose thereof as the Bank may
direct. Where the giving of a fixed and specific mortgage and charge on any
real or personal property held by the Company under lease requires the consent
of the lessor of such property, the giving of the fixed and specific mortgage
and charge hereunder on such property shall not take effect until such consent
is obtained or legally dispensed with but the suspension of the effect of the
fixed and specific mortgage and charge on such property shall not affect the
fixed and specific mortgage and charge on any other property of the Company.
2.2.2 Exception as to Consumer Goods
----- ----------------------------------
Consumer goods now held or hereafter acquired by the Company are
excepted out of the Mortgaged Property.
2.3 CHARGE VALID IRRESPECTIVE OF ADVANCE OF MONEY
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The mortgages, pledges and charges hereby created shall have effect
and be deemed to be effective whether or not the monies or obligations hereby
secured or any part thereof shall be advanced or owing or in existence before or
after or upon the date of this Agreement and neither the giving of this
Agreement nor any advance of funds shall oblige the Bank to advance any funds or
any additional funds. The Company acknowledges that the parties have not agreed
to postpone the time for attachment of any of the charges created hereby,
including the floating charge created hereby, all of which shall attach upon the
execution hereof or, in the case of after-acquired Collateral, as soon as the
Company acquires rights therein. The Company acknowledges that value has been
given.
2.4 SUPPLEMENTAL INDENTURES
------------------------
The Company shall from time to time on demand by the Bank execute and
deliver such further deeds or indentures supplemental hereto, which shall
thereafter form part hereof, for the purpose of mortgaging to the Bank any
property now owned or hereafter acquired by the Company and falling within the
description of the Collateral, for correcting or amplifying the description of
any property hereby mortgaged or intended so to be, or for any other purpose not
inconsistent with the terms of this Agreement.
2.5 CONTINUING SECURITY
--------------------
This Agreement and any other security given with the Bank's consent in
replacement thereof, substitution therefor or in addition thereto shall be held
by the Bank as general and continuing security for due payment and performance
of all Obligations, including without limitation all costs and amounts payable
pursuant hereto and interest on the Obligations at the rate or rates applicable
thereto in accordance with the Offer of Finance or the prevailing agreement
between the Bank and the Company. Any and all payments made at any time in
respect of the Obligations and the proceeds realized from any securities held
therefor (including moneys realized from the enforcement of this Agreement) may
be applied (and reapplied from time to time notwithstanding any previous
application) to such part or parts of the Obligations as the Bank sees fit. The
Bank may hold as additional security hereunder any increase or profits or other
proceeds realized from the Collateral (including money) for such period of time
as the Bank sees fit or the Bank may hold such monies unappropriated in a
collateral account to apply against the Obligations when and how the Bank sees
fit. The Company shall be accountable for any deficiency and the Bank shall
distribute any surplus as required by law.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 GENERAL REPRESENTATIONS AND WARRANTIES
-----------------------------------------
The Company represents, warrants and covenants to and with the Bank as
follows:
3.1.1 Incorporation and Status
--------------------------
The Company is duly incorporated and validly subsisting under the laws
of its jurisdiction of incorporation or continuance and has the corporate power
and capacity to own its properties and assets and to carry on its business as
presently carried on by it or as contemplated in the Offer of Finance to be
carried on by it and holds all material licences, permits and assets as are
required to own its properties and assets and to carry on business in each
jurisdiction in which it does so. The Company's chief executed office is
located at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇.
3.1.2 Power and Capacity
--------------------
The Company has the corporate power and capacity to enter into each of
the Security Documents to which it is a party and to do all acts and things as
are required or contemplated hereunder or thereunder to be done, observed and
performed by it.
3.1.3 Due Authorization and Enforceability
---------------------------------------
The Company has taken all necessary corporate action to authorize the
execution, delivery and performance of each of the Security Documents to which
it is a party and each such document constitutes, or upon execution and delivery
will constitute, a valid and binding obligation of the Company enforceable
against it in accordance with its terms, subject only to the following
qualifications:
(a) an order of specific performance and an injunction are
discretionary remedies, and in particular, may not be available
where damages are considered an adequate remedy; and
(b) enforcement may be limited by bankruptcy, insolvency,
liquidation, reorganization, reconstruction and other similar
laws generally affecting enforceability of creditors' rights.
3.1.4 No Contravention
-----------------
The execution and delivery of this Agreement and the other Security
Documents and the performance by the Company of its obligations thereunder (i)
does not and will not violate any law or any provision of the articles, by-laws,
constating documents or other organizational documents of the Company or
constitute a breach of any existing contractual or other obligation of the
Company or contravene any licence or permit to which the Company is subject,
(ii) will not result in the creation of, or require the Company to create, any
Encumbrance in favour any person other than the Bank, and (iii) will not result
in or permit the acceleration of the maturity of any indebtedness or other
obligation of the Company.
3.1.5 No Consents Required
----------------------
No authorization, consent or approval of, or filing with or notice to,
any person is required in connection with the execution, delivery or performance
of this Agreement or any of the other Security Documents by the Company.
3.1.6 Leases
------
With respect to each Lease now existing:
(a) the copy of the Lease provided to the Bank contains the entire
agreement between the Company, the lessee and any guarantor,
surety or indemnitor respecting the subject matter and there have
been no modifications, amendments or extensions thereto or
thereof; and
(b) the Lease is in full force and effect and in good standing.
3.1.7 Financial Statements
---------------------
The financial statements of the Company in the form delivered by the
Company to the Bank have been prepared in accordance with generally accepted
accounting principles and fairly, completely and accurately present the
financial condition of the Company and the financial information presented
therein for the period and as at the date thereof. Since the date of the last
financial statements delivered to the Bank there has been no development which
has had or will have a material adverse effect upon the business, property,
financial condition or prospects of the Company or upon the ability of the
Company to perform its obligations under any of the Security Documents.
3.1.8 Solvency
--------
The Company is not an insolvent person within the meaning of the
Bankruptcy and Insolvency Act (Canada).
3.1.9 No Litigation
--------------
There are no actions, suits, judgments, awards or proceedings pending
or, to the knowledge of the Company, threatened against the Company before any
court or government department, commission, board, agency or instrumentality,
domestic or foreign, or before any other authority, or before any arbitrator of
any kind, which would, if determined adversely to the Company, materially
adversely affect its business, property, financial condition or prospects or its
ability to perform any of the provisions of any Security Document to which it is
a party or which purports to affect the legality, validity or enforceability of
any Security Document, and the Company is not in default with respect to any
judgment, order, writ, injunction, award, rule or regulation of any Governmental
Authority or any arbitrator, which individually or in the aggregate results in
any such material adverse effect.
3.1.10 No Default
-----------
The Company is not in default or breach under any material commitment
or obligation (including, without limitation, obligations in relation to
Financial Indebtedness) or under any order, writ, decree or demand of any
Governmental Authority or with respect to any leases, licences or permits to own
and/or operate material properties and assets or to carry on business and there
exists no state of facts which, after notice or the passage of time or both,
would constitute such a default or breach; and there are not any proceedings in
progress, pending or threatened, which may result in the revocation,
cancellation, suspension or any adverse modification of any such leases,
licences or permits.
3.1.11 All Material Information Supplied
------------------------------------
The Company has provided to the Bank all material information relating
to the financial condition, business and prospects of the Company and the
Guarantors (if any) and all such information is true, accurate and complete in
all material respects.
3.1.12 Serial Numbered Goods and Fixtures
--------------------------------------
Full particulars (including serial number, year, make and model) of
each motor vehicle, trailer, mobile home, boat, outboard motor and aircraft in
which the Company has rights and which is not Inventory are set out in Schedule
"B" hereto. None of the goods comprised in the Collateral are fixtures except
any fixtures that are described so that they may be readily identified in
Schedule "B" hereto and that are affixed or attached to the Premises described
in Schedule "A" hereto.
3.1.13 Consumer Goods
---------------
None of the Collateral now owned or hereafter acquired is now or shall
at any time be Consumer Goods of the Company.
3.2 ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES
-----------------------------------------------
The Company represents, warrants and covenants to and with the Bank as
follows:
3.2.1 The Collateral and the operations of the Occupants now and will
at all times in future comply in all material respects with all Environmental
Laws and Environmental Orders.
3.2.2 After due and diligent inquiry, it has been found that, except
for substances necessary to the carrying on of the Normal Business of the
Company, there is no Hazardous Substance on or in any of the Premises, no
Hazardous Substance has ever been used, stored, located or Released on or in any
of the Premises, no part of the Premises is or has ever been contaminated by any
Hazardous Substance.
3.2.3 After due and diligent inquiry and except as approved by the Bank
in writing, it has been found that there are no:
(a) underground or above-ground storage tanks;
(b) asbestos or material containing asbestos;
(c) urea formaldehyde or material containing urea formaldehyde;
at, on or under the Premises and none of the foregoing will at any
time in future be placed, installed or Released at, on or under the Premises
without the prior written consent of the Bank.
3.2.4 Any underground or above-ground storage tanks located at, on or
under the Premises which have been approved by the Bank have been identified,
registered, constructed, operated and maintained as required by Environmental
Laws and Environmental Orders and they are presently in a state of good
condition and repair, have not leaked and are not presently leaking any of their
contents.
3.2.5 There is no judicial or administrative proceeding or
investigation pending and no Environmental Order has been issued or, to the best
of the Company's knowledge, threatened concerning the possible violation of any
Environmental Laws or Environmental Orders by any of the Occupants, by any of
the operations of the Occupants or otherwise in relation to the Collateral.
3.2.6 To the best of the Company's knowledge (after due and diligent
inquiry), no condition exists as to any parcel of real property contiguous to or
in close proximity with the Premises which would require a qualification to any
of the representations or warranties in this Section 0 if such condition applied
to the Premises.
3.2.7 Except for substances necessary to the carrying on of the Normal
Business of the Company, no Hazardous Substance shall be brought onto or used on
or in any part of the Premises without the prior written consent of the Bank and
any Hazardous Substance brought onto or into any part of the Premises or used by
any person on or in any part of the Premises shall be transported, used and
stored only in accordance with all Environmental Laws, other lawful
requirements, prudent industrial standards (including without limitation any
published environmental standards of any applicable industry association) and
any requirements of applicable insurance policies.
3.2.8 The Company has created, properly organized and maintained all
documentation and records concerning environmental matters as required by any
Environmental Laws or Environmental Orders and will maintain such documentation
and records at all times in future as aforesaid.
3.2.9 The Company has provided to the Bank any Environmental Assessment
and related documentation concerning any of the Premises in its possession or
control and shall promptly provide to the Bank any such material as the Company
may obtain in future.
3.2.10 The Company shall promptly notify the Bank if it:
(a) receives notice from any Governmental Authority of any
violation or potential violation of any Environmental Laws or Environmental
Orders, including the Release of a Hazardous Substance, which may have occurred
or been committed or is about to occur or be committed;
(b) receives notice that any administrative or judicial complaint
or Environmental Order has been issued or filed or is about to be issued or
filed against any of the Occupants or their representatives alleging violations
of any Environmental Laws or Environmental Orders or requiring the taking of any
action in connection with any Hazardous Substance;
(c) learns of the enactment of any Environmental Laws or the
issuance of any Environmental Orders which may have a material adverse effect on
the Premises or the operations or the condition, financial or otherwise, of any
of the Occupants; or
(d) knows of or suspects that any Hazardous Substance (other than
a substance necessary to the carrying on of the Normal Business of the Company)
has been brought onto any part of the Premises or that there is any actual,
threatened or potential Release of any Hazardous Substance (whether or not a
substance necessary to the carrying on of the Normal Business of the Company)
on, from, in or under any part of the Premises.
3.2.11 The Company hereby grants to the Bank and its employees and
agents an irrevocable and non-exclusive licence, subject to the rights of
tenants, to enter any of the Premises to conduct testing and monitoring with
respect to Hazardous Substances and to remove and analyze any Hazardous
Substance at the cost and expense of the Company (which cost and expense shall
be secured hereby).
3.2.12 The Company shall indemnify the Bank and hold the Bank harmless
against and from all loss, costs, damages and expenses which the Bank may
sustain, incur or be or become liable for by reason of or arising from the
presence, clean-up, removal or disposal of any Hazardous Substance referred to
in this section or compliance with Environmental Laws or Environmental Orders
relating thereto, including any clean-up, decommissioning, restoration or
remediation of the Premises and other affected lands or property (and this
indemnification shall survive the satisfaction, release or extinguishment of the
indebtedness secured hereby).
3.3 TITLE
-----
The Company covenants with the Bank that, subject only to Permitted
Encumbrances, it lawfully owns, as legal and beneficial owner, and is lawfully
possessed of the Collateral and all property and assets indicated by the
financial statements which it has delivered to the Bank to be owned by it and
has good right and authority to mortgage and charge the same as provided for
herein, free and clear of all Encumbrances (other than Permitted Encumbrances),
and it will warrant and defend the title thereto as well as to any other
property, rights and interests hereafter acquired by the Company. No person has
any agreement or right or option to acquire any of such property (except under
unfilled purchase orders accepted in the ordinary course of business for the
sale of Inventory).
ARTICLE 4
COVENANTS OF THE COMPANY
4.1 GENERAL COVENANTS
------------------
So long as this Agreement remains outstanding, the Company covenants
and agrees as follows:
4.1.1 To Pay Costs
--------------
The Company shall pay all costs, charges and expenses of or incurred
by the Bank (a) incidental to the preparation, execution and filing of this
Agreement and any other Security Documents and any instruments relating thereto
or required by the Offer of Finance (including without limitation any
supplemental security or any instrument amending any of the Security Documents),
(b) in inspecting the Collateral or in or about taking, recovering or keeping
possession of any of the Collateral or in any other proceedings taken in
enforcing the remedies provided herein or otherwise in relation to this
Agreement or the Collateral, or by reason of non-payment of the moneys hereby
secured, (c) the costs of any sale proceedings hereunder, whether such sale
proves abortive or not, and (d) the costs of any Receiver with respect to, and
all expenditures made by the Bank or any Receiver in the course of, doing
anything hereby permitted to be done by the Bank or such Receiver (including
without limitation any costs and expenditures relating to compliance with the
Bankruptcy and Insolvency Act (Canada)). All such costs and expenses and other
monies payable hereunder, together with interest at the highest rate applicable
to any Obligations, shall be payable on demand and shall constitute a charge on
the Collateral. Without limiting the generality of the foregoing, such costs
shall extend to and include any legal costs incurred by or on behalf of the Bank
as between solicitor and own client.
4.1.2 To Pay Certain Debts
-----------------------
The Company shall punctually pay and discharge every obligation,
failure to pay or discharge which might result in any lien or charge or right of
distress, forfeiture, termination or sale or any other remedy being enforced
against the Collateral and provide to the Bank when required satisfactory
evidence of such payment and discharge, but the Company may on giving the Bank
such security (if any) as the Bank may require refrain from paying or
discharging any obligation so long as it contests in good faith its liability
therefor.
4.1.3 To Maintain Corporate Existence and Security
-------------------------------------------------
The Company shall:
(a) maintain its corporate existence;
(b) diligently preserve all its rights, licences, powers,
privileges, franchises and goodwill;
(c) observe and perform all of its obligations and comply with all
conditions under leases, licences and other agreements to which it is a party or
upon or under which any of the Collateral is held;
(d) carry on and conduct its business in a proper and efficient
manner so as to preserve and protect the Collateral and income therefrom;
(e) keep proper books of account with correct entries of all
transactions in relation to its business;
(f) observe and conform to all valid requirements of law and of
any Governmental Authority relative to the Collateral or the carrying on by the
Company of its business;
(g) repair and keep in repair and good order and condition all
property, including the Collateral, the use of which is necessary or
advantageous in connection with its business;
(h) immediately notify the Bank in writing of any proposed change
of name of the Company or of the Company's chief place of business or chief
executive office;
(i) keep the Bank constantly informed in writing as to the
location of the Collateral and the books of account and other records of the
Company;
(j) immediately deliver to the Bank any negotiable instrument
forming part of the Collateral;
(k) effect such registrations as may be required by the Bank from
time to time to protect the security hereof; and
(l) prevent the Collateral from being or becoming an accession to
property not secured hereby or becoming affixed to any real property.
4.1.4 Leases
------
(a) The Company shall at all times perform and discharge all of
the lessee's covenants and obligations under any Lease.
(b) The Company will not without the written consent of the Bank
terminate, surrender, amend, alter or vary the terms and conditions of the any
Lease. Nor shall the Company, without the written consent of the Bank, waive
performance by the landlord under any of the Leases or release any of the said
landlords from any obligations under their respective Leases.
4.1.5 To Insure
----------
The Company shall keep the Collateral and the operations of the
Company insured in such amounts as the Bank may reasonably require against loss
or damage by fire and such other risks as the Bank may from time to time
specify, with insurers approved by the Bank. The Company shall whenever from
time to time requested by the Bank provide the Bank with satisfactory evidence
of such insurance and any renewal thereof which shall at all times be subject to
mortgage clauses in a form approved by the Bank, and shall at the request of the
Bank forthwith name the Bank as first loass payee and assign, transfer and
deliver unto the Bank the policy or policies of such insurance. Evidence
satisfactory to the Bank of the renewal of every policy of insurance shall be
provided to the Bank at least seven (7) days before the termination thereof.
4.1.6 To Furnish Proofs
-------------------
The Company shall forthwith on the happening of any loss or damage
furnish at its own expense all necessary proofs and do all necessary acts to
enable the Bank to obtain payment of the insurance monies, which, in the sole
discretion of the Bank, may be applied in reinstating the insured property or be
paid to the Company or be applied in payment of the monies owing hereunder,
whether due or not then due, or paid partly in one way and partly in another.
4.1.7 Inspection by the Bank
-------------------------
The Company shall allow any employees or authorized agents of the Bank
at any reasonable time to enter the premises of the Company in order to inspect
the Collateral and to inspect the books and records of the Company and make
extracts therefrom, and shall permit the Bank prompt access to such other
persons as the Bank 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 Company, provided that any information so obtained
shall be kept confidential, save as required by the Bank in exercising its
rights hereunder.
4.1.8 Accounts
--------
Subject to any Permitted Encumbrances thereon, Accounts shall be
received by the Company in trust for the Bank; provided that as long as an Event
of Default has not occurred the Company may collect and use the Accounts in the
ordinary course of business.
4.1.9 Deliver Information
--------------------
The Company shall deliver to the Bank at the close of each financial
year of the Company one copy of its annual financial statements, which unless
otherwise indicated in the Offer of Finance shall be prepared on an audited
basis by independent auditors of the Company, qualified and entitled to carry on
in the Applicable Province the practice of public accounting and auditing,
including the balance sheet and statements of income, retained earnings and
changes in financial position, together with all supporting schedules. Such
financial statements shall be signed by an authorized officer of the Company and
shall be accompanied by a detailed report of the auditors (which report shall
not be qualified in any material respect). The Company shall deliver such
financial statements to the Bank, together with such other statements and
reports as may be required pursuant to the Offer of Finance, within the time
periods stipulated therein. The Company shall provide to the Bank any other
information concerning its financial position and business operations which the
Bank may from time to time request.
4.1.10 Notice of Litigation and Damage
-----------------------------------
The Company will promptly give written notice to the Bank of (a) all
claims or proceedings pending or threatened against the Company which may give
rise to uninsured liability in excess of $25,000.00 or which may have a material
adverse affect on the business or operations of the Company, (b) all damage to
or loss or destruction of any property comprising part of the Collateral which
may give rise to an insurance claim in excess of $25,000 and (c) all uninsured
damage to or loss or destruction of property comprising part of the Collateral
in excess of $25,000; and will supply the Bank with all information reasonably
requested in respect of any such matters.
4.1.11 Notice of Default
-------------------
The Company will promptly give written notice to the Bank of the
occurrence of any Event of Default or of any event which after notice or lapse
of time would constitute an Event of Default.
4.1.12 Representations and Warranties
--------------------------------
The representations and warranties made by the Company in Article 4
shall be true and correct on each day that this Agreement or any of the Security
Documents remains in force, with the same effect as if such representations and
warranties had been made and given on and as of such day (except to the extent
any such representation and warranty is expressly limited to a particular date
or particular period or time), notwithstanding any investigation made at any
time by or on behalf of the Bank.
4.1.13 Not to Create Certain Charges
---------------------------------
The Company shall not, without the prior written consent of the Bank,
create or permit to arise any Encumbrance on any of the Collateral (other than
Permitted Encumbrances), and will not permit any Subsidiary to do the same
(except in favour of the Company). Nothing herein contained shall be construed
as subordinating the Bank's interest in the Collateral in favour of any third
party who claims the Collateral by virtue of a Permitted Encumbrance
4.1.14 Not to Sell
-------------
The Company shall not, except as otherwise permitted hereunder,
remove, destroy, lease, sell or otherwise dispose of any of the Collateral;
provided that the Company may sell, lease or otherwise dispose of Equipment
which has 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 or charges, property of equal value so that the security
hereby constituted shall not thereby be in any way reduced or impaired; and
provided further that the Company may sell Inventory in the ordinary course of
business and for the purpose of carrying on the same.
4.1.15 Not to Make Certain Changes
-------------------------------
The Company shall not without the prior written consent of the Bank:
(a) change its financial year end;
(b) purchase, establish or acquire in any manner any new business
undertaking;
(c) materially change the nature of the Company's business as
presently carried on;
(d) amalgamate, consolidate or merge or enter into a partnership,
joint venture or syndicate with any other person, or acquire or establish any
Subsidiary;
(e) enter into any transaction, or permit any Subsidiary to do so,
outside the ordinary active business operations of the Company and its
Subsidiaries;
(f) acquire or invest in any securities except instruments or
securities issued by a financial institution or liquid securities traded on a
recognized public securities exchange and acquired only for the Company's cash
management purposes or permit any Subsidiary to do so; or
(g) remove any of the Collateral or any of the books of account or
other records of the Company from the jurisdiction where presently located.
4.1.16 Serial Numbered Goods and Fixtures
--------------------------------------
Upon the acquisition by the Company from time to time of rights in any
motor vehicles, trailers, mobile homes, boats, outboard motors or aircraft which
are not Inventory and which are not fully described in Schedule "B" hereto, or
upon repossession by or return to the Company of any such goods, the Company
will forthwith give written notice to the Bank of full particulars (including
the serial number) of the same. The Company will not permit goods now or
hereafter comprised in the Collateral to become fixtures unless they are, or are
to be, affixed or attached to the Premises described in Schedule "A" hereto and
unless the goods are described in Schedule "B" hereto so that they may be
readily identified.
ARTICLE 5
EVENTS OF DEFAULT AND REMEDIES
5.1 EVENTS OF DEFAULT
-------------------
The occurrence of any of the following events shall constitute an
Event of Default under this Agreement:
5.1.1 if default occurs in payment or performance of any Obligation
(whether arising herein or otherwise);
5.1.2 if any representation or warranty made by the Company herein or
in any other Loan Document or in any certificate, statement or report furnished
in connection with or pursuant to the Offer of Finance is found to be false or
incorrect in any way so as to make it materially misleading when made or when
deemed to have been made;
5.1.3 if default occurs in payment or performance of any obligation in
favour of any person to whom the Company is indebted except obligations to trade
creditors incurred in the ordinary course of business which do not materially
and adversely affect the financial condition of the Company;
5.1.4 if default occurs in payment or performance of any obligation
(whether now existing, presently arising or created in future) of any Affiliate
of the Company in favour of the Bank;
5.1.5 if the Company commits an act of bankruptcy or becomes insolvent
within the meaning of any bankruptcy or insolvency legislation applicable to it
or a petition or other process for the bankruptcy of the Company is filed or
instituted;
5.1.6 if any act, matter or thing is done toward, or any action or
proceeding is launched, had or taken for, terminating the corporate existence of
the Company, whether by winding-up, surrender of charter or otherwise;
5.1.7 if the Company ceases to carry on its business or makes or
proposes to make any sale of its assets in bulk or any sale of its assets out of
the usual course of its business;
5.1.8 if any proposal is made or any petition is filed by the Company
under any law having for its purpose the extension of time for payment,
composition or compromise of the liabilities of the Company or other
reorganization or arrangement respecting its liabilities or if the Company gives
notice of its intention to make or file any such proposal or petition including
without limitation an application to any court for an order to stay or suspend
any proceedings of creditors pending the making or filing of any such proposal
or petition;
5.1.9 if any receiver, administrator or manager of the property, assets
or undertaking of the Company or a substantial part thereof is appointed
pursuant to the terms of any trust deed, trust indenture, debenture or similar
instrument or by or under any judgment or order of any court;
5.1.10 if any balance sheet or other financial statement provided by
the Company to the Bank pursuant to the provisions hereof is false or misleading
in any material respect;
5.1.11 if the Company permits any sum which has been admitted as due by
it or is not disputed to be due by it and which forms, or is capable of being
made, an Encumbrance upon any of the Collateral in priority to, or pari passu
with, the charge created by this Agreement to remain unpaid for thirty (30) days
after proceedings have been taken to enforce the same as such charge;
5.1.12 if any proceedings are taken to enforce any Encumbrance
affecting any of the Collateral;
5.1.13 if the validity of any Loan Document is brought into question or
disputed in whole or in part where the effect of any such invalidity would
materially adversely affect the interests of the Bank hereunder or in connection
with the Offer of Finance;
5.1.14 if any action is taken or power or right be exercised by any
Governmental Authority or if any claim or proceeding is pending or threatened by
any person which may have a material adverse effect on the Company, its business
or operations, its properties or its prospects;
5.1.15 if in the opinion of the Bank a material adverse change has
occurred in the financial condition or business of the Company which may impair
the ability or willingness of the Company to perform its obligations hereunder,
under the Offer of Finance or under any other Loan Document or if the Bank
considers that the Collateral is in jeopardy or that the Bank is insecure; and
5.1.16 if any event occurs with respect to any Guarantor which if a
like event had occurred with respect to the Company would have constituted an
Event of Default.
5.2 CONSEQUENCES OF AN EVENT OF DEFAULT
----------------------------------------
Upon the occurrence of an Event of Default, any obligation of the Bank
to make further loans or advances or extend other credit to the Company shall
immediately terminate and all Obligations and all monies secured hereby shall at
the option of the Bank become forthwith due and payable whereupon the floating
charge hereby created shall crystallize, all of the rights and remedies hereby
conferred in respect of the Collateral shall become immediately enforceable and
any and all additional and collateral securities for payment of this Agreement
shall become immediately enforceable.
5.3 ENFORCEMENT
-----------
Upon the happening of any Event of Default the Bank shall have the
following rights and powers:
5.3.1 to enter into possession of all or any part of the Collateral;
5.3.2 to preserve and maintain the Collateral and make such
replacements thereof and additions thereto as it deems advisable;
5.3.3 to borrow money in the Company's name or in the Bank's name, to
borrow money on the security of the Collateral or to advance the Bank's own
money to the Company, in any case upon such terms as the Bank may deem
reasonable and upon the security hereof;
5.3.4 to pay or otherwise satisfy in whole or in part any Encumbrances
which, in the Bank's opinion, rank in priority to the security hereof;
5.3.5 after entry by its officers or agents or without entry to sell,
lease or otherwise dispose in any way whatsoever of all or any part of the
Collateral either en bloc or separately at public auction or by tender or by
private agreement and at such time or times and on such terms and conditions as
the Bank in its absolute discretion may determine and without any notice to or
concurrence of the Company except as may be required by applicable law;
5.3.6 by instrument in writing to appoint any person or persons
(whether an officer or officers of the Bank or not) (herein called the
"Receiver") as receiver or receiver-manager of all or any part of the Collateral
and to remove any Receiver so appointed and appoint another or others in his
stead;
5.3.7 to exercise any of the rights of a secured party under the
Personal Property Security Act of the Applicable Province or any other rights
available at law or equity;
5.3.8 to transfer or require the transfer of any securities forming
part of the Collateral to the Bank and to exercise all rights, including,
without limitation, voting rights attached to such securities; and
5.3.9 to bring proceedings in any court of competent jurisdiction for
the appointment of a receiver or a receiver-manager of all or any portion of the
Collateral.
The security of this Agreement may be realized and the rights enforced
by any remedy or in any manner authorized or permitted by this Agreement or by
law or equity and no remedy for the realization of the security hereof shall be
exclusive of or dependent upon any other remedy and all or any remedies may from
time to time be exercised independently or in any combination.
5.4 DISPOSITION
-----------
Without limiting the generality of the foregoing it shall be lawful
for the Bank:
5.4.1 to make any sale, lease or other disposition of the Collateral
either for cash or upon credit or partly for one and partly for the other upon
such conditions as to terms of payment as it in its absolute discretion may deem
proper;
5.4.2 to rescind or vary any contract for sale, lease or other
disposition that the Bank may have entered into pursuant hereto and resell,
release or redispose of the Collateral with or under any of the powers conferred
herein; and
5.4.3 to stop, suspend or adjourn any sale, lease or other disposition
from time to time and to hold the same as adjourned without further notice.
Upon any such sale, lease or other disposition the Bank shall be
accountable only for money actually received by it. The Company shall be
accountable for any deficiency and the Bank shall distribute any surplus as
required by law. The Bank may deliver to the purchaser or purchasers of the
Collateral or any part thereof good and sufficient conveyances or deeds for the
same free and clear of any claim by the Company. The purchaser or lessee
receiving any disposition of the Collateral or any part thereof need not inquire
whether default under this Agreement has actually occurred but may as to this
and all other matters rely upon a statutory declaration of an officer of the
Bank, which declaration shall be conclusive evidence as between the Company and
any such purchaser or lessee, and the purchaser or lessee need not look to the
application of the purchase money, rent or other consideration given upon such
sale, lease or other disposition, which shall not be affected by any
irregularity of any nature or kind relating to the crystallizing or enforcing of
the security hereof or the taking of possession of the Collateral or the sale,
lease or other disposition thereof.
5.5 POWERS OF RECEIVER
--------------------
Any Receiver appointed as aforesaid shall have the power without legal
process:
5.5.1 to take possession of the Collateral or any part thereof wherever
the same may be found;
5.5.2 to carry on the business of the Company or any part thereof in
the name of the Company or of the Receiver; and
5.5.3 to exercise on behalf of the Bank all of the rights and remedies
herein granted to the Bank,
and without in any way limiting the foregoing the Receiver shall have all the
powers of a receiver appointed by a court of competent jurisdiction. Any
Receiver shall, so far as concerns responsibility for his acts, be deemed the
agent of the Company, and the Bank shall not be in any way responsible for any
misconduct or negligence on the part of any Receiver or any loss resulting
therefrom.
5.6 APPLICATION OF MONEYS
-----------------------
All moneys actually received by the Bank or by the Receiver in
enforcing the security of this Agreement shall be applied, subject to the proper
claims of any other person:
5.6.1 first, to pay or reimburse the Bank and any Receiver the costs,
charges, expenses and advances payable by the Company in accordance herewith;
5.6.2 second, in or toward the payment to the Bank of all other moneys
owing hereunder or secured hereby in such order as the Bank in its sole
discretion may determine; and
5.6.3 third, any surplus shall be distributed as required by law.
5.7 POWERS OF DIRECTORS AND OFFICERS
------------------------------------
Upon the Bank declaring as aforesaid that the security hereof has
become enforceable and crystallized or the Company receiving notice from the
Bank of the taking of possession of any of the Collateral or of the appointment
of a Receiver, all the powers, functions, rights and privileges of the directors
and officers of the Company with respect to the property, business and
undertaking of the Company shall cease except to the extent specifically
continued at any time by the Bank in writing, the whole to the extent permitted
by law.
5.8 LIMITATIONS ON LIABILITY
--------------------------
Neither the provisions of this Agreement nor anything done under or
pursuant to the rights, remedies and powers conferred upon the Bank and the
Receiver, whether hereunder or otherwise, will render the Bank a mortgagee in
possession. Neither the Bank nor any Receiver will be bound to collect, dispose
of, realize, enforce or sell any securities, Instruments, Chattel Paper or
Intangibles (including any Accounts) comprised in the Collateral or to allow any
such Collateral to be sold or disposed of, nor will it be responsible for any
loss occasioned by any such sale or other dealing or for any failure to sell or
so act, nor will it be responsible for any failure to take necessary steps to
preserve rights against others in respect of such Collateral, nor will it be
responsible for any loss occasioned by the failure to exercise any rights in
respect of Collateral within the time limited for the exercise thereof. Neither
the Bank nor the Receiver will be obligated to keep Collateral separate or
identifiable.
ARTICLE 6
GENERAL
6.1 WAIVER
------
No act or omission by the Bank in any manner whatever in the premises
shall extend to or be taken to affect any provision hereof save only express
waiver in writing. A waiver of default shall not extend to, or be taken in any
manner whatsoever to affect the rights of the Bank with respect to, any
subsequent default, whether similar or not. The Company waives every defence
based upon any or all indulgences that may be granted by the Bank.
6.2 OTHER SECURITIES
-----------------
The rights of the Bank hereunder shall not be prejudiced nor shall the
liabilities of the Company or of any other person be reduced in any way by the
taking of any other security of any nature or kind whatsoever whether in
addition to, or in substitution of, existing security either at the time of
execution of this Agreement or at any time hereafter.
6.3 NO MERGER OR NOVATION
------------------------
Neither the taking of any judgment nor the exercise of any power of
seizure or sale shall operate to extinguish the liability of the Company to pay
the moneys hereby secured nor shall the same operate as a merger of any covenant
herein contained or of any other Obligation, nor shall the acceptance of any
payment or other security constitute or create any novation.
6.4 AMALGAMATION
------------
The Company acknowledges that if it amalgamates with any other
corporation or corporations (a) the Collateral and the lien created hereby shall
extend to and include all the property and assets of each of the amalgamating
corporations and the amalgamated corporation and to any property or assets of
the amalgamated corporation thereafter owned or acquired, (b) the term,
"COMPANY", where used herein shall extend to and include each of the
amalgamating corporations and the amalgamated corporation, and (c) the term,
"Obligations", where used herein shall extend to and include the Obligations of
each of the amalgamating corporations and the amalgamated corporation. Nothing
in this Section 6.4 shall be interpreted as permitting the Company to amalgamate
in violation of any covenant of the Company contained herein or in any other
agreement binding the Company.
6.5 POWER OF ATTORNEY
-------------------
The Company for valuable consideration irrevocably appoints the Bank
and its officers from time to time or any of them to be the attorneys of the
Company in the name of and on behalf of the Company
to execute and do any deeds, transfers, conveyances, assignments, assurances
and things which the Company ought to execute and do under the covenants and
provisions herein contained and generally to use the name of the Company in the
exercise of all or any of the powers hereby conferred on the Bank.
6.6 THE BANK MAY REMEDY DEFAULT
-------------------------------
If the Company fails to do anything hereby required to be done by it,
the Bank may, but shall not be obliged to, do such thing and all sums thereby
expended by the Bank shall be payable forthwith by the Company, shall be secured
hereby and shall have the benefit of the lien hereby created, but no such
performance by the Bank shall be deemed to relieve the Company from any default
hereunder.
6.7 PURCHASE MONEY SECURITY INTEREST
-----------------------------------
The Company acknowledges that the security interest in any item of
Collateral and its proceeds shall constitute a purchase-money security interest
to the extent it secures Obligations incurred by the Company to enable the
Company to acquire rights in such Collateral. The Bank hereby reserves title to
any item of Collateral which may be sold by the Bank to the Company until
satisfaction of the Obligations as aforesaid.
6.8 TAXES AND RESERVE REQUIREMENTS
---------------------------------
In case the Bank is or becomes subject to any tax with respect to
payments of principal, interest or other amounts by the Company hereunder or in
respect of any of the Obligations (except for taxes on the overall net income of
the Bank) or to any reserve or similar requirement against assets held by, or
deposits in or for the account of, or loans by, an office of the Bank, or to any
other condition with respect to this Agreement, and the result of any of the
foregoing is to increase the cost to the Bank of making or maintaining any
Obligation or to reduce the income receivable by the Bank in respect of any
Obligation, then the Company shall pay to the Bank on demand that amount which
shall compensate the Bank for such additional cost or reduction in income. A
certificate of the Bank setting forth the amount of such additional compensation
and the basis therefor shall be submitted by the Bank to the Company and shall
be conclusive evidence, in the absence of manifest error, of such amount.
6.9 SASKATCHEWAN WAIVER
--------------------
To the extent permitted by law, the Company hereby agrees that the
provisions of the Limitation of Civil Rights Act (Saskatchewan), The Land
Contracts (Actions) Act (Saskatchewan), and The Saskatchewan Farm Security Act
(Saskatchewan), as may be applicable, shall have no application to this
Agreement, the security interest granted to the Bank herein, or to any other
agreement or interest arising collateral hereto, or as a result hereof, or any
replacement or substitution therefor and to all extensions, renewals or
amendments of the same.
6.10 ADDITIONAL PROVISIONS
----------------------
Any provisions set forth in Schedule "D" hereto form part hereof to
the same extent and effect as if set forth in the body hereof.
6.11 NOTICES
-------
Any notice or written communication given pursuant to or in connection
with this Agreement shall be in writing and shall be given by delivering the
same personally or by prepaid courier, prepaid registered mail, telex or
telecopier, addressed to the party to be notified at the address of such party
set out herein or at such other address of which such party has given notice to
the other parties hereto. Any such notice shall be conclusively deemed to have
been given and received on the day of actual receipt by the addressee or, if
given by prepaid registered mail, on the third Business Day following the
mailing date (absent a general disruption in postal service.)
6.12 OFFER OF FINANCE
------------------
This Agreement is being issued by the Company to the Bank pursuant to
the terms of the Offer of Finance. All terms and conditions of the Offer of
Finance shall remain in full force and effect, except to the extent inconsistent
with the provisions of this Agreement in which case the provisions of this
Agreement shall govern and prevail.
6.13 RECEIPT
-------
The Company hereby acknowledges receipt of a true copy of this
Agreement and, to the extent permitted by law, waives any right it may have to
receive a copy of any financing statement, financing change statement and
verification statement filed from time to time in respect of the security
created hereby.
6.14 SUCCESSORS AND ASSIGNS, ETC.
-------------------------------
This Agreement and all its provisions shall enure to the benefit of
the Bank, its successors and assigns and shall be binding upon the Company, its
successors and assigns, and every reference herein to a party hereto shall
include such party's successors and assigns as if specifically named. Time
shall be in all respects of the essence hereof.
IN WITNESS WHEREOF the Company has hereunto affixed its Corporate Seal
attested by the hands of its proper officers duly authorized in that behalf as
of the 22nd day of February, 2002.
CABLETEC COMMUNICATIONS INC.
Name of Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
per:___/s/ ▇▇▇ ▇▇▇▇▇ ________________________
Name: ▇▇▇ ▇▇▇▇▇
Title: President
c/s
per:_____/s/ ▇▇▇▇▇▇ Boujos______________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
We have authority to bind the Corporation
LAURENTIAN BANK OF CANADA
Per:___/s/ ▇▇▇▇▇ Knight________________________
Name:
Title:
Per:______/s/ Karim Habib______________________
Name:
Title:
SCHEDULE "A"
PREMISES
Municipal Address
------------------
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
SCHEDULE "B"
EQUIPMENT
ALL ASSETS
SCHEDULE "C"
PERMITTED ENCUMBRANCES
PERSONAL PROPERTY SECURITY ACT
---------------------------------
NONE EXCEPT EQUIPMENT LEASES LIMITED TO OPERATING LEASES FOR SPECIFIC EQUIPMENT
(INCLUDING CAR LEASES FROM FORD CREDIT CANADA)NONE EXCEPT EQUIPMENT LEASES
LIMITED TO OPERATING LEASES FOR SPECIFIC EQUIPMENT (INCLUDING CAR LEASES FROM
FORD CREDIT CANADA)
OTHER SECURED LIABILITIES
---------------------------
SECURED PARTY REGISTRATION PARTICULARS AMOUNT
NONE
BANK INDEBTEDNESS
------------------
NONE
SCHEDULE "D"
ADDITIONAL PROVISIONS
1. In the event that any Affiliate of the Company that is currently
inactive, as declared by the auditor of the Company, becomes active at any time
in the future, and if the Company advances any monies to such Affiliate, then
the Company hereby covenants and undertakes to cause such Affiliate to grant in
favour of the Bank a first ranked general security agreement over all the
property of such Affiliate before any advances are made to such Affiliate.
2. All existing Priority Claims, which term means the aggregate amount of
all claims (i) created or arising by operation of law without the consent of the
Company, or any of its Affiliates, under statute, regulation, common or other
law which rank prior to or pari passu with any security held by the Bank,
including without limitation income tax withheld from employees, unemployment
insurance premiums, Canada Pension Plan contributions, vacation pay, provincial
sales tax, federal excise and goods service taxes, Workers' Safety and Insurance
Board contributions or (ii) of suppliers which rank pari passu with any security
held by the Bank, shall be paid in full on or before May 31, 2002 and the
Company and its Affiliates shall furnish the Bank with proof of such payment on
or before May 31, 2002.
For the purposes of this schedule and notwithstanding the definition in section
1.1 of this Agreement, "Affiliate" shall mean only the following corporations:
CableTec Communications Inc., Multilink Network Services Inc. and Coastal
Network Services Inc.
SCHEDULE "E"
MISCELLANEOUS PARTICULARS
1.1 "AFFILIATE" includes the following corporations:
Universe2U Inc.; 1418276 Ontario Inc.; CableTec Communications Inc.; Multilink
Network Services Inc. and Coastal Network Services Inc.
1.2 "MANAGEMENT GROUP" includes the following persons:
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
1.3 "NORMAL BUSINESS" means the following activities:
Currently, no active business operations. Previously, the installation of fiber
optic networks.
1.4 "OFFER OF FINANCE" for the time being means the letter of the Bank to
the Company dated the 15th day of February, 2002, as accepted by the Company;
1.5 "SHAREHOLDER OWNERSHIP" means the direct or indirect beneficial
ownership of shares of the Company as follows:
Owner Class of Shares Number of Shares
----- ----------------- ------------------
Universe2U Canada Inc. Common 120