EXHIBIT 4.20
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CREDIT AGREEMENT
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between
ADDISON YORK INSURANCE BROKERS LTD.
and
OAK STREET FUNDING LLC
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Dated as of March 19, 2004
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TABLE OF CONTENTS
Page
Article 1. Definitions.............................................1
Section 1.1 Defined Terms...........................................1
Section 1.2 Rules of Construction..................................10
Section 1.3 Accounting Terms.......................................10
Article 2. Credit.................................................10
Section 2.1 Line of Credit.........................................10
Section 2.2 Interest...............................................10
Section 2.3 Payments of Principal and Interest.....................11
Section 2.4 Prepayment.............................................11
Section 2.5 Option to Cancel.......................................12
Section 2.6 Use of Proceeds........................................12
Section 2.7 Fees...................................................12
Section 2.8 Method of Advance......................................13
Section 2.9 Taxes..................................................13
Section 2.10 Changes in Capital Adequacy Regulations................14
Article 3. Security and Guaranty..................................14
Section 3.1 Security...............................................4
Section 3.2 Guaranty...............................................15
Section 3.3 Collateral Account/Setoff..............................15
Article 4. Representations and Warranties.........................15
Section 4.1 Due Organization.......................................15
Section 4.2 Due Qualification......................................15
Section 4.3 Organization Power.....................................15
Section 4.4 Organization Authority.................................15
Section 4.5 Financial Statements...................................15
Section 4.6 No Material Adverse Change.............................16
Section 4.7 Binding Obligations....................................16
Section 4.8 Lack of Encumbrances...................................16
Section 4.9 Indebtedness...........................................16
Section 4.10 Default................................................16
Section 4.11 Tax Returns............................................16
Section 4.12 Litigation.............................................16
Section 4.13 ERISA..................................................16
Section 4.14 Full Disclosure........................................17
Section 4.15 Contracts of Surety....................................17
Section 4.16 Licenses...............................................17
Section 4.17 Compliance with Law....................................17
Section 4.18 Force Majeure..........................................17
Section 4.19 Margin Stock...........................................17
Section 4.20 Approvals..............................................18
Section 4.21 Insolvency.............................................18
Section 4.22 Regulation.............................................18
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Section 4.23 Environmental Matters..................................18
Section 4.24 Conditions Precedent...................................19
Section 4.25 General................................................19
Article 5. Covenants..............................................19
Section 5.1 Negative Covenants.....................................19
Section 5.2 Affirmative Covenants..................................21
Section 5.3 Financial Covenants....................................25
Article 6. Conditions Precedent...................................26
Section 6.1 Conditions to Initial Advance..........................26
Section 6.2 Conditions to Subsequent Advances......................27
Section 6.3 General................................................28
Article 7. Default................................................28
Article 8. Remedy.................................................30
Section 8.1 Acceleration...........................................30
Section 8.2 Remedy.................................................30
Section 8.3 Preservation of Rights.................................30
Article 9. General Provisions.....................................30
Section 9.1 Benefit of Agreement; Participation....................30
Section 9.2 Survival of Representations............................31
Section 9.3 Governmental Regulation................................31
Section 9.4 Conflict...............................................31
Section 9.5 Choice of Law..........................................31
Section 9.6 Headings...............................................31
Section 9.7 Entire Agreement.......................................31
Section 9.8 Expenses...............................................32
Section 9.9 Indemnification........................................32
Section 9.10 Confidentiality........................................32
Section 9.11 Giving Notice..........................................32
Section 9.12 Counterparts...........................................32
Section 9.13 Incorporation by Reference.............................33
Section 9.14 Time of Essence........................................33
Section 9.15 No Joint Venture.......................................33
Section 9.16 Relationship of Parties; Waiver of
Consequential DamageS...............................33
Section 9.17 Severability...........................................33
Section 9.18 Gender.................................................33
Section 9.19 Waiver and Amendment...................................33
Section 9.20 Lender Not in Control..................................33
Section 9.21 Conflict...............................................34
Section 9.22 WAIVER OF JURY TRIAL...................................34
Section 9.23 Limitation of Advances.................................34
Section 9.24 Press Releases.........................................34
Exhibit A - Credit Note
Exhibit B - General Security Agreement
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Exhibit C - Guaranty
Exhibit D - Parent Security Agreement
Exhibit E - Parent Pledge Agreement
Exhibit F - Subsidiary Security Agreement
Exhibit G - Contingent Guaranty
Exhibit H - Charge-Off Policy
Schedule 1 - Permitted Encumbrances
Schedule 4.10 - Other Indebtedness
Schedule 4.13 - Material Pending or Threatened Litigation
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 19, 2004, is between ADDISON YORK
INSURANCE BROKERS LTD. and OAK STREET FUNDING LLC. The parties agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 Defined Terms. As used herein:
"Acceptable Insurance" means policies of insurance of the following types
(i) individual or group long-term care, medicare supplemental benefits, dread
disease, supplemental hospital indemnity, medical savings accounts, individual
or group medical, dental, long-term and short-term disability, vision, life
insurance including universal, adjustable, whole, endowment or term, accidental
death and dismemberment; (ii) property, liability and casualty insurance
acceptable to Lender including commercial and personal property, homeowners and
dwelling fire policies, business interruption and loss of use, commercial and
personal liability, commercial and personal inland marine, builders' risks,
commercial package policies, businessowners' packages, boiler and machinery or
equipment breakdown, commercial and personal automobile liability and physical
damage, carriers for hire liability and physical damage, garage liability
including dealer inventory physical damage and garagekeepers' liability,
commercial crime insurance including employee dishonesty and forgery, management
liability including directors' and officers' liability, fiduciary liability,
employment practices liability, kidnap, ▇▇▇▇▇▇ and extortion, workplace violence
and plan sponsorship liability, intellectual property infringement coverage, any
and all forms of professional liability, errors and omissions, workers'
compensation and employers liability, excess workers compensation and identity
theft indemnity, which are (a) originated by employees or contracted agents of
the Combined Entity who are appropriately licensed in the jurisdictions where
such policies are originated, (b) (i) issued by insurance companies, having an
AM Best rating of B or higher or, (ii) issued by the State Compensation
Insurance Fund of California, and (c) issued by insurance companies organized
under the laws of a state located within the United States or under the laws of
Canada and which maintain their principal places of business within the borders
of the United States or Canada.
"Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (i) acquires any ongoing business or all or substantially
all of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage of voting power) of the outstanding
equity interests of another Person.
"Additional Credit Note" means any Credit Note executed by Borrower in
favor of Lender on or subsequent to the Closing Date which is not intended to
amend, modify, extend, or replace any other Credit Note.
"Advance" means a disbursement of proceeds of the Line of Credit.
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"Affiliate" means, with respect to any Person, any other Person (a)
directly or indirectly through one or more intermediaries, controlling,
controlled by, or under common control with, such Person, or (b) that directly
or indirectly owns more than Ten Percent (10%) of any class of the voting
securities or capital stock of or equity interests in such Person. A Person
shall be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit Agreement, as amended from time to time.
"Anticipated Draw Schedule" means the schedule prepared by Borrower setting
forth all anticipated Advances to be requested within twenty-four (24) months of
the Closing Date.
"Applicable Margin" means the incremental margin to be paid by Borrower on
Advances hereunder, expressed as an annual rate of interest to be added to the
Prime Rate, which incremental margin is as follows:
Total of All Advances Applicable Margin
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= $ 5,000,000 8.0%
6.0%
> $ 5,000,000
= $10,000,000
> $10,000,000 4.0%
"Approved First Capital Indebtedness" means Indebtedness of the Borrower to
First Capital which (i) is incurred to finance a Permitted Acquisition, (ii) is
unsecured or secured by an Approved First Capital Lien, (iii) is incurred at a
time when no Default or Unmatured Default has occurred and is continuing, (iv)
has a scheduled maturity and is not due on demand, (v) does not exceed, together
with any Approved Seller Indebtedness incurred in connection with the same
transaction, the lower of the fair market value or the cost of the applicable
assets on the day acquired, (vi) does not exceed $7.5 million in the aggregate
outstanding at any time, and (vii) is incurred after receipt of a written
approval of such incurrence by the Lender.
"Approved First Capital Lien" means purchase money Liens securing Approved
First Capital Indebtedness incurred in connection with a Permitted Acquisition;
provided that such Liens (i) shall not apply to any property of the Borrower
other than that purchased in such Permitted Acquisition, and (ii) with respect
to which Lender and First Capital shall have entered into an intercreditor
agreement satisfactory to Lender.
"Approved Seller Indebtedness" means Indebtedness of the Borrower to the
seller of assets acquired by the Borrower which (i) is incurred to finance a
Permitted Acquisition, (ii) constitutes Subordinated Indebtedness, (iii) is
unsecured or secured by an Approved Seller Lien, (iv) is incurred at a time no
Default or Unmatured Default has occurred and is continuing, (v) has a scheduled
maturity and is not due on demand, (vi) does not exceed, together with any
Approved First Capital Indebtedness incurred in connection with the same
transaction, the lower of the fair market value or the cost of the applicable
assets on the day acquired, and (vii) after receipt of a written approval of
such incurrence by the Lender.
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"Approved Seller Lien" means purchase money Liens securing Approved Seller
Indebtedness incurred in connection with a Permitted Acquisition; provided that
such Liens (i) shall not apply to any property of the Borrower or the
Subsidiaries other than that purchased in such Permitted Acquisition, and (ii)
shall be subordinate to the Liens of the Lender pursuant to a Subordination
Agreement.
"Banking Day" means a day on which the national banks are open for the
purpose of conducting substantially all of their business activities in
Indianapolis, Indiana.
"Borrower" means Addison York Insurance Brokers Ltd., a Delaware
corporation.
"Borrowing Base" means, on any date of calculation, an amount as set forth
on the most recent Borrowing Base Certificate delivered to Lender equal to the
sum of (i) One Hundred Percent (100%) of the Recurring Annual Revenue of
Eligible Insurance Commissions paid with regard to policies of Acceptable
Insurance issued pursuant to agency agreements with Borrower by insurance
companies having a rating by AM Best of A- or above; plus (ii) Eighty Percent
(80%) of the Recurring Annual Revenue of Eligible Insurance Commissions paid
with regard to policies of Acceptable Insurance issued pursuant to agency
agreements with Borrower by insurance companies having a rating by AM Best of B+
or B; plus (iii) Fifty Percent (50%) of the Recurring Annual Revenue of Eligible
Insurance Commissions paid with regard to policies of Acceptable Insurance
issued pursuant to agency agreements with Parent by insurance companies having a
rating by AM Best of B or greater; provided, however, that to the extent
Recurring Annual Revenue of Eligible Insurance Commissions paid with regard to
policies of Acceptable Insurance issued by insurance companies having a rating
by AM Best of B+ or B exceeds twenty percent (20%) of the total Recurring Annual
Revenue of Eligible Insurance Commissions, such excess shall be excluded in the
calculation of the Borrowing Base.
"Borrowing Base Certificate" means a certificate duly executed and provided
by Borrower and Parent to Lender, in the form reasonably prescribed by Lender,
reflecting information and data relevant to the calculation of the Borrowing
Base.
"Capitalized Lease" means any lease of property which would be capitalized
on a financial statement of a Person prepared in accordance with GAAP.
"Capitalized Lease Obligations" means the amount of the obligations of a
Person under Capitalized Leases which are shown as liabilities on a balance
sheet of such Person prepared in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List under CERCLA.
"Change" shall have the meaning ascribed thereto in Section 2.10 hereof.
"Charge-Off Policy" means the policy adopted by Borrower and Parent to
determine when Accounts (as defined in the Security Agreement) of the Borrower
and the Parent, including but not limited to insurance commissions, should be
written off or written down due to the risk of non-collection. A copy of the
Charge-Off Policy is attached to this Credit Agreement as Exhibit H.
"Closing Date" means the date of this Agreement.
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"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral" means all right, title and interest of Borrower in all
properties, assets, and rights, tangible and intangible, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof, including, but not limited to, the following: (i) all
insurance commissions due on or after the date hereof and all insurance
commissions due before the date hereof but received after the date hereof; and
(ii) the Collateral Account.
"Collateral Account" means that certain deposit account (as such term is
defined by the Security Agreement), account number 656678109 held in the name of
Borrower and maintained at Bank One, N.A. The Collateral Account shall be
subject to the terms and provisions of a Deposit Account Control Agreement.
"Combined Entity" means the Borrower and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇ International
Insurance Brokers Ltd.
"Compliance Certificate" means a Compliance Certificate, in the form
prescribed by Lender, duly executed by the chief executive or chief financial
officers of Borrower and Parent.
"Credit Notes" means any Credit Note, in substantially the form of Exhibit
A hereto, duly executed by Borrower to Lender to evidence Advances under the
Line of Credit, including any amendment, modification, renewal, extension or
replacement thereof.
"Default" means any of the events specified in Section 7 hereof.
"Deposit Account Control Agreement" means any of the Deposit Account
Control Agreements duly executed by Borrower or the Parent in favor of Lender to
secure the Obligations, including any amendment or modification thereof, in a
form acceptable to Lender in its sole discretion.
"Dollar" and "$" mean, unless otherwise specifically stated, United States
dollars.
"EBITDA" means, as of any date of determination with respect to the
Combined Entity, the sum of (a) net income, plus (b) to the extent deducted in
determining net income, (i) income taxes paid or accrued, (ii) interest expense,
(iii) depreciation, (iv) amortization; and (v) non-cash stock option expense; in
each instance determined for the trailing four (4) quarter period ending on the
date of determination. EBITDA shall be determined from the Financial Statements.
"Eligible Insurance Commissions" means all insurance commissions in respect
of policies of Acceptable Insurance due and owing to the Combined Entity in the
ordinary course of its business in which Lender holds a valid and perfected
first priority security interest and Lien, excluding all revenues, commissions,
operations, support and payments from joint venture partners of the Combined
Entity, and which are not required to be written off or written down under the
Charge-Off Policy.
"Environmental Laws" means all provisions of laws, statutes, ordinances,
rules, regulations, permits, licenses, judgments, writs, injunctions, decrees,
orders, awards and standards promulgated by any Governmental Authority
concerning the protection of, or regulation of the discharge of substances into,
the environment or concerning the health or safety of persons with respect to
environmental hazards, and includes, without limitation, the Hazardous Materials
Transportation Act, 42 U.S.C. ss.1801 et seq., the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
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Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.ss.9601 et
seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and the Solid and Hazardous Waste Amendments of 1984, 42
U.S.C. ss.ss.6901 et seq., the Federal Water Pollution Control Act, as amended
by the Clean Water Act of 1977, 33 U.S.C. ss.ss.1251 et seq., the Clean Air Act
of 1966, as amended, 42 U.S.C. ss.ss.7401 et seq., the Toxic Substances Control
Act of 1976, 15 U.S.C. ss.ss.2601 et seq., the Federal Insecticide, Fungicide,
and Rodenticide Act, 7 U.S.C. ss.7401 et seq., the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. ss.ss.651 et seq., the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss.11001 et seq.,
the National Environmental Policy Act of 1975, 42 U.S.C. ss.ss.4321 et seq., the
Safe Drinking Water Act of 1974, as amended, 42 U.S.C. ss.ss.300(f) et seq., and
any similar or implementing state law, and all amendments, rules, and
regulations promulgated thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time-to-time.
"ERISA Affiliate" means any trade or business, whether or not incorporated,
which together with the subject Person would be treated as a single employer
under ERISA.
"Financial Statements" means, as the context may require, (a) the financial
statements of Borrower and the consolidated financial statements of the Parent
as of the date of this Agreement which have been furnished to Lender, and/or (b)
the similar financial statements of Borrower and the consolidated financial
statements of the Parent furnished from time to time pursuant to Section 5.2(a)
hereof; in all cases together with any accompanying notes or other disclosures
to such financial statements, and any other documents or data furnished to
Lender in connection therewith.
"First Capital" means First Capital Corporation.
"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time as promulgated by the Financial
Accounting Standards Board and recognized and interpreted by the American
Institute of Certified Public Accountants.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to any
government, including, without limiting the generality of the foregoing, any
agency, body, commission, court or department thereof whether federal, state,
local or foreign.
"Guarantors" mean (i) Parent, (ii) all Subsidiaries of Borrower as of the
Closing Date, (iii) Subsidiaries of the Parent, to the extent required to become
guarantors under the Parent Security Agreement, and (iv) any other new
Subsidiaries of Borrower which have satisfied the provisions of Section 5.2(r)
hereof, in each case together with their respective successors and assigns.
"Guaranty" means a Continuing Guaranty, in substantially the form of
Exhibit C hereto, duly executed by each Guarantor to Lender, including any
modification or replacement thereof, secured by a first priority security
interest in and lien upon all assets of each Guarantor.
"Hazardous Materials" mean (a) any "hazardous substance," as defined by
CERCLA, (b) any "hazardous waste," as defined by the Resource Conservation and
Recovery Act, as amended, (c) any petroleum product, or (d) any pollutant or
contaminant or hazardous,
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dangerous or toxic chemical, material or substance within the meaning of any
other federal, state or local law, regulation, ordinance or requirement
(including consent decrees and administrative orders) relating to, or imposing
liability or standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, all as amended or hereafter amended.
"Indebtedness" of a Person means such Person's (a) obligations for borrowed
money, (b) obligations representing the deferred purchase price of Property or
services (other than payable arising in the ordinary course of such Person's
business payable on terms customary in the trade), (c) obligations, whether or
not assumed, secured by any Lien upon or in Property owned by the subject Person
or payable out of the proceeds or production from Property now or hereafter
owned or acquired by such Person, (d) obligations which are evidenced by notes,
acceptances, or other instruments, (e) Capitalized Lease Obligations, (f)
indebtedness or other obligations of any other Person for borrowed money or for
the deferred purchase price of property or services, the payment or collection
of which the subject Person has guaranteed (except by reason of endorsement for
collection in the ordinary course of business) or in respect of which the
subject Person is liable, contingently or otherwise, including, without
limitation, liability by way of agreement to purchase, to provide funds for
payment, to supply funds to or otherwise to invest in such other Person, or
otherwise to assure a creditor against loss, (g) reimbursement or other
obligations in connection with letters of credit, and (h) any other transaction
which is the functional equivalent of, or takes the place of borrowing, but
which would not constitute a liability on a balance sheet of such Person
prepared in accordance with GAAP.
"Initial Credit Note" means that certain Credit Note in the maximum
principal amount of $5,000,000.00 executed by Borrower in favor of Lender on the
Closing Date, including any amendment, modification, renewal, extension or
replacement thereof.
"Investments" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade) or
contribution of capital by such Person; stocks, bonds, mutual funds, partnership
interests, notes, debentures or other securities owned by such Person; any
deposit accounts and certificates of deposit owned by such Person; and
structured notes, derivative financial instruments and other similar instruments
or contracts owned by such Person.
"Lender" means Oak Street Funding LLC, a Delaware limited liability
company, its successors and assigns.
"Lien" means any lien (statutory or other), security interest, mortgage,
pledge, hypothecation, assignment for the purpose of security, deposit
arrangement for the purpose of security, encumbrance or preference, priority or
other security agreement of any kind or nature whatsoever (including, without
limitation, the interest of a vendor or lessor under any conditional sale,
Capitalized Lease or other title retention agreement).
"Line of Credit" means, initially, a secured line of credit which Lender
establishes for Borrower pursuant to Section 2.1 hereof up to the maximum
principal amount of Five Million Dollars ($5,000,000), governed by this
Agreement, including any renewal or extension thereof. Upon one or more
Participants executing participation agreements with Lender, the amount of the
Line of Credit shall be increased to an amount determined by Lender to represent
the potential additional borrowing capacity made available by such Participants,
but in no event shall
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the Line of Credit exceed Fifteen Million Dollars ($15,000,000). Lender shall
notify Borrower in writing of any increases in the Line of Credit.
"Loan Documents" means this Agreement, the Credit Notes, the Security
Agreement, the Guaranty, the Parent Security Agreement, the Parent Pledge
Agreement, the Guarantor Security Agreement, the Deposit Account Control
Agreement, the Validity Guaranty, any UCC Financing Statements and all other
documents executed and delivered by Borrower or any Guarantor to govern,
evidence or secure the Line of Credit.
"Loss" shall have the meaning ascribed in Section 9.9 hereof.
"Manuals" means those certain manuals as defined in Section 5.1(n).
"Material Adverse Effect" means any event, circumstance or condition that
could reasonably be expected to have a material adverse effect on (a) the
business, operations, financial condition, Properties or prospects of Borrower,
the Parent or the Combined Entity, (b) the ability of Borrower or the Parent or
the Combined Entity to perform the Obligations, (c) the validity or
enforceability of any of the Loan Documents, or any material provision thereof
or any material transaction contemplated thereby, or (d) the rights and remedies
of Lender under any of the Loan Documents.
"Maturity Date" means the date which is sixty (60) calendar months after
the last day of the Pre-Amortization Period.
"Minimum Interest Coverage Ratio" means, as of the end of each fiscal
quarter of the Combined Entity, the ratio of (a) EBITDA to (b) the Combined
Entity's interest expense; in each instance determined for the trailing four (4)
quarter period ending on the date of determination. The Minimum Interest
Coverage Ratio shall be determined based on the Financial Statements.
"Net Worth" means the excess of a Person's total assets over such Person's
total liabilities (excluding from liabilities, however, any Subordinated Debt),
each determined in accordance with GAAP, as applicable, as shown on the balance
sheets furnished to Lender from time to time pursuant to Section 5.2(a) hereof.
"Obligations" means all unpaid principal and accrued and unpaid interest on
the Credit Notes, all accrued and unpaid fees hereunder, and all other
obligations, indemnities and liabilities of Borrower to Lender of every type and
description, direct or indirect, joint, several or joint and several, absolute
or contingent, whether or not arising in connection with the Line of Credit, due
or to become due, now existing or hereafter arising and whether or not
contemplated by Borrower or Lender as of the date hereof, including, without
limitation, any Advances pursuant to any amendment of this Agreement, all
reasonable costs of collection and enforcement of any and all thereof, including
reasonable attorney fees.
"Parent" means ▇▇▇▇▇▇▇ ▇▇▇▇▇ International Insurance Brokers Ltd., a
corporation amalgamated under the laws of the Province of Alberta.
"Parent Pledge Agreement" means a Pledge Agreement, in substantially the
form of Exhibit E hereto, duly executed by Parent in favor of Lender to secure
the Obligations, including any amendment or modification thereof.
"Parent Security Agreement" means a General Security Agreement, in
substantially the form of Exhibit D hereto, duly executed by Parent in favor of
Lender to secure the Obligations, including any amendment or modification
thereof.
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"Participants" shall have the meaning set forth in Section 9.1 of this
Credit Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to ERISA, or any successor entity.
"Permitted Acquisition" means an Acquisition meeting all the following
requirements (i) Lender has approved such Acquisition in writing, (ii) no
Default or Unmatured Default shall have occurred or would result from such
Acquisition, (iii) the Acquisition shall be consummated on a non-hostile basis,
(iv) the business being acquired shall be substantially similar to the business
of the Borrower and (v) the business being acquired is located in the United
States.
"Permitted Encumbrances" means (a) Liens for taxes or assessments which are
not yet due, Liens for taxes or assessments or Liens of judgments which are
being contested, appealed or reviewed in good faith by appropriate proceedings
which prevent foreclosure of any such Lien or levy of execution thereunder and
against which Liens, if any, adequate insurance or reserves have been provided;
(b) pledges or deposits to secure payment of workers' compensation obligations
and deposits or indemnities to secure public or statutory obligations or for
similar purposes; (c) those minor defects which in the opinion of Lender's
counsel do not materially affect title to the collateral for the Obligations;
(d) Liens in favor of Lender; (e) Liens imposed by law, such as carrier's,
warehousemen's and mechanic's liens and other similar Liens arising in the
ordinary course of business which secure payment of obligations not more than
sixty (60) days past due; (f) utility easements, building restrictions, zoning
ordinances and such other encumbrances or charges against real Property as are
of a nature generally existing with respect to real Properties of a similar
character and which do not in any material way affect the marketability of the
same or interfere with the use thereof in the business of Borrower; (g) Approved
First Capital Liens, (h) Approved Seller Liens, and (i) those further
encumbrances (if any) shown on Schedule 1 attached hereto.
"Person" means and includes an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust, an unincorporated
association and a Governmental Authority.
"Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which a Borrower may have any liability.
"Pre-Amortization Period" means a period of time commencing on the Closing
Date and ending on March 19, 2006. The Pre-Amortization Period may be extended
for up to three (3) additional one (1) year periods with the consent of Lender.
"Prime Rate" means a rate per annum equal to the prime rate of interest
announced from time to time by Bank One, N.A. or its successors (which is not
necessarily the lowest rate charged to any customer), changing when and as said
prime rate changes.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"Recurring Annual Revenue" means the amount of Eligible Insurance
Commissions [earned] by the Combined Entity in the prior twelve (12) months,
adjusted to the extent necessary to reflect the consistent application of the
Charge-Off Policy, calculated on a rolling twelve (12) month basis. Recurring
Annual Revenue shall further be adjusted, with respect to Permitted
Acquisitions, to include an amount equal to the Eligible Insurance Commissions
[earned] by the acquired businesses in the same prior twelve (12) months (based
on historical
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financial statements of the seller in such Permitted Acquisition, adjusted to
reflect the assumed application of the Charge-Off Policy during such period).
The basis for the calculation of all such adjustments shall be provided to
Lender and the amount of any such adjustments shall be subject to the approval
of the Lender.
"Security Agreement" means the General Security Agreement, in substantially
the form of Exhibit B hereto, duly executed by Borrower in favor of Lender to
secure the Obligations, including any amendment or modification thereof.
"Solvency Certificate" means a certificate duly executed and provided by
Borrower to Lender, in the form reasonably prescribed by Lender, reflecting
information and data relevant to the financial solvency of Borrower.
"Subordinated Debt" means Indebtedness of Borrower that is subordinated in
writing to the full, final and irrevocable payment of the Obligations, in form
and substance acceptable to Lender.
"Subordination Agreement" means each Subordination Agreement executed by a
holder of Subordinated Debt, in the form prescribed by Lender, including any
amendment or modification thereof.
"Subsidiaries" means, as to any Person, (a) a corporation of which shares
of stock having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of the Board of
Directors or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person, and (b) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Subsidiaries of such Person has more than a Fifty Percent (50%) equity
interest; and, as to Borrower, without limiting the foregoing, means each of the
Companies.
"Subsidiary Security Agreement" means a General Security Agreement, in
substantially the form of Exhibit F hereto, duly executed by a Guarantor in
favor of Lender to secure the Obligations, including any amendment or
modification thereof.
"Tangible Net Worth" means on any date of determination, the amount by
which (a) Net Worth, exceeds (b) the sum of (i) all assets which would be
classified as intangible assets under GAAP, including, without limitation,
goodwill (whether representing the excess of cost over book value of assets
acquired or otherwise), patents, trade names, copyrights, franchises, operating
permits, unamortized debt discount and expense, organization costs, and research
and development costs, (ii) treasury stock and minority interests in
subsidiaries or other entities, (iii) cash set apart and held in a sinking or
other similar fund established for the purpose of redemption or other retirement
of capital stock, and (iv) to the extent not otherwise deducted, reserves for
depreciation, depletion, obsolescence and/or amortization of properties and all
other reserves or appropriations of retained earnings which, in accordance with
GAAP, should be established in connection with the business conducted by the
Combined Entity, and (v) any revaluation or other write-up in book value of
assets (the items in (b)(i) through (v) are hereinafter referred to as the
"Intangible Assets") provided, however, that with regard to Acquisitions of
insurance agencies consummated by Borrower prior to the Closing Date and
Permitted Acquisitions by Borrower of insurance agencies after the Closing Date
using proceeds of the Line of Credit and as a result of which the Lender holds
the first lien in all property
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acquired (each an "Acquired Agency"), the amount recorded on the books and
records of the Borrowers under GAAP at the time of each such Acquisition for
customer accounts of the Acquired Agency (reduced for any subsequent impairment
charges) shall not be considered Intangible Assets so long as the annual
insurance commissions from the book of insurance policies at each Acquired
Agency (measured on a rolling four quarter basis) is equal to or exceeds the
annual commissions from the book of insurance policies at each Acquired Agency
in the four fiscal quarter period immediately prior to its acquisition.
"Taxes" shall have the meaning ascribed in Section 2.9 hereof.
"Total Liabilities" means, as of any date, all obligations of a Person
which, in accordance with GAAP, are or should be classified as liabilities on a
balance sheet of such Person.
"Unmatured Default" means any event which with notice, or lapse of time, or
both, would constitute a Default.
"Validity Guaranty" means a Contingent Guaranty, in substantially the form
of Exhibit G hereto, duly executed by the [(i) President, and Chief Operating
Officer of Parent and President of Borrower], and (ii) upon the return of the
Chief Financial Officer from her maternity leave or the hiring of a new Chief
Financial Officer, the Chief Financial Officer of Parent to Lender, including
any modification or replacement thereof.
Section 1.2 Rules of Construction. The foregoing definitions shall be
equally applicable to both the singular and plural forms of the defined terms.
Use of the terms "herein" "hereof", and "hereunder" shall be deemed references
to this Agreement in its entirety and not to the Section clause in which such
term appears.
Section 1.3 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, consistent with those
applied in the preparation of the Financial Statements.
ARTICLE 2. CREDIT
Section 2.1 Line of Credit. Subject to the terms and conditions of this
Agreement, Lender shall, upon request from Borrower, make one or more Advances
to Borrower from time to time during the Pre-Amortization Period, in an
aggregate amount not to exceed at any time outstanding the lesser of (a) the
maximum principal amount of the Line of Credit, or (b) the Borrowing Base. The
Advances requested by Borrower under the Line of Credit must be no less than Two
Hundred Fifty Thousand Dollars ($250,000.00) and in increments of Two Hundred
Fifty Thousand Dollars ($250,000.00). The initial Advance shall be evidenced by
the Initial Credit Note. In the event that aggregate Advances exceed the maximum
principal amount of $5,000,000.00, such additional advances shall be evidenced
by one or more Additional Credit Notes, each Additional Credit Note to be
executed in a maximum principal amount determined by Lender in its sole
discretion.
Section 2.2 Interest.
(a) Line of Credit. Prior to maturity or Default, the outstanding
principal balance of Advances under the Line of Credit (both during and
after the Pre-Amortization Period) shall bear interest at a per annum rate
equal to the Prime Rate plus the Applicable Margin.
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(b) General. Interest shall be due and payable for the exact number of
days principal is outstanding and shall be calculated on the basis of a
three hundred sixty (360) day year. Monthly interest payments shall be
calculated on the date such payment is due (the twenty-fifth (25th) day of
each calendar month) based on the Prime Rate plus the Applicable Margin in
effect on such date.
(c) Default Rate. While and so long as there shall exist any uncured
Default (before or after the Line of Credit becomes due and payable), the
Line of Credit shall bear interest at a per annum rate equal to Three
Percent (3%) above the otherwise applicable rates.
Section 2.3 Payments of Principal and Interest.
(a) Interest. Interest on the outstanding balance of Advances under
the Line of Credit from time to time throughout the term of the Line of
Credit shall be due and payable on the twenty-fifth (25th) day of each
calendar month.
(b) Principal. From time to time during the term of the Line of
Credit, Borrower shall make principal payments in an amount sufficient that
the outstanding principal balance of Advances under the Line of Credit
shall not exceed the Borrowing Base. Commencing on the twenty-fifth (25th)
day of the month following the Pre-Amortization Period, and continuing on
the twenty-fifth (25th) day of each month thereafter, Borrower shall pay
equal monthly installments of principal and interest in the amount
calculated by Lender as sufficient to amortize the outstanding principal
balance of Line of Credit over a period of sixty (60) months, with the
final payment to be made on the Maturity Date. The final installment shall
be sufficient to fully satisfy the remaining unpaid principal balance of
the Line of Credit, together with all accrued and unpaid interest thereon
and all fees and charges payable in connection therewith, and shall be due
and payable on the Maturity Date.
(c) Method of Payment. All payments of principal, interest and fees
hereunder shall be made in immediately available funds to Lender at
Lender's address set forth on the signature page hereof or at any other
place specified in writing by Lender to Borrower, by Noon (Indianapolis
time) on the date when due. Such amounts may be debited by Lender when due
to the Collateral Account without further authority.
(d) Banking Day. If any installment of principal and/or interest
provided herein becomes due and payable on a date other than a Banking Day,
the maturity of the installment of principal and/or interest shall be
extended to the next succeeding Banking Day, and interest shall be payable
during such extension of maturity.
(e) Currency. All payments under this Agreement shall be made in U.S.
Dollars.
Section 2.4 Prepayment.
(a) Voluntary Prepayment. Except as provided in Section 2.7(d) and
subject to the other provisions of this Agreement, Borrower may prepay the
outstanding principal amount of the Line of Credit at any time, and from
time to time, in any multiple, without premium or penalty; provided,
however, that during the Pre-Amortization Period, Borrower must maintain a
minimum outstanding principal balance of Four Million Dollars ($4,000,000).
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(b) General. Unless otherwise specifically designated by Borrower or
otherwise provided in the Loan Documents, all partial principal prepayments
received shall be applied to the outstanding principal balance of Advances
under the Line of Credit.
Section 2.5 Option to Cancel. No later than the Closing Date, Borrower
shall provide an Anticipated Draw Schedule for the full use of the Line of
Credit. Lender retains the right to cancel the unused portion of the Line of
Credit on or after March 19, 2005 if Borrower has not requested aggregate
Advances totaling at least Five Million Dollars ($5,000,000).
Section 2.6 Use of Proceeds. The proceeds of Advances under the Line of
Credit shall be used (i) to refinance an existing senior credit facility, (ii)
to make Permitted Acquisitions, (iii) to acquire equipment in the ordinary
course to expand its business, which acquisitions are approved in writing by the
Lender, (iv) to fund reasonable working capital needs associated with Permitted
Acquisitions, such amounts to be approved in writing by the Lender, and (v) for
such other purposes as may be approved in writing by the Lender.
Section 2.7 Fees.
(a) Loan Fee. Borrower shall pay Lender on the date hereof a
non-refundable loan fee equal to Seventy-Five Thousand Dollars ($75,000).
On the date that additional Participants sign participation agreements with
Lender on terms acceptable to Borrower, Borrower will directly pay such
Participants any incremental fees negotiated between Borrower and such
Participants.
(b) Non-Use Fee. Borrower shall pay to Lender (a) a non-use fee equal
to one-fourth of one percent (.25%) per annum on the average daily
unborrowed portion of the Line of Credit, and (b) a non-use fee equal to
one-half of one percent (.50%) per annum on the average daily unborrowed
portion of the Line of Credit with regard to the amount of any draw which
does not occur within three (3) months of the date set forth in the
Anticipated Draw Schedule. Such fees shall be due and payable monthly in
arrears on the twenty-fifth (25th) day of each calendar month. Such non-use
fee shall be calculated on the basis of the actual number of days elapsed
and a three hundred sixty (360) day year.
(c) Service Fee. A monthly service fee equal to 1/12 times One Percent
(1%) of the outstanding principal balance of the Line of Credit from the
previous month. Such fees shall be due and payable monthly in arrears on
the twenty-fifth (25th) day of each calendar month.
(d) Prepayment ▇▇▇.▇▇ the event Borrower (i) elects to prepay the Line
of Credit in full and otherwise voluntarily terminates this Credit
Agreement, or (ii) the Line of Credit is terminated and Borrower is
required to prepay the Line of Credit as a result of acceleration following
a Default, Borrower shall pay to Lender, in addition to all other payments
due as provided in this Credit Agreement, a prepayment fee equal to: (i)
ten percent (10%) of the maximum Line of Credit if the termination occurs
on or prior to the first anniversary of the Closing Date; (ii) eight
percent (8%) of the maximum Line of Credit if the termination date occurs
after the first anniversary, but on or before the second anniversary of the
Closing Date; (iii) five percent (5%) of the maximum Line of Credit if the
termination occurs after the second anniversary of the Closing Date, but on
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or before the third anniversary of the Closing Date; (iv) four percent (4%)
of the maximum Line of Credit if the termination occurs after the third
anniversary of the Closing Date, but on or before the fourth anniversary of
the Closing Date; (v) three percent (3%) of the maximum Line of Credit if
the termination occurs after the fourth anniversary of the Closing Date,
but on or before the fifth anniversary of the Closing Date; (vi) two
percent (2%) of the Line of Credit if the termination occurs after the
fifth anniversary of the Closing Date, but on or before the sixth
anniversary of the Closing Date; (vii) one percent (1%) of the maximum Line
of Credit if the termination occurs after the sixth anniversary of the
Closing Date. Notwithstanding the foregoing, prior to any increase in the
Line of Credit above $5,000,000 during the PreAmortization Period, Borrower
shall only pay a pre-payment fee on $4,000,000. Upon an increase in the
Line of Credit above $5,000,000, Lender and Borrower shall negotiate an
adjustment to the prepayment fee payable during the PreAmortization Period
to reflect such increase. Such revision shall be implemented only by an
amendment to this Agreement.
(e) General. The compensation provided in this Section 2.7 shall be in
consideration of the services of Lender in connection with the Line of
Credit and shall be in addition to any other fee, charge, payment or
expense required to be borne by Borrower under the Loan Documents.
Section 2.8 Method of Advance.
(a) Line of Credit. Borrower shall give Lender a written request for
Advance signed by an authorized officer of Borrower and Parent of its
intention to borrow under the Line of Credit by not later than noon
(Indianapolis time) at least ten (10) Banking Days prior to the proposed
borrowing date, which shall be a Banking Day, in order to allow Lender to
conduct appropriate due diligence on the Borrowing Base. The initial
Advance under the Line of Credit shall be in a minimum amount of Four
Million Dollars ($4,000,000), and in integral multiples of Two Hundred
Fifty Thousand Dollars ($250,000). Subsequent Advances under the Line of
Credit made on any borrowing date shall be in minimum amounts of Two
Hundred Fifth Thousand Dollars ($250,000) and in integral multiples of Two
Hundred Fifty Thousand Dollars ($250,000). No Advance shall be made by
Lender unless and until all conditions precedent to subsequent Advances set
forth in Section 6.2 hereof have been met. Lender has no commitment to make
Advances, even if the conditions precedent to subsequent Advances set forth
in Section 6.2 have been met.
(b) General. All Advances by Lender under the Line of Credit and
payments by Borrower on the Line of Credit shall be recorded by Lender on
its books and records, and the principal amount outstanding from time to
time, plus interest and fees payable thereon, shall be determined from the
books and records of Lender. The books and records of Lender shall be
presumed prima facie correct as to such matters.
Section 2.9 Taxes.
(a) General. All payments by Borrower under this Agreement or the
Credit Notes shall be made free and clear of, and without deduction or
withholding for, any present or future income, stamp or other taxes,
levies, duties, imposts, charges or fees or any related penalties, interest
or other liabilities ("Taxes"). If any Taxes are required to be deducted or
withheld from any amount payable to Lender under this Agreement or the
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Credit Notes, Borrower shall pay additional amounts so that the amount
received by Lender after the deduction of such Taxes (including Taxes on
such additional amounts) equals the amount that Lender would have received
if no Taxes had been deducted. Borrower shall pay to the appropriate taxing
authority all Taxes required to be deducted or withheld. Within thirty (30)
days after paying any such Taxes, Borrower shall deliver to Lender the
original or a certified copy of the receipt for such payment. Borrower
shall not be required to pay additional amounts to Lender on account of any
Taxes, including, but not limited to, income taxes, imposed solely by
reason of a present or past connection between Lender and the jurisdiction
imposing such Taxes (except a connection arising solely from the execution,
delivery, performance, enforcement of or the receipt of payments under this
Agreement or the Credit Notes).
(b) Tax Indemnity. Borrower shall indemnify Lender against any Taxes
imposed on (and any related expenses reasonably incurred by) Lender on
account of the execution, delivery, performance or enforcement of or the
receipt of payments under this Agreement or the Credit Notes other than
Taxes imposed solely by reason of the cause specified in the last sentence
of Section 2.9(b) hereof. Borrower also shall pay and indemnify Lender
against any stamp or other documentary, excise or property taxes or similar
levies, imposts, or charges (or any related liability) arising from the
execution, delivery, registration, performance or enforcement of this
Agreement or the Credit Notes.
Section 2.10 Changes in Capital Adequacy Regulations. If Lender or any
Participant determines the amount of capital required or expected to be
maintained by Lender or any Participant or any corporation controlling Lender or
any Participant is increased as a result of a Change, then, within fifteen (15)
days of demand by Lender, Borrower shall pay Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which Lender determines is attributable to this Agreement, the
Line of Credit or its commitment to make Advances hereunder (after taking into
account Lender's policies as to capital adequacy). "Change" means (a) any change
after the date of this Agreement in the Risk-Based Capital Guidelines, or (b)
any adoption of or change in any other law, governmental or quasi-governmental
rule, regulation, policy, guideline, interpretation, or directive (whether or
not having the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by Lender or any
corporation controlling Lender. "Risk-Based Capital Guidelines" means (i) the
risk-based capital guidelines in effect in the United States on the date of this
Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
ARTICLE 3. SECURITY AND GUARANTY
Section 3.1 Security. The Obligations shall be secured by the following:
(a) the Security Agreement constituting a first priority security
interest in the Collateral, other than Collateral subject to an Approved
First Capital Lien; and
(b) such other security interests as may be described in the Loan
Documents.
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Section 3.2 Guaranty. The Obligations shall be unconditionally guaranteed
by each Guarantor pursuant to a Guaranty, which Guaranty shall be secured by (i)
in the case of Parent, the Parent Security Agreement and the Parent Pledge
Agreement, and (ii) in the case of other Guarantors, the Subsidiary Security
Agreement. In addition, certain officers of Borrower and Parent shall provide a
Validity Guaranty.
Section 3.3 Collateral Account/Setoff. On the Closing Date, Borrower will
be required to deposit $500,000 into the Collateral Account and maintain a
minimum balance of $500,000 in the Collateral Account at all times. As provided
in Section 2.3(c), Lender is authorized to withdraw the payment of all
Obligations due hereunder from the Collateral Account. Upon the occurrence and
during the continuance of a Default, Lender (and any such Participant of the
Line of Credit) is authorized at any time and from time to time, without notice
to Borrower, and shall have the right to setoff, appropriate and apply its own
debt or liability to Borrower, or to any other Person liable for the
Obligations, in whole or partial payment of any Obligation in such order or
manner as Lender may reasonably determine, without any requirements of mutual
maturity.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
Borrower represents, covenants and warrants to Lender as follows:
Section 4.1 Due Organization. Borrower is a corporation duly organized,
validly existing and, if applicable, in good standing under and by virtue of the
laws of its state of organization.
Section 4.2 Due Qualification. Borrower is qualified, in good standing
and authorized to do business as a foreign limited liability company in such
other states or countries wherein the failure to so qualify would have a
Material Adverse Effect.
Section 4.3 Organization Power. Borrower possesses the requisite power to
enter into the Loan Documents, to borrow thereunder, to execute and deliver the
Loan Documents and to perform its respective obligations thereunder.
Section 4.4 Organization Authority. Borrower has taken the necessary
entity action to authorize the execution and delivery of the Loan Documents, as
applicable, and the borrowings thereunder and the granting of the security
interests therein, and except as set forth on Schedule 4.4 none of the
provisions of the Loan Documents violate, breach, contravene, conflict with, or
cause a default under any provision of the articles of organization or operating
agreement of Borrower or any provision of any existing note, bond, mortgage,
debenture, indenture, trust, license, lease, instrument, decree, order,
judgment, or agreement (including, without limitation, any agreements with
insurance carriers) to which Borrower is a party or by which it or its assets
may be bound or affected.
Section 4.5 Financial Statements. The Financial Statements of Borrower
were prepared in accordance with GAAP consistent with prior years, unless
specifically otherwise noted thereon, and fairly present the financial condition
of Borrower as of the date thereof and the results of its operations for the
period then ended, and no material adverse change in the financial condition of
Borrower has occurred since the date of the Financial Statements. The Financial
Statements of the Parent and its Subsidiaries were prepared in accordance with
GAAP consistent with prior years, unless specifically otherwise noted thereon,
and fairly present the
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financial condition of the Parent and its Subsidiaries as of the date thereof
and the results of its operations for the period then ended, and no material
adverse change in the financial condition of the Parent and its Subsidiaries has
occurred since the date of the Financial Statements.
Section 4.6 No Material Adverse Change. The information submitted by the
Borrower to Lender discloses all known or anticipated material liabilities,
direct or contingent, of the Combined Entity and their Subsidiaries as of the
dates thereof, and, to the best knowledge of Borrower, since such dates, there
has been no material adverse change in the Combined Entity's or their
Subsidiaries' financial condition.
Section 4.7 Binding Obligations. Each of the Loan Documents, when issued
for value, will constitute a legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms, except as the same
may be limited by reorganization, bankruptcy, insolvency, moratorium or other
laws affecting generally the enforcement of creditors' rights.
Section 4.8 Lack of Encumbrances. The Collateral is not subject to any
Lien, other than Permitted Encumbrances, and the security interests in favor of
Lender under the Loan Documents will constitute first, senior and prior
perfected security interests in the Collateral, and no financing statement or
similar instrument which names Borrower or its Subsidiaries as debtor or relates
to any of the Collateral, has been filed in any state or other jurisdiction and
remains unreleased, and Borrower has not signed any financing statement or
similar instrument or security agreement authorizing the secured party
thereunder to file any such financing statement or similar instrument.
Section 4.9 Indebtedness. Except as shown on the Financial Statements,
except as set forth on Schedule 4.10 hereto, and except for trade debt incurred
in the ordinary course of business since the date of the Financial Statements,
Borrower has no outstanding Indebtedness.
Section 4.10 Default. Borrower and/or, to Borrower's knowledge, each
insurance carrier or any other applicable party is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any material contract or agreement to which the Combined
Entity is a party, including, but not limited to, those contracts relating to
the Eligible Insurance Commissions. There are no outstanding claims of breach or
indemnification or notice of default or termination with respect to any such
contracts or agreements.
Section 4.11 Tax Returns. All tax returns or reports of Borrower or the
Combined Entity required by law have been filed, and all taxes, assessments,
contributions, fees and other governmental charges (other than those presently
payable without penalty or interest and those currently being contested in good
faith and against which adequate reserves have been established) upon Borrower
or its assets, properties or income, which are payable, have been paid.
Section 4.12 Litigation. Except as set forth on any Schedule 4.13 hereto,
no litigation or proceeding of any Governmental Authority or other Person is
presently pending or threatened, nor has any claim been asserted, against
Borrower or the Combined Entity which, if adversely determined, could reasonably
be expected to have a Material Adverse Effect.
Section 4.13 ERISA. Borrower and each ERISA Affiliate is in compliance
in all material respects with all applicable provisions of ERISA, and neither
Borrower nor any ERISA
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Affiliate has incurred any liability to the PBGC. Neither a "reportable event",
nor a "prohibited transaction", has occurred under, nor has there occurred any
complete or partial withdrawal from, nor has there occurred any other event
which would constitute grounds for termination of or the appointment of a
trustee to administer any "employee benefit plan" (including any "multi-employer
plan") maintained for employees of Borrower or any ERISA Affiliate, all within
the meanings ascribed by ERISA.
Section 4.14 Full Disclosure. No information, exhibit, memorandum, or
report (excluding estimated future operating results) furnished by Borrower to
Lender in connection with the negotiation of the Line of Credit contains any
material misstatement of fact, or omits to state any fact necessary to make the
statements contained therein not materially misleading in light of the
circumstances when made, and all estimated future operating results, if
furnished, were prepared on the basis of assumptions, data, information, tests
or other conditions believed to be valid or accurate or to exist at the time
such estimates were prepared and furnished. To Borrower's knowledge, there
presently exists no fact or circumstance relative to Borrower or the Combined
Entity, whether or not disclosed, which is presently anticipated to have a
Material Adverse Effect.
Section 4.15 Contracts of Surety. Except for the endorsements of Borrower
of negotiable instruments for deposit or collection in the ordinary course of
business, Borrower is not a party to any contract of guaranty or surety.
Section 4.16 Licenses. Borrower and the Combined Entity possess such
franchises, licenses, permits, patents, copyrights, trademarks, and consents of
appropriate Governmental Authorities to own their respective property (including
the assets acquired pursuant to the Acquisition) and as are necessary to carry
on their respective businesses.
Section 4.17 Compliance with Law. Borrower and the Combined Entity are
in compliance with and conformity with all laws, ordinances, rules, regulations
and all other legal requirements applicable to their respective businesses and
assets, the violation of which would have a material effect on their respective
businesses or financial condition. Neither Borrower nor the Combined Entity has
received nor does it have a reasonable basis to expect any order or notice of
violation or claim of violation of any law, ordinance, rules or regulation. The
properties on which Borrower or the Combined Entity is conducting its business
are properly zoned for the activities conducted or to be conducted thereon, and
all required variances have been obtained, and are in full force and effect with
no notice or threat of invalidity, expiration or lapse of any kind.
Section 4.18 Force Majeure. Neither the business nor the properties of
Borrower or the Combined Entity are presently affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty that
could reasonably be expected to have a Material Adverse Effect.
Section 4.19 Margin Stock. Neither Borrower nor the Combined Entity is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Line of Credit will be used, either directly or indirectly, for the purpose,
whether immediate, incidental or remote, of purchasing or carrying any margin
stock or of extending credit to others for the purpose of purchasing or carrying
any margin stock, and Borrower shall furnish to Lender, upon its request, a
statement in conformity with the
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requirements of Federal Reserve Board Form U-1 referred to in Regulation U.
Further, no part of the proceeds of the Line of Credit will be used for any
purpose that violates, or which is inconsistent with, the provisions of
Regulations T, U or X of the Board of Governors.
Section 4.20 Approvals. No authorization, consent, approval or any form of
exemption of any Governmental Authority is required in connection with the
execution and delivery by Borrower of the Loan Documents, the borrowings and
performance by Borrower thereunder or the issuance of the Credit Notes.
Section 4.21 Insolvency. Borrower is not "insolvent" within the meaning of
that term as defined in the Federal Bankruptcy Code and is able to pay its debts
as they mature.
Section 4.22 Regulation. Borrower is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or a "holding
company" or an "affiliate of a holding company" or a "subsidiary of a holding
company" within the meanings of the Public Utility Holding Company Act of 1935,
as amended.
Section 4.23 Environmental Matters. Borrower has no reason to believe and
has not received any notice to the effect that its operations are not in
compliance with any of the requirements of applicable Environmental Laws or are
the subject of any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any Hazardous Materials.
Except as disclosed in writing to Lender as of the date of this Agreement, to
the best of Borrower's knowledge after due inquiry (provided that clause (e)
below is not subject to any such knowledge qualification except as specifically
provided in clause (e)):
(a) All facilities and Property (including underlying groundwater)
owned, leased or operated by Borrower and its Subsidiaries have been, and
continue to be, owned, leased or operated by Borrower in compliance with
all applicable Environmental Laws, noncompliance with which could not,
singly or, in the aggregate, have, or reasonably be expected to have, a
Material Adverse Effect;
(b) There have been no past unresolved, and there are no pending or
threatened,
(i) claims, complaints, notices or inquiries, to, or requests for
information received by, Borrower with respect to any alleged
violation of any Environmental Law, that, singly or in the aggregate,
have, or may reasonably be expected to have, a Material Adverse
Effect, or
(ii) claims, complaints, notices or inquiries to, or requests for
information received by, Borrower regarding potential liability under
any Environmental Law or under any common law theories relating to
operations or the condition of any facilities or Property by Borrower
that, singly or in the aggregate, have, or may reasonably be expected
to have, a Material Adverse Effect.
(c) There have been no releases of Hazardous Materials, at, on or
under any Property now or previously owned or leased by Borrower that,
singly or in the aggregate, have, or may reasonably be expected to have, a
Material Adverse Effect;
(d) Borrower has been issued and is in compliance with all permits,
certificates, approvals, licenses and other authorizations relating to
environmental matters
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and necessary for its business, the noncompliance with which could not,
singly or in the aggregate, have, or reasonably be expected to have, a
Material Adverse Effect;
(e) No Property now or previously owned, leased or operated by
Borrower is listed or, to the best knowledge of Borrower, proposed for
listing on the National Priorities List pursuant to CERCLA (or any similar
Environmental Law) or on the CERCLIS or on any other federal or state list
of sites requiring investigation or clean-up, to the extent that any such
listing, singly or in the aggregate, may have, or may reasonably be
expected to have, a Material Adverse Effect;
(f) There are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any Property now or
previously owned, leased or operated by a Borrower that, singly or in the
aggregate, have, or may reasonably be expected to have, a Material Adverse
Effect;
(g) Borrower has not directly transported or directly arranged for the
transportation of any Hazardous Material to any location (i) which is
listed or proposed for listing on the National Priorities List pursuant to
CERCLA (or any similar Environmental Law) or on the CERCLIS or on any
federal or state list, to the extent that any such listing, singly or in
the aggregate, may have, or may reasonably be expected to have, a Material
Adverse Effect, or (ii) which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims
against Borrower for any remedial work, damage to natural resources or
personal injury, including claims under any Environmental Law, to the
extent that such claims, singly or in the aggregate, may have, or may
reasonably be expected to have, a Material Adverse Effect;
(h) There are no polychlorinated biphenyl, radioactive materials or
friable asbestos present at any Property now or previously owned or leased
by Borrower that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect; and
(i) No condition exists at, on or under any Property now or previously
owned or leased by Borrower which, with the passage of time, or the giving
of notice or both, would give rise to material liability under any
Environmental Law that, singly or in the aggregate have, or may reasonably
be expected to have, a Material Adverse Effect.
Section 4.24 Conditions Precedent. Each item furnished to Lender pursuant
to Section 6.1 hereof is a true and correct copy thereof, has not been modified
or amended and is in full force and effect on the date hereof.
Section 4.25 General. All statements contained in any certificate or
financial statement delivered by or on behalf of Borrower to Lender under any
Loan Document shall constitute representations and warranties made by Borrower
hereunder.
ARTICLE 5. COVENANTS
Section 5.1 Negative Covenants. Until the Obligations shall have been
fully and finally paid and performed, and so long as any commitment of Lender is
outstanding, without the prior written consent of Lender, Borrower shall not:
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(a) Further Encumber. Except for the Permitted Encumbrances, create or
suffer to exist any Lien upon any of the Collateral, whether now owned or
hereafter acquired.
(b) Merge, Etc. Not merge, consolidate, or otherwise combine with or
into any other entity, sell all or substantially all its assets or its
business, or make loans to or investments in others without prior approval
of Lender.
(c) Change Name or Place of Business. Not change its name or do
business under any trade names except as previously disclosed in writing to
Lender, or change the location of its principal office.
(d) Commission Advances. Not request or receive any funds from any
insurance carrier representing an advance on any commission relating to any
insurance policy.
(e) Post-Default Payments. Upon the occurrence and during the
continuance of a Default, pay to or compensate any officer, director or
employee, or any member of such person's family, any additional cash
compensation in the form of a bonus, stock options or other similar
incentive compensation, and shall suspend any then existing bonus and
incentive compensation payment structure, until such time as all amounts
then due and owing Lender have been satisfied.
(f) Additional Indebtedness. Create, incur, assume or suffer to exist
any Indebtedness except (i) Indebtedness represented by the Credit Notes,
(ii) other Indebtedness to Lender, (iii) Approved First Capital
Indebtedness, (iv) Approved Seller Indebtedness, (v) Subordinated Debt by
Borrower, or (iv) Indebtedness existing as of the Closing Date and secured
by the Liens set forth on Schedule 1 hereto.
(g) Guaranties. Assume, guarantee, endorse, contingently agree to
purchase or otherwise become liable upon the obligation of any other
Person.
(h) Business. Make any material change in the nature of the business
that Borrower or the Combined Entity currently conducts or change its name
or the location of its chief executive office or the location of the office
where records are kept.
(i) Dividends. Declare or pay any cash or property distributions or
dividends to shareholders other than distributions for the purpose of
paying income tax liability arising out of the business of Borrower.
(j) Capital Stock. Directly or indirectly redeem or acquire any of its
own capital stock, or any options, warrants or any securities in respect of
its capital stock.
(k) Capital Expenditures. At any time permit the capital expenditures
for any fiscal year to be greater than $100,000.
(l) Ownership Interests. Transfer ownership interests in Borrower on
its books and records.
(m) Manuals. Materially change the policy and procedures manual(s),
which were reviewed and approved by Lender (the "Manuals").
(n) Charge-Off Policy. Revoke or modify the Charge-Off Policy.
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(o) Acquisitions. Make any Acquisitions other than Permitted
Acquisitions.
Section 5.2 Affirmative Covenants. Until the Obligations shall have been
fully and finally paid and performed, and so long as any commitment of Lender is
outstanding, unless expressly waived in writing by Lender, Borrower shall:
(a) Financial Reporting. Furnish or caused to be furnished to Lender:
(i) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year, financial statements of the
Borrower and the consolidated financial statements of the Parent
audited by independent certified public accountants acceptable to
Lender, including a balance sheet, statement of income and retained
earnings and a statement of cash flows, with accompanying notes to
financial statements, all prepared in accordance with GAAP (with all
amounts denominated in Dollars), on a basis consistent with prior
years unless specifically noted thereon, accompanied by the
unqualified report of such auditors thereon, and further accompanied
by the certificate of the chief financial officers of Borrower and the
Parent that there exists no Default or Unmatured Default under the
Loan Documents, or if any Default or Unmatured Default exists, stating
the nature and status thereof;
(ii) As soon as possible, but in any event within fifteen (15)
days after the end of each month, (i) similar financial statements of
the Borrower and the consolidated financial statements of the Parent
as of the end of such month and the results of its operations for the
portion of the fiscal year then elapsed, prepared and signed by the
chief executive officer or chief financial officer of Borrower and
Parent, all prepared in accordance with GAAP (with all amounts
denominated in Dollars), on a basis consistent with prior periods,
unless specifically otherwise noted thereon, and accompanied by the
certificate of the chief executive officer or chief financial officer
of Borrower and Parent that there exists no Default or Unmatured
Default under the Loan Documents or if any Default or Unmatured
Default exists, stating the nature and status thereof, and (ii) a
report of the amount of total Eligible Insurance Commissions received
by the Combined Entity in such month, broken down to show the amount
received from each insurance company;
(iii) as soon as possible, but in any event within three (3) days
after Borrower becomes aware thereof, a written statement signed by
the chief executive or chief financial officer of Borrower as to the
occurrence of any Default or Unmatured Default stating the specific
nature thereof, Borrower's intended action to cure the same and the
time period in which such cure is to occur;
(iv) as soon as possible, but in any event within twenty (20)
days after the commencement thereof, a written statement describing
any litigation instituted by or against Borrower or the Parent, or any
Affiliate which, if adversely determined, may have a Material Adverse
Effect;
(v) within fifteen (15) days after the end of each fiscal
quarter, a Compliance Certificate, in form and substance acceptable to
Lender, showing
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compliance with the Borrowing Base and the financial covenants set
forth in Section 5 hereof;
(vi) as soon as possible, but in any event within twenty (20)
days after Borrower becomes aware thereof, a written statement
describing any reportable event or prohibited transaction which has
occurred with respect to any employee benefit plan and the action
which Borrower or the Combined Entity proposes to take with respect
thereto;
(vii) promptly upon the filing thereof, copies of all
registration statements and annual, quarterly, monthly, or other
regular reports which Borrower or the Parent files with any securities
commission or other governmental authority;
(viii) as soon as practicable, but any event within twenty (20)
days after receipt by Borrower or the Parent, a copy of any notice,
compliant, Lien, inquiry or claim (i) to the effect that Borrower or
the Combined Entity is or may be liable to any Person as a result of
the release by Borrower or the Combined Entity, or any other Person of
any Hazardous Substance into the environment, or (ii) alleging any
violation of any Environmental Law by Borrower or the Combined Entity,
which, in either case, could reasonably be expect to have a Material
Adverse Effect;
(ix) Borrower will promptly notify Lender upon the occurrence of
any of the following: (i) the receipt by Borrower of any oral or
written notice of any default, event of default, or breach purportedly
committed by it under any of the contracts pursuant to which the
Eligible Insurance Commissions are paid; (ii) the receipt by Borrower
of any oral or written notice by an insurance carrier of its intention
to cancel, terminate, or not renew any of the contracts pursuant to
which the Eligible Insurance Commissions are paid; (iii) the lapse of
any of the contracts pursuant to which the Eligible Insurance
Commissions are paid; or (iv) the downgrade by AM Best of the rating
of any insurance company from whom Eligible Insurance Commissions are
received;
(x) such other information as Lender may from time to time
reasonably request.
(b) Good Standing. Maintain its corporate existence and right to do
business in its state or country of organization and in such other
jurisdictions wherein non-qualification could have a Material Adverse
Effect.
(c) Taxes, Etc. Pay and discharge all taxes, assessments, judgments,
orders, and governmental charges or levies imposed upon it or on its income
or profits or upon its property prior to the date on which penalties attach
thereto and all lawful claims which, if unpaid, may become a Lien or charge
upon its Property, provided that Borrower shall not be required to pay any
tax, assessment, charge, judgment, order, levy or claim, if such payment is
being contested diligently, in good faith, and by appropriate proceedings
which will prevent foreclosure or levy upon its Property and adequate
reserves against such liability have been established.
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(d) Insurance. Maintain adequate insurance as is customarily maintained by
similar businesses and otherwise as may be required by the Security
Agreement with a provision for thirty (30) days prior notice to Lender
of any cancellation and stipulating Lender as mortgagee and payee,
provide a detailed list of such insurance to Lender upon request, and
within thirty (30) days of written notice from Lender, obtain such
additional insurance as may be reasonably requested.
(e) Books and Records. Keep proper books of account in which full,
true and correct entries will be made of all dealings and transactions of
and in relation to the business and affairs of Borrower and, at all
reasonable times, and as often as Lender may request, permit authorized
representatives of Lender to (a) have access to the premises and Properties
of Borrower and to the records relating to the operations of Borrower; (b)
make copies of or excerpts from such records; (c) discuss the affairs,
finances and accounts of Borrower with and be advised as to the same by the
chief executive and financial officers of Borrower; and (d) audit and
inspect such books, records, accounts, memoranda and correspondence at all
reasonable times, to make such abstracts and copies thereof as Lender may
deem necessary, and to furnish copies of all such information to any
proposed purchaser of or participant in the Line of Credit; provided that
Lender shall take all reasonable actions required to comply with any
privacy or similar laws which Borrower has advised Lender are applicable to
it.
(f) Reports. File, as appropriate, on a timely basis, annual reports,
operating records and any other reports or filings required to be made with
any governmental authority.
(g) Licenses. Maintain in full force and effect all material operating
permits, licenses, franchises, and rights used by it in the ordinary course
of business.
(h) Notice of Material Adverse Effect. Give prompt notice in writing
to Lender of the occurrence of any development, financial or otherwise,
including pending or threatened litigation, which might have a Material
Adverse Effect upon Borrower's or the Combined Entity's financial
condition, future commissions from insurance carriers, business or future
prospects.
(i) Compliance with Law. Comply with all material laws, ordinances,
rules, regulations and other legal requirements applicable to it,
including, without limitation, all Environmental Laws and ERISA, except
where the failure to do so could not be reasonably expected to result in a
Material Adverse Effect.
(j) Trade Accounts. Pay all trade accounts in accordance with standard
industry practices.
(k) Use of Proceeds. Use the proceeds of the Line of Credit solely for
the purposes herein described.
(l) Loan Payments. Duly and punctually pay or cause to be paid
principal and interest on the Line of Credit in lawful money of the United
States at the time and places and in the manner specified herein according
to the stated terms and the true intent and meaning hereof.
(m) Environmental Matters. (i) Use, operate and maintain all of its
Properties in material compliance with all applicable Environmental Laws,
keep or
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acquire all necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain in
material compliance therewith, and handle all Hazardous Substances in
material compliance with all applicable Environmental Laws, (ii) within
ninety (90) days after filing thereof, have dismissed with prejudice any
actions or proceedings against Borrower relating to compliance with
Environmental Laws which could in the reasonable opinion of Lender have a
Material Adverse Effect, and (iii) diligently pursue cure of any material
underlying environmental problem which forms the basis of any claim,
complaint, notice, Lien, inquiry, proceeding or action referred to in
Section 5.2(a)(viii) hereof. If Borrower is notified of any event described
in Section 5.2(a)(viii) hereof, Borrower shall, upon the request of Lender,
establish appropriate reserves against such potential liabilities and
engage a firm or firms of engineers or environmental consultants
appropriately qualified to determine as quickly as practical the extent of
contamination and the potential financial liability of Borrower with
respect thereto, and Lender shall be provided with a copy of any report
prepared by such firm or by any governmental authority as to such matters
as soon as any such report becomes available to Borrower. The selection of
any engineers or environmental consultants engaged pursuant to the
requirements of this Section shall be subject to the approval of Lender,
which approval shall not be unreasonably withheld or delayed.
(n) Servicing. Service all insurance policies and the insurance
carriers in the ordinary course of its business and in a manner necessary
to preserve the insurance commissions owed to the Combined Entity. The
Combined Entity shall not solicit or encourage the termination,
non-renewal, cancellation or lapse of any insurance policy or other
agreement pursuant to which insurance commissions are paid.
(o) Electronic Commission Statements. With respect to any electronic
commission statements furnished by any insurance carrier, Borrower shall
grant Lender direct access to any such electronic commission statements
and, in connection therewith, shall furnish to Lender any passwords and/or
other information necessary to obtain such access. If electronic commission
information is not available from the carrier, then Borrower shall furnish
Lender such financial information, including original (manual) commission
statements and/or electronic commission statements relating to the
insurance commissions, as made available by insurance carrier from time to
time.
(p) Financial Condition. Maintain its financial condition and
management (including, without limitation, insurance agents) of such skill
and experience as is currently in place and necessary to support fully its
business.
(q) Insurance Certificates. Cause to be provided, upon reasonable
notice and request of Lender, certificates of good standing issued by the
department of insurance or other applicable governmental or regulatory
bodies with respect to Borrower or the Combined Entity and applicable
insurance carriers.
(r) Addition of Guarantors; Addition of Pledged Capital Stock and
other Collateral. Borrower shall cause each Subsidiary that is a Subsidiary
as of the date of this Agreement or at any time thereafter, to deliver to
Lender an executed Guaranty and appropriate corporate resolutions, opinions
and other documentation in form and substance reasonably satisfactory to
Lender, such Guaranty and other documentation to be delivered to Lender as
promptly as possible but in any event within thirty (30) days of
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determination that a Subsidiary needs to be added as a Guarantor.
Simultaneously with any Subsidiary becoming a Guarantor, Borrower shall
also cause such Subsidiary to (i) execute and deliver a Subsidiary Security
Agreement (and deliver the other documents required thereby, including,
without limitation, restricted account agreements), if applicable, and such
other collateral documents as Lender may require its sole and reasonable
discretion; and (ii) deliver such other documentation as Lender may
reasonably require in connection with the foregoing, including, without
limitation, appropriate UCC-1 financing statements, certified resolutions
and other organizational and authorizing documents of such Subsidiary,
favorable opinions of counsel to such Subsidiary (which shall cover, among
other things, the legality, validity, binding effect and enforceability of
the documentation referred to above and the perfection of Lender's liens
thereunder) and other items of the types required to be delivered by
Borrower and its Subsidiaries pursuant to Section 6.1 as of the Closing
Date, all in form, content and scope reasonably satisfactory to Lender.
(s) Acquisition. Provide the Lender with all information it reasonably
requests in connection with any proposed Acquisition.
(t) Contingent Guaranty. Require at all times that the President,
Chief Operating Officer and, upon the return of the current Chief Financial
Officer from her maternity leave or the hiring of a new Chief Financial
Officer, Chief Financial Officer of Parent and the President of the
Borrower have signed a Validity Guaranty.
(u) Litigation Reserve. Maintain the cash reserve set aside with
regard to the ▇▇▇▇▇▇▇▇▇ judgment until such judgment is overturned or
dismissed by a court of competent jurisdiction (and all appeals have
ended).
(v) Review Report. Provide Lender by March 31, 2004 a copy of the SAS
70 review report to be issued by KPMG which report shall be satisfactory to
Lender.
(w) Deposit Account Control Agreements. Provide Lender by March 31,
2004 with signed Deposit Account Control Agreements for all accounts of the
Combined Entity at the Royal Bank of Canada which are satisfactory to
Lender.
Section 5.3 Financial Covenants.
(a) Minimum Interest Coverage Ratio. Commencing as of September 1,
2004 and as of the last day of each fiscal quarter end thereafter, maintain
a Minimum Interest Coverage Ratio of the Parent and its Subsidiaries of not
less than:
(i) 1.5 to 1 for the period commencing with the fiscal quarter
ending September 30, 2004 through the fiscal quarter ending December
31, 2005;
(ii) 2.0 to 1 for the period commencing with the fiscal quarter
ending March 31, 2006 through the fiscal quarter ending December 31,
2006;
(iii) 2.25 to 1 for the period commencing with the fiscal quarter
ending March 31, 2007 through the fiscal quarter ending December 31,
2007; and
(iv) 2.5 to 1 for each fiscal quarter ending thereafter until the
Maturity Date.
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(b) Tangible Net Worth. Maintain the Tangible Net Worth of the Parent
and its Subsidiaries at not less than as of Three Million Three Hundred
Thousand Dollars ($3,300,000.00), and in an amount increasing cumulatively
as of each fiscal year end thereafter by an amount equal to Fifty Percent
(50%) of Borrower's net after-tax income (without reduction for any net
losses) for such fiscal year.
(c) Maximum Total Liabilities to Tangible Net Worth. Maintain the
ratio of Total Liabilities to Tangible Net Worth of the Parent and its
Subsidiaries at (i) 10.0 to 1.00 or lower as of the Closing Date and for
the period commencing with the fiscal quarter ending December 31, 2004
through the fiscal quarter ending March 31, 2005, and (ii) 8.0 to 1.00 or
lower as of the last day of each fiscal quarter ending thereafter.
(d) Net Worth. Maintain the Net Worth of Borrower at not less than
Three Million Dollars ($3,000,000.00) at all times.
ARTICLE 6. PRECEDENT
Section 6.1 Conditions to Initial Advance. The obligation of Lender to
make the initial Advance under the Line of Credit is subject to satisfaction of
each of the following conditions precedent:
(a) Authorization. Lender shall have received and approved, certified
copies of Borrower's articles of incorporation and by-laws, all as amended,
accompanied by a recent certificate of good standing issued by the
appropriate official of its place of organization and certificates of good
standing from those states in which Borrower owns property or maintains an
office and a certified copy of resolutions adopted by Borrower's Members
authorizing the Line of Credit and specifying the names and capacities of
those persons authorized to execute and deliver the Loan Documents.
(b) Insurance. Borrower shall have furnished to Lender evidence of the
insurance required by this Agreement.
(c) Loan Documents. Each of the Loan Documents, in the form prescribed
by Lender, shall have been executed and delivered by Borrower and each
Guarantor to Lender, and the other loan documents and guaranties required
by this Agreement, in the form prescribed by Lender, shall have been
executed and delivered by the appropriate parties thereto.
(d) Borrowing Base Certificate. Borrower shall have furnished to
Lender a Borrowing Base Certificate current as of the Closing Date in a
form acceptable to Lender.
(e) Anticipated Draw Schedule. Borrower shall have furnished to Lender
an Anticipated Draw Schedule in a form acceptable to Lender.
(f) Commission Payments. Evidence satisfactory to Lender in its sole
discretion of the direction by the Combined Entity that insurance companies
remit all insurance commissions payable to the Combined Entity to accounts
subject to a Deposit Account Control Agreements shall have been delivered
by Borrower to Lender.
(g) Incumbency. Lender shall have received an Incumbency Certificate,
executed by the Secretary or Assistant Secretary of Borrower which shall
identify the name and title and bear the signature of the officers of
Borrower authorized to sign the
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Loan Documents, and Lender shall be entitled to rely upon such certificate
until informed of any change in writing by Borrower.
(h) Legal Matters. All legal matters incident to the Loan Documents
and the making of Advances shall be reasonably satisfactory to Lender and
its counsel.
(i) Opinions of Counsel. Lender shall have received the favorable
written opinion(s) of counsel to Borrower and each Guarantor, dated of even
date herewith, as to those matters which Lender may reasonably require.
(j) Searches. Lender shall have received satisfactory return after
search in accordance with the Uniform Commercial Code and the Personal
Property Security Act (Alberta) in such governmental offices as Lender
shall have deemed appropriate.
(k) Fees. Borrower shall have reimbursed Lender for all reasonable
legal fees, appraisal fees, investment banking fees and other reasonable
out-of-pocket expenses of Lender in connection with the Line of Credit.
(l) Regulation U. Lender shall have received such certificates and
other documents as it shall have deemed reasonably appropriate as to
compliance with Regulations U, T and X of the Board of Governors of the
Federal Reserve System.
(m) No Default. As of the date hereof, and after giving effect to the
initial funding of the Line of Credit, there shall not exist a Default or
Unmatured Default, and Lender shall have received evidence satisfactory to
Lender that the transactions contemplated by this Agreement do not create a
default under any agreement to which Borrower is a party.
(n) Consents. All consents necessary for the secured financing
transaction contemplated by this Agreement pursuant to the Loan Documents
shall have been obtained.
(o) Due Diligence. Lender shall have completed its business due
diligence, including, but not limited to an actuarial study, and the
findings therefrom are acceptable to Lender.
(p) Additional Documentation. Lender shall have received such other
documents, instruments, financing statements, waivers, certificates,
reaffirmations, consents and opinions as it may request.
Section 6.2 Conditions to Subsequent Advances. Prior to each subsequent
Advance under the Line of Credit or subsequent Advances under the Line of
Credit:
(a) No Default. No Default or Unmatured Default shall have occurred
and be continuing.
(b) Representations and Warranties. Each representation and warranty
contained in Section 4 shall be true and correct as of the date of such
Advance, except to the extent any such representation or warranty relates
solely to an earlier date and except changes reflecting transactions
permitted by this Agreement.
(c) Additional Credit Notes. Borrower shall have executed such
Additional Credit Notes as required by Lender.
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3
(d) Borrowing Base Certificate. Borrower shall have furnished to
Lender a Borrowing Base Certificate current as of the date of the request
for subsequent Advance in a form acceptable to Lender.
(e) Solvency Certificate. Borrower shall have furnished to Lender a
Solvency Certificate current as of the date of the request for subsequent
Advance in a form acceptable to Lender.
(f) Commission Payments. Evidence satisfactory to Lender in its sole
discretion of the direction by the Combined Entity that insurance companies
remit all insurance commissions payable to the Combined Entity to accounts
subject to a Deposit Account Control Agreements shall have been delivered
by Borrower to Lender.
(g) Legal Matters. All legal matters incident to the making of such
Advance shall be reasonably satisfactory to Lender and its counsel.
(h) Expenses. Borrower shall have reimbursed Lender for all reasonable
legal fees and other reasonable expenses incurred by Lender in connection
with the Line of Credit in accordance with Section 9.8 hereof.
(i) Additional Documentation. Lender shall have received such other
documents, instruments, financing statements, waivers, certificates,
reaffirmations, consents and opinions as it may request.
Section 6.3 General. Each request for an Advance shall constitute a
representation and warranty by Borrower that the applicable conditions contained
in this Section 6 have been satisfied.
ARTICLE 7. DEFAULT
The occurrence of any of the following events shall be deemed a Default
hereunder:
(a) any representation or warranty made by or on behalf of Borrower or
any Affiliate to Lender under or in connection with any Loan Document shall
be false in any material respect as of the date on which made;
(b) Borrower fails to make any payment of principal of or interest on
the Line of Credit or any fee or other payment Obligation in connection
with the Line of Credit when due and such failure continues uncured for a
period of seven (7) calendar days after such due date;
(c) the breach of any of the covenants contained in Article 5 hereof;
(d) the breach of any other terms or provisions of the Loan Documents
(other than a breach which constitutes a Default under Section 7.1(a), (b)
or (c) above) not cured within thirty (30) days after written notice from
Lender to Borrower specifying such breach;
(e) the failure of Borrower or any Guarantor to pay other Indebtedness
with an aggregate outstanding principal amount of $25,000.00 or more
("Cross Default Indebtedness") when due or within any applicable grace or
cure period; or the breach by Borrower or any Guarantor of any term,
provision or condition contained in any agreement under which any such
Cross Default Indebtedness was created or is governed,
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which constitutes a default thereunder, or any other event shall occur or
condition exist, the effect of which is to cause, or to permit the holder
or holders of such Indebtedness to cause such Indebtedness to become due
prior to its stated maturity, or any Indebtedness shall be declared to be
due and payable or required to be prepaid or repurchased (other than by a
regularly scheduled payment) prior to the stated maturity thereof;
(f) Borrower or any Guarantor shall (i) have an order for relief
entered with respect to it under the Federal Bankruptcy Code, (ii) not pay,
or admit in writing its inability to pay, its debts generally as they
become due, (iii) make an assignment for the benefit of creditors, (iv)
apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for
it or any substantial part of its property, (v) institute any proceeding
seeking an order for relief under the Federal Bankruptcy Code or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, or (vi) suspend operations as presently conducted or
discontinue doing business as an ongoing concern;
(g) without the application, approval or consent of Borrower or any
Guarantor, a receiver, trustee, examiner, liquidator or similar official
shall be appointed for Borrower or any Guarantor or any substantial part of
its Property, or a proceeding described in item (f) above shall be
instituted against Borrower or any Guarantor and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a
period of sixty (60) consecutive days;
(h) any Governmental Authority shall condemn, seize or otherwise
appropriate, or take custody or control of all or any substantial portion
of the Property of Borrower or any Guarantor;
(i) Borrower or any Guarantor shall fail within thirty (30) days to
pay, bond or otherwise discharge any judgment or order for the payment of
money in excess of $25,000 which is not stayed on appeal or otherwise
appropriately contested in good faith, or any attachment, levy or
garnishment is issued against any Property of Borrower or any Guarantor;
(j) if Parent fails to continue to own one hundred percent (100%) of
each class or type of the outstanding shares in Borrower;
(k) there occurs a "reportable event" or a "prohibited transaction"
under, or any complete or partial withdrawal from, or any other event which
would constitute grounds for termination of or the appointment of a trustee
to administer, any "plan" maintained by Borrower or any ERISA Affiliate for
the benefit of its "employees" (as such terms are defined in ERISA) which
will have a Material Adverse Effect;
(l) any Loan Document shall for any reason fail to create a valid and
perfected first priority security interest in any collateral purported to
be covered thereby (except as permitted by the terms of any Loan Document),
or any Loan Document shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert
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5
the invalidity or unenforceability of, or the security interest created
under, any Loan Document;
(m) a Guaranty or any material provision thereof shall cease to be in
full force or effect, or any Guarantor fails to promptly perform under its
Guaranty, or any Guarantor terminates or revokes or attempts to terminate
or revoke its Guaranty; or the breach by any Guarantor of any other term or
provision of any Loan Document to which it is a party not cured within
thirty (30) days after written notice from Lender;
(n) failure of Borrower to maintain a minimum balance of $500,000 in
the Collateral Account;
(o) any material adverse change in Borrower's or any Guarantor's
business or financial condition, as determined by Lender in its good faith
discretion; or
(p) termination by any bank of a Deposit Account Control Agreement
without the consent of the Lender.
ARTICLE 8. REMEDY
Section 8.1 Acceleration. If any Default described in Section 7 item (f)
or (g) occurs, the Line of Credit and the commitment of Lender to make Advances
under the Line of Credit shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part of
Lender. If any other Default occurs, Lender may terminate the Line of Credit and
declare the Obligations to be due and payable, whereupon the Obligations shall
become immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which Borrower hereby expressly waives.
Section 8.2 Remedy. Upon the occurrence of a Default, Lender may
immediately proceed to exercise all remedies available to it under the Loan
Documents or otherwise under applicable law. No right or remedy conferred upon
or reserved to Lender under the Loan Documents is intended to be exclusive of
any other available remedy or right, but each and every remedy shall be
cumulative and concurrent and shall be in addition to every other remedy now or
hereafter existing at law or in equity. No single or partial exercise of any
power or right shall preclude any further or other exercise of any power or
right.
Section 8.3 Preservation of Rights. No delay or omission of Lender to
exercise any power or right under the Loan Documents shall impair such power or
right or be construed to be a waiver of any Default or an acquiescence therein,
and any single or partial exercise of any power or right shall not preclude
other or further exercise thereof or the exercise of any other power or right.
No Advance hereunder shall constitute a waiver of any of the conditions of
Lender's obligation to make further Advances, nor, in the event Borrower is
unable to satisfy any such condition, shall a waiver of such condition in any
one instance have the effect of precluding Lender from thereafter declaring such
inability to be a Default hereunder. No course of dealing shall be binding upon
Lender.
ARTICLE 9. GENERAL PROVISIONS
Section 9.1 Benefit of Agreement; Participation. Lender will accept the
Credit Notes as evidence of loans made in the ordinary course of its lending
business. The terms and provisions of this Agreement, the Credit Notes and the
other Loan Documents shall be binding
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6
upon and inure to the benefit of Borrower and Lender and their respective
successors and assigns of their entire interests, except that Borrower shall not
have the right to assign this Agreement. Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time sell to one or
more banks or other entities ("Participants") participating interests in the
Line of Credit owing to Lender, any Credit Note held by Lender or any other
interest of Lender under the Loan Documents on a pro rata or non-pro rata basis.
In the event of any such sale by Lender of participating interests to a
Participant, Lender's obligations under the Loan Documents shall remain
unchanged, Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, Lender shall remain the holder of any
such Credit Note for all purposes under the Loan Documents, all amounts payable
by Borrower under this Agreement shall be determined as if Lender had not sold
such participating interests, and Borrower shall continue to deal solely and
directly with Lender in connection with Lender's rights and obligations under
the Loan Documents.
Section 9.2 Survival of Representations. All representations, warranties
and agreements of Borrower contained in the Loan Documents shall survive
delivery of the Credit Notes and the making of the Line of Credit.
Section 9.3 Governmental Regulation. Anything contained in this Agreement
to the contrary notwithstanding, Lender shall not be obligated to extend credit
to Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
Section 9.4 Conflict. This Agreement and the other Loan Documents shall be
interpreted, wherever possible, in a manner consistent with one another, but in
the event of any irreconcilable inconsistency, this Agreement shall control.
Section 9.5 Choice of Law. The Loan Documents (other than those containing
a contrary express choice of law provision) and the rights and obligations of
the parties thereunder and hereunder shall be governed by, and construed and
interpreted in accordance with the laws of the State of Indiana, notwithstanding
the fact that Indiana conflict of law rules might otherwise require the
substantive rules of law of another jurisdiction to apply. Borrower hereby
consents to the jurisdiction of any state or federal court located within ▇▇▇▇▇▇
County, Indiana. All service of process may be made by messenger, certified
mail, return receipt requested or by registered mail directed to Borrower at the
address indicated aside its signature to this Agreement, and Borrower otherwise
waives personal service of any and all process made upon Borrower. Borrower
waives any objection which Borrower may have to any proceeding commenced in a
federal or state court located within ▇▇▇▇▇▇ County, Indiana, based upon
improper venue or forum non conveniens. Nothing contained in this Section shall
affect the right of Lender to serve legal process in any other manner permitted
by law or to bring any action or proceeding against Borrower or its property in
the courts of any other jurisdiction.
Section 9.6 Headings. Section headings in the Loan Documents are for
convenience of reference only and shall not govern the interpretation of any of
the provisions of the Loan Documents.
Section 9.7 Entire Agreement. The Loan Documents embody the entire
agreement and understanding between Borrower and Lender and supersede all prior
agreements and understandings between Borrower and Lender relating to the
subject matter thereof.
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Page 31
Section 9.8 Expenses. Borrower shall reimburse Lender for any and all
reasonable costs, charges and out-of-pocket expenses (including reasonable
attorneys' fees and time charges of attorneys for Lender), paid or incurred by
Lender in connection with the preparation, review, execution, delivery,
amendment, modification, administration, collection and enforcement of the Line
of Credit and/or the Loan Documents and in connection with the conduct by
Lender's internal auditors of periodic field (twice annually) and servicing
audits of Borrower. Lender may pay or deduct from the loan proceeds any of such
expenses, and any proceeds so applied shall be deemed to be Advances under this
Agreement evidenced by the Credit Notes and secured by the Loan Documents, and
shall bear interest at the rate of interest provided in the Credit Notes.
Section 9.9 Indemnification. Borrower agrees to indemnify Lender, and its
successors and assigns (including any purchaser of a participation in the Line
of Credit), and their directors, officers and employees, against all losses,
claims, costs, damages, liabilities and expenses, including, without limitation,
all expenses of litigation or preparation therefor (a "Loss"), which they may
pay or incur in connection with or arising out of the direct or indirect
application of the proceeds of the Line of Credit hereunder; provided, however,
that no indemnification shall be required if it has been determined by a court
of competent jurisdiction that such Loss was caused by the gross negligence or
willful misconduct of Lender. The indemnity set forth herein shall be in
addition to any other Obligations of Borrower to Lender hereunder or at common
law or otherwise, and shall survive any termination of this Agreement, the
expiration of the obligation of Lender to make the Line of Credit and the
payment of all Obligations.
Section 9.10 Confidentiality. Lender agrees to treat all information
received by it in connection with the Loan Documents (except such information
which is generally available or has been made available to the public) as
confidential, provided, however, that nothing in this Section 9.10 shall
prohibit Lender from, or subject Lender to liability for, disclosing any such
information to any Governmental Authority to whose jurisdiction Lender is
subject, and provided further that Lender may provide such information to
proposed purchasers of or participants in the Line of Credit from time to time.
Section 9.11 Giving Notice. Any notice required or permitted to be given
under this Agreement may be, and shall be deemed effective if made in writing
and delivered to the recipient's address, telex number or facsimile number
addressed to Borrower or Lender at the addresses indicated aside their
signatures to this Agreement by any of the following means: (a) hand delivery,
(b) United States first class mail, postage prepaid, (c) registered or certified
mail, postage prepaid, with return receipt requested, (d) by a reputable rapid
delivery service, or (e) by telegraph or telex when delivered to the appropriate
office for transmission, charges prepaid, with request for assurance of receipt
in a manner typical with respect to communication of that type. Notice made in
accordance with this Section shall be deemed given upon receipt if delivered by
hand or wire transmission, three (3) Banking Days after mailing if mailed by
first class, registered or certified mail, or one (1) Banking Day after deposit
with an overnight courier service if delivered by overnight courier. Borrower
and Lender may each change the address for service of notice upon it by a notice
in writing to the other parties hereto.
Section 9.12 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by
Borrower and Lender.
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Page 32
Section 9.13 Incorporation by Reference. All Exhibits hereto are
incorporated herein by this reference. Each of the other Loan Documents shall be
made subject to all of the terms, covenants, conditions, obligations,
stipulations and agreements contained in this Agreement to the same extent and
effect as if fully set forth therein, and this Agreement is made subject to all
of the terms, covenants, conditions, obligations, stipulations and agreements
contained in the other Loan Documents to the same extent and effect as if fully
set forth therein. The provisions of this Agreement, including, without
limitation, provisions relating to maintenance of insurance, are in addition to,
and not a limitation upon, the requirements of any other Loan Document or any
subordination agreement.
Section 9.14 Time of Essence. Time is of the essence under the Loan
Documents.
Section 9.15 No Joint Venture. Notwithstanding anything to the contrary
herein contained or implied, Lender, by this Agreement, or by any action
pursuant hereto, shall not be deemed to be a partner of, or a joint venturer
with, Borrower, and Borrower hereby indemnifies and agrees to defend and hold
Lender harmless, including the payment of reasonable attorneys' fees, from any
Loss resulting from any judicial construction of the parties' relationship as
such.
Section 9.16 Relationship of Parties; Waiver of Consequential Damages.
The relationship between Borrower and Lender shall be solely that of borrower
and lender. Lender shall not have any fiduciary responsibilities to Borrower.
Lender undertakes no responsibility to Borrower to review or inform Borrower of
any matter in connection with any phase of Borrower's business or operations.
Lender shall not have any liability with respect to, and Borrower hereby waives,
releases and agrees not to ▇▇▇ for, any special or consequential damages
suffered by it in connection with, arising out of, or in any way related to the
Loan Documents or the transactions contemplated thereby.
Section 9.17 Severability. In the event any provision of this Agreement
or any of the Loan Documents shall be held invalid or unenforceable by any court
of competent jurisdiction, such holding shall not affect the validity,
enforceability or legality of the remaining provisions hereof or thereof, all of
which shall continue unaffected and unimpaired thereby.
Section 9.18 Gender. As used herein, the masculine gender shall be deemed
to include the feminine and the neuter and the singular number shall also
include the plural.
Section 9.19 Waiver and Amendment. Borrower and Lender may enter into
agreements supplemental hereto for the purpose of adding or modifying provisions
of this Agreement or changing the respective rights, powers, privileges, duties,
liabilities, covenants or obligations of Lender or Borrower or waiving any
Default hereunder, provided, however, that no such agreements supplemental shall
be binding unless in writing and duly signed by the parties hereto, and then
only to the extent specifically set forth therein.
Section 9.20 Lender Not in Control. None of the covenants or other
provisions contained in the Loan Documents shall, or shall be deemed to, give
Lender the right or power to exercise control over the affairs and/or management
of Borrower, the power of Lender being limited to the right to exercise the
remedies provided in the Loan Documents, provided, however, that if Lender
becomes the owner of any stock or other equity interest in any Person, whether
through foreclosure or otherwise, Lender shall be entitled (subject to
requirements of law) to exercise such legal rights as it may have by virtue of
being the owner of such stock or other equity interest in such Person.
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Page 33
Section 9.21 Conflict. This Agreement and the other Loan Documents shall
be interpreted, wherever possible, in a manner consistent with one another, but
in the event of any irreconcilable inconsistency, this Agreement shall control.
Section 9.22 WAIVER OF JURY TRIAL. LENDER AND BORROWER, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY RIGHT EITHER OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. NEITHER LENDER NOR BORROWER SHALL SEEK
TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL
HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY EITHER LENDER OR BORROWER EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY BOTH OF THEM. THIS PROVISION IS A MATERIAL INDUCEMENT TO
LENDER TO PROVIDE THE FINANCING GOVERNED BY THIS AGREEMENT.
Section 9.23 Limitation of Advances. Borrower hereby acknowledges that
the ability of Lender to make Advances under the Line of Credit in excess of
$5,000,000 is contingent upon Lender and GVC Financial Services, LLC locating
additional Participants. GVC Financial Services, LLC and Lender have agreed to
use reasonable efforts to locate additional Participants sufficient to increase
the Line of Credit to $15,000,000, but Lender has made no commitment to locate
such additional Participants and Borrower has made no commitment to accept any
additional Participants.
Section 9.24 Press Releases. Except as may be required by applicable law
(but only with prior notice to the other party), Borrower and Lender agree that
no public information releases or press releases shall be made with regard to
the existence or subject matter of the Loan Documents without the prior written
consent of the other party.
[THIS SPACE LEFT INTENTIONALLY BLANK]
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Page 34
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
executed by their respective officers duly authorized as of the date first above
written.
"BORROWER"
ADDISON YORK INSURANCE BROKERS LTD.
By: /s/ Primo Podorieszach
-----------------------------------
Primo Podorieszach, CEO
Address:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: Primo Podorieszach, CEO
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
"LENDER"
OAK STREET FUNDING LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Address:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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Page 35
Schedule 1
----------
Permitted Encumbrances
----------------------
None.
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Page 36
Schedule 4.10
-------------
Other Indebtedness
------------------
None.
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Page 37
Schedule 4.13
-------------
Material Pending or Threatened Litigation
-----------------------------------------
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Page 38
EXHIBIT A
CREDIT NOTE
$15,000,000 Dated: March 19, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
FOR VALUE RECEIVED, the undersigned ADDISON YORK INSURANCE BROKERS LTD, a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
OAK STREET FUNDING LLC ("Lender"), or its assigns, at its principal office at
Carmel, Indiana, or at such other place as the holder hereof may designate in
writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of Fifteen Million Dollars ($15,000,000), or
so much thereof as may be advanced and outstanding from time to time, together
with interest on the unpaid principal balance existing from time to time at the
per annum rates and on the dates set forth in the Agreement (hereinafter
defined). The entire unpaid balance of principal under this Note, and all
accrued and unpaid interest thereon, shall be due and payable on the Line of
Credit Maturity Date, and Borrower shall make such mandatory principal payments
as are required to be made under the terms of Section 2.4(b) of the Agreement.
Lender shall, and is hereby authorized to, record in accordance with its
usual practice, the date and amount of each advance under this Note and the date
and amount of each principal payment hereunder.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of, that certain Credit Agreement between Borrower and
Lender as of even date herewith (as the same may be amended from time to time,
the "Agreement"). Advances under this Note shall be made in accordance with the
Agreement. The Agreement, among other things, contains a description of the
collateral securing this Note, the definitions of the proper nouns used herein
as defined terms but that are not defined herein, and provisions for
acceleration upon the happening of certain stated events.
Neither the existence of this Note nor the fact that, from time to time,
amounts may be outstanding hereunder, shall constitute or be deemed to imply any
commitment on the part of Lender to make any one or more additional Loans to
Borrower.
Subject to the provisions of the Agreement, Borrower may prepay the
principal amount of this Note at any time and from time to time.
If Borrower fails to make the payment of any installment of principal or
interest, as provided in the Agreement, within seven (7) calendar days after the
date due, or upon the occurrence of any other Default, then in any of such
events, or at any time thereafter, the entire principal balance of this Note,
and all accrued and unpaid interest thereon, irrespective of the maturity date
specified herein or in the Agreement, together with reasonable attorneys' fees
and other costs incurred in collecting or enforcing payment or performance
hereof and with interest from the date of Default on the unpaid principal
balance hereof at the rate specified in the Agreement following maturity or a
Default, shall, at the election of the holder hereof (except as otherwise
provided for automatic acceleration on the occurrence of certain Defaults
specified in the Agreement), and without relief from valuation and appraisement
laws, become immediately due and payable.
--------------------------------------------------------------------------------
Borrower and all endorsers, guarantors, sureties, accommodation parties
hereof and all other parties liable or to become liable for all or any part of
this indebtedness, severally waive demand, presentment for payment, notice of
dishonor, protest and notice of protest and expressly agree that this Note and
any payment coming due under it may be extended or otherwise modified from time
to time without in any way affecting their liability hereunder.
Notice of acceptance of this Note is hereby waived. This Note shall be
construed according to and governed by the laws of the State of Indiana.
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF THIS NOTE OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS NOTE OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER
ORAL OR WRITTEN, OR ACTIONS OF BORROWER OR LENDER. BORROWER SHALL NOT SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY LENDER EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY
BORROWER AND LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO
PROVIDE THE FINANCING EVIDENCED BY THIS NOTE.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first hereinabove written.
ADDISON YORK INSURANCE BROKERS LTD.
a Delaware corporation
By: Primo Podorieszach
--------------------------------------
Primo Podorieszach, CEO
EXHIBIT B
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT ("Security Agreement") is made as of the 19th
day of March, 2004, by ADDISON YORK INSURANCE BROKERS LTD., a Delaware
corporation having its chief executive offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇.,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ (Taxpayer I.D. No. ▇▇-▇▇▇▇▇▇▇) (the
"Borrower"), in favor of OAK STREET FUNDING LLC, having a notice address of
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Lender").
ARTICLE 1. DEFINITIONS
Section 1.1 Defined Terms. As used herein:
"Accounts", "Inventory", "Equipment", "Fixtures", "General Intangibles",
"Chattel Paper", "Documents", "Goods", "Deposit Accounts", "Instruments",
"Investment Property" and "Proceeds" shall mean all of Borrower's such property
within the meanings ascribed in the Indiana Uniform Commercial Code, as in
effect from time to time.
"Account Debtor" shall have the meaning ascribed in the Indiana Uniform
Commercial Code, as in effect from time to time.
"Collateral" shall mean all of the Borrower's property or rights in which a
security interest is granted hereunder.
"Collateral Account" shall mean the Deposit Account more fully described in
Section 4.5.
"Control" shall have the meaning ascribed in the Indiana Uniform Commercial
Code, as in effect from time to time.
"Credit Agreement" shall mean the Credit Agreement executed between the
Borrower and the Lender of even date, as amended and/or restated from time to
time.
"First Lien Collateral" means all Collateral except that Collateral which
Lender has agreed in an intercreditor agreement is subject to a first priority
Approved First Capital Lien.
"Intellectual Property" shall mean all intellectual property of the
Borrower, including, without limitation, (a) all patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice); (b) all trademarks, service marks, trade dress, trade
names, and corporate names and all the goodwill and quality control standards
associated therewith; (c) all registered and unregistered statutory and common
law copyrights; (d) all registrations, applications and renewals for any of the
foregoing; (e) all trade secrets, confidential information, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
improvements, proposals, technical and computer data, financial, business and
marketing plans, and customer and supplier lists and related information; (f)
all other proprietary rights (including, without limitation, all computer
software and documentation and all license agreements and sublicense agreements
to and from third parties relating to any of the foregoing); (g) all copies and
tangible embodiments of the foregoing in whatever form or medium; (h) all
damages and payments for past, present and future infringements of the
--------------------------------------------------------------------------------
foregoing; (i) all royalties and income due with respect to the foregoing; and
(j) the right to ▇▇▇ and recover for past, present and future infringements of
the foregoing.
"Liabilities" shall mean (a) all Obligations including all future advances;
(b) all other time to time obligations of the Borrower to the Lender of every
type and description, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and whether or not contemplated
by the Borrower or the Lender as of the date of this Security Agreement,
including, without limitation, any modification, extension, or addition to or of
the Obligations or the Credit Agreement and any overlying advances, out of
formula advances and overdrafts made or permitted in connection with the
Obligations or other Liabilities; and (c) any duty of the Borrower to act or to
refrain from acting in connection with any Liability.
"Lock Boxes" shall have the meaning set forth in Section 4.5(a).
"Lock Box Agreements" shall have the meaning set forth in Section 4.5(a).
"Obligations" shall have the meaning ascribed in the Credit Agreement.
"Schedule of Accounts" shall have the meaning ascribed in Section 4.3.
"Stock Rights" means any securities, dividends or other distributions and
any other right or property which the Borrower shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any securities or other ownership interests in a
corporation, partnership, joint venture or limited liability company
constituting Collateral and any securities, any right to receive securities and
any right to receive earnings, in which the Borrower now has or hereafter
acquires any right, issued by an issuer of such securities.
Section 1.2 Incorporation of Credit Agreement Definitions. Other
capitalized terms used herein and not specifically herein defined shall have the
meanings ascribed to them in the Credit Agreement.
Section 1.3 Terms Defined in the Indiana Uniform Commercial Code. Terms
defined in the Indiana Uniform Commercial Code which are not otherwise defined
in this Security Agreement are used herein as defined in the Indiana Uniform
Commercial Code, as in effect from time to time.
ARTICLE 2. SECURITY INTEREST IN COLLATERAL
As security for the payment and performance of the Liabilities, the Lender
shall have, and the Borrower does hereby grant to the Lender, a continuing
perfected security interest in the following Collateral:
(a) All Accounts, Deposit Accounts, General Intangibles, Documents,
Instruments, Investment Property, Chattel Paper and any other similar
rights of the Borrower however created or evidenced, whether now existing
or hereafter owned, acquired, created, used, or arising, specifically
including, without limitation, claims, leases, agreements, license
agreements, licensing fees, royalties, policies, insurance commissions,
credit insurance, guaranties, letters of credit, advices of credit, binders
or certificates of insurance, deposits, documents of title, securities,
security interests, licenses, goodwill, tax refunds (federal, state or
local), customer lists, franchises, franchise rights, drawings, designs,
marketing rights, computer programs, artwork,
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databases and other like business property rights, all applications to
acquire such rights, for which application may at any time be made by the
Borrower, together with any and all books and records pertaining thereto
and any right, title or interest in any Inventory which gave rise to an
Account, and all Intellectual Property throughout the world;
(b) All Inventory, whether now existing or hereafter acquired and
wherever located, specifically including, without limitation, all
merchandise, personal property, raw materials, work in process, finished
Goods, materials and supplies of every nature usable or useful in
connection with the manufacturing, packing, shipping, advertising, selling,
leasing or furnishing of any of such Inventory and all materials of the
Borrower used or consumed or to be used or consumed in the Borrower's
business, together with any and all books and records pertaining thereto;
(c) All Equipment, Fixtures, Goods and all other tangible personal
property of the Borrower of every kind or nature, whether now owned or
hereafter acquired, wherever located, specifically including, without
limitation, all machinery, trucks, boats, barges, on and off the road
vehicles, forklifts, tools, dies, jigs, presses, appliances, implements,
improvements, accessories, attachments, parts, components, partitions,
systems, carpeting, draperies and apparatus;
(d) All products and Proceeds of each of the foregoing, specifically
including, without limitation, (i) any and all Proceeds of any insurance,
indemnity, warranty or guaranty payable to the Borrower from time to time,
(ii) any and all payments of any form whatsoever made or due and payable to
the Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
foregoing by any governmental authority or any Person acting under color of
governmental authority, (iii) to the extent of the value of Collateral,
claims arising out of the loss, nonconformity, or interference with the use
of, defects or infringement of rights in, or damage to, the Collateral,
(iv) any Stock Rights, and (v) any and all other amounts from time to time
paid or payable under or in connection with any of the foregoing, whether
or not in lieu thereof;
(e) All renewals, extensions, replacements, modifications, additions,
improvements, accretions, accessions, betterments, substitutions,
replacements, annexations, tools, accessories, parts and the like now in,
attached to or which may hereafter at any time be placed in or added to any
Collateral, whether or not of like kind; and
(f) All rights, remedies, claims and demands under or in connection
with each of the foregoing.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into the Credit Agreement and to make each
and every loan and other financial accommodation thereunder, the Borrower
represents and warrants to the Lender that, except as may otherwise be provided
in the Credit Agreement:
Section 3.1 Names of Borrower. The exact corporate name of the Borrower
and its state of organization are each correctly stated in the preamble to this
Security Agreement. Set forth on Schedule 1 hereto is a true, accurate and
complete list of all previous legal names of the
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Borrower and all past and present assumed (or fictitious) names and trade names
of the Borrower for the past six (6) years.
Section 3.2 Prior Combinations. Except as set forth on Schedule 1 hereto,
the Borrower has not ever been conducted as a partnership or proprietorship, no
entity has merged into the Borrower or has been consolidated with the Borrower,
and no entity has sold substantially all of its assets to the Borrower or sold
assets to the Borrower outside the ordinary course of such entity's business.
Section 3.3 Chief Executive Office, etc. The Borrower's chief executive
office and taxpayer identification number are set forth in the preamble to this
Security Agreement. Subject to Section 4.1 hereof, Borrower maintains all of its
records with respect to its Accounts at such address. Borrower has not at any
time within the past four (4) months maintained its chief executive office or
its records with respect to Accounts at any other location.
Section 3.4 Perfection Certificate. The Borrower has previously delivered
to Lender a certificate signed by the Borrower and entitled "Perfection
Certificate" (the "Perfection Certificate") in substantially the form attached
hereto as Appendix I. The Borrower represents and warrants to Lender as follows:
(a) the Borrower's exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof, (b) the Borrower is a resident of
the jurisdiction set forth in the Perfection Certificate, (c) the Perfection
Certificate accurately sets forth the Borrower's social security number, and (d)
all other information set forth on the Perfection Certificate pertaining to the
Borrower is accurate and complete.
Section 3.5 Title to Collateral. Except for Intellectual Property, which
is separately addressed in Section 3.7 below, all Collateral is lawfully owned
by the Borrower, free and clear of any prior security interest, pledge, sale,
assignment, transfer or other encumbrance other than Permitted Encumbrances; the
Borrower has the unencumbered right to pledge, sell, assign or transfer the
Collateral subject to the Permitted Encumbrances and to subject the Collateral
to the security interest in favor of the Lender herein; except in respect of
Permitted Encumbrances, no financing statement covering all or any portion of
the Collateral is on file in any public office other than in favor of the
Lender; and the security interest herein constitutes a legal and valid, first
priority security interest in the Collateral.
Section 3.6 Representations Regarding Accounts. To the best of Borrower's
knowledge and except for Permitted Encumbrances, each Account (a) is a valid
Account representing an undisputed, bona fide right to payment from the Account
Debtor named therein for Goods sold or leased, Intellectual Property licensed,
or for services rendered, whether or not such right to payment has been earned
by performance; (b) is free and clear of any agreement wherein the Account
Debtor may claim a deduction or discount; and (c) is free and clear of all
set-offs or counterclaims.
Section 3.7 Representations Regarding Intellectual Property. Schedule 2
hereto contains a complete and accurate list as of the date hereof of all
patented and registered Intellectual Property owned by the Borrower and of all
pending applications for the registration of other Intellectual Property owned
or filed by the Borrower. Schedule 2 also contains a complete and accurate list
of all licenses and other rights granted by the Borrower to any third party with
respect to the Intellectual Property and licenses and other rights granted by
any third party to the Borrower that are necessary for the Borrower's business.
Except for Permitted Encumbrances and except as may be set forth in Schedule 2
(a) the Borrower owns and possesses
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all right, title and interest in and to, or has a valid and enforceable license
to use, all of the Intellectual Property necessary for the operation of the
Borrower's business as presently conducted or proposed to be conducted; (b) no
claim by any third party contesting the validity, enforceability, use or
ownership of any Intellectual Property has been made, is currently outstanding
or, to the Borrower's knowledge, is threatened, and, to the Borrower's
knowledge, there are no grounds for any such claim; (c) the Borrower has not
received any notice of, nor is the Borrower aware of any facts which indicate
the likelihood of, any material infringement or misappropriation by, or conflict
with, any third party with respect to any Intellectual Property, nor has the
Borrower received any claim of infringement or misappropriation of, or other
conflict with, any intellectual property rights of any third party; (d) the
Borrower has not materially infringed, misappropriated or otherwise conflicted
with any intellectual property rights of any third party, nor is Borrower aware
of any material infringement, misappropriation or conflict which will occur as a
result of the continued operation of the business of the Borrower as presently
conducted or proposed to be conducted; and (e) the Borrower has made or will
timely make all necessary filings and recordations (except user filings) and has
paid or will pay all required fees and taxes to record and maintain its
ownership in its Intellectual Property throughout the world to the extent
necessary to conduct Borrower's business as currently being conducted or
proposed to be conducted.
Section 3.8 Representations Regarding Contracts and Leases. All material
leases of real or personal property and all material contracts to which the
Borrower is a party are in full force and effect. To the best of Borrower's
knowledge, no Person is challenging or disputing the validity or enforceability
of any such leases or contracts, and the Borrower is not in material default
under any such leases or contracts. Section 3.9 Representations Regarding
Equipment and Inventory. Schedule 3 is a true and correct list of all locations
where Equipment and Inventory of the Borrower is located (except Inventory in
transit) and all locations where Equipment and Inventory of the Borrower has
been located in the four (4) months immediately preceding the date of this
Agreement.
Section 3.10 Representations Regarding Investment Property. The Borrower is
the direct and beneficial owner of each type of Investment Property listed on
Schedule 4 hereto as being owned by it, free and clear of any liens,
encumbrances or security interests except for the security interest granted to
the Lender. The Borrower further represents and warrants that (i) all such
Investment Property which are shares of stock in a corporation or ownership
interests in a partnership or limited liability company have been (to the extent
such concepts are relevant with respect to such Investment Property) duly and
validly issued, are fully paid and non-assessable, (ii) this pledge of such
Investment Property will not violate the proscriptions or require the consent,
license, filing, report, permit, exemption, regulation or approval, of any
Governmental Authority or other Person or violate any provision of law, (iii)
such ownership of pledged Investment Property represent One Hundred Percent
(100%) of the issued and outstanding ownership of the Borrower's Subsidiaries,
(iv) such Investment Property has not been materially altered and all signatures
thereon are genuine, (v) there exists no default by an issuer under any of such
Investment Property with respect thereto, (vi) no insolvency proceedings have
been instituted with respect to the issuer of such Investment Property (vii)
other than those in favor of the Lender, the Borrower has executed no instrument
of any kind assigning any of such Investment Property or the liability of any
issuer thereon, or with respect thereto, which remains in effect, (viii) none of
the issuers of such Investment Property have any obligation,
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commitment, subscription, option, warrant or other rights outstanding entitling
the holder thereof to purchase or otherwise acquire any capital stock of such
issuer, and (ix) with respect to any certificates delivered to the Lender
representing an ownership interest in a partnership or limited liability
company, either such certificates are Securities as defined in Article 8 or 8.1
(as applicable) of the Uniform Commercial Code of the applicable jurisdiction as
a result of actions by the issuer or otherwise, or, if such certificates are not
Securities, the Borrower has so informed the Lender so that the Lender may take
steps to perfect its security interest therein as a General Intangible.
ARTICLE 4. AGREEMENTS CONCERNING ACCOUNTS
Section 4.1 Location. The Borrower will give the Lender written notice of
each office of the Borrower at which records of the Borrower relative to
Accounts are kept. Except where such notice is given, all records of the
Borrower relative to Accounts are and will be kept at the chief executive office
of the Borrower.
Section 4.2 Returns and Repossessions. Prior to the occurrence of a Default
or Unmatured Default, the Borrower may grant, in the ordinary course of
business, to any Account Debtor, any rebate, refund or adjustment to which such
Account Debtor may be lawfully entitled and may accept, in connection therewith,
the return of Goods, the sale or lease of which shall have given rise to the
obligation of the Account Debtor, subject, however, to the Lender's security
interest therein and in any Proceeds arising from the disposition thereof. After
the occurrence of a Default or an Unmatured Default, no discount, credit or
allowance shall be granted by the Borrower to any Account Debtor, and no return
of Goods shall be accepted by the Borrower without the Lender's prior written
consent.
Section 4.3 Schedule of Accounts. Upon reasonable request by the Lender the
Borrower will, from time to time, deliver to the Lender a schedule identifying
each Account ("Schedule of Accounts"), together with such schedules and
certificates and reports relative to all or any of the Collateral and the items
or amounts received by the Borrower in full or partial payment or otherwise, as
Proceeds of any of the Collateral. Each Schedule of Accounts or other schedule,
certificate or report shall be executed by its duly authorized officer and shall
be in the form specified by the Lender; provided, however, that each Schedule of
Accounts may omit any information that would cause the Borrower to violate
applicable privacy or other laws. The Borrower shall take reasonable steps,
including, but not limited to, the negotiation and execution of confidentiality
agreements, in regard to each Schedule of Accounts necessary to allow the
Borrower to disclose as much information as possible in said Schedule of
Accounts without violating any applicable privacy or other law. Any Schedule of
Accounts identifying any Account shall be accompanied, if the Lender requests,
(a) by a true and correct copy of the contract or invoice evidencing such
Account, (b) by evidence of shipment, delivery or performance, and (c) if such
request shall be made after the occurrence of a Default or an Unmatured Default,
by a duly executed assignment of such Account from the Borrower to the Lender;
provided, however, that the Borrower's failure to execute and deliver any such
Schedule of Account and/or assignment shall not affect or limit the Lender's
security interest or other rights in and to Accounts, and provided, further,
that a proper assignment of any Account wherein the United States Government is
the Account Debtor may be requested by the Lender at any time whether or not
there shall have occurred a Default or Unmatured Default.
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Section 4.4 Verification of Accounts. The Lender, its officers, agents,
attorneys, and accountants, may verify Accounts and returned and repossessed
Goods and, under reasonable procedures, directly with the Account Debtor or by
other methods, and the Borrower shall furnish to the Lender upon request
additional Schedules of Accounts, together with all notes or other papers
evidencing the same and any guaranty, securities or other information relating
thereto, and shall do, make and deliver all such additional and further acts,
things, deeds, assurances and instruments as the Lender may reasonably require.
Section 4.5 Collection and Application of Collateral Proceeds; Deposit
Accounts.
(a) Collection of Accounts.
(1) The Borrower will (i) cause each bank or other financial
institution in which it maintains (a) a Deposit Account, including
each Deposit Account maintained by the Borrower into which all cash,
checks, or other similar payments relating to or constituting payments
made in respect of Accounts will be deposited (a "Collateral Deposit
Account"), to enter into a control agreement with the Lender, in form
and substance satisfactory to the Lender in order to give the Lender
Control of the Deposit Account or (b) other deposits (general or
special, time or demand, provisional or final) to be notified of the
security interest granted to the Lender hereunder and cause each such
bank or other financial institution to acknowledge such notification
in writing, and (ii) upon the Lender's request after the occurrence
and during the continuance of a Default, deliver to each such bank or
other financial institution a letter, in form and substance acceptable
to the Lender, transferring ownership of the Deposit Account to the
Lender or transferring dominion and control over each such other
deposit to the Lender until such time as no Default exists.
Notwithstanding the foregoing, no control agreement shall be required
for Deposit Accounts specifically identified in an intercreditor
agreement executed by the Lender as being subject to an Approved First
Capital Lien.
(2) Upon the occurrence of a Default or Unmatured Default,
establish lock box service (the "Lock Boxes") with the bank(s) set
forth in Appendix I hereto, which lock boxes shall be subject to
irrevocable lockbox agreements in the form provided by or otherwise
acceptable to the Lender and shall be accompanied by an acknowledgment
by the bank where the Lock Box is located of the Lien of the Lender
granted hereunder and of irrevocable instructions to wire all amounts
collected therein to the Collection Account (as hereinafter defined)
(a "Lock Box Agreement"). Upon the occurrence of a Default or
Unmatured Default, (a) the Borrower shall direct all of its Account
Debtors of Accounts which constitute First Lien Collateral to forward
payments directly to Lock Boxes subject to Lock Box Agreements, (b)
the Lender shall have sole access to the Lock Boxes at all times and
the Borrower shall take all actions necessary to grant the Lender such
sole access, (c) at no time shall the Borrower remove any item from
the Lock Box or from a Collateral Deposit Account without the Lender's
prior written consent, (d) if the Borrower should refuse or neglect to
notify any Account Debtor to forward payments directly to a Lock Box
subject to a Lock Box Agreement after notice from the Lender, the
Lender shall be entitled to make such notification
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directly to Account Debtor, (e) if notwithstanding the foregoing
instructions, the Borrower receives any proceeds of any Accounts
constituting First Lien Collateral, the Borrower shall receive such
payments as the Lender's trustee, and shall immediately deposit all
cash, checks or other similar payments related to or constituting
payments made in respect of such Accounts received by it to a
Collateral Deposit Account, (f) all funds deposited into any Lock Box
subject to a Lock Box Agreement or a Collateral Deposit Account will
be swept on a daily basis into a collection account maintained by the
Borrower with Bank One, N.A., or its successors (the "Collection
Account"), and (g) the Lender shall hold and apply funds received into
the Collection Account as provided by the terms of Section 4.5(c).
(b) Covenant Regarding New Deposit Accounts; Lock Boxes. Before
opening or replacing any Collateral Deposit Account or other Deposit
Account or establishing any new Lock Box in regard to which the Lender
holds or is to hold a first priority security interest in and lien upon
pursuant to this Security Agreement or any other Loan Document, the
Borrower shall (a) obtain the Lender's consent in writing to the opening of
such Deposit Account or Lock Box, and (b) cause each bank or financial
institution in which it seeks to open (i) a Deposit Account, to enter into
a Deposit Account Control Agreement with the Lender in order to give the
Lender Control of such Deposit Account, or (ii) a Lock Box, to enter into a
Lock Box Agreement with the Lender in order to give the Lender Control of
the Lock Box.
(c) Application of Proceeds; Deficiency. Upon the occurrence of a
Default or an Unmatured Default, all amounts deposited in the Collection
Account shall be deemed received by the Lender in accordance with the
Credit Agreement and shall, after having been credited in immediately
available funds to the Collection Account, be applied by the Lender in
accordance with the Credit Agreement. In no event shall any amount be so
applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account. The Lender shall
require all other cash proceeds of the Collateral, which are not required
to be applied to the Liabilities pursuant to the Credit Agreement, to be
deposited in a special non-interest bearing cash collateral account with a
bank of Lender's choosing and held there as security for the Liabilities.
The Borrower shall have no control whatsoever over said cash collateral
account. Any such proceeds of the Collateral shall be applied in the order
set forth in the Credit Agreement unless a court of competent jurisdiction
shall otherwise direct. The balance, if any, after all of the Liabilities
have been satisfied, shall be deposited by the Lender into the Borrower's
general operating account. The Borrower shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Liabilities, including any attorneys' fees and
other expenses incurred by the Lender to collect such deficiency.
Section 4.6 Accounts Owed by the Federal Government. If any Account shall
arise out of a contract with the United States of America, or any department,
agency, subdivision, or instrumentality thereof, the Borrower shall promptly
notify the Lender thereof in writing and shall take all other action requested
by the Lender to protect the Lender's security interest in such Account under
the provisions of the federal Assignment of Claims Act, as amended.
Section 4.7 Assignment of Security Interests. If, at any time the Borrower
shall take and perfect a security interest in any property of an Account Debtor
or any other Person to secure
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payment or performance of an Account, the Borrower shall promptly, upon the
request of Lender, assign such security interest to the Lender.
ARTICLE 5. AGREEMENTS CONCERNING CERTAIN COLLATERAL
Section 5.1 Maintenance of Intellectual Property. Unless otherwise agreed
in writing by the Lender, Borrower shall have the duty to do any and all acts
which are necessary to preserve and maintain all material rights in the
Intellectual Property. Borrower will give proper statutory notice in connection
with the use of its Intellectual Property. Borrower has used, and will continue
to use for the duration of this Agreement, consistent standards of quality in
its manufacture or creation of products sold under its trademarks. The Borrower
shall not abandon any of the Intellectual Property nor permit the expiration of
any material Intellectual Property registrations, except where occasioned by
non-use, without the written consent of the Lender. Borrower shall do any and
all acts reasonably required by the Lender to ensure Borrower's compliance with
this Section 5.1. Any reasonable expenses incurred in connection with the
Intellectual Property shall be borne by Borrower.
Section 5.2 After-Acquired Intellectual Property. If the Borrower obtains
rights to any new Intellectual Property, the provisions of this Security
Agreement shall automatically apply thereto. With respect to any new
applications for Intellectual Property, the issuance of any new registration for
Intellectual Property, and renewals or extensions of any of the foregoing, the
Borrower shall give the Lender prompt written notice thereof in writing.
Section 5.3 Opposition Proceedings. Unless and until there shall have
occurred and be continuing a Default, Borrower shall retain the legal and
equitable title to the Intellectual Property and shall have the right to bring
any opposition proceedings, cancellation proceedings or lawsuit in its own name
to enforce, protect and use the Intellectual Property in the ordinary course of
its business, but shall not be permitted, except with the prior written consent
of the Lender, to sell, assign, transfer or otherwise encumber the Intellectual
Property, other than licensings or other dispositions in the ordinary course of
business or to resolve litigation or disputed claims brought or made by
unrelated parties.
Section 5.4 Verification of Intellectual Property. The Lender, its
officers, agents, attorneys and accountants, may verify the Intellectual
Property and all licenses and other agreements with respect thereto, under
reasonable procedures, directly with licensees or by other methods, and the
Borrower shall furnish to the Lender upon request schedules of Intellectual
Property and licenses, together with other information relating thereto, and
shall do, make and deliver all such additional and further acts, things, deeds,
assurances and instruments as the Lender may reasonably require with respect to
the Intellectual Property, including, without limitation, the licenses. The
Borrower shall promptly notify the Lender, if it knows that any material
application or registration relating to Intellectual Property may become
abandoned or dedicated to the public, or of any material adverse determination
or development (including any claim) regarding the Intellectual Property or any
material license with respect thereto, or regarding its right to register, keep
and maintain the same, or if it knows that a material item of Intellectual
Property is materially infringed or misappropriated by a third party, and, in
any such event, unless (a) the Lender, or (b) the Board of Directors of the
Borrower in the exercise of its reasonable business judgment after having
considered the advice of reputable intellectual property counsel shall have
determined that litigation is inappropriate or unadvisable, promptly ▇▇▇ for
infringement or misappropriation.
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Section 5.5 Supplemental Documentation. Concurrently with the execution of
this Security Agreement, and from time to time hereafter upon request of the
Lender, the Borrower shall execute and deliver to the Lender supplemental
security agreements relating to any or all registered patents, trademarks, trade
names, copyrights and applications for any of the foregoing, in a form
satisfactory to the Lender and suitable for recording in the records of the
registering Governmental Authority.
Section 5.6 Contracts and Leases. The Borrower shall perform each of its
obligations under all contracts, leases and other agreements (including, without
limitation, all license agreements) to which the Borrower is a party, and,
immediately upon learning of any material default by any party under any such
contract, lease or other agreement, the Borrower shall give written notice
thereof to the Lender, together with a description as to the nature and status
thereof. After the occurrence of any Default or Unmatured Default, the Borrower
shall not amend, modify, supplement or otherwise agree to any change in any
contract, lease or other agreement or waive any provision thereof, without the
prior written consent of the Lender.
Section 5.7 Letter-of-Credit Rights. Upon the occurrence and during the
continuance of a Default the Borrower will, upon the Lender's request, cause
each issuer of a letter of credit to consent to the assignment of proceeds of
the letter of credit in order to give the Lender Control of the letter-of-credit
rights to such letter of credit.
Section 5.8 Certificated Securities. If the Borrower shall at any time hold
or acquire any certificated securities, the Borrower shall forthwith endorse,
assign and deliver the same to the Lender, accompanied by such instruments of
transfer or assignment duly executed in blank as the Lender may from time to
time specify. If any certificated securities or other investment property now or
hereafter acquired by the Borrower are held by the Borrower or its nominee
through a securities intermediary or commodity intermediary, the Borrower shall
immediately notify the Lender thereof and, at the Lender's request and option,
pursuant to an agreement in form and substance satisfactory to the Lender,
either (i) cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply with entitlement orders or other instructions
from the Lender to such securities intermediary as to such securities or other
investment property, or (as the case may be) to apply any value distributed on
account of any commodity contract as directed by the Lender to such commodity
intermediary, in each case without further consent of the Borrower or such
nominee, or (ii) in the case of financial assets or other investment property
held through a securities intermediary, arrange for the Lender to become the
entitlement holder with respect to such investment property, with the Borrower
being permitted, only with the consent of the Lender, to exercise rights to
withdraw or otherwise deal with such investment property.
Section 5.9 Uncertificated Securities. Upon the occurrence and during the
continuance of a Default, the Borrower will permit the Lender from time to time
to cause the appropriate issuers (and, if held with a securities intermediary,
such securities intermediary) of uncertificated securities which are Collateral
to ▇▇▇▇ their books and records with the numbers and face amounts of all such
uncertificated securities and all rollovers and replacements therefor to reflect
the Lien of the Lender granted pursuant to this Security Agreement. The Borrower
will take any actions necessary to cause the issuers of uncertificated
securities which are Collateral and which are Securities to cause the Lender to
have and retain Control over such Securities.
Section 5.10 Stock and Other Ownership Interests.
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(a) Changes in Capital Structure of Issuers. The Borrower will not (i)
permit or suffer any issuer of privately held corporate securities or other
ownership interests in a corporation, partnership, joint venture or limited
liability company constituting Collateral to dissolve, liquidate, retire
any of its capital stock or other Instruments or Securities evidencing
ownership, reduce its capital or merge or consolidate with any other
entity, or (ii) vote any of the Instruments or Securities in favor of any
of the foregoing.
(b) Issuance of Additional Securities. The Borrower will not permit or
suffer the issuer of privately held corporate securities or other ownership
interests in a corporation, partnership, joint venture or limited liability
company constituting Collateral to issue any such securities or other
ownership interests, any right to receive the same or any right to receive
earnings, except to the Borrower.
(c) Registration of Pledged Securities. The Borrower will permit any
registerable Collateral to be registered in the name of the Lender or its
nominee at any time at the option of the Lender.
(d) Exercise of Rights in Pledged Securities. The Borrower will permit
the Lender or its nominee at any time after the occurrence of a Default,
without notice, to exercise all voting and corporate rights relating to the
Collateral, including, without limitation, exchange, subscription or any
other rights, privileges, or options pertaining to any corporate securities
or other ownership interests in or of a corporation, partnership, joint
venture or limited liability company constituting Collateral and the Stock
Rights as if it were the absolute owner thereof.
ARTICLE 6. AGREEMENTS CONCERNING INVENTORY
Section 6.1 Locations. Borrower will give the Lender written notice of each
location at which Inventory is or will be kept at all times. Except where such
notice is given and except for Inventory sold in the ordinary course of
business, all Inventory is and shall be kept at the locations set forth on
Schedule 3 hereto.
Section 6.2 Sales of Inventory. The Borrower may, in the ordinary course of
business, at its own expense, sell, lease or furnish under contracts of sale or
service, any of the Inventory normally held by the Borrower for such purpose (a
sale in the ordinary course of business does not include a transfer in total or
partial satisfaction of a debt), and use and consume, in the ordinary course of
business, any raw materials, work-in-process or materials normally held by it
for such purpose.
Section 6.3 Condition of Inventory; Books and Records. Borrower shall keep
all Inventory in good order and condition and shall maintain full, accurate and
complete books and records with respect to Inventory at all times.
Section 6.4 Warehousemen and Landlords. Borrower shall not store any
material portion of its Inventory with any bailee, warehouseman, or similar
party without the Lender's prior written consent. If Inventory is so stored,
Borrower will, concurrently with storing such Inventory, cause such bailee,
warehouseman, or similar party to issue and deliver to the Lender, in a form
acceptable to the Lender, warehouse receipts in the Lender's name evidencing the
storage of the Inventory. The Borrower shall provide the Lender with copies of
all agreements between the Borrower and any bailee, warehouseman, or similar
party and shall deliver to the
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Lender a landlord's or warehouseman's lien waiver in a form acceptable to the
Lender, prior to entering into any material lease for warehouse storage or
business facilities.
Section 6.5 Consigned Inventory. If at any time any of the Inventory is
placed by the Borrower on consignment with any consignee, Borrower shall, prior
to delivery of such consigned Inventory, (a) provide Lender with all consignment
agreements and other instruments and documentation to be used in connection with
such consignment (all of which shall be in a form acceptable to the Lender); (b)
prepare, execute and file appropriate financing statements with respect to any
consigned Inventory showing the consignee as debtor, the Borrower as secured
party, and the Lender as assignee of the secured party; (c) prepare, execute and
file appropriate financing statements with respect to any consigned Inventory
showing the Borrower, as debtor, and the Lender, as secured party; (d) conduct a
search of all UCC filings made against the consignee and all jurisdictions in
which Inventory to be consigned is to be located while on consignment, and
furnish copies of such results to the Lender; and (e) notify in writing all
creditors of the consignee that are or may be holders of security interests in
the Inventory to be consigned that the Borrower expects to deliver certain
Inventory to the consignee.
Section 6.6 Compliance with Law. Borrower shall substantially comply in all
material respects with all federal, state and local laws, regulations, rulings
and orders applicable to the Borrower for its assets or business in all
respects. Without limiting the generality of the foregoing, Borrower shall
comply with all requirements of the federal Fair Labor Standards Act, as
amended, in the conduct of its business and the production of Inventory.
Borrower shall notify the Lender immediately of any violation by Borrower of the
Fair Labor Standards Act, and the absence of such notice shall constitute
Borrower's continuing representation that all Inventory then existing has been
produced in compliance with the Fair Labor Standards Act.
ARTICLE 7. AGREEMENTS CONCERNING EQUIPMENT AND FIXTURES
Section 7.1 Locations. Borrower will give the Lender written notice of each
location at which Equipment is or will be kept at all times, except where such
notice is given, the Equipment will be kept at locations set forth on Schedule 3
hereto. Schedule 3 sets forth all locations at which Equipment and Fixtures of
the Borrower are located and the name and owner of record of the real estate at
each location if the Borrower is not the owner of record.
Section 7.2 Condition. The Borrower will keep the Equipment in good order
and repair, ordinary wear and tear excepted, and will not waste or destroy the
Equipment or any portion thereof, except in the case of obsolete Equipment which
is no longer used or useful in Borrower's business.
Section 7.3 Titled Equipment. If Borrower now or hereafter has any
vehicles, aircraft, watercraft, or other Equipment for which a certificate of
title has been issued by a Governmental Authority, upon the request of the
Lender, the Borrower shall immediately deliver to the Lender, properly endorsed,
each certificate of title or application for title or other evidence of
ownership for each such item of Equipment, and the Borrower shall take all
actions necessary to have the Lender's security interest properly recorded on
each such certificate of title and shall take all other steps necessary to
perfect the Lender's security interest in such Equipment.
Section 7.4 Compliance with Laws. The Borrower will not use the Equipment
in material violation of any statute, rule, regulation or ordinance or any
policy of insurance thereon. Borrower will neither use the Equipment nor permit
the Equipment to be used, for any unlawful
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PAGE 12
purpose or contrary to any statute, law, ordinance or regulation relating to the
registration, use, operation or control of the Equipment.
Section 7.5 Transfers of Equipment. Borrower may from time to time
substitute Equipment, provided that (a) the substituted Equipment is not subject
to any lien or other encumbrance and has a fair market value at least equal to
the fair market of the Equipment for which it is substituted; (b) the
marketability and operating integrity of Borrower's Equipment after such
substitution is not impaired; (c) the Equipment substituted for is no longer
used or useful in the operation of Borrower's business and is sold in arm's
length transaction in exchange for money or monies' worth at least equal to the
fair market value of such Equipment substituted for; and (d) no Default or
Unmatured Default has occurred and is continuing.
Section 7.6 Fixtures. The Borrower shall not permit any item of Equipment
to become a Fixture to real estate or an accession to any other property not
subject to the Lender's security interest herein without the prior written
consent of the Lender. If any Equipment is or will be attached to real estate in
such a manner as to become a fixture, such real estate is encumbered, the
Borrower will, upon the request of the Lender, obtain from the holder of such
real estate encumbrance a written consent and subordination to the security
interest hereby granted, or a written disclaimer of any interest in such
Collateral, in a form acceptable to the Lender.
ARTICLE 8. GENERAL PROVISIONS CONCERNING COLLATERAL
Section 8.1 Title to After-Acquired Collateral. All Collateral acquired
after the date hereof will be acquired by the Borrower free of any lien,
security interest or encumbrance, except Permitted Encumbrances.
Section 8.2 Further Assurances. The Borrower agrees to do such reasonable
acts and things and deliver or cause to be delivered such other documents as the
Lender may deem necessary to establish and maintain a valid security interest in
the Collateral (free of all other liens and claims except Permitted
Encumbrances) to secure the payment and performance of the Liabilities and to
defend title to the Collateral against any Person claiming any interest therein
adverse to the Lender (other than the holders of Permitted Encumbrances). The
Borrower authorizes the Lender, at the expense of the Borrower, to execute and
file a financing statement or statements on its behalf in those public offices
deemed advisable or necessary by the Lender to protect the security interests of
the Lender herein granted. If permitted by law, the Borrower agrees that a
carbon, photographic or other reproduction of this Security Agreement or of a
financing statement may be filed as a financing statement.
Section 8.3 Insurance.
(a) The Borrower shall have and maintain at all times, with respect to
Inventory and Equipment, insurance written by companies acceptable to the
Lender covering risks customarily insured against by companies engaged in
business similar to that of the Borrower in reasonable amounts, containing
such terms, in such form, and for such periods customarily maintained by
companies engaged in business similar to that of the Borrower. Such
insurance shall be payable to the Borrower and the Lender as their
interests may appear.
(b) All such insurance policies shall carry standard, non-contributory
lender's loss payable clauses in favor of the Lender (to the extent such
Inventory or Equipment
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PAGE 13
constitutes First Lien Collateral). The insurance certificates evidencing
the Borrower's compliance with the above shall be deposited with the
Lender, and in the event the Borrower fails to file and maintain such
insurance, the Lender may, at its option, purchase such insurance and the
cost of such insurance shall become a Liability secured by these presents
and all sums expended shall bear interest at the highest Default rate of
interest set forth in the Credit Agreement until paid. If requested by the
Lender, the Borrower shall deliver certified copies of such policies to the
Lender. The Borrower shall pay all insurance premiums promptly when due and
shall provide substitute policies of insurance should the Lender at any
time reject, for reasonable cause, any such policies of insurance furnished
by the Borrower. In the event that a Default or Unmatured Default has
occurred and is continuing, the Borrower hereby assigns to the Lender the
proceeds of all such insurance, including, without limitation, any premium
refunds, to the extent of the Liabilities, shall direct the insurer to make
payment of any losses or refunds directly to the Lender, and appoints the
Lender its attorney-in-fact to endorse any draft, check or other form of
payment made by such insurer.
Section 8.4 Collection of Collateral. The Borrower will, at its own
expense, endeavor to collect, as and when due, all amounts due with respect to
any Collateral including the taking of such action with respect to such
collection as the Lender may reasonably request or, in the absence of such
request, as the Borrower may deem advisable.
Section 8.5 Lender May Defend Title. In the event the Borrower fails to pay
any taxes, assessments, premiums, or fees, or fails to discharge any liens or
claims against the Collateral required to be paid or discharged by the Borrower,
or fails to purchase, maintain and file with the Lender any insurance required
by this Security Agreement, or if any such insurance is inappropriate to the
situation, in the Lender's reasonable discretion, the Lender may, without demand
or notice, pay any such taxes, assessments, premiums or fees, or pay, acquire,
satisfy or discharge any liens or claims asserted against the Collateral
(without any obligation to determine the validity thereof), or purchase any such
insurance. All sums so expended by the Lender shall become a Liability secured
by these presents and shall bear interest at the highest Default rate of
interest set forth in the Credit Agreement until paid.
Section 8.6 Negotiable Collateral. If any First Lien Collateral, including
Proceeds, consists of a letter of credit, certificates of deposit, negotiable
Documents (other than checks received by the Borrower in the ordinary course of
business), or chattel paper, the Borrower shall, immediately upon receipt
thereof, endorse and assign such Collateral, and deliver actual physical
possession thereof, to the Lender, and prior to such delivery, shall hold such
property in trust for the Lender. Schedule 5 hereto is a true and correct list
of all such negotiable Collateral owned by the Borrower. The Borrower will give
the Lender written notice each time it acquires such additional negotiable First
Lien Collateral.
Section 8.7 Contracts. The Borrower shall remain liable to perform its
obligations under any contracts included in the Collateral to the extent as
though this Security Agreement had not been entered into, and the Lender shall
not have any obligation under any such contracts by reason of this Agreement.
Section 8.8 Inspection of Collateral and Records. During Borrower's usual
business hours, the Lender may inspect and examine the Collateral and check and
test the same as to quality, quantity, value, and condition; provided, however,
that the Borrower may refuse to
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PAGE 14
disclose any information regarding Accounts that would cause the Borrower to
violate applicable privacy or other laws. The Borrower shall take reasonable
steps, including, but not limited to, the negotiation and execution of
confidentiality agreements with the Lender, in regard to each Account necessary
to allow the Borrower to disclose as much information as possible to the Lender
regarding said Accounts without violating any applicable privacy or other law.
The Lender shall also have the right at any time or times hereafter, during
Borrower's usual business hours or during the usual business hours of any third
party having control over the records of the Borrower, to inspect Borrower's
books and records in order to verify the amount or condition of, or any other
matter relating to, the Collateral and Borrower's financial condition and to
copy and make extracts from such books and records. Borrower waives the right to
assert a confidential relationship, if any, it may have with any accounting firm
in connection with any information requested by the Lender pursuant to this
Security Agreement and agrees that the Lender may directly contact any such
accounting firm in order to obtain such information after prior notice to
Borrower.
Section 8.9 Transfer of Collateral. Borrower shall not sell, lease,
license, transfer or otherwise dispose of any interest in any Collateral except
(a) sales of Inventory in the ordinary course of business pursuant to Section
6.2, (b) licensings and other dispositions of Intellectual Property in the
ordinary course of business pursuant to Section 5.3, and (c) dispositions of
Equipment in accordance with Section 7.5.
ARTICLE 9. REMEDY
Section 9.1 Remedies Generally; Power of Sale. Upon the occurrence and
during the continuance of any Default and at any time thereafter, the Lender
shall have all rights and remedies available at law or in equity including,
without limitation, the rights and remedies of a secured party under the Indiana
Uniform Commercial Code, as in effect from time to time (regardless of whether
the Code has been enacted in the jurisdiction where rights or remedies are
asserted), including, without limitation, the right to take possession of the
Collateral, and for that purpose the Lender may, so far as the Borrower can give
authority therefor, enter upon any premises on which the Collateral may be
situated and remove the same therefrom. The Lender shall give to the Borrower at
least ten (10) days' prior written notice of the time and place of any public
sale of Collateral or of the time after which any private sale or any other
intended disposition is to be made. The Lender may in its discretion transfer
any securities or other property constituting Collateral into its own name or
that of its nominee and receive the income thereon and hold the same as security
for Liabilities or apply it on principal or interest due on Liabilities. In the
event that the Lender takes possession of any Intellectual Property, the
goodwill associated with any trademarks, trade names, trade dress, and service
marks of the Borrower shall be transferred to the Lender.
Section 9.2 Deposits. Any and all Deposit Accounts, deposits or other sums
at any time credited by or due from the Lender to the Borrower shall at all
times constitute security for any and all Liabilities, and the Lender may apply
or set off such deposits or other sums against Liabilities at any time in
Default whether or not the Liabilities are then due or other Collateral is
considered by the Lender to be adequate.
Section 9.3 Waiver and Amendment. Except as otherwise expressly set forth
herein, to the extent permitted by law, the Borrower waives demand, notice,
protest, notice of acceptance of this Security Agreement, notice of loans made,
credit extended, Collateral received or
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PAGE 15
delivered or other action taken in reliance hereon and all other demands and
notices of any description. With respect to both Liabilities and Collateral, the
Borrower assents to any extension or postponement of the time of payment or any
other indulgence, to any substitution, exchange, or release of Collateral, to
the addition or release of any party or person primarily or secondarily liable,
to the acceptance of partial payments thereon and the settlement, compromise or
adjustment of any thereof, all in such manner and at such time or times as the
Lender may deem advisable. Except as otherwise provided by law, the Lender shall
have no duty as to the collection or protection of the Collateral, or any income
therefrom, nor as to the preservation of rights against prior parties nor as the
preservation of any rights pertaining thereto beyond the safe custody thereof.
The Lender may exercise its rights with respect to Collateral without resorting
or regard to other Collateral or sources of reimbursement for any Liability. The
Lender shall not be deemed to have waived any of these rights upon or under
Liabilities or Collateral unless such waiver be in writing and signed by the
Lender. No delay or omission on the part of the Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to the exercise of any right on any
future occasion. All rights and remedies of the Lender as to the Liabilities or
Collateral whether evidenced hereby or by any other instrument or papers shall
be cumulative and may be exercised singly, successively or together. The Lender
may, from time to time, without notice to the Borrower (a) retain or obtain a
security interest in any property of any other Person, in addition to the
Collateral, to secure any of the Liabilities; (b) retain or obtain the primary
or secondary liability of any party or parties, in addition to the Borrower with
respect to any of the Liabilities; (c) extend or renew for any period (whether
or not longer than the original period) or release or compromise any liability
of any party or parties primarily or secondarily liable to the Lender under the
Credit Agreement; (d) release its security interest in any of the property
securing any of the Liabilities and permit any substitution or exchange for any
such property; and (e) resort to the Collateral for the payment of any of the
Liabilities whether or not it shall have resorted to any other property or shall
have proceeded against any party primarily or secondarily liable for any of the
Liabilities. The Lender shall not, under any circumstances, or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the liquidation of any Collateral, including the settlement,
collection of any Account or for any damage resulting therefrom except liability
resulting from any act or omission by the Lender which constitutes willful
misconduct. This Security Agreement may be amended only by a writing duly signed
by the Lender and the Borrower.
Section 9.4 Expenses; Proceeds of Collateral. The Borrower shall pay to the
Lender on demand any and all reasonable out-of-pocket expenses, including
reasonable attorneys' fees, incurred or paid by the Lender in protecting the
Collateral or the existence, perfection or priority of the Lender's security
interest therein. After deducting all of such expenses, the residue of any
Proceeds of collection or sale of the Collateral shall be applied to the payment
of principal or interest on Liabilities in such order of preference as the
Lender may determine, proper allowance for interest on Liabilities not then due
being made, and any excess shall be returned to the Borrower.
Section 9.5 Power of Attorney. The Borrower hereby irrevocably appoints the
Lender and the Lender's designees from time to time its true and lawful
attorneys-in-fact, with full power of substitution in the premises upon the
occurrence and during the continuance of a Default (a) to demand, collect,
receipt for, settle, compromise, adjust, ▇▇▇ for, foreclose or realize upon the
Collateral in such manner as the Lender may determine, whether or not the
Collateral is
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PAGE 16
then due; (b) to receive, open, and dispose of mail addressed to the Borrower;
(c) to endorse notes, checks, drafts, money orders, Documents or other evidences
of payment, shipment or storage or any form of Collateral on behalf of and in
the name of the Borrower; (d) to sign and send on behalf of the Borrower any
invoice or ▇▇▇▇ of lading relating to any Account, on drafts against customers,
on schedules and assignments of Accounts, on notices of assignment, financing
statements and other public records, on verifications of Accounts and on notices
to customers; (e) to sign the Borrower's name to the proofs of claim against any
Account Debtor on behalf of the Borrower; (f) to notify the post office
authorities to change the address for delivery of the Borrower's mail to an
address designated by the Lender; (g) to endorse Borrower's name on all
applications, documents, papers, certificates and instruments necessary or
expedient for the Lender to use the Intellectual Property, or necessary or
expedient to grant or issue any exclusive or nonexclusive license under the
Intellectual Property to anyone else, or necessary or expedient for the Lender
to assign, pledge, convey or otherwise transfer title in, or dispose of, the
Intellectual Property to anyone else, for the purpose of recording, registering,
filing or accomplishing any other formula with respect to the Intellectual
Property; and (h) to do all things necessary to carry out this Security
Agreement. The Borrower hereby ratifies and approves all acts of such attorneys.
Neither the Lender nor any attorney will be liable for any acts or omissions nor
for any error of judgment or mistake of fact or law, absent gross negligence,
bad faith or willful misconduct. This power, being coupled with an interest, is
irrevocable until the Liabilities have been fully satisfied. Notwithstanding
anything herein to the contrary, no attorney acting pursuant to this Section 9.5
shall have any authority to confess judgment on behalf of the Borrower.
Section 9.6 License. Borrower hereby grants to the Lender a license to use,
without charge, Borrower's Intellectual Property and other Collateral in
completing production of, advertising for sale, or selling, any Collateral when
permitted to do so hereunder or by applicable law, and all of the Borrower's
rights under all licenses and franchise agreements shall, in such event, inure
to the Lender's benefit. In addition, the Borrower shall, upon request by the
Lender, make available such personnel in Borrower's employ on the date of any
Default as the Lender may reasonably designate to permit the Lender to continue,
directly or indirectly, to produce, advertise and sell the Collateral sold by
the Borrower under any Intellectual Property or license. The license herein
shall include the right of the Lender to use, assign, license or sublicense any
of the Borrower's Intellectual Property, including in such license reasonable
access as to all media in which any of the licensed items may be recorded or
stored; provided that the Lender shall comply with all pre-existing quality
control standards and trademark use requirements of the Borrower. No agreements
hereafter entered into by the Borrower shall prohibit, restrict or impair the
rights of the Lender granted hereunder.
Section 9.7 Reinstatement. If, at any time after payment in full by the
Borrower of all Liabilities and termination of the Lender's security interest,
any payments on the Liabilities previously made by the Borrower or any other
Person must be disgorged by the Lender for any reason whatsoever, including,
without limitation, the insolvency, bankruptcy or reorganization of the Borrower
or such Person, this Security Agreement and the Lender's security interests
herein shall be reinstated as to all disgorged payments as though such payments
had not been made, and the Borrower shall sign and deliver to the Lender all
documents, and shall do such other acts and things, as may be necessary to
re-perfect the Lender's security interest.
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Section 9.8 No Marshaling. The Borrower, on its own behalf and on behalf of
its successors and assigns, hereby expressly waives all rights, if any, to
require a marshaling of assets by the Lender or to require the Lender's first
resort to some or any portion of the Collateral before foreclosing upon, selling
or otherwise realizing on any other portion thereof.
ARTICLE 10. MISCELLANEOUS PROVISIONS
Section 10.1 Priority. Unless otherwise expressly provided, the security
interest hereby created shall be pro rata on par with any prior security
interests in the Collateral now or hereafter existing in favor of the Lender.
Section 10.2 Governing Law. This Security Agreement and all rights and
obligations hereunder, including matters of construction, validity and
performance, shall be governed by the Uniform Commercial Code and other
applicable laws of the State of Indiana, without regard to conflict of law
principles.
Section 10.3 Severability. Whenever possible each provision of this
Security Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition without invalidating the
remainder of such provision or the remaining provisions of this Security
Agreement. The Borrower recognizes that the Lender has relied on this Security
Agreement in extending credit to the Borrower and agrees that such reliance by
the Lender shall be sufficient consideration for this Security Agreement.
Section 10.4 Binding on Successors. The rights and privileges of the Lender
shall inure to the benefit of its respective successors and assigns.
Section 10.5 Chattel Mortgage. This Security Agreement shall also
constitute a chattel mortgage and an assignment of rents.
SECTION 10.6 WAIVER OF JURY TRIAL. LENDER AND BORROWER, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT EITHER OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. NEITHER LENDER NOR BORROWER SHALL SEEK
TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL
HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY EITHER LENDER OR BORROWER EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY BOTH OF THEM. THIS PROVISION IS A MATERIAL INDUCEMENT TO
LENDER TO ACCEPT THIS SECURITY AGREEMENT.
[SIGNATURES ON FOLLOWING PAGE.]
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PAGE 18
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Security Agreement to be executed by their respective officers duly authorized
as of the date first above written.
ADDISON YORK INSURANCE BROKERS LTD.
a Delaware corporation
By: /s/ Primo Podorieszach
-----------------------------------
Primo Podorieszach, CEO
ACCEPTED:
OAK STREET FUNDING LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
STATE OF INDIANA )
) SS:
COUNTY OF ▇▇▇▇▇▇ )
Before me, a Notary Public in and for said County and State, personally
appeared Primo Podorieszach, known to me to be the Chief Executive Officer of
ADDISON YORK INSURANCE BROKERS LTD., and acknowledged the execution of the
foregoing for and on behalf of said corporation.
Witness my hand and Notarial Seal this 19 day of March, 2004.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Notary Public - Signature
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
9/26/07 ▇▇▇▇▇▇▇▇
---------------------- -----------------------------
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PAGE 19
SCHEDULE 1
Former Names, Assumed Names
and Tradenames of Borrower
Prior Combinations
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PAGE 20
SCHEDULE 2
Trademarks and Trademark Applications
Application or Registration
Registration No. Trademark Country Date
None
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PAGE 21
SCHEDULE 2 (CONT'D)
Registered Copyrights
Registration
Registration No. Trademark Country Date
None
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PAGE 22
SCHEDULE 2 (CONT'D)
Licenses
Licensed Date of Expiration
Name of Licensee ▇▇▇▇ License Date
None
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PAGE 23
SCHEDULE 3
Location of Collateral
Equipment Locations:
Fixture Locations:
(include record owner of real estate, if other than Borrower) (attach legal
description of real estate)
Inventory Locations:
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PAGE 24
SCHEDULE 4
Investment Property
A. CERTIFICATED SECURITIES:
Percentage
Issuer's Certificate Number of Number of of Shares
Issuer Organization Number Shares Owned Shares Pledged Pledged
B. UNCERTIFICATED SECURITIES:
Issuer's
Issuer Organization Description of Collateral Percentage Ownership Interest
****[Add description of custody accounts or arrangements with securities
intermediary, if applicable]***
C. SECURITY ENTITLEMENTS:
D. SECURITY ACCOUNTS:
E. COMMODITY CONTRACTS:
F. COMMODITY ACCOUNTS:
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SCHEDULE 5
Negotiable Collateral
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SCHEDULE 6
Insurance Policies
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PAGE 27
Appendix I
Perfection Certificate
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PAGE 28
EXHIBIT C
CONTINUING GUARANTY
THIS CONTINUING GUARANTY ("Guaranty") is made as of the 19th day of March,
2004, by ▇▇▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL INSURANCE BROKERS LTD., a corporation
amalgamated under the laws of the Province of Alberta (the "Guarantor") in favor
of OAK STREET FUNDING LLC (the "Lender"), pursuant to that certain Credit
Agreement, as it may be amended, modified or supplemented from time to time (the
"Credit Agreement") of even date herewith, by and between ADDISON YORK INSURANCE
BROKERS LTD., a Delaware corporation (the "Borrower") and the Lender. Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
ascribed to them in the Credit Agreement.
Section 1. Guaranty.
For value received and in consideration of any loan, advance or financial
accommodation of any kind whatsoever now or heretofore or hereafter made or
granted to the Borrower by the Lender pursuant to the Credit Agreement, the
Guarantor, in accordance with this Guaranty, hereby absolutely, unconditionally
and irrevocably guarantees to the Lender, as if the Guarantor was the principal
debtor, the punctual payment and performance when due of all Obligations (which
for purposes of this Guaranty shall also be deemed to include all commissions,
fees, charges, costs and other expenses arising out of or incurred by the Lender
in connection with the enforcement of this Guaranty).
Section 2. Continuing Guaranty; No Right of Set-Off; Independent
Obligation.
(a) This Guaranty shall be a continuing guaranty of the payment and
performance of all Obligations and shall remain in full force and effect until
the payment in full of all of the Obligations and shall apply to and secure any
ultimate balance due or remaining unpaid to the Lender; and this Guaranty shall
not be considered as wholly or partially satisfied by the payment or liquidation
at any time or from time to time of any sum of money for the time being due or
remaining unpaid to the Lender. The Guarantor covenants and agrees to comply
with all obligations, covenants, agreements and provisions applicable to it in
this Guaranty. Without limiting the generality of the foregoing, the Guarantor's
liability shall extend to all amounts which constitute part of the Obligations
and would be owed by the Borrower pursuant thereto but for the fact that they
are unenforceable, reduced, limited, impaired, suspended or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Borrower.
(b) The Guarantor hereby guarantees that the Obligations will be paid to
the Lender without set-off or counterclaim or other reduction whatsoever
(whether for taxes, withholding or otherwise) in lawful currency of the United
States of America.
(c) All payments by the Guarantor under this Guaranty shall be made free
and clear of, and without deduction or withholding for, any present or future
income, stamp or other taxes, levies, duties, imposts, charges or fees or any
related penalties, interest or other liabilities ("Taxes"). If any Taxes are
required to be deducted or withheld from any amount payable to the Lender under
this Guaranty, the Guarantor shall pay additional amounts so that the amount
received by the Lender after the deduction of such Taxes (including Taxes on
such additional amounts) equals the amount that the Lender would have received
if no Taxes had been deducted. The Guarantor shall pay to the appropriate taxing
authority all Taxes required to be deducted or
withheld. Within thirty (30) days after paying any such Taxes, the Guarantor
shall deliver to the Lender the original or a certified copy of the receipt for
such payment. Guarantor shall not be required to pay additional amounts to the
Lender on account of any Taxes, including, but not limited to, income taxes,
imposed solely by reason of a present or past connection between the Lender and
the jurisdiction imposing such Taxes (except a connection arising solely from
the execution, delivery, performance, enforcement of or the receipt of payments
under this Guaranty). The Guarantor shall indemnify the Lender against any Taxes
imposed on (and any related expenses reasonably incurred by) the Lender on
account of the execution, delivery, performance or enforcement of or the receipt
of payments under this Guaranty other than Taxes imposed solely by reason a
present or past connection between the Lender and the jurisdiction imposing such
Taxes (except a connection arising solely from the execution, delivery,
performance, enforcement of or the receipt of payments under this Guaranty). The
Guarantor also shall pay and indemnify the Lender against any stamp or other
documentary, excise or property taxes or similar levies, imposts, or charges (or
any related liability) arising from the execution, delivery, registration,
performance or enforcement of this Guaranty.
(d) The Guarantor guarantees that the Obligations shall be paid strictly in
accordance with their terms regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender.
(e) The Guarantor's liability to pay or perform or cause the performance of
the Obligations shall arise forthwith after demand for payment or performance by
the Lender has been given to the Guarantor in the manner prescribed in Section
24 hereof.
(f) Except as provided herein, the provisions of this Guaranty cover all
agreements between the parties hereto relative to this Guaranty and none of the
parties shall be bound by any representation, warranty or promise made by any
Person relative thereto which is not embodied herein; and it is specifically
acknowledged and agreed that this Guaranty has been delivered by the Guarantor
free of any conditions whatsoever and that no representations, warranties or
promises have been made to the Guarantor affecting its liabilities hereunder,
and that the Lender shall not be bound by any representations, warranties or
promises now or at any time hereafter made by the Borrower to the Guarantor.
(g) This Guaranty is a guarantee of payment, performance and compliance and
not of collectability and is in no way conditioned or contingent upon any
attempt to collect from or enforce performance or compliance by the Borrower or
upon any event or condition whatsoever.
(h) The obligations of the Guarantor set forth herein constitute the full
recourse obligations of the Guarantor enforceable against it to the full extent
of all its assets and properties.
Section 3. Guaranty Absolute.
The obligations of the Guarantor hereunder are independent of the
obligations of the Borrower under the Obligations and the Credit Agreement and a
separate action or actions may be brought and prosecuted against the Guarantor
whether or not an action or proceeding is brought against the Borrower and
whether or not the Borrower is joined in any such action or proceeding. The
liability of the Guarantor hereunder is irrevocable, absolute and unconditional
3
and (to the extent permitted by law) the liability and obligations of the
Guarantor hereunder shall not be released, discharged, mitigated, waived,
impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect of any
Indebtedness or other obligation of the Borrower or any other Person under the
Credit Agreement or the Obligations, or any agreement or instrument relating to
any of the foregoing;
(b) any grants of time, renewals, extensions, indulgences, releases,
discharges or modifications which the Lender may extend to, or make with, the
Borrower, the Guarantor or any other Person, or any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of, or any consent to or departure from, this
Guaranty, the Credit Agreement or the Obligations, including any increase or
decrease in the Obligations;
(c) the taking of security from the Borrower, the Guarantor or any other
Person, and the release, discharge or alteration of, or other dealing with, such
security;
(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, the Credit
Agreement any of the Obligations and the obligations of the Guarantor hereunder;
(e) the abstention from taking security from the Borrower, the Guarantor or
any other Person or from perfecting, continuing to keep perfected or taking
advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any security
received from the Borrower, the Guarantor or any other Person, and including any
other guarantees received by the Lender;
(g) any other dealings with the Borrower, the Guarantor or any other
Person, or with any security;
(h) the Lender's acceptance of compositions from the Borrower or the
Guarantor;
(i) the application by the Lender of all monies at any time and from time
to time received from the Borrower, the Guarantor or any other Person on account
of any indebtedness and liabilities owing by the Borrower or the Guarantor to
the Lender, in such manner as the Lender deems best and the changing of such
application in whole or in part and at any time or from time to time, or any
manner of application of collateral, or proceeds thereof, to all or any of the
Obligations, or the manner of sale of any collateral;
(j) the release or discharge of the Borrower or the Guarantor or of any
Person liable directly as surety or otherwise by operation of law or otherwise
for the Obligations, other than an express release in writing given by the
Lender of the liability and obligations of the Guarantor hereunder;
(k) any change in the name, business, capital structure or governing
instrument of the Borrower or the Guarantor or any refinancing or restructuring
of any of the Obligations;
3
(l) the sale of the Borrower's or the Guarantor's business or any part
thereof;
(m) any merger or consolidation, arrangement or reorganization of the
Borrower, the Guarantor, any Person resulting from the merger or consolidation
of the Borrower or the Guarantor with any other Person or any other successor to
such Person or merged or consolidated Person or any other change in the
corporate existence, structure or ownership of the Borrower or the Guarantor or
any change in the corporate relationship between the Borrower and the Guarantor,
or any termination of such relationship;
(n) the insolvency, bankruptcy, liquidation, winding-up, dissolution,
receivership, arrangement, readjustment, assignment for the benefit of creditors
or distribution of the assets of the Borrower or its assets or any resulting
discharge of any obligations of the Borrower (whether voluntary or involuntary)
or of the Guarantor (whether voluntary or involuntary) or the loss of corporate
existence;
(o) any arrangement or plan of reorganization affecting the Borrower or the
Guarantor;
(p) any failure, omission or delay on the part of the Borrower to conform
or comply with any term of the Credit Agreement;
(q) any limitation on the liability or obligations of the Borrower or any
other Person under this Guaranty, or any discharge, termination, cancellation,
distribution, irregularity, invalidity or unenforceability in whole or in part
of this Guaranty;
(r) any other circumstance (including any statute of limitations) that
might otherwise constitute a defense available to, or discharge of, the Borrower
or the Guarantor; or
(s) any modification, compromise, settlement or release by the Lender, or
by operation of law or otherwise, of the Obligations or the liability of the
Borrower or any other obligor under the Obligations, in whole or in part, and
any refusal of payment by the Lender, in whole or in part, from any other
obligor or other guarantor in connection with any of the Obligations, whether or
not with notice to, or further assent by, or any reservation of rights against,
the Guarantor.
Section 4. Right to Demand Full Performance.
In the event of any demand for payment or performance by the Lender from
the Guarantor hereunder, the Lender shall have the right to demand its full
claim and to receive all dividends or other payments in respect thereof until
the Obligations have been paid in full, and the Guarantor shall continue to be
liable hereunder for any balance which may be owing to the Lender by the
Borrower under the Obligations. The retention by the Lender of any security,
prior to the realization by the Lender of its rights to such security upon
foreclosure thereon, shall not, as between the Lender, on one hand, and the
Guarantor, on the other hand, be considered as a purchase of such security, or
as payment, satisfaction or reduction of the Obligations due to the Lender by
the Borrower or any part thereof. The Guarantor, promptly after demand, will
reimburse the Lender for all costs and expenses of collecting such amount under,
or enforcing this Guaranty, including, without limitation, the reasonable fees
and expenses of counsel.
Section 5. Waivers.
(a) The Guarantor hereby expressly waives (to the extent permitted by law)
notice of the acceptance of this Guaranty and notice of the existence, renewal,
extension or the
4
non-performance, non-payment, or non-observance on the part of the Borrower of
any of the terms, covenants, conditions and provisions of the Credit Agreement
or the Obligations or any other notice whatsoever to or upon the Borrower or the
Guarantor with respect to the Obligations. The Guarantor hereby acknowledges
communication to it of the terms of the Credit Agreement and the Obligations and
all of the provisions therein contained and consents to and approves the same.
The Guarantor hereby expressly waives (to the extent permitted by law)
diligence, presentment, protest and demand for payment with respect to (i) any
notice of sale, transfer or other disposition of any right, title to or interest
in the Obligations by the Lender or in this Guaranty, (ii) any release of the
Guarantor from its obligations hereunder resulting from any loss by it of its
rights of subrogation hereunder and (iii) any other circumstances whatsoever
that might otherwise constitute a legal or equitable discharge, release or
defense of a guarantor or surety or that might otherwise limit recourse against
the Guarantor.
(b) Without prejudice to any of the rights or recourses which the Lender
may have against the Borrower, the Guarantor hereby expressly waives (to the
extent permitted by law) any right to require the Lender to:
(i) enforce, assert, exercise, initiate or exhaust any rights,
remedies or recourse against the Borrower, the Guarantor or any other
Person under this Guaranty or the Credit Agreement or otherwise;
(ii) value, realize upon, or dispose of any security of the Borrower
or any other Person held by the Lender;
(iii) initiate or exhaust any other remedy which the Lender may have
in law or equity; or
(iv) mitigate the damages resulting from any default under the
Obligations or the Credit Agreement;
before requiring or becoming entitled to demand payment from the Guarantor under
this Guaranty.
Section 6. The Guarantor Remains Obligated in Event the Borrower Is No
Longer Obligated to Discharge Obligations.
It is the express intention of the Lender and the Guarantor that if for any
reason the Borrower has no legal existence, is or becomes under no legal
obligation to discharge the Obligations owing to the Lender by the Borrower or
if any of the Obligations owing by the Borrower to the Lender becomes
irrecoverable from the Borrower by operation of law or for any reason
whatsoever, this Guaranty and the covenants, agreements and obligations of the
Guarantor contained in this Guaranty shall nevertheless be binding upon the
Guarantor, as principal debtor, until such time as all such Obligations have
been paid in full to the Lender and all Obligations owing to the Lender by the
Borrower have been discharged, and the Guarantor shall be responsible for the
payment thereof to the Lender upon demand.
Section 7. Fraudulent Conveyance; Subrogation.
(a) Any term or provision of this Guaranty to the contrary notwithstanding,
the aggregate amount of the Obligations guaranteed hereunder shall be reduced to
the extent necessary to prevent this Guaranty from violating or becoming
voidable under applicable law
5
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
(B) THE GUARANTOR HEREBY AGREES NOT TO ASSERT ANY RIGHTS OF SUBROGATION OR
CONTRIBUTION, WHETHER ARISING BY CONTRACT OR OPERATION OF LAW (INCLUDING,
WITHOUT LIMITATION, ANY SUCH RIGHT ARISING UNDER FEDERAL BANKRUPTCY LAW) OR
OTHERWISE BY REASON OF ANY PAYMENT BY IT PURSUANT TO THE PROVISIONS OF THIS
GUARANTY UNTIL AND UNLESS ALL OF THE OBLIGATIONS HAVE BEEN PAID IN FULL.
Section 8. Guaranty Is in Addition to Other Security.
This Guaranty shall be in addition to and not in substitution for any other
guarantees or other security which the Lender may now or hereafter hold in
respect of the Obligations owing to the Lender by the Borrower and (except as
may be required by law) the Lender shall be under no obligation to marshal in
favor of the Guarantor any other guarantees or other security or any moneys or
other assets which the Lender may be entitled to receive or upon which the
Lender may have a claim.
Section 9. Release of Security Interests.
Without limiting the generality of the foregoing and except as otherwise
provided in this Guaranty, the Guarantor hereby consents and agrees, to the
fullest extent permitted by applicable law, that the rights of the Lender
hereunder, and the liability of the Guarantor hereunder, shall not be affected
by any and all releases for any purpose of any collateral, if any, from the
Liens and security interests created by any collateral document and that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Obligations is rescinded or must otherwise
be returned by the Lender upon the insolvency, bankruptcy or reorganization of
the Borrower or otherwise, all as though such payment had not been made.
Section 10. No Bar to Further Actions.
Except as provided by law, no action or proceeding brought or instituted
under the Credit Agreement or this Guaranty and no recovery or judgment in
pursuance thereof shall be a bar or defense to any further action or proceeding
which may be brought under the Credit Agreement or this Guaranty by reason of
any further default or defaults under the Credit Agreement or Guaranty or in the
payment of any of the Obligations owing by the Borrower.
Section 11. Failure to Exercise Rights Shall Not Operate as a Waiver; No
Suspension of Remedies.
(a) No failure to exercise and no delay in exercising, on the part of the
Lender, any right, power, privilege or remedy under the Credit Agreement or this
Guaranty shall operate as a waiver thereof, nor shall any single or partial
exercise of any rights, power, privilege or remedy preclude any other or further
exercise thereof, or the exercise of any other rights, powers, privileges or
remedies. The rights and remedies herein provided for are cumulative and not
exclusive of any rights or remedies provided in law or equity.
(b) Nothing contained in this Guaranty shall limit the right of the Lender
to take any action to accelerate the maturity of the Obligations pursuant to the
Credit Agreement or to pursue any rights or remedies hereunder or under
applicable law.
6
Section 12. Lender's Duties; Notice to Lender.
(a) Any provision in this Guaranty allowing the Lender to request any
information or to take any action authorized by, or on behalf of the Guarantor,
shall be permissive and shall not be obligatory on the Lender except where the
failure of the Lender to request any such information or to take any such action
arises from the Lender's gross negligence or willful misconduct.
(b) The Lender shall not be required to inquire into the existence, powers
or capacities of the Borrower, the Guarantor or the officers, directors or
agents acting or purporting to act on their respective behalf.
Section 13. Successors and Assigns.
All terms, agreements and conditions of this Guaranty shall extend to and
be binding upon the Guarantor and its successors and permitted assigns and shall
inure to the benefit of and may be enforced by the Lender and its successors and
assigns; provided, however, that the Guarantor may not assign any of its rights
or obligations hereunder.
Section 14. Release of Guaranty.
Concurrently with the payment in full of all of the Obligations, the
Guarantor shall be released from and relieved of its obligations under this
Guaranty. Upon the delivery by the Borrower to the Lender of a certificate
signed by an authorized senior officer of the Borrower to the effect that the
transaction giving rise to the release of this Guaranty was made by the Borrower
in accordance with the provisions of the Credit Agreement and the Obligations,
the Lender shall execute any documents reasonably required in order to evidence
the release of the Guarantor from its obligations under this Guaranty. If any of
the Obligations are revived and reinstated after the termination of this
Guaranty, then all of the obligations of the Guarantor under this Guaranty shall
be revived and reinstated as if this Guaranty had not been terminated until such
time as the Obligations are paid in full, and the Guarantor shall enter into an
amendment to this Guaranty, reasonably satisfactory to the Lender, evidencing
such revival and reinstatement.
Section 15. Representations and Warranties.
The Guarantor represents and warrants to the Lender as of the date hereof
that:
(i) The Guarantor (a) is either a corporation or a limited liability
company duly organized, validly existing and in existence under
the laws of the jurisdiction of its organization, (b) is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which it is doing
business, and (c) has all requisite power and authority to own,
operate and encumber its property;
(ii) The Guarantor (a) has the requisite power and authority to
execute, deliver and perform this Guaranty and any other document
required to be delivered by it under the Credit Agreement, and
(b) has duly executed and delivered this Guaranty which
constitutes the legal, valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with
its terms; and
7
(iii)The execution, delivery and performance of this Guaranty do not
and will not (a) conflict with the Articles of Incorporation and
By-Laws, as applicable, of the Guarantor, (b) require any
approval of the Guarantor's shareholders or members, as
applicable, except such as has been obtained, (c) require any
approval or consent of any other Person or Governmental
Authority, (d) result in or require the creation of any lien or
security interest upon or with respect to any of the properties
or assets of the Guarantor other than in favor of the Lender, and
(e) conflict with, result in a breach of or constitute a default
under any requirement of law or contractual obligation of the
Guarantor.
Section 16. Setoff.
At any time after all or any part of the Obligations have become due and
payable (by acceleration or otherwise), the Lender may, without notice to the
Guarantor and regardless of the acceptance of any security or collateral for the
payment hereof, appropriate and apply toward the payment of all or any part of
the Obligations (a) any indebtedness due or to become due from the Lender to the
Guarantor, and (b) any moneys, credits or other property belonging to the
Guarantor held by or coming into the possession of the Lender.
Section 17. Subordination.
The Guarantor agrees that any and all claims of the Guarantor against the
Borrower, or against any of its properties, shall be subordinate and subject in
right of payment to the prior payment of the Obligations. Notwithstanding any
right of the Guarantor to ask, demand, ▇▇▇ for, take or receive any payment from
the Borrower, all rights, liens and security interests of the Guarantor, whether
now or hereafter arising and howsoever existing, in any assets of the Borrower
shall be and hereby are subordinated to the rights of the Lender in those
assets. The Guarantor shall have no right to possession of any such asset or to
foreclose any such lien or security interest, whether by judicial action or
otherwise, unless and until all of the Obligations shall have been fully paid
and satisfied. If all or any part of the assets of the Borrower, or the proceeds
thereof, are subject to any distribution, division or application to the
creditors of the Borrower, whether partial or complete, voluntary or
involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, or if the business of the Borrower is dissolved, or if substantially
all of the assets of the Borrower are sold, then, and in any such event, any
payment or distribution of any kind or character, either in cash, securities or
other property, which shall be payable or deliverable upon or with respect to
any indebtedness of the Borrower to the Guarantor shall be paid or delivered
directly to the Lender for application on the Obligations due or to become due
until such shall have first been fully paid and satisfied. The Guarantor
irrevocably authorizes and empowers the Lender to demand, ▇▇▇ for, collect and
receive every such payment or distribution and give acquittance therefor and to
make and present for and on behalf of the Guarantor such proofs of claim and
take such other action, in the Lender's own name or in the name of the Guarantor
or otherwise, as the Lender may deem necessary or advisable for the enforcement
of this Guaranty. The Lender may vote such proofs of claim in any such
proceeding, receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
apply the same on account of any of the Obligations. Should any payment,
distribution, security or instrument or proceeds thereof
8
be received by the Guarantor upon or with respect to any of Indebtedness of the
Borrower to the Guarantor prior to the satisfaction of all of the Obligations,
the Guarantor shall receive and hold the same in trust, as trustee, for the
benefit of the Lender and shall forthwith deliver the same to the Lender in
precisely the form received (except for the endorsement or assignment of the
Guarantor where necessary), for application to any of the Obligations, and until
so delivered, the same shall be held in trust by the Guarantor as the property
of the Lender. If the Guarantor fails to make any such endorsement or assignment
to the Lender, the Lender is hereby irrevocably authorized to make the same. The
Guarantor agrees that until the Obligations have been paid in full and
satisfied, the Guarantor will not assign or transfer to any Person any claim
that the Guarantor has or may have against the Borrower.
Section 18. Amendments.
No modification or waiver of any of the provisions of this Guaranty shall
be binding upon the Lender, except as expressly set forth in a writing duly
signed and delivered by the Lender.
Section 19. Governing Law.
This Guaranty shall be governed by and interpreted and enforced in
accordance with the internal laws (without regard to conflicts of law
provisions) of the State of Indiana. Without limiting the foregoing, any dispute
between the Lender and the Guarantor arising out of or related to the
relationship established between them in connection with this Guaranty, whether
arising in contract, tort, equity or otherwise, shall be resolved in accordance
with the internal laws, and not the conflicts of law provisions, of the State of
Indiana.
Section 20. Consent to Jurisdiction; Counterclaims; Forum Non Conveniens.
Except as provided hereinbelow, the Lender and the Guarantor agree that all
disputes between them arising out of or related to the relationship established
between them in connection with this Guaranty, whether arising in contract,
tort, equity, or otherwise, shall be resolved only by state or federal courts
located in Indianapolis, Indiana, provided however that the parties acknowledge
that any appeals from those courts may be heard by a court located outside of
Indianapolis, Indiana. The Lender shall have the right to proceed against the
Guarantor or its real or personal property in a court in any location in order
to obtain personal jurisdiction over the Guarantor or to enforce a judgment or
other court order entered against the Guarantor, and the Guarantor shall not
assert any permissive counterclaims arising out of or relating to this Guaranty
in any proceeding brought under this provision. The Guarantor hereby waives any
objection that it may now or hereafter have (including, without limitation, any
objection to the laying of venue or based on forum non conveniens) to the
location of the court in which any proceeding with respect to this Guaranty or
any other document executed or delivered in connection herewith is commenced in
accordance with this Section 20.
Section 21. Waiver of Jury Trial.
The Guarantor waives any right to trial by jury in any dispute, whether
sounding in contract, tort, or otherwise arising out of or related to the
transactions contemplated by this Guaranty or any other instrument, document or
agreement executed or delivered in connection herewith. The Lender may file an
original counterpart or a copy of this
9
Guaranty with any court as written evidence of the consent of the Guarantor to
the waiver of its rights to trial by jury.
Section 22. Waiver of Bond.
The Guarantor waives the posting of any bond otherwise required of the
Lender in connection with any judicial process or proceeding to enforce any
judgment or other court order entered in favor of the Lender, or to enforce by
specific performance, temporary restraining order, or preliminary or permanent
injunction, this Guaranty or any other agreement or document between the Lender
and the Guarantor.
Section 23. Advice of Counsel.
The Guarantor represents and warrants that it has consulted with legal
counsel regarding all waivers under this Guaranty, that it fully understands all
rights that it is waiving and the effect of such waivers, that it assumes the
risk of any misunderstanding that it may have regarding any of the foregoing,
and that it intends that such waivers shall be a material inducement to the
Lender to extend the Indebtedness guaranteed hereby.
Section 24. Notices.
All notices and other communications required or desired to be served,
given or delivered hereunder shall be in writing or by a telecommunications
device capable of creating a printed record and shall be addressed to the party
to be notified as follows:
If to Guarantor, at: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: Primo Podorieszach, CEO
Facsimile: _______________________
If to the Lender, at: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or, as to each party, at such other address as designated by such party in a
written notice to the other party. All such notices and communications shall be
deemed to be validly served, given or delivered (a) three (3) days following
deposit in the United States mail, with proper postage prepaid; (b) upon
delivery thereof if delivered by hand or by a reputable overnight courier
service; or (c) upon confirmation of receipt thereof if transmitted by a
telecommunications device.
Section 25. Severability.
Wherever possible, each provision of this Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of the provision or the remaining
provisions of this Guaranty
10
Section 26. Merger.
This Guaranty represents the final agreement of the Guarantor with respect
to the matters contained herein and may not be contradicted by evidence of prior
or contemporaneous agreements, or subsequent oral agreement, between the
Guarantor and the Lender.
Section 27. Execution in Counterparts.
This Guaranty may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute on and the same agreement
Section 28. No Strict Construction.
The parties hereto have participated jointly in the negotiation and
drafting of this Guaranty. In the event an ambiguity or question of intent or
interpretation arises, this Guaranty shall be construed as if drafted jointly by
the parties hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Guaranty.
Section 29. Security.
The performance of the obligations of Guarantor under this Guaranty is
secured by that certain General Security Agreement dated the date hereof from
Guarantor to Lender.
[Signatures on following page.]
11
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed, all as of the date and year first written above.
▇▇▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL INSURANCE
BROKERS LTD.
By: /s/ Primo Podorieszach
-----------------------------------
Primo Podorieszach, CEO
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attn: Primo Podorieszach, CEO
Phone: ▇▇▇ ▇▇▇-▇▇▇▇
Fax: ▇▇▇ ▇▇▇-▇▇▇▇
12
EXHIBIT D
GENERAL SECURITY AGREEMENT
--------------------------
TO: OAK STREET FUNDING LLC
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
(hereinafter the "Lender")
GRANTED BY: ▇▇▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL INSURANCE
BROKERS LTD.
having its principal office or place of business at:
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
(hereinafter the "Grantor")
SECTION 1 - DEFINITIONS
1.1. Defined Terms
(a) As used herein:
"Accounts", "Inventory", "Equipment", "Intangibles", "Chattel Paper",
"Goods", "Instruments", and "Proceeds" shall mean all of Grantor's
such property within the meanings ascribed to such terms in the PPSA.
"Collateral" shall mean all of the Grantor's property or rights in
which a security interest is granted hereunder.
"Credit Agreement" shall mean the Credit Agreement executed between
Addison York Insurance Brokers Ltd. (the "Borrower") and the Lender of
even date, as amended and/or restated from time to time.
"Deposit Accounts" shall mean any and all demand, time, savings,
passbook, or similar accounts maintained with a bank or similar
institution, but shall not include investment property or accounts
evidenced by an instrument.
"Documents" shall mean all books, records, accounts, invoices,
letters, papers, documents and other records in any form or medium
evidencing or relating to the Collateral.
"Documents of Title" shall mean all present and future documents of
title of the Grantor, whether negotiable or otherwise, including all
warehouse receipts and bills of lading.
"Encumbrance" shall include, without limitation, a security interest,
lien, hypothecation, claim, charge, deemed trust or encumbrance of any
kind whatsoever.
"Fixture" shall include articles of personal property annexed to the
Grantor's owned or leased real property so as to be regarded as a part
thereof.
"Guaranty" shall mean the Guaranty dated as of even date, made by the
Grantor in favor of the Lender with respect to the debts and
obligations of Addison York Insurance Brokers Ltd, as Borrower to the
Lender, as same may be amended, supplemented, revised, restated or
replaced from time to time.
"Intellectual Property" shall mean all intellectual property of the
Grantor, including, without limitation, (a) all patents, patent
applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (b) all
trademarks, service marks, trade dress, trade names, and corporate
names and all the goodwill and quality control standards associated
therewith; (c) all registered and unregistered statutory and common
law copyrights; (d) all registrations, applications and renewals for
any of the foregoing; (e) all trade secrets, confidential information,
ideas, formulae, compositions, know-how, manufacturing and production
processes and techniques, research and development information,
drawings, specifications, designs, plans, improvements, proposals,
technical and computer data, financial, business and marketing plans,
and customer and supplier lists and related information; (f) all other
proprietary rights (including, without limitation, all computer
software and documentation and all license agreements and sublicense
agreements to and from third parties relating to any of the
foregoing); (g) all copies and tangible embodiments of the foregoing
in whatever form or medium; (h) all damages and payments for past,
present and future infringements of the foregoing; (i) all royalties
and income due with respect to the foregoing; and (j) the right to ▇▇▇
and recover for past, present and future infringements of the
foregoing.
"Investment Property" shall mean any property of the Grantor, the
primary purpose of which is the earning of profit by the Grantor.
"Liabilities" shall mean (a) all of the obligations of Grantor \ in
favor of Lender arising under, pursuant to, or in connection with that
certain continuing Guaranty dated as of the date hereof from Grantor
to Lender, (b) all other time to time obligations of Grantor to the
Lender of every type and description, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising,
and whether or not contemplated by the Grantor or the Lender as of the
date of this Security Agreement, including, without limitation, any
modification, extension, or addition to or of the Liabilities and any
overlying advances, out of formula advances and overdrafts made or
permitted in connection with the Liabilities or other Liabilities; and
(c) any duty of the Grantor to act or to refrain from acting in
connection with any Liability.
"Lock Boxes" shall have the meaning set forth in Section 4.2(a).
"Lock Box Agreements" shall have the meaning set forth in Section
4.2(a).
"Money" shall mean all present and future money of the Grantor,
whether authorized or adopted by the Parliament of Canada as part of
its currency or any foreign government as part of its currency.
"PPSA" shall mean the Personal Property Security Act (Alberta), as the
same may be amended, supplemented or replaced from time to time.
"Subsidiaries" means, as to the Grantor, (a) a corporation of which
shares of stock having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect
a majority of the Board of Directors or other managers of such
corporation are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by the Grantor, and (b) any partnership,
association, joint venture or other entity in which the Grantor and/or
one or more Subsidiaries of the Grantor has more than a Fifty Percent
(50%) equity interest.
(b) Other capitalized terms used herein and not specifically herein
defined shall have the meanings ascribed to them in the Credit
Agreement.
(c) The term "security interest" shall include, without limitation, a
fixed mortgage, hypothecation, pledge, charge and assignment, and the
grant of the security interest herein provided for shall include,
without limitation, a fixed mortgage, hypothecation, pledge, charge
and assignment of the Collateral in favor of the Lender.
1.2. Security Interest
As a general and continuing security for the payment and performance of any and
all Liabilities, present or future, direct or indirect, absolute or contingent,
matured or not, at any time owing by the Grantor to the Lender or remaining
unpaid by the Grantor to the Lender wheresoever and howsoever incurred and
howsoever evidenced, whether arising from dealings between the Lender and the
Grantor or from other dealings or proceedings by which the Grantor may be or
become in any manner indebted, obligated or liable to the Lender, including,
without limitation, under the Guaranty, and wherever incurred and in any
currency and whether incurred by the Grantor alone or with another or others and
whether as principal, guarantor or surety including expenses under Sections 3.5
and 3.12 of this Agreement and all interest, commissions, cost of realization,
legal and other costs, charges and expenses the Grantor, IN CONSIDERATION OF THE
LIABILITIES and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, does hereby grant to the Lender, a
continuing security interest in the following Collateral:
(a) All Accounts, Deposit Accounts, Intangibles, Documents, Documents of
Title, Instruments, Investment Property, Money, Chattel Paper and any
other similar rights of the Grantor however created or evidenced,
whether now existing or hereafter owned, acquired, created, used, or
arising, specifically including, without limitation, claims, leases,
agreements, license agreements, licensing fees, royalties, policies,
insurance commissions, credit insurance, guaranties, letters of
credit, advices of credit, binders or certificates of insurance,
deposits, documents of title, securities, security interests,
licenses, goodwill, tax refunds (federal, provincial or local),
customer lists, franchises, franchise rights, drawings, designs,
marketing rights, computer programs, artwork, databases and other like
business property rights, all applications to acquire such rights, for
which application may at any time be made by the Grantor, together
with any and all books and records pertaining thereto and any right,
title or interest in any Inventory which gave rise to an Account, and
all Intellectual Property throughout the world;
(b) All Inventory, whether now existing or hereafter acquired and wherever
located, specifically including, without limitation, all merchandise,
personal property, raw materials, work in process, finished Goods,
materials and supplies of every nature usable or useful in connection
with the manufacturing, packing, shipping, advertising, selling,
leasing or furnishing of any of such Inventory and all materials of
the Grantor used or consumed or to be used or consumed in the
Grantor's business, together with any and all books and records
pertaining thereto;
(c) All Equipment, Fixtures, Goods and all other tangible personal
property of the Grantor of every kind or nature which are not
inventory or consumer goods as defined in the PPSA, whether now owned
or hereafter acquired, wherever located, specifically including,
without limitation, all machinery, trucks, boats, barges, on and off
the road vehicles, forklifts, tools, dies, jigs, presses, appliances,
implements, improvements, accessories, attachments, parts, components,
partitions, systems, carpeting, draperies and apparatus;
(d) All products and Proceeds of each of the foregoing, specifically
including, without limitation, (i) any and all Proceeds of any
insurance, indemnity, warranty or guaranty payable to the Grantor from
time to time, (ii) any and all payments of any form whatsoever made or
due and payable to the Grantor from time to time in connection with
any requisition, confiscation, condemnation, seizure or forfeiture of
all or any part of the foregoing by any governmental authority or any
Person acting under color of governmental authority, (iii) to the
extent of the value of Collateral, claims arising out of the loss,
nonconformity, or interference with the use of, defects or
infringement of rights in, or damage to, the Collateral, and (iv) any
and all other amounts from time to time paid or payable under or in
connection with any of the foregoing, whether or not in lieu thereof;
(e) All renewals, extensions, replacements, modifications, additions,
improvements, accretions, accessions, betterments, substitutions,
replacements, annexations, tools, accessories, parts and the like now
in, attached to or which may hereafter at any time be placed in or
added to any Collateral, whether or not of like kind; and
(f) All rights, remedies, claims and demands under or in connection with
each of the foregoing.
1.3. Leases
The last day of the term of any lease, oral or written, or any agreement
therefor, now held or hereafter acquired by the Grantor, shall be excepted from
the security interest hereby granted and
shall not form part of the Collateral, but the Grantor shall stand possessed of
such one day remaining, upon trust to assign and dispose of the same as the
Lender or any assignee of such lease or agreement shall direct. If any such
lease or agreement therefor contains a provision which provides in effect that
such lease or agreement may not be assigned, sub-leased, charged or encumbered
without the leave, license, consent or approval of the lessor, the application
of the security interest created hereby to any such lease or agreement shall be
conditional upon such leave, license, consent or approval having been obtained.
1.4. Grantor Remains Liable
Notwithstanding anything herein to the contrary:
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform
all its duties and obligations thereunder to the same extent as if
this Security Agreement had not been executed;
(b) the exercise by the Lender of any of the rights or remedies hereunder
shall not release the Grantor from any of its duties or obligations
under the contracts and agreements included in the Collateral; and
(c) the Lender shall not have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Lender be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
1.5. Attachment
The Grantor acknowledges and agrees that: (i) value has been given; (ii) the
Grantor has rights in the Collateral; and (iii) the security interest created
hereunder shall attach to existing Collateral upon execution of this Agreement
by the Grantor and to each item of after-acquired Collateral at the time that
the Grantor acquires any rights therein.
1.6. Subordination
Notwithstanding anything herein contained, the Lender hereby acknowledges that
its security interest in Collateral is subject and subordinate to any security
interests which exist as of the date hereof granted by Grantor to an insurance
carrier, wholesaler, provider or company (together referred to herein as the
"Insurance Carriers") in any agency or similar agreement between Grantor and
such Insurance Carrier and the Lender, at any time and from time to time, does
hereby agree, at the request of the Grantor, to enter into a subordination and
postponement agreement in favor of such Insurance Carriers and file all
necessary documents under applicable public registries, including without
limitation, the Personal Property Security Act (Alberta), to give effect to the
subordination and postponement of its security interests to any security
interest granted by the Grantor in favor of such Insurance Carrier.
SECTION 2 - REPRESENTATIONS AND WARRANTIES
The Grantor represents and warrants to and in favor of the Lender as follows.
2.1. Incorporation
The Grantor is validly amalgamated and organized, is up to date in filing its
corporate returns (including annual returns and financial statements) and is a
subsisting corporation in good standing under the laws of its jurisdiction of
incorporation and the Grantor has all necessary power and authority to own its
property and assets, to carry on its business as at present carried on by it or
as contemplated hereunder to be carried on by it and holds all necessary
licenses, permits and consents as are required so to own its property and assets
and so to carry on business in each jurisdiction in which it does so without any
violation of law or the rights of others.
2.2. Corporate Power
The Grantor has the power, capacity, full legal right and the corporate
authority to enter into this Security Agreement and the Guaranty, to grant the
security interest contained herein and to do all acts and things as are required
or contemplated hereunder to be done, observed and performed by it.
2.3. Corporate Authorization
The Grantor has taken all necessary corporate action to authorize the creation,
execution, delivery and performance of this Security Agreement and the Guaranty.
2.4. Non-Conflict
None of the execution of the Guaranty, this Security Agreement, the grant of the
security interests hereunder and the performance and observance of the terms
hereof requires the approval of any regulatory agency having jurisdiction over
the Grantor, results in the grant or creation of any Encumbrance on the property
of assets of the Grantor other than in favor of the Lender or is in
contravention of or in conflict with the articles, by-laws or resolutions of
directors or shareholders of the Grantor or the provisions of any indenture,
instrument, agreement or undertaking to which the Grantor is a party or by which
all or any part of its property or assets may be bound, any statute, regulation,
by-law, ordinance or other law, or any judgment, decree, ruling or order to
which the Grantor or its property and assets may be subject.
2.5. No Default
The Grantor is not in default in the performance or observance of any of the
obligations, covenants or conditions contained in any material contract,
agreement or other instrument to which it is a party or by which it is bound. At
the date hereof, no Default exists and no event or condition has occurred or
exists which with the passage of time or the giving of notice, or both, would
constitute a Default.
2.6. Title
Subject only to the security interests in favor of the Lender, the Grantor has
good and marketable title to the Collateral free and clear of all Encumbrances
whatsoever except as are described in the attached Schedule "B".
2.7. Enforceability
The Guaranty and this Security Agreement constitute a valid and legally binding
obligation of the Grantor enforceable against the Grantor in accordance with
their terms.
2.8. Information
The information, representations and warranties made by the Grantor to the
Lender in respect of the Grantor's assets, operations or otherwise including,
without limitation, the information contained in any financial statements and in
the Schedules attached hereto, are true and accurate in all material respects
and are not misleading in light of the circumstances existing when made or
delivered or in present circumstances. There are no facts or circumstances not
disclosed in writing to the Lender relating to the business, properties,
prospects or financial condition of the Grantor or its ability to perform its
obligations hereunder which may, in the Lender's discretion, be considered
material, including without limitation, with respect to the existence of any
contract, agreement or instrument or charter or corporate restriction which may,
in the Lender's discretion, materially adversely affect the Grantor's business,
properties, assets, operations, or condition (financial or otherwise).
2.9. Locations of Collateral
The Collateral, except where it is in transit to and from the locations herein
described is located at the location specified above as the Grantor's principal
office or place of business (and its chief place of business and chief executive
office) and at such additional addresses as are listed in Schedule "A" hereto.
The location at which all records of the Grantor pertaining to Accounts (and all
chattel paper which evidences Accounts) and contract rights are kept is the
location specified above unless the contrary is indicated in Schedule "A".
2.10. No Litigation
Other than the litigation or proceedings pending against the Grantor identified
in Schedule "C" hereto, there is no litigation, proceeding or governmental
investigation, administrative or judicial, pending or threatened, against the
Grantor or any of its subsidiaries which, if decided adversely to the Grantor or
such subsidiary(ies) might have a materially adverse effect on the business,
properties or condition (financial or otherwise) of the Grantor or such
subsidiary(ies) or on the ability or the Grantor to perform its obligations
hereunder or under any other agreement between the Grantor and the Lender.
2.11. Taxes
The Grantor and each of its subsidiaries has filed all federal, state,
provincial and other tax returns required to be filed, and all taxes,
assessments and other governmental charges (the "Tax
Liabilities") due from each of the Grantor and its subsidiaries have been fully
paid. Neither the Grantor nor any of its subsidiaries has executed any waiver
that would have the effect of extending any applicable statute of limitations in
respect of Tax Liabilities. Each of the Grantor and its subsidiaries has
established on its books reserves adequate for the payment of all Tax
Liabilities.
2.12. Survival
All representations and warranties of the Grantor made herein or in any
certificate or other document delivered by or on behalf of the Grantor to the
Lender are material, shall be deemed to have been relied upon by the Lender
notwithstanding any investigation heretofore or hereafter made by or on behalf
of the Lender, shall survive the execution and delivery of this Security
Agreement and shall continue in full force and effect without time limit.
2.13. Financial Statements
All financial statements of Grantor were prepared in accordance with Canadian or
U.S. generally accepted accounting principles (GAAP), consistent with prior
years, unless specifically otherwise noted thereon, and fairly present the
financial condition of Grantor as of the date thereof and the results of its
operations for the period then ended, and no material adverse change in the
financial condition of Grantor has occurred since the date of the financial
statements.
2.14. No Material Adverse Change
The information submitted by Grantor to Lender discloses all known or
anticipated material liabilities, direct or contingent, of Grantor and its
Subsidiaries as of the dates thereof, and, to the best knowledge of Grantor,
since such dates, there has been no material adverse change in Grantor's or its
Subsidiaries' financial condition.
2.15. Indebtedness
Except as shown on the financial statements of Grantor, except as set forth on
Schedule "D" hereto, and except for trade debt incurred in the ordinary course
of business since the date of the financial statements, Grantor has no
outstanding indebtedness.
2.16. Full Disclosure
No information, exhibit, memorandum, or report (excluding estimated future
operating results) furnished by Grantor to Lender in connection with the
negotiation of the Guaranty or this Agreement contains any material misstatement
of fact, or omits to state any fact necessary to make the statements contained
therein not materially misleading in light of the circumstances when made, and
all estimated future operating results, if furnished, were prepared on the basis
of assumptions, data, information, tests or other conditions believed to be
valid or accurate or to exist at the time such estimates were prepared and
furnished. To Grantor's knowledge, there presently exists no fact or
circumstance relative to Grantor, whether or not disclosed, which is presently
anticipated to have a Material Adverse Effect.
2.17. Contracts of Surety
Except for the endorsements of Grantor of negotiable instruments for deposit or
collection in the ordinary course of business, Grantor is not a party to any
contract of guaranty or surety.
2.18. Licenses
Grantor possesses such franchises, licenses, permits, patents, copyrights,
trademarks, and consents of appropriate governmental authorities to own its
property and as are necessary to carry on its business.
2.19. Compliance with Law
Grantor is in compliance with and conformity with all laws, ordinances, rules,
regulations and all other legal requirements applicable to its business and
assets, the violation of which would have a material effect on its business or
financial condition. Grantor has not received nor does it have a reasonable
basis to expect any order or notice of violation or claim of violation of any
law, ordinance, rules or regulation. The properties on which Grantor is
conducting its business are properly zoned for the activities conducted or to be
conducted thereon, and all required variances have been obtained, and are in
full force and effect with no notice or threat of invalidity, expiration or
lapse of any kind.
2.20. Force Majeure
Neither the business nor the properties of Grantor are presently affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty that could reasonably be expected to have a Material Adverse Effect on
its business or financial condition.
2.21. Approvals
No authorization, consent, approval or any form of exemption of any governmental
authority is required in connection with the execution and delivery by Grantor
of the Guaranty or this Agreement or the performance by Grantor thereunder.
2.22. Insolvency
Grantor is not "insolvent" within the meaning of that term as defined under the
Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act
(Canada) or the Winding-Up and Restructuring Act (Canada), and is able to pay
its debts as they mature.
2.23. General
All statements contained in any certificate or financial statement delivered by
or on behalf of Grantor to Lender under this Agreement and the Guaranty shall
constitute representations and warranties made by Grantor hereunder.
2.24. Subsidiaries
Each Subsidiary of Grantor is listed on Schedule E hereto. With the exception of
Borrower, no Subsidiary of Grantor has any right, title, or interest in any real
or personal property, whether tangible or intangible, exceeding a value of
$100,000.
SECTION 3 - COVENANTS OF GRANTOR
The Grantor covenants and agrees with the Lender as follows.
3.1. Repair
The Grantor shall diligently repair, maintain, use, care for, protect and
operate the Collateral and shall carry on and conduct its business in a proper
and efficient manner so as to preserve and protect the Collateral and the
earnings, incomes, rents, issues and profits thereof.
3.2. Information
The Grantor shall keep proper books of account in accordance with sound
accounting practice and applicable laws with respect to questionable, improper
or corrupt payments, shall promptly furnish to the Lender such information with
respect to the Collateral and the Grantor and its business including, without
limitation, financial information and statements relating to its business and
the Collateral, as the Lender may from time to time reasonably require and shall
promptly notify the Lender of all proceedings (pending or threatened) before any
court, board, tribunal or similar body or any occurrence, condition or event
which could have a Material Adverse Effect on the business, property, assets or
condition (financial or otherwise) of the Grantor or any of its subsidiaries.
The Grantor shall permit the Lender or its authorized agents, at any times and
at the expense of the Grantor, to audit its Accounts under reasonable procedures
directly with account debtors or by other procedures, to have access to all
premises occupied by the Grantor or any place where the Collateral may be found
in order to discuss the affairs, finances and accounts of the Grantor with
appropriate officers, to inspect the Collateral and to examine the information
contained in any records or other writings of the Grantor including, without
limitation, books of account and other financial records and reports relating to
the Collateral, to have temporary custody thereof and to make copies thereof and
take extracts therefrom and shall, at the reasonable request of the Lender, ▇▇▇▇
the Collateral to indicate clearly the security interest of the Lender.
3.3. Make Payments
The Grantor shall pay all rents, taxes, rates, levies, assessments and
government fees or dues lawfully levied, assessed or imposed in respect of the
Collateral or any part thereof as and when the same shall become due and payable
except as are being contested in good faith by proper legal proceedings with
respect to which adequate reserves have been established and are being
maintained and shall exhibit to the Lender, when required, the receipts and
vouchers evidencing such payments.
3.4. Encumbrances
Except for any Encumbrances in favor of the Lender and those Encumbrances
identified on Schedule B hereto and purchase money security interests in
Equipment, validly created in accordance with the PPSA, on Collateral hereafter
acquired by the Debtor, the Grantor shall keep the Collateral free at all times
from any and all Encumbrances of whatsoever nature, kind or priority other than
those consented to by the Lender or Encumbrances which, in the sole opinion of
counsel to the Lender, are satisfactorily subordinated to Encumbrances in favor
of the Lender, defend the title to the Collateral against all persons, not
permit the Collateral to become an accession to any property not subject to the
security interest granted by this Security Agreement or a security interest
consented to by the Lender that is subordinate to the Lender's security interest
and not to become a fixture unless the security interest of the Lender ranks
prior to the interests of all persons in the realty. The Lender may, at any
time, contest the validity and enforceability against it or the Grantor of any
Encumbrance including, without limitation, any purchase money security interest.
3.5. Insurance
The Grantor shall cause all of the Collateral which is of a character usually
insured by businesses owning or operating Collateral of a similar nature to be
properly insured and kept insured with reputable insurers acceptable to the
Lender, against loss or damage by fire or other risks and hazards usually
insured against by businesses owning or operating Collateral of a similar
nature, in such amounts, containing such terms, in such form and for such
purposes, as may be satisfactory to the Lender. Loss under such insurance shall
be payable to the Lender as its interest may appear and such insurance shall
contain a mortgage clause acceptable to the Lender. The Grantor shall, at the
Lender's request, provide satisfactory evidence that such insurance has been
effected, that loss thereunder is payable to the Lender as its interest may
appear and any other information relating to such insurance as the Lender may
require. If the Grantor fails to maintain satisfactory insurance, the Lender
may, at its option, obtain such insurance at the expense of the Grantor and the
Grantor shall forthwith repay all costs and expenses incurred by the Lender in
connection therewith and all such costs and expenses shall be deemed advanced to
the Grantor by the Lender, shall become part of the Liabilities, shall bear
interest at the highest rate per annum charged by the Lender on the Liabilities
or any part thereof and shall be secured by this Security Agreement.
3.6. Compliance with Governmental Requirements
The Grantor shall duly observe and comply with all requirements of any
governmental authority applicable to the Collateral or its use and operation and
shall observe and comply with all covenants, terms and conditions upon or under
which the Collateral is held.
3.7. Permitted Disposals
The Grantor shall not, except as otherwise permitted hereunder, remove, destroy,
lease, sell or otherwise dispose of any of the Collateral except equipment which
has become worn out or damaged or otherwise unsuitable for its purpose, in which
case the Grantor shall substitute for such equipment, subject to the security
interest created hereby and free from any other security
interests, property of equal value such that the security hereby constituted
shall not thereby be in any way reduced or impaired.
3.8. No Change in Business
The Grantor shall not, without the prior written consent of the Lender, which
consent shall be conditional on the receipt by the Lender of all security and
deeds of confirmation as its counsel may consider advisable to protect the
Lender's interest, directly or indirectly: change the nature of its business;
change its fiscal year; otherwise incur any material (determined in the Lender's
reasonable discretion) capital expenditures in excess of, cumulatively, US
$25,000 per annum (including, without limitation, entering into equipment
leases); guarantee, endorse or otherwise become surety for or upon the
obligations of others, except to the Lender, or to others which, in the sole
opinion of counsel to the Lender, creates an Encumbrance which is subordinate to
Encumbrances of the Lender or by endorsement of negotiable instruments for
deposit or collection in the ordinary course of its business; provide financial
assistance (including, without limitation, by way of loans to, investments in
and assumptions of obligations) to any person, corporation, partnership or other
entity other than by way of advances and extensions of credit in the ordinary
course of its business or with the consent of the Lender or which, in the sole
opinion of counsel to the Lender, creates an Encumbrance which is subordinate to
Encumbrances of the Lender; sell, discount or dispose of any note, instrument,
account or other obligation owing to the Grantor; amalgamate, reconstruct,
consolidate or otherwise merge with any person or entity other than with a
wholly owned subsidiary of the Grantor; enter into an arrangement or agreement
for the sale of any substantial portion of the Collateral other than in the
ordinary course of business; permit all or a substantial portion of the
Collateral to become the property of any other person or entity, whether in one
or a series of transactions; otherwise cease to carry on business as a going
concern; do or omit to do any other act or thing that could materially adversely
affect its business, financial condition, assets or position or its ability to
carry on the business as now conducted by it; or allow, permit or authorize any
such change in business, acquisition, extension of financial assistance, merger,
reconstruction, consolidation, carrying on of business, arrangement or cessation
of business of any of its subsidiaries except a merger contemplated herein.
3.9. Dividends, etc.
The Grantor shall not pay, make or declare any cash or other dividend or
distribution to any person who holds an equity interest in the Grantor, whether
evidenced by a security or not, without the prior written consent of the Lender.
3.10. No Further Indebtedness
The Grantor shall not incur, assume or suffer to exist or in any manner become
liable, directly or indirectly, for any further or additional indebtedness or
liabilities other than:
(a) To the Lender;
(b) Any other debt which, in the sole opinion of counsel to the Lender, is
satisfactorily subordinated to all indebtedness contingent or
otherwise owing to the Lender by the Grantor;
(c) For taxes, assessments or governmental charges to the extent that
payment therefore shall not, at the time, be required to be made
hereunder;
(d) On open account for the purchase price of services, materials or
supplies incurred by the Grantor in the ordinary course of business
and not as a result of borrowing and provided that such indebtedness
shall be promptly paid and discharged when due in conformity with
ordinary trade terms, except for any such indebtedness which is being
contested in good faith by the Grantor by appropriate proceedings and
adequate reserves for which have been established and are being
maintained and in connection with which no Encumbrance has been placed
on the property of the Grantor; and
(e) For the purchase price of capital assets incurred in the ordinary
course of business and as expressly permitted hereunder.
3.11. Notice Regarding Change of Address, etc.
The Grantor shall notify the Lender in writing:
(a) At least 20 days prior to any change of name of the Grantor;
(b) At least 20 days prior to any transfer of the Grantor's interest in
any part of the Collateral, not expressly permitted hereunder;
(c) Promptly of any significant loss of or damage to Collateral;
(d) At least 20 days prior to any change in the location(s) of the
Collateral and any records relating thereto; and
(e) Forthwith upon becoming aware of the existence of any condition or
event which could cause or which, with the passage of time or notice,
or both, constitute a Default, give the Lender written notice thereof
specifying the nature and duration thereof and the action being taken
or proposed to be taken with respect thereto.
3.12. Protective Disbursements - Legal Fees
If the Grantor fails to pay any amounts required to be paid by it under this
Security Agreement or to observe or perform any of the covenants and obligations
set forth in this Security Agreement to be observed or performed by it, the
Lender may, but shall be under no obligation to, pay such amounts or observe and
perform any of such covenants and obligations in any manner deemed proper by the
Lender, without waiving any of its rights under this Security Agreement. No such
payment or performance by the Lender shall relieve the Grantor from any default
under this Security Agreement or the consequences of such default. The
reasonable expenses, including the cost of any insurance, payment of taxes or
other charges and legal fees and expenses on a solicitor and his own client
scale, paid by the Lender in respect of the custody, preservation, use or
operation of the Collateral shall be deemed advanced to the Grantor by the
Lender, shall become part of the Liabilities, shall bear interest at the highest
rate per annum charged by the Lender on the Liabilities or any part thereof and
shall be secured by this Security Agreement. In
addition, the Grantor shall pay all reasonable costs, claims, damages and
expenses including, without limitation, legal fees and expenses on a solicitor
and his own client scale, incurred by the Lender in connection with the
preparation, perfection, execution, protection, enforcement of and advice with
respect to this Security Agreement, the realization, disposing of, retaining,
protecting or collecting of the Collateral or any part thereof and the
protection and enforcement of the rights of the Lender hereunder, and all such
costs and expenses shall be deemed advanced to the Grantor by the Lender, shall
become part of the Liabilities, shall bear interest at such highest rate per
annum charged by the Lender on the Liabilities or any part thereof and shall be
secured by this Security Agreement.
3.13. Post-Default Payments
Upon the occurrence and during the continuance of a Default, the Grantor shall
not pay to or compensate any officer, director or employee, or any member of
such person's family, any additional cash compensation in the form of a cash
bonus, or other similar cash incentive compensation.
3.14. Capital Stock
Without the prior written consent of Lender, Grantor shall not directly or
indirectly redeem or acquire any of its own capital stock, or any options,
warrants or any securities in respect of its capital stock prior to March 19,
2009.
3.15. Financial Reporting
Grantor shall furnish or caused to be furnished to Lender:
(a) as soon as practicable, but in any event within ninety (90) days after
the end of each fiscal year, financial statements of each of the Grantor
and its Subsidiaries (on a consolidated basis) audited by independent
certified public accountants acceptable to Lender, including a balance
sheet, statement of income and retained earnings and a statement of cash
flows, with accompanying notes to financial statements, all prepared in
accordance with GAAP (with all amounts denominated in Dollars) on a basis
consistent with prior years unless specifically noted thereon, accompanied
by the unqualified report of such auditors thereon, and further accompanied
by the certificate of the chief executive officer or chief financial
officer of Grantor that there exists no Default under the this Agreement or
the Guaranty, or if any Default exists, stating the nature and status
thereof;
(b) As soon as possible, but in any event within fifteen (15) days after
the end of each month, similar consolidated financial statements of the
Grantor and its Subsidiaries (on a consolidated basis) as of the end of
such quarter and the results of its operations for the portion of the
fiscal year then elapsed, prepared and signed by the chief financial
officers of the Grantor and its Subsidiaries, all prepared in accordance
with GAAP (with all amounts denominated in Dollars) on a basis consistent
with prior periods, unless specifically otherwise noted thereon, and
accompanied by the certificate of the chief executive officer or chief
financial
officer of the Grantor that there exists no Default under the Loan
Documents or if any Default exists, stating the nature and status thereof;
(c) as soon as possible, but in any event within three (3) days after the
Grantor becomes aware thereof, a written statement signed by the chief
executive or chief financial officer of Grantor as to the occurrence of any
Default stating the specific nature thereof, Grantor's intended action to
cure the same and the time period in which such cure is to occur;
(d) as soon as possible, but in any event within twenty (20) days after the
commencement thereof, a written statement describing any litigation
instituted by or against the Grantor, or any Affiliate which, if adversely
determined, may have a Material Adverse Effect on the business or financial
condition of Grantor and its Subsidiaries;
(e) promptly upon the filing thereof, copies of all filed prospectuses and
annual, quarterly, monthly, or other regular reports which the Grantor
files with any securities commission or other governmental authority;
(f) such other information as Lender may from time to time reasonably
request.
3.16. Reports
The Grantor shall file, as appropriate, on a timely basis, annual reports,
operating records and any other reports or filings required to be made with any
governmental authority.
3.17. Licenses
The Grantor shall maintain in full force and effect all material operating
permits, licenses, franchises, and rights used by it in the ordinary course of
business.
3.18. Notice of Material Adverse Effect
The Grantor shall give prompt notice in writing to Lender of the occurrence of
any development, financial or otherwise, including pending or threatened
litigation, which might have a Material Adverse Effect upon the Grantor's
financial condition, business or future prospects.
3.19. Compliance with Law
The Grantor shall comply with all material laws, ordinances, rules, regulations
and other legal requirements applicable to it, except where the failure to do so
could not be reasonably expected to result in a Material Adverse Effect upon the
Grantor's financial condition, business or future prospects.
3.20. Financial Condition
The Grantor shall maintain its financial condition and management (including,
without limitation, insurance agents) of such skill and experience as is
currently in place and necessary to support fully its business.
3.21. Subsidiaries
Except for the Subsidiaries listed in Schedule E hereto, the Grantor shall not
create or acquire any additional Subsidiaries without the prior consent of the
Lender. In the event that any Subsidiaries of the Grantor have right, title, or
interest in any real or personal property, whether tangible or intangible,
exceeding a value of $100,000, the Grantor shall cause each Subsidiary to
deliver to the Lender an executed Guaranty and appropriate corporate
resolutions, opinions and other documentation in form and substance reasonably
satisfactory to the Lender, such Guaranty and other documentation to be
delivered to Lender as promptly as possible but in any event within thirty (30)
days of determination that a Subsidiary needs to be added as a Guarantor.
Simultaneously with any such Subsidiary becoming a Guarantor, the Grantor shall
also cause such Subsidiary to (i) execute and deliver a Subsidiary Security
Agreement (and deliver the other documents required thereby, including, without
limitation, restricted account agreements), if applicable, and such other
collateral documents as the Lender may require its sole and reasonable
discretion; and (ii) deliver such other documentation as the Lender may
reasonably require in connection with the foregoing, including, without
limitation, appropriate financing statements, certified resolutions and other
organizational and authorizing documents of such Subsidiary, favorable opinions
of counsel to such Subsidiary (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the documentation
referred to above and the perfection of the Lender's liens thereunder).
SECTION 4 - COLLECTION OF PROCEEDS
4.1. Payments to Lender
The Grantor shall:
(a) Collect and enforce payment of all Accounts (except as provided for in
Section 4.2) and shall dispose of and receive payment for all
Inventory which is ordinarily disposed of in the Grantor's business;
(b) Receive and hold in trust for the Lender, all payments on or
instruments received in respect of the Collateral, all rights by way
of suretyship or guarantee which the Grantor now has or may hereafter
acquire to enforce payment of Collateral and all rights in the nature
of a security interest whereby the Grantor may satisfy any Collateral
out of property, and all non-cash proceeds of any such collection,
disposition or realization of any of the Collateral shall be subject
to the security interest hereby created;
(c) Endorse to the Lender and forthwith deliver to it all such payments
and instruments in the form received by the Grantor; and
(d) Forthwith deliver to the Lender all property in the Grantor's
possession or hereafter coming into its possession through enforcement
of any such rights.
4.2. Collection and Application of Collateral Proceeds; Deposit Accounts
(a) Collection of Accounts.
(1) The Grantor will (i) cause each bank or other financial
institution in which it maintains (a) a Deposit Account,
including each Deposit Account maintained by the Grantor into
which all cash, checks, or other similar payments relating to or
constituting payments made in respect of Accounts will be
deposited (a "Collateral Deposit Account"), to enter into a
control agreement with the Lender, in form and substance
satisfactory to the Lender in order to give the Lender control of
the Deposit Account or (b) other deposits (general or special,
time or demand, provisional or final) to be notified of the
security interest granted to the Lender hereunder and cause each
such bank or other financial institution to acknowledge such
notification in writing, and (ii) upon the Lender's request after
the occurrence and during the continuance of a Default, deliver
to each such bank or other financial institution a letter, in
form and substance acceptable to the Lender, transferring
ownership of the Deposit Account to the Lender or transferring
dominion and control over each such other deposit to the Lender
until such time as no Default exists.
(2) Upon the occurrence of a Default or Unmatured Default, establish
lock box service (the "Lock Boxes") with the bank(s) set forth in
Appendix I hereto, which Lock Boxes shall be subject to
irrevocable lockbox agreements in the form provided by or
otherwise acceptable to the Lender and shall be accompanied by an
acknowledgment by the bank where the Lock Box is located of the
Lien of the Lender granted hereunder and of irrevocable
instructions to wire all amounts collected therein to the
Collection Account (as hereinafter defined) (a "Lock Box
Agreement"). Upon the occurrence of a Default or Unmatured
Default, (a) the Grantor shall direct all of its Account Debtors
to forward payments directly to Lock Boxes subject to Lock Box
Agreements, (b) the Lender shall have sole access to the Lock
Boxes at all times and the Grantor shall take all actions
necessary to grant the Lender such sole access, (c) at no time
shall the Grantor remove any item from the Lock Box or from a
Collateral Deposit Account without the Lender's prior written
consent, (d) if the Grantor should refuse or neglect to notify
any Account Debtor to forward payments directly to a Lock Box
subject to a Lock Box Agreement after notice from the Lender, the
Lender shall be entitled to make such notification directly to
Account Debtor, (e) if notwithstanding the foregoing
instructions, the Grantor receives any proceeds of any Accounts,
the Grantor shall receive such payments as the Lender's trustee,
and shall immediately deposit all cash, checks or other similar
payments related to or constituting payments made in respect of
Accounts received by it to a Collateral Deposit Account, (f) all
funds deposited into any Lock Box subject to a Lock Box Agreement
or a Collateral Deposit Account will be swept on a daily basis
into a collection account maintained by the Grantor with Bank
One, N.A., or its successors, (the "Collection Account"), and (g)
the Lender shall hold and apply funds received into the
Collection Account as provided by the terms of Section 4.2(c).
(b) Covenant Regarding New Deposit Accounts; Lock Boxes. Before opening or
replacing any Collateral Deposit Account, other Deposit Account, or
establishing a new Lock Box, the Grantor shall (a) obtain the Lender's
consent in writing to the opening of such Deposit Account or Lock Box,
and (b) cause each bank or financial institution in which it seeks to
open (i) a Deposit Account, to enter into a Deposit Account Control
Agreement with the Lender in order to give the Lender Control of such
Deposit Account, or (ii) a Lock Box, to enter into a Lock Box
Agreement with the Lender in order to give the Lender Control of the
Lock Box.
(c) Application of Proceeds; Deficiency. Upon the occurrence of a Default
or an Unmatured Default, all amounts deposited in the Collection
Account shall be deemed received by the Lender for application in
satisfaction of the Liabilities. In no event shall any amount be so
applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account. The Lender
shall require all other cash proceeds of the Collateral to be
deposited in a special non-interest bearing cash collateral account
with a bank of the Lender's choosing and held there as security for
the Liabilities. The Grantor shall have no control whatsoever over
said cash collateral account. Any such proceeds of the Collateral
shall be applied in the order set forth in the Credit Agreement unless
a court of competent jurisdiction shall otherwise direct. The balance,
if any, after all of the Liabilities have been satisfied, shall be
deposited by the Lender into the Grantor's general operating account.
The Grantor shall remain liable for any deficiency if the proceeds of
any sale or disposition of the Collateral are insufficient to pay all
Liabilities, including any attorneys' fees and other expenses incurred
by the Lender to collect such deficiency.
SECTION 5 - DEFAULT
5.1. Defaults
Without in any way limiting or restricting the demand nature of any of the
Liabilities and the Lender's rights to demand, at any time, payment of any or
all of the Liabilities payable on demand, the Liabilities secured by this
Security Agreement shall be immediately due and payable in full and the security
hereby constituted shall become enforceable without the need for any action or
notice on the part of the Lender upon the happening of any of the following
events (herein called a "Default"):
(a) If the Grantor shall fail to make any payment of any of the
Liabilities when due;
(b) If the Grantor commits a breach of or fails to observe or perform any
of the covenants, terms or conditions contained in this Security
Agreement or in any other agreement or instrument from time to time in
effect between the Grantor and the Lender, whether relating to the
Liabilities or not, or if any representation or warranty of the
Grantor made to the Lender or otherwise contained herein or in any
other agreement or instrument from time to time in effect between the
Grantor and the Lender, whether relating to the Liabilities or not,
shall be
established by the Lender to have been incorrect in any material
(determined in the Lender's sole discretion) respect;
(c) If any guarantor (individually a "Guarantor" and collectively
`Guarantors") of the Liabilities commits a breach of or fails to
observe or perform any covenant, term or condition contained in any
agreement or writing to which the Guarantor and the Lender are
parties;
(d) If the Grantor shall default under any instrument or agreement with
respect to any indebtedness or other obligation of it to the Lender or
to any creditor or other person, provided that such default has
resulted in, or may result in, with notice or lapse of time, or both,
the acceleration of any such indebtedness or obligation in favor of
such person, in excess of $25,000, or the right of such person to
realize upon the Collateral;
(e) If the Grantor or any Guarantor ceases paying its debts as they
mature, ceases or threatens to cease to carry on its business, makes
an assignment for the benefit of creditors, commits any act or does
any thing constituting or being an event of bankruptcy or insolvency
(as defined or provided for in any applicable statute), fails to
defend in good faith any action, suit or proceeding commenced against
it, fails to discharge or appeal forthwith any judgment for the
payment of money rendered against it, fails to pay any taxes, rates or
charges when due, in consequence of which any lien or other
Encumbrance, inchoate or otherwise, upon the Collateral arises or
could arise thereby, applies to any tribunal or similar body for the
appointment or authorization of any receiver, trustee, liquidator or
sequestrator or otherwise commences any proceedings relating to any
substantial portion of its property under any reorganization,
arrangement or readjustment of debt, dissolution, winding-up,
adjustment, composition or liquidation law or statute of any
jurisdiction including, without limitation, under the Companies'
Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act
(Canada) or the Winding-Up and Restructuring Act (Canada), whether now
or hereafter in effect (each of the foregoing herein referred to as a
"Proceeding");
(f) If there is commenced against the Grantor or any Guarantor any
Proceeding and an order approving the petition or dissolution,
liquidation or winding up is entered, or such Proceeding remains
undismissed for a period of 30 days, any receiver, trustee,
liquidator, sequestrator or similar official of or for the Grantor or
any Guarantor or any substantial portion of the property of the
Grantor or any Guarantor is appointed, the Grantor or any Guarantor by
any act indicates consent to or approval of or acquiescence in any
Proceeding or the appointment of any receiver, trustee, liquidator,
sequestrator or similar official of or for the Grantor or any
Guarantor or any substantial portion of the property of the Grantor or
any Guarantor or if any writ of seizure and sale, distress or similar
process is levied or enforced against a substantial portion of the
property and assets of the Grantor or any Guarantor or otherwise
remains undischarged or not defended or appealed forthwith; or
(g) If the Lender, in its absolute discretion, concludes as the result of
the occurrence of any material change in the condition or affairs
(financial or otherwise) of the Grantor or any Guarantor, that the
essential basis of the Liabilities or security hereby constituted has
been impaired or otherwise altered.
SECTION 6 - REMEDIES ON DEFAULT
If the security hereby constituted becomes enforceable, the Lender shall have,
in addition to any other rights, remedies and powers which it may have at law,
in equity or under the PPSA, the following rights, remedies and powers:
6.1. Power of Entry
The Grantor shall forthwith upon demand assemble and deliver to the Lender
possession of all of the Collateral at such place as may be specified by the
Lender. The Lender may take such steps as it considers necessary or desirable to
obtain possession of all or any part of the Collateral and, to that end, the
Grantor agrees that the Lender, its servants or agents or Receiver may, at any
time, during the day or night, enter upon lands and premises where the
Collateral may be found for the purpose of taking possession of and/or removing
the Collateral or any part thereof. In the event of the Lender taking possession
of the Collateral, or any part thereof, the Lender shall have the right to
maintain the same upon the premises on which the Collateral may then be situate.
The Lender may, in a reasonable manner, take such action or do such things as to
render any Equipment unusable.
6.2. Power of Sale
The Lender may sell, lease or otherwise dispose of all or any part of the
Collateral, as a whole or in separate parcels, by public auction, private tender
or by private contract, with or without notice, except as otherwise required by
applicable law, with or without advertising and without any other formality, all
of which are hereby waived by the Grantor. Such sale, lease or disposition shall
be on such terms and conditions as to credit and otherwise and as to upset or
reserve bid or price as to the Lender, in its sole discretion, may seem
advantageous. If such sale, transfer or disposition is made on credit or part
cash and part credit, the Lender need only credit against the Liabilities the
actual cash received at the time of the sale. Any payments made pursuant to any
credit granted at the time of the sale shall be credited against the Liabilities
as they are received. The Lender may buy in or rescind or vary any contract for
sale of all or any of the Collateral and may resell without being answerable for
any loss occasioned thereby. Any such sale, lease or disposition may take place
whether or not the Lender has taken possession of the Collateral. The Lender
may, before any such sale, lease or disposition, perform any commercially
reasonable repair, processing or preparation for disposition and the amount so
paid or expended shall be deemed advanced to the Grantor by the Lender, shall
become part of the Liabilities, shall bear interest at the highest rate per
annum charged by the Lender on the Liabilities or any part thereof and shall be
secured by this Security Agreement.
6.3. Validity of Sale
No person dealing with the Lender or its servants or agents shall be concerned
to inquire whether the security hereby constituted has become enforceable,
whether the powers that the Lender is
purporting to exercise have become exercisable, whether any money remains due on
the security of the Collateral, as to the necessity or expedience of the
stipulations and conditions subject to which any sale, lease or disposition
shall be made, otherwise as to the propriety or regularity of any sale or any
other dealing by the Lender with the Collateral or to see to the application of
any money paid to the Lender. In the absence of fraud on the part of such
persons, such dealings shall be deemed, so far as regards the safety and
protection of such person, to be within the powers hereby conferred and to be
valid and effective accordingly.
6.4. Receiver-Manager
The Lender may, in addition to any other rights it may have, appoint by
instrument in writing a receiver or receiver and manager (both of which are
herein called a "Receiver") of all or any part of the Collateral or may
institute proceedings in any court of competent jurisdiction for the appointment
of such a Receiver. Any such Receiver is hereby given and shall have the same
powers and rights and exclusions and limitations of liability as the Lender has
under this Security Agreement, at law or in equity. In exercising any such
powers, any such Receiver shall, to the extent permitted by law, act as and for
all purposes shall be deemed to be the agent of the Grantor and the Lender shall
not be responsible for any act or default of any such Receiver. The Lender may
appoint one or more Receivers hereunder and may remove any such Receiver or
Receivers and appoint another or others in his or their stead from time to time.
Any Receiver so appointed may be an officer or employee of the Lender. A court
need not appoint, ratify the appointment by the Lender of or otherwise supervise
in any manner the actions of any Receiver. Upon the Grantor receiving notice
from the Lender of the taking of possession of the Collateral or the appointment
of a Receiver, all powers, functions, rights and privileges of each of the
directors and officers of the Grantor with respect to the Collateral shall
cease, unless specifically continued by the written consent of the Lender.
6.5. Carrying on Business
The Lender may carry on, or concur in the carrying on of, all or any part of the
business or undertaking of the Grantor, may, to the exclusion of all others,
including the Grantor, enter upon, occupy and use all or any of the premises,
buildings, plant and undertaking of or occupied or used by the Grantor and may
use all or any of the tools, machinery, equipment and intangibles of the Grantor
for such time as the Lender sees fit, free of charge, to carry on the business
of the Grantor and, if applicable, to manufacture or complete the manufacture of
any Inventory and to pack and ship the finished product.
6.6. Dealing with Collateral
The Lender may seize, collect, realize, dispose of, enforce, release to third
parties or otherwise deal with the Collateral or any part thereof in such
manner, upon such terms and conditions and at such time or times as may seem to
it advisable, all of which without notice to the Grantor except as otherwise
required by any applicable law. The Lender may demand, ▇▇▇ for and receive any
Accounts with or without notice to the Grantor, give such receipts, discharges
and extensions of time and make such compromises in respect of any Accounts
which may, in the Lender's absolute discretion, seem bad or doubtful. The Lender
may charge on its own behalf and pay to others, sums for costs and expenses
incurred including, without limitation, legal fees
and expenses on a solicitor and his own client scale and Receivers' and
accounting fees, in or in connection with seizing, collecting, realizing,
disposing, enforcing or otherwise dealing with the Collateral and in connection
with the protection and enforcement of the rights of the Lender hereunder
including, without limitation, in connection with advice with respect to any of
the foregoing. The amount of such sums shall be deemed advanced to the Grantor
by the Lender, shall become part of the Liabilities, shall bear interest at the
highest rate per annum charged by the Lender on the Liabilities or any part
thereof and shall be secured by this Security Agreement.
6.7. Retention of Collateral
Upon notice to the Grantor and subject to any obligation to dispose of any of
the Collateral, as provided in the PPSA, the Lender may elect to retain all or
any part of the Collateral in satisfaction of the Liabilities or any of them.
6.8. Pay Encumbrances
The Lender may pay any Encumbrance that may exist or be threatened against the
Collateral. In addition, the Lender may borrow money required for the
maintenance, preservation or protection of the Collateral or for the carrying on
of the business or undertaking of the Grantor and may grant further security
interests in the Collateral in priority to the security interest created hereby
as security for the money so borrowed. In every such case the amounts so paid or
borrowed together with costs, charges and expenses incurred in connection
therewith shall be deemed to have been advanced to the Grantor by the Lender,
shall become part of the Liabilities, shall bear interest at the highest rate
per annum charged by the Lender on the Liabilities or any part thereof and shall
be secured by this Security Agreement.
6.9. Application of Payments Against Liabilities
Any and all payments made in respect of the Liabilities from time to time and
moneys realized on the Collateral may be applied to such part or parts of the
Liabilities as the Lender may see fit. The Lender shall, at all times and from
time to time, have the right to change any appropriation as it may see fit. Any
insurance moneys received by the Lender pursuant to this Security Agreement may,
at the option of the Lender, be applied to rebuilding or repairing the
Collateral or be applied against the Liabilities in accordance with the
provisions of this Section.
6.10. Set-Off
The Liabilities will be paid by the Grantor without regard to any equities
between the Grantor and the Lender or any right of set-off or cross-claim. Any
indebtedness owing by the Lender to the Grantor may be set off and applied by
the Lender against the Liabilities at any time or from time to time either
before or after maturity, without demand upon or notice to anyone.
6.11. Deficiency
If the proceeds of the realization of the Collateral are insufficient to repay
the Lender all moneys due to it, the Grantor shall forthwith pay or cause to be
paid to the Lender such deficiency.
6.12. Lender Not Liable
The Lender shall not be liable or accountable for any failure to seize, collect,
realize, dispose of, enforce or otherwise deal with the Collateral, shall not be
bound to institute proceedings for any such purposes or for the purpose of
preserving any rights of the Lender, the Grantor or any other person, firm or
corporation in respect of the Collateral and shall not be liable or responsible
for any loss, cost or damage whatsoever which may arise in respect of any such
failure including, without limitation, resulting from the negligence of the
Lender or any of its officers, servants, agents, solicitors, attorneys,
Receivers or otherwise. Neither the Lender nor its officers, servants, agents or
Receivers shall be liable by reason of any entry into possession of the
Collateral or any part thereof, to account as a mortgagee in possession, for
anything except actual receipts, for any loss on realization, for any act or
omission for which a mortgagee in possession might be liable, for any negligence
in the carrying on or occupation of the business or undertaking of the Grantor
as provided in Section 6.5 or for any loss, cost, damage or expense whatsoever
which may arise in respect of any such actions, omissions or negligence.
6.13. Extensions of Time
The Lender may grant renewals, extensions of time and other indulgences, take
and give up securities, accept compositions, grant releases and discharges,
perfect or fail to perfect any securities, release any part of the Collateral to
third parties and otherwise deal or fail to deal with the Grantor, debtors of
the Grantor, Guarantors, sureties and others and with the Collateral and other
securities as the Lender may see fit, all without prejudice to the liability of
the Grantor to the Lender or the Lenders rights and powers under this Security
Agreement.
6.14. Rights in Addition
The rights and powers conferred by this Section 6 are in supplement of and in
addition to and not in substitution for any other rights or powers the Lender
may have from time to time under this Security Agreement or under applicable
law. The Lender may proceed by way of any action, suit, remedy or other
proceeding at law or in equity and no such remedy for the enforcement of the
rights of the Lender shall be exclusive of or dependent on any other such
remedy. Any one or more of such remedies may from time to time be exercised
separately or in combination.
SECTION 7 - DEALING WITH COLLATERAL BY THE GRANTOR
7.1. Sale of Inventory
Prior to the occurrence of a Default, the Grantor may, in the ordinary course of
its business and on customary trade terms, lease or sell items of inventory, so
that the purchaser thereof takes title clear of the security interest hereby
created. If such sale or lease results in an Account, such Account shall be
subject to the security interest hereby created.
SECTION 8 - GENERAL
8.1. Security in Addition
The security hereby constituted is not in substitution for any other security
for the Liabilities or for any other agreement between the parties creating a
security interest in all or part of the Collateral, whether heretofore or
hereafter made, and such security and such agreements shall be deemed to be
continued and not affected hereby unless expressly provided to the contrary in
writing and signed by the Lender and the Grantor. The taking of any action or
proceedings or refraining from so doing, or any other dealing with any other
security for the Liabilities or any part thereof, shall not release or affect
the security interest created by this Security Agreement and the taking of the
security interest hereby created or any proceedings hereunder for the
realization of the security interest hereby created shall not release or affect
any other security held by the Lender for the repayment of or performance of the
Liabilities.
8.2. Waiver
Any waiver of a breach by the Grantor of any of the terms or provisions of this
Security Agreement or of a Default under Section 5.1 must be in writing to be
effective against and bind the Lender. No such waiver by the Lender shall extend
to or be taken in any manner to affect any subsequent breach or Default or the
rights of the Lender arising therefrom.
8.3. Further Assurances
The Grantor shall at all times do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged or delivered all and singular every such further
acts, deeds, conveyances, instruments, transfers, assignments, security
agreements and assurances as the Lender may reasonably require in order to give
effect to the provisions and purposes of this Security Agreement including,
without limitation, in respect of the Lender's enforcement of the security and
its realization on the Collateral, and for the better granting, transferring,
assigning, charging, setting over, assuring, confirming and/or perfecting the
security interest of the Lender in the Collateral pursuant to this Security
Agreement. The Grantor hereby constitutes and appoints the Manager or acting
Manager of the Lender at its above address, or any Receiver appointed by the
Court or the Lender as provided herein, the true and lawful attorney of the
Grantor irrevocably with full power of substitution to do, make and execute all
such assignments, documents, acts, matters or things with the right to use the
name of the Grantor whenever and wherever it may be deemed necessary or
expedient. The Grantor hereby authorizes the Lender to file such proofs of claim
and other documents as may be necessary or advisable in order to prove its claim
in any bankruptcy, proposed winding-up or other proceeding relating to the
Grantor.
Without limiting the generality of the foregoing, the Grantor:
(a) shall ▇▇▇▇ conspicuously each chattel paper evidencing or relating to
an Account and each related contract and, at the request of the
Lender, each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Lender, indicating
that such chattel paper, related contract or Collateral is subject to
the security interests granted hereby;
(b) shall, if any Accounts shall be evidenced by a promissory note or
other instrument or chattel paper, deliver and pledge to the Lender
hereunder such note, instrument or chattel paper duly endorsed and
accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Lender;
(c) shall execute and file such financing or renewal statements, or
amendments, thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Lender may request, in order to
perfect and preserve the security interests granted or purported to be
granted hereby;
(d) hereby authorizes the Lender to file one or more financing or renewal
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of the Grantor, where permitted by
law; and
(e) shall furnish to the Lender from time to time statements and schedules
further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Lender may request,
all in reasonable detail.
8.4. No Merger
Neither the taking of any judgment nor the exercise of any power of seizure or
sale shall operate to extinguish the liability of the Grantor to make payment of
or satisfy the Liabilities. The acceptance of any payment or alternate security
shall not constitute or create any novation and the taking of a judgment or
judgments under any of the covenants herein contained shall not operate as a
merger of such covenants.
8.5. Notices
Subject to Section 8.7 hereof, any notice required to be given to the Grantor or
the Lender may be delivered to such party or a responsible officer thereof or
may be sent by prepaid registered mail addressed to the appropriate party at the
address above shown, or such further or other address as such party may notify
to the other in writing from time to time, and if so given the notice shall be
deemed to have been given on the day of delivery or the day when it is deemed or
otherwise considered to have been received for the purposes of the PPSA, as the
case may be.
8.6. Continuing Security Interest and Discharge
This Security Agreement shall create a continuing security interest in the
Collateral and shall remain in full force and effect until payment and
performance in full of the Liabilities, notwithstanding any dealing between the
Lender and the Grantor or any Guarantor in respect of the Liabilities or any
release, exchange, non-perfection, amendment, waiver, consent or departure from
or in respect of any or all of the terms or provision of any security held for
the Liabilities.
If the Grantor pays to the Lender and fully discharges the Liabilities secured
by this Security Agreement and otherwise observes and performs the terms and
conditions hereof, then the Lender shall at the request and at the expense of
the Grantor release and discharge the security
interest created hereby and execute and deliver to the Grantor such deeds and
other instruments as shall be requisite therefor.
8.7. Governing Law and Waiver
The provisions of this Security Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Alberta and the federal laws of
Canada applicable therein, without reference to applicable conflict of law
principles. Grantor consents to the non-exclusive jurisdiction of the courts of
the Province of Alberta in connection with the resolution of any disputes
relating to this Security Agreement or any other Agreement or document executed
or delivered hereunder. Grantor irrevocably waives any objection, including any
objection to the laying of venue based on the grounds of forum non conveniens,
which it may now or hereafter have to the bringing of any action or proceeding
with respect to this Agreement.
Grantor hereby waives personal service of any and all process upon it and
consents tat all such service of process may be made by registered mail (return
receipt requested) directed to the Grantor and service so made shall be deemed
to be completed five (5) days after the same shall have been mailed. Nothing
contained herein shall affect the right of lender to serve legal process by any
other manner permitted by law.
The parties hereto hereby waive trial by jury (if applicable) in any action,
proceeding, claim or counterclaim, whether in contract or tort, at law or in
equity with respect to, in connection with, or arising out of this Security
Agreement, other financing agreements, the obligations of Grantor and Grantor,
the collateral, or any instrument, document or guarantee delivered pursuant
hereto or to any of the foregoing, or the validity, protection, interpretation,
administration, collection or enforcement hereof or thereof, or any other claim
or dispute hereunder or thereunder. Grantor agrees that it will not assert
against lender any claim for consequential, incidental, special, or punitive
damages in connection with this Security Agreement or the transactions
contemplated hereby or thereby. No officer of lender has authority to waive,
condition, or modify this provision.
8.8. Security Interest Effective Immediately
Neither the execution nor registration of this Security Agreement nor any
partial advances by the Lender shall bind the Lender to advance any other
amounts to the Grantor. The parties intend the security interest created hereby
to attach and take effect forthwith upon execution of this Security Agreement by
the Grantor and the Grantor acknowledges that value has been given and that the
Grantor has rights in the Collateral.
8.9. No Collateral Warranties
There is no representation, warranty or collateral agreement affecting this
Security Agreement or the Collateral, other than as expressed herein in writing.
8.10. Joint and Several Liability
If more than one person executes this Security Agreement as Grantor, their
obligations under this Security Agreement shall be joint and several.
8.11. Provisions Reasonable
The Grantor expressly acknowledges and agrees that the provisions of this
Security Agreement and, in particular, those respecting remedies and powers of
the Lender against the Grantor, its business and the Collateral upon default,
are commercially reasonable and not manifestly unreasonable.
8.12. Number and Gender
In this Security Agreement, words importing the singular number include the
plural and vice-versa and words importing gender include all genders.
8.13. Invalidity
In the event that any term or provision of this Security Agreement shall, to any
extent, be invalid or unenforceable, the remaining terms and provisions of this
Security Agreement shall be unaffected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
8.14. Indemnity and Expenses
(a) The Grantor agrees to indemnify and save harmless the Lender from and
against any and all claims, losses and liabilities rising out of or
resulting out of or resulting from this Security Agreement (including,
without limitation, enforcement of this Security Agreement), except
claims, losses or liabilities resulting from the Lender's gross
negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Lender the amount of any and
all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the
Lender may incur in connection with (i) the administration of this
Security Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights
or remedies of the Lender hereunder or (iv) the failure by the Grantor
to perform or observe any of the provisions hereunder.
8.15. Judgment Currency
If for the purpose of obtaining judgment in any court or for the purpose of
determining, pursuant to the obligations of the undersigned, the amounts owing
hereunder, it is necessary to convert an amount due hereunder in the currency in
which it is due (the "Original Currency") into another currency (the "Second
Currency"), the rate of exchange applied shall be that at which, in accordance
with normal banking procedures, the Lender could purchase, in The New York
Foreign Exchange Market, the Original Currency with the Second Currency on the
date two (2) Business Days preceding that on which judgment is given or any
other payment is due hereunder. The undersigned and each of them agrees that its
obligation in respect of any Original Currency due from it to the Lender
hereunder shall, notwithstanding any judgment or payment in such other currency,
be discharged only to the extent that, on the Business Day following the date
the Lender receives payment of any sum so adjudged or owing to be due hereunder
in the
Second Currency the Lender may, in accordance with normal banking procedures,
purchase, in The New York Foreign Exchange Market the Original Currency with the
amount of the Second Currency so paid; and if the amount of the Original
Currency so purchased or could have been so purchased is less than the amount
originally due in the Original Currency, the undersigned and each of them agrees
as a separate obligation and notwithstanding any such payment or judgment to
indemnify the Lender against such loss. The term "rate of exchange" in this
Section 8.15 means the spot rate at which the Lender, in accordance with normal
practices is able on the relevant date to purchase the Original Currency with
the Second Currency and includes any premium and costs of exchange payable in
connection with such purchase.
8.16. Sections and Headings
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 hereof.
8.17. Receipt of Copy
The Grantor acknowledges receipt of an executed copy of this Security Agreement.
8.18. Binding Effect
All rights of the Lender hereunder shall enure to the benefit of its successors
and assigns and all obligations of the Grantor hereunder shall bind the Grantor
and its successors and permitted assigns.
IN WITNESS WHEREOF the Grantor has duly executed this Security Agreement
under seal this ____ day of March, 2004.
ADDISON YORK INSURANCE BROKERS LTD.
a Delaware corporation
By: /s/ Primo Podorieszach
--------------------------------
Name: Primo Podorieszach
Title: CEO
OAK STREET FUNDING LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
Schedule "A"
LOCATIONS
Schedule "B"
ENCUMBRANCES
Schedule "C"
LITIGATION
Schedule "D"
INDEBTEDNESS
Schedule "E"
SUBSIDIARIES
EXHIBIT E
SECURITIES PLEDGE AGREEMENT
TO: OAK STREET FUNDING LLC ("Oak Street")
WHEREAS pursuant to a Continuing Guaranty and a General Security Agreement
(as the same may be amended, supplemented, revised, restated or varied from time
to time, collectively the "Agreement"), made by ▇▇▇▇▇▇▇ ▇▇▇▇▇ International
Insurance Brokers Ltd. (the "Guarantor") in favor of Oak Street, Oak Street has
agreed to make certain loan facilities available to Addison York Insurance
Brokers Ltd, a subsidiary of the Guarantor.
AND WHEREAS pursuant to the Agreement the Guarantor has agreed to execute
and deliver this Securities Pledge Agreement to and in favor of Oak Street as
security for the payment and performance of the Guarantor's obligations (the
"Obligations") to Oak Street under the Agreement.
NOW THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Guarantor, the Guarantor hereby covenants to and for the
benefit of Oak Street as follows:
ARTICLE I
INTERPRETATION
1.1 Defined Terms. In this agreement or any amendment to this agreement,
capitalized terms used herein and not otherwise defined shall have the
meanings ascribed thereto in the Agreement.
1.2 Other Usages. References to "this agreement", "the agreement", "hereof',
"herein", and like references refer to this Securities Pledge Agreement, as
the same may be amended, supplemented, revised, restated or replaced from
time to time, and not to any particular Article, section or other
subdivision of this agreement.
1.3 Plural and Similar. Where the context so requires, words importing the
singular number shall include the plural and vice versa.
1.4 Headings. The insertion of headings in this agreement is for convenience of
reference only and shall not affect the construction or interpretation of
this agreement.
1.5 Time of the Essence. Time shall in all aspects be of the essence of this
agreement, and no extension or variation of this agreement or any
obligation hereunder shall operate as a waiver of this provision.
ARTICLE II
SECURITY
2.1 Pledge of Securities. The Guarantor hereby pledges, hypothecates, assigns,
mortgages, charges, transfers, and grants a security interest in, to and in
favor of Oak Street, the securities described in the attached Schedule "A"
and deposits with Oak Street any and
all security certificates evidencing such securities as may be accompanied
in each case by a duly executed power of attorney (collectively, together
with all dividends, monies, rights and claims hereinafter referred to and
the securities referred to in Section 2.2, the "Securities"), any cash
dividends or other monies now or hereafter received or declared in respect
of the Securities and all other rights and claims of the Guarantor in
respect of the Securities.
2.2 Substitutions, Additions and Proceeds. The Securities shall include any
substitutions, additions or proceeds arising out of any consolidation,
subdivision, reclassification, stock dividend or similar increase or
decrease in, or alteration to, the capital of the issuer of the Securities
(the "Issuer")
2.3 Obligations Secured. The pledges, hypothecations, assignments, mortgages,
charges, and security interests granted hereby (the "Security Interest")
secure the payment and performance of all debts, liabilities and
obligations present or future, direct or indirect, absolute or contingent,
matured or unmatured, at any time due or accruing due, owing by the
Guarantor to Oak Street, however or wherever incurred, and in any currency,
and whether incurred by the Guarantor alone or with another or others and
whether as principal or surety of the Guarantor to Oak Street pursuant to
or in connection with the Agreement and the Guarantor's Obligations.
2.4 Expenses. All expenses, costs and charges incurred by or on behalf of Oak
Street in connection with this Securities Pledge Agreement, the Security
Interest or the realization of the Securities including all legal fees,
court costs, receiver's or agent's remuneration and other expenses relating
to the taking or defending any action in connection with such realization,
the taking possession of, repairing, protecting, insuring, preparing for
disposition, realizing, collecting, selling, transferring, delivering or
obtaining payment of the Securities or other lawful exercises of the powers
conferred by the Agreement shall be added to and form a part of the
Obligations.
2.5 Attachment.
(a) The Guarantor acknowledges that (i) value has been given, (ii) it has
rights in the Securities, (iii) it has not agreed to postpone the time of
attachment of the Security Interest, and (iv) it has received a duplicate
original copy of this Securities Pledge Agreement.
(b) If the Securities are now or at any time hereafter become evidenced in
whole or in part, by uncertificated securities registered or recorded in
records maintained by or on behalf of the Issuer in the name of a clearing
agency the Guarantor shall, at the request of Oak Street, cause the
Security Interest to be entered in the records of such clearing agency.
(c) At the election of Oak Street and immediately upon written notice being
provided by Oak Street to the Guarantor, the Guarantor shall cause the
Securities to be transferred into and registered in the name of Oak Street
or as Oak Street may direct and the Guarantor covenants that, at the time
of any such transfer, it will provide all required consents and approvals.
2
2.6 Care and Custody of Securities. Oak Street need not see to the collection
of dividends on, or exercise any option or right in connection with, the
Securities and need not protect or preserve them from depreciating in value
or becoming worthless and is released from all responsibility for any loss
of value. Oak Street is limited to exercising with regard to the Securities
the same degree of care which Oak Street gives to its valuable property of
the same value and kind.
2.7 Representation. The Guarantor represents and warrants to Oak Street that
(i) it is the registered, legal and beneficial owner of the Securities,
(ii) the Securities are free and clear of all liens, mortgages, charges and
security interests whatsoever other than those created in favor of Oak
Street and Permitted Encumbrances, (iii) the Securities have been issued
and are fully paid and non-assessable and (iv) the information contained in
Schedule "A" is true and accurate in all respects.
2.8 Rights of the Guarantor.
(a) So long as no Default or Unmatured Default has occurred and is continuing,
(i) the Guarantor shall be entitled to vote the Securities and to receive
all cash dividends and (ii) Oak Street will grant, or cause its nominee to
grant to the Guarantor or its nominee a proxy to vote and to exercise all
rights with respect to any Securities registered in the name of Oak Street.
Upon the occurrence and during the continuance of a Default, all rights of
the Guarantor to vote or to receive dividends shall cease and all such
rights shall become vested solely and absolutely in Oak Street.
(b) Any dividends received by the Guarantor contrary to Section 2.8(a) or any
other monies or property which may be received by the Guarantor at any time
for, or in respect of, the Securities shall be received as trustee for Oak
Street and shall be immediately paid over to Oak Street.
ARTICLE III
ENFORCEMENT
3.1 Remedies. Upon the occurrence and during the continuance of a Default, Oak
Street may, at any time in its sole discretion, (i) realize upon or
otherwise dispose of or contract to dispose of the Securities by sale,
transfer or delivery, or (ii) exercise and enforce all rights and remedies
of a holder of the Securities as if Oak Street were their absolute owner
(including, if necessary, causing the Securities to be registered in the
name of Oak Street or its nominee), all without demand of performance or
other demand, advertisement or notice of any kind to or upon the Guarantor
or any third party (except as may be required by law). Any remedy may be
exercised separately or in combination and shall be in addition to, and not
in substitution for, any other rights Oak Street may have, however created.
Oak Street shall not be bound to exercise any right or remedy, and the
exercise of rights and remedies shall be without prejudice to the rights of
Oak Street in respect of the Obligations including the right to claim for
any deficiency.
3.2 Standards of Sale. Without prejudice to the ability of Oak Street to
dispose of the Securities in any manner which is commercially reasonable,
the Guarantor acknowledges
3
that a disposition of Securities by Oak Street which takes place
substantially in accordance with the following provisions shall be deemed
to be commercially reasonable:
(a) Securities may be disposed of in whole or in part;
(b) Securities may be disposed of by public auction, public tender or private
contract, with or without advertising and without any other formality;
(c) any assignee of such Securities may be Oak Street;
(d) any sale conducted by Oak Street shall be at such time and place, on such
notice and in accordance with such procedures as Oak Street, in its sole
discretion, may deem advantageous;
(e) Securities may be disposed of in any manner and on any terms necessary to
avoid violation of applicable law (including, without limitation,
compliance with such procedures as may restrict the number of prospective
bidders and purchasers, require that the prospective bidders and purchasers
have certain qualifications, and restrict the prospective bidders and
purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the
distribution or resale of the Securities) or in order to obtain any
required approval of the disposition (or of the resulting purchase) by any
governmental or regulatory authority or official;
(f) a disposition of Securities may be on such terms and conditions as to
credit or otherwise as Oak Street, in its sole discretion, may deem
advantageous; and
(g) Oak Street may establish an upset or reserve bid or price in respect of the
Securities.
3.3 Dealing with the Securities.
(a) Oak Street shall not be obliged to exhaust its recourse against the
Guarantor or any other person or against any other security it may hold in
respect of the Obligations before realizing upon or otherwise dealing with
the Securities in such manner as Oak Street may consider desirable.
(b) Oak Street may grant extensions or other indulgences, take and give up
security, accept compositions, grant releases and discharges and otherwise
deal with the Guarantor and with other persons, sureties or security as it
may see fit without prejudice to the Obligations, the liability of the
Guarantor or the rights of Oak Street in respect of the Securities.
(c) Oak Street shall not be (i) liable or accountable for any failure to
collect, realize or obtain payment in respect of the Securities, (ii) bound
to institute proceedings for the purpose of collecting, enforcing,
realizing or obtaining payment of the Securities or for the purpose of
preserving any rights of any persons, (iii) responsible for any loss
occasioned by any sale or other dealing with the Securities or by the
retention of or failure to sell or
4
otherwise deal with the Securities, or (iv) bound to protect the Securities
from depreciating in value or becoming worthless.
3.4 Appointment of Attorney. The Guarantor irrevocably appoints Oak Street (and
any of its officers) as attorney of the Guarantor (with full power of
substitution) to do, make and execute in the name of and on behalf of the
Guarantor upon Oak Street exercising its rights and remedies under the
Agreement all such further acts, documents, matters and things which Oak
Street may deem necessary or advisable to accomplish the purposes of this
Securities Pledge Agreement including the execution, endorsement and
delivery and transfer of the Securities to Oak Street or its nominees or
transferees. Oak Street or its nominees and transferees are empowered to
exercise all rights and powers and to perform all acts of ownership with
respect to the Securities to the same extent as the Guarantor might do. The
powers of attorney herein granted is an addition to, and not in
substitution for any stock power of attorney delivered by the Guarantor and
such power of attorney may be relied upon by Oak Street severally or in
combination. All acts of the attorney are hereby ratified and approved, and
the attorney shall not be liable for any act, failure to act or any other
matter or thing in connection therewith, except to the extent caused by its
own gross negligence or willful misconduct.
3.5 Dealings by Third Parties. No person dealing with Oak Street or an agent or
receiver shall be required to determine (i) whether the Security Interest
has become enforceable, (ii) whether the powers which such person is
purporting to exercise have become exercisable, (iii) whether any money
remains due to Oak Street by the Guarantor, (iv) the necessity or
expediency of the stipulations and conditions subject to which any sale or
lease shall be made, (v) the propriety or regularity of any sale or other
dealing by Oak Street with the Securities, or (vi) how any money paid to
Oak Street has been applied.
(a) Any purchaser of Securities from Oak Street shall hold the Securities
absolutely, free from any claim or right of whatever kind, including any
equity of redemption, of the Guarantor, which it specifically waives (to
the fullest extent permitted by law) as against any such purchaser, all
rights of redemption, stay or appraisal which the Guarantor has or may have
under any rule of law or statute now existing or hereafter adopted.
ARTICLE IV
GENERAL
4.1 Notices. Any notices and other communications provided for in this
Securities Pledge Agreement shall be given in accordance with the
provisions of the Agreement.
4.2 No Merger. This Securities Pledge Agreement shall not operate by way of
merger of any of the Obligations and no judgment recovered by Oak Street
shall operate by way of merger of, or in any way affect, the Security
Interest.
4.3 Further Assurances. The Guarantor shall from time to time, whether before
or after the occurrence of a Default, do all acts and things and execute
and deliver all transfers, assignments and instruments as Oak Street may
reasonably require for (i) protecting the Securities, (ii) perfecting the
Security Interest, and (iii) exercising all powers, authorities
5
and discretions hereby conferred upon Oak Street. The Guarantor shall, from
time to time, upon the occurrence and during the continuance of a Default,
do all acts and things and execute and deliver all transfers, assignments
and instruments as Oak Street may require for facilitating the sale or
other disposition of the Securities in connection with their realization.
4.4 Supplemental Security. This Securities Pledge Agreement is in addition to
and without prejudice to all other security now held or which may hereafter
be held by Oak Street in respect of the Obligations.
4.5 Successors and Assigns. This Securities Pledge Agreement shall be binding
upon the Guarantor, its successors and assigns, and shall enure to the
benefit of Oak Street and its successors and assigns. All rights of Oak
Street shall be assignable and in any action brought by an assignee to
enforce any right, the Guarantor shall not assert against the assignee any
claim or defense which the Guarantor now has or hereafter may have against
Oak Street.
4.6 Severability. If any provision of this Securities Pledge Agreement shall be
deemed by any court of competent jurisdiction to be invalid or void, the
remaining provisions shall continue in full force and effect.
4.7 Paramountcy. In the event any provisions of this agreement contradict or
are otherwise incapable of being construed in conjunction with the
provisions of the Agreement, the provisions of the Agreement shall take
precedence over those contained in this agreement and in particular, if any
act of the Guarantor is expressly permitted under the Agreement but is
prohibited hereunder, any such act shall be deemed to be permitted under
this agreement.
4.8 Governing Law. This Securities Pledge Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the Province of
Alberta and the federal laws of Canada applicable therein. The Guarantor
consents to the non-exclusive jurisdiction of the courts of the Province of
Alberta in connection with the resolution of any disputes relating to this
Security Pledge Agreement or any other Agreement or document executed or
delivered hereunder. The Guarantor irrevocably waives any objection,
including any objection to the laying of venue based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of
any action or proceeding with respect to this Securities Pledge Agreement.
6
IN WITNESS WHEREOF the Guarantor has caused this Securities Pledge
Agreement to be executed by its duly authorized officers on this 19 day of
March, 2004.
ADDISON YORK INSURANCE BROKERS LTD.
a Delaware corporation
By: /s/ Primo Podorieszach
--------------------------------
Name: Primo Podorieszach
Title: CEO
7
SCHEDULE "A"
SECURITIES
Number of
Issuer Class of Securities Securities Certificate Number
8
EXHIBIT F
SUBSIDIARY SECURITY AGREEMENT
EXHIBIT G
CONTINGENT GUARANTY
EXHIBIT H
CHARGE-OFF POLICY
EXHIBIT I
PERMITTED ENCUMBRANCES
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT ("Security Agreement") is made as of the 19th
day of March, 2004, by ADDISON YORK INSURANCE BROKERS LTD., a Delaware
corporation having its chief executive offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇.,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ (Taxpayer I.D. No. ▇▇-▇▇▇▇▇▇▇) (the
"Borrower"), in favor of OAK STREET FUNDING LLC, having a notice address of
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Lender").
ARTICLE 1. DEFINITIONS
Section 1.1 Defined Terms. As used herein:
"Accounts", "Inventory", "Equipment", "Fixtures", "General Intangibles",
"Chattel Paper", "Documents", "Goods", "Deposit Accounts", "Instruments",
"Investment Property" and "Proceeds" shall mean all of Borrower's such property
within the meanings ascribed in the Indiana Uniform Commercial Code, as in
effect from time to time.
"Account Debtor" shall have the meaning ascribed in the Indiana Uniform
Commercial Code, as in effect from time to time.
"Collateral" shall mean all of the Borrower's property or rights in which a
security interest is granted hereunder.
"Collateral Account" shall mean the Deposit Account more fully described in
Section 4.5.
"Control" shall have the meaning ascribed in the Indiana Uniform Commercial
Code, as in effect from time to time.
"Credit Agreement" shall mean the Credit Agreement executed between the
Borrower and the Lender of even date, as amended and/or restated from time to
time.
"First Lien Collateral" means all Collateral except that Collateral which
Lender has agreed in an intercreditor agreement is subject to a first priority
Approved First Capital Lien.
"Intellectual Property" shall mean all intellectual property of the
Borrower, including, without limitation, (a) all patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice); (b) all trademarks, service marks, trade dress, trade
names, and corporate names and all the goodwill and quality control standards
associated therewith; (c) all registered and unregistered statutory and common
law copyrights; (d) all registrations, applications and renewals for any of the
foregoing; (e) all trade secrets, confidential information, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
improvements, proposals, technical and computer data, financial, business and
marketing plans, and customer and supplier lists and related information; (f)
all other proprietary rights (including, without limitation, all computer
software and documentation and all license agreements and sublicense agreements
to and from third parties relating to any of the foregoing); (g) all copies and
tangible embodiments of the foregoing in whatever form or medium; (h) all
damages and payments for past, present and future infringements of the
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foregoing; (i) all royalties and income due with respect to the foregoing; and
(j) the right to ▇▇▇ and recover for past, present and future infringements of
the foregoing.
"Liabilities" shall mean (a) all Obligations including all future advances;
(b) all other time to time obligations of the Borrower to the Lender of every
type and description, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and whether or not contemplated
by the Borrower or the Lender as of the date of this Security Agreement,
including, without limitation, any modification, extension, or addition to or of
the Obligations or the Credit Agreement and any overlying advances, out of
formula advances and overdrafts made or permitted in connection with the
Obligations or other Liabilities; and (c) any duty of the Borrower to act or to
refrain from acting in connection with any Liability.
"Lock Boxes" shall have the meaning set forth in Section 4.5(a).
"Lock Box Agreements" shall have the meaning set forth in Section 4.5(a).
"Obligations" shall have the meaning ascribed in the Credit Agreement.
"Schedule of Accounts" shall have the meaning ascribed in Section 4.3.
"Stock Rights" means any securities, dividends or other distributions and
any other right or property which the Borrower shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any securities or other ownership interests in a
corporation, partnership, joint venture or limited liability company
constituting Collateral and any securities, any right to receive securities and
any right to receive earnings, in which the Borrower now has or hereafter
acquires any right, issued by an issuer of such securities.
Section 1.2 Incorporation of Credit Agreement Definitions. Other
capitalized terms used herein and not specifically herein defined shall have the
meanings ascribed to them in the Credit Agreement.
Section 1.3 Terms Defined in the Indiana Uniform Commercial Code. Terms
defined in the Indiana Uniform Commercial Code which are not otherwise defined
in this Security Agreement are used herein as defined in the Indiana Uniform
Commercial Code, as in effect from time to time.
ARTICLE 2. SECURITY INTEREST IN COLLATERAL
As security for the payment and performance of the Liabilities, the Lender
shall have, and the Borrower does hereby grant to the Lender, a continuing
perfected security interest in the following Collateral:
(a) All Accounts, Deposit Accounts, General Intangibles, Documents,
Instruments, Investment Property, Chattel Paper and any other similar
rights of the Borrower however created or evidenced, whether now existing
or hereafter owned, acquired, created, used, or arising, specifically
including, without limitation, claims, leases, agreements, license
agreements, licensing fees, royalties, policies, insurance commissions,
credit insurance, guaranties, letters of credit, advices of credit, binders
or certificates of insurance, deposits, documents of title, securities,
security interests, licenses, goodwill, tax refunds (federal, state or
local), customer lists, franchises, franchise rights, drawings, designs,
marketing rights, computer programs, artwork,
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databases and other like business property rights, all applications to
acquire such rights, for which application may at any time be made by the
Borrower, together with any and all books and records pertaining thereto
and any right, title or interest in any Inventory which gave rise to an
Account, and all Intellectual Property throughout the world;
(b) All Inventory, whether now existing or hereafter acquired and
wherever located, specifically including, without limitation, all
merchandise, personal property, raw materials, work in process, finished
Goods, materials and supplies of every nature usable or useful in
connection with the manufacturing, packing, shipping, advertising, selling,
leasing or furnishing of any of such Inventory and all materials of the
Borrower used or consumed or to be used or consumed in the Borrower's
business, together with any and all books and records pertaining thereto;
(c) All Equipment, Fixtures, Goods and all other tangible personal
property of the Borrower of every kind or nature, whether now owned or
hereafter acquired, wherever located, specifically including, without
limitation, all machinery, trucks, boats, barges, on and off the road
vehicles, forklifts, tools, dies, jigs, presses, appliances, implements,
improvements, accessories, attachments, parts, components, partitions,
systems, carpeting, draperies and apparatus;
(d) All products and Proceeds of each of the foregoing, specifically
including, without limitation, (i) any and all Proceeds of any insurance,
indemnity, warranty or guaranty payable to the Borrower from time to time,
(ii) any and all payments of any form whatsoever made or due and payable to
the Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
foregoing by any governmental authority or any Person acting under color of
governmental authority, (iii) to the extent of the value of Collateral,
claims arising out of the loss, nonconformity, or interference with the use
of, defects or infringement of rights in, or damage to, the Collateral,
(iv) any Stock Rights, and (v) any and all other amounts from time to time
paid or payable under or in connection with any of the foregoing, whether
or not in lieu thereof;
(e) All renewals, extensions, replacements, modifications, additions,
improvements, accretions, accessions, betterments, substitutions,
replacements, annexations, tools, accessories, parts and the like now in,
attached to or which may hereafter at any time be placed in or added to any
Collateral, whether or not of like kind; and
(f) All rights, remedies, claims and demands under or in connection
with each of the foregoing.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into the Credit Agreement and to make each
and every loan and other financial accommodation thereunder, the Borrower
represents and warrants to the Lender that, except as may otherwise be provided
in the Credit Agreement:
Section 3.1 Names of Borrower. The exact corporate name of the Borrower
and its state of organization are each correctly stated in the preamble to this
Security Agreement. Set forth on Schedule 1 hereto is a true, accurate and
complete list of all previous legal names of the
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PAGE 3
Borrower and all past and present assumed (or fictitious) names and trade names
of the Borrower for the past six (6) years.
Section 3.2 Prior Combinations. Except as set forth on Schedule 1 hereto,
the Borrower has not ever been conducted as a partnership or proprietorship, no
entity has merged into the Borrower or has been consolidated with the Borrower,
and no entity has sold substantially all of its assets to the Borrower or sold
assets to the Borrower outside the ordinary course of such entity's business.
Section 3.3 Chief Executive Office, etc. The Borrower's chief executive
office and taxpayer identification number are set forth in the preamble to this
Security Agreement. Subject to Section 4.1 hereof, Borrower maintains all of its
records with respect to its Accounts at such address. Borrower has not at any
time within the past four (4) months maintained its chief executive office or
its records with respect to Accounts at any other location.
Section 3.4 Perfection Certificate. The Borrower has previously delivered
to Lender a certificate signed by the Borrower and entitled "Perfection
Certificate" (the "Perfection Certificate") in substantially the form attached
hereto as Appendix I. The Borrower represents and warrants to Lender as follows:
(a) the Borrower's exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof, (b) the Borrower is a resident of
the jurisdiction set forth in the Perfection Certificate, (c) the Perfection
Certificate accurately sets forth the Borrower's social security number, and (d)
all other information set forth on the Perfection Certificate pertaining to the
Borrower is accurate and complete.
Section 3.5 Title to Collateral. Except for Intellectual Property, which
is separately addressed in Section 3.7 below, all Collateral is lawfully owned
by the Borrower, free and clear of any prior security interest, pledge, sale,
assignment, transfer or other encumbrance other than Permitted Encumbrances; the
Borrower has the unencumbered right to pledge, sell, assign or transfer the
Collateral subject to the Permitted Encumbrances and to subject the Collateral
to the security interest in favor of the Lender herein; except in respect of
Permitted Encumbrances, no financing statement covering all or any portion of
the Collateral is on file in any public office other than in favor of the
Lender; and the security interest herein constitutes a legal and valid, first
priority security interest in the Collateral.
Section 3.6 Representations Regarding Accounts. To the best of Borrower's
knowledge and except for Permitted Encumbrances, each Account (a) is a valid
Account representing an undisputed, bona fide right to payment from the Account
Debtor named therein for Goods sold or leased, Intellectual Property licensed,
or for services rendered, whether or not such right to payment has been earned
by performance; (b) is free and clear of any agreement wherein the Account
Debtor may claim a deduction or discount; and (c) is free and clear of all
set-offs or counterclaims.
Section 3.7 Representations Regarding Intellectual Property. Schedule 2
hereto contains a complete and accurate list as of the date hereof of all
patented and registered Intellectual Property owned by the Borrower and of all
pending applications for the registration of other Intellectual Property owned
or filed by the Borrower. Schedule 2 also contains a complete and accurate list
of all licenses and other rights granted by the Borrower to any third party with
respect to the Intellectual Property and licenses and other rights granted by
any third party to the Borrower that are necessary for the Borrower's business.
Except for Permitted Encumbrances and except as may be set forth in Schedule 2
(a) the Borrower owns and possesses
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all right, title and interest in and to, or has a valid and enforceable license
to use, all of the Intellectual Property necessary for the operation of the
Borrower's business as presently conducted or proposed to be conducted; (b) no
claim by any third party contesting the validity, enforceability, use or
ownership of any Intellectual Property has been made, is currently outstanding
or, to the Borrower's knowledge, is threatened, and, to the Borrower's
knowledge, there are no grounds for any such claim; (c) the Borrower has not
received any notice of, nor is the Borrower aware of any facts which indicate
the likelihood of, any material infringement or misappropriation by, or conflict
with, any third party with respect to any Intellectual Property, nor has the
Borrower received any claim of infringement or misappropriation of, or other
conflict with, any intellectual property rights of any third party; (d) the
Borrower has not materially infringed, misappropriated or otherwise conflicted
with any intellectual property rights of any third party, nor is Borrower aware
of any material infringement, misappropriation or conflict which will occur as a
result of the continued operation of the business of the Borrower as presently
conducted or proposed to be conducted; and (e) the Borrower has made or will
timely make all necessary filings and recordations (except user filings) and has
paid or will pay all required fees and taxes to record and maintain its
ownership in its Intellectual Property throughout the world to the extent
necessary to conduct Borrower's business as currently being conducted or
proposed to be conducted.
Section 3.8 Representations Regarding Contracts and Leases. All material
leases of real or personal property and all material contracts to which the
Borrower is a party are in full force and effect. To the best of Borrower's
knowledge, no Person is challenging or disputing the validity or enforceability
of any such leases or contracts, and the Borrower is not in material default
under any such leases or contracts. Section 3.9 Representations Regarding
Equipment and Inventory. Schedule 3 is a true and correct list of all locations
where Equipment and Inventory of the Borrower is located (except Inventory in
transit) and all locations where Equipment and Inventory of the Borrower has
been located in the four (4) months immediately preceding the date of this
Agreement.
Section 3.10 Representations Regarding Investment Property. The Borrower is
the direct and beneficial owner of each type of Investment Property listed on
Schedule 4 hereto as being owned by it, free and clear of any liens,
encumbrances or security interests except for the security interest granted to
the Lender. The Borrower further represents and warrants that (i) all such
Investment Property which are shares of stock in a corporation or ownership
interests in a partnership or limited liability company have been (to the extent
such concepts are relevant with respect to such Investment Property) duly and
validly issued, are fully paid and non-assessable, (ii) this pledge of such
Investment Property will not violate the proscriptions or require the consent,
license, filing, report, permit, exemption, regulation or approval, of any
Governmental Authority or other Person or violate any provision of law, (iii)
such ownership of pledged Investment Property represent One Hundred Percent
(100%) of the issued and outstanding ownership of the Borrower's Subsidiaries,
(iv) such Investment Property has not been materially altered and all signatures
thereon are genuine, (v) there exists no default by an issuer under any of such
Investment Property with respect thereto, (vi) no insolvency proceedings have
been instituted with respect to the issuer of such Investment Property (vii)
other than those in favor of the Lender, the Borrower has executed no instrument
of any kind assigning any of such Investment Property or the liability of any
issuer thereon, or with respect thereto, which remains in effect, (viii) none of
the issuers of such Investment Property have any obligation,
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commitment, subscription, option, warrant or other rights outstanding entitling
the holder thereof to purchase or otherwise acquire any capital stock of such
issuer, and (ix) with respect to any certificates delivered to the Lender
representing an ownership interest in a partnership or limited liability
company, either such certificates are Securities as defined in Article 8 or 8.1
(as applicable) of the Uniform Commercial Code of the applicable jurisdiction as
a result of actions by the issuer or otherwise, or, if such certificates are not
Securities, the Borrower has so informed the Lender so that the Lender may take
steps to perfect its security interest therein as a General Intangible.
ARTICLE 4. AGREEMENTS CONCERNING ACCOUNTS
Section 4.1 Location. The Borrower will give the Lender written notice of
each office of the Borrower at which records of the Borrower relative to
Accounts are kept. Except where such notice is given, all records of the
Borrower relative to Accounts are and will be kept at the chief executive office
of the Borrower.
Section 4.2 Returns and Repossessions. Prior to the occurrence of a Default
or Unmatured Default, the Borrower may grant, in the ordinary course of
business, to any Account Debtor, any rebate, refund or adjustment to which such
Account Debtor may be lawfully entitled and may accept, in connection therewith,
the return of Goods, the sale or lease of which shall have given rise to the
obligation of the Account Debtor, subject, however, to the Lender's security
interest therein and in any Proceeds arising from the disposition thereof. After
the occurrence of a Default or an Unmatured Default, no discount, credit or
allowance shall be granted by the Borrower to any Account Debtor, and no return
of Goods shall be accepted by the Borrower without the Lender's prior written
consent.
Section 4.3 Schedule of Accounts. Upon reasonable request by the Lender the
Borrower will, from time to time, deliver to the Lender a schedule identifying
each Account ("Schedule of Accounts"), together with such schedules and
certificates and reports relative to all or any of the Collateral and the items
or amounts received by the Borrower in full or partial payment or otherwise, as
Proceeds of any of the Collateral. Each Schedule of Accounts or other schedule,
certificate or report shall be executed by its duly authorized officer and shall
be in the form specified by the Lender; provided, however, that each Schedule of
Accounts may omit any information that would cause the Borrower to violate
applicable privacy or other laws. The Borrower shall take reasonable steps,
including, but not limited to, the negotiation and execution of confidentiality
agreements, in regard to each Schedule of Accounts necessary to allow the
Borrower to disclose as much information as possible in said Schedule of
Accounts without violating any applicable privacy or other law. Any Schedule of
Accounts identifying any Account shall be accompanied, if the Lender requests,
(a) by a true and correct copy of the contract or invoice evidencing such
Account, (b) by evidence of shipment, delivery or performance, and (c) if such
request shall be made after the occurrence of a Default or an Unmatured Default,
by a duly executed assignment of such Account from the Borrower to the Lender;
provided, however, that the Borrower's failure to execute and deliver any such
Schedule of Account and/or assignment shall not affect or limit the Lender's
security interest or other rights in and to Accounts, and provided, further,
that a proper assignment of any Account wherein the United States Government is
the Account Debtor may be requested by the Lender at any time whether or not
there shall have occurred a Default or Unmatured Default.
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Section 4.4 Verification of Accounts. The Lender, its officers, agents,
attorneys, and accountants, may verify Accounts and returned and repossessed
Goods and, under reasonable procedures, directly with the Account Debtor or by
other methods, and the Borrower shall furnish to the Lender upon request
additional Schedules of Accounts, together with all notes or other papers
evidencing the same and any guaranty, securities or other information relating
thereto, and shall do, make and deliver all such additional and further acts,
things, deeds, assurances and instruments as the Lender may reasonably require.
Section 4.5 Collection and Application of Collateral Proceeds; Deposit
Accounts.
(a) Collection of Accounts.
(1) The Borrower will (i) cause each bank or other financial
institution in which it maintains (a) a Deposit Account, including
each Deposit Account maintained by the Borrower into which all cash,
checks, or other similar payments relating to or constituting payments
made in respect of Accounts will be deposited (a "Collateral Deposit
Account"), to enter into a control agreement with the Lender, in form
and substance satisfactory to the Lender in order to give the Lender
Control of the Deposit Account or (b) other deposits (general or
special, time or demand, provisional or final) to be notified of the
security interest granted to the Lender hereunder and cause each such
bank or other financial institution to acknowledge such notification
in writing, and (ii) upon the Lender's request after the occurrence
and during the continuance of a Default, deliver to each such bank or
other financial institution a letter, in form and substance acceptable
to the Lender, transferring ownership of the Deposit Account to the
Lender or transferring dominion and control over each such other
deposit to the Lender until such time as no Default exists.
Notwithstanding the foregoing, no control agreement shall be required
for Deposit Accounts specifically identified in an intercreditor
agreement executed by the Lender as being subject to an Approved First
Capital Lien.
(2) Upon the occurrence of a Default or Unmatured Default,
establish lock box service (the "Lock Boxes") with the bank(s) set
forth in Appendix I hereto, which lock boxes shall be subject to
irrevocable lockbox agreements in the form provided by or otherwise
acceptable to the Lender and shall be accompanied by an acknowledgment
by the bank where the Lock Box is located of the Lien of the Lender
granted hereunder and of irrevocable instructions to wire all amounts
collected therein to the Collection Account (as hereinafter defined)
(a "Lock Box Agreement"). Upon the occurrence of a Default or
Unmatured Default, (a) the Borrower shall direct all of its Account
Debtors of Accounts which constitute First Lien Collateral to forward
payments directly to Lock Boxes subject to Lock Box Agreements, (b)
the Lender shall have sole access to the Lock Boxes at all times and
the Borrower shall take all actions necessary to grant the Lender such
sole access, (c) at no time shall the Borrower remove any item from
the Lock Box or from a Collateral Deposit Account without the Lender's
prior written consent, (d) if the Borrower should refuse or neglect to
notify any Account Debtor to forward payments directly to a Lock Box
subject to a Lock Box Agreement after notice from the Lender, the
Lender shall be entitled to make such notification
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directly to Account Debtor, (e) if notwithstanding the foregoing
instructions, the Borrower receives any proceeds of any Accounts
constituting First Lien Collateral, the Borrower shall receive such
payments as the Lender's trustee, and shall immediately deposit all
cash, checks or other similar payments related to or constituting
payments made in respect of such Accounts received by it to a
Collateral Deposit Account, (f) all funds deposited into any Lock Box
subject to a Lock Box Agreement or a Collateral Deposit Account will
be swept on a daily basis into a collection account maintained by the
Borrower with Bank One, N.A., or its successors (the "Collection
Account"), and (g) the Lender shall hold and apply funds received into
the Collection Account as provided by the terms of Section 4.5(c).
(b) Covenant Regarding New Deposit Accounts; Lock Boxes. Before
opening or replacing any Collateral Deposit Account or other Deposit
Account or establishing any new Lock Box in regard to which the Lender
holds or is to hold a first priority security interest in and lien upon
pursuant to this Security Agreement or any other Loan Document, the
Borrower shall (a) obtain the Lender's consent in writing to the opening of
such Deposit Account or Lock Box, and (b) cause each bank or financial
institution in which it seeks to open (i) a Deposit Account, to enter into
a Deposit Account Control Agreement with the Lender in order to give the
Lender Control of such Deposit Account, or (ii) a Lock Box, to enter into a
Lock Box Agreement with the Lender in order to give the Lender Control of
the Lock Box.
(c) Application of Proceeds; Deficiency. Upon the occurrence of a
Default or an Unmatured Default, all amounts deposited in the Collection
Account shall be deemed received by the Lender in accordance with the
Credit Agreement and shall, after having been credited in immediately
available funds to the Collection Account, be applied by the Lender in
accordance with the Credit Agreement. In no event shall any amount be so
applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account. The Lender shall
require all other cash proceeds of the Collateral, which are not required
to be applied to the Liabilities pursuant to the Credit Agreement, to be
deposited in a special non-interest bearing cash collateral account with a
bank of Lender's choosing and held there as security for the Liabilities.
The Borrower shall have no control whatsoever over said cash collateral
account. Any such proceeds of the Collateral shall be applied in the order
set forth in the Credit Agreement unless a court of competent jurisdiction
shall otherwise direct. The balance, if any, after all of the Liabilities
have been satisfied, shall be deposited by the Lender into the Borrower's
general operating account. The Borrower shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Liabilities, including any attorneys' fees and
other expenses incurred by the Lender to collect such deficiency.
Section 4.6 Accounts Owed by the Federal Government. If any Account shall
arise out of a contract with the United States of America, or any department,
agency, subdivision, or instrumentality thereof, the Borrower shall promptly
notify the Lender thereof in writing and shall take all other action requested
by the Lender to protect the Lender's security interest in such Account under
the provisions of the federal Assignment of Claims Act, as amended.
Section 4.7 Assignment of Security Interests. If, at any time the Borrower
shall take and perfect a security interest in any property of an Account Debtor
or any other Person to secure
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payment or performance of an Account, the Borrower shall promptly, upon the
request of Lender, assign such security interest to the Lender.
ARTICLE 5. AGREEMENTS CONCERNING CERTAIN COLLATERAL
Section 5.1 Maintenance of Intellectual Property. Unless otherwise agreed
in writing by the Lender, Borrower shall have the duty to do any and all acts
which are necessary to preserve and maintain all material rights in the
Intellectual Property. Borrower will give proper statutory notice in connection
with the use of its Intellectual Property. Borrower has used, and will continue
to use for the duration of this Agreement, consistent standards of quality in
its manufacture or creation of products sold under its trademarks. The Borrower
shall not abandon any of the Intellectual Property nor permit the expiration of
any material Intellectual Property registrations, except where occasioned by
non-use, without the written consent of the Lender. Borrower shall do any and
all acts reasonably required by the Lender to ensure Borrower's compliance with
this Section 5.1. Any reasonable expenses incurred in connection with the
Intellectual Property shall be borne by Borrower.
Section 5.2 After-Acquired Intellectual Property. If the Borrower obtains
rights to any new Intellectual Property, the provisions of this Security
Agreement shall automatically apply thereto. With respect to any new
applications for Intellectual Property, the issuance of any new registration for
Intellectual Property, and renewals or extensions of any of the foregoing, the
Borrower shall give the Lender prompt written notice thereof in writing.
Section 5.3 Opposition Proceedings. Unless and until there shall have
occurred and be continuing a Default, Borrower shall retain the legal and
equitable title to the Intellectual Property and shall have the right to bring
any opposition proceedings, cancellation proceedings or lawsuit in its own name
to enforce, protect and use the Intellectual Property in the ordinary course of
its business, but shall not be permitted, except with the prior written consent
of the Lender, to sell, assign, transfer or otherwise encumber the Intellectual
Property, other than licensings or other dispositions in the ordinary course of
business or to resolve litigation or disputed claims brought or made by
unrelated parties.
Section 5.4 Verification of Intellectual Property. The Lender, its
officers, agents, attorneys and accountants, may verify the Intellectual
Property and all licenses and other agreements with respect thereto, under
reasonable procedures, directly with licensees or by other methods, and the
Borrower shall furnish to the Lender upon request schedules of Intellectual
Property and licenses, together with other information relating thereto, and
shall do, make and deliver all such additional and further acts, things, deeds,
assurances and instruments as the Lender may reasonably require with respect to
the Intellectual Property, including, without limitation, the licenses. The
Borrower shall promptly notify the Lender, if it knows that any material
application or registration relating to Intellectual Property may become
abandoned or dedicated to the public, or of any material adverse determination
or development (including any claim) regarding the Intellectual Property or any
material license with respect thereto, or regarding its right to register, keep
and maintain the same, or if it knows that a material item of Intellectual
Property is materially infringed or misappropriated by a third party, and, in
any such event, unless (a) the Lender, or (b) the Board of Directors of the
Borrower in the exercise of its reasonable business judgment after having
considered the advice of reputable intellectual property counsel shall have
determined that litigation is inappropriate or unadvisable, promptly ▇▇▇ for
infringement or misappropriation.
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Section 5.5 Supplemental Documentation. Concurrently with the execution of
this Security Agreement, and from time to time hereafter upon request of the
Lender, the Borrower shall execute and deliver to the Lender supplemental
security agreements relating to any or all registered patents, trademarks, trade
names, copyrights and applications for any of the foregoing, in a form
satisfactory to the Lender and suitable for recording in the records of the
registering Governmental Authority.
Section 5.6 Contracts and Leases. The Borrower shall perform each of its
obligations under all contracts, leases and other agreements (including, without
limitation, all license agreements) to which the Borrower is a party, and,
immediately upon learning of any material default by any party under any such
contract, lease or other agreement, the Borrower shall give written notice
thereof to the Lender, together with a description as to the nature and status
thereof. After the occurrence of any Default or Unmatured Default, the Borrower
shall not amend, modify, supplement or otherwise agree to any change in any
contract, lease or other agreement or waive any provision thereof, without the
prior written consent of the Lender.
Section 5.7 Letter-of-Credit Rights. Upon the occurrence and during the
continuance of a Default the Borrower will, upon the Lender's request, cause
each issuer of a letter of credit to consent to the assignment of proceeds of
the letter of credit in order to give the Lender Control of the letter-of-credit
rights to such letter of credit.
Section 5.8 Certificated Securities. If the Borrower shall at any time hold
or acquire any certificated securities, the Borrower shall forthwith endorse,
assign and deliver the same to the Lender, accompanied by such instruments of
transfer or assignment duly executed in blank as the Lender may from time to
time specify. If any certificated securities or other investment property now or
hereafter acquired by the Borrower are held by the Borrower or its nominee
through a securities intermediary or commodity intermediary, the Borrower shall
immediately notify the Lender thereof and, at the Lender's request and option,
pursuant to an agreement in form and substance satisfactory to the Lender,
either (i) cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply with entitlement orders or other instructions
from the Lender to such securities intermediary as to such securities or other
investment property, or (as the case may be) to apply any value distributed on
account of any commodity contract as directed by the Lender to such commodity
intermediary, in each case without further consent of the Borrower or such
nominee, or (ii) in the case of financial assets or other investment property
held through a securities intermediary, arrange for the Lender to become the
entitlement holder with respect to such investment property, with the Borrower
being permitted, only with the consent of the Lender, to exercise rights to
withdraw or otherwise deal with such investment property.
Section 5.9 Uncertificated Securities. Upon the occurrence and during the
continuance of a Default, the Borrower will permit the Lender from time to time
to cause the appropriate issuers (and, if held with a securities intermediary,
such securities intermediary) of uncertificated securities which are Collateral
to ▇▇▇▇ their books and records with the numbers and face amounts of all such
uncertificated securities and all rollovers and replacements therefor to reflect
the Lien of the Lender granted pursuant to this Security Agreement. The Borrower
will take any actions necessary to cause the issuers of uncertificated
securities which are Collateral and which are Securities to cause the Lender to
have and retain Control over such Securities.
Section 5.10 Stock and Other Ownership Interests.
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PAGE 10
(a) Changes in Capital Structure of Issuers. The Borrower will not (i)
permit or suffer any issuer of privately held corporate securities or other
ownership interests in a corporation, partnership, joint venture or limited
liability company constituting Collateral to dissolve, liquidate, retire
any of its capital stock or other Instruments or Securities evidencing
ownership, reduce its capital or merge or consolidate with any other
entity, or (ii) vote any of the Instruments or Securities in favor of any
of the foregoing.
(b) Issuance of Additional Securities. The Borrower will not permit or
suffer the issuer of privately held corporate securities or other ownership
interests in a corporation, partnership, joint venture or limited liability
company constituting Collateral to issue any such securities or other
ownership interests, any right to receive the same or any right to receive
earnings, except to the Borrower.
(c) Registration of Pledged Securities. The Borrower will permit any
registerable Collateral to be registered in the name of the Lender or its
nominee at any time at the option of the Lender.
(d) Exercise of Rights in Pledged Securities. The Borrower will permit
the Lender or its nominee at any time after the occurrence of a Default,
without notice, to exercise all voting and corporate rights relating to the
Collateral, including, without limitation, exchange, subscription or any
other rights, privileges, or options pertaining to any corporate securities
or other ownership interests in or of a corporation, partnership, joint
venture or limited liability company constituting Collateral and the Stock
Rights as if it were the absolute owner thereof.
ARTICLE 6. AGREEMENTS CONCERNING INVENTORY
Section 6.1 Locations. Borrower will give the Lender written notice of each
location at which Inventory is or will be kept at all times. Except where such
notice is given and except for Inventory sold in the ordinary course of
business, all Inventory is and shall be kept at the locations set forth on
Schedule 3 hereto.
Section 6.2 Sales of Inventory. The Borrower may, in the ordinary course of
business, at its own expense, sell, lease or furnish under contracts of sale or
service, any of the Inventory normally held by the Borrower for such purpose (a
sale in the ordinary course of business does not include a transfer in total or
partial satisfaction of a debt), and use and consume, in the ordinary course of
business, any raw materials, work-in-process or materials normally held by it
for such purpose.
Section 6.3 Condition of Inventory; Books and Records. Borrower shall keep
all Inventory in good order and condition and shall maintain full, accurate and
complete books and records with respect to Inventory at all times.
Section 6.4 Warehousemen and Landlords. Borrower shall not store any
material portion of its Inventory with any bailee, warehouseman, or similar
party without the Lender's prior written consent. If Inventory is so stored,
Borrower will, concurrently with storing such Inventory, cause such bailee,
warehouseman, or similar party to issue and deliver to the Lender, in a form
acceptable to the Lender, warehouse receipts in the Lender's name evidencing the
storage of the Inventory. The Borrower shall provide the Lender with copies of
all agreements between the Borrower and any bailee, warehouseman, or similar
party and shall deliver to the
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PAGE 11
Lender a landlord's or warehouseman's lien waiver in a form acceptable to the
Lender, prior to entering into any material lease for warehouse storage or
business facilities.
Section 6.5 Consigned Inventory. If at any time any of the Inventory is
placed by the Borrower on consignment with any consignee, Borrower shall, prior
to delivery of such consigned Inventory, (a) provide Lender with all consignment
agreements and other instruments and documentation to be used in connection with
such consignment (all of which shall be in a form acceptable to the Lender); (b)
prepare, execute and file appropriate financing statements with respect to any
consigned Inventory showing the consignee as debtor, the Borrower as secured
party, and the Lender as assignee of the secured party; (c) prepare, execute and
file appropriate financing statements with respect to any consigned Inventory
showing the Borrower, as debtor, and the Lender, as secured party; (d) conduct a
search of all UCC filings made against the consignee and all jurisdictions in
which Inventory to be consigned is to be located while on consignment, and
furnish copies of such results to the Lender; and (e) notify in writing all
creditors of the consignee that are or may be holders of security interests in
the Inventory to be consigned that the Borrower expects to deliver certain
Inventory to the consignee.
Section 6.6 Compliance with Law. Borrower shall substantially comply in all
material respects with all federal, state and local laws, regulations, rulings
and orders applicable to the Borrower for its assets or business in all
respects. Without limiting the generality of the foregoing, Borrower shall
comply with all requirements of the federal Fair Labor Standards Act, as
amended, in the conduct of its business and the production of Inventory.
Borrower shall notify the Lender immediately of any violation by Borrower of the
Fair Labor Standards Act, and the absence of such notice shall constitute
Borrower's continuing representation that all Inventory then existing has been
produced in compliance with the Fair Labor Standards Act.
ARTICLE 7. AGREEMENTS CONCERNING EQUIPMENT AND FIXTURES
Section 7.1 Locations. Borrower will give the Lender written notice of each
location at which Equipment is or will be kept at all times, except where such
notice is given, the Equipment will be kept at locations set forth on Schedule 3
hereto. Schedule 3 sets forth all locations at which Equipment and Fixtures of
the Borrower are located and the name and owner of record of the real estate at
each location if the Borrower is not the owner of record.
Section 7.2 Condition. The Borrower will keep the Equipment in good order
and repair, ordinary wear and tear excepted, and will not waste or destroy the
Equipment or any portion thereof, except in the case of obsolete Equipment which
is no longer used or useful in Borrower's business.
Section 7.3 Titled Equipment. If Borrower now or hereafter has any
vehicles, aircraft, watercraft, or other Equipment for which a certificate of
title has been issued by a Governmental Authority, upon the request of the
Lender, the Borrower shall immediately deliver to the Lender, properly endorsed,
each certificate of title or application for title or other evidence of
ownership for each such item of Equipment, and the Borrower shall take all
actions necessary to have the Lender's security interest properly recorded on
each such certificate of title and shall take all other steps necessary to
perfect the Lender's security interest in such Equipment.
Section 7.4 Compliance with Laws. The Borrower will not use the Equipment
in material violation of any statute, rule, regulation or ordinance or any
policy of insurance thereon. Borrower will neither use the Equipment nor permit
the Equipment to be used, for any unlawful
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PAGE 12
purpose or contrary to any statute, law, ordinance or regulation relating to the
registration, use, operation or control of the Equipment.
Section 7.5 Transfers of Equipment. Borrower may from time to time
substitute Equipment, provided that (a) the substituted Equipment is not subject
to any lien or other encumbrance and has a fair market value at least equal to
the fair market of the Equipment for which it is substituted; (b) the
marketability and operating integrity of Borrower's Equipment after such
substitution is not impaired; (c) the Equipment substituted for is no longer
used or useful in the operation of Borrower's business and is sold in arm's
length transaction in exchange for money or monies' worth at least equal to the
fair market value of such Equipment substituted for; and (d) no Default or
Unmatured Default has occurred and is continuing.
Section 7.6 Fixtures. The Borrower shall not permit any item of Equipment
to become a Fixture to real estate or an accession to any other property not
subject to the Lender's security interest herein without the prior written
consent of the Lender. If any Equipment is or will be attached to real estate in
such a manner as to become a fixture, such real estate is encumbered, the
Borrower will, upon the request of the Lender, obtain from the holder of such
real estate encumbrance a written consent and subordination to the security
interest hereby granted, or a written disclaimer of any interest in such
Collateral, in a form acceptable to the Lender.
ARTICLE 8. GENERAL PROVISIONS CONCERNING COLLATERAL
Section 8.1 Title to After-Acquired Collateral. All Collateral acquired
after the date hereof will be acquired by the Borrower free of any lien,
security interest or encumbrance, except Permitted Encumbrances.
Section 8.2 Further Assurances. The Borrower agrees to do such reasonable
acts and things and deliver or cause to be delivered such other documents as the
Lender may deem necessary to establish and maintain a valid security interest in
the Collateral (free of all other liens and claims except Permitted
Encumbrances) to secure the payment and performance of the Liabilities and to
defend title to the Collateral against any Person claiming any interest therein
adverse to the Lender (other than the holders of Permitted Encumbrances). The
Borrower authorizes the Lender, at the expense of the Borrower, to execute and
file a financing statement or statements on its behalf in those public offices
deemed advisable or necessary by the Lender to protect the security interests of
the Lender herein granted. If permitted by law, the Borrower agrees that a
carbon, photographic or other reproduction of this Security Agreement or of a
financing statement may be filed as a financing statement.
Section 8.3 Insurance.
(a) The Borrower shall have and maintain at all times, with respect to
Inventory and Equipment, insurance written by companies acceptable to the
Lender covering risks customarily insured against by companies engaged in
business similar to that of the Borrower in reasonable amounts, containing
such terms, in such form, and for such periods customarily maintained by
companies engaged in business similar to that of the Borrower. Such
insurance shall be payable to the Borrower and the Lender as their
interests may appear.
(b) All such insurance policies shall carry standard, non-contributory
lender's loss payable clauses in favor of the Lender (to the extent such
Inventory or Equipment
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PAGE 13
constitutes First Lien Collateral). The insurance certificates evidencing
the Borrower's compliance with the above shall be deposited with the
Lender, and in the event the Borrower fails to file and maintain such
insurance, the Lender may, at its option, purchase such insurance and the
cost of such insurance shall become a Liability secured by these presents
and all sums expended shall bear interest at the highest Default rate of
interest set forth in the Credit Agreement until paid. If requested by the
Lender, the Borrower shall deliver certified copies of such policies to the
Lender. The Borrower shall pay all insurance premiums promptly when due and
shall provide substitute policies of insurance should the Lender at any
time reject, for reasonable cause, any such policies of insurance furnished
by the Borrower. In the event that a Default or Unmatured Default has
occurred and is continuing, the Borrower hereby assigns to the Lender the
proceeds of all such insurance, including, without limitation, any premium
refunds, to the extent of the Liabilities, shall direct the insurer to make
payment of any losses or refunds directly to the Lender, and appoints the
Lender its attorney-in-fact to endorse any draft, check or other form of
payment made by such insurer.
Section 8.4 Collection of Collateral. The Borrower will, at its own
expense, endeavor to collect, as and when due, all amounts due with respect to
any Collateral including the taking of such action with respect to such
collection as the Lender may reasonably request or, in the absence of such
request, as the Borrower may deem advisable.
Section 8.5 Lender May Defend Title. In the event the Borrower fails to pay
any taxes, assessments, premiums, or fees, or fails to discharge any liens or
claims against the Collateral required to be paid or discharged by the Borrower,
or fails to purchase, maintain and file with the Lender any insurance required
by this Security Agreement, or if any such insurance is inappropriate to the
situation, in the Lender's reasonable discretion, the Lender may, without demand
or notice, pay any such taxes, assessments, premiums or fees, or pay, acquire,
satisfy or discharge any liens or claims asserted against the Collateral
(without any obligation to determine the validity thereof), or purchase any such
insurance. All sums so expended by the Lender shall become a Liability secured
by these presents and shall bear interest at the highest Default rate of
interest set forth in the Credit Agreement until paid.
Section 8.6 Negotiable Collateral. If any First Lien Collateral, including
Proceeds, consists of a letter of credit, certificates of deposit, negotiable
Documents (other than checks received by the Borrower in the ordinary course of
business), or chattel paper, the Borrower shall, immediately upon receipt
thereof, endorse and assign such Collateral, and deliver actual physical
possession thereof, to the Lender, and prior to such delivery, shall hold such
property in trust for the Lender. Schedule 5 hereto is a true and correct list
of all such negotiable Collateral owned by the Borrower. The Borrower will give
the Lender written notice each time it acquires such additional negotiable First
Lien Collateral.
Section 8.7 Contracts. The Borrower shall remain liable to perform its
obligations under any contracts included in the Collateral to the extent as
though this Security Agreement had not been entered into, and the Lender shall
not have any obligation under any such contracts by reason of this Agreement.
Section 8.8 Inspection of Collateral and Records. During Borrower's usual
business hours, the Lender may inspect and examine the Collateral and check and
test the same as to quality, quantity, value, and condition; provided, however,
that the Borrower may refuse to
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PAGE 14
disclose any information regarding Accounts that would cause the Borrower to
violate applicable privacy or other laws. The Borrower shall take reasonable
steps, including, but not limited to, the negotiation and execution of
confidentiality agreements with the Lender, in regard to each Account necessary
to allow the Borrower to disclose as much information as possible to the Lender
regarding said Accounts without violating any applicable privacy or other law.
The Lender shall also have the right at any time or times hereafter, during
Borrower's usual business hours or during the usual business hours of any third
party having control over the records of the Borrower, to inspect Borrower's
books and records in order to verify the amount or condition of, or any other
matter relating to, the Collateral and Borrower's financial condition and to
copy and make extracts from such books and records. Borrower waives the right to
assert a confidential relationship, if any, it may have with any accounting firm
in connection with any information requested by the Lender pursuant to this
Security Agreement and agrees that the Lender may directly contact any such
accounting firm in order to obtain such information after prior notice to
Borrower.
Section 8.9 Transfer of Collateral. Borrower shall not sell, lease,
license, transfer or otherwise dispose of any interest in any Collateral except
(a) sales of Inventory in the ordinary course of business pursuant to Section
6.2, (b) licensings and other dispositions of Intellectual Property in the
ordinary course of business pursuant to Section 5.3, and (c) dispositions of
Equipment in accordance with Section 7.5.
ARTICLE 9. REMEDY
Section 9.1 Remedies Generally; Power of Sale. Upon the occurrence and
during the continuance of any Default and at any time thereafter, the Lender
shall have all rights and remedies available at law or in equity including,
without limitation, the rights and remedies of a secured party under the Indiana
Uniform Commercial Code, as in effect from time to time (regardless of whether
the Code has been enacted in the jurisdiction where rights or remedies are
asserted), including, without limitation, the right to take possession of the
Collateral, and for that purpose the Lender may, so far as the Borrower can give
authority therefor, enter upon any premises on which the Collateral may be
situated and remove the same therefrom. The Lender shall give to the Borrower at
least ten (10) days' prior written notice of the time and place of any public
sale of Collateral or of the time after which any private sale or any other
intended disposition is to be made. The Lender may in its discretion transfer
any securities or other property constituting Collateral into its own name or
that of its nominee and receive the income thereon and hold the same as security
for Liabilities or apply it on principal or interest due on Liabilities. In the
event that the Lender takes possession of any Intellectual Property, the
goodwill associated with any trademarks, trade names, trade dress, and service
marks of the Borrower shall be transferred to the Lender.
Section 9.2 Deposits. Any and all Deposit Accounts, deposits or other sums
at any time credited by or due from the Lender to the Borrower shall at all
times constitute security for any and all Liabilities, and the Lender may apply
or set off such deposits or other sums against Liabilities at any time in
Default whether or not the Liabilities are then due or other Collateral is
considered by the Lender to be adequate.
Section 9.3 Waiver and Amendment. Except as otherwise expressly set forth
herein, to the extent permitted by law, the Borrower waives demand, notice,
protest, notice of acceptance of this Security Agreement, notice of loans made,
credit extended, Collateral received or
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PAGE 15
delivered or other action taken in reliance hereon and all other demands and
notices of any description. With respect to both Liabilities and Collateral, the
Borrower assents to any extension or postponement of the time of payment or any
other indulgence, to any substitution, exchange, or release of Collateral, to
the addition or release of any party or person primarily or secondarily liable,
to the acceptance of partial payments thereon and the settlement, compromise or
adjustment of any thereof, all in such manner and at such time or times as the
Lender may deem advisable. Except as otherwise provided by law, the Lender shall
have no duty as to the collection or protection of the Collateral, or any income
therefrom, nor as to the preservation of rights against prior parties nor as the
preservation of any rights pertaining thereto beyond the safe custody thereof.
The Lender may exercise its rights with respect to Collateral without resorting
or regard to other Collateral or sources of reimbursement for any Liability. The
Lender shall not be deemed to have waived any of these rights upon or under
Liabilities or Collateral unless such waiver be in writing and signed by the
Lender. No delay or omission on the part of the Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to the exercise of any right on any
future occasion. All rights and remedies of the Lender as to the Liabilities or
Collateral whether evidenced hereby or by any other instrument or papers shall
be cumulative and may be exercised singly, successively or together. The Lender
may, from time to time, without notice to the Borrower (a) retain or obtain a
security interest in any property of any other Person, in addition to the
Collateral, to secure any of the Liabilities; (b) retain or obtain the primary
or secondary liability of any party or parties, in addition to the Borrower with
respect to any of the Liabilities; (c) extend or renew for any period (whether
or not longer than the original period) or release or compromise any liability
of any party or parties primarily or secondarily liable to the Lender under the
Credit Agreement; (d) release its security interest in any of the property
securing any of the Liabilities and permit any substitution or exchange for any
such property; and (e) resort to the Collateral for the payment of any of the
Liabilities whether or not it shall have resorted to any other property or shall
have proceeded against any party primarily or secondarily liable for any of the
Liabilities. The Lender shall not, under any circumstances, or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the liquidation of any Collateral, including the settlement,
collection of any Account or for any damage resulting therefrom except liability
resulting from any act or omission by the Lender which constitutes willful
misconduct. This Security Agreement may be amended only by a writing duly signed
by the Lender and the Borrower.
Section 9.4 Expenses; Proceeds of Collateral. The Borrower shall pay to the
Lender on demand any and all reasonable out-of-pocket expenses, including
reasonable attorneys' fees, incurred or paid by the Lender in protecting the
Collateral or the existence, perfection or priority of the Lender's security
interest therein. After deducting all of such expenses, the residue of any
Proceeds of collection or sale of the Collateral shall be applied to the payment
of principal or interest on Liabilities in such order of preference as the
Lender may determine, proper allowance for interest on Liabilities not then due
being made, and any excess shall be returned to the Borrower.
Section 9.5 Power of Attorney. The Borrower hereby irrevocably appoints the
Lender and the Lender's designees from time to time its true and lawful
attorneys-in-fact, with full power of substitution in the premises upon the
occurrence and during the continuance of a Default (a) to demand, collect,
receipt for, settle, compromise, adjust, ▇▇▇ for, foreclose or realize upon the
Collateral in such manner as the Lender may determine, whether or not the
Collateral is
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then due; (b) to receive, open, and dispose of mail addressed to the Borrower;
(c) to endorse notes, checks, drafts, money orders, Documents or other evidences
of payment, shipment or storage or any form of Collateral on behalf of and in
the name of the Borrower; (d) to sign and send on behalf of the Borrower any
invoice or ▇▇▇▇ of lading relating to any Account, on drafts against customers,
on schedules and assignments of Accounts, on notices of assignment, financing
statements and other public records, on verifications of Accounts and on notices
to customers; (e) to sign the Borrower's name to the proofs of claim against any
Account Debtor on behalf of the Borrower; (f) to notify the post office
authorities to change the address for delivery of the Borrower's mail to an
address designated by the Lender; (g) to endorse Borrower's name on all
applications, documents, papers, certificates and instruments necessary or
expedient for the Lender to use the Intellectual Property, or necessary or
expedient to grant or issue any exclusive or nonexclusive license under the
Intellectual Property to anyone else, or necessary or expedient for the Lender
to assign, pledge, convey or otherwise transfer title in, or dispose of, the
Intellectual Property to anyone else, for the purpose of recording, registering,
filing or accomplishing any other formula with respect to the Intellectual
Property; and (h) to do all things necessary to carry out this Security
Agreement. The Borrower hereby ratifies and approves all acts of such attorneys.
Neither the Lender nor any attorney will be liable for any acts or omissions nor
for any error of judgment or mistake of fact or law, absent gross negligence,
bad faith or willful misconduct. This power, being coupled with an interest, is
irrevocable until the Liabilities have been fully satisfied. Notwithstanding
anything herein to the contrary, no attorney acting pursuant to this Section 9.5
shall have any authority to confess judgment on behalf of the Borrower.
Section 9.6 License. Borrower hereby grants to the Lender a license to use,
without charge, Borrower's Intellectual Property and other Collateral in
completing production of, advertising for sale, or selling, any Collateral when
permitted to do so hereunder or by applicable law, and all of the Borrower's
rights under all licenses and franchise agreements shall, in such event, inure
to the Lender's benefit. In addition, the Borrower shall, upon request by the
Lender, make available such personnel in Borrower's employ on the date of any
Default as the Lender may reasonably designate to permit the Lender to continue,
directly or indirectly, to produce, advertise and sell the Collateral sold by
the Borrower under any Intellectual Property or license. The license herein
shall include the right of the Lender to use, assign, license or sublicense any
of the Borrower's Intellectual Property, including in such license reasonable
access as to all media in which any of the licensed items may be recorded or
stored; provided that the Lender shall comply with all pre-existing quality
control standards and trademark use requirements of the Borrower. No agreements
hereafter entered into by the Borrower shall prohibit, restrict or impair the
rights of the Lender granted hereunder.
Section 9.7 Reinstatement. If, at any time after payment in full by the
Borrower of all Liabilities and termination of the Lender's security interest,
any payments on the Liabilities previously made by the Borrower or any other
Person must be disgorged by the Lender for any reason whatsoever, including,
without limitation, the insolvency, bankruptcy or reorganization of the Borrower
or such Person, this Security Agreement and the Lender's security interests
herein shall be reinstated as to all disgorged payments as though such payments
had not been made, and the Borrower shall sign and deliver to the Lender all
documents, and shall do such other acts and things, as may be necessary to
re-perfect the Lender's security interest.
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Section 9.8 No Marshaling. The Borrower, on its own behalf and on behalf of
its successors and assigns, hereby expressly waives all rights, if any, to
require a marshaling of assets by the Lender or to require the Lender's first
resort to some or any portion of the Collateral before foreclosing upon, selling
or otherwise realizing on any other portion thereof.
ARTICLE 10. MISCELLANEOUS PROVISIONS
Section 10.1 Priority. Unless otherwise expressly provided, the security
interest hereby created shall be pro rata on par with any prior security
interests in the Collateral now or hereafter existing in favor of the Lender.
Section 10.2 Governing Law. This Security Agreement and all rights and
obligations hereunder, including matters of construction, validity and
performance, shall be governed by the Uniform Commercial Code and other
applicable laws of the State of Indiana, without regard to conflict of law
principles.
Section 10.3 Severability. Whenever possible each provision of this
Security Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition without invalidating the
remainder of such provision or the remaining provisions of this Security
Agreement. The Borrower recognizes that the Lender has relied on this Security
Agreement in extending credit to the Borrower and agrees that such reliance by
the Lender shall be sufficient consideration for this Security Agreement.
Section 10.4 Binding on Successors. The rights and privileges of the Lender
shall inure to the benefit of its respective successors and assigns.
Section 10.5 Chattel Mortgage. This Security Agreement shall also
constitute a chattel mortgage and an assignment of rents.
SECTION 10.6 WAIVER OF JURY TRIAL. LENDER AND BORROWER, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT EITHER OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. NEITHER LENDER NOR BORROWER SHALL SEEK
TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL
HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY EITHER LENDER OR BORROWER EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY BOTH OF THEM. THIS PROVISION IS A MATERIAL INDUCEMENT TO
LENDER TO ACCEPT THIS SECURITY AGREEMENT.
[SIGNATURES ON FOLLOWING PAGE.]
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PAGE 18
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Security Agreement to be executed by their respective officers duly authorized
as of the date first above written.
ADDISON YORK INSURANCE BROKERS LTD.
a Delaware corporation
By: /s/ Primo Podorieszach
-----------------------------------
Primo Podorieszach, CEO
ACCEPTED:
OAK STREET FUNDING LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
STATE OF INDIANA )
) SS:
COUNTY OF ▇▇▇▇▇▇ )
Before me, a Notary Public in and for said County and State, personally
appeared Primo Podorieszach, known to me to be the Chief Executive Officer of
ADDISON YORK INSURANCE BROKERS LTD., and acknowledged the execution of the
foregoing for and on behalf of said corporation.
Witness my hand and Notarial Seal this 19 day of March, 2004.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Notary Public - Signature
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
9/26/07 ▇▇▇▇▇▇▇▇
---------------------- -----------------------------
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SCHEDULE 1
Former Names, Assumed Names
and Tradenames of Borrower
Prior Combinations
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SCHEDULE 2
Trademarks and Trademark Applications
Application or Registration
Registration No. Trademark Country Date
None
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SCHEDULE 2 (CONT'D)
Registered Copyrights
Registration
Registration No. Trademark Country Date
None
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PAGE 22
SCHEDULE 2 (CONT'D)
Licenses
Licensed Date of Expiration
Name of Licensee ▇▇▇▇ License Date
None
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SCHEDULE 3
Location of Collateral
Equipment Locations:
Fixture Locations:
(include record owner of real estate, if other than Borrower) (attach legal
description of real estate)
Inventory Locations:
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SCHEDULE 4
Investment Property
A. CERTIFICATED SECURITIES:
Percentage
Issuer's Certificate Number of Number of of Shares
Issuer Organization Number Shares Owned Shares Pledged Pledged
B. UNCERTIFICATED SECURITIES:
Issuer's
Issuer Organization Description of Collateral Percentage Ownership Interest
****[Add description of custody accounts or arrangements with securities
intermediary, if applicable]***
C. SECURITY ENTITLEMENTS:
D. SECURITY ACCOUNTS:
E. COMMODITY CONTRACTS:
F. COMMODITY ACCOUNTS:
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PAGE 25
SCHEDULE 5
Negotiable Collateral
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PAGE 26
SCHEDULE 6
Insurance Policies
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PAGE 27
Appendix I
Perfection Certificate
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PAGE 28
CONTINUING GUARANTY
THIS CONTINUING GUARANTY ("Guaranty") is made as of the 19th day of March,
2004, by ▇▇▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL INSURANCE BROKERS LTD., a corporation
amalgamated under the laws of the Province of Alberta (the "Guarantor") in favor
of OAK STREET FUNDING LLC (the "Lender"), pursuant to that certain Credit
Agreement, as it may be amended, modified or supplemented from time to time (the
"Credit Agreement") of even date herewith, by and between ADDISON YORK INSURANCE
BROKERS LTD., a Delaware corporation (the "Borrower") and the Lender. Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
ascribed to them in the Credit Agreement.
Section 1. Guaranty.
For value received and in consideration of any loan, advance or financial
accommodation of any kind whatsoever now or heretofore or hereafter made or
granted to the Borrower by the Lender pursuant to the Credit Agreement, the
Guarantor, in accordance with this Guaranty, hereby absolutely, unconditionally
and irrevocably guarantees to the Lender, as if the Guarantor was the principal
debtor, the punctual payment and performance when due of all Obligations (which
for purposes of this Guaranty shall also be deemed to include all commissions,
fees, charges, costs and other expenses arising out of or incurred by the Lender
in connection with the enforcement of this Guaranty).
Section 2. Continuing Guaranty; No Right of Set-Off; Independent
Obligation.
(a) This Guaranty shall be a continuing guaranty of the payment and
performance of all Obligations and shall remain in full force and effect until
the payment in full of all of the Obligations and shall apply to and secure any
ultimate balance due or remaining unpaid to the Lender; and this Guaranty shall
not be considered as wholly or partially satisfied by the payment or liquidation
at any time or from time to time of any sum of money for the time being due or
remaining unpaid to the Lender. The Guarantor covenants and agrees to comply
with all obligations, covenants, agreements and provisions applicable to it in
this Guaranty. Without limiting the generality of the foregoing, the Guarantor's
liability shall extend to all amounts which constitute part of the Obligations
and would be owed by the Borrower pursuant thereto but for the fact that they
are unenforceable, reduced, limited, impaired, suspended or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Borrower.
(b) The Guarantor hereby guarantees that the Obligations will be paid to
the Lender without set-off or counterclaim or other reduction whatsoever
(whether for taxes, withholding or otherwise) in lawful currency of the United
States of America.
(c) All payments by the Guarantor under this Guaranty shall be made free
and clear of, and without deduction or withholding for, any present or future
income, stamp or other taxes, levies, duties, imposts, charges or fees or any
related penalties, interest or other liabilities ("Taxes"). If any Taxes are
required to be deducted or withheld from any amount payable to the Lender under
this Guaranty, the Guarantor shall pay additional amounts so that the amount
received by the Lender after the deduction of such Taxes (including Taxes on
such additional amounts) equals the amount that the Lender would have received
if no Taxes had been deducted. The Guarantor shall pay to the appropriate taxing
authority all Taxes required to be deducted or
withheld. Within thirty (30) days after paying any such Taxes, the Guarantor
shall deliver to the Lender the original or a certified copy of the receipt for
such payment. Guarantor shall not be required to pay additional amounts to the
Lender on account of any Taxes, including, but not limited to, income taxes,
imposed solely by reason of a present or past connection between the Lender and
the jurisdiction imposing such Taxes (except a connection arising solely from
the execution, delivery, performance, enforcement of or the receipt of payments
under this Guaranty). The Guarantor shall indemnify the Lender against any Taxes
imposed on (and any related expenses reasonably incurred by) the Lender on
account of the execution, delivery, performance or enforcement of or the receipt
of payments under this Guaranty other than Taxes imposed solely by reason a
present or past connection between the Lender and the jurisdiction imposing such
Taxes (except a connection arising solely from the execution, delivery,
performance, enforcement of or the receipt of payments under this Guaranty). The
Guarantor also shall pay and indemnify the Lender against any stamp or other
documentary, excise or property taxes or similar levies, imposts, or charges (or
any related liability) arising from the execution, delivery, registration,
performance or enforcement of this Guaranty.
(d) The Guarantor guarantees that the Obligations shall be paid strictly in
accordance with their terms regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender.
(e) The Guarantor's liability to pay or perform or cause the performance of
the Obligations shall arise forthwith after demand for payment or performance by
the Lender has been given to the Guarantor in the manner prescribed in Section
24 hereof.
(f) Except as provided herein, the provisions of this Guaranty cover all
agreements between the parties hereto relative to this Guaranty and none of the
parties shall be bound by any representation, warranty or promise made by any
Person relative thereto which is not embodied herein; and it is specifically
acknowledged and agreed that this Guaranty has been delivered by the Guarantor
free of any conditions whatsoever and that no representations, warranties or
promises have been made to the Guarantor affecting its liabilities hereunder,
and that the Lender shall not be bound by any representations, warranties or
promises now or at any time hereafter made by the Borrower to the Guarantor.
(g) This Guaranty is a guarantee of payment, performance and compliance and
not of collectability and is in no way conditioned or contingent upon any
attempt to collect from or enforce performance or compliance by the Borrower or
upon any event or condition whatsoever.
(h) The obligations of the Guarantor set forth herein constitute the full
recourse obligations of the Guarantor enforceable against it to the full extent
of all its assets and properties.
Section 3. Guaranty Absolute.
The obligations of the Guarantor hereunder are independent of the
obligations of the Borrower under the Obligations and the Credit Agreement and a
separate action or actions may be brought and prosecuted against the Guarantor
whether or not an action or proceeding is brought against the Borrower and
whether or not the Borrower is joined in any such action or proceeding. The
liability of the Guarantor hereunder is irrevocable, absolute and unconditional
3
and (to the extent permitted by law) the liability and obligations of the
Guarantor hereunder shall not be released, discharged, mitigated, waived,
impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect of any
Indebtedness or other obligation of the Borrower or any other Person under the
Credit Agreement or the Obligations, or any agreement or instrument relating to
any of the foregoing;
(b) any grants of time, renewals, extensions, indulgences, releases,
discharges or modifications which the Lender may extend to, or make with, the
Borrower, the Guarantor or any other Person, or any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of, or any consent to or departure from, this
Guaranty, the Credit Agreement or the Obligations, including any increase or
decrease in the Obligations;
(c) the taking of security from the Borrower, the Guarantor or any other
Person, and the release, discharge or alteration of, or other dealing with, such
security;
(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, the Credit
Agreement any of the Obligations and the obligations of the Guarantor hereunder;
(e) the abstention from taking security from the Borrower, the Guarantor or
any other Person or from perfecting, continuing to keep perfected or taking
advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any security
received from the Borrower, the Guarantor or any other Person, and including any
other guarantees received by the Lender;
(g) any other dealings with the Borrower, the Guarantor or any other
Person, or with any security;
(h) the Lender's acceptance of compositions from the Borrower or the
Guarantor;
(i) the application by the Lender of all monies at any time and from time
to time received from the Borrower, the Guarantor or any other Person on account
of any indebtedness and liabilities owing by the Borrower or the Guarantor to
the Lender, in such manner as the Lender deems best and the changing of such
application in whole or in part and at any time or from time to time, or any
manner of application of collateral, or proceeds thereof, to all or any of the
Obligations, or the manner of sale of any collateral;
(j) the release or discharge of the Borrower or the Guarantor or of any
Person liable directly as surety or otherwise by operation of law or otherwise
for the Obligations, other than an express release in writing given by the
Lender of the liability and obligations of the Guarantor hereunder;
(k) any change in the name, business, capital structure or governing
instrument of the Borrower or the Guarantor or any refinancing or restructuring
of any of the Obligations;
3
(l) the sale of the Borrower's or the Guarantor's business or any part
thereof;
(m) any merger or consolidation, arrangement or reorganization of the
Borrower, the Guarantor, any Person resulting from the merger or consolidation
of the Borrower or the Guarantor with any other Person or any other successor to
such Person or merged or consolidated Person or any other change in the
corporate existence, structure or ownership of the Borrower or the Guarantor or
any change in the corporate relationship between the Borrower and the Guarantor,
or any termination of such relationship;
(n) the insolvency, bankruptcy, liquidation, winding-up, dissolution,
receivership, arrangement, readjustment, assignment for the benefit of creditors
or distribution of the assets of the Borrower or its assets or any resulting
discharge of any obligations of the Borrower (whether voluntary or involuntary)
or of the Guarantor (whether voluntary or involuntary) or the loss of corporate
existence;
(o) any arrangement or plan of reorganization affecting the Borrower or the
Guarantor;
(p) any failure, omission or delay on the part of the Borrower to conform
or comply with any term of the Credit Agreement;
(q) any limitation on the liability or obligations of the Borrower or any
other Person under this Guaranty, or any discharge, termination, cancellation,
distribution, irregularity, invalidity or unenforceability in whole or in part
of this Guaranty;
(r) any other circumstance (including any statute of limitations) that
might otherwise constitute a defense available to, or discharge of, the Borrower
or the Guarantor; or
(s) any modification, compromise, settlement or release by the Lender, or
by operation of law or otherwise, of the Obligations or the liability of the
Borrower or any other obligor under the Obligations, in whole or in part, and
any refusal of payment by the Lender, in whole or in part, from any other
obligor or other guarantor in connection with any of the Obligations, whether or
not with notice to, or further assent by, or any reservation of rights against,
the Guarantor.
Section 4. Right to Demand Full Performance.
In the event of any demand for payment or performance by the Lender from
the Guarantor hereunder, the Lender shall have the right to demand its full
claim and to receive all dividends or other payments in respect thereof until
the Obligations have been paid in full, and the Guarantor shall continue to be
liable hereunder for any balance which may be owing to the Lender by the
Borrower under the Obligations. The retention by the Lender of any security,
prior to the realization by the Lender of its rights to such security upon
foreclosure thereon, shall not, as between the Lender, on one hand, and the
Guarantor, on the other hand, be considered as a purchase of such security, or
as payment, satisfaction or reduction of the Obligations due to the Lender by
the Borrower or any part thereof. The Guarantor, promptly after demand, will
reimburse the Lender for all costs and expenses of collecting such amount under,
or enforcing this Guaranty, including, without limitation, the reasonable fees
and expenses of counsel.
Section 5. Waivers.
(a) The Guarantor hereby expressly waives (to the extent permitted by law)
notice of the acceptance of this Guaranty and notice of the existence, renewal,
extension or the
4
non-performance, non-payment, or non-observance on the part of the Borrower of
any of the terms, covenants, conditions and provisions of the Credit Agreement
or the Obligations or any other notice whatsoever to or upon the Borrower or the
Guarantor with respect to the Obligations. The Guarantor hereby acknowledges
communication to it of the terms of the Credit Agreement and the Obligations and
all of the provisions therein contained and consents to and approves the same.
The Guarantor hereby expressly waives (to the extent permitted by law)
diligence, presentment, protest and demand for payment with respect to (i) any
notice of sale, transfer or other disposition of any right, title to or interest
in the Obligations by the Lender or in this Guaranty, (ii) any release of the
Guarantor from its obligations hereunder resulting from any loss by it of its
rights of subrogation hereunder and (iii) any other circumstances whatsoever
that might otherwise constitute a legal or equitable discharge, release or
defense of a guarantor or surety or that might otherwise limit recourse against
the Guarantor.
(b) Without prejudice to any of the rights or recourses which the Lender
may have against the Borrower, the Guarantor hereby expressly waives (to the
extent permitted by law) any right to require the Lender to:
(i) enforce, assert, exercise, initiate or exhaust any rights,
remedies or recourse against the Borrower, the Guarantor or any other
Person under this Guaranty or the Credit Agreement or otherwise;
(ii) value, realize upon, or dispose of any security of the Borrower
or any other Person held by the Lender;
(iii) initiate or exhaust any other remedy which the Lender may have
in law or equity; or
(iv) mitigate the damages resulting from any default under the
Obligations or the Credit Agreement;
before requiring or becoming entitled to demand payment from the Guarantor under
this Guaranty.
Section 6. The Guarantor Remains Obligated in Event the Borrower Is No
Longer Obligated to Discharge Obligations.
It is the express intention of the Lender and the Guarantor that if for any
reason the Borrower has no legal existence, is or becomes under no legal
obligation to discharge the Obligations owing to the Lender by the Borrower or
if any of the Obligations owing by the Borrower to the Lender becomes
irrecoverable from the Borrower by operation of law or for any reason
whatsoever, this Guaranty and the covenants, agreements and obligations of the
Guarantor contained in this Guaranty shall nevertheless be binding upon the
Guarantor, as principal debtor, until such time as all such Obligations have
been paid in full to the Lender and all Obligations owing to the Lender by the
Borrower have been discharged, and the Guarantor shall be responsible for the
payment thereof to the Lender upon demand.
Section 7. Fraudulent Conveyance; Subrogation.
(a) Any term or provision of this Guaranty to the contrary notwithstanding,
the aggregate amount of the Obligations guaranteed hereunder shall be reduced to
the extent necessary to prevent this Guaranty from violating or becoming
voidable under applicable law
5
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
(B) THE GUARANTOR HEREBY AGREES NOT TO ASSERT ANY RIGHTS OF SUBROGATION OR
CONTRIBUTION, WHETHER ARISING BY CONTRACT OR OPERATION OF LAW (INCLUDING,
WITHOUT LIMITATION, ANY SUCH RIGHT ARISING UNDER FEDERAL BANKRUPTCY LAW) OR
OTHERWISE BY REASON OF ANY PAYMENT BY IT PURSUANT TO THE PROVISIONS OF THIS
GUARANTY UNTIL AND UNLESS ALL OF THE OBLIGATIONS HAVE BEEN PAID IN FULL.
Section 8. Guaranty Is in Addition to Other Security.
This Guaranty shall be in addition to and not in substitution for any other
guarantees or other security which the Lender may now or hereafter hold in
respect of the Obligations owing to the Lender by the Borrower and (except as
may be required by law) the Lender shall be under no obligation to marshal in
favor of the Guarantor any other guarantees or other security or any moneys or
other assets which the Lender may be entitled to receive or upon which the
Lender may have a claim.
Section 9. Release of Security Interests.
Without limiting the generality of the foregoing and except as otherwise
provided in this Guaranty, the Guarantor hereby consents and agrees, to the
fullest extent permitted by applicable law, that the rights of the Lender
hereunder, and the liability of the Guarantor hereunder, shall not be affected
by any and all releases for any purpose of any collateral, if any, from the
Liens and security interests created by any collateral document and that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Obligations is rescinded or must otherwise
be returned by the Lender upon the insolvency, bankruptcy or reorganization of
the Borrower or otherwise, all as though such payment had not been made.
Section 10. No Bar to Further Actions.
Except as provided by law, no action or proceeding brought or instituted
under the Credit Agreement or this Guaranty and no recovery or judgment in
pursuance thereof shall be a bar or defense to any further action or proceeding
which may be brought under the Credit Agreement or this Guaranty by reason of
any further default or defaults under the Credit Agreement or Guaranty or in the
payment of any of the Obligations owing by the Borrower.
Section 11. Failure to Exercise Rights Shall Not Operate as a Waiver; No
Suspension of Remedies.
(a) No failure to exercise and no delay in exercising, on the part of the
Lender, any right, power, privilege or remedy under the Credit Agreement or this
Guaranty shall operate as a waiver thereof, nor shall any single or partial
exercise of any rights, power, privilege or remedy preclude any other or further
exercise thereof, or the exercise of any other rights, powers, privileges or
remedies. The rights and remedies herein provided for are cumulative and not
exclusive of any rights or remedies provided in law or equity.
(b) Nothing contained in this Guaranty shall limit the right of the Lender
to take any action to accelerate the maturity of the Obligations pursuant to the
Credit Agreement or to pursue any rights or remedies hereunder or under
applicable law.
6
Section 12. Lender's Duties; Notice to Lender.
(a) Any provision in this Guaranty allowing the Lender to request any
information or to take any action authorized by, or on behalf of the Guarantor,
shall be permissive and shall not be obligatory on the Lender except where the
failure of the Lender to request any such information or to take any such action
arises from the Lender's gross negligence or willful misconduct.
(b) The Lender shall not be required to inquire into the existence, powers
or capacities of the Borrower, the Guarantor or the officers, directors or
agents acting or purporting to act on their respective behalf.
Section 13. Successors and Assigns.
All terms, agreements and conditions of this Guaranty shall extend to and
be binding upon the Guarantor and its successors and permitted assigns and shall
inure to the benefit of and may be enforced by the Lender and its successors and
assigns; provided, however, that the Guarantor may not assign any of its rights
or obligations hereunder.
Section 14. Release of Guaranty.
Concurrently with the payment in full of all of the Obligations, the
Guarantor shall be released from and relieved of its obligations under this
Guaranty. Upon the delivery by the Borrower to the Lender of a certificate
signed by an authorized senior officer of the Borrower to the effect that the
transaction giving rise to the release of this Guaranty was made by the Borrower
in accordance with the provisions of the Credit Agreement and the Obligations,
the Lender shall execute any documents reasonably required in order to evidence
the release of the Guarantor from its obligations under this Guaranty. If any of
the Obligations are revived and reinstated after the termination of this
Guaranty, then all of the obligations of the Guarantor under this Guaranty shall
be revived and reinstated as if this Guaranty had not been terminated until such
time as the Obligations are paid in full, and the Guarantor shall enter into an
amendment to this Guaranty, reasonably satisfactory to the Lender, evidencing
such revival and reinstatement.
Section 15. Representations and Warranties.
The Guarantor represents and warrants to the Lender as of the date hereof
that:
(i) The Guarantor (a) is either a corporation or a limited liability
company duly organized, validly existing and in existence under
the laws of the jurisdiction of its organization, (b) is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which it is doing
business, and (c) has all requisite power and authority to own,
operate and encumber its property;
(ii) The Guarantor (a) has the requisite power and authority to
execute, deliver and perform this Guaranty and any other document
required to be delivered by it under the Credit Agreement, and
(b) has duly executed and delivered this Guaranty which
constitutes the legal, valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with
its terms; and
7
(iii)The execution, delivery and performance of this Guaranty do not
and will not (a) conflict with the Articles of Incorporation and
By-Laws, as applicable, of the Guarantor, (b) require any
approval of the Guarantor's shareholders or members, as
applicable, except such as has been obtained, (c) require any
approval or consent of any other Person or Governmental
Authority, (d) result in or require the creation of any lien or
security interest upon or with respect to any of the properties
or assets of the Guarantor other than in favor of the Lender, and
(e) conflict with, result in a breach of or constitute a default
under any requirement of law or contractual obligation of the
Guarantor.
Section 16. Setoff.
At any time after all or any part of the Obligations have become due and
payable (by acceleration or otherwise), the Lender may, without notice to the
Guarantor and regardless of the acceptance of any security or collateral for the
payment hereof, appropriate and apply toward the payment of all or any part of
the Obligations (a) any indebtedness due or to become due from the Lender to the
Guarantor, and (b) any moneys, credits or other property belonging to the
Guarantor held by or coming into the possession of the Lender.
Section 17. Subordination.
The Guarantor agrees that any and all claims of the Guarantor against the
Borrower, or against any of its properties, shall be subordinate and subject in
right of payment to the prior payment of the Obligations. Notwithstanding any
right of the Guarantor to ask, demand, ▇▇▇ for, take or receive any payment from
the Borrower, all rights, liens and security interests of the Guarantor, whether
now or hereafter arising and howsoever existing, in any assets of the Borrower
shall be and hereby are subordinated to the rights of the Lender in those
assets. The Guarantor shall have no right to possession of any such asset or to
foreclose any such lien or security interest, whether by judicial action or
otherwise, unless and until all of the Obligations shall have been fully paid
and satisfied. If all or any part of the assets of the Borrower, or the proceeds
thereof, are subject to any distribution, division or application to the
creditors of the Borrower, whether partial or complete, voluntary or
involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, or if the business of the Borrower is dissolved, or if substantially
all of the assets of the Borrower are sold, then, and in any such event, any
payment or distribution of any kind or character, either in cash, securities or
other property, which shall be payable or deliverable upon or with respect to
any indebtedness of the Borrower to the Guarantor shall be paid or delivered
directly to the Lender for application on the Obligations due or to become due
until such shall have first been fully paid and satisfied. The Guarantor
irrevocably authorizes and empowers the Lender to demand, ▇▇▇ for, collect and
receive every such payment or distribution and give acquittance therefor and to
make and present for and on behalf of the Guarantor such proofs of claim and
take such other action, in the Lender's own name or in the name of the Guarantor
or otherwise, as the Lender may deem necessary or advisable for the enforcement
of this Guaranty. The Lender may vote such proofs of claim in any such
proceeding, receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
apply the same on account of any of the Obligations. Should any payment,
distribution, security or instrument or proceeds thereof
8
be received by the Guarantor upon or with respect to any of Indebtedness of the
Borrower to the Guarantor prior to the satisfaction of all of the Obligations,
the Guarantor shall receive and hold the same in trust, as trustee, for the
benefit of the Lender and shall forthwith deliver the same to the Lender in
precisely the form received (except for the endorsement or assignment of the
Guarantor where necessary), for application to any of the Obligations, and until
so delivered, the same shall be held in trust by the Guarantor as the property
of the Lender. If the Guarantor fails to make any such endorsement or assignment
to the Lender, the Lender is hereby irrevocably authorized to make the same. The
Guarantor agrees that until the Obligations have been paid in full and
satisfied, the Guarantor will not assign or transfer to any Person any claim
that the Guarantor has or may have against the Borrower.
Section 18. Amendments.
No modification or waiver of any of the provisions of this Guaranty shall
be binding upon the Lender, except as expressly set forth in a writing duly
signed and delivered by the Lender.
Section 19. Governing Law.
This Guaranty shall be governed by and interpreted and enforced in
accordance with the internal laws (without regard to conflicts of law
provisions) of the State of Indiana. Without limiting the foregoing, any dispute
between the Lender and the Guarantor arising out of or related to the
relationship established between them in connection with this Guaranty, whether
arising in contract, tort, equity or otherwise, shall be resolved in accordance
with the internal laws, and not the conflicts of law provisions, of the State of
Indiana.
Section 20. Consent to Jurisdiction; Counterclaims; Forum Non Conveniens.
Except as provided hereinbelow, the Lender and the Guarantor agree that all
disputes between them arising out of or related to the relationship established
between them in connection with this Guaranty, whether arising in contract,
tort, equity, or otherwise, shall be resolved only by state or federal courts
located in Indianapolis, Indiana, provided however that the parties acknowledge
that any appeals from those courts may be heard by a court located outside of
Indianapolis, Indiana. The Lender shall have the right to proceed against the
Guarantor or its real or personal property in a court in any location in order
to obtain personal jurisdiction over the Guarantor or to enforce a judgment or
other court order entered against the Guarantor, and the Guarantor shall not
assert any permissive counterclaims arising out of or relating to this Guaranty
in any proceeding brought under this provision. The Guarantor hereby waives any
objection that it may now or hereafter have (including, without limitation, any
objection to the laying of venue or based on forum non conveniens) to the
location of the court in which any proceeding with respect to this Guaranty or
any other document executed or delivered in connection herewith is commenced in
accordance with this Section 20.
Section 21. Waiver of Jury Trial.
The Guarantor waives any right to trial by jury in any dispute, whether
sounding in contract, tort, or otherwise arising out of or related to the
transactions contemplated by this Guaranty or any other instrument, document or
agreement executed or delivered in connection herewith. The Lender may file an
original counterpart or a copy of this
9
Guaranty with any court as written evidence of the consent of the Guarantor to
the waiver of its rights to trial by jury.
Section 22. Waiver of Bond.
The Guarantor waives the posting of any bond otherwise required of the
Lender in connection with any judicial process or proceeding to enforce any
judgment or other court order entered in favor of the Lender, or to enforce by
specific performance, temporary restraining order, or preliminary or permanent
injunction, this Guaranty or any other agreement or document between the Lender
and the Guarantor.
Section 23. Advice of Counsel.
The Guarantor represents and warrants that it has consulted with legal
counsel regarding all waivers under this Guaranty, that it fully understands all
rights that it is waiving and the effect of such waivers, that it assumes the
risk of any misunderstanding that it may have regarding any of the foregoing,
and that it intends that such waivers shall be a material inducement to the
Lender to extend the Indebtedness guaranteed hereby.
Section 24. Notices.
All notices and other communications required or desired to be served,
given or delivered hereunder shall be in writing or by a telecommunications
device capable of creating a printed record and shall be addressed to the party
to be notified as follows:
If to Guarantor, at: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attention: Primo Podorieszach, CEO
Facsimile: _______________________
If to the Lender, at: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or, as to each party, at such other address as designated by such party in a
written notice to the other party. All such notices and communications shall be
deemed to be validly served, given or delivered (a) three (3) days following
deposit in the United States mail, with proper postage prepaid; (b) upon
delivery thereof if delivered by hand or by a reputable overnight courier
service; or (c) upon confirmation of receipt thereof if transmitted by a
telecommunications device.
Section 25. Severability.
Wherever possible, each provision of this Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of the provision or the remaining
provisions of this Guaranty
10
Section 26. Merger.
This Guaranty represents the final agreement of the Guarantor with respect
to the matters contained herein and may not be contradicted by evidence of prior
or contemporaneous agreements, or subsequent oral agreement, between the
Guarantor and the Lender.
Section 27. Execution in Counterparts.
This Guaranty may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute on and the same agreement
Section 28. No Strict Construction.
The parties hereto have participated jointly in the negotiation and
drafting of this Guaranty. In the event an ambiguity or question of intent or
interpretation arises, this Guaranty shall be construed as if drafted jointly by
the parties hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Guaranty.
Section 29. Security.
The performance of the obligations of Guarantor under this Guaranty is
secured by that certain General Security Agreement dated the date hereof from
Guarantor to Lender.
[Signatures on following page.]
11
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed, all as of the date and year first written above.
▇▇▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL INSURANCE
BROKERS LTD.
By: /s/ Primo Podorieszach
-----------------------------------
Primo Podorieszach, CEO
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Attn: Primo Podorieszach, CEO
Phone: ▇▇▇ ▇▇▇-▇▇▇▇
Fax: ▇▇▇ ▇▇▇-▇▇▇▇
12
AGREEMENT
TO: OAK STREET FUNDING LLC
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
(hereinafter the "Lender")
GRANTED BY: ▇▇▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL INSURANCE
BROKERS LTD.
having its principal office or place of business at:
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
(hereinafter the "Grantor")
SECTION 1 - DEFINITIONS
1.1. Defined Terms
(a) As used herein:
"Accounts", "Inventory", "Equipment", "Intangibles", "Chattel Paper",
"Goods", "Instruments", and "Proceeds" shall mean all of Grantor's
such property within the meanings ascribed to such terms in the PPSA.
"Collateral" shall mean all of the Grantor's property or rights in
which a security interest is granted hereunder.
"Credit Agreement" shall mean the Credit Agreement executed between
Addison York Insurance Brokers Ltd. (the "Borrower") and the Lender of
even date, as amended and/or restated from time to time.
"Deposit Accounts" shall mean any and all demand, time, savings,
passbook, or similar accounts maintained with a bank or similar
institution, but shall not include investment property or accounts
evidenced by an instrument.
"Documents" shall mean all books, records, accounts, invoices,
letters, papers, documents and other records in any form or medium
evidencing or relating to the Collateral.
"Documents of Title" shall mean all present and future documents of
title of the Grantor, whether negotiable or otherwise, including all
warehouse receipts and bills of lading.
"Encumbrance" shall include, without limitation, a security interest,
lien, hypothecation, claim, charge, deemed trust or encumbrance of any
kind whatsoever.
"Fixture" shall include articles of personal property annexed to the
Grantor's owned or leased real property so as to be regarded as a part
thereof.
"Guaranty" shall mean the Guaranty dated as of even date, made by the
Grantor in favor of the Lender with respect to the debts and
obligations of Addison York Insurance Brokers Ltd, as Borrower to the
Lender, as same may be amended, supplemented, revised, restated or
replaced from time to time.
"Intellectual Property" shall mean all intellectual property of the
Grantor, including, without limitation, (a) all patents, patent
applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (b) all
trademarks, service marks, trade dress, trade names, and corporate
names and all the goodwill and quality control standards associated
therewith; (c) all registered and unregistered statutory and common
law copyrights; (d) all registrations, applications and renewals for
any of the foregoing; (e) all trade secrets, confidential information,
ideas, formulae, compositions, know-how, manufacturing and production
processes and techniques, research and development information,
drawings, specifications, designs, plans, improvements, proposals,
technical and computer data, financial, business and marketing plans,
and customer and supplier lists and related information; (f) all other
proprietary rights (including, without limitation, all computer
software and documentation and all license agreements and sublicense
agreements to and from third parties relating to any of the
foregoing); (g) all copies and tangible embodiments of the foregoing
in whatever form or medium; (h) all damages and payments for past,
present and future infringements of the foregoing; (i) all royalties
and income due with respect to the foregoing; and (j) the right to ▇▇▇
and recover for past, present and future infringements of the
foregoing.
"Investment Property" shall mean any property of the Grantor, the
primary purpose of which is the earning of profit by the Grantor.
"Liabilities" shall mean (a) all of the obligations of Grantor \ in
favor of Lender arising under, pursuant to, or in connection with that
certain continuing Guaranty dated as of the date hereof from Grantor
to Lender, (b) all other time to time obligations of Grantor to the
Lender of every type and description, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising,
and whether or not contemplated by the Grantor or the Lender as of the
date of this Security Agreement, including, without limitation, any
modification, extension, or addition to or of the Liabilities and any
overlying advances, out of formula advances and overdrafts made or
permitted in connection with the Liabilities or other Liabilities; and
(c) any duty of the Grantor to act or to refrain from acting in
connection with any Liability.
"Lock Boxes" shall have the meaning set forth in Section 4.2(a).
"Lock Box Agreements" shall have the meaning set forth in Section
4.2(a).
"Money" shall mean all present and future money of the Grantor,
whether authorized or adopted by the Parliament of Canada as part of
its currency or any foreign government as part of its currency.
"PPSA" shall mean the Personal Property Security Act (Alberta), as the
same may be amended, supplemented or replaced from time to time.
"Subsidiaries" means, as to the Grantor, (a) a corporation of which
shares of stock having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect
a majority of the Board of Directors or other managers of such
corporation are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by the Grantor, and (b) any partnership,
association, joint venture or other entity in which the Grantor and/or
one or more Subsidiaries of the Grantor has more than a Fifty Percent
(50%) equity interest.
(b) Other capitalized terms used herein and not specifically herein
defined shall have the meanings ascribed to them in the Credit
Agreement.
(c) The term "security interest" shall include, without limitation, a
fixed mortgage, hypothecation, pledge, charge and assignment, and the
grant of the security interest herein provided for shall include,
without limitation, a fixed mortgage, hypothecation, pledge, charge
and assignment of the Collateral in favor of the Lender.
1.2. Security Interest
As a general and continuing security for the payment and performance of any and
all Liabilities, present or future, direct or indirect, absolute or contingent,
matured or not, at any time owing by the Grantor to the Lender or remaining
unpaid by the Grantor to the Lender wheresoever and howsoever incurred and
howsoever evidenced, whether arising from dealings between the Lender and the
Grantor or from other dealings or proceedings by which the Grantor may be or
become in any manner indebted, obligated or liable to the Lender, including,
without limitation, under the Guaranty, and wherever incurred and in any
currency and whether incurred by the Grantor alone or with another or others and
whether as principal, guarantor or surety including expenses under Sections 3.5
and 3.12 of this Agreement and all interest, commissions, cost of realization,
legal and other costs, charges and expenses the Grantor, IN CONSIDERATION OF THE
LIABILITIES and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, does hereby grant to the Lender, a
continuing security interest in the following Collateral:
(a) All Accounts, Deposit Accounts, Intangibles, Documents, Documents of
Title, Instruments, Investment Property, Money, Chattel Paper and any
other similar rights of the Grantor however created or evidenced,
whether now existing or hereafter owned, acquired, created, used, or
arising, specifically including, without limitation, claims, leases,
agreements, license agreements, licensing fees, royalties, policies,
insurance commissions, credit insurance, guaranties, letters of
credit, advices of credit, binders or certificates of insurance,
deposits, documents of title, securities, security interests,
licenses, goodwill, tax refunds (federal, provincial or local),
customer lists, franchises, franchise rights, drawings, designs,
marketing rights, computer programs, artwork, databases and other like
business property rights, all applications to acquire such rights, for
which application may at any time be made by the Grantor, together
with any and all books and records pertaining thereto and any right,
title or interest in any Inventory which gave rise to an Account, and
all Intellectual Property throughout the world;
(b) All Inventory, whether now existing or hereafter acquired and wherever
located, specifically including, without limitation, all merchandise,
personal property, raw materials, work in process, finished Goods,
materials and supplies of every nature usable or useful in connection
with the manufacturing, packing, shipping, advertising, selling,
leasing or furnishing of any of such Inventory and all materials of
the Grantor used or consumed or to be used or consumed in the
Grantor's business, together with any and all books and records
pertaining thereto;
(c) All Equipment, Fixtures, Goods and all other tangible personal
property of the Grantor of every kind or nature which are not
inventory or consumer goods as defined in the PPSA, whether now owned
or hereafter acquired, wherever located, specifically including,
without limitation, all machinery, trucks, boats, barges, on and off
the road vehicles, forklifts, tools, dies, jigs, presses, appliances,
implements, improvements, accessories, attachments, parts, components,
partitions, systems, carpeting, draperies and apparatus;
(d) All products and Proceeds of each of the foregoing, specifically
including, without limitation, (i) any and all Proceeds of any
insurance, indemnity, warranty or guaranty payable to the Grantor from
time to time, (ii) any and all payments of any form whatsoever made or
due and payable to the Grantor from time to time in connection with
any requisition, confiscation, condemnation, seizure or forfeiture of
all or any part of the foregoing by any governmental authority or any
Person acting under color of governmental authority, (iii) to the
extent of the value of Collateral, claims arising out of the loss,
nonconformity, or interference with the use of, defects or
infringement of rights in, or damage to, the Collateral, and (iv) any
and all other amounts from time to time paid or payable under or in
connection with any of the foregoing, whether or not in lieu thereof;
(e) All renewals, extensions, replacements, modifications, additions,
improvements, accretions, accessions, betterments, substitutions,
replacements, annexations, tools, accessories, parts and the like now
in, attached to or which may hereafter at any time be placed in or
added to any Collateral, whether or not of like kind; and
(f) All rights, remedies, claims and demands under or in connection with
each of the foregoing.
1.3. Leases
The last day of the term of any lease, oral or written, or any agreement
therefor, now held or hereafter acquired by the Grantor, shall be excepted from
the security interest hereby granted and
shall not form part of the Collateral, but the Grantor shall stand possessed of
such one day remaining, upon trust to assign and dispose of the same as the
Lender or any assignee of such lease or agreement shall direct. If any such
lease or agreement therefor contains a provision which provides in effect that
such lease or agreement may not be assigned, sub-leased, charged or encumbered
without the leave, license, consent or approval of the lessor, the application
of the security interest created hereby to any such lease or agreement shall be
conditional upon such leave, license, consent or approval having been obtained.
1.4. Grantor Remains Liable
Notwithstanding anything herein to the contrary:
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform
all its duties and obligations thereunder to the same extent as if
this Security Agreement had not been executed;
(b) the exercise by the Lender of any of the rights or remedies hereunder
shall not release the Grantor from any of its duties or obligations
under the contracts and agreements included in the Collateral; and
(c) the Lender shall not have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Lender be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
1.5. Attachment
The Grantor acknowledges and agrees that: (i) value has been given; (ii) the
Grantor has rights in the Collateral; and (iii) the security interest created
hereunder shall attach to existing Collateral upon execution of this Agreement
by the Grantor and to each item of after-acquired Collateral at the time that
the Grantor acquires any rights therein.
1.6. Subordination
Notwithstanding anything herein contained, the Lender hereby acknowledges that
its security interest in Collateral is subject and subordinate to any security
interests which exist as of the date hereof granted by Grantor to an insurance
carrier, wholesaler, provider or company (together referred to herein as the
"Insurance Carriers") in any agency or similar agreement between Grantor and
such Insurance Carrier and the Lender, at any time and from time to time, does
hereby agree, at the request of the Grantor, to enter into a subordination and
postponement agreement in favor of such Insurance Carriers and file all
necessary documents under applicable public registries, including without
limitation, the Personal Property Security Act (Alberta), to give effect to the
subordination and postponement of its security interests to any security
interest granted by the Grantor in favor of such Insurance Carrier.
SECTION 2 - REPRESENTATIONS AND WARRANTIES
The Grantor represents and warrants to and in favor of the Lender as follows.
2.1. Incorporation
The Grantor is validly amalgamated and organized, is up to date in filing its
corporate returns (including annual returns and financial statements) and is a
subsisting corporation in good standing under the laws of its jurisdiction of
incorporation and the Grantor has all necessary power and authority to own its
property and assets, to carry on its business as at present carried on by it or
as contemplated hereunder to be carried on by it and holds all necessary
licenses, permits and consents as are required so to own its property and assets
and so to carry on business in each jurisdiction in which it does so without any
violation of law or the rights of others.
2.2. Corporate Power
The Grantor has the power, capacity, full legal right and the corporate
authority to enter into this Security Agreement and the Guaranty, to grant the
security interest contained herein and to do all acts and things as are required
or contemplated hereunder to be done, observed and performed by it.
2.3. Corporate Authorization
The Grantor has taken all necessary corporate action to authorize the creation,
execution, delivery and performance of this Security Agreement and the Guaranty.
2.4. Non-Conflict
None of the execution of the Guaranty, this Security Agreement, the grant of the
security interests hereunder and the performance and observance of the terms
hereof requires the approval of any regulatory agency having jurisdiction over
the Grantor, results in the grant or creation of any Encumbrance on the property
of assets of the Grantor other than in favor of the Lender or is in
contravention of or in conflict with the articles, by-laws or resolutions of
directors or shareholders of the Grantor or the provisions of any indenture,
instrument, agreement or undertaking to which the Grantor is a party or by which
all or any part of its property or assets may be bound, any statute, regulation,
by-law, ordinance or other law, or any judgment, decree, ruling or order to
which the Grantor or its property and assets may be subject.
2.5. No Default
The Grantor is not in default in the performance or observance of any of the
obligations, covenants or conditions contained in any material contract,
agreement or other instrument to which it is a party or by which it is bound. At
the date hereof, no Default exists and no event or condition has occurred or
exists which with the passage of time or the giving of notice, or both, would
constitute a Default.
2.6. Title
Subject only to the security interests in favor of the Lender, the Grantor has
good and marketable title to the Collateral free and clear of all Encumbrances
whatsoever except as are described in the attached Schedule "B".
2.7. Enforceability
The Guaranty and this Security Agreement constitute a valid and legally binding
obligation of the Grantor enforceable against the Grantor in accordance with
their terms.
2.8. Information
The information, representations and warranties made by the Grantor to the
Lender in respect of the Grantor's assets, operations or otherwise including,
without limitation, the information contained in any financial statements and in
the Schedules attached hereto, are true and accurate in all material respects
and are not misleading in light of the circumstances existing when made or
delivered or in present circumstances. There are no facts or circumstances not
disclosed in writing to the Lender relating to the business, properties,
prospects or financial condition of the Grantor or its ability to perform its
obligations hereunder which may, in the Lender's discretion, be considered
material, including without limitation, with respect to the existence of any
contract, agreement or instrument or charter or corporate restriction which may,
in the Lender's discretion, materially adversely affect the Grantor's business,
properties, assets, operations, or condition (financial or otherwise).
2.9. Locations of Collateral
The Collateral, except where it is in transit to and from the locations herein
described is located at the location specified above as the Grantor's principal
office or place of business (and its chief place of business and chief executive
office) and at such additional addresses as are listed in Schedule "A" hereto.
The location at which all records of the Grantor pertaining to Accounts (and all
chattel paper which evidences Accounts) and contract rights are kept is the
location specified above unless the contrary is indicated in Schedule "A".
2.10. No Litigation
Other than the litigation or proceedings pending against the Grantor identified
in Schedule "C" hereto, there is no litigation, proceeding or governmental
investigation, administrative or judicial, pending or threatened, against the
Grantor or any of its subsidiaries which, if decided adversely to the Grantor or
such subsidiary(ies) might have a materially adverse effect on the business,
properties or condition (financial or otherwise) of the Grantor or such
subsidiary(ies) or on the ability or the Grantor to perform its obligations
hereunder or under any other agreement between the Grantor and the Lender.
2.11. Taxes
The Grantor and each of its subsidiaries has filed all federal, state,
provincial and other tax returns required to be filed, and all taxes,
assessments and other governmental charges (the "Tax
Liabilities") due from each of the Grantor and its subsidiaries have been fully
paid. Neither the Grantor nor any of its subsidiaries has executed any waiver
that would have the effect of extending any applicable statute of limitations in
respect of Tax Liabilities. Each of the Grantor and its subsidiaries has
established on its books reserves adequate for the payment of all Tax
Liabilities.
2.12. Survival
All representations and warranties of the Grantor made herein or in any
certificate or other document delivered by or on behalf of the Grantor to the
Lender are material, shall be deemed to have been relied upon by the Lender
notwithstanding any investigation heretofore or hereafter made by or on behalf
of the Lender, shall survive the execution and delivery of this Security
Agreement and shall continue in full force and effect without time limit.
2.13. Financial Statements
All financial statements of Grantor were prepared in accordance with Canadian or
U.S. generally accepted accounting principles (GAAP), consistent with prior
years, unless specifically otherwise noted thereon, and fairly present the
financial condition of Grantor as of the date thereof and the results of its
operations for the period then ended, and no material adverse change in the
financial condition of Grantor has occurred since the date of the financial
statements.
2.14. No Material Adverse Change
The information submitted by Grantor to Lender discloses all known or
anticipated material liabilities, direct or contingent, of Grantor and its
Subsidiaries as of the dates thereof, and, to the best knowledge of Grantor,
since such dates, there has been no material adverse change in Grantor's or its
Subsidiaries' financial condition.
2.15. Indebtedness
Except as shown on the financial statements of Grantor, except as set forth on
Schedule "D" hereto, and except for trade debt incurred in the ordinary course
of business since the date of the financial statements, Grantor has no
outstanding indebtedness.
2.16. Full Disclosure
No information, exhibit, memorandum, or report (excluding estimated future
operating results) furnished by Grantor to Lender in connection with the
negotiation of the Guaranty or this Agreement contains any material misstatement
of fact, or omits to state any fact necessary to make the statements contained
therein not materially misleading in light of the circumstances when made, and
all estimated future operating results, if furnished, were prepared on the basis
of assumptions, data, information, tests or other conditions believed to be
valid or accurate or to exist at the time such estimates were prepared and
furnished. To Grantor's knowledge, there presently exists no fact or
circumstance relative to Grantor, whether or not disclosed, which is presently
anticipated to have a Material Adverse Effect.
2.17. Contracts of Surety
Except for the endorsements of Grantor of negotiable instruments for deposit or
collection in the ordinary course of business, Grantor is not a party to any
contract of guaranty or surety.
2.18. Licenses
Grantor possesses such franchises, licenses, permits, patents, copyrights,
trademarks, and consents of appropriate governmental authorities to own its
property and as are necessary to carry on its business.
2.19. Compliance with Law
Grantor is in compliance with and conformity with all laws, ordinances, rules,
regulations and all other legal requirements applicable to its business and
assets, the violation of which would have a material effect on its business or
financial condition. Grantor has not received nor does it have a reasonable
basis to expect any order or notice of violation or claim of violation of any
law, ordinance, rules or regulation. The properties on which Grantor is
conducting its business are properly zoned for the activities conducted or to be
conducted thereon, and all required variances have been obtained, and are in
full force and effect with no notice or threat of invalidity, expiration or
lapse of any kind.
2.20. Force Majeure
Neither the business nor the properties of Grantor are presently affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty that could reasonably be expected to have a Material Adverse Effect on
its business or financial condition.
2.21. Approvals
No authorization, consent, approval or any form of exemption of any governmental
authority is required in connection with the execution and delivery by Grantor
of the Guaranty or this Agreement or the performance by Grantor thereunder.
2.22. Insolvency
Grantor is not "insolvent" within the meaning of that term as defined under the
Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act
(Canada) or the Winding-Up and Restructuring Act (Canada), and is able to pay
its debts as they mature.
2.23. General
All statements contained in any certificate or financial statement delivered by
or on behalf of Grantor to Lender under this Agreement and the Guaranty shall
constitute representations and warranties made by Grantor hereunder.
2.24. Subsidiaries
Each Subsidiary of Grantor is listed on Schedule E hereto. With the exception of
Borrower, no Subsidiary of Grantor has any right, title, or interest in any real
or personal property, whether tangible or intangible, exceeding a value of
$100,000.
SECTION 3 - COVENANTS OF GRANTOR
The Grantor covenants and agrees with the Lender as follows.
3.1. Repair
The Grantor shall diligently repair, maintain, use, care for, protect and
operate the Collateral and shall carry on and conduct its business in a proper
and efficient manner so as to preserve and protect the Collateral and the
earnings, incomes, rents, issues and profits thereof.
3.2. Information
The Grantor shall keep proper books of account in accordance with sound
accounting practice and applicable laws with respect to questionable, improper
or corrupt payments, shall promptly furnish to the Lender such information with
respect to the Collateral and the Grantor and its business including, without
limitation, financial information and statements relating to its business and
the Collateral, as the Lender may from time to time reasonably require and shall
promptly notify the Lender of all proceedings (pending or threatened) before any
court, board, tribunal or similar body or any occurrence, condition or event
which could have a Material Adverse Effect on the business, property, assets or
condition (financial or otherwise) of the Grantor or any of its subsidiaries.
The Grantor shall permit the Lender or its authorized agents, at any times and
at the expense of the Grantor, to audit its Accounts under reasonable procedures
directly with account debtors or by other procedures, to have access to all
premises occupied by the Grantor or any place where the Collateral may be found
in order to discuss the affairs, finances and accounts of the Grantor with
appropriate officers, to inspect the Collateral and to examine the information
contained in any records or other writings of the Grantor including, without
limitation, books of account and other financial records and reports relating to
the Collateral, to have temporary custody thereof and to make copies thereof and
take extracts therefrom and shall, at the reasonable request of the Lender, ▇▇▇▇
the Collateral to indicate clearly the security interest of the Lender.
3.3. Make Payments
The Grantor shall pay all rents, taxes, rates, levies, assessments and
government fees or dues lawfully levied, assessed or imposed in respect of the
Collateral or any part thereof as and when the same shall become due and payable
except as are being contested in good faith by proper legal proceedings with
respect to which adequate reserves have been established and are being
maintained and shall exhibit to the Lender, when required, the receipts and
vouchers evidencing such payments.
3.4. Encumbrances
Except for any Encumbrances in favor of the Lender and those Encumbrances
identified on Schedule B hereto and purchase money security interests in
Equipment, validly created in accordance with the PPSA, on Collateral hereafter
acquired by the Debtor, the Grantor shall keep the Collateral free at all times
from any and all Encumbrances of whatsoever nature, kind or priority other than
those consented to by the Lender or Encumbrances which, in the sole opinion of
counsel to the Lender, are satisfactorily subordinated to Encumbrances in favor
of the Lender, defend the title to the Collateral against all persons, not
permit the Collateral to become an accession to any property not subject to the
security interest granted by this Security Agreement or a security interest
consented to by the Lender that is subordinate to the Lender's security interest
and not to become a fixture unless the security interest of the Lender ranks
prior to the interests of all persons in the realty. The Lender may, at any
time, contest the validity and enforceability against it or the Grantor of any
Encumbrance including, without limitation, any purchase money security interest.
3.5. Insurance
The Grantor shall cause all of the Collateral which is of a character usually
insured by businesses owning or operating Collateral of a similar nature to be
properly insured and kept insured with reputable insurers acceptable to the
Lender, against loss or damage by fire or other risks and hazards usually
insured against by businesses owning or operating Collateral of a similar
nature, in such amounts, containing such terms, in such form and for such
purposes, as may be satisfactory to the Lender. Loss under such insurance shall
be payable to the Lender as its interest may appear and such insurance shall
contain a mortgage clause acceptable to the Lender. The Grantor shall, at the
Lender's request, provide satisfactory evidence that such insurance has been
effected, that loss thereunder is payable to the Lender as its interest may
appear and any other information relating to such insurance as the Lender may
require. If the Grantor fails to maintain satisfactory insurance, the Lender
may, at its option, obtain such insurance at the expense of the Grantor and the
Grantor shall forthwith repay all costs and expenses incurred by the Lender in
connection therewith and all such costs and expenses shall be deemed advanced to
the Grantor by the Lender, shall become part of the Liabilities, shall bear
interest at the highest rate per annum charged by the Lender on the Liabilities
or any part thereof and shall be secured by this Security Agreement.
3.6. Compliance with Governmental Requirements
The Grantor shall duly observe and comply with all requirements of any
governmental authority applicable to the Collateral or its use and operation and
shall observe and comply with all covenants, terms and conditions upon or under
which the Collateral is held.
3.7. Permitted Disposals
The Grantor shall not, except as otherwise permitted hereunder, remove, destroy,
lease, sell or otherwise dispose of any of the Collateral except equipment which
has become worn out or damaged or otherwise unsuitable for its purpose, in which
case the Grantor shall substitute for such equipment, subject to the security
interest created hereby and free from any other security
interests, property of equal value such that the security hereby constituted
shall not thereby be in any way reduced or impaired.
3.8. No Change in Business
The Grantor shall not, without the prior written consent of the Lender, which
consent shall be conditional on the receipt by the Lender of all security and
deeds of confirmation as its counsel may consider advisable to protect the
Lender's interest, directly or indirectly: change the nature of its business;
change its fiscal year; otherwise incur any material (determined in the Lender's
reasonable discretion) capital expenditures in excess of, cumulatively, US
$25,000 per annum (including, without limitation, entering into equipment
leases); guarantee, endorse or otherwise become surety for or upon the
obligations of others, except to the Lender, or to others which, in the sole
opinion of counsel to the Lender, creates an Encumbrance which is subordinate to
Encumbrances of the Lender or by endorsement of negotiable instruments for
deposit or collection in the ordinary course of its business; provide financial
assistance (including, without limitation, by way of loans to, investments in
and assumptions of obligations) to any person, corporation, partnership or other
entity other than by way of advances and extensions of credit in the ordinary
course of its business or with the consent of the Lender or which, in the sole
opinion of counsel to the Lender, creates an Encumbrance which is subordinate to
Encumbrances of the Lender; sell, discount or dispose of any note, instrument,
account or other obligation owing to the Grantor; amalgamate, reconstruct,
consolidate or otherwise merge with any person or entity other than with a
wholly owned subsidiary of the Grantor; enter into an arrangement or agreement
for the sale of any substantial portion of the Collateral other than in the
ordinary course of business; permit all or a substantial portion of the
Collateral to become the property of any other person or entity, whether in one
or a series of transactions; otherwise cease to carry on business as a going
concern; do or omit to do any other act or thing that could materially adversely
affect its business, financial condition, assets or position or its ability to
carry on the business as now conducted by it; or allow, permit or authorize any
such change in business, acquisition, extension of financial assistance, merger,
reconstruction, consolidation, carrying on of business, arrangement or cessation
of business of any of its subsidiaries except a merger contemplated herein.
3.9. Dividends, etc.
The Grantor shall not pay, make or declare any cash or other dividend or
distribution to any person who holds an equity interest in the Grantor, whether
evidenced by a security or not, without the prior written consent of the Lender.
3.10. No Further Indebtedness
The Grantor shall not incur, assume or suffer to exist or in any manner become
liable, directly or indirectly, for any further or additional indebtedness or
liabilities other than:
(a) To the Lender;
(b) Any other debt which, in the sole opinion of counsel to the Lender, is
satisfactorily subordinated to all indebtedness contingent or
otherwise owing to the Lender by the Grantor;
(c) For taxes, assessments or governmental charges to the extent that
payment therefore shall not, at the time, be required to be made
hereunder;
(d) On open account for the purchase price of services, materials or
supplies incurred by the Grantor in the ordinary course of business
and not as a result of borrowing and provided that such indebtedness
shall be promptly paid and discharged when due in conformity with
ordinary trade terms, except for any such indebtedness which is being
contested in good faith by the Grantor by appropriate proceedings and
adequate reserves for which have been established and are being
maintained and in connection with which no Encumbrance has been placed
on the property of the Grantor; and
(e) For the purchase price of capital assets incurred in the ordinary
course of business and as expressly permitted hereunder.
3.11. Notice Regarding Change of Address, etc.
The Grantor shall notify the Lender in writing:
(a) At least 20 days prior to any change of name of the Grantor;
(b) At least 20 days prior to any transfer of the Grantor's interest in
any part of the Collateral, not expressly permitted hereunder;
(c) Promptly of any significant loss of or damage to Collateral;
(d) At least 20 days prior to any change in the location(s) of the
Collateral and any records relating thereto; and
(e) Forthwith upon becoming aware of the existence of any condition or
event which could cause or which, with the passage of time or notice,
or both, constitute a Default, give the Lender written notice thereof
specifying the nature and duration thereof and the action being taken
or proposed to be taken with respect thereto.
3.12. Protective Disbursements - Legal Fees
If the Grantor fails to pay any amounts required to be paid by it under this
Security Agreement or to observe or perform any of the covenants and obligations
set forth in this Security Agreement to be observed or performed by it, the
Lender may, but shall be under no obligation to, pay such amounts or observe and
perform any of such covenants and obligations in any manner deemed proper by the
Lender, without waiving any of its rights under this Security Agreement. No such
payment or performance by the Lender shall relieve the Grantor from any default
under this Security Agreement or the consequences of such default. The
reasonable expenses, including the cost of any insurance, payment of taxes or
other charges and legal fees and expenses on a solicitor and his own client
scale, paid by the Lender in respect of the custody, preservation, use or
operation of the Collateral shall be deemed advanced to the Grantor by the
Lender, shall become part of the Liabilities, shall bear interest at the highest
rate per annum charged by the Lender on the Liabilities or any part thereof and
shall be secured by this Security Agreement. In
addition, the Grantor shall pay all reasonable costs, claims, damages and
expenses including, without limitation, legal fees and expenses on a solicitor
and his own client scale, incurred by the Lender in connection with the
preparation, perfection, execution, protection, enforcement of and advice with
respect to this Security Agreement, the realization, disposing of, retaining,
protecting or collecting of the Collateral or any part thereof and the
protection and enforcement of the rights of the Lender hereunder, and all such
costs and expenses shall be deemed advanced to the Grantor by the Lender, shall
become part of the Liabilities, shall bear interest at such highest rate per
annum charged by the Lender on the Liabilities or any part thereof and shall be
secured by this Security Agreement.
3.13. Post-Default Payments
Upon the occurrence and during the continuance of a Default, the Grantor shall
not pay to or compensate any officer, director or employee, or any member of
such person's family, any additional cash compensation in the form of a cash
bonus, or other similar cash incentive compensation.
3.14. Capital Stock
Without the prior written consent of Lender, Grantor shall not directly or
indirectly redeem or acquire any of its own capital stock, or any options,
warrants or any securities in respect of its capital stock prior to March 19,
2009.
3.15. Financial Reporting
Grantor shall furnish or caused to be furnished to Lender:
(a) as soon as practicable, but in any event within ninety (90) days after
the end of each fiscal year, financial statements of each of the Grantor
and its Subsidiaries (on a consolidated basis) audited by independent
certified public accountants acceptable to Lender, including a balance
sheet, statement of income and retained earnings and a statement of cash
flows, with accompanying notes to financial statements, all prepared in
accordance with GAAP (with all amounts denominated in Dollars) on a basis
consistent with prior years unless specifically noted thereon, accompanied
by the unqualified report of such auditors thereon, and further accompanied
by the certificate of the chief executive officer or chief financial
officer of Grantor that there exists no Default under the this Agreement or
the Guaranty, or if any Default exists, stating the nature and status
thereof;
(b) As soon as possible, but in any event within fifteen (15) days after
the end of each month, similar consolidated financial statements of the
Grantor and its Subsidiaries (on a consolidated basis) as of the end of
such quarter and the results of its operations for the portion of the
fiscal year then elapsed, prepared and signed by the chief financial
officers of the Grantor and its Subsidiaries, all prepared in accordance
with GAAP (with all amounts denominated in Dollars) on a basis consistent
with prior periods, unless specifically otherwise noted thereon, and
accompanied by the certificate of the chief executive officer or chief
financial
officer of the Grantor that there exists no Default under the Loan
Documents or if any Default exists, stating the nature and status thereof;
(c) as soon as possible, but in any event within three (3) days after the
Grantor becomes aware thereof, a written statement signed by the chief
executive or chief financial officer of Grantor as to the occurrence of any
Default stating the specific nature thereof, Grantor's intended action to
cure the same and the time period in which such cure is to occur;
(d) as soon as possible, but in any event within twenty (20) days after the
commencement thereof, a written statement describing any litigation
instituted by or against the Grantor, or any Affiliate which, if adversely
determined, may have a Material Adverse Effect on the business or financial
condition of Grantor and its Subsidiaries;
(e) promptly upon the filing thereof, copies of all filed prospectuses and
annual, quarterly, monthly, or other regular reports which the Grantor
files with any securities commission or other governmental authority;
(f) such other information as Lender may from time to time reasonably
request.
3.16. Reports
The Grantor shall file, as appropriate, on a timely basis, annual reports,
operating records and any other reports or filings required to be made with any
governmental authority.
3.17. Licenses
The Grantor shall maintain in full force and effect all material operating
permits, licenses, franchises, and rights used by it in the ordinary course of
business.
3.18. Notice of Material Adverse Effect
The Grantor shall give prompt notice in writing to Lender of the occurrence of
any development, financial or otherwise, including pending or threatened
litigation, which might have a Material Adverse Effect upon the Grantor's
financial condition, business or future prospects.
3.19. Compliance with Law
The Grantor shall comply with all material laws, ordinances, rules, regulations
and other legal requirements applicable to it, except where the failure to do so
could not be reasonably expected to result in a Material Adverse Effect upon the
Grantor's financial condition, business or future prospects.
3.20. Financial Condition
The Grantor shall maintain its financial condition and management (including,
without limitation, insurance agents) of such skill and experience as is
currently in place and necessary to support fully its business.
3.21. Subsidiaries
Except for the Subsidiaries listed in Schedule E hereto, the Grantor shall not
create or acquire any additional Subsidiaries without the prior consent of the
Lender. In the event that any Subsidiaries of the Grantor have right, title, or
interest in any real or personal property, whether tangible or intangible,
exceeding a value of $100,000, the Grantor shall cause each Subsidiary to
deliver to the Lender an executed Guaranty and appropriate corporate
resolutions, opinions and other documentation in form and substance reasonably
satisfactory to the Lender, such Guaranty and other documentation to be
delivered to Lender as promptly as possible but in any event within thirty (30)
days of determination that a Subsidiary needs to be added as a Guarantor.
Simultaneously with any such Subsidiary becoming a Guarantor, the Grantor shall
also cause such Subsidiary to (i) execute and deliver a Subsidiary Security
Agreement (and deliver the other documents required thereby, including, without
limitation, restricted account agreements), if applicable, and such other
collateral documents as the Lender may require its sole and reasonable
discretion; and (ii) deliver such other documentation as the Lender may
reasonably require in connection with the foregoing, including, without
limitation, appropriate financing statements, certified resolutions and other
organizational and authorizing documents of such Subsidiary, favorable opinions
of counsel to such Subsidiary (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the documentation
referred to above and the perfection of the Lender's liens thereunder).
SECTION 4 - COLLECTION OF PROCEEDS
4.1. Payments to Lender
The Grantor shall:
(a) Collect and enforce payment of all Accounts (except as provided for in
Section 4.2) and shall dispose of and receive payment for all
Inventory which is ordinarily disposed of in the Grantor's business;
(b) Receive and hold in trust for the Lender, all payments on or
instruments received in respect of the Collateral, all rights by way
of suretyship or guarantee which the Grantor now has or may hereafter
acquire to enforce payment of Collateral and all rights in the nature
of a security interest whereby the Grantor may satisfy any Collateral
out of property, and all non-cash proceeds of any such collection,
disposition or realization of any of the Collateral shall be subject
to the security interest hereby created;
(c) Endorse to the Lender and forthwith deliver to it all such payments
and instruments in the form received by the Grantor; and
(d) Forthwith deliver to the Lender all property in the Grantor's
possession or hereafter coming into its possession through enforcement
of any such rights.
4.2. Collection and Application of Collateral Proceeds; Deposit Accounts
(a) Collection of Accounts.
(1) The Grantor will (i) cause each bank or other financial
institution in which it maintains (a) a Deposit Account,
including each Deposit Account maintained by the Grantor into
which all cash, checks, or other similar payments relating to or
constituting payments made in respect of Accounts will be
deposited (a "Collateral Deposit Account"), to enter into a
control agreement with the Lender, in form and substance
satisfactory to the Lender in order to give the Lender control of
the Deposit Account or (b) other deposits (general or special,
time or demand, provisional or final) to be notified of the
security interest granted to the Lender hereunder and cause each
such bank or other financial institution to acknowledge such
notification in writing, and (ii) upon the Lender's request after
the occurrence and during the continuance of a Default, deliver
to each such bank or other financial institution a letter, in
form and substance acceptable to the Lender, transferring
ownership of the Deposit Account to the Lender or transferring
dominion and control over each such other deposit to the Lender
until such time as no Default exists.
(2) Upon the occurrence of a Default or Unmatured Default, establish
lock box service (the "Lock Boxes") with the bank(s) set forth in
Appendix I hereto, which Lock Boxes shall be subject to
irrevocable lockbox agreements in the form provided by or
otherwise acceptable to the Lender and shall be accompanied by an
acknowledgment by the bank where the Lock Box is located of the
Lien of the Lender granted hereunder and of irrevocable
instructions to wire all amounts collected therein to the
Collection Account (as hereinafter defined) (a "Lock Box
Agreement"). Upon the occurrence of a Default or Unmatured
Default, (a) the Grantor shall direct all of its Account Debtors
to forward payments directly to Lock Boxes subject to Lock Box
Agreements, (b) the Lender shall have sole access to the Lock
Boxes at all times and the Grantor shall take all actions
necessary to grant the Lender such sole access, (c) at no time
shall the Grantor remove any item from the Lock Box or from a
Collateral Deposit Account without the Lender's prior written
consent, (d) if the Grantor should refuse or neglect to notify
any Account Debtor to forward payments directly to a Lock Box
subject to a Lock Box Agreement after notice from the Lender, the
Lender shall be entitled to make such notification directly to
Account Debtor, (e) if notwithstanding the foregoing
instructions, the Grantor receives any proceeds of any Accounts,
the Grantor shall receive such payments as the Lender's trustee,
and shall immediately deposit all cash, checks or other similar
payments related to or constituting payments made in respect of
Accounts received by it to a Collateral Deposit Account, (f) all
funds deposited into any Lock Box subject to a Lock Box Agreement
or a Collateral Deposit Account will be swept on a daily basis
into a collection account maintained by the Grantor with Bank
One, N.A., or its successors, (the "Collection Account"), and (g)
the Lender shall hold and apply funds received into the
Collection Account as provided by the terms of Section 4.2(c).
(b) Covenant Regarding New Deposit Accounts; Lock Boxes. Before opening or
replacing any Collateral Deposit Account, other Deposit Account, or
establishing a new Lock Box, the Grantor shall (a) obtain the Lender's
consent in writing to the opening of such Deposit Account or Lock Box,
and (b) cause each bank or financial institution in which it seeks to
open (i) a Deposit Account, to enter into a Deposit Account Control
Agreement with the Lender in order to give the Lender Control of such
Deposit Account, or (ii) a Lock Box, to enter into a Lock Box
Agreement with the Lender in order to give the Lender Control of the
Lock Box.
(c) Application of Proceeds; Deficiency. Upon the occurrence of a Default
or an Unmatured Default, all amounts deposited in the Collection
Account shall be deemed received by the Lender for application in
satisfaction of the Liabilities. In no event shall any amount be so
applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account. The Lender
shall require all other cash proceeds of the Collateral to be
deposited in a special non-interest bearing cash collateral account
with a bank of the Lender's choosing and held there as security for
the Liabilities. The Grantor shall have no control whatsoever over
said cash collateral account. Any such proceeds of the Collateral
shall be applied in the order set forth in the Credit Agreement unless
a court of competent jurisdiction shall otherwise direct. The balance,
if any, after all of the Liabilities have been satisfied, shall be
deposited by the Lender into the Grantor's general operating account.
The Grantor shall remain liable for any deficiency if the proceeds of
any sale or disposition of the Collateral are insufficient to pay all
Liabilities, including any attorneys' fees and other expenses incurred
by the Lender to collect such deficiency.
SECTION 5 - DEFAULT
5.1. Defaults
Without in any way limiting or restricting the demand nature of any of the
Liabilities and the Lender's rights to demand, at any time, payment of any or
all of the Liabilities payable on demand, the Liabilities secured by this
Security Agreement shall be immediately due and payable in full and the security
hereby constituted shall become enforceable without the need for any action or
notice on the part of the Lender upon the happening of any of the following
events (herein called a "Default"):
(a) If the Grantor shall fail to make any payment of any of the
Liabilities when due;
(b) If the Grantor commits a breach of or fails to observe or perform any
of the covenants, terms or conditions contained in this Security
Agreement or in any other agreement or instrument from time to time in
effect between the Grantor and the Lender, whether relating to the
Liabilities or not, or if any representation or warranty of the
Grantor made to the Lender or otherwise contained herein or in any
other agreement or instrument from time to time in effect between the
Grantor and the Lender, whether relating to the Liabilities or not,
shall be
established by the Lender to have been incorrect in any material
(determined in the Lender's sole discretion) respect;
(c) If any guarantor (individually a "Guarantor" and collectively
`Guarantors") of the Liabilities commits a breach of or fails to
observe or perform any covenant, term or condition contained in any
agreement or writing to which the Guarantor and the Lender are
parties;
(d) If the Grantor shall default under any instrument or agreement with
respect to any indebtedness or other obligation of it to the Lender or
to any creditor or other person, provided that such default has
resulted in, or may result in, with notice or lapse of time, or both,
the acceleration of any such indebtedness or obligation in favor of
such person, in excess of $25,000, or the right of such person to
realize upon the Collateral;
(e) If the Grantor or any Guarantor ceases paying its debts as they
mature, ceases or threatens to cease to carry on its business, makes
an assignment for the benefit of creditors, commits any act or does
any thing constituting or being an event of bankruptcy or insolvency
(as defined or provided for in any applicable statute), fails to
defend in good faith any action, suit or proceeding commenced against
it, fails to discharge or appeal forthwith any judgment for the
payment of money rendered against it, fails to pay any taxes, rates or
charges when due, in consequence of which any lien or other
Encumbrance, inchoate or otherwise, upon the Collateral arises or
could arise thereby, applies to any tribunal or similar body for the
appointment or authorization of any receiver, trustee, liquidator or
sequestrator or otherwise commences any proceedings relating to any
substantial portion of its property under any reorganization,
arrangement or readjustment of debt, dissolution, winding-up,
adjustment, composition or liquidation law or statute of any
jurisdiction including, without limitation, under the Companies'
Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act
(Canada) or the Winding-Up and Restructuring Act (Canada), whether now
or hereafter in effect (each of the foregoing herein referred to as a
"Proceeding");
(f) If there is commenced against the Grantor or any Guarantor any
Proceeding and an order approving the petition or dissolution,
liquidation or winding up is entered, or such Proceeding remains
undismissed for a period of 30 days, any receiver, trustee,
liquidator, sequestrator or similar official of or for the Grantor or
any Guarantor or any substantial portion of the property of the
Grantor or any Guarantor is appointed, the Grantor or any Guarantor by
any act indicates consent to or approval of or acquiescence in any
Proceeding or the appointment of any receiver, trustee, liquidator,
sequestrator or similar official of or for the Grantor or any
Guarantor or any substantial portion of the property of the Grantor or
any Guarantor or if any writ of seizure and sale, distress or similar
process is levied or enforced against a substantial portion of the
property and assets of the Grantor or any Guarantor or otherwise
remains undischarged or not defended or appealed forthwith; or
(g) If the Lender, in its absolute discretion, concludes as the result of
the occurrence of any material change in the condition or affairs
(financial or otherwise) of the Grantor or any Guarantor, that the
essential basis of the Liabilities or security hereby constituted has
been impaired or otherwise altered.
SECTION 6 - REMEDIES ON DEFAULT
If the security hereby constituted becomes enforceable, the Lender shall have,
in addition to any other rights, remedies and powers which it may have at law,
in equity or under the PPSA, the following rights, remedies and powers:
6.1. Power of Entry
The Grantor shall forthwith upon demand assemble and deliver to the Lender
possession of all of the Collateral at such place as may be specified by the
Lender. The Lender may take such steps as it considers necessary or desirable to
obtain possession of all or any part of the Collateral and, to that end, the
Grantor agrees that the Lender, its servants or agents or Receiver may, at any
time, during the day or night, enter upon lands and premises where the
Collateral may be found for the purpose of taking possession of and/or removing
the Collateral or any part thereof. In the event of the Lender taking possession
of the Collateral, or any part thereof, the Lender shall have the right to
maintain the same upon the premises on which the Collateral may then be situate.
The Lender may, in a reasonable manner, take such action or do such things as to
render any Equipment unusable.
6.2. Power of Sale
The Lender may sell, lease or otherwise dispose of all or any part of the
Collateral, as a whole or in separate parcels, by public auction, private tender
or by private contract, with or without notice, except as otherwise required by
applicable law, with or without advertising and without any other formality, all
of which are hereby waived by the Grantor. Such sale, lease or disposition shall
be on such terms and conditions as to credit and otherwise and as to upset or
reserve bid or price as to the Lender, in its sole discretion, may seem
advantageous. If such sale, transfer or disposition is made on credit or part
cash and part credit, the Lender need only credit against the Liabilities the
actual cash received at the time of the sale. Any payments made pursuant to any
credit granted at the time of the sale shall be credited against the Liabilities
as they are received. The Lender may buy in or rescind or vary any contract for
sale of all or any of the Collateral and may resell without being answerable for
any loss occasioned thereby. Any such sale, lease or disposition may take place
whether or not the Lender has taken possession of the Collateral. The Lender
may, before any such sale, lease or disposition, perform any commercially
reasonable repair, processing or preparation for disposition and the amount so
paid or expended shall be deemed advanced to the Grantor by the Lender, shall
become part of the Liabilities, shall bear interest at the highest rate per
annum charged by the Lender on the Liabilities or any part thereof and shall be
secured by this Security Agreement.
6.3. Validity of Sale
No person dealing with the Lender or its servants or agents shall be concerned
to inquire whether the security hereby constituted has become enforceable,
whether the powers that the Lender is
purporting to exercise have become exercisable, whether any money remains due on
the security of the Collateral, as to the necessity or expedience of the
stipulations and conditions subject to which any sale, lease or disposition
shall be made, otherwise as to the propriety or regularity of any sale or any
other dealing by the Lender with the Collateral or to see to the application of
any money paid to the Lender. In the absence of fraud on the part of such
persons, such dealings shall be deemed, so far as regards the safety and
protection of such person, to be within the powers hereby conferred and to be
valid and effective accordingly.
6.4. Receiver-Manager
The Lender may, in addition to any other rights it may have, appoint by
instrument in writing a receiver or receiver and manager (both of which are
herein called a "Receiver") of all or any part of the Collateral or may
institute proceedings in any court of competent jurisdiction for the appointment
of such a Receiver. Any such Receiver is hereby given and shall have the same
powers and rights and exclusions and limitations of liability as the Lender has
under this Security Agreement, at law or in equity. In exercising any such
powers, any such Receiver shall, to the extent permitted by law, act as and for
all purposes shall be deemed to be the agent of the Grantor and the Lender shall
not be responsible for any act or default of any such Receiver. The Lender may
appoint one or more Receivers hereunder and may remove any such Receiver or
Receivers and appoint another or others in his or their stead from time to time.
Any Receiver so appointed may be an officer or employee of the Lender. A court
need not appoint, ratify the appointment by the Lender of or otherwise supervise
in any manner the actions of any Receiver. Upon the Grantor receiving notice
from the Lender of the taking of possession of the Collateral or the appointment
of a Receiver, all powers, functions, rights and privileges of each of the
directors and officers of the Grantor with respect to the Collateral shall
cease, unless specifically continued by the written consent of the Lender.
6.5. Carrying on Business
The Lender may carry on, or concur in the carrying on of, all or any part of the
business or undertaking of the Grantor, may, to the exclusion of all others,
including the Grantor, enter upon, occupy and use all or any of the premises,
buildings, plant and undertaking of or occupied or used by the Grantor and may
use all or any of the tools, machinery, equipment and intangibles of the Grantor
for such time as the Lender sees fit, free of charge, to carry on the business
of the Grantor and, if applicable, to manufacture or complete the manufacture of
any Inventory and to pack and ship the finished product.
6.6. Dealing with Collateral
The Lender may seize, collect, realize, dispose of, enforce, release to third
parties or otherwise deal with the Collateral or any part thereof in such
manner, upon such terms and conditions and at such time or times as may seem to
it advisable, all of which without notice to the Grantor except as otherwise
required by any applicable law. The Lender may demand, ▇▇▇ for and receive any
Accounts with or without notice to the Grantor, give such receipts, discharges
and extensions of time and make such compromises in respect of any Accounts
which may, in the Lender's absolute discretion, seem bad or doubtful. The Lender
may charge on its own behalf and pay to others, sums for costs and expenses
incurred including, without limitation, legal fees
and expenses on a solicitor and his own client scale and Receivers' and
accounting fees, in or in connection with seizing, collecting, realizing,
disposing, enforcing or otherwise dealing with the Collateral and in connection
with the protection and enforcement of the rights of the Lender hereunder
including, without limitation, in connection with advice with respect to any of
the foregoing. The amount of such sums shall be deemed advanced to the Grantor
by the Lender, shall become part of the Liabilities, shall bear interest at the
highest rate per annum charged by the Lender on the Liabilities or any part
thereof and shall be secured by this Security Agreement.
6.7. Retention of Collateral
Upon notice to the Grantor and subject to any obligation to dispose of any of
the Collateral, as provided in the PPSA, the Lender may elect to retain all or
any part of the Collateral in satisfaction of the Liabilities or any of them.
6.8. Pay Encumbrances
The Lender may pay any Encumbrance that may exist or be threatened against the
Collateral. In addition, the Lender may borrow money required for the
maintenance, preservation or protection of the Collateral or for the carrying on
of the business or undertaking of the Grantor and may grant further security
interests in the Collateral in priority to the security interest created hereby
as security for the money so borrowed. In every such case the amounts so paid or
borrowed together with costs, charges and expenses incurred in connection
therewith shall be deemed to have been advanced to the Grantor by the Lender,
shall become part of the Liabilities, shall bear interest at the highest rate
per annum charged by the Lender on the Liabilities or any part thereof and shall
be secured by this Security Agreement.
6.9. Application of Payments Against Liabilities
Any and all payments made in respect of the Liabilities from time to time and
moneys realized on the Collateral may be applied to such part or parts of the
Liabilities as the Lender may see fit. The Lender shall, at all times and from
time to time, have the right to change any appropriation as it may see fit. Any
insurance moneys received by the Lender pursuant to this Security Agreement may,
at the option of the Lender, be applied to rebuilding or repairing the
Collateral or be applied against the Liabilities in accordance with the
provisions of this Section.
6.10. Set-Off
The Liabilities will be paid by the Grantor without regard to any equities
between the Grantor and the Lender or any right of set-off or cross-claim. Any
indebtedness owing by the Lender to the Grantor may be set off and applied by
the Lender against the Liabilities at any time or from time to time either
before or after maturity, without demand upon or notice to anyone.
6.11. Deficiency
If the proceeds of the realization of the Collateral are insufficient to repay
the Lender all moneys due to it, the Grantor shall forthwith pay or cause to be
paid to the Lender such deficiency.
6.12. Lender Not Liable
The Lender shall not be liable or accountable for any failure to seize, collect,
realize, dispose of, enforce or otherwise deal with the Collateral, shall not be
bound to institute proceedings for any such purposes or for the purpose of
preserving any rights of the Lender, the Grantor or any other person, firm or
corporation in respect of the Collateral and shall not be liable or responsible
for any loss, cost or damage whatsoever which may arise in respect of any such
failure including, without limitation, resulting from the negligence of the
Lender or any of its officers, servants, agents, solicitors, attorneys,
Receivers or otherwise. Neither the Lender nor its officers, servants, agents or
Receivers shall be liable by reason of any entry into possession of the
Collateral or any part thereof, to account as a mortgagee in possession, for
anything except actual receipts, for any loss on realization, for any act or
omission for which a mortgagee in possession might be liable, for any negligence
in the carrying on or occupation of the business or undertaking of the Grantor
as provided in Section 6.5 or for any loss, cost, damage or expense whatsoever
which may arise in respect of any such actions, omissions or negligence.
6.13. Extensions of Time
The Lender may grant renewals, extensions of time and other indulgences, take
and give up securities, accept compositions, grant releases and discharges,
perfect or fail to perfect any securities, release any part of the Collateral to
third parties and otherwise deal or fail to deal with the Grantor, debtors of
the Grantor, Guarantors, sureties and others and with the Collateral and other
securities as the Lender may see fit, all without prejudice to the liability of
the Grantor to the Lender or the Lenders rights and powers under this Security
Agreement.
6.14. Rights in Addition
The rights and powers conferred by this Section 6 are in supplement of and in
addition to and not in substitution for any other rights or powers the Lender
may have from time to time under this Security Agreement or under applicable
law. The Lender may proceed by way of any action, suit, remedy or other
proceeding at law or in equity and no such remedy for the enforcement of the
rights of the Lender shall be exclusive of or dependent on any other such
remedy. Any one or more of such remedies may from time to time be exercised
separately or in combination.
SECTION 7 - DEALING WITH COLLATERAL BY THE GRANTOR
7.1. Sale of Inventory
Prior to the occurrence of a Default, the Grantor may, in the ordinary course of
its business and on customary trade terms, lease or sell items of inventory, so
that the purchaser thereof takes title clear of the security interest hereby
created. If such sale or lease results in an Account, such Account shall be
subject to the security interest hereby created.
SECTION 8 - GENERAL
8.1. Security in Addition
The security hereby constituted is not in substitution for any other security
for the Liabilities or for any other agreement between the parties creating a
security interest in all or part of the Collateral, whether heretofore or
hereafter made, and such security and such agreements shall be deemed to be
continued and not affected hereby unless expressly provided to the contrary in
writing and signed by the Lender and the Grantor. The taking of any action or
proceedings or refraining from so doing, or any other dealing with any other
security for the Liabilities or any part thereof, shall not release or affect
the security interest created by this Security Agreement and the taking of the
security interest hereby created or any proceedings hereunder for the
realization of the security interest hereby created shall not release or affect
any other security held by the Lender for the repayment of or performance of the
Liabilities.
8.2. Waiver
Any waiver of a breach by the Grantor of any of the terms or provisions of this
Security Agreement or of a Default under Section 5.1 must be in writing to be
effective against and bind the Lender. No such waiver by the Lender shall extend
to or be taken in any manner to affect any subsequent breach or Default or the
rights of the Lender arising therefrom.
8.3. Further Assurances
The Grantor shall at all times do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged or delivered all and singular every such further
acts, deeds, conveyances, instruments, transfers, assignments, security
agreements and assurances as the Lender may reasonably require in order to give
effect to the provisions and purposes of this Security Agreement including,
without limitation, in respect of the Lender's enforcement of the security and
its realization on the Collateral, and for the better granting, transferring,
assigning, charging, setting over, assuring, confirming and/or perfecting the
security interest of the Lender in the Collateral pursuant to this Security
Agreement. The Grantor hereby constitutes and appoints the Manager or acting
Manager of the Lender at its above address, or any Receiver appointed by the
Court or the Lender as provided herein, the true and lawful attorney of the
Grantor irrevocably with full power of substitution to do, make and execute all
such assignments, documents, acts, matters or things with the right to use the
name of the Grantor whenever and wherever it may be deemed necessary or
expedient. The Grantor hereby authorizes the Lender to file such proofs of claim
and other documents as may be necessary or advisable in order to prove its claim
in any bankruptcy, proposed winding-up or other proceeding relating to the
Grantor.
Without limiting the generality of the foregoing, the Grantor:
(a) shall ▇▇▇▇ conspicuously each chattel paper evidencing or relating to
an Account and each related contract and, at the request of the
Lender, each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Lender, indicating
that such chattel paper, related contract or Collateral is subject to
the security interests granted hereby;
(b) shall, if any Accounts shall be evidenced by a promissory note or
other instrument or chattel paper, deliver and pledge to the Lender
hereunder such note, instrument or chattel paper duly endorsed and
accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Lender;
(c) shall execute and file such financing or renewal statements, or
amendments, thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Lender may request, in order to
perfect and preserve the security interests granted or purported to be
granted hereby;
(d) hereby authorizes the Lender to file one or more financing or renewal
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of the Grantor, where permitted by
law; and
(e) shall furnish to the Lender from time to time statements and schedules
further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Lender may request,
all in reasonable detail.
8.4. No Merger
Neither the taking of any judgment nor the exercise of any power of seizure or
sale shall operate to extinguish the liability of the Grantor to make payment of
or satisfy the Liabilities. The acceptance of any payment or alternate security
shall not constitute or create any novation and the taking of a judgment or
judgments under any of the covenants herein contained shall not operate as a
merger of such covenants.
8.5. Notices
Subject to Section 8.7 hereof, any notice required to be given to the Grantor or
the Lender may be delivered to such party or a responsible officer thereof or
may be sent by prepaid registered mail addressed to the appropriate party at the
address above shown, or such further or other address as such party may notify
to the other in writing from time to time, and if so given the notice shall be
deemed to have been given on the day of delivery or the day when it is deemed or
otherwise considered to have been received for the purposes of the PPSA, as the
case may be.
8.6. Continuing Security Interest and Discharge
This Security Agreement shall create a continuing security interest in the
Collateral and shall remain in full force and effect until payment and
performance in full of the Liabilities, notwithstanding any dealing between the
Lender and the Grantor or any Guarantor in respect of the Liabilities or any
release, exchange, non-perfection, amendment, waiver, consent or departure from
or in respect of any or all of the terms or provision of any security held for
the Liabilities.
If the Grantor pays to the Lender and fully discharges the Liabilities secured
by this Security Agreement and otherwise observes and performs the terms and
conditions hereof, then the Lender shall at the request and at the expense of
the Grantor release and discharge the security
interest created hereby and execute and deliver to the Grantor such deeds and
other instruments as shall be requisite therefor.
8.7. Governing Law and Waiver
The provisions of this Security Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Alberta and the federal laws of
Canada applicable therein, without reference to applicable conflict of law
principles. Grantor consents to the non-exclusive jurisdiction of the courts of
the Province of Alberta in connection with the resolution of any disputes
relating to this Security Agreement or any other Agreement or document executed
or delivered hereunder. Grantor irrevocably waives any objection, including any
objection to the laying of venue based on the grounds of forum non conveniens,
which it may now or hereafter have to the bringing of any action or proceeding
with respect to this Agreement.
Grantor hereby waives personal service of any and all process upon it and
consents tat all such service of process may be made by registered mail (return
receipt requested) directed to the Grantor and service so made shall be deemed
to be completed five (5) days after the same shall have been mailed. Nothing
contained herein shall affect the right of lender to serve legal process by any
other manner permitted by law.
The parties hereto hereby waive trial by jury (if applicable) in any action,
proceeding, claim or counterclaim, whether in contract or tort, at law or in
equity with respect to, in connection with, or arising out of this Security
Agreement, other financing agreements, the obligations of Grantor and Grantor,
the collateral, or any instrument, document or guarantee delivered pursuant
hereto or to any of the foregoing, or the validity, protection, interpretation,
administration, collection or enforcement hereof or thereof, or any other claim
or dispute hereunder or thereunder. Grantor agrees that it will not assert
against lender any claim for consequential, incidental, special, or punitive
damages in connection with this Security Agreement or the transactions
contemplated hereby or thereby. No officer of lender has authority to waive,
condition, or modify this provision.
8.8. Security Interest Effective Immediately
Neither the execution nor registration of this Security Agreement nor any
partial advances by the Lender shall bind the Lender to advance any other
amounts to the Grantor. The parties intend the security interest created hereby
to attach and take effect forthwith upon execution of this Security Agreement by
the Grantor and the Grantor acknowledges that value has been given and that the
Grantor has rights in the Collateral.
8.9. No Collateral Warranties
There is no representation, warranty or collateral agreement affecting this
Security Agreement or the Collateral, other than as expressed herein in writing.
8.10. Joint and Several Liability
If more than one person executes this Security Agreement as Grantor, their
obligations under this Security Agreement shall be joint and several.
8.11. Provisions Reasonable
The Grantor expressly acknowledges and agrees that the provisions of this
Security Agreement and, in particular, those respecting remedies and powers of
the Lender against the Grantor, its business and the Collateral upon default,
are commercially reasonable and not manifestly unreasonable.
8.12. Number and Gender
In this Security Agreement, words importing the singular number include the
plural and vice-versa and words importing gender include all genders.
8.13. Invalidity
In the event that any term or provision of this Security Agreement shall, to any
extent, be invalid or unenforceable, the remaining terms and provisions of this
Security Agreement shall be unaffected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
8.14. Indemnity and Expenses
(a) The Grantor agrees to indemnify and save harmless the Lender from and
against any and all claims, losses and liabilities rising out of or
resulting out of or resulting from this Security Agreement (including,
without limitation, enforcement of this Security Agreement), except
claims, losses or liabilities resulting from the Lender's gross
negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Lender the amount of any and
all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the
Lender may incur in connection with (i) the administration of this
Security Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights
or remedies of the Lender hereunder or (iv) the failure by the Grantor
to perform or observe any of the provisions hereunder.
8.15. Judgment Currency
If for the purpose of obtaining judgment in any court or for the purpose of
determining, pursuant to the obligations of the undersigned, the amounts owing
hereunder, it is necessary to convert an amount due hereunder in the currency in
which it is due (the "Original Currency") into another currency (the "Second
Currency"), the rate of exchange applied shall be that at which, in accordance
with normal banking procedures, the Lender could purchase, in The New York
Foreign Exchange Market, the Original Currency with the Second Currency on the
date two (2) Business Days preceding that on which judgment is given or any
other payment is due hereunder. The undersigned and each of them agrees that its
obligation in respect of any Original Currency due from it to the Lender
hereunder shall, notwithstanding any judgment or payment in such other currency,
be discharged only to the extent that, on the Business Day following the date
the Lender receives payment of any sum so adjudged or owing to be due hereunder
in the
Second Currency the Lender may, in accordance with normal banking procedures,
purchase, in The New York Foreign Exchange Market the Original Currency with the
amount of the Second Currency so paid; and if the amount of the Original
Currency so purchased or could have been so purchased is less than the amount
originally due in the Original Currency, the undersigned and each of them agrees
as a separate obligation and notwithstanding any such payment or judgment to
indemnify the Lender against such loss. The term "rate of exchange" in this
Section 8.15 means the spot rate at which the Lender, in accordance with normal
practices is able on the relevant date to purchase the Original Currency with
the Second Currency and includes any premium and costs of exchange payable in
connection with such purchase.
8.16. Sections and Headings
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 hereof.
8.17. Receipt of Copy
The Grantor acknowledges receipt of an executed copy of this Security Agreement.
8.18. Binding Effect
All rights of the Lender hereunder shall enure to the benefit of its successors
and assigns and all obligations of the Grantor hereunder shall bind the Grantor
and its successors and permitted assigns.
IN WITNESS WHEREOF the Grantor has duly executed this Security Agreement
under seal this ____ day of March, 2004.
ADDISON YORK INSURANCE BROKERS LTD.
a Delaware corporation
By: /s/ Primo Podorieszach
--------------------------------
Name: Primo Podorieszach
Title: CEO
OAK STREET FUNDING LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
Schedule "A"
LOCATIONS
Schedule "B"
ENCUMBRANCES
Schedule "C"
LITIGATION
Schedule "D"
INDEBTEDNESS
Schedule "E"
SUBSIDIARIES
SECURITIES PLEDGE AGREEMENT
TO: OAK STREET FUNDING LLC ("Oak Street")
WHEREAS pursuant to a Continuing Guaranty and a General Security Agreement
(as the same may be amended, supplemented, revised, restated or varied from time
to time, collectively the "Agreement"), made by ▇▇▇▇▇▇▇ ▇▇▇▇▇ International
Insurance Brokers Ltd. (the "Guarantor") in favor of Oak Street, Oak Street has
agreed to make certain loan facilities available to Addison York Insurance
Brokers Ltd, a subsidiary of the Guarantor.
AND WHEREAS pursuant to the Agreement the Guarantor has agreed to execute
and deliver this Securities Pledge Agreement to and in favor of Oak Street as
security for the payment and performance of the Guarantor's obligations (the
"Obligations") to Oak Street under the Agreement.
NOW THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Guarantor, the Guarantor hereby covenants to and for the
benefit of Oak Street as follows:
ARTICLE I
INTERPRETATION
1.1 Defined Terms. In this agreement or any amendment to this agreement,
capitalized terms used herein and not otherwise defined shall have the
meanings ascribed thereto in the Agreement.
1.2 Other Usages. References to "this agreement", "the agreement", "hereof',
"herein", and like references refer to this Securities Pledge Agreement, as
the same may be amended, supplemented, revised, restated or replaced from
time to time, and not to any particular Article, section or other
subdivision of this agreement.
1.3 Plural and Similar. Where the context so requires, words importing the
singular number shall include the plural and vice versa.
1.4 Headings. The insertion of headings in this agreement is for convenience of
reference only and shall not affect the construction or interpretation of
this agreement.
1.5 Time of the Essence. Time shall in all aspects be of the essence of this
agreement, and no extension or variation of this agreement or any
obligation hereunder shall operate as a waiver of this provision.
ARTICLE II
SECURITY
2.1 Pledge of Securities. The Guarantor hereby pledges, hypothecates, assigns,
mortgages, charges, transfers, and grants a security interest in, to and in
favor of Oak Street, the securities described in the attached Schedule "A"
and deposits with Oak Street any and
all security certificates evidencing such securities as may be accompanied
in each case by a duly executed power of attorney (collectively, together
with all dividends, monies, rights and claims hereinafter referred to and
the securities referred to in Section 2.2, the "Securities"), any cash
dividends or other monies now or hereafter received or declared in respect
of the Securities and all other rights and claims of the Guarantor in
respect of the Securities.
2.2 Substitutions, Additions and Proceeds. The Securities shall include any
substitutions, additions or proceeds arising out of any consolidation,
subdivision, reclassification, stock dividend or similar increase or
decrease in, or alteration to, the capital of the issuer of the Securities
(the "Issuer")
2.3 Obligations Secured. The pledges, hypothecations, assignments, mortgages,
charges, and security interests granted hereby (the "Security Interest")
secure the payment and performance of all debts, liabilities and
obligations present or future, direct or indirect, absolute or contingent,
matured or unmatured, at any time due or accruing due, owing by the
Guarantor to Oak Street, however or wherever incurred, and in any currency,
and whether incurred by the Guarantor alone or with another or others and
whether as principal or surety of the Guarantor to Oak Street pursuant to
or in connection with the Agreement and the Guarantor's Obligations.
2.4 Expenses. All expenses, costs and charges incurred by or on behalf of Oak
Street in connection with this Securities Pledge Agreement, the Security
Interest or the realization of the Securities including all legal fees,
court costs, receiver's or agent's remuneration and other expenses relating
to the taking or defending any action in connection with such realization,
the taking possession of, repairing, protecting, insuring, preparing for
disposition, realizing, collecting, selling, transferring, delivering or
obtaining payment of the Securities or other lawful exercises of the powers
conferred by the Agreement shall be added to and form a part of the
Obligations.
2.5 Attachment.
(a) The Guarantor acknowledges that (i) value has been given, (ii) it has
rights in the Securities, (iii) it has not agreed to postpone the time of
attachment of the Security Interest, and (iv) it has received a duplicate
original copy of this Securities Pledge Agreement.
(b) If the Securities are now or at any time hereafter become evidenced in
whole or in part, by uncertificated securities registered or recorded in
records maintained by or on behalf of the Issuer in the name of a clearing
agency the Guarantor shall, at the request of Oak Street, cause the
Security Interest to be entered in the records of such clearing agency.
(c) At the election of Oak Street and immediately upon written notice being
provided by Oak Street to the Guarantor, the Guarantor shall cause the
Securities to be transferred into and registered in the name of Oak Street
or as Oak Street may direct and the Guarantor covenants that, at the time
of any such transfer, it will provide all required consents and approvals.
2
2.6 Care and Custody of Securities. Oak Street need not see to the collection
of dividends on, or exercise any option or right in connection with, the
Securities and need not protect or preserve them from depreciating in value
or becoming worthless and is released from all responsibility for any loss
of value. Oak Street is limited to exercising with regard to the Securities
the same degree of care which Oak Street gives to its valuable property of
the same value and kind.
2.7 Representation. The Guarantor represents and warrants to Oak Street that
(i) it is the registered, legal and beneficial owner of the Securities,
(ii) the Securities are free and clear of all liens, mortgages, charges and
security interests whatsoever other than those created in favor of Oak
Street and Permitted Encumbrances, (iii) the Securities have been issued
and are fully paid and non-assessable and (iv) the information contained in
Schedule "A" is true and accurate in all respects.
2.8 Rights of the Guarantor.
(a) So long as no Default or Unmatured Default has occurred and is continuing,
(i) the Guarantor shall be entitled to vote the Securities and to receive
all cash dividends and (ii) Oak Street will grant, or cause its nominee to
grant to the Guarantor or its nominee a proxy to vote and to exercise all
rights with respect to any Securities registered in the name of Oak Street.
Upon the occurrence and during the continuance of a Default, all rights of
the Guarantor to vote or to receive dividends shall cease and all such
rights shall become vested solely and absolutely in Oak Street.
(b) Any dividends received by the Guarantor contrary to Section 2.8(a) or any
other monies or property which may be received by the Guarantor at any time
for, or in respect of, the Securities shall be received as trustee for Oak
Street and shall be immediately paid over to Oak Street.
ARTICLE III
ENFORCEMENT
3.1 Remedies. Upon the occurrence and during the continuance of a Default, Oak
Street may, at any time in its sole discretion, (i) realize upon or
otherwise dispose of or contract to dispose of the Securities by sale,
transfer or delivery, or (ii) exercise and enforce all rights and remedies
of a holder of the Securities as if Oak Street were their absolute owner
(including, if necessary, causing the Securities to be registered in the
name of Oak Street or its nominee), all without demand of performance or
other demand, advertisement or notice of any kind to or upon the Guarantor
or any third party (except as may be required by law). Any remedy may be
exercised separately or in combination and shall be in addition to, and not
in substitution for, any other rights Oak Street may have, however created.
Oak Street shall not be bound to exercise any right or remedy, and the
exercise of rights and remedies shall be without prejudice to the rights of
Oak Street in respect of the Obligations including the right to claim for
any deficiency.
3.2 Standards of Sale. Without prejudice to the ability of Oak Street to
dispose of the Securities in any manner which is commercially reasonable,
the Guarantor acknowledges
3
that a disposition of Securities by Oak Street which takes place
substantially in accordance with the following provisions shall be deemed
to be commercially reasonable:
(a) Securities may be disposed of in whole or in part;
(b) Securities may be disposed of by public auction, public tender or private
contract, with or without advertising and without any other formality;
(c) any assignee of such Securities may be Oak Street;
(d) any sale conducted by Oak Street shall be at such time and place, on such
notice and in accordance with such procedures as Oak Street, in its sole
discretion, may deem advantageous;
(e) Securities may be disposed of in any manner and on any terms necessary to
avoid violation of applicable law (including, without limitation,
compliance with such procedures as may restrict the number of prospective
bidders and purchasers, require that the prospective bidders and purchasers
have certain qualifications, and restrict the prospective bidders and
purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the
distribution or resale of the Securities) or in order to obtain any
required approval of the disposition (or of the resulting purchase) by any
governmental or regulatory authority or official;
(f) a disposition of Securities may be on such terms and conditions as to
credit or otherwise as Oak Street, in its sole discretion, may deem
advantageous; and
(g) Oak Street may establish an upset or reserve bid or price in respect of the
Securities.
3.3 Dealing with the Securities.
(a) Oak Street shall not be obliged to exhaust its recourse against the
Guarantor or any other person or against any other security it may hold in
respect of the Obligations before realizing upon or otherwise dealing with
the Securities in such manner as Oak Street may consider desirable.
(b) Oak Street may grant extensions or other indulgences, take and give up
security, accept compositions, grant releases and discharges and otherwise
deal with the Guarantor and with other persons, sureties or security as it
may see fit without prejudice to the Obligations, the liability of the
Guarantor or the rights of Oak Street in respect of the Securities.
(c) Oak Street shall not be (i) liable or accountable for any failure to
collect, realize or obtain payment in respect of the Securities, (ii) bound
to institute proceedings for the purpose of collecting, enforcing,
realizing or obtaining payment of the Securities or for the purpose of
preserving any rights of any persons, (iii) responsible for any loss
occasioned by any sale or other dealing with the Securities or by the
retention of or failure to sell or
4
otherwise deal with the Securities, or (iv) bound to protect the Securities
from depreciating in value or becoming worthless.
3.4 Appointment of Attorney. The Guarantor irrevocably appoints Oak Street (and
any of its officers) as attorney of the Guarantor (with full power of
substitution) to do, make and execute in the name of and on behalf of the
Guarantor upon Oak Street exercising its rights and remedies under the
Agreement all such further acts, documents, matters and things which Oak
Street may deem necessary or advisable to accomplish the purposes of this
Securities Pledge Agreement including the execution, endorsement and
delivery and transfer of the Securities to Oak Street or its nominees or
transferees. Oak Street or its nominees and transferees are empowered to
exercise all rights and powers and to perform all acts of ownership with
respect to the Securities to the same extent as the Guarantor might do. The
powers of attorney herein granted is an addition to, and not in
substitution for any stock power of attorney delivered by the Guarantor and
such power of attorney may be relied upon by Oak Street severally or in
combination. All acts of the attorney are hereby ratified and approved, and
the attorney shall not be liable for any act, failure to act or any other
matter or thing in connection therewith, except to the extent caused by its
own gross negligence or willful misconduct.
3.5 Dealings by Third Parties. No person dealing with Oak Street or an agent or
receiver shall be required to determine (i) whether the Security Interest
has become enforceable, (ii) whether the powers which such person is
purporting to exercise have become exercisable, (iii) whether any money
remains due to Oak Street by the Guarantor, (iv) the necessity or
expediency of the stipulations and conditions subject to which any sale or
lease shall be made, (v) the propriety or regularity of any sale or other
dealing by Oak Street with the Securities, or (vi) how any money paid to
Oak Street has been applied.
(a) Any purchaser of Securities from Oak Street shall hold the Securities
absolutely, free from any claim or right of whatever kind, including any
equity of redemption, of the Guarantor, which it specifically waives (to
the fullest extent permitted by law) as against any such purchaser, all
rights of redemption, stay or appraisal which the Guarantor has or may have
under any rule of law or statute now existing or hereafter adopted.
ARTICLE IV
GENERAL
4.1 Notices. Any notices and other communications provided for in this
Securities Pledge Agreement shall be given in accordance with the
provisions of the Agreement.
4.2 No Merger. This Securities Pledge Agreement shall not operate by way of
merger of any of the Obligations and no judgment recovered by Oak Street
shall operate by way of merger of, or in any way affect, the Security
Interest.
4.3 Further Assurances. The Guarantor shall from time to time, whether before
or after the occurrence of a Default, do all acts and things and execute
and deliver all transfers, assignments and instruments as Oak Street may
reasonably require for (i) protecting the Securities, (ii) perfecting the
Security Interest, and (iii) exercising all powers, authorities
5
and discretions hereby conferred upon Oak Street. The Guarantor shall, from
time to time, upon the occurrence and during the continuance of a Default,
do all acts and things and execute and deliver all transfers, assignments
and instruments as Oak Street may require for facilitating the sale or
other disposition of the Securities in connection with their realization.
4.4 Supplemental Security. This Securities Pledge Agreement is in addition to
and without prejudice to all other security now held or which may hereafter
be held by Oak Street in respect of the Obligations.
4.5 Successors and Assigns. This Securities Pledge Agreement shall be binding
upon the Guarantor, its successors and assigns, and shall enure to the
benefit of Oak Street and its successors and assigns. All rights of Oak
Street shall be assignable and in any action brought by an assignee to
enforce any right, the Guarantor shall not assert against the assignee any
claim or defense which the Guarantor now has or hereafter may have against
Oak Street.
4.6 Severability. If any provision of this Securities Pledge Agreement shall be
deemed by any court of competent jurisdiction to be invalid or void, the
remaining provisions shall continue in full force and effect.
4.7 Paramountcy. In the event any provisions of this agreement contradict or
are otherwise incapable of being construed in conjunction with the
provisions of the Agreement, the provisions of the Agreement shall take
precedence over those contained in this agreement and in particular, if any
act of the Guarantor is expressly permitted under the Agreement but is
prohibited hereunder, any such act shall be deemed to be permitted under
this agreement.
4.8 Governing Law. This Securities Pledge Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the Province of
Alberta and the federal laws of Canada applicable therein. The Guarantor
consents to the non-exclusive jurisdiction of the courts of the Province of
Alberta in connection with the resolution of any disputes relating to this
Security Pledge Agreement or any other Agreement or document executed or
delivered hereunder. The Guarantor irrevocably waives any objection,
including any objection to the laying of venue based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of
any action or proceeding with respect to this Securities Pledge Agreement.
6
IN WITNESS WHEREOF the Guarantor has caused this Securities Pledge
Agreement to be executed by its duly authorized officers on this 19 day of
March, 2004.
ADDISON YORK INSURANCE BROKERS LTD.
a Delaware corporation
By: /s/ Primo Podorieszach
--------------------------------
Name: Primo Podorieszach
Title: CEO
7
SCHEDULE "A"
SECURITIES
Number of
Issuer Class of Securities Securities Certificate Number
8