Issued to:
Roynat Merchant Capital Inc.
Suite 3720, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ Equipment, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
DEBENTURE
CDN$6,500,000.00 February 28, 2005
1. ▇▇▇▇▇▇ Equipment, Inc. (the "Company") for value received hereby promises
to pay to Roynat Merchant Capital Inc. ("Roynat"), at its address specified
above, the principal amount of Six Million, Five Hundred Thousand Dollars
($6,500,000.00) in lawful money of Canada in the manner hereinafter provided,
together with all other moneys which may from time to time be owing hereunder or
pursuant hereto. At the option of Roynat the principal amount outstanding
hereunder may be converted to United States Dollars at a rate to be agreed
between the Company and Roynat, and upon such conversion, notwithstanding any
other terms and conditions set out herein, all payments to be made in connection
herewith shall be made in lawful money of the United States.
2. Principal Payments. Subject to the provisions of this Debenture, the
principal amount of this Debenture shall become due and payable in one
instalment, together with interest thereon and all other moneys owing hereunder,
on the 30th day of December, 2005.
3. Interest. Interest shall be payable on the 15th day of each month on the
balance from time to time outstanding of the principal amount of this Debenture,
any overdue interest and any other moneys due and payable hereunder, both before
and after maturity, default or judgment, at fifteen percent (15%) per annum (the
"Loan Rate") calculated and compounded monthly, computed from the respective
dates of advance of the moneys by Roynat to the Company until payment in full of
all moneys owing hereunder. The first interest payment date shall be the 15th
day of the month in which the first advance is made by Roynat hereunder or, if
the first advance is made after the 15th day of a month, the first interest
payment date shall be the 15th day of the next succeeding month.
In addition to the foregoing, if the principal amount of this Debenture is not
repaid in full on the 30th day of December, 2005 then on December 31, 2005 and
the last day of each month thereafter until payment in full, the Company agrees
to pay additional interest to Roynat in the amount of One Hundred Thousand
Dollars ($100,000) in lawful money of Canada. Such additional interest is not
liquidated damages.
At the option of Roynat, interest accrued may be deducted from proceeds of
advances hereunder.
At the option of the Company, upon not less than five (5) days prior written
notice to Roynat, up to one-fifth (1/5) of any particular interest payment
hereunder due and payable prior to December 30, 2005 may be accrued rather than
paid on such interest payment date and the amount so accrued shall be added to
the principal amount hereunder and interest shall be payable thereon at the Loan
Rate from the date of such accrual until paid in full.
4. Redemption, The Company may redeem this Debenture prior to maturity either
in whole at any time or, when not in default hereunder, in part from time to
time on not less than 30 days' written notice at a price equal to the principal
amount being redeemed together in each case with accrued and unpaid interest on
such principal amount to the date fixed for redemption and, in the case of
redemption in whole, all other moneys owing hereunder.
5. Partial Payments . The amounts received by Roynat in respect of any
particular repayment (other than a partial redemption under Paragraph 4 above)
shall be applied as follows: (a) firstly, in payment of accrued but unpaid
interest, (b) secondly, in payment of the then outstanding principal
obligations; and (c) the balance thereof, in payment of all other amounts
secured by this Debenture. In case less than the total principal amount of this
Debenture is redeemed at any time, the principal amount so redeemed shall be
credited against the principal payable hereunder in inverse order of maturity
and the amount of instalments of principal hereunder shall be adjusted
accordingly.
6. Security. As security for the payment of the principal, interest and all
other moneys from time to time payable under this Debenture or otherwise payable
to Roynat, and the performance by the Company of all its obligations hereunder
and of any other obligations to or in favour of Roynat and to better secure the
principal, interest and other monies from time to time secured hereunder, but
subject to Permitted Encumbrances and to the exception as to leaseholds
hereinafter contained, the Company hereby grants a security interest in and
grants, assigns, mortgages and charges, as and by way of a fixed and specific
mortgage and charge to and in favour of Roynat:
a. all real and immoveable property, both freehold and leasehold, now
owned or hereafter acquired by the Company, together with all
buildings, erections, fixed machinery and fixed equipment presently
situated thereon or which may at any time hereafter be constructed
or placed thereon or used in connection therewith, including without
limitation the property described in Schedule "B" hereto;
b. all furniture, machinery, equipment, vehicles, accessories and other
tangible personal property (other than Inventory) now owned or
hereafter acquired by the Company or in respect of which the Company
now or hereafter has any right, title or interest, together with any
proceeds of sale or disposition thereof; and
c. by way of a sublease,
(i) the leasehold interest of the Company in the lands and all
buildings and other improvements thereon and all appurtenances
therewith and all other premises comprised therein which have
been demised by the Lease (the "Lands");
(ii) the Lease and leasehold estate created by the Lease;
(iii) any and all interest of the Company in any and all buildings
and improvements located on the Lands; and
(iv) all of the Company's rights and benefits of any kind
whatsoever granted by the Lease and the unexpired residue of
the said term thereof and all other estate, term, rights of
renewal and purchase and other interests of the Company in and
to the Lease;
but excepting always the last day of the term of the Lease or any renewal
thereof or any agreement with respect thereto; all of which property
charged hereunder shall be hereinafter collectively referred to as the
"Leasehold Interest".
And for the same consideration and purposes and subject to the same exceptions,
the Company hereby charges as and by way of a first floating charge to and in
favour of Roynat the undertaking of the Company and all its property and assets
for the time being, both present and future, and of whatsoever nature and
wherever situate (other than property and assets from time to time effectively
subjected to the fixed and specific mortgages and charges created hereby or by
any instrument supplemental hereto).
Provided that such floating charge shall not prevent the Company from time to
time until the security hereby constituted shall have become enforceable from
selling, leasing or otherwise disposing of the property, rights and assets
included in such floating charge or from making expenditures with a view to the
expansion of its business or from giving security constituting Permitted
Encumbrances, all in the ordinary course of its business and subject to the
provisions of this Debenture. In particular, the Company may give security to
Laurus Master Fund, Ltd. ("Laurus") on any and all of the Company's assets and
such security if validly perfected shall rank prior to the lien hereof on such
assets without further action by Roynat. Notwithstanding any other provision of
this Debenture except as provided in the foregoing sentence, the security
interests constituted hereby and by any supplemental security granted to Roynat
shall not be subordinate to, nor is there any intention to subordinate such
security interests to, any Permitted Encumbrances or security interests held by
others.
All security interests created by this Debenture attach immediately upon
execution of the Debenture. The attachment of the floating charge has not been
postponed and the floating charge shall attach to any particular property
intended to be subject to it as soon as the Company has rights in such property.
Roynat shall be authorized to file such financing statements or other documents
in the public records indicating that it has a security interest in all of the
assets, property and undertaking of the Company.
All property and assets of the Company whether specifically charged or subjected
to the floating charge are hereinafter referred to as the "Mortgaged Premises".
7. Exception as to Leaseholds. It is hereby declared that the last day of any
term of years reserved by any lease or sublease, verbal or written, or any
agreement therefor, now held or hereafter acquired by the Company is excepted
out of the Mortgaged Premises, but the Company shall stand possessed of any such
reversion upon trust to assign and dispose thereof as Roynat may direct.
8. Payments and Notice. Any payments not received by Roynat by two o'clock
p.m. on a Business Day shall be deemed to have been received on the next
Business Day. Any notice required or desired to be given hereunder or under any
Offer of Finance or under any instrument supplemental hereto shall be in writing
and may be given by personal delivery, by facsimile or other means of electronic
communication or by sending the same by registered mail, postage prepaid, to
Roynat or to the Company at their respective addresses set out above and, in the
case of electronic communication, to the facsimile numbers set out above. Any
notice so delivered shall be conclusively deemed given when personally delivered
and any notice sent by facsimile or other means of electronic transmission shall
be deemed to have been delivered on the Business Day following the sending of
the notice, and any notice so mailed shall be conclusively deemed given on the
third Business Day following the day of mailing, provided that in the event of a
known disruption of postal service, notice shall not be given by mail. Any
address for notice or payments herein referred to may be changed by notice in
writing given pursuant hereto.
9. Covenants.
a. This Debenture is issued subject to and with the benefit of
all the covenants, terms and conditions in Schedule "A" hereto
which Schedule forms a part hereof.
b. The Company covenants and agrees that it shall not, nor shall
it allow any of its subsidiaries to, make any payments in
respect of any shareholder loans except as permitted herein or
otherwise agreed to.
c. In addition to such covenants, terms and conditions, the
Company covenants with Roynat that so long as this Debenture
remains outstanding the Company shall:
(i) execute and deliver all such documents as may be necessary to
maintain in force the pre-authorized payment system specified
in the Offer of Finance;
(ii) comply, and shall cause its subsidiaries to comply, with all
applicable laws, rules, regulations and policies applicable
thereto including applicable securities regulatory
requirements;
(iii) provide, and shall cause its subsidiaries to provide, Roynat
will full, complete and timely disclosure of all matters
pertaining to its business and the financial condition thereof
and the Mortgaged Premises and shall allow Roynat to inspect
such business and financial records upon request;
(iv) firstly, from the proceeds of any public offering of shares or
other securities of the Company, repay all amounts outstanding
hereunder, prior to the payment of any other creditor of the
Company, whether ranking senior or junior to Roynat, and prior
to using such proceeds for the operation of the Company and
its subsidiaries;
(v) not make any payments in respect of any shareholder loans
except as permitted herein;
(vi) not, and shall not permit any of its subsidiaries to, repay
the principal amount of any debt other than scheduled
repayments or payments to Laurus by delivery of the Company's
securities, whether senior or junior to this Debenture,
without the prior consent of Roynat until such time as all
amounts payable hereunder have been paid in full;
(vii) not permit the breach of any financial or other material
covenant of the Company or any subsidiary made in favour of
any senior operating lender of the Company or any subsidiary,
as the case may be;
(viii) not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, amalgamation,
merger, transfer, sale, lease or otherwise) whereby all or
substantially all of its undertaking or assets (including all
or part of the Mortgaged Premises) would become the property
of any other person or any person resulting or continuing from
such transaction without the prior written consent of Roynat.;
(ix) not allow any subsidiary to enter into any transaction
(whether by way of reconstruction, reorganization,
consolidation, amalgamation, merger, transfer, sale, lease or
otherwise) whereby all or substantially all of such
subsidiary's undertaking or assets would become the property
of any other person or any person resulting or continuing from
such transaction without the prior written consent of Roynat;
(x) maintain directly or indirectly (through the ownership of a
wholly-owned incorporated entity) ownership of all of the
issued and outstanding shares of each of its subsidiaries;
(xi) not, and shall not permit any of its subsidiaries, to acquire
or create any subsidiary, affiliate or non-arms length person
without the prior written consent of Roynat;
(xii) not, and shall not permit any subsidiary to, acquire any
business, whether by way of assets or shares;
(xiii) not, and shall not permit any of its subsidiaries to, make
any capital expenditures in excess of CDN$5,000,000 per year;
(xiv) not, and shall not permit any of its subsidiaries to, incur
any funded debt or enter into any capital lease obligations in
excess of CDN$3,000,000 in the aggregate;
(xv) not, and shall not permit any of its subsidiaries to, enter
into any arrangement with any person providing for the leasing
by any of the Company or any of its subsidiaries, as lessee,
of property which has been or is to be sold or transferred by
the Company or any of its subsidiaries to such person or to
any other person to whom funds have been or are to be advanced
by such person on the security of such property or the lease
obligation of the Company or any of its subsidiaries;
(xvi) not, and shall not permit any of its subsidiaries to,
guarantee, endorse, indemnify a person in respect of or
otherwise become a surety for or upon the obligations or
liabilities of any person;
(xvii) not, and shall not permit any of its subsidiaries to, declare
or pay any dividends or pay any management compensation of any
kind including, without limitation, a bonus or bonuses of any
kind or make any other payment or distribution in respect of
any share of the capital of the Company or any of its
subsidiaries without the prior written consent of Roynat;
(xviii) not, and shall not permit any of its subsidiaries to, make
any change whatsoever in the issued or authorized share
capital or issue any rights, warrants, options or other
similar instruments of any kind without the prior written
consent of Roynat, except that the Company shall be permitted
to issue an aggregate of up to 3,000,000 shares of common
stock or options to purchase up to 3,000,000 shares of common
stock in each case for fair market value or as set out on
Schedule "D" attached hereto;
(xix) not, and shall not permit any of its subsidiaries to, directly
or indirectly enter into any transactions with, provide
services to, receive services from, or make payments, with, to
or from any person who does not deal at arm's length with the
Company or any of its subsidiaries without the prior written
consent of Roynat;
(xx) not, issue any shares or redeem any shares of the Company or
any subsidiaries, except that the Company shall be permitted
to issue an aggregate of up to 3,000,000 shares of common
stock or options to purchase up to 3,000,000 shares of common
stock in each case for fair market value or as set out on
Schedule "D" attached hereto;
(xxi) not change the fiscal year end of the Company or any of its
subsidiaries or change its auditors or the accounting
principals it applies in preparing its financial statements;
and
(xxii) not amend the articles of incorporation or other constating
documents of the Company or any of its subsidiaries.
10. Offer of Finance. This Debenture is being issued by the Company to Roynat
pursuant to the terms of a certain letter agreement between the Company and
Roynat dated January 18, 2005 (such letter agreement including any amendments
thereto being herein called the "Offer of Finance"). All terms and conditions of
the Offer of Finance shall remain in full force and effect, except to the extent
inconsistent with the provisions of this Debenture, and the Company shall abide
by such terms and conditions.
11. Maximum Recovery . If any amounts, whether on account of interest, fees,
bonus or additional consideration, becomes payable to or is received by Roynat
pursuant to this Debenture, the Offer of Finance, any other security document or
other agreement which would exceed the maximum amount recoverable under
applicable law on moneys advanced by Roynat:
a. any amounts so payable shall be reduced and are hereby limited
to the maximum amount recoverable under applicable law;
b. any amounts so received by Roynat shall, at Roynat's option,
either be returned to the Company or, notwithstanding Section
4 hereof, be deemed to have been received by Roynat as a
partial redemption of this Debenture and shall be credited
against principal payable hereunder in inverse order of
maturity; and
c. if paragraph (a) requires the reduction in an amount or
amounts payable to Roynat, Roynat in its sole discretion shall
determine which amount or amounts shall be reduced to ensure
compliance with this Section 11.
12. Extensions and Amendments. Any agreement for the extension of the time of
payment of the moneys hereby secured or any part thereof made at, before or
after maturity, and prior to the execution of a discharge or release of this
Debenture, or any agreement for altering the term, rate of interest (whether
increased or decreased), the amount of the principal payments hereunder or any
other covenant or condition hereof, need not be registered in any office of
public record but shall be effectual and binding upon the Company and upon every
subsequent mortgagee, chargee, encumbrancer or other person claiming an interest
in the Mortgaged Premises or any part thereof when executed by the Company and
delivered to Roynat.
13. Receipt. The Company hereby acknowledges receipt of a true copy of this
Debenture and, to the extent permitted by law, waives all rights to receive from
Roynat a copy of any financing statement or financing change statement filed, or
any verification statement received, at any time in respect of this Debenture or
any supplemental or collateral security granted to Roynat.
14. Binding Effect, Governing Law and Headings. These presents
are binding upon the parties hereto and their respective successors and assigns.
This Debenture shall be governed by and construed in accordance with the laws of
the State of New York and the federal laws of the United States of America
applicable therein, without regard to any conflict of law principles. Each of
the Company and Roynat irrevocably submits to the non exclusive jurisdiction of
the courts of the State of New York and all courts competent to hear appeals
from those courts with respect to any matter related to this Debenture. The
division of this Debenture into sections and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Debenture.
15. Invalidity, etc. Each of the provisions contained in this
Debenture is distinct and severable and a declaration of invalidity, illegality
or unenforceability of any such provision or part thereof by a court of
competent jurisdiction shall not affect the validity or enforceability of any
other provision of Debenture.
16. Interest Calculations. Interest payable on the Debenture shall
be payable both before and after demand, default and judgement at the Loan Rate
with interest on overdue interest at the same rate. The yearly rate of interest
to which the rate of interest per annum is payable on or is in respect of
amounts owing on the Debenture shall be calculated on the basis of a 365 day
year.
17. Transfers. This Debenture and the rights hereunder are transferable by
Roynat without the consent of the Company. In the event that Roynat effects a
partial transfer of this Debenture, Roynat shall advise the Company of the name,
address and facsimile number of the transferee, the portion of this Debenture
transferred and the date of transfer and the Company shall forthwith thereafter
issue Roynat and the transferee a replacement Debenture with terms identical to
this Debenture (save for the principal amount owing) without cost or charge to
Roynat or the transferee, and this Debenture shall thereafter be deemed
surrendered. Roynat and any transferee hereof shall be entitled to the rights
evidenced by this Debenture free from all equities or rights of set-off or
counterclaim between the Company and the original or any intermediate holder of
this Debenture.
IN WITNESS WHEREOF the Company has executed this Debenture.
▇▇▇▇▇▇ EQUIPMENT, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
-----------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: President
SCHEDULE "A"
1. THE COMPANY HEREBY DECLARES, COVENANTS AND AGREES THAT IT:
a) As to Title - is the sole legal and beneficial owner of the
Mortgaged Premises and owns the same free of all encumbrances other
than Permitted Encumbrances;
b) Further Assurances - shall at its expense on the request of Roynat,
execute and deliver to Roynat such further assurances and documents
as Roynat may require to perfect Roynat's security on all or any
part of the Mortgaged Premises, or to specifically charge any or all
of the property then subject to the floating charge created hereby;
c) Pay Costs - shall pay all costs and expenses (including legal fees
and disbursements on a attorney and own client basis) of Roynat
incidental to or which in any way relates to this Debenture or its
enforcement including (i) the preparation, execution and filing of
this Debenture and any instruments postponing, discharging,
amending, extending or supplemental to this Debenture or any
security required by any Offer of Finance ("Roynat's Security");
(ii) perfecting and keeping perfected Roynat's Security; (iii)
maintaining the intended priority of Roynat's Security on all or any
part of the Mortgaged Premises; (iv) taking, recovering or
possessing the Mortgaged Premises; (v) taking any actions or other
proceedings to enforce the remedies provided herein or otherwise in
relation to this Debenture or the Mortgaged Premises, or by reason
of a default hereunder or the non-payment of the moneys hereby
secured; (vi) taking proceedings, giving notices and giving
responses required under any applicable law concerning or relating
to Roynat's Security, including compliance with the provisions of
applicable bankruptcy, insolvency, personal property security and
mortgage enforcement legislation; (vii) any inspections required to
be made to the Mortgaged Premises, or the review of any plans,
specifications or other documentation which may require the approval
or consent of Roynat; (viii) responding to or participating in
proceedings in the nature of those described in Sections 10(e), (f)
and (g) hereof; and (ix) obtaining the advice of counsel and other
advisors in relation to the foregoing;
all such costs and expenses and other monies payable hereunder,
together with interest at the Loan Rate, shall be payable on demand
and shall upon being incurred by Roynat be secured hereby and
constitute a charge on the Mortgaged Premises and any proceeds of
realization;
d) To Pay Rents and Taxes - shall, and shall cause it subsidiaries to,
pay all rents, taxes and assessments lawfully imposed upon the
Mortgaged Premises or any part thereof and upon the income and
profits of the Company when the same become due and payable, shall
show to Roynat on request receipts for such payment;
e) To Maintain Corporate Existence and Security - shall, and shall
cause it subsidiaries to, maintain its corporate existence, shall
keep the Mortgaged Premises in good condition and repair, shall
maintain the security hereby created as a valid and effective
security at all times so long as any moneys are outstanding
hereunder, shall carry on and conduct its business in a proper and
efficient manner and in accordance with all applicable law, shall
not materially alter the kind of business carried on by it, shall
not change its name without providing ten (10) days prior written
notice to Roynat, shall observe and perform all of its obligations
under leases, licences and other agreements to which it is a party
so as to preserve and protect the Mortgaged Premises and the income
therefrom, and shall keep proper books of accounts with correct
entries of all transactions in relation to its business. The Company
acknowledges, covenants and agrees that if it amalgamates with any
other company or companies, then (i) the Mortgaged Premises and the
security interests created by this Debenture will extend to and
include all property and assets of the amalgamated Company and to
any property or assets of the amalgamated Company thereafter owned
or acquired, (ii) the term "Company", where used in this Debenture,
will extend to and include the amalgamated Company;
f) Not to Sell - shall not, and shall ensure that each of its
subsidiaries does not, except as otherwise permitted hereunder,
remove, destroy, lease, sell or otherwise dispose of any of the
Mortgaged Premises; provided that the Company and its subsidiaries
may sell or otherwise dispose of furniture, machinery, equipment,
vehicles and accessories which have become worn out or damaged or
otherwise unsuitable for their purposes on condition that it shall
substitute therefor, subject to the lien hereof and free from prior
liens or charges, property of equal value so that the security
hereby constituted shall not thereby be in any way reduced or
impaired;
g) No Other Liens - shall not, and shall ensure that each of its
subsidiaries does not, create, assume or suffer to exist any charge,
lien, security interest or encumbrance upon any Mortgaged Premises
ranking or purporting to rank in priority to or pari passu with the
security interest created hereunder, other than Permitted
Encumbrances; provided that no provision hereof shall be construed
as a subordination or postponement of the security interest created
hereunder to or in favour of any other charge, lien, security
interest or encumbrance, whether or not it is a Permitted
Encumbrance;
h) To Hold Proceeds of Unauthorized Sale in Trust - in the event the
Mortgaged Premises or any part thereof are sold or disposed of prior
to the full discharge of this Debenture by Roynat, in any manner not
authorized by this Debenture, shall hold all proceeds of such sale
or disposition received by the Company as trustee for Roynat until
the Company has been fully released from this Debenture by Roynat;
i) To Insure - shall, and shall cause it subsidiaries to, keep insured
the Mortgaged Premises with reputable insurers approved by Roynat in
such amounts against loss or damage by fire and other causes or
perils as Roynat may reasonably require and shall pay all premiums
necessary for such purposes as the same shall become due. All
policies of insurance issued in respect of the Mortgaged Premises
and all proceeds thereof are hereby assigned to Roynat as security
for the Company's obligations hereunder. Roynat shall be named as
loss payee or mortgagee, as its interest may appear, and/or
additional insured, as applicable, with respect to any such
insurance providing coverage in respect of any of the Mortgaged
Premises, and each provider of any such insurance shall agree, by
endorsement upon the policy or policies issued by it or by
independent instruments furnished to Roynat, that it will give
Roynat thirty (30) days prior written notice before any such policy
or policies shall be altered or cancelled;
j) To Furnish Proofs - shall, and shall cause it subsidiaries to,
forthwith on the happening of any loss or damage furnish at its
expense all necessary proofs and do all necessary acts to enable
Roynat to obtain payment of the insurance moneys subject to the
rights of holders of Permitted Encumbrances;
k) Inspection by Roynat - shall, and shall cause it subsidiaries to,
allow any employees or third parties retained by Roynat at any
reasonable time to enter the premises of the Company to inspect the
Mortgaged Premises, including without limitation the right to
undertake soil, ground water, environmental or other tests,
measurements or surveys in, on or below the Mortgaged Premises, and
to inspect the books and records of the Company and any of its
subsidiaries and make extracts therefrom, and shall permit Roynat
prompt access to such other persons as Roynat may deem necessary or
desirable for the purposes of inspecting or verifying any matters
relating to any part of the Mortgaged Premises or the books and
records of the Company, provided that any information so obtained
shall be kept confidential, save as required by Roynat in exercising
its rights hereunder or pursuant to any applicable law or court
order. The Company shall pay all costs and expenses of third parties
(including legal fees and disbursements on a attorney and own client
basis) retained by Roynat for purposes of inspection under this
Section 1(k);
l) Deliver Financial Statements - shall, and shall cause it
subsidiaries to, deliver to Roynat within 105 days of the close of
each financial year of the Company one copy of the audited
consolidated annual financial statements for that year, including
the balance sheet and statements of income, retained earnings and
changes in financial position accompanied by the report of the
Company's auditors, and such other statements or reports as may be
required by Roynat in the Offer of Finance, and within 30 days after
the end each month, one copy of the interim consolidated financial
statements signed by an authorized officer of the Company, all of
which financial statements shall be prepared in accordance with
generally accepted accounting principles; and shall at the same time
deliver to Roynat copies of all management reports prepared by the
auditors of the Company together with any other statements
stipulated in the Offer of Finance;
m) Not to Create Certain Charges - without the prior written consent of
Roynat, shall not create or suffer to exist any charge or
encumbrance over all or any portion of the Mortgaged Premises
ranking or purporting to rank prior to or pari passu with the
charges hereof, other than Permitted Encumbrances, and shall not
permit any subsidiary to mortgage, charge or otherwise encumber any
of its property or assets or issue any bonds, debentures, shares or
other securities, except to the Company;
n) Not to Remove - prior to the removal of any of the Mortgaged
Premises from the state or province in which it is situated at the
date of this Debenture or to leasehold property, the Company shall,
and shall cause it subsidiaries to, effect such further
registrations and obtain such other consents and give such other
security, at the sole cost and expense of the Company, as may be
required or desirable to protect or preserve the security hereby
created, and the Company shall forthwith notify Roynat of the
intended removal and the action proposed to be taken.
o) No Actions - has received no notice of and has no knowledge of any
pending, potential or threatened litigation or claim for judicial or
administrative action claiming an amount in excess of Cdn$500,000
which would adversely affect the Mortgaged Premises or their use or
market value;
p) Compliance with Environmental Laws -
(i) shall, and shall cause it subsidiaries to, conduct and
maintain its business, operations and the Mortgaged Premises
so as to comply in all respects with all applicable
Environmental Laws, including obtaining all necessary
licenses, permits, consents and approvals required to own or
operate the Mortgaged Premises and the business carried out
on, at or from the Mortgaged Premises;
(ii) except as specifically permitted by Roynat in writing, the
Company shall not, and shall not permit any of its
subsidiaries to, permit or suffer to exist, Contaminants or
dangerous or potentially dangerous conditions in, on or below
the Mortgaged Premises including, without limitation, any
polychlorinated biphenyls, radio-active substances,
underground storage tanks, asbestos or urea formaldehyde foam
insulation;
(iii) has no knowledge of the existence of Contaminants or dangerous
or potentially dangerous conditions at, on or under the
Mortgaged Premises or any properties in the vicinity of the
Mortgaged Premises which could affect the Mortgaged Premises
or the market value thereof or in levels that exceed the
standards in Environmental Laws;
(iv) has no knowledge of the Mortgaged Premises, or any portion
thereof, having been used for the disposal of waste;
(v) has not given or received, nor does it have an obligation to
give, any notice, claim, communication or information
regarding any past, present, planned or threatened treatment,
storage, disposal, presence, release or spill of any
Contaminant at, on, under or from the Mortgaged Premises or
any property in the vicinity of the Mortgaged Premises,
including any notice pursuant to any Environmental Laws or any
environmental report or audit. The Company shall notify Roynat
promptly and in reasonable detail upon receipt of any such
claim, notice, communication or information or if the Company
becomes aware of any violation or potential violation of the
Company of any Environmental Laws and shall describe therein
the action which the Company intends to take with respect to
such matter;
(vi) shall, and shall cause it subsidiaries to, at the Company's
expense establish and maintain a system to assure and monitor
continued compliance with, and to prevent the contravention
of, Environmental Laws, which system shall include periodic
reviews of such compliance system and the Company shall
provide an annual report to Roynat regarding the Company's and
each of its subsidiaries environmental performance, and the
effectiveness of such system;
(vii) shall, and shall cause it subsidiaries to, promptly advise
Roynat in writing of any material adverse change in the
environmental or other legal requirements affecting the
Company or the Mortgaged Premises upon the Company becoming
aware of any such change, and the Company shall provide Roynat
with a copy of any of the orders, by-laws, agreements or other
documents pursuant to which any such change is effected or
documented;
(viii) shall at the Company's expense, and shall cause it
subsidiaries to, promptly take or cause to be taken any and
all necessary remedial or clean-up action in response to the
presence, storage, use, disposal, transportation, release or
discharge of any Contaminant in, on, under or about any of the
Mortgaged Premises, or used by the Company, in compliance with
all material laws including, without limitation, Environmental
Laws, and in accordance with the orders and directions of all
applicable federal, state, provincial, municipal and local
governmental authorities;
(ix) shall deliver to Roynat a true and complete copy of all
environmental audits, evaluations, assessments, studies or
tests relating to the Mortgaged Premises or the Company now in
its possession or control or forthwith after the completion
thereof, or upon such materials coming into the Company's
possession or control;
(x) shall at the Company's expense, if reasonably requested by
Roynat in writing, retain an environmental consultant
acceptable to Roynat, acting reasonably, to undertake
environmental tests and to prepare a report or audit with
respect to the Mortgaged Premises and deliver same to Roynat
for its review; and
(xi) shall indemnify and save harmless Roynat, its officers,
directors, employees, agents and shareholders from and against
all losses, liabilities, damages or costs (including legal
fees and disbursements on a attorney and own client basis)
suffered including, without limitation, the cost or expense of
any environmental investigation, the preparation of any
environmental or similar report, and the costs of any
remediation arising from or relating to any breach of the
foregoing covenants of this Section 1(p), any breach by the
Company or any other person now or hereafter having an
interest in the Mortgaged Premises which is asserted or
claimed against Roynat; the presence, in any form, of any
Contaminant on or under the Mortgaged Premises, or the
discharge, release, spill or disposal of any contaminant by
the Company, which is asserted or claimed against any of these
indemnified persons. This indemnity shall survive the payment
in full of all amounts secured hereunder and the discharge of
this Debenture. Roynat shall hold the benefit of this
indemnity in trust for those indemnified persons who are not
parties to this Debenture;
q) No Consents - has received all consents required in connection with
the transactions contemplated hereby and the consummation of the
transaction contemplated hereby will not result in any default under
any agreement the Company or any of its subsidiaries are party to
and will not result in the creation of any security interest or
other encumbrance on the assets of the Company or any of its
subsidiaries.
r) Correspondence - shall, within 10 business days of receipt or
delivery as the case may be, deliver to Roynat copies of all
correspondence from or to any securities regulatory authority
including without limitation the Securities and Exchange Commission,
any state securities regulator, any securities exchange or market
including NASDAQ.
2. Waiver of Covenants. Roynat may waive in writing any breach by the
Company of any of the provisions contained in this Debenture or any default by
the Company in the observance or performance of any covenant or condition
required to be observed or performed by the Company hereunder, provided that no
such waiver or any other act, failure to act or omission by Roynat shall extend
to or be taken in any manner to affect any subsequent breach or default or the
rights of Roynat resulting therefrom.
3. Performance of Covenants by Roynat. If the Company shall fail to perform
any covenant on its part herein contained, Roynat may in its absolute discretion
perform any such covenant capable of being performed by it, but Roynat shall be
under no obligation to do so. If any such covenant requires the payment of money
or if the Mortgaged Premises or any part thereof shall become subject to any
charge ranking in priority to the lien hereof, Roynat may in its absolute
discretion make such payment and/or pay or discharge such charge, but shall be
under no obligation to do so. All sums so paid by Roynat, together with interest
at the Loan Rate, shall be payable by the Company on demand and shall constitute
a charge upon the Mortgaged Premises. No such performance or payment shall
relieve the Company from any default hereunder or any consequences of such
default.
4. Appointment of Monitor. If in the opinion of Roynat, acting reasonably, a
material adverse change has occurred in the financial condition of the Company,
or if Roynat in good faith believes that the ability of the Company to pay any
of its obligations to Roynat or to perform any other covenant contained herein
has become impaired or if an event of default has occurred, Roynat may by
written notice to the Company, appoint a monitor (the "Monitor") to investigate
any or a particular aspect of the Company or its business and affairs for the
purpose of reporting to Roynat. The Company shall give the Monitor its full
co-operation, including full access to facilities, assets and records of the
Company and to its creditors, customers, contractors, officers, directors,
employees, auditors, legal counsel and agents. The Monitor shall have no
responsibility for the affairs of the Company nor shall it participate in the
management of the Company's affairs and shall incur no liability in respect
thereof or otherwise in connection with the Company, its business and affairs or
the Mortgaged Premises. The Monitor shall act solely on behalf of Roynat and
shall have no contractual relationship with the Company as a consultant or
otherwise. The appointment of a Monitor shall not be regarded as an act of
enforcement of this Debenture. All reasonable fees and expenses of the Monitor
(including legal fees and disbursements on a attorney and own client basis)
shall be paid by the Company upon submission to it of a written invoice
therefor. Roynat may at its option upon the occurrence of an event of default
appoint or seek to have appointed the Monitor as Receiver, receiver and manager,
liquidator, or trustee in bankruptcy of the Company or the Mortgaged Premises or
any part thereof.
5. Application of Insurance Proceeds. Any insurance moneys received by Roynat
pursuant to Sections 1(i) and/or 1(j) above may at the option of Roynat be
applied to rebuilding or repairing the Mortgaged Premises, or be paid to the
Company, or any such moneys or any insurance moneys received by Roynat upon the
death of any person whose life is insured under any policy of insurance assigned
to Roynat as security for the obligations of the Company hereunder may be
applied in the sole discretion of Roynat, in whole or in part, to the repayment
of the principal amount hereby secured or any part thereof whether then due or
not, with any partial payments to be credited against principal instalments
payable hereunder in inverse order of their maturity dates.
6. No Merger or Novation. The taking of any judgment or the exercise of any
power of seizure or sale shall not operate to extinguish the liability of the
Company to perform its obligations hereunder or to pay the moneys hereby
secured, shall not operate as a merger of any covenant herein contained or
affect the right of Roynat to interest at the Loan Rate in effect from time to
time hereunder, and the acceptance of any payment or other security shall not
constitute or create any novation. The execution and delivery of this Debenture
or of any instruments or documents supplemental hereto shall not operate as a
merger of any representation, warranty, term, condition or other provision
contained in any other obligation or indebtedness of the Company to Roynat or
under any Offer of Finance.
7. Security in Addition. The security hereby constituted is in addition to
any other security now or hereafter held by Roynat. The taking of any action or
proceedings or refraining from so doing, or any other dealings with any other
security for the moneys secured hereby, shall not release or affect the charges
created hereby.
8. Additional Leasehold Provisions.
a. The Company covenants and agrees that upon receipt of a written
demand therefor from Roynat, it shall promptly pay to Roynat as the
same fall due all rents, taxes and other charges payable by the
Company or demanded by the Landlord pursuant to the provisions of
the Lease, which Roynat shall pay to the Landlord or to the
competent tax authority, as the case may be, in default whereof
Roynat's power of sale hereby given and all other remedies hereunder
shall be exercisable.
b. The Company covenants with Roynat that the Lease is, at the time of
the sealing and delivery of these presents, a good, valid and
subsisting lease in law and not surrendered, forfeited void or
voidable, and that the rents and covenants therein reserved and
contained have been duly paid and performed by the Company up to the
date hereof, and that the Company has the right, full power and
lawful and absolute authority to demise and sublet the said lands
and buildings and to grant a new sublease in manner aforesaid and
according to the true intent and meaning of these presents, subject
only to the consent of the landlord.
c. The Company covenants and agrees that it will at all times fully
perform and comply with all agreements, covenants, terms and
conditions imposed upon or assumed by it as tenant under the Lease,
and/or imposed upon or assumed by or agreed to by it pursuant to any
prior encumbrance and that if the Company shall fail to do so Roynat
may (but shall not be obliged to) take any action Roynat deems
necessary or desirable to prevent or to cure any default by the
Company in the performance of or compliance with any of the
Company's covenants or obligations under the Lease and/or imposed
upon or assumed by or agreed to by it pursuant to any prior
encumbrance. Upon receipt by Roynat from the owner and or any prior
encumbrancer of any written notice of default by the Company, Roynat
may, upon notice to the Company, rely thereon and take any action as
aforesaid to cure such default even though the existence of such
default or the nature thereof be questioned or denied by the Company
or by any party on behalf of the Company. The Company hereby
expressly grants to Roynat and agrees that Roynat shall have the
absolute and immediate right to enter in and upon the Leasehold
Interest or any part thereof to such extent and as often as Roynat,
in its sole discretion deems necessary or desirable, in order to
prevent or to cure any such default by the Company. Roynat may pay
and expend such sums of money as Roynat in its sole discretion deems
necessary for any such purpose, and the Company hereby agrees to pay
to Roynat, immediately upon notification by Roynat and without
demand, all such sums so paid and expended by Roynat, together with
interest thereon at the rate aforesaid from the date of each such
payment. All sums so paid and expended by Roynat, and the interest
thereon, shall stand charged upon the Leasehold Interest with
interest at the rate aforesaid, shall be added to the principal
moneys hereby secured in addition to all other moneys secured
thereon, and shall be secured by the lien of this Debenture.
d. The Company covenants with Roynat that if this Debenture is or shall
be outstanding at the expiration of the term of the Lease and the
Company shall refuse or neglect to exercise its right, if any, to
renew the Lease or any renewals thereof to be hereafter granted, and
to pay the fees, costs, charges and expenses incidental to and
payable upon such renewals, then, and as often as it shall happen,
Roynat may, if it thinks proper, effect such renewals in its own
name or otherwise, and in that case every such new lease less one
day of the term thereof and the lands and buildings thereby demised
shall remain and be a security to Roynat as well for the payment of
all money paid to it for such renewal and its costs, charges and
expenses, as for any other sums that may be due by virtue of this
indenture.
e. For the consideration aforesaid, the Company will henceforth stand
possessed of the Leasehold Interest for the residue of the term
granted by the Lease in trust for Roynat, and will assign and
dispose thereof as Roynat may direct, but subject to the same right
of redemption as is hereby given to the Company with respect to the
derivative term hereby granted; the Company hereby irrevocably
appoints Roynat as the Company's substitute to be the Company's
attorney during the continuance of this security and for and on
behalf of the Company to assign the Lease and convey the Leasehold
Interest and the said reversion as Roynat shall, in the event of
default hereunder, direct, and in particular, upon any sale made by
Roynat under the statutory power or powers of sale herein contained,
to assign the Lease and convey the Leasehold Interest and the said
reversion to the purchaser; and it is hereby declared that in the
event of default hereunder Roynat or other person for the time being
entitled to the money hereby secured may at any time, by deed,
remove the Company or any other person from being a trustee of the
Lease under the declaration of trust hereinbefore declared and on
the removal of the Company, or any future trustee of the Lease may,
by deed, appoint a new trustee or trustees in the Company's place.
f. The Company further covenants and agrees:
(i) that it will not surrender the Lease or the rights of renewal,
nor terminate or cancel the Lease, and that it will not
without the express written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇, change,
supplement, alter or amend the Lease either orally or in
writing which consent shall not be unreasonably withheld;
(ii) that no release or forbearance of any of the Company's
obligations under the Lease or under any prior encumbrance
shall release the Company from any of its obligations under
this Debenture, including the obligations with respect to the
payment of rent as provided for in the Lease and the
performance of all of the terms, provisions, covenants,
conditions and agreements contained in the Lease and any prior
encumbrance to be kept, performed and complied with by the
tenant in the Lease and by the Company in any prior
encumbrance;
(iii) that unless Roynat shall otherwise expressly consent in
writing, the title in fee simple to the property demised by
the Lease and the leasehold estate shall not merge but shall
always remain separate and distinct, notwithstanding the union
of said estates by purchase or otherwise.
9. Partial Discharges. Roynat may in its sole discretion grant partial
discharges or releases of security in respect of any of the Mortgaged Premises
on such terms and conditions as it shall deem fit and no such partial discharges
or releases shall affect the remainder of the security constituted hereby nor
shall it alter the obligations of the Company hereunder.
10. Events of Default. The whole of the principal balance remaining unpaid
together with interest and all other moneys secured by this Debenture shall, at
the option of Roynat, become immediately due and payable and the security hereby
created shall become enforceable in each of the following events (each event
being herein called an "event of default"):
a) if the Company defaults in payment of the principal on this
Debenture or on any other indebtedness of the Company to Roynat when
the same becomes due;
b) if the Company defaults in payment of the interest on this Debenture
or on any other indebtedness of the Company to Roynat, other than
principal, when the same becomes due and such default is, in the
reasonable opinion of Roynat, not capable of being cured or, if it
is capable of being cured, is not cured within 5 days of default;
c) if the Company defaults in the performance or observance of any of
the covenants contained in Section 9(b) of the Debenture or in
Sections 1(f), (g), (k), (m) or (n) of this Schedule or Section 4 of
this Schedule;
d) if the Company or any of its subsidiaries defaults in the
performance or observance of any other covenant or condition herein
contained or contained in any other agreement or instrument between
the Company or any of its subsidiaries and, or in favour of, Roynat,
including, without limitation, the warrants issued by the Company to
Roynat or the related registration rights agreement (other than a
default of the obligation of the Company to have a registration
statement effective as of a particular date) or the Subscription
Agreement, and such default shall continue for 10 days after written
notice thereof to the Company by Roynat;
e) if there is any material misrepresentation or misstatement contained
in any certificate or document delivered by an officer or director
of the Company or any subsidiary in connection with this Debenture,
or in connection with any other agreement, document, certificate or
instrument of any kind whatsoever delivered at any time by the
Company or any subsidiary to Roynat;
f) if the Company or any of its subsidiaries institutes any proceeding
or takes any corporate action or executes any agreement or notice of
intention to authorize its participation in or commencement of any
proceeding (i) seeking to adjudicate it a bankrupt or insolvent, or
(ii) seeking liquidation, dissolution, winding up, restructuring,
reorganization, arrangement, protection, relief or composition of it
or any of its property or debt or making a proposal with respect to
it under any law relating to bankruptcy, insolvency, reorganization
or compromise of debts or other similar laws (including, without
limitation, any reorganization, arrangement or compromise of debt
under the laws of its jurisdiction of incorporation or
organization);
g) the Company or any of its subsidiaries becomes bankrupt or insolvent
or commits an act of bankruptcy, or any proceeding is commenced
against or affecting the Company or any of its subsidiaries:
(i) seeking to adjudicate it a bankrupt or insolvent;
(ii) seeking liquidation, dissolution, winding up, restructuring,
reorganization, arrangement, protection, relief or composition
of it or any of its property or debt or making a proposal with
respect to it under any law relating to bankruptcy,
insolvency, reorganization or compromise of debts or other
similar laws (including, without limitation, any
reorganization, arrangement or compromise of debt under the
laws of its jurisdiction of incorporation or organization); or
(iii) seeking appointment of a receiver, receiver and manager,
liquidator, trustee, agent, custodian or other similar
official for it or for any part of its properties and assets,
including the Mortgaged Premises or any part thereof;
h) any order or judgment is issued by a court granting any of the
relief referred to in Section 10(f) hereof;
i) if an encumbrancer or secured creditor shall appoint a receiver or
agent or other similar official over any part of the Mortgaged
Premises, or take possession of any part of the Mortgaged Premises
or if any execution, distress or other process of any court becomes
enforceable against any of the property of the Company, or a
distress or like process is levied upon any of such property;
j) if the Company takes any corporate proceedings for its dissolution,
liquidation or amalgamation with another company or if the corporate
existence of the Company shall be terminated by expiration,
forfeiture or otherwise;
k) if a default occurs under any agreement supplemental hereto or under
any other security previously, now or hereafter granted to Roynat by
the Company or any guarantor of the obligations of the Company or
should any party to any agreement supplemental or collateral hereto
fail to carry out or observe any covenant or condition on its part
to be observed or performed and such default continues for 10 days
after written notice thereof to the Company by Roynat;
l) if voting control of the Company or any of its subsidiaries shall
change without the prior written consent of Roynat;
m) if a default, breach material misrepresentation or material
misstatement occurs or is made, or is permitted to occur or to be
made under any agreement, promissory note, debt obligation,
guarantee or otherwise now or hereafter granted by or entered into
by the Company or any of its subsidiaries to or with Roynat, any
other bank, financial institution, or other lender; or
n) if a default or acceleration occurs under any agreement, promissory
note, debt obligation, guarantee or otherwise now or hereafter
granted by the Company to any other bank or financial institution.
11. Enforcement. Upon the happening of any event of default, Roynat may
exercise any rights, powers or remedies available to Roynat at law or in equity
or under applicable legislation and, in addition, shall have the following
rights, powers and remedies:
a) to enter upon and take possession of all or any part of the
Mortgaged Premises;
b) to hold, use, repair, preserve and maintain all or any part of the
Mortgaged Premises and make such replacements thereof and additions
thereto as Roynat shall deem advisable;
c) to exercise all powers necessary to the performance of all functions
provided for herein including without limitation the powers to
purchase on credit, to borrow money in the Company's name or in its
own name and to advance its own money to the Company at such rates
of interest as it may deem reasonable;
d) to sell, for cash or credit or part cash and part credit, lease or
dispose of or otherwise realize upon all or any part of the
Mortgaged Premises whether by public auction or by private sale or
lease in such manner as Roynat in its absolute discretion may
determine, provided that it shall not be incumbent on Roynat to
sell, lease or dispose of the said property but that it shall be
lawful for Roynat peaceably to use and possess the same without
hindrance or interruption by the Company, or any other person or
persons whomsoever, and to receive income from such property and to
convey, transfer and assign to a purchaser or purchasers the title
to any undertaking, property and assets so sold and provided further
that in the case of a sale on credit Roynat shall only be liable to
account to the Company, any subsequent encumbrancers and others for
moneys actually received by Roynat;
e) to appoint by instrument in writing any person or persons to be a
Receiver of all or any portion of the undertaking, property and
assets hereby charged, to fix the Receiver's remuneration and to
remove any Receiver so appointed and appoint another or others in
his stead; and
f) to apply to any court of competent jurisdiction for the appointment
of a Receiver of all or any portion of the undertaking, property and
assets hereby charged.
12. Powers of Receiver.
a) Any Receiver shall have all of the powers of Roynat set out in
Section 11 of this Schedule and, in addition, shall have the
following powers:
(i) to carry on the business of the Company and to enter into any
compromise or arrangement on behalf of the Company; and
(ii) with the prior written consent of Roynat to borrow money in
his name or in the Company's name, for the purpose of carrying
on the business of the Company and for the preservation and
realization of the undertaking, property and assets of the
Company including, without limitation, the right to pay
persons having prior charges or encumbrances on properties on
which the Company may hold charges or encumbrances, with any
amount so borrowed and any interest thereon to be a charge
upon the Mortgaged Premises in priority to this Debenture;
b) Any Receiver appointed pursuant to the provisions hereof shall be
deemed to be an agent of the Company for the purposes of:
(i) carrying on and managing the business and affairs of the
Company, and
(ii) establishing liability for all of the acts or omissions of the
Receiver while acting in any capacity hereunder and Roynat
shall not be liable for such acts or omissions,
provided that, without restricting the generality of the foregoing, the Company
irrevocably authorizes Roynat to give instructions to the Receiver relating to
the performance of its duties as set out herein.
13. Application of Moneys. All moneys actually received by Roynat or by the
Receiver pursuant to Sections 11 and 12 of this Schedule shall be applied:
a) first, in payment of claims, if any, of secured creditors of the
Company, including any claim of the Receiver pursuant to Section
12(a), ranking in priority to the charges created by this ▇▇▇▇▇▇▇▇▇
as directed by Roynat or the Receiver;
b) second, in payment of all costs, charges and expenses of and
incidental to the appointment of the Receiver (including legal fees
and disbursements on a attorney and its own client basis) and the
exercise by the Receiver or Roynat of all or any of the powers
granted to them under this Debenture, including the reasonable
remuneration of the Receiver or any agent or employee of the
Receiver or any agent of Roynat and all outgoings properly paid by
the Receiver or Roynat in exercising their powers as aforesaid;
c) third, in or towards the payment to Roynat of all moneys due to it
by the Company in such order as Roynat in its sole discretion may
determine;
d) fourth, in or towards the payment of the obligation of the Company
to persons, if any, with charges or security interests against the
Mortgaged Premises ranking subsequent to those in favour of Roynat;
and
e) fifth, subject to applicable law, any surplus shall be paid to the
Company.
14. Restriction on Company and its Officers and Directors. Upon the Company
receiving notice from Roynat of the taking of possession of the Mortgaged
Premises or the appointment of a Receiver, all the powers, functions, rights and
privileges of each of the directors and officers of the Company with respect to
the properties, business and undertaking of the Company shall cease unless
specifically continued by the written consent of Roynat.
15. Discharge and Satisfaction. Upon payment by the Company to Roynat of
all moneys hereby secured, these presents shall cease and become null and void
and the charges and security interests granted by the Company herein shall cease
and be of no further effect without any acknowledgement or formality, but Roynat
shall upon the request and at the expense of the Company, execute and deliver to
the Company a full release and discharge.
16. No Obligation to Advance. Neither the issue and delivery of this
Debenture nor the advance of any funds hereunder shall obligate Roynat to
advance any further funds hereunder or otherwise make credit available to the
Company, nor will Roynat have any liability for any failure or delay on its part
to exercise any rights hereunder.
17. Limited Power of Attorney. The Company hereby appoints Roynat as the
Company's attorney, with full power of substitution, in the name and on behalf
of the Company, to execute, deliver and do all such acts, deeds, leases,
documents, transfers, demands, conveyances, assignments, contracts, assurances,
consents, financing statements and things as the Company has agreed to execute,
deliver and do hereunder, under any Offer of Finance or otherwise, or as may be
required by Roynat or any Receiver to give effect to this Debenture or in the
exercise of any rights, powers or remedies hereby conferred on Roynat or any
Receiver, and generally to use the name of the Company in the exercise of all or
any of the rights, powers or remedies hereby conferred on Roynat or any
Receiver. This appointment, being coupled with an interest, shall not be revoked
by the insolvency, bankruptcy, dissolution, liquidation or other termination of
the existence of the Company or for any other reason.
18. Interpretation. As used herein the following expressions shall have the
following meanings:
a) "Business Day" means any day except Saturday, Sunday or a statutory
holiday.
b) "Contaminant" means any solid, liquid, gas, odour, heat, sound,
smoke, waste, vibration, radiation or combination of any of them
resulting directly or indirectly from human activities that may
cause: (i) impairment of the quality of the natural environment for
any use that can be made of it, (ii) injury or damage to property or
to plant or animal life, (iii) harm or material discomfort to any
person, (iv) an adverse affect on the health of any person, (v)
impairment of the safety of any person, (vi) rendering any property
or plant or animal life unfit for use by man, (vii) loss of
enjoyment of normal use of property, or (viii) interference with the
normal conduct of business, and includes any pollutant or
contaminant as defined in any applicable Environmental Laws and any
biological, chemical or physical agent which is regulated,
prohibited, restricted or controlled.
c) "Environmental Laws" means the common law and all applicable United
States of America and Canadian federal, state, provincial, local,
municipal, governmental or quasi-governmental laws, rules,
regulations, licences, orders, permits, decisions or requirements
concerning Contaminants, occupational or public health and safety or
the environment and any other order, injunction, judgment,
declaration, notice or demand issued thereunder;
d) "Inventory" means property of the Company held for sale including
products purchased for resale, finished goods, work in process and
raw materials but not including any property not intended to be
directly incorporated in finished goods or products to be sold.
e) "Lease" means any lease entered into by the Company in respect of
real property.
f) "Loan Rate" means the rate of interest specified in Section 3 of the
Debenture.
g) "Permitted Encumbrances" means any of the following:
(i) liens for taxes, assessments, governmental charges or levies
not at the time due;
(ii) easements, rights of way or other similar rights in land
existing at the date of this Debenture which in the aggregate
do not materially impair the usefulness in the business of the
Company of the property subject thereto;
(iii) rights reserved to or vested in any municipality or
governmental or other public authority by the terms of any
lease, licence, franchise, grant or permit, or by any
statutory provision, to terminate the same or to require
annual or other periodic payments as a condition to the
continuance thereof;
(iv) any lien or encumbrance the validity of which is being
contested by the Company in good faith and in respect of which
either there shall have been deposited with Roynat cash in an
amount sufficient to satisfy the same or Roynat shall be
otherwise satisfied that its interests are not prejudiced
thereby;
(v) any reservations, limitations, provisos and conditions
expressed in any original grant from the Crown;
(vi) title defects or irregularities which, in the opinion of
counsel to Roynat, are of a minor nature and in the aggregate
shall not materially impair the usefulness in the business of
the Company of the property subject thereto;
(vii) validly perfected security given by the Company to the senior
lender of the Company listed in Schedule C to which this
Debenture has been subordinated on any assets of the Company;
and
(viii) such other encumbrances as are set out in Schedule C.
h) "person' for the purposes of this Debenture, person is to be broadly
interpreted and shall include an individual, a company, a
partnership, a trust, an unincorporated organization, a joint
venture or any other entity.
i) "Receiver" shall include one or more of a receiver, receiver-manager
or receiver and manager of all or a portion of the undertaking,
property and assets of the Company appointed by Roynat pursuant to
this Debenture or by a court of competent jurisdiction.
j) "Roynat" means Roynat Merchant Capital Inc., its successors and
assigns and, where applicable, includes those for whom it acts as
nominee or agent.
k) "Subscription Agreement" means the subscription agreement dated the
date hereof between the Company and Roynat.
l) "subsidiaries" means any subsidiary of the Company and for greater
certainty includes ▇▇▇▇▇▇ Ventures, Inc., ▇▇▇▇▇▇ Equipment 2004
Inc., Pneutech Inc., ▇▇▇▇▇▇▇▇ Controls Inc. and Hydramen Fluid Power
Limited.