SECURITY AGREEMENT

 

(a)

all Goods, including (i) all equipment in all of its forms of the Grantor, wherever located, including all parts thereof and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor (any and all of the foregoing being the “Equipment”) and (ii) all inventory all of its forms of the Grantor, wherever located, including

 

(i)

all raw materials and work in process therefor, finished goods thereof, and materials used or consumed in the manufacture or production thereof,

 

(ii)

all goods in which the Grantor has an interest in mass or a joint or other interest or right of any kind (including goods in which the Grantor has an interest or right as consignee), and

 

(iii)

all goods which are returned to or repossessed by the Grantor,

 

(b)

all Accounts (including health-care-insurance receivables), contracts, contract rights, chattel paper (whether tangible or electronic), documents, instruments and general intangibles (including payment intangibles and software), rental agreement, or any part thereof, including, but not limited to Grantor's right to receive, either directly or indirectly, from any person, any rents or other payments due and payable under such agreements) of the Grantor, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights of the Grantor now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such accounts, contracts, contract rights, chattel paper, documents, instruments and general intangibles (any and all such accounts, contracts, contract rights, chattel paper, documents, instruments and general intangibles being the “Receivables”, and any and all such security agreements, guaranties, leases and other contracts being the “Related Contracts”);

 

(c)

all books and records relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section 2.1;

 

(d)

all General Intangibles;

 

(e)

all Investment Property; and

 

(f)

all products, rents, issues, profits, returns, income and proceeds of and from any and all of the foregoing Collateral (including proceeds which constitute property of the types described in clauses (a), (b), (c), (d) and (e).

 

(a)

remain in full force and effect until expressly released in writing by the Secured Party following the full and final payment and satisfaction of all Obligations;

 

(b)

be binding upon the Grantor, its successors, transferees and assigns; and

 

(c)

inure, together with the rights and remedies of the Secured Party hereunder, to the benefit of the Secured Party.

 

(a)

the Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein, and shall perform all of its duties and obligations under such contracts and agreements to the same extent as if this Security Agreement had not been executed, unless such performance is excused by breach of the other party or parties thereto;

 

(b)

the exercise by the Secured Party of any of its rights hereunder shall not release the Grantor from any of its duties or obligations under any such contracts or agreements included in the Collateral;

 

(c)

the Secured Party shall have no obligation or liability under any such contracts or agreements included in the Collateral by reason of this Security Agreement, nor shall the Secured Party 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, nor shall the Secured Party have any obligation to preserve rights against prior parties with respect to any part of the Collateral; and

 

(d)

except for reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters, (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral or (c) exercising any rights to close out any option or exercising any put option relative to any Collateral, whether or not the Secured Party has or is deemed to have knowledge of it and regardless of any expiration or termination date.

 

(a)

This Security Agreement is effective to create, as collateral security for the Obligations of the Grantor, valid and enforceable Liens on the Collateral in favor of the Secured Party, except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditor's rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

 

(b)

Except with regard to Liens (if any) on Specified Assets, upon the completion of the Filings (with respect to Collateral existing on the Effective Date) and Subsequent Filings (with respect to Collateral acquired following the Effective Date for which the Filings are not effective to perfect the Lien on such after-acquired Collateral), the Liens created pursuant to this Security Agreement will constitute valid Liens on and (to the extent provided herein) perfected security interests in the Collateral in favor of the Secured Party, and will be prior to all other Liens of all other Persons, except (i) to the extent that the recording of an assignment or other transfer of title to the Secured Party, or the recording of other applicable documents in the United States Patent and Trademark Office or United States Copyright Office may be necessary for perfection or enforceability, and (ii) as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law) or by an implied covenant of good faith and fair dealing. Notwithstanding the foregoing, the representation set forth above shall be deemed true and correct for all purposes so long as the Grantor has complied with its covenants set forth under Section 4.1.1, clause (a) of Section 4.1.2, and Section 4.1.4 of this Security Agreement, including the delivery to the Secured Party of executed financing statements for Subsequent Filings, whether or not the Secured Party has caused such financing statements to be filed in the applicable filing offices. To the extent permitted at any time by the U.C.C., the Grantor hereby irrevocably authorizes the Secured Party to supplement this Security Agreement with a more itemized list of Collateral and complete and file on behalf of the Grantor U.C.C. Financing Statements or similar documents necessary in the good faith judgment of the Secured Party to perfect the security interests purported to be created hereby.

 

(a)

The Grantor shall give the Secured Party a supplement to Schedule I at the end of each quarter, which shall set forth any changes as of such date to the information set forth in Section 3.1.1, clause (b) of Section 4.1.2 or Schedule I. The Grantor shall be entitled to deliver such a supplement at other times in addition to the times set forth in the preceding sentence.

 

(b)

The Grantor shall keep its place(s) of business and chief executive office and the office(s) where it keeps its records concerning the Receivables located at the addresses set forth in Item B of Schedule I hereto, and shall not change its legal name after the date hereof except upon 30 days' prior written notice to the Secured Party.

 

(a)

With respect to the foregoing and the grant of the security interest hereunder, the Grantor hereby authorizes the Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Grantor where permitted by law. A carbon, photographic or other reproduction of this Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

 

(b)

The Secured Party may at any time and from time to time file financing statements and amendments thereto that describe the Collateral as all assets of any Grantor or words of similar effect and which contain any other information required by Part 5 of Article 9 of the U.C.C. for the sufficiency or filing office acceptance of any financing statement or amendment, including whether the Grantor is an organization, the type of organization and any organization identification number issued to the Grantor. The Grantor agrees to furnish such information to the Secured Party promptly upon request therefor.

 

(a)

to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;

 

(b)

to receive, endorse, and collect any drafts or other instruments, documents in connection with clause (a) above; and

 

(c)

to file any claims or take any action or institute any proceedings which the Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Secured Party with respect to any of the Collateral.

 

(a)

The Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and also may:

 

(i)

require the Grantor to, and the Grantor hereby agrees that it will, at its expense and upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it available to the Secured Party at a place to be designated by the Secured Party which is reasonably convenient to both parties; and

 

(ii)

without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Secured Party's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Secured Party may deem commercially reasonable. The Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' prior notice to the Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

 

(b)

All cash proceeds received by the Secured Party in respect of any sale of, collection from or other realization upon all or any part of the Collateral may, in the discretion of the Secured Party, be held by the Secured Party as collateral for, and/or then or at any time thereafter applied against, all or any part of the Obligations as follows: (i) first, to the reasonable out-of-pocket costs and expenses of the Secured Party in connection with the retaking, holding, preparing for sale, selling or other disposition of the Collateral, including, without limitation, all court costs and the reasonable fees and expenses of its agents and legal counsel; (ii) second, to the payment in full of the Obligations; and (ii) third, to the Grantor, or its successors and assigns, or whomever may be lawfully entitled to receive the same, of any surplus then remaining.

 

(a)

The Grantor agrees to indemnify the Secured Party from and against any and all claims, losses and liabilities arising out of or resulting from this Security Agreement (including, without limitation, enforcement of this Security Agreement), except claims, losses or liabilities resulting from the Secured Party's gross negligence, bad faith or willful misconduct.

 

(b)

The Grantor will upon demand pay to the Secured Party the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel (but not more than one firm and all local or special expert counsel, if any, who may be retained by counsel to the Secured Party) and of any experts and agents, which the Secured Party 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 of the Secured Party hereunder; or

 

(iv)

the failure by the Grantor to perform or observe any of the provisions hereof.

1.

Filing office: Delaware

2.

Chief Executive Office: 96 Mowat Ave., Toronto, Ontario M6K 3M1

3.

Location of Books and Records and other Place of Business: 96 Mowat Ave., Toronto, Ontario M6K 3M1