Business Development Bank of Canada

Banque de développement du Canada

 

BDC

 

GENERAL SECURITY AGREEMENT

 

THIS AGREEMENT dated September 27, 2013

 

BETWEEN:

 

LAKELAND PROTECTIVE REAL ESTATE INC.

 

(the "Borrower")

 

AND:

 

BUSINESS DEVELOPMENT BANK OF CANADA, with a branch office at 25 Main Street
West, Suite 1900, Hamilton, Ontario L8P 1H1

 

(the "Bank")

 

1.            SECURITY INTEREST

(You, as the Borrower, will grant to the Bank a charge, referred to as a
security interest, over all personal property now held or in the future held or
acquired by you. You will also grant a charge, referred to as a floating charge,
over your complete undertaking . These charges are the security the Bank will
hold in consideration of lending you funds or providing the credit facility to
you.)

 

1.1          For consideration the Borrower hereby:

 

(a)mortgages and charges as a fixed and specific charge, and assigns and
transfers to the Bank, and grants to the Bank a general and continuing security
interest in all of the Borrower's present and after acquired personal property
including, without limitation:

 

(i)all office, trade, manufacturing and all other equipment and all goods,
including, without limitation, machinery, tools, fixtures, computers, furniture,
furnishings, chattels, motor vehicles and other tangible personal property that
is not Inventory, and all parts, components, attachments, accessories,
accessions, replacements, substitutions, additions and improvements to any of
the above (all of which is collectively called the "Equipment");

 

(ii)all inventory, including, without limitation, goods acquired or held for
sale or lease or furnished or to be furnished under contracts of rental or
service, all raw materials, work in process, finished goods, returned goods,
repossessed goods, all livestock and their young after conception, all crops and
timber, and all packaging materials, supplies and containers relating to or used
or consumed in connection with any of the foregoing (all of which is
collectively called the "Inventory");

 

(iii)all debts, accounts, claims, demands, moneys and choses in action which now
are, or which may at any time be, due or owing to or owned by the Borrower and
all books, records, documents, papers and electronically recorded data
recording, evidencing or relating to the debts, accounts, claims, demands,
moneys and choses in action (all of which is collectively called the
"Accounts");

 

General Security Agreement

Rev. May, 2008

 

 

 

 

(iv)all documents of title, chattel paper, instruments, securities and money,
and all other personal property, of the Borrower that is not Equipment,
Inventory or Accounts;

 

(v)all patents, trade-marks, copyrights, industrial designs, plant breeder’s
rights, integrated circuit topographies, trade-names, goodwill, confidential
information, trade secrets and know-how, including without limitation,
environmental technology and bio-technology, software and any registrations and
applications for registration of the foregoing and all other intellectual and
industrial property of the Borrower (all of which is collectively called the
“Intellectual Property”);

 

(vi)all the Borrower’s contractual rights, licenses and all other choses in
action of every kind which now are, or which may at any time be due or owing to
or owned by the Borrower, and all other intangible property of the Borrower,
that is not Accounts, chattel paper, instruments, documents of title,
Intellectual Property, securities or money;

 

(vii)the personal property described in Schedule “A” attached to this Agreement
and all additions thereto and replacements thereof; and

 

(viii)all proceeds of every nature and kind arising from the personal property
referred to in this Security Agreement;

 

(b)grants to the Bank a general and continuing security interest and charges by
way of a floating charge:

  

(i)all of the undertaking and assets of the Borrower, of every nature or kind
and wherever situate, whether presently owned or hereafter acquired, and all
their proceeds, other than its assets and undertakings that are otherwise
validly and effectively subject to the charges and security interests in favour
of the Bank created pursuant to this Clause 1.1.

 

1.2          The security interests, mortgages, transfers, assignments, charges,
grants and conveyances created pursuant to Clause 1.1 shall be collectively
called the "Security Interests", and the property subject to the Security
Interests and all property, assets and undertaking charged, assigned or
transferred or secured by any instruments supplemental to or in implementation
of this Security Agreement are collectively called the "Collateral".

 

1.3          The schedules, including definitions, form part of this Security
Agreement.

 

2.            EXCEPTIONS

(With few exceptions, all of your personal property is subject to the security
interests and charges described in Clause 1.1. Only the last day of any lease
term and possibly your consumer goods are excepted. Corporations do not hold
consumer goods.)

 

2.1          The last day of the term created by any lease or agreement is
excepted out of any charge or the Security Interests but the Borrower shall
stand possessed of the reversion and shall remain upon trust to assign and
dispose of it to any third party as the Bank shall direct.

 

2.2          All the Borrower’s consumer goods are excepted out of the Security
Interests.

 

3.ATTACHMENT

(Value or consideration has flowed between you and the Bank and the Security
Interests in your personal property are complete once you sign this Security
Agreement.)

 

The Borrower agrees that the Security Interests attach upon the signing of this
Security Agreement (or in the case of after acquired property, upon the date of
acquisition), that value has been given, and that the Borrower has (or in the
case of after acquired property, will have upon the date of acquisition) rights
in the Collateral and the Borrower confirms that there has been no agreement
between the Borrower and the Bank to postpone the time for attachment of the
Security Interests and that it is the Borrower's understanding that the Bank
intends the Security Interests to attach at the same time.

 

General Security Agreement

Rev. May, 2008

 

Page 1

 

 

4.            PURCHASE MONEY SECURITY INTEREST

(To the extent that the Bank helps you acquire an interest in any personal
property, you grant a special security interest to the Bank over that personal
property. The special security interest is known as a "Purchase Money Security
Interest".)

 

The Borrower acknowledges and agrees that the Security Interests constitute and
are intended to create Purchase Money Security Interests in Collateral to the
extent that moneys advanced by the Bank, including all future advances and
re-advances, are used or are to be used, in whole or in part, to purchase or
otherwise to acquire rights in Collateral.

 

5.            OBLIGATIONS SECURED

(The Security Interests and charges you have granted to the Bank secure all
indebtedness and all obligations to the Bank.)

 

This Security Agreement is in addition to and not in substitution for any other
security interest or charge now or in the future held by the Bank from the
Borrower or from any other person and shall be general and continuing security
for the payment and performance of all indebtedness, liabilities and obligations
of the Borrower to the Bank (including interest thereon), whether incurred prior
to, at the time of or after the signing of this Security Agreement including
extensions and renewals, and all other liabilities of the Borrower to the Bank,
present and future, absolute or contingent, joint or several, direct or
indirect, matured or not, extended or renewed, wherever and however incurred,
including all advances on current or running account, future advances and
re-advances of any loans or credit by the Bank and the Borrower’s obligation and
liability under any contract or guarantee now or in the future in existence
whereby the Borrower guarantees payment of the debts, liabilities and/or
obligations of a third party to the Bank, and for the performance of all
obligations of the Borrower to the Bank, whether or not contained in this
Security Agreement (all of which indebtedness, liabilities and obligations are
collectively called the "Obligations").

 

6.            REPRESENTATIONS AND WARRANTIES

(You state that you are able to legally grant this Security Agreement to the
Bank, it will be binding and the Collateral is not subject to any encumbrances
that have not been approved by the Bank. You own the Collateral and nothing
prevents you from granting the Security Interests and charges in favour of the
Bank. The Bank will rely on all of the following representations and
warranties.)

 

6.1          The Borrower represents and warrants to the Bank that:

 

(a)if a corporation, it is a corporation incorporated and organised and validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; it has the corporate power to own or lease its property and to
carry on the business conducted by it; it is qualified as a corporation to carry
on the business conducted by it and to own or lease its property and is in good
standing under the laws of each jurisdiction in which the nature of its business
or the property owned or leased by it makes such qualification necessary; and
the execution, delivery and performance of this Security Agreement are within
its corporate powers, have been authorised and do not contravene, violate or
conflict with any law or the terms and provisions of its constating documents or
its by-laws or any shareholders agreement or any other agreement, indenture or
undertaking to which the Borrower is a party or by which it is bound;

 

(b)if it is a corporation, its name as set forth on page 1 of this Security
Agreement is its full, true and correct name as stated in its constating
documents and if such name is in English, it does not have or use a French
language form of its name or a combined English language and French language
form of its name and vice versa, and the Borrower has provided a written
memorandum to the Bank accurately setting forth all prior names under which the
Borrower has operated;

 

(c)if it is a partnership, its name as set forth on page 1 is its full, true and
correct, and where required or voluntarily registered its registered, name; it
is a partnership validly created and organised and validly existing under the
laws of the jurisdiction of its creation; it has the power to carry on the
business conducted by it; it is qualified as a partnership to carry on the
business conducted by it and is in good standing under the laws of each
jurisdiction in which the nature of its business makes such qualification
necessary; and the execution, delivery and performance of this Agreement are
within its powers, have been authorised, and do not contravene, violate or
conflict with any law or the terms of its partnership agreement or any other
agreement, indenture or undertaking to which the Borrower is a party or by which
it is bound, and a complete list of the names, addresses and (if individuals)
the dates of birth of the partners of the partnership are set forth on a
Schedule attached to this Security Agreement;

 

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Rev. May, 2008

 

Page 2

 

 

(d)if the Borrower is an individual, that individual's full name and address
provided to the Bank are the individual's full and correct name and address and
the individual's date of birth as described on the individual's birth
certificate a true copy of which has been provided to the Bank or, if no birth
certificate issued from any jurisdiction in Canada exists, as described on the
documents provided to the Bank is the individual's correct birth date;

 

(e)there is no litigation or governmental proceedings commenced or pending
against or affecting the Collateral or the Borrower, in which a decision adverse
to the Borrower would constitute or result in a material adverse change in the
business, operations, properties or assets or in the condition, financial or
otherwise, of the Borrower; and the Borrower agrees to promptly notify the Bank
of any such future litigation or governmental proceeding;

 

(f)it does not have any information or knowledge of any facts relating to its
business, operations, property or assets or to its condition, financial or
otherwise, which it has not disclosed to the Bank in writing and which, if known
to the Bank, might reasonably be expected to deter the Bank from extending
credit or advancing funds to the Borrower;

 

(g)it has good title and lawfully owns and possesses all presently held
Collateral, free from all security interests, charges, encumbrances, liens and
claims, save only the Security Interests and the charges or security interests
consented to in writing by the Bank, and it has not granted any licenses in or
of its Intellectual Property other than as disclosed and consented to by the
Bank;

 

(h)to the extent that any of the Collateral includes serial numbered goods and
motor vehicles which require serial number registration by virtue of the Act and
its regulations including motor vehicles, trailers, manufactured homes, mobile
homes, boats, outboard motors for boats or aircraft, the Borrower has given the
full and correct serial numbers and any Ministry of Transport designation marks
or other relevant licensing authority marks of all such Collateral to the Bank;

 

(i)the Collateral is and/or will be located at the place(s) described in
Schedule “A” and will not be removed from such location(s) without the prior
written consent of the Bank;

 

(j)this Security Agreement is granted in accordance with resolutions of the
directors (and of the shareholders as applicable) of the Borrower, if the
Borrower is a corporation, or, if the Borrower is a partnership, of the partners
of the Borrower, and all other requirements have been fulfilled to authorise and
make the execution and delivery of this Security Agreement, and the performance
of the Borrower's obligations valid and there is no restriction contained in the
constating documents of the Borrower or in any shareholders agreement or
partnership agreement which restricts the powers of the authorised signatories
of the Borrower to borrow money or give security; and

 

(k)the Borrower's place(s) of business and chief executive office have been
correctly provided to the Bank.

 

7.            COVENANTS OF THE BORROWER

(The Security Interests and the Collateral must be protected while the Security
Agreement remains in effect. These covenants are your promises to the Bank
describing how the Bank's Security Interests will be attended to. You will also
covenant to maintain accurate books and records and allow the Bank's inspection.
Your promises are found in the Security Agreement and Schedules.)

 

7.1          The Borrower covenants with the Bank that while this Security
Agreement remains in effect the Borrower will:

 

(a)promptly pay and satisfy the Obligations as they become due or are demanded;

 

(b)defend the title to the Collateral for the Bank’s benefit, against the claims
and demands of all persons;

 

(c)fully and effectually maintain and ensure that the Security Interests are and
continue to be valid and effective;

 

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Rev. May, 2008

 

Page 3

 

 

(d)maintain the Collateral in good condition and repair and provide adequate
storage facilities to protect the Collateral and not permit the value of the
Collateral to be impaired;

 

(e)observe and conform to all valid requirements of any governmental authority
relative to any of the Collateral and all covenants, terms and conditions upon
or under which the Collateral is held;

 

(f)forthwith pay and satisfy:

 

(i)all taxes, assessments, rates, duties, levies, government fees, claims and
dues lawfully levied, assessed or imposed upon it or the Collateral when due,
unless the Borrower shall in good faith contest its obligations so to pay and
shall furnish to the Bank such security as the Bank may require;

 

(ii)all security interests, charges, encumbrances, liens and claims which rank
or could rank in priority to, or on an equal basis with, any of the Security
Interests; and

 

(iii)all fees from time to time chargeable by the Bank arising out of any term
of the commitment letter between the Bank and the Borrower including, without
limitation, inspection, administration and returned cheque handling fees;

 

(g)forthwith pay and satisfy all costs, charges, expenses and legal fees and
disbursements (on a solicitor and its own client basis) which may be incurred by
the Bank in connection with granting loans or credit to the Borrower, including
for:

 

(i)inspecting the Collateral;

 

(ii)negotiating, preparing, perfecting, registering or renewing the registration
of this Security Agreement and the Security Interests, any Financing or
Financing Change Statement, any modification or amending agreement and other
documents relating to the Borrower's obligations, whether or not relating to
this Security Agreement;

 

(iii)complying with any disclosure requirements under the Act;

 

(iv)investigating title to the Collateral;

 

(v)taking, recovering, keeping possession and disposing of the Collateral;

 

(vi)maintaining the Collateral in good repair, storing the Collateral and
preparing the Collateral for disposition;

 

(vii)any inspection, appraisal, investigation or environmental audit of the
Collateral and the cost of any environmental rehabilitation, treatment, removal
or repair necessary to protect, preserve or remedy the Collateral including any
fine or penalty the Bank becomes obligated to pay by reason of any statute,
order or direction of competent authority;

 

(viii)all other actions and proceedings taken to preserve the Collateral,
enforce this Security Agreement and of any other security interest held by the
Bank as security for the Obligations, protect the Bank from liability in
connection with the Security Interests or assist the Bank in its loan and credit
granting or realization of the Security Interest, including any actions under
the Bankruptcy and Insolvency Act (Canada) and all remuneration of any Receiver
(as defined in Article 15 hereof) or appointed pursuant to the Bankruptcy and
Insolvency Act (Canada);

 

(ix)any sums the Bank pays as fines, or as clean up costs because of
contamination of or from your assets. Further, you will indemnify the Bank and
its employees and agents from any liability or costs incurred including legal
defense costs. Your obligation under this paragraph continues even after the
Obligations are repaid and this agreement is terminated.

 

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Rev. May, 2008

 

Page 4

 

 

(h)at the Bank's request, execute and deliver further documents and instruments
and do all acts as the Bank in its absolute discretion requires to confirm,
register and perfect, and maintain the registration and perfection of, the
Security Interests;

 

(i)notify the Bank promptly of:

 

(i)any change in the information contained in this Security Agreement relating
to the Borrower, its business or the Collateral, including, without limitation,
any change of name or address (including any change of trade name, proprietor or
partner) and any change in the present location of any Collateral;

 

(ii)the details of any material acquisition of Collateral, including the
acquisition of any motor vehicles, trailers, manufactured homes, boats or
aircraft;

 

(iii)any material loss or damage to the Collateral;

 

(iv)any material default by any account debtor in the payment or other
performance of its obligations to the Borrower respecting any Accounts;

 

(v)any claims against the Borrower including claims in respect of the
Intellectual Property or of any actions taken by the Borrower to defend the
registration of or the validity of or any infringement of the Intellectual
Property;

 

(vi)the return to or repossession by the Borrower of Collateral that was
disposed of by the Borrower; and

 

(vii)all additional places of business and any changes in its place(s) of
business or chief executive office;

 

(j)prevent the Collateral, other than Inventory sold, leased, or otherwise
disposed of as permitted by this Security Agreement, from being or becoming an
accession to property not covered by this Security Agreement;

 

(k)carry on and conduct its business and undertaking in a proper and
businesslike manner so as to preserve and protect the Collateral and the
earnings, income, rents, issues and profits of the Collateral, including
maintenance of proper and accurate books of account and records;

 

(l)permit the Bank and its representatives, at all reasonable times, access to
the Collateral including all of the Borrower's property, assets and undertakings
and to all its books of account and records for the purpose of inspection and
the taking of extracts and copies, whether at the Borrower’s premises or
otherwise, and the Borrower will render all assistance necessary;

 

(m)observe and perform all its obligations under:

 

(i)leases, licences, undertakings, and any other agreements to which it is a
party;

 

(ii)any statute or regulation, federal, provincial, territorial, or municipal,
to which it is subject;

 

(n)deliver to the Bank from time to time promptly upon request:

 

(i)any documents of title, instruments, securities and chattel paper
constituting, representing or relating to the Collateral;

 

(ii)all books of account and all records, ledgers, reports, correspondence,
schedules, documents, statements, lists and other writings relating to the
Collateral to allow the Bank to inspect, audit or copy them;

 

(iii)all financial statements prepared by or for the Borrower regarding the
Borrower's business;

 

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Rev. May, 2008

 

Page 5

 

 

(iv)such information concerning the Collateral, the Borrower and the Borrower's
business and affairs as the Bank may reasonably require;

 

(o)with respect to the Intellectual Property, take all necessary steps and
initiate all necessary proceedings, to maintain the registration or recording of
the Intellectual Property, to defend the Intellectual Property from infringement
and to prevent any licensed or permitted user from doing anything that may
invalidate or otherwise impair the Intellectual Property;

 

(p)with respect to copyright forming part of the Intellectual Property, provide
to the Bank waivers of the moral rights thereto executed by all contributors or
authors of the copyrighted work;

 

(q)receive and hold in trust on behalf of and for the benefit of the Bank all
proceeds from the sale or other disposition of any Collateral;

 

(r)consent to the Bank contacting and making enquiries of the Borrower’s
lessors, as well as municipal or other government officials or assessors; and

 

(s)observe and perform the additional covenants and agreements set out in any
schedules to this Security Agreement.

 

7.2          Any amounts required to be paid to the Bank by the Borrower under
this Clause 7 shall be immediately payable with interest at the highest rate
borne by any of the Obligations until all amounts have been paid.

 

7.3          This Security Agreement shall remain in effect until it has been
terminated by the Bank by notice of termination to the Borrower and all
registrations relating to the Security Agreement have been discharged.

 

8.            INSURANCE

(It is your obligation to thoroughly insure the Collateral in order to protect
your interests and those of the Bank. You will follow the specific requirements
of the insurance coverage described in this Clause.)

 

8.1          The Borrower covenants that while this Security Agreement is in
effect the Borrower shall:

 

(a)maintain or cause to be maintained insurance on the Collateral with a
reputable insurer, of kinds, for amounts and payable to such person or persons,
all as the Bank may require, and in particular maintain insurance on the
Collateral to its full insurable value against loss or damage by fire and all
other risks of damage, including an extended coverage endorsement and in the
case of motor vehicles, insurance against theft;

 

(b)cause the insurance policy or policies required by this Security Agreement to
be assigned to the Bank, including a standard mortgage clause or a mortgage
endorsement, as the Bank may require;

 

(c)pay all premiums respecting such insurance, and deliver all policies to the
Bank, if it so requires.

 

8.2          If proceeds of any required insurance becomes payable, the Bank
may, in its absolute discretion, apply these proceeds to the Obligations as the
Bank sees fit or release any insurance proceeds to the Borrower to repair,
replace or rebuild, but any release of insurance proceeds to the Borrower shall
not operate as a payment on account of the Obligations or in any way affect this
Security Agreement or the Security Interests.

 

8.3          The Borrower will forthwith, on the happening of loss or damage to
the Collateral, notify the Bank and furnish to the Bank at the Borrower's
expense any necessary proof and do any necessary act to enable the Bank

to obtain payment of the insurance proceeds, but nothing shall limit the Bank's
right to submit to the insurer a proof of loss on its own behalf.

 

8.4          The Borrower hereby authorizes and directs the insurer under any
required policy of insurance to include the name of the Bank as loss payee on
any policy of insurance and on any cheque or draft which may be issued
respecting a claim settlement under and by virtue of such insurance, and the
production by the Bank to any insurer of a notarial or certified copy of this
Security Agreement (notarized or certified by a notary public or solicitor)
shall be the insurer's complete authority for so doing.

 

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Rev. May, 2008

 

Page 6

 

 

8.5          If the Borrower fails to maintain insurance as required, the Bank
may, but shall not be obliged to, maintain or effect such insurance coverage, or
so much insurance coverage as the Bank may wish to maintain.

 

9.            OTHER PROHIBITIONS

(You agree to not encumber your property so as to interfere with the security
interests or charges granted to the Bank and you will not dispose of any of the
Collateral except inventory disposed of in the ordinary course of your
business.)

 

Without the prior written consent of the Bank the Borrower will not:

 

(a)create or permit to exist any security interest in, charge, encumbrance or
lien over, or claim against any of its property, assets, undertakings including
without limitation the Collateral which ranks or could in any event rank in
priority to or on an equal basis with any of the Security Interests created by
this Security Agreement;

 

(b)grant, sell, or otherwise assign any of its chattel paper or any of the
Collateral except only Inventory that is disposed of in accordance with Clause
10.2; or

 

(c)where the Borrower is a corporation

 

(i) repay or reduce any shareholders loans or other debts due to its
shareholders; or

 

(ii)change its name, merge with or amalgamate with any other entity;

 

10.          RESTRICTIONS ON SALE OR DISPOSAL OF COLLATERAL

(You will preserve and protect all of the Collateral and not dispose of it
without the consent of the Bank. Any sales or other disposition will result in
you holding the proceeds in trust for the Bank. Your responsibilities towards
the Collateral and any trust proceeds are important to the Bank.)

 

10.1        Except as provided by this Security Agreement, without the Bank’s
prior written consent the Borrower will not:

 

(a)sell, lease, license or otherwise dispose of the Collateral;

 

(b)release, surrender or abandon possession of the Collateral; or

 

(c)move or transfer the Collateral from the jurisdictions in which the Security
Interests have been perfected.

 

10.2         Provided that the Borrower is not in default under this Security
Agreement, the Borrower may lease, sell, license, consign or otherwise deal with
items of Inventory only in the ordinary course of its business and for the
purposes of carrying on its business.

 

10.3         Any disposition of any Collateral, excepting sales of Inventory in
the ordinary course, shall result in the Borrower holding the proceeds in trust
for and on behalf of the Bank and subject to the Bank’s exclusive direction and
control. Nothing restricts the Bank’s rights to attach, seize or otherwise
enforce its Security Interests in any Collateral sold or disposed, unless it is
sold or disposed with the Bank’s prior written consent.

 

11.          PERFORMANCE OF OBLIGATIONS

(If you do not strictly do all those things that you have agreed to do in this
Security Agreement, the Bank may perform those obligations but you will be
required to pay for them.)

 

If the Borrower fails to perform its covenants and agreements under this
Security Agreement, the Bank may, but shall not be obliged to, perform any or
all of such covenants and agreements without prejudice to any other rights and
remedies of the Bank, and any payments made and any costs, charges, expenses and
legal fees and disbursements (on a solicitor and its own client basis) incurred
by the Bank shall be immediately payable by the Borrower to the Bank with
interest at the highest rate borne by any of the Obligations and shall be
secured by the Security Interests, until all such amounts have been paid.

 

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Rev. May, 2008

 

Page 7

 

 

12.          ACCOUNTS

(Any dealing with the Collateral that results in an account being created, or
proceeds arising, is of particular importance to the Bank. The account, or
proceeds, acts in substitution for the Collateral that has been sold, usually
inventory. You will protect the account or proceeds in favour of the Bank.)

 

Notwithstanding any other provision of this Security Agreement, the Bank may
collect, realize, sell or otherwise deal with all or a portion of the Accounts
in such manner, upon such terms and conditions and at any time, whether before
or after default, as may seem to it advisable, and without notice to the
Borrower, except in the case of disposition after default and then subject to
the applicable provisions of the Act, if any. All forms of payment received by
the Borrower in payment of any Account, or as proceeds, shall be subject to the
Security Interests and shall be received and held by the Borrower in trust for
the Bank.

 

13.          APPROPRIATION OF PAYMENTS

(The Bank has the right to determine how funds it receives will be applied in
relation to your loan facility.)

 

Any and all payments made respecting the Obligations and monies realized from
any Security Interests (including monies collected in accordance with or
realized on any enforcement of this Security Agreement) may be applied to such
part or parts of the Obligations as the Bank sees fit, and the Bank may at any
time change any appropriation as the Bank sees fit.

 

14.          DEFAULT

(You must comply with the payment and other obligations that you have made in
favour of the Bank. You must also strictly satisfy the covenants and agreements
that you have made in this Security Agreement. Failure to do so will be
considered a default and the Bank will consider its legal remedies and possibly
pursue them. This Clause defines the defaults and outlines your obligations.)

 

14.1        Unless waived by the Bank, the Borrower shall be in default under
this Security Agreement and shall be deemed to be in default under all other
agreements between the Borrower and the Bank in any of the following events:

 

(a)the Borrower defaults, or threatens to default, in payments when due of any
of the Obligations; or

 

(b)the Borrower is in breach of, or threatens to breach, any term, condition,
obligation or covenant made by it to or with the Bank, or any representation or
warranty of the Borrower to the Bank is untrue or ceases to be accurate, whether
or not contained in this Security Agreement; or

 

(c)the Borrower or a guarantor of the Borrower declares itself to be insolvent
or admits in writing its inability to pay its debts generally as they become
due, or makes an assignment for the benefit of its creditors, is declared
bankrupt, makes a proposal or otherwise takes advantage of any provisions for
relief under the Bankruptcy and Insolvency Act (Canada), the Companies
Creditors' Arrangement Act (Canada) or similar legislation in any jurisdiction,
or makes an authorized assignment; or

 

(d)a receiver, manager, receiver and manager or receiver-manager of all or a
part of the Collateral is appointed; or

 

(e)an order is made or a resolution is passed for the winding up of the Borrower
or a guarantor of the Borrower; or

 

(f)the Borrower or a guarantor of the Borrower ceases or threatens to cease to
carry on all or a substantial part of its business or makes or threatens to make
a sale of all or substantially all of its assets; or

 

(g)distress or execution is levied or issued against all or any part of the
Collateral; or

 

(h)if the Borrower is a corporation and any member or shareholder:

 

(i)commences an action against the Borrower; or

 

(ii)gives a notice of dissent to the Borrower in accordance with the provisions
of any governing legislation; or

 

General Security Agreement

Rev. May, 2008

 

Page 8

 

 

(i)if the Borrower is a corporation and its voting control changes without the
Bank's prior written consent; or

 

(j)the Borrower uses any monies advanced to it by the Bank for any purpose other
than as agreed upon by the Bank; or

 

(k)without the Bank’s prior written consent, the Borrower creates or permits to
exist any security interest, charge, encumbrance, lien or claim against any of
the Collateral which ranks or could in any event rank in priority to or on an
equal basis with any of the Security Interests; or

 

(l)the holder of any other security interest, charge, encumbrance, lien or claim
against any of the Collateral does anything to enforce or realize on such
security interest, charge, encumbrance, lien or claim; or

 

(m)the Borrower enters into an amalgamation, a merger or other similar
arrangement with any other person without the Bank's prior written consent or,
if the Borrower is a corporation, it is continued or registered in a different
jurisdiction without the Bank's prior written consent; or

 

(n)the Bank in good faith and on commercially reasonable grounds believes that
the prospect of payment or performance of any of the Obligations is impaired or
that any of the Collateral is or is about to be placed in jeopardy or removed
from the jurisdiction in which this Security Agreement has been registered; or

 

(o)the lessor under any lease to the Borrower of any real or personal property
takes any steps to or threatens to terminate such lease or otherwise exercise
any of its remedies under such lease as a result of any default by the Borrower;
or

 

(p)the Borrower causes or allows hazardous materials to be brought upon any
lands or premises occupied by the Borrower or to be incorporated into any of its
assets, or the Borrower causes, permits, or fails to remedy any environmental
contamination upon, in or under any of its lands or assets, or fails to comply
with any abatement or remediation order given by a responsible authority; or

 

(q)any permit, license, certification, quota or order granted to or held by the
Borrower is cancelled, revoked or reduced, as the case may be, or any order
against the Borrower is enforced, preventing the business of the Borrower from
being carried on for more than 5 days or materially adversely changing the
condition (financial or otherwise) of the Borrower’s business; or

 

(r)if an individual, the Borrower dies or is declared incompetent by a court of
competent jurisdiction.

 

15.          ENFORCEMENT

(If a default occurs, the Bank has numerous remedies and legal rights, including
enforcement of the Security Agreement according to this Clause. You also have
rights, provided by the Personal Property Security Act and the common law in
your jurisdiction.)

 

15.1        Upon any default under this Security Agreement the Bank may declare
any or all of the Obligations whether or not payable on demand to become
immediately due and payable and the Security Interests will immediately become
enforceable. To enforce and realize on the Security Interests the Bank may take
any action permitted by law or in equity as it may deem expedient and in
particular, without limitation, the Bank may do any of the following:

 

(a)appoint by instrument a receiver, manager, receiver and manager or
receiver-manager (the "Receiver") of all or any part of the Collateral, with or
without bond as the Bank may determine, and in its absolute discretion remove
such Receiver and appoint another in its stead;

 

(b)enter upon any of the Borrower’s premises at any time and take possession of
the Collateral with power to exclude the Borrower, its agents and its servants,
without becoming liable as a mortgagee in possession;

 

(c)preserve, protect and maintain the Collateral and make such replacements and
repairs and additions to the Collateral as the Bank deems advisable;

 

General Security Agreement

Rev. May, 2008

 

Page 9

 

 

(d)dispose of all or part of the Collateral, whether by public or private sale
or lease or otherwise, in such manner, at such price as can be reasonably
obtained and on such terms as to credit and with such conditions of sale and
stipulations as to title or conveyance or evidence of title or otherwise as to
the Bank may seem reasonable, provided that if any sale, lease or other
disposition is on credit the Borrower will not be entitled to be credited with
the proceeds of any such sale, lease or other disposition until the monies are
actually received;

 

(e)register assignments of the Intellectual Property, and use sell, assign,
license or sub-license any of the Intellectual Property; and

 

(f)exercise all of the rights and remedies of a secured party under the Act and
any other applicable laws.

 

15.2        A Receiver appointed pursuant to this Security Agreement insofar as
responsibility for its actions is concerned shall be the agent of the Borrower
and not of the Bank and, to the extent permitted by law or to such lesser extent
permitted by its appointment, shall have all the powers of the Bank under this
Security Agreement, and in addition shall have power to:

 

(a)carry on the Borrower’s business and for such purpose from time to time to
borrow money either secured or unsecured, and if secured by granting a security
interest on the Collateral, such security interest may rank before or on an
equal basis with or behind any of the Security Interests and if it does not so
specify such security interest shall rank in priority to the Security Interests;
and

 

(b)make an assignment for the benefit of the Borrower's creditors or a proposal
on behalf of the Borrower under the Bankruptcy and Insolvency Act (Canada); and

 

(c)commence, continue or defend proceedings in the name of the Receiver or in
the name of the Borrower for the purpose of protecting, seizing, collecting,
realizing or obtaining possession of or payment for the Collateral; and

 

(d)make any arrangement or compromise that the Receiver deems expedient.

 

15.3        Subject to the claims, if any, of the creditors of the Borrower
ranking in priority to this Security Agreement, all amounts realized from the
disposition of the Collateral pursuant to this Security Agreement will be
applied as the Bank, in its absolute discretion and to the full extent permitted
by law, may direct as follows:

 

(a)in payment of all costs, charges and expenses (including legal fees and
disbursements on a solicitor and its own client basis) incurred by the Bank
respecting or incidental to:

 

(i)the exercise by the Bank of the rights and powers granted to it by this
Security Agreement; and

 

(ii)the appointment of the Receiver and the exercise by the Receiver of the
powers granted to it by this Security Agreement, including the Receiver's
reasonable remuneration and all outgoings properly payable by the Receiver;

 

(b)in or toward payment to the Bank of all principal and other monies (except
interest) due in respect of the Obligations;

 

(c)in or toward payment to the Bank of all interest remaining unpaid respecting
the Obligations; and

 

(d)in payment to those parties entitled thereto under the Act.

 

16.          GENERAL PROVISIONS PROTECTING THE BANK

(You have granted this Security Agreement to the Bank in consideration by the
Bank advancing funds or providing credit or a credit facility to you. The Bank
will not be responsible for debts or liabilities that may arise except to the
extent that it agrees to be responsible or liable in this Security Agreement. If
enforcement becomes necessary, the Bank will act in good faith and in a
commercially reasonable manner.)

 

General Security Agreement

Rev. May, 2008

 

Page 10

 

 

16.1          To the full extent permitted by law, the Bank shall not be liable
for any debts contracted by it during enforcement of this Security Agreement,
for damages to persons or property or for salaries or non-fulfilment of
contracts during any period when the Bank shall manage the Collateral upon entry
or seizure, nor shall the Bank be liable to account as a mortgagee in possession
or for anything except actual receipts or be liable for any loss on realization
or for any default or omission for which a mortgagee in possession may be
liable. The Bank shall not be bound to do, observe or perform or to see to the
observance or performance by the Borrower of any obligations or covenants
imposed upon the Borrower nor shall the Bank, in the case of securities,
instruments or chattel paper, be obliged to preserve rights against other
persons, nor shall the Bank be obliged to keep any of the Collateral
identifiable. To the full extent permitted by law, the Borrower waives any
provision of law permitted to be waived by it which imposes greater obligations
upon the Bank than described above.

 

16.2          Neither the Bank nor any Receiver appointed by it shall be liable
or accountable for any failure to seize, collect, realize, sell or obtain
payments for the Collateral nor shall they be bound to institute proceedings for
the purposes of seizing, collecting, realizing or obtaining payment or
possession of the Collateral or the preserving of any right of the Bank, the
Borrower or any other party respecting the Collateral. The Bank shall also not
be liable for any misconduct, negligence, misfeasance by the Bank, the Receiver
or any employee or agent of the Bank or the Receiver, or for the exercise of the
rights and remedies conferred upon the Bank or the Receiver by this Security
Agreement.

 

16.3          The Bank or any Receiver appointed by it may grant extensions of
time and other indulgences, take and give securities, accept compromises, grant
releases and discharges, release any part of the Collateral to third parties and
otherwise deal with the debtors of the Borrower, co-obligants, guarantors and
others and with the Collateral and other securities as the Bank may see fit
without liability to the Bank and without prejudice to the Bank’s rights
respecting the Obligations or the Bank's right to hold and realize the
Collateral.

 

16.4          The Bank in its sole discretion may realize upon any other
security provided by the Borrower in any order or concurrently with the
realization under this Security Agreement whether such security is held by it at
the date of this Security Agreement or is provided at any time in the future. No
realization or exercise of any power or right under this Security Agreement or
under any other security shall prejudice any further realization or exercise
until all Obligations have been fully paid and satisfied.

 

16.5          Any right of the Bank and any obligation of the Borrower arising
under any other agreements between the Bank and the Borrower shall survive the
signing, registration and advancement of any money under this Security
Agreement, and no merger respecting any such right or obligation shall occur by
reason of this Security Agreement. The obligation, if any, of the Borrower to
pay legal fees, a commitment fee, a standby fee or administration fees, under
the terms of the Bank's commitment letter with the Borrower shall survive the
signing and registration of this Security Agreement and the Bank’s advancement
of any money to the Borrower and any legal fees, commitment fees, standby fees
or administration fees owing by the Borrower shall be secured by the Collateral.

 

16.6           In the event that the Bank registers a notice of assignment of
Intellectual Property the Borrower shall be responsible for and shall indemnify
the Bank against all maintenance and renewal costs in respect thereof, and any
costs of initiating or defending litigation, together with all costs,
liabilities and damages related thereto.

 

16.7          Notwithstanding any taking of possession of the Collateral, or any
other action which the Bank or the Receiver may take, the Borrower now covenants
and agrees with the Bank that if the money realized upon any disposition of the
Collateral is insufficient to pay and satisfy the whole of the Obligations due
to the Bank at the time of such disposition, the Borrower shall immediately pay
to the Bank an amount equal to the deficiency between the amount of the
Obligations and the sum of money realized upon the disposition of the
Collateral, and the Borrower agrees that the Bank may bring action against the
Borrower for payment of the deficiency, notwithstanding any defects or
irregularities of the Bank or the Receiver in enforcing its rights under this
Security Agreement.

 

17.APPOINTMENT OF ATTORNEY

(You appoint the Bank your attorney for specific matters.)

 

The Borrower hereby irrevocably appoints the Bank or the Receiver, as the case
may be, with full power of substitution, as the attorney of the Borrower for and
in the name of the Borrower to do, make, sign, endorse or execute under seal or
otherwise all deeds, documents, transfers, cheques, instruments, demands,
assignments, assurances or consents that the Borrower is obliged to sign,
endorse or execute and generally to use the name of the Borrower and to do
everything necessary or incidental to the exercise of all or any of the powers
conferred on the Bank, or the Receiver, as the case may be, pursuant to this
Security Agreement. This grant and authority shall continue and survive any
mental infirmity or legal incapacity of the Borrower subsequent to the execution
hereof.

 

General Security Agreement

Rev. May, 2008

 

Page 11

 

 

18.          CONSOLIDATION

(Should you wish to redeem the Security Interest, the Bank may require you to
also pay other obligations to it before discharging its Security Interests.)

 

For the purposes of the laws of all jurisdictions in Canada, the doctrine of
consolidation applies to this Security Agreement.

 

19.          NO OBLIGATION TO ADVANCE

(The Bank determines, in the end, whether any advances or further advances under
the loan facility will be made.)

 

Neither the preparation and execution of this Security Agreement nor the
perfection of the Security Interests or the advance of any monies by the Bank
shall bind the Bank to make any advance or loan or further advance or loan, or
extend any time for payment of any indebtedness or liability of the Borrower to
the Bank.

 

20.WAIVER

(Indulgences granted by the Bank should not be taken for granted.)

 

The Bank may permit the Borrower to remedy any default without waiving the
default so remedied. The Bank may from time to time and at any time partially or
completely waive any right, benefit or default under this Security Agreement but
such waiver shall not be a bar to or a waiver of any such right, benefit or
default thereafter, or of any other right, benefit or default under this
Security Agreement. No waiver shall be effective unless it is in writing and
signed by the Bank. No delay or omission on the part of the Bank in exercising
any right shall operate as a waiver of such right or any other right.

 

21.          NOTICE

(This Clause describes how the various notices referred to in this Security
Agreement may be given.)

 

Notice may be given to either party by prepaid mail or delivered to the party
for whom it is intended, at the principal address of such party provided in this
Security Agreement or at such other address as may be given in writing by one
party to the other, and any notice if mailed shall be deemed to have been given
at the expiration of three business days after mailing and if delivered, on
delivery.

 

22.EXTENSIONS

(Your duties and responsibilities to the Bank remain in place regardless of any
concerns you may have about the loan facility or the Bank's actions.)

 

The Bank may grant extensions of time and other indulgences, take and give up
security, accept compositions, compound, compromise, settle, grant releases and
discharges, refrain from perfecting or maintaining perfection of security
interests, and otherwise deal with the Borrower, the Borrower’s account debtors,
sureties and others and with the Collateral and other security interests as the
Bank may see fit without prejudice to the Borrower’s liability or the Bank's
right to hold and realize on the Security Interests.

 

23.NO MERGER

(Except as agreed upon in the Security Agreement or another contract
specifically discussing this point, this Security Agreement is an independent
obligation on your part.)

 

This Security Agreement shall not create any merger or discharge of any of the
Obligations, or any assignment, transfer, guarantee, lien, contract, promissory
note, bill of exchange or security interest of any form held or which may be
held by the Bank now or in the future from the Borrower or from any other
person. The taking of a judgement respecting any of the Obligations will not
operate as a merger of any of the covenants contained in this Security
Agreement.

 

24.RIGHTS CUMULATIVE

(This Agreement describes some rights and remedies of the Bank. The Bank also is
entitled to rely on all other rights and remedies available to it in law and in
any other agreements it has entered into with you.)

 

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Rev. May, 2008

 

Page 12

 

 

The Bank’s rights and remedies set out in this Security Agreement, and in any
other security agreement held by the Bank from the Borrower or any other person
to secure payment and performance of the Obligations, are cumulative and no
right or remedy contained in this Security Agreement or any other security
agreements is intended to be exclusive but each will be in addition to every
other right or remedy now or hereafter existing at law, in equity or by statute,
or pursuant to any other agreement between the Borrower and the Bank that may be
in effect from time to time.

 

25.ASSIGNMENT

(Should the Bank assign or transfer or otherwise deal with this Security
Agreement on its own behalf, you agree that the Security Agreement shall remain
binding and effective upon you.)

 

The Bank may, without notice to the Borrower, at any time assign or transfer, or
grant a security interest in, all or any of the Obligations, this Security
Agreement and the Security Interests. The Borrower agrees that the assignee,
transferee or secured party, as the case may be, shall have all of the Bank's
rights and remedies under this Security Agreement and the Borrower will not
assert as a defence, counterclaim, right of set-off or otherwise any claim which
it now has or may acquire in the future against the Bank in respect of any claim
made or any action commenced by such assignee, transferee or secured party, as
the case may be, and will pay the assigned Obligations to the assignee,
transferee or secured party, as the case may be, as the said Obligations become
due.

 

26.SATISFACTION AND DISCHARGE

(Until this Security Agreement is terminated and any registrations relating to
it are discharged, the Security Agreement will remain effective even though the
indebtedness to the Bank may have been paid.)

 

Any partial payment or satisfaction of the Obligations, or any ceasing by the
Borrower to be indebted to the Bank shall not be a redemption or discharge of
this Security Agreement. The Borrower shall be entitled to a release and
discharge of this Security Agreement upon full payment and satisfaction of all
Obligations, and upon written request by the Borrower and, subject to applicable
law, payment to the Bank of an administrative fee to be fixed by the Bank and
payment of all costs, charges, expenses and legal fees and disbursements (on a
solicitor and his own client basis) incurred by the Bank in connection with the
Obligations and such release and discharge. The Borrower shall, subject to
applicable law, pay an administrative fee, to be fixed by the Bank, for the
preparation or execution of any full or partial release or discharge by the Bank
of any security it holds, of the Borrower, or of any guarantor or covenantor
with respect to any Obligations.

 

27.ENVIRONMENT

 

The Borrower represents and agrees that:

 

(a)it operates and will continue to operate in conformity with all applicable
environmental laws, regulations, standards, codes, ordinances and other
requirements of any jurisdiction in which it carries on business and will ensure
its staff is trained as required for that purpose;

 

(b)it has an environmental emergency response plan and all officers and
employees are familiar with that plan and their duties under it;

 

(c)it possesses and will maintain all environmental licences, permits and other
governmental approvals as may be necessary to conduct its business and maintain
the Collateral;

 

(d)there has been no complaint, prosecution, investigation or proceeding,
environmental or otherwise, respecting the Borrower's business or assets
including without limitation the Collateral;

 

(f)it will advise the Bank immediately upon becoming aware of any environmental
problems relating to its business or the Collateral;

 

(g)it will provide the Bank with copies of all communications with environmental
officials and all environmental studies or assessments prepared for the Borrower
and it consents to the Bank contacting and making enquiries of environmental
officials or assessors;

 

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Rev. May, 2008

 

Page 13

 

 

(h)it will from time to time when requested by the Bank provide to the Bank
evidence of its full compliance with the Borrower's obligations in this Clause
27.

 

28.ENUREMENT

 

This Security Agreement shall enure to the benefit of the Bank and its
successors and assigns, and shall be binding upon the Borrowers and its heirs,
executors, administrators, successors and any assigns permitted by the Bank, as
the case may be.

 

29.INTERPRETATION

 

29.1In this Security Agreement:

 

(a)"Collateral" has the meaning set out in Clause 1 and any reference to the
Collateral shall, unless the context otherwise requires, be deemed to be a
reference to the Collateral in whole or in part;

 

(b)"the Act" means the Personal Property Security Act of the province in which
the branch of the Bank is located, as described on page 1 of this Security
Agreement, and all regulations under the Act, as amended from time to time.

 

29.2        Words and expressions used in this Security Agreement that have been
defined in the Act shall be interpreted in accordance with their respective
meanings given in the Act unless otherwise defined in this Security Agreement or
unless the context otherwise requires.

 

29.3        The invalidity or unenforceability of the whole or any part of any
clause of this Security Agreement shall not affect the validity or
enforceability of any other clause or the remainder of such clause of this
Security Agreement.

 

29.4        The headings used in this Security Agreement have been inserted for
convenience of reference only and shall not define, limit, alter or enlarge the
meaning of any provision of this Security Agreement.

 

29.5        This Security Agreement shall be governed by the laws of the
province referred to in subclause 29.1(b). For enforcement purposes, the
Borrower hereby attorns to the jurisdiction of the courts and laws of any
province, state, territory or country in which the Bank enforces its rights and
remedies hereunder.

 

30.          COPY OF AGREEMENT AND FINANCING STATEMENT

 

The Borrower:

 

(a)acknowledges receiving a copy of this Security Agreement; and

 

(b)if the Act so permits, waives all rights to receive from the Bank a copy of
any financing statement or financing change statement filed, or any verification
statement or other document received at any time respecting this Security
Agreement.

 

31.TIME

 

Time shall in all respects be of the essence.

 

32.INDEPENDENT ADVICE

 

The Borrower acknowledges having received, or having had the opportunity to
receive, independent legal and accounting advice respecting this Security
Agreement and its effect.

 

33.PARENTHETICAL COMMENTS

 

The Borrower acknowledges and agrees that the comments in parentheses are
intended to provide a brief but not thorough indication of the intent of the
legal provisions that follow in each subsequent clause, and do not form part of
this Security Agreement.

 

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Rev. May, 2008

 

Page 14

 

 

34.THE COMMITMENT LETTER

 

The Bank has extended an offer of financing or a commitment letter to the
Borrower relating to the loan facilities secured by this Security Agreement. The
Borrower acknowledges and agrees that in the event of any discrepancy between
any term of this Security Agreement and any term of the commitment letter, the
terms of the commitment letter shall apply and take precedence over the terms of
this Security Agreement.

 

IN WITNESS WHEREOF the Borrower has hereunto set his hand and seal or has
affixed its corporate seal duly attested by the hand(s) of its proper officer(s)
in that behalf, on the day and year first above written.

 

    LAKELAND PROTECTIVE REAL ESTATE INC. (Witness)   (Borrower)            
Per:   /s/ Gary Pokrassa       Gary Pokrassa, CFO             I have authority
to bind the Corporation

 

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Rev. May, 2008

 

Page 15

 

 

SCHEDULE “A”

 

Subclause 1.1(a):

 

1.the following specific items, even though they may be included within the
descriptions of Collateral (insert description by item or kind):

 

 

2.the following serial numbered goods:

 

  Serial No. (re  motor vehicles & trailers, etc.) Year Make and Model

  

3.Location(s) of the Collateral:

 

59 Bury Court, Brantford, Ontario N3S 0A9

 

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Rev. May, 2008

 

Page 16