Document:

Exhibit

 

COLLATERAL MORTGAGE
THIS COLLATERAL MORTGAGE made this    9th    day of October, 2018.
IN PURSUANCE OF THE ENACTMENTS RESPECTING SHORT FORMS OF INDENTURES.
BETWEEN:
AQUA BOUNTY CANADA INC., a body corporate, duly incorporated under the laws of the Province of Newfoundland and Labrador;
(hereinafter called the “Mortgagor”)
OF THE FIRST PART;
AND:
PRINCE EDWARD ISLAND CENTURY 2000 FUND INC., a body corporate, duly incorporated by a special Act of the Prince Edward Island Legislature, with head office in the City of Charlottetown, in Queens County, Province of Prince Edward Island
(hereinafter called the “Mortgagee”)
OF THE SECOND PART.
WHEREAS the Mortgagor is indebted to the Mortgagee;
AND WHEREAS the Mortgagee has demanded from the Mortgagor additional security for payment to the Mortgagee on demand of all money and liabilities, whether direct or contingent, now or hereafter owing or incurred from or by the Mortgagor to the Mortgagee;
NOW, THEREFORE, THIS INDENTURE WITNESSETH that in consideration of the premises and of the Mortgagee agreeing to deal with the Mortgagor in the way of its business as a lending institution, the Mortgagor, who conveys as beneficial owner, doth grant a Mortgage unto the Mortgagee, its successors and assigns forever, over all and singular all the lands and premises described in the Schedule hereto annexed and marked “A”, TOGETHER with all and every the rights, privileges, easements, advantages and appurtenances wheresoever to the said hereditaments belonging or in anywise pertaining or thereunto now or heretofore holden, used, occupied or enjoyed; TO HAVE AND TO HOLD the said messuages and tenements, lands and hereditaments and all and singular other the premises hereinbefore granted, appointed and released or expressed and intended so to be with their appurtenances UNTO AND TO THE USE OF the Mortgagee, its successors and assigns forever.
The Mortgagor and the Mortgagee covenant and agree with each other that the provisions of this Indenture added to the short form clause shall not derogate from the Mortgagee’s rights under the long clauses in The Enactments Respecting Short Forms of Indentures but shall be in addition thereto or in substitution for part or parts thereof as the Mortgagee may elect and all shall have the force of covenants.
PROVIDED THIS MORTGAGE TO BE VOID on payment by the Mortgagor on demand of all money and liabilities, whether direct or contingent, now or hereafter owing or

 

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incurred from or by the Mortgagor, whether as principal or surety, whether alone or jointly with any other person, and in whatever name, style or firm arising from dealings between the Mortgagee and the Mortgagor and all interests, damages, costs, charges and expenses which may become due or payable to the Mortgagee or may be paid or incurred by the Mortgagee upon or in respect to the said money and liabilities or any part thereof, all premiums of insurance upon the buildings upon the said lands which may be paid by the Mortgagee and taxes (the foregoing being hereinafter referred to as the “Indebtedness”), and performance of statute labour and observance and performance of all covenants, provisos and conditions herein contained.
IT IS UNDERSTOOD AND AGREED that these presents shall stand as continuing security for the payment of the Indebtedness.
THIS MORTGAGE shall continue to be operative and binding and shall not be considered satisfied or discharged notwithstanding that, at any time or times, the account operated by the Mortgagor at the Mortgagee may be inactive and that there may be no present indebtedness at such time or times owing by the Mortgagor or that there may be any intermediate payments of the whole or any part of the Indebtedness from time to time made to the Mortgagee or any settlements of accounts effected for any other thing whatsoever done, suffered or operated.
UPON payment by the Mortgagor of the present Indebtedness at any time owing by the Mortgagor to the Mortgagee and upon observance and performance by the Mortgagor of all covenants, provisions and conditions herein contained then to be observed and performed by the Mortgagor and upon written request of the Mortgagor delivered to the Mortgagee for a Satisfaction of Mortgage to this Mortgage, which written request and its delivery to the Mortgagee is a condition to be performed by the Mortgagor under this Mortgage before this Mortgage shall be void.  The Mortgagee shall at the expense of the Mortgagor execute and deliver to the Mortgagor a Satisfaction of Mortgage to discharge this Mortgage.  This Mortgage shall stand as a continuing security for payment of the Indebtedness until such request is so made and delivered by the Mortgagor to the Mortgagee.
AND FURTHER that the taking of this security shall not operate as a merger of the remedies of the Mortgagee for the payment of the Indebtedness or of other obligations or securities now or at any time hereafter held for the same or any part thereof but that for and notwithstanding these presents and anything herein contained the said remedies shall remain intact and be capable of enforcement against the Mortgagor and all other persons liable in respect of the Indebtedness and other obligations or securities in the same manner and to the same extent as if these presents had not been executed.

 

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THE MORTGAGOR covenants with the Mortgagee that the Mortgagor will pay the Indebtedness and will in all things abide by, observe and perform the above proviso, that the Mortgagor has a good title in fee simple to the said lands and that it has the right to convey the said lands to the Mortgagee and that on default the Mortgagee shall have quiet possession of the lands free from encumbrances and the Mortgagor will execute such further assurances of the said lands as may be requisite, and that the Mortgagor will execute as well before as after default; and the Mortgagor has done no act to encumber the said lands save as aforesaid; and that the Mortgagor will pay all taxes, charges and assessments, municipal, local, parliamentary and otherwise that may at any time be imposed on the said lands or any part thereof, or on the Mortgagee, its successors and assigns, on account thereof or of said redemption moneys, and that the said lands shall stand charged with and for such payments and the making thereof, and the Mortgagor will insure the buildings on the said lands to their full insurable value in dollars of lawful money of Canada; and the Mortgagor will assign and deliver up to the Mortgagee any policy or policies of insurance now existing upon the said buildings subject to the rights of any prior Mortgagee; and the Mortgagor doth release to the Mortgagee all its claims upon the said lands subject to the said proviso.
PROVIDED that the Mortgagee on default of payment for at least fifteen days may on at least four weeks’ notice enter on and lease or sell the said lands.  Provided further that on default of payment for three months’ the foregoing power of entry, leasing and selling may be exercised by the Mortgagee without any notice whatsoever.
THE MORTGAGOR hereby covenants and agrees with the Mortgagee that, without prejudice to the powers under the foregoing proviso, the Mortgagee, in the event of default by the Mortgagor in payment of the Indebtedness or any part thereof, may sell the said lands or any part thereof by public auction or private sale for such price as can reasonably be obtained therefor and on such terms as to credit and otherwise and with such conditions of sale and stipulations as to title or evidence or commencement of title or otherwise as it shall in its discretion deem proper, and in that event of any sale on credit or for part cash and part credit, the Mortgagee shall not be accountable for or be charged with any moneys until actually received; and the Mortgagee may rescind or vary any contract for sale and may buy in and re-sell the mortgaged lands or any part thereof without being answerable for loss occasioned thereby; and no purchaser shall be bound to inquire into the legality, regularity or propriety of any sale or be affected by notice of any irregularity or impropriety; and no lack of default or want of notice or other requirement or any irregularity or impropriety of any kind shall invalidate any sale hereunder but the Mortgagee alone shall be responsible; and the Mortgagee may sell without entering into actual possession of the lands, and when it desires to take possession it

 

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may break locks and bolts and while in possession shall be accountable only for moneys which are actually received by it and sales may be made from time to time of parts of the mortgaged lands to satisfy any part of the Indebtedness, leaving the residue thereof secured hereunder on the remaining lands or may take proceedings to sell and may sell the said lands for part of the Indebtedness subject to the balance of the Indebtedness not yet due at the time of the said sale; and the Mortgagee may take sale proceedings hereunder notwithstanding that other mortgage proceedings have been taken or are then pending; and the proceeds of any sale hereunder may be applied firstly in payment of any costs, charges and expenses incurred in taking, recovering or keeping possession of the said lands or by reason of non-payment or procuring payments of the Indebtedness of any part thereof;
THE MORTGAGOR hereby attorns to and becomes tenant of the said lands to the Mortgagee from year to year from the date of the execution hereof during the term of this Mortgage and any renewal or renewals thereof at a rental equivalent to, applicable in satisfaction of, and payable at the same times as the payments of interest hereinbefore provided to be paid, the legal relation of landlord and tenant being hereby constituted between the Mortgagee and the Mortgagor; but it is agreed that neither the existence of this provision nor anything done by virtue hereof shall render the Mortgagee a mortgagee in possession or accountable for any moneys except those actually received by it, and the Mortgagee may on default of payment or on breach of any of the covenants in this Mortgage contained enter upon the said lands and determine the tenancy hereby created without notice.
PROVIDED that the Mortgagee may distrain for arrears of any part of the Indebtedness.  The Mortgagor hereby waives the right to claim exemption and agrees that the Mortgagee shall not be limited in the amount for which it may distrain.
THE MORTGAGOR covenants with the Mortgagee that it will keep the said lands and buildings, fixtures and improvements thereon or hereafter brought or erected thereon in good condition and repair according to the nature and description thereof respectively, and that the Mortgagee may, whenever it deems it necessary, by its surveyor or agent, enter upon and inspect the said lands and the reasonable cost of such inspection shall be added to the Indebtedness, and that if the Mortgagor or those claiming under it neglect to keep the said lands, fixtures and improvements in good condition and repair or commit any act of waste on the said lands or do anything by which the value of the said lands shall be diminished, as to all of which the Mortgagee shall be the sole judge, or make default as to any of the covenants or provisos herein contained, the Indebtedness shall, at the option of the Mortgagee, forthwith become due and payable, and in default of payment thereof the powers of entering upon and leasing or selling hereby given may be exercised forthwith; and the Mortgagee may make such

 

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repairs as it deems necessary and the cost thereof with interest thereon shall be a charge upon the said lands prior to all claims thereon subsequent to these presents.
PROVIDED that until default of payment the Mortgagor shall have quiet possession of the said lands.
IT IS FURTHER AGREED by and between the parties hereto that the Mortgagee may at its discretion at all times release any part or parts of the said lands or any other security or any surety for the Indebtedness or any part thereof either with or without any sufficient consideration therefor, without responsibility therefor and without thereby releasing any other part of the said lands or any person from this Mortgage or from any of the covenants herein contained and without being accountable to the Mortgagor for the value thereof or for any money except that actually received by the Mortgagee, it being expressly agreed that every part or lot into which the mortgaged lands are or may hereafter be divided does and shall stand charged with the whole of Indebtedness.  PROVIDED that no extension of time given by the Mortgagee to the Mortgagor or anyone claiming under the Mortgagee or any other dealing by the Mortgagee with the owner or owners of the equity of redemption of the said lands or of any part thereof shall in any way affect or prejudice the rights of the Mortgagee against the Mortgagor or any other person liable for the payment of the Indebtedness or any parts thereof;
PROVIDED that no sale or other dealing by the Mortgagor with the equity of redemption in the said lands or any part thereof shall in any way change the liability of the Mortgagor or in any way alter the rights of the Mortgagee as against the Mortgagor or any other person liable for payment of the Indebtedness or any part thereof.
PROVIDED and it is hereby further agreed by and between the parties hereto that should default be made by the Mortgagor in the observance or performance of any of the covenants, provisos, agreements or conditions contained in any mortgage to which this mortgage is subject, then, and in that event, the Indebtedness shall forthwith become due and be payable at the option of the Mortgagee and all the powers in and by this mortgage conferred shall become exercisable forthwith without any notice.
IT IS FURTHER understood and agreed between the parties hereto that any moneys received by the Mortgagee under and by virtue of this mortgage, whether by sale or lease of the property mortgaged or any part thereof or otherwise, and any moneys received by the Mortgagee under or by virtue of any other security now or hereafter held in connection with the Indebtedness or any part thereof, may be applied from time to time by the Mortgagee upon such part or parts of the Indebtedness as the Mortgagee may think best.
PROVIDED that the taking of a judgment or judgments against the Mortgagor on any of the covenants herein contained shall not operate as a merger of the said covenants or

 

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affect the Mortgagee’s right to interest on the amount of the Indebtedness at the rate payable by the Mortgagor to the Mortgagee, and further that any such judgment may provide that interest thereon shall be computed at the same rate until such judgment shall have been fully paid and satisfied.
AND it is hereby declared and agreed by and between the parties hereto that all rights, advantages, privileges, immunities, powers and remedies hereby secured to the Mortgagee shall be equally secured to and exercisable by its successors and assigns; that all covenants and liabilities entered into or imposed hereunder upon the Mortgagor shall be equally binding upon the heirs, executors, administrators and assigns or successors and assigns of the Mortgagor as the case may be; and that all the provisions hereof shall have effect, any statute to the contrary notwithstanding.
Notwithstanding anything herein to the contrary, the Mortgagee shall not be required to disburse all or any further part of any principal sum at any time or times and the whole of any principal sum may, at the Mortgagee’s option, become immediately due and payable:
		
	(a)
	if an event of default has occurred or an event which, with the lapse of time or with notice and lapse of time specified herein would become an event of default, shall have occurred and be continuing;

		
	(b)
	if, in the opinion of the Mortgagee, there has been any material adverse change in the business, assets or financial condition of the Mortgagor;

		
	(c)
	if there is any action, proceeding or investigation pending or threatened against the Mortgagor, which would in the opinion of the Mortgagee, if successful, have a material adverse effect on the Mortgagor;

		
	(d)
	if there is or has been any material discrepancy or inaccuracy in any written or oral representations, statements or information made or furnished to the Mortgagee at any time;

		
	(e)
	if, in the opinion of the Mortgagee, any money loaned has not been, or is not being applied for the purpose to which it was advance, or if the security materially depreciates in value.

Any one or more of the following events shall constitute an event of default (whether any such event of default shall be voluntary or involuntary or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative governmental body):
		
	(a)
	the failure by the Mortgagor to make any payment within fifteen (15) days after its due date;

		
	(b)
	the failure by the Mortgagor to repay the balance outstanding of any principal sum on its maturity date;

 

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	(c)
	the failure by the Mortgagor to perform or observe any of the covenants, conditions or agreements to be performed or observed by the Mortgagor under the terms hereof;

		
	(d)
	default by the Mortgagor hereunder, which default shall continue unremedied for a period of fifteen (15) days after written notice thereof by the Mortgagee to the Mortgagor;

		
	(e)
	the making of any representation or warranty by the Mortgagor in the application or under any document or certificate furnished to the Mortgagee in connection herewith or pursuant hereto which shall prove at any time to be materially incorrect, as of the date made;

		
	(f)
	the making by the Mortgagor of a proposal or general assignment for the benefit of their creditors or other acknowledgement of the Mortgagor’s insolvency;

		
	(g)
	the appointment of a receiver, receiver-manager or receiver and manager of the Mortgagor or any part of its property or assets;

		
	(h)
	the enforceability of any execution, sequestration, judgment or any other process of any court against the Mortgagor or the levy of a distress or analogous process upon the Mortgagor’s property or assets or any part thereof unless the execution, sequestration, judgment or other process, against the Mortgagor or distress or analogous process is in good faith contested by the Mortgagor and the Mortgagor gives adequate security to the Mortgagee to pay in full the amount claimed;

		
	(i)
	if the Mortgagee is of the reasonable opinion that the security is in danger of being sold or removed, except as permitted hereunder, or if the Mortgagee is of the reasonable opinion that the security is not adequate for the purposes of security the loan hereunder;

		
	(j)
	the failure by the Mortgagor to perform or observe any of the covenants, conditions or agreement to be performed or observed by the Mortgagor pursuant to any letters of offer and/or loan agreements entered into between the Mortgagor and the Mortgagee in respect of the Indebtedness;

		
	(k)
	The occurrence of any event of default set out in the letter of offer dated July 10, 2018, from Island Investment Development Inc. to the Mortgagor.

IT IS FURTHER declared and agreed that in these presents, unless there is something in the context inconsistent therewith, any words importing the singular shall include the plural and words importing person shall include firms and corporations, and these presents shall be construed accordingly.

 

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NO REMEDY conferred on the Mortgagee by this instrument or otherwise shall be deemed exclusive of any other remedy.  Each such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter existing at law or in equity and may be exercised from time to time as often as it is deemed expedient.
IN WITNESS WHEREOF the corporate seal of the Mortgagor was hereunto affixed by its duly authorized signing officer(s) who signed in authentication thereof on day and year first above written.
	
				
	SIGNED SEALED & ATTESTED TO
in the presence of:
	 
	AQUA BOUNTY CANADA INC.

	 
	Per:
	/s/ David A. Frank

	/s/ Christopher H. Martin
	 
	David A. Frank
Secretary, Treasurer & CFO

	Witness
	 

 

C A N A D A
PROVINCE OF PRINCE EDWARD ISLAND

AFFIDAVIT OF SPOUSAL STATUS OR INTEREST
I, David A. Frank, of Concord, in the State of Massachusetts,
MAKE OATH AND SAY AS FOLLOWS:
1.    I am the Secretary, Treasurer & CFO of the Mortgagor named in the annexed Indenture and am of the full age of eighteen (18) years.
2.    Aqua Bounty Canada Inc. is a resident of Canada within the meaning of the Income Tax Act (Canada).
3.    For the purpose of this Affidavit, “Act” means the Family Law Act, S.P.E.I. 1995, c.12; “family home” means every property in which a married person has an interest and that is or, if the spouses are living separate and apart, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence; “property” means the lands described in the Schedule to the annexed Indenture; and “spouse” means an individual who, in respect of another person, (i) is married to the other person, or (ii) has entered into a marriage with the other person that is voidable or void.
4.    The property is not now the subject of a Court Order, interim or otherwise, made pursuant to the Act.
5.    The property has never been occupied by myself, my spouse or any other person (or their spouses) who is associated with or is a shareholder of the corporate grantor as a family home.

	
			
	SWORN TO before me at Maynard,
in the State of Massachusetts, this 9th day of October, 2018.

/s/ Christopher H. Martin
	 
	/s/ David A. Frank

	A Notary Public in and for the State of Massachusetts.
	David A. Frank

SCHEDULE “A”

Description for PID#1022300 to be inserted.

DATED:    October    9th   , 2018
BETWEEN:
AQUA BOUNTY CANADA INC.
OF THE FIRST PART;
AND:
PRINCE EDWARD ISLAND CENTURY 2000 FUND INC.
OF THE SECOND PART.

OPEN-ENDED COLLATERAL MORTGAGE

STEWART McKELVEY
M10167-21 PMK/amcExhibit

 

GENERAL SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made the     26th     day of July, 2016.
BETWEEN:
AQUA BOUNTY CANADA INC., a body corporate duly incorporated pursuant to the laws of the Province of Newfoundland and Labrador (the “Debtor”) 
OF THE FIRST PART
AND:
PRINCE EDWARD ISLAND CENTURY 2000 FUND INC., a body corporate, duly incorporated under the laws of the Province of Prince Edward Island, (the “Secured Party”)
OF THE SECOND PART
		
	1.
	SECURITY INTEREST

For consideration and as security for the payment and performance of the Obligations referred to in Clause 3, the Debtor, subject to the exceptions set out in Clause 2, hereby mortgages, charges, assigns and transfers to the Secured Party, and grants to the Secured Party a security interest in, all the Debtor’s right, title and interest in and to all presently owned or held and after acquired or held personal property, assets and undertakings of the Debtor (other than real property), of whatever nature or kind and wheresoever situate and all proceeds thereof and therefrom (all of which is hereinafter collectively called the “Collateral”) including all those items as outlined in Schedule “A” attached hereto, and, without limiting the generality of the foregoing:
		
	(a)
	Equipment: all equipment, including, without limiting the generality of the foregoing, machinery, tools, fixtures, furniture, furnishings, chattels, motor vehicles, vessels 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 foregoing (all of which is hereinafter collectively called the “Equipment”);

		
	(b)
	Inventory: all inventory of the Debtor, including, without limiting the generality of the foregoing, 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, and all packaging materials, supplies and containers relating to or used or consumed in connection with any of the foregoing (all of which is hereinafter collectively called the “Inventory”);

		
	(c)
	Accounts: all debts, accounts, claims, monies and choses in action which now are, or which may at any time hereafter be, due or owing to or owned by the Debtor and all books, records, documents, papers and electronically recorded data recording, evidencing or relating to the said debts, accounts, claims, monies and choses in action or any part thereof (all of which is hereinafter collectively called the “Accounts”);

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	(d)
	Other Personal Property: all documents of title, chattel paper, instruments, securities and money, and all other goods of the Debtor that are not Equipment, Inventory or Accounts; and 

		
	(e)
	Intangibles: all contractual rights, licenses, goodwill, patents, trademarks, trade names, copyrights and other intellectual property of the Debtor, all other choses in action of the Debtor of every kind which now are, or which may at any time hereafter be, due or owing to or owned by the Debtor, and all other intangible property of the Debtor which is not Accounts, chattel paper, instruments, documents of title, securities or money. 

		
	2.
	EXCEPTIONS

		
	(a)
	The last day of the term created by any lease or agreement therefor is hereby excepted out of any mortgage, charge, assignment or security interest created by this Security Agreement, but the Debtor shall stand possessed of the reversion thereby remaining upon trust to assign and dispose thereof to any third party as the Secured Party shall direct; and 

		
	(b)
	There shall be excluded from the security interests hereby created any consumer goods of the Debtor.

		
	3.
	OBLIGATIONS SECURED

This Security Agreement and the security interests hereby created are in addition to and not in substitution for any other mortgage, charge, assignment or security interest now or hereafter held by the Secured Party from the Debtor or from any other person whomsoever and shall be general and continuing security for the payment of all indebtedness and liability of the Debtor to the Secured Party (including interest thereon), present or future, absolute or contingent, joint or several, direct or indirect, matured or not, extended or renewed, wheresoever and howsoever incurred, and any ultimate balance thereof, including all future advances and re-advances, and for the performance of all obligations of the Debtor to the Secured Party, whether or not contained in this Security Agreement (all of which indebtedness, liability and obligations are hereinafter collectively called the “Obligations”).
		
	4.
	PROHIBITIONS

Without the prior written consent of the Secured Party the Debtor shall not:
		
	(a)
	create or permit to exist any mortgage, charge, assignment or security interest in, charge, encumbrance or lien over, or claim against any of its property, assets, or undertakings which ranks or could in any event rank in priority to or pari passu with any security interest created by this Security Agreement; or

		
	(b)
	grant, sell, or otherwise assign its chattel paper.

		
	5.
	ATTACHMENT

The Debtor acknowledges that the security interests hereby created attach upon the execution of this Security Agreement (or in the case of any after acquired property, upon the date of acquisition thereof), that value has been given, and that the Debtor has, or in the case of after acquired property will have, rights in the Collateral.

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	6.
	REPRESENTATIONS AND WARRANTIES

		
	(a)
	The Debtor, if a company or a partnership, represents and warrants that this Security Agreement is granted in accordance with resolutions of the directors (and of the shareholders as applicable) or of the partners, as the case may be, of the Debtor and all other matters and things have been done and performed so as to authorize and make the execution and delivery of this Security Agreement, and the performance of the Debtor’s obligations hereunder, legal, valid and binding; and 

		
	(b)
	The Debtor represents and warrants that the Debtor lawfully owns and possesses all presently held Collateral and has good title thereto, free from all security interests, charges, encumbrances, liens and claims, save only the charges or security interests, if any, shown in the Schedule hereto and those consented to in writing by the Secured Party, and the Debtor has good right and lawful authority to grant a Security Interest in the Collateral as provided by this Security Agreement.

		
	7.
	COVENANTS OF THE DEBTOR

		
	(a)
	The Debtor covenants that at all times while this Security Agreement remains in effect the Debtor will:

		
	(i)
	defend the title to the Collateral for the benefit of the Secured Party against the claims and demands of all persons;

		
	(ii)
	fully and effectually maintain and keep maintained the security interests hereby created valid and effective;

		
	(iii)
	maintain insurance on the Collateral with an insurer, of kinds, for amounts and payable to such person or persons, all as of the Secured Party may require;

		
	(iv)
	maintain the Collateral in good order and repair;

		
	(v)
	forthwith pay:

		
	(A)
	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 Debtor shall in good faith contest its obligations so to pay and shall furnish such security as the Secured Party may require; and

		
	(B)
	all security interests, charges, encumbrances, liens and claims which rank or could in any event rank in priority to or pari pasu with any security interest created by this Security Agreement, other than the charges or security interests, if any, shown in the Schedule hereto and those consented to in writing by the Secured Party;

		
	(vi)
	forthwith pay all costs, charges, expenses and legal fees and disbursements (on a solicitor and his own client basis) which may be incurred by the Secured Party in:

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	(A)
	inspecting the Collateral;

		
	(B)
	negotiating, preparing, perfecting and registering this Security Agreement and other documents, whether or not relating to this Security Agreement;

		
	(C)
	investigating title to the Collateral;

		
	(D)
	taking, recovering, keeping possession of and insuring the Collateral; and

		
	(E)
	all other actions and proceedings taken in connection with the preservation of the Collateral and the enforcement of this Security Agreement and of any other security interest held by the Secured Party as security for the Obligations;

		
	(vii)
	at the Secured Party’s request at any time and from time to time execute and deliver such further and other documents and instruments and do all acts and things as the Secured Party in its absolute discretion requires in order to confirm and perfect, and maintain perfection of, the security interests and charges hereby created in favour of the Secured Party upon any of the Collateral;

		
	(viii)
	notify the Secured Party promptly of:

		
	(A)
	any change in the information contained herein relating to the Debtor, its address, its business or the Collateral;

		
	(B)
	the details of any material acquisition of Collateral;

		
	(C)
	any material loss of or damage to the Collateral;

		
	(D)
	any material default by any account debtor in payment or other performance of his obligations to the Debtor with respect to any Accounts; and

		
	(E)
	the return to or repossession by the Debtor of the Collateral where such return or repossession of the Collateral is material in relation to the business of the Debtor;

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

		
	(x)
	permit the Secured Party and its representatives, at all reasonable times, access to all its property, assets and undertakings and to all its books of account and records for the purpose of inspection and render all assistance necessary for such inspection; and

		
	(xi)
	deliver to the Secured Party from time to time promptly upon request:

		
	(A)
	any documents of title, insurance, securities and chattel paper constituting, representing or relating to Collateral;

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	(B)
	all books of account and all records, ledgers, reports, correspondence, schedules, documents, statements, lists and other writings relating to the Collateral for the purpose of inspecting, auditing or copying the same;

		
	(C)
	all financial statements prepared by or for the Debtor regarding the Debtor’s business;

		
	(D)
	all policies and certificates of insurance relating to the Collateral; and

		
	(E)
	such information concerning the Collateral, the Debtor and the Debtor’s business and affairs as the Secured Party may require;

		
	(b)
	The Debtor, if a company, covenants that at all times while this Security Agreement remains in effect, without the prior written consent of the Secured Party, it will not:

		
	(i)
	declare or pay any dividends;

		
	(ii)
	purchase or redeem any of its shares or otherwise reduce its share capital;

		
	(iii)
	become guarantor of any obligation; or

		
	(iv)
	become an endorser in respect of any obligation or otherwise become liable upon any note or other obligation other than bills of exchange deposited to the bank account of the Debtor.

		
	8.
	PERFORMANCE OF OBLIGATIONS

If the Debtor fails to perform its Obligations hereunder, the Secured Party may, but shall not be obliged to, perform any or all of such Obligations without prejudice to any other rights and remedies of the Secured Party hereunder, and any payment made and any costs, charges, expenses and legal fees and disbursements (on a solicitor and his own client basis) incurred in connection therewith shall be payable by the Debtor to the Secured Party forthwith with interest until paid at the highest rate borne by any of the Obligations and such amounts shall be a charge upon and security interest in the Collateral in favour of the Secured Party to all claims subsequent to this Security Agreement.
		
	9.
	RESTRICTIONS ON SALE OR DISPOSAL OF COLLATERAL

		
	(a)
	Except as herein provided, without the prior written consent of the Secured party the Debtor will not:

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

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

		
	(iii)
	move or transfer the Collateral from its present location.

– 6 –

		
	(b)
	Provided that the Debtor is not in default under this Security Agreement, at any time without the consent of the Secured Party the Debtor may lease, sell, license, consign or otherwise deal with items of Inventory in the ordinary course of business and for the purposes of carrying on its business.

		
	10.
	DEFAULT

The Debtor shall be in default under this Security Agreement, unless waived by the Secured Party, in any of the following events:
		
	(a)
	the Debtor makes default in payment when due of any indebtedness or liability of the Debtor to the Secured Party;

		
	(b)
	the Debtor is in breach of any term, condition, obligation or covenant to the Secured Party, or any representation or warranty to the Secured Party is untrue, whether or not contained in this Security Agreement;

		
	(c)
	the Debtor makes an assignment for the benefit of its creditors, is declared bankrupt, makes a proposal or otherwise takes advantage of 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;

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

		
	(e)
	an order of execution against the Collateral or any part thereof remains unsatisfied for a period of 10 days;

		
	(f)
	without the prior written consent of the Secured Party, the Debtor creates or permits to exist any charge, encumbrance or lien on or claim against or any security interest in, any of the Collateral which ranks or could in any event rank in priority to or pari passu with any security interest created by this Security Agreement;

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

		
	(h)
	if the Debtor is a company or a partnership, an order is made or an effective resolution is passed for winding up the Debtor;

		
	(i)
	the Debtor, if a company, enters into any reconstruction, reorganization, amalgamation, merger or other similar arrangement with any other person;

		
	(j)
	the Debtor, if an individual, dies or is declared incompetent by a court of competent jurisdiction; or

		
	(k)
	the Secured Party in good faith believes and has commercially reasonable grounds to believe 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;

– 7 –

		
	11.
	ENFORCEMENT

		
	(a)
	Upon any default under this Security Agreement, the Secured Party may declare any or all of the Obligations to become immediately due and payable and the security hereby constituted will immediately become enforceable.  To enforce and realize on the security constituted by this Security Agreement the Secured Party may take any action permitted by law or in equity, as it may deem expedient, and in particular without limiting the generality of the foregoing, the Secured Party may do any of the following:

		
	(i)
	appoint by instrument a receiver, a receiver and manager or receiver-manager (the person so appointed is hereinafter called the “Receiver”) of the Collateral, with or without bond as the Secured Party may determine, and from time to time in its absolute discretion remove such Receiver and appoint another in its stead;

		
	(ii)
	enter upon any premises of the Debtor and take possession of the Collateral with power to exclude the Debtor, its agents and its servants therefrom, without becoming liable as a mortgagee in possession;

		
	(iii)
	preserve, protect and maintain the Collateral and make such replacements thereof and repairs and additions thereto as the Secured Party may deem advisable;

		
	(iv)
	sell, lease or otherwise dispose of all or any 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 therefor 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 Secured Party may seem reasonable, provided that if any sale is on credit the Debtor will not be entitled to be credited with the proceeds of any such sale, lease or other disposition until the monies therefor are actually received; and

		
	(v)
	exercise all of the rights and remedies of a secured party under the Act.

		
	(b)
	A Receiver appointed pursuant to this Security Agreement shall be the agent of the Debtor and not of the Secured Party and, to the extent permitted by law or to such lesser extent permitted by its appointment, shall have all the powers of the Secured Party hereunder, and in addition, shall have power to carry on the business of the Debtor and for such purpose from time to time to borrow money on the security of any of the Collateral; such security interest may rank before or pari passu with or behind any security interest created by this Security Agreement, and if it does not so specify such security interest shall rank before the security interests created by this Security Agreement.

		
	(c)
	Without prejudice to the ability of the Secured Party to dispose of the Collateral in any manner which is commercially reasonable, the Debtor acknowledges that a disposition of the Collateral by the Secured Party which takes place substantially in accordance with the following provisions shall be deemed to be commercially reasonable:

		
	(i)
	the Collateral may be disposed of whether or not the Secured Party has taken possession thereof;

– 8 –

		
	(ii)
	the Collateral may be disposed of in whole or in part;

		
	(iii)
	the Collateral may be disposed of by public auction, public tender or private contract, with or without advertising and without any other formality;

		
	(iv)
	any purchaser or lessee of the Collateral may be a customer of or related person to the Secured Party;

		
	(v)
	a disposition of the Collateral may be on such terms and conditions as to credit, deferred payment or otherwise as the Secured Party, in its sole discretion, may deem advantageous;

		
	(vi)
	the Secured Party may establish an upset or reserve bid or price in respect of the Collateral; and

		
	(vii)
	the Secured Party may buy in, rescind or vary any contract for the disposition of the Collateral and may dispose of any Collateral again without being obligated to account or answer for any gain or loss occasioned thereby.

		
	(d)
	Subject to the claims, if any, of the creditors of the Debtor ranking in priority to this Security Agreement, all amounts realized from the disposition of Collateral pursuant to this Security Agreement will be applied as the Secured Party, in its absolute discretion, may direct as follows:

		
	(i)
	in payment of all costs, charges and expenses (including legal fees and disbursements on a solicitor and his own client basis) incurred by the Secured Party in connection with or incidental to:

		
	(A)
	the exercise by the Secured Party of all or any of the powers granted to it pursuant to this Security Agreement; and

		
	(B)
	the appointment of the Receiver and the exercise by the Receiver of all or any of the powers granted to it pursuant to this Security Agreement, including the Receiver’s reasonable remuneration and all outgoings properly payable by the Receiver;

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

		
	(iii)
	in or toward payment to the Secured Party of all interest remaining unpaid in respect of the Obligations.

Subject to applicable law and the claims, if any, of other creditors of the Debtor, any surplus will be paid to the Debtor.
		
	12.
	DEFICIENCY

If the amounts realized from the disposition of the Collateral are not sufficient to pay the Obligations in full, the Debtor will immediately pay to the Secured Party the amount of such deficiency.

– 9 –

		
	13.
	RIGHTS CUMULATIVE

All rights and remedies of the Secured Party set out in this Security Agreement are cumulative and no right or remedy contained herein is intended to be exclusive but each will be in addition to every other right or remedy contained herein or in any existing or future security agreement now or hereafter existing at law, in equity or by statute, or pursuant to any other agreement between the Debtor and the Secured Party that may be in effect from time to time.
		
	14.
	LIABILITY OF SECURED PARTY

The Secured Party shall not be responsible or liable for any debts contracted by it, for damages to persons or property or for salaries or nonfulfillment of contracts during any period when the Secured Party shall manage the Collateral upon entry, as herein provided, nor shall the Secured party be liable to account as mortgagee in possession or for any default or omission for which a mortgagee in possession may be liable.  The Secured Party shall not be bound to do, observer or perform or to see to the observance or performance by the Debtor of any obligations or covenants imposed upon the Debtor nor shall the Secured Party, in the case of securities, instruments or chattel paper, be obliged to preserve rights against other persons, nor shall the Secured party be obliged to keep any of the Collateral identifiable.  The Debtor hereby waives any applicable provisions of law permitted to be waived by it which imposes higher or greater obligations upon the Secured Party than aforesaid.
		
	15.
	APPOINTMENT OF ATTORNEY

The Debtor hereby irrevocable appoints the Secured Party or the Receiver, as the case may be, with full power of substitution, to be the attorney of the Debtor for and in the name of the Debtor to sign, endorse or execute under seal or otherwise any deeds, documents, transfers, cheques, instruments, demands, assignments, assurances or consents that the Debtor is obliged to sign, endorse or execute and generally to use the name of the Debtor and to do all things as may be necessary or incidental to the exercise of all or any of the powers conferred on the Secured Party or the Receiver, as the case may be, pursuant to this Security Agreement.
		
	16.
	ACCOUNTS

Notwithstanding any other provision of this Security Agreement, the Secured Party may collect, realize, sell or otherwise deal with the Accounts or any part thereof in such manner, upon such terms and conditions and at such time or times, whether before or after default, as may seem to it advisable, and without notice to the Debtor, except in the case of disposition after default and then in accordance with the provisions of the Act.  All monies or other forms of payment received by the Debtor in payment of any Account will be received and held by the Debtor in trust for the Secured Party.
		
	17.
	APPROPRIATION OF PAYMENTS

Any and all payments made in respect of the Obligations from time to time and monies realized from any security interests held therefor (including monies collection 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 Secured Party may see fit, and the Secured Party may at all times and from time to time change any appropriation as the Secured Party may see fit.

– 10 –

		
	18.
	LIABILITY TO ADVANCE

None of the preparation, execution, perfection and registration of this Security Agreement or the advance of any monies shall bind the Secured Party to make any advance or loan or further advance or loan, or renew any note or extend any time for payment of any indebtedness or liability of the Debtor to the Secured Party.
		
	19.
	WAIVER

The Secured Party may from time to time and at any time waive in whole or in part any right, benefit or default under any clause of this Security Agreement but any such waiver or any right, benefit or default on any occasion shall be deemed not to be a waiver of any such right, benefit or default thereafter, or of any other right, benefit or default, as the case may be.
		
	20.
	NOTICE

Notice may be given to either party by delivering the same to the party for whom it is intended, at the principal address of such party provided herein or at such other address as may be given in writing by such party to the other.
		
	21.
	EXTENSIONS

The Secured Party 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 Debtor, account debtors of the Debtor, sureties and others and with the Collateral and other security interests as the Secured Party may see fit without prejudice to the liability of the Debtor or the Secured Party’s right to hold and realize on the secured constituted by this Security Agreement.
		
	22.
	NO MERGER

This Security Agreement shall not operate so as to 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 hereafter be held by the Secured Party from the Debtor or from any other person whomsoever.  The taking of a judgment with respect to any of the Obligations will not operate as a merger of any of the covenants contained in this Security Agreement.
		
	23.
	ASSIGNMENT

The Secured party may, without further notice to the Debtor, at any time, assign, transfer or grant a security interest in this Security Agreement and the security interests granted thereby.  The Debtor expressly agrees that the assignee, transferee or secured party, as the case may be, shall have all of the Secured Party’s rights and remedies under this Security Agreement and the Debtor will not assert any defense, counterclaim, right of set-off or otherwise against any party in any action commenced by such assignee, transferee or secured party, as the case may be, and will pay the Obligations to the assignee, transferee or secured party, as the case may be, as the Obligations become due.

– 11 –

		
	24.
	SATISFACTION AND DISCHARGE

Any partial payment or satisfaction of the Obligations, or any ceasing by the Debtor to be indebted to the Secured Party, shall be deemed not to be a redemption or discharge of this Security Agreement.  The Debtor 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 Debtor and payment of any disbursements (on a solicitor and his own client basis) incurred by the Secured Party in connection with the Obligations and such release and discharge.
		
	25.
	ENUREMENT

This Security Agreement shall enure to the benefit of the Secured party and its successors and assigns, and shall be binding upon the respective heirs, executors, personal representatives, successors and permitted assigns of the Debtor.
		
	26.
	INTERPRETATION

		
	(a)
	In this Security Agreement:

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

		
	(ii)
	“Debtor” and the personal pronoun “it” or “its” and any verb relating thereto and used therewith shall be read and construed as required by and in accordance with the context in which such words are used depending upon whether the Debtor is one or more individuals, corporations or partnerships and, if more than one, shall apply and be binding upon each of them severally;

		
	(iii)
	the “Act” means the Personal Property Security Act of Prince Edward Island and all regulations thereunder as amended from time to time.

		
	(b)
	words and expressions used herein that have been defined in the Act shall be interpreted in accordance with their respective meanings given in the Act unless otherwise defined herein or unless the context otherwise requires;

		
	(c)
	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;

		
	(d)
	the headings of the clauses of this Security Agreement have been inserted for reference only and do not define, limit, alter or enlarge the meaning of any provision of this Security Agreement;

		
	(e)
	this Security Agreement shall be governed by the laws of the Province of Prince Edward Island.

		
	27.
	COPY OF AGREEMENT AND FINANCING STATEMENT

The Debtor hereby:
		
	(a)
	acknowledges receiving a copy of this Security Agreement; and

– 12 –

		
	(b)
	waives all rights to receive from the Secured Party a copy of any financing statement, financing change statement or verification statement filed at any time in respect of this Security Agreement.

IN WITNESS WHEREOF the Debtor has executed this Security Agreement this   26th   day of July, 2016.
	
				
	SIGNED SEALED & ATTESTED TO
in the presence of:
	 
	AQUA BOUNTY CANADA INC.

	

	Per:
	/s/ David A. Frank

	/s/ Christopher H. Martin
	 
	David A. Frank

	Witness
	 
	 

SCHEDULE “A”
A security interest is taken in all present and after-acquired personal property of the Debtor.

DATED:    July   26  , 2016
BETWEEN:
AQUA BOUNTY CANADA INC.
OF THE FIRST PART
AND:
PRINCE EDWARD ISLAND CENTURY 2000 FUND INC.
OF THE SECOND PART
*******************************************************************
GENERAL SECURITY AGREEMENT
*******************************************************************
Kaitlyn Angus
Mcinnes Cooper
141 Kent Street, Suite 300
Charlottetown, PE C1A 1 N3
Tel 902.368.84731 Fax 902.368.8346
Matter 137971
(24909374_ 1.doc)

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