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DEED OF HYPOTHEC ON MOVABLES


This Deed of Hypothec on Movables Agreement (the Agreement) is effective [DATE],

BETWEEN:  [YOUR COMPANY NAME] (the "Company"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at:

      [YOUR COMPLETE ADDRESS]

AND:  [COMPANY NAME] (the "Creditor"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at:

      [YOUR COMPLETE ADDRESS]

WHICH PARTIES AGREE WITH EACH OTHER AS FOLLOWS:

INTERPRETATION

Definitions

All capitalized words and expressions not otherwise defined herein shall have the meanings assigned thereto by the Debenture. All other capitalized words and expressions used in this Deed or in any deed, document or agreement supplemental or ancillary hereto, unless there be something in the subject or the context inconsistent therewith, shall have the following meanings:

1.1.1  Debenture means that certain Senior Secured Convertible Debenture dated for reference [DATE] issued by Company in favor of the Creditor in the principal amount of [AMOUNT] lawful money of [COUNTRY], as same may be amended, supplemented or restated from time to time;
 
1.1.2  Deed of Hypothec, this Deed, this Deed of Hypothec, these presents, herein, hereby, hereunder and other similar expressions refer collectively to this Deed of Hypothec, its accompanying schedules as well as any and every deed or other instrument which is supplementary or ancillary hereto or in implementation hereof, the whole as same may be amended, supplemented or restated from time to time;

1.1.3  Default means any one of the events specified in Section 8.1, the occurrence or failure to occur of which constitutes, or with the passage of time or the giving of notice or both, would constitute an Event of Default;

1.1.4  Event of Default shall have the meaning ascribed to it in Section 8.1;

1.1.5  Governmental Authority means any nation or government, any state or other political subdivision thereof and any entity-exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government;

1.1.6  Hypothecated Property shall have the meaning ascribed to it in Section 2.1;

1.1.7  [COUNTRY] Law means all applicable provisions of statutes, ordinances, decrees, orders in council, rules, regulations, treaties and all applicable determinations, rulings, orders and decrees of Governmental Authorities and arbitrators;

Lien means any interest in property or the income or profits therefrom securing an obligation owed to, or a claim by, a Person other than the owner (which for the purposes hereof shall include a possessor under a title retention agreement and a lessee under a lease hereinbelow described) of such property, or claim whether such interest is based on common law, civil law, statute or contract, and including, but not limited to, any security interest, hypothec, prior claim, mortgage, pledge, lien, claim, charge, cession, transfer, assignment, encumbrance, title retention agreement, lessors interest under a lease which would be capitalized on a balance sheet of the owner of such property or analogous instrument in, of, or on any property or the income or profits therefrom of a Person, other than Liens incurred in the ordinary course of business and for the purpose of carrying on same not in connection with the borrowing of money or the obtaining of credit and which do not in the aggregate materially impair the use, the income or profits therefrom, of the property covered thereby in the operation of such Persons business;

Obligations is the collective reference to all the obligations, present and future, direct and indirect, absolute and contingent, presently owing and due or hereafter to become owing and due to the Creditor by Company from time to time, including, without limiting the generality of the foregoing, all its obligations under the Debenture;

Person means any legal or natural person, corporation, firm, joint venture, partnership, whether general, limited or undeclared, trust, association, unincorporated organization, Governmental Authority or other entity of whatever nature.

1.2  Plural and MasculineUnless there be something in the subject or the context inconsistent therewith, words importing the singular only shall include the plural and vice versa and words importing the masculine gender shall include the feminine gender and vice versa, and any reference to dollars shall mean [COUNTRY] dollars.

1.3  Division in ArticlesThe division of this Deed into Articles, Sections, subsections and paragraphs and the insertion of titles are for convenience of reference only and do not affect the meaning or the interpretation of the present Deed.


HYPOTHECS

2.1  Principal HypothecAs a general and continuing collateral security for the performance by Company of the Obligations, Company hereby hypothecates to and in favour of the Creditor the following property and its rights, titles and interests in and to such property (collectively referred to herein as the Hypothecated Property) to the extent of the sum of [AMOUNT] in lawful money of [COUNTRY], with interest thereon at the rate of [%] per annum, calculated monthly, with interest on overdue interest at the same rate, all of the Grantors right, title and interest presently owned and hereafter acquired in all movable property of Company of whatsoever nature and kind and wheresoever situate and all proceeds thereof and therefrom, renewals thereof, Accessions thereto and substitutions therefor, including without limiting the generality of the foregoing, all the presently owned or held and hereafter acquired right, title and interest in and to all Goods (including all accessories, attachments, additions and Accessions thereto), Chattel Paper, Documents of Title (whether negotiable or not), Instruments, Intangibles, Licenses, Money (including without limitation the Principal) and all:

2.1.1  inventory of Company of whatever nature and kind situate in the [State/Province] of [STATE/PROVINCE];

2.1.2  equipment of Company (other than Inventory) of whatsoever nature and kind situate in the [State/Province] of [STATE/PROVINCE] including without limitation, all machinery, tools, apparatus, plant, furniture, fixtures, and vehicles of whatsoever nature and kind;

2.1.3  book accounts and book debts of Company and generally all accounts, debts, dues, claims, chooses in action and demands of every kind and nature howsoever arising or secured including without limitation letters of credit, letters of guarantee and advances of credit, which are now due, owing or accruing or growing due to or owned by or which may hereafter become due, owing or accruing or growing due to or owned by Company (collectively, the Claims);

2.1.4  deeds, documents, writings, papers, books of account and other books or electronically recorded data relating to or being records of Claims, Chattel Paper or Documents of Title or by which such are or may hereafter be secured, evidenced, acknowledged or made payable;

2.1.5  contractual rights of Company, including rents, revenues, and incomes and all insurance claims and policies and all goodwill, patents, trade marks, copyrights, and other industrial or intellectual property of Company;

2.1.6  monies (including without limitation the Principal) other than trust monies lawfully belonging to third parties;

2.1.7  the securities, including shares, bonds, rights, options, certificates of deposit, debt instruments and subscriptions, issued and which shall be issued in favor of Company, as well as all securities which shall be delivered to the Creditor by the Company from time to time, including without limitation the shares held by Company in the capital stock of [COMPANY NAME] and [COMPANY NAME] (collectively referred to herein as the Securities);

2.1.8  other presently owned or held and after-acquired property of Company situated in [STATE/PROVINCE] and not otherwise hypothecated hereunder in favor of the Creditor including without limitation, all businesses, goodwill and uncalled capital of Company; and

2.1.9  the fruits and revenues of the Hypothecated Property, as well as all the bills of exchange, bank drafts, securities, sums of money and expropriation indemnities delivered or paid pursuant to a sale, repurchase, distribution or other operation in respect of any of the Hypothecated Property or in virtue of any other deed or contract.

2.2  Additional Hypothec:As general and continuing collateral security for the performance by Company of the Obligations not otherwise secured by the hypothecs created under the terms of Section 2.1, including, without limiting the generality of the foregoing, interest on all overdue interest, as well as the costs and expenses incurred by the Creditor in order to preserve or realize upon the Liens created and to be created from time to time under the terms hereof and all other costs and expenses related to the Obligations, Company hereby hypothecates the Hypothecated Property to and in favor of the Creditor to the extent of an additional sum of [AMOUNT] with interest thereon at the rate of [%] per annum, with interest on overdue interest at the same rate.


POSSESSION AND USE OF THE HYPOTHECATED PROPERTY

3.1  Possession and Use:Until Company has surrendered or is bound to surrender the whole or any part of the Hypothecated Property under the terms of any laws, Company subject, however, to the express terms hereof, shall be entitled and permitted to possess the Hypothecated Property and to manage, develop, operate, use and enjoy the same.


SPECIAL PROVISIONS RELATING TO THE HYPOTHEC ON CLAIMS

4.1  The Creditor expressly authorizes Company to collect, when and as due, the capital and interest of the Claim becoming due from time to time until the Creditor notifies Company of the withdrawal of the present authorization.

4.2  In the event that the capital or interest of any of the Claim is paid to Company following the receipt of such a notice, Company shall hold same on gratuitous deposit on behalf of and for the benefit of the Creditor and shall deposit same, as depositary of the Creditor, in an account with a financial institution designated by the Creditor, which account shall be opened at that moment and for that purpose only, and shall pay over said amounts to the Creditor forthwith following demand therefor, Company hereby expressly acknowledging the Creditors rights of ownership to said capital and interest. Notwithstanding the fact that the deposit shall be gratuitous, the Creditor hereby acknowledges that Company shall be entitled to the interest on the capital and interest held on deposit provided that Company is not in default in restoring the capital and interest deposited to the Creditor following a demand from the latter to that effect.

4.3  Company hereby acknowledges that it shall be bound by the obligation to hold the capital and interest of the Claim on deposit and all obligations accessory thereto immediately upon receipt from the Creditor of a notice of the withdrawal of the authorization given in this Article. In respect of such deposit, Company expressly renounces to its rights to be reimbursed for the expenses incurred for the preservation of the capital and interest held on deposit and to be indemnified for any loss caused by the capital and interest deposited or by their premature restitution.

4.4  Company hereby assigns to the Creditor in any absolute manner all its present and future claims falling within the scope of the laws of the [State/Province] of [STATE/PROVINCE] as additional and continuing security for the performance of the Obligations. The Creditor may, at any time and from time to time, accomplish the formalities required by law in order to perfect the present assignment.


SPECIAL PROVISIONS RELATING TO THE HYPOTHEC ON SECURITIES

5.1  In order to protect its rights in the Securities, the Creditor may, at any time and from time to time, have itself or a third person on its behalf registered as the holder of the Securities in the appropriate registers of the issuer of same. In this case:

5.1.1  the rights to vote and other rights attached to the Securities shall be exercised by the Creditor or on its behalf;

5.1.2  the income, dividends and distributions of capital shall be collected by the Creditor who shall have the right, at its option, to either hold same as part of the Charged Property or to apply same in reduction of the Obligations; and

5.1.3  the Creditor may, at its option, provide Company with a proxy, revocable at any time, authorizing the latter to exercise the rights to vote and other rights attached to the Securities in whole or in part.


APPLICATION OF MONEY RECEIVED BY THE CREDITOR

6.1  Use of Moneys Not Otherwise Released:All the sums of money collected by the Creditor pursuant to the provisions hereof and all the sums of money of which the Creditor is depositary in virtue of this Deed and in respect of which no other specific provision regulates the use thereof, are held by the Creditor as security for the payment of the Obligations. However, the Creditor, notwithstanding the provisions of the laws of the [State/Province] of [STATE/PROVINCE] and every other legal rule concerning the imputation of payments, may apply such moneys to the full or partial reduction and to such of the indebtedness forming part of the Obligations as the Creditor may deem appropriate. In the absence of any such imputation on the part of the Creditor, such sums, at the request of Company, may be invested, provided however that any such investment of the sums held by the Creditor be realizable upon demand.


REPRESENTATIONS AND COVENANTS OF Company

So long as any Obligation is outstanding and unpaid, Company makes the following representations, provides the following warranties and covenants and agrees as follows:

7.1  Title to Hypothecated Property:That it alone is and shall be the lawful owner of the Hypothecated Property; that it has full, good and lawful authority to hypothecate the Hypothecated Property as provided in this Deed. The Hypothecated Property is free and clear of all Liens. It shall not create, assume, incur or permit the existence of any Lien on the Hypothecated Property other than Liens in favour of the Creditor.

7.2  Payment of Taxes:That it will pay or cause to be paid as and when due and payable all taxes, rates, charges, levies or assessments, ordinary or extraordinary, governmental or other charges of a like nature, assessed or payable upon the Hypothecated Property or any part thereof or upon the income and profits of Company.

7.3  Maintenance of Security:That it will fully and effectively maintain the Liens hereby constituted as valid and effective security, and that it will perform all acts and execute and publish all documents as may be necessary to ensure that the Liens hereof remain effective and at all times opposable to third Persons.

Restriction on Alienation of Hypothecated Property:That, unless the Creditor otherwise consents to same in writing, Company shall not sell, transfer or otherwise dispose of any of the Hypothecated Property save and except for the sale of Inventory in the ordinary course of its business and for the purpose of carrying on same, provided that no Default hereunder shall have occurred and be continuing at the time of any such sale, transfer or other disposition.

7.5  No Inchoate Liens:Company represents and warrants that it has not executed or agreed to execute any deed, document, contract or agreement with any Person whomsoever which would necessitate or result in the creation in favor of such Person of any Lien whatsoever on the Hypothecated Property.


EVENTS OF DEFAULT

8.1  Events of Default:The occurrence of any one or more of the following events shall constitute an event of default (herein referred to as an Event of Default):

8.1.1  Payment:Should Company default in the payment or performance of any of the Obligations and such default continue beyond any applicable grace period; or

8.1.2  Bankruptcy:Should Company make an assignment for the benefit of creditors, or file or consent to the filing of a petition in bankruptcy, a proposal or a notice of intention under any bankruptcy law of any jurisdiction whatsoever or be adjudicated insolvent or bankrupt, or petition or apply to any tribunal to have any receiver, trustee, liquidator or sequestrator appointed for any substantial portion of its property, or if Company commences any proceeding in respect of itself, its property or any substantial portion thereof under any reorganization, arrangement, readjustment of debt, composition or liquidation law of any jurisdiction whatsoever, whether now or hereafter in effect (any of which proceedings, including, without limitation, the making of an assignment for the benefit of creditors, or the filing or consenting to the filing of a petition in bankruptcy, a proposal or a notice of intention under any such bankruptcy [YOUR COUNTRY LAW] shall be referred to herein as a Proceeding); or 

if there is commenced against Company any Proceeding and such Proceeding remains undismissed for a period of [NUMBER] days; or if any receiver, trustee, liquidator or sequestrator is appointed for Company or any substantial portion of its property or if Company consents to or approves or accepts any Proceeding or the appointment of any receiver, trustee, liquidator or sequestrator for itself or for any substantial portion of its property; or

8.1.3  Seizure:Should any process of execution be enforced or levied upon any of the Hypothecated Property and remain unsatisfied for a period of [NUMBER] days. However, an Event of Default shall only occur under this subsection if such process is not contested in good faith by or on behalf of Company and non-payment, in the opinion of the Creditor, shall jeopardize or impair the Liens created hereunder and Company shall not have granted or caused to have been granted security which, in the discretion of the Creditor, shall be sufficient to pay in full the amount claimed in the event that it shall be held to be a valid claim; or

8.1.4  Representations:Should any representation which has been made by Company under, in connection with or pursuant to this Deed prove to be, at any time and from time to time, substantially false or inaccurate; or
8.1.5  Observance of Covenants:Should Company fail to perform or observe any one of the covenants or conditions which it is bound to perform or observe under this Deed and any such Default (excluding an Event of Default specifically provided for in this Article) continue for a period of [NUMBER] days following the receipt by Company of a written notice from the Creditor specifying such Default and requiring Company to rectify same; or

8.1.6  Registrations affecting the Hypothecated Property:Should Company fail to obtain the cancellation of any prior notice of exercise of a hypothecary right or any other entry affecting the Hypothecated Property in favor of any creditor of Company other than the Creditor within [NUMBER] days of their respective publication or registration, as the case may be.


REMEDIES

9.1  Exercise of Rights:If an Event of Default shall occur and be continuing, to the extent and in the manner permitted by law and subject to any preliminary measures thereby contemplated, but without in any way limiting any of the rights, remedies or recourses which the Creditor may otherwise have under any law or under any other deed or document, the Creditor may declare the whole or any part of the Obligations as being immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Grantor, anything in this Deed to the contrary notwithstanding and the Creditor shall be entitled to exercise all recourses available to it under law.


MISCELLANEOUS

10.1  Separate Security:The present Deed and the Liens created herein, are and shall be in addition to and not in substitution for any other security held by the Creditor for the fulfilment of the Obligations and shall thus not operate as a novation of any Obligation.

10.2  Continuing Security:The Liens created hereunder shall constitute continuing security which shall remain in full force and effect until the Obligations shall have been fulfilled in full and the Liens hereof shall have been cancelled. Company expressly acknowledges, for the purpose of laws of the [State/Province] of [STATE/PROVINCE], that until it shall have received a written notice from the Creditor to the effect that the Obligations have been fulfilled in full, it binds and obliges itself anew continuously under the Obligations.

10.3  Notices:Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Deed when delivered to such party (by certified mail, postage prepaid, or by telegraph, telex, telecopier or hand delivery) at its address set forth in the appearance hereinabove, or at such other address as any of the parties may hereafter notify the others in writing.  No other method of giving notice is hereby precluded.

10.4  Severability:Any provision of this Deed which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.

10.5  Governing Law:This Deed and the interpretation and enforcement thereof shall be governed by and in accordance with the laws of the [State/Province] of [STATE/PROVINCE].


IN WITNESS WHEREOF, each party to this agreement has caused it to be executed at [PLACE OF EXECUTION] on the date indicated above.

COMPANY             CREDITOR


                          
Authorized Signature          Authorized Signature


                          
Print Name and Title          Print Name and Title

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