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EXHIBIT 10.4
GENERAL SECURITY AGREEMENT
TO:
LASALLE BUSINESS CREDIT, A DIVISION OF ABN AMRO BANK N.V.,
CANADA BRANCH
15th Floor, Maritime Life Tower, 79 Wellington Street West,
Toronto-Dominion Centre, Toronto, Ontario, M5K 1G8
(hereinafter the "Lender")
GRANTED BY:
TARPON INDUSTRIES, INC.
having its principal office or place of business at:
2420 Wills Street,
Marysville, MI 48040
(hereinafter the "Debtor")
SECTION 1 - GRANT OF SECURITY INTEREST
1.1 SECURITY INTEREST
As a general and continuing security for
the payment and performance of any and
all indebtedness, obligations and
liabilities, present or future, direct or
indirect, absolute or contingent, matured
or not, at any time owing by the
Debtor to the Lender or remaining unpaid by
the Debtor to the Lender wheresoever
and howsoever incurred and howsoever
evidenced, whether arising from dealings
between the Lender and the Debtor or from
other dealings or proceedings by which
the Debtor may be or become in any manner
indebted, obligated or liable to the
Lender, including, without limitation,
under the Guarantee (as hereinafter
defined), and wherever incurred and in any
currency and whether incurred by the
Debtor alone or with another or others and
whether as principal, guarantor or
surety, including expenses under Sections
3.5 and 3.12 of this Agreement and all
interest, commissions, cost of realization,
legal and other costs, charges and
expenses (all of the foregoing being herein
collectively called the
"Obligations") the Debtor, IN CONSIDERATION
OF THE OBLIGATIONS and for other
good and valuable consideration, the
receipt and sufficiency of which are hereby
acknowledged, hereby grants, bargains,
assigns and transfers to the Lender a
continuing security interest in all the
property, assets and undertakings of the
Debtor of whatsoever nature and kind, now
owned or hereafter-acquired by or on
behalf of the Debtor, wherever located (the
"Collateral") including, without
limitation:
(a)
Accounts
Receivable
All debts, book debts, accounts, claims, demands, moneys and
choses
in action whatsoever including, without limitation, claims
against
the Crown and claims under insurance policies, which are now
owned
by or are due, owing or accruing due to the Debtor or which may
hereafter be owned by or become due, owing or accruing due to
the
Debtor together with all contracts, securities, bills, notes,
lien
notes, judgments, chattel mortgages, mortgages and all other
rights,
benefits and
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documents now or hereafter taken, vested in or held by the Debtor
in
respect of or as security for the same and the full benefit and
advantage thereof, and all rights of action or claims which the
Debtor now has or may at any time hereafter have against any
person
or persons, firm or corporation in respect thereof (all of the
foregoing being herein collectively called the "Accounts
Receivable");
(b)
Inventory
All inventory of whatever kind now or hereafter owned by the
Debtor
or in which the Debtor now or hereinafter has an interest or
right
of any kind, and all accessions thereto and products thereof,
including, without limitation, all goods, merchandise, raw
materials, goods in process, finished goods, packaging and
packing
material and other tangible personal property now or hereafter
held
for sale, lease, rental or resale or that are to be furnished
or
have been furnished under a contract of service or that are to
be
used or consumed in the business of the Debtor and including
all
items, types and/or classes of inventory located at the places
listed in the attached Schedule "A" (all of the foregoing being
herein collectively called the "Inventory");
(c)
Equipment
All goods now or hereafter owned by the Debtor which are not
inventory or consumer goods as defined in the Personal Property
Security Act (Ontario) ("PPSA") including, without limitation,
the
fixtures, equipment, machinery, tools, furniture, vehicles and
other
tangible personal property (all of the foregoing being herein
collectively called the "Equipment");
(d)
Chattel Paper,
Instruments, Securities, etc.
All chattel paper, instruments, warehouse receipts, bills of
lading
and other documents of title, whether negotiable or
non-negotiable,
shares, stock, warrants, bonds, debentures, debenture stock or
other
securities, now or hereafter owned by the Debtor, other than
the
Debtor's shares
in Eugene Welding Company;
(e)
Intangibles
All intangibles now or hereafter owned by the Debtor including,
without limitation, all contractual rights, goodwill, patents,
trade
marks, trade names, copyrights, industrial designs and other
industrial or intellectual property or rights therein;
(f)
Books and
Accounts, etc.
With respect to the personal property described in Paragraphs (a)
to
(e) inclusive, all books, accounts, invoices, deeds, documents,
writings, letters, papers, security certificates and other
records
in any form evidencing or relating thereto and all contracts,
securities, instruments and other rights and benefits in
respect
thereof;
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(g)
Other
Property
The uncalled capital, money, rights, bills of exchange,
negotiable
and non-negotiable instruments, judgments and securities not
otherwise described in Paragraphs (a) to (f) inclusive;
(h)
Replacements,
etc.
With respect to the personal property described in Paragraphs (a)
to
(g) inclusive, all substitutions and replacements thereof,
increases, additions and accessions thereto and any interest of
the
Debtor therein; and
(i)
Proceeds
With respect to the personal property described in Paragraphs (a)
to
(h) inclusive, personal property in any form or fixtures
derived
directly or indirectly from any dealing with such property or
that
indemnifies or compensates for such property destroyed or
damaged
and proceeds of proceeds whether of the same type, class or kind
as
the original proceeds.
Without limiting the foregoing, the
Collateral shall include all of the
following property of Debtor other than the
Debtor's shares in Eugene Welding
Company, whether now or hereafter owned,
existing, acquired or arising and
wherever now or hereafter located: (a) all
accounts and all goods whose sale,
lease or other disposition by Debtor has
given rise to accounts and have been
returned to, or repossessed or stopped in
transit by, Debtor; (b) all chattel
paper, instruments, documents and general
intangibles (including, without
limitation, all patents, patent
applications, trademarks, trademark applications
(other than "intent to use" applications
until such time as Debtor begins to use
the related trademark), tradenames, trade
secrets, goodwill, copyrights,
copyright applications, registrations,
licenses, software, franchises, customer
lists, tax refund claims, claims against
carriers and shippers, guarantee
claims, contract rights, payment
intangibles, security interests, security
deposits and rights to indemnification);
(c) all goods, including, without
limitation, inventory, equipment, vehicles
and fixtures; (d) all investment
property; (e) all deposit accounts, bank
accounts and all deposits and cash; (f)
all letter-of-credit rights; (g) all
commercial tort claims, (h) any other
property of Debtor now or hereafter in the
possession, custody or control of
Lender or any agent or any parent,
affiliate or subsidiary of Lender or any
participant in the Obligations for any
purpose (whether for safekeeping,
deposit, collection, custody, pledge,
transmission or otherwise); and (i) all
additions and accessions to, substitutions
for, and replacements, products and
Proceeds of the foregoing property,
including, without limitation, proceeds of
all insurance policies insuring the
foregoing property, and all of Debtor's
books and records relating to any of the
foregoing and to Debtor's business. All
terms used in this paragraph shall have the
meanings provided in the Uniform
Commercial Code as in effect in the State
of Michigan (the "Code").
1.2 DEFINITIONS AND
INTERPRETATION
In this Security Agreement:
(a)
Terms used
herein and defined in the PPSA shall have the same
meanings as in the PPSA unless the context otherwise requires;
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(b)
Any reference to
"Collateral" shall, unless the context otherwise
requires, refer to "Collateral or any part thereof";
(c)
The grant of the
security interest herein provided for shall
include, without limitation, a fixed mortgage, hypothecation,
pledge, charge and assignment of the Collateral in favour of
the
Lender;
(d)
"Guarantee"
shall mean the Guarantee dated as of the date hereof,
made by the Debtor in favour of the Lender with respect to the
debts
and obligations of Steelbank Inc., as Borrower to the Lender,
as
same may be amended, supplemented, revised, restated or
replaced
from time to time;
(e)
The term
"Affiliate" shall mean any person or entity (i) which
directly or indirectly through one or more intermediaries
controls,
is controlled by, or is under common control with, the Debtor,
(ii)
which beneficially owns or holds five percent (5%) or more of
the
voting control or equity interests of the Debtor, or (iii) five
percent (5%) or more of the voting control or equity interests
of
which is beneficially owned or held by the Debtor;
(f)
The term
"encumbrance" shall include, without limitation, a security
interest, lien, hypothec, claim, charge, deemed trust or
encumbrance
of any kind whatsoever;
(g)
The Debtor's
"Fiscal Year" shall mean each twelve (12) month
accounting period of the Debtor, which ends on December 31 of
each
year;
(h)
The term "GAAP"
shall mean generally accepted accounting principles
in effect in the United States of America from time to time
applied
in a consistent manner from period to period;
(i)
The term
"Person" shall mean any individual, sole proprietorship,
partnership, joint
venture, trust, unincorporated organization,
association, corporation, limited liability company,
institution,
entity, party or government (whether federal, provincial,
regional,
city, state, local, municipal or otherwise), including, without
limitation, any instrumentality, division, agency, body or
department thereof;
(j)
The term
"purchase money security interest" shall mean a purchase
money security interest granted by the Debtor under the PPSA to
secure all or any part of the indebtedness incurred by the Debtor
in
connection with the acquisition of property (not in excess of
the
acquisition price of such property) or any extension or renewal
or
replacement of such indebtedness provided that the principal
amount
of such indebtedness is not increased; and
(k)
The term
"security interest" shall include, without limitation, a
fixed mortgage, hypothecation, pledge, charge and assignment.
1.3 LEASES
The last day of the term of any lease, oral
or written, or any agreement
therefor, now held or hereafter acquired by
the Debtor, shall be excepted from
the security interest hereby granted
and
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shall not form part of the Collateral, but
the Debtor shall stand possessed of
such one day remaining, upon trust to
assign and dispose of the same as the
Lender or any assignee of such lease or
agreement shall direct. If any such
lease or agreement therefor contains a
provision which provides in effect that
such lease or agreement may not be
assigned, sub-leased, charged or encumbered
without the leave, license, consent or
approval of the lessor, the application
of the security interest created hereby to
any such lease or agreement shall be
conditional upon such leave, license,
consent or approval having been obtained.
1.4 DEBTOR REMAINS LIABLE
Notwithstanding anything herein to the
contrary:
(a)
the Debtor shall
remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to
perform all its duties and obligations thereunder to the same
extent
as if this Security Agreement had not been executed;
(b)
the exercise by
the Lender of any of the rights or remedies
hereunder shall not release the Debtor from any of its duties
or
obligations under the contracts and agreements included in the
Collateral; and
(c)
the Lender shall
not have any obligation or liability under the
contracts and agreements included in the Collateral by reason
of
this Agreement, nor shall the Lender be obligated to perform any
of
the obligations or duties of the Debtor thereunder or to take
any
action to collect or enforce any claim for payment assigned
hereunder.
SECTION 2 - REPRESENTATIONS AND
WARRANTIES
The Debtor represents and warrants to and
in favour of the Lender as follows:
2.1 ORGANIZATION
The Debtor is a corporation duly
incorporated, validly existing and in good
standing under the laws of the State of
Michigan and is duly qualified and in
good standing in all jurisdictions where
the nature and extent of the business
transacted by it or the ownership of its
assets makes such qualification
necessary. The Debtor has the right and
power and is duly authorized and
empowered to enter into, execute and
deliver this Security Agreement, the
Guarantee and all other agreements
contemplated hereunder and perform its
obligations hereunder and thereunder. The
execution, delivery and performance of
this Security Agreement, the Guarantee and
all other agreements contemplated
hereunder and thereunder by the Debtor does
not conflict with the provisions of
the articles of incorporation or bylaws of
the Debtor, any statute, regulation,
ordinance or rule of law, or any agreement,
contract or other document which may
now or hereafter be binding on the
Debtor.
2.2 NO DEFAULT
The Debtor is not in default in the
performance or observance of any of the
obligations, covenants or conditions
contained in any material contract,
agreement or other instrument to
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which Debtor is a party or by which it is
bound. The Debtor has filed its
corporate returns (including annual returns
and financial statements) which are
required to be filed as of the date hereof.
At the date hereof, no Default (as
hereinafter defined) exists and to the
knowledge of the Debtor no event or
condition has occurred or exists which with
the passage of time or the giving of
notice, or both, would constitute a
Default.
2.3 TITLE
Subject only to the security interests in
favour of the Lender, the Debtor has
good and marketable title to the Collateral
free and clear of all encumbrances
whatsoever except as are described in the
attached Schedule "B" (the "Permitted
Liens").
2.4 ENFORCEABILITY
The Guarantee and this Security Agreement
an all other agreements contemplated
thereunder and hereunder constitute a valid
and legally binding obligation of
the Debtor enforceable against the Debtor
in accordance with their terms.
2.5 LOANS BY DEBTOR
The Debtor has not made any loans or
advances to any person except for advances
made to employees, officers and directors
of the Debtor for travel and other
expenses arising in the ordinary course of
business, and loans already known to
the Lender and listed in Schedule "C"
terms.
2.6 INFORMATION
The information, representations and
warranties made by the Debtor to the Lender
in respect of the Debtor's assets,
operations or otherwise including, without
limitation, the information contained in
any financial statements or other
information delivered or to be delivered by
the Debtor to the Lender at or prior
to the date hereof, and in the Schedules
attached hereto, are true and accurate
in all material respects and to the extent
that there are any errors or
omissions in said Schedules, the Debtor
shall amend them accordingly. There are
no facts or circumstances not disclosed in
writing to the Lender relating to the
business, properties, prospects or
financial condition of the Debtor or its
ability to perform its obligations
hereunder, including without limitation, with
respect to the existence of any contract,
agreement or instrument or charter or
corporate restriction.
2.7 AFFILIATE TRANSACTIONS.
Except as
set forth on Schedule "D" hereto or as permitted pursuant to
Paragraph 2.5 or Paragraph 3.10 hereof, the
Debtor is not conducting, permitting
or suffering to be conducted, transactions
with any Affiliate other than
transactions with Affiliates for the
purchase or sale of Inventory or services
in the ordinary course of business pursuant
to terms that are no less favourable
to the Debtor than the terms upon which
such transactions would have been made
had they been made to or with a person or
entity that is not an Affiliate.
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2.8 NAMES AND TRADE NAMES.
Except as
set forth in Schedule "E" hereto, the Debtor name has always
been as set forth on the first page of this
Security Agreement and the Debtor
uses no trade names, assumed names,
fictitious names or division names in the
operation of its business.
2.9 LOCATIONS OF COLLATERAL
The Collateral, except where it is in
transit to and from the locations herein
described is located at the location
specified above as the Debtor's principal
office or place of business (and its chief
place of business and chief executive
office) and at such additional addresses as
are listed in Schedule "A" hereto.
The location at which all records of the
Debtor pertaining to Accounts
Receivable (and all chattel paper which
evidences Accounts Receivable) and
contract rights are kept is the location
specified above unless the contrary is
indicated in Schedule "A".
2.10 NO LITIGATION
There are no actions or proceedings pending
or to the knowledge of the Debtor
threatened against the Debtor.
2.11 TAXES
The Debtor has (i) filed all federal,
state, provincial and other tax returns
required to be filed, and all taxes,
assessments and other government charges
("Tax") and information returns and other
reports which it was required by law
to file on or prior to the date hereof and
the information contained in such
returns and reports is correct in all
material respects and reflects accurately
all liability for Taxes for the period
covered, and (ii) paid all Taxes, and
penalties and interest, if any, against it
or its property, income, or
franchise, that are due and payable. To the
knowledge of the Debtor there are no
Tax disputes waiting or pending that
include the Debtor.
2.12 INDEBTEDNESS.
Except as
set forth on Schedule "F" hereto, the Debtor is not obligated
(directly or indirectly), for any loans or
other indebtedness for borrowed money
other than to the Lender under the
Guarantee.
2.13 EMPLOYEE MATTERS
There are no material controversies, work
stoppage or strikes pending or, to the
knowledge of Debtor, threatened between the
Debtor and any of its employees,
agents or independent contractors other
than employee grievances arising in the
ordinary course of business, and the Debtor
is in material compliance with all
federal, provincial, state and local laws
respecting employment and employment
terms, conditions and practices. There is
no collective bargaining agreement or
other labour contract covering employees of
the Debtor, except as disclosed on
Schedule "G" and to the Debtor's knowledge,
no union or other labour
organization is seeking to organize, or to
be recognized as, a collective
bargaining unit of employees of the Debtor
or for any similar purpose, except as
disclosed on Schedule "G".
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2.14 INTELLECTUAL PROPERTY
The Debtor possesses adequate licenses,
patents, patent applications,
copyrights, service marks, trademarks,
trademark applications, tradestyles and
trade names to continue to conduct its
business as heretofore conducted by it.
The Debtor's intellectual property is set
forth on Schedule "H" hereto.
2.15 CAPITAL STOCK
The Debtor's authorized and issued capital
stock and the registered and
beneficial holders thereof as of the date
immediately prior to Debtor's initial
public offering of its common shares are
correctly and completely described in
Schedule "I".
2.16 COMPLIANCE WITH LAWS AND
MAINTENANCE OF PERMITS
To the Debtor's knowledge, Debtor has
obtained all governmental consents,
franchises, certificates, licenses,
authorizations, approvals and permits
required in order to conduct its business.
The Debtor is in compliance in all
respects with all applicable federal,
provincial, state, local and foreign
statutes, orders, regulations, rules and
ordinances (including, without
limitation, environmental laws and
statutes, orders, regulations, rules and
ordinances relating to taxes, employer and
employee contributions and similar
items, securities, pensions or employee
health and safety).
2.17 SOLVENCY
The Debtor is, after giving effect to the
transactions contemplated hereunder,
solvent, able to pay its debts as they
become due, has capital sufficient to
carry on its business, now owns property
having a value both at fair valuation
and at present fair saleable value greater
than the amount required to pay its
debts, and will not be rendered insolvent
by the execution and delivery of this
Security Agreement or any other agreement
contemplated hereunder, or by
completion of the transactions contemplated
hereunder or thereunder.
2.18 SURVIVAL
All representations and warranties of the
Debtor made herein or in any
certificate or other document delivered by
or on behalf of the Debtor to the
Lender are material, shall be deemed to
have been relied upon by the Lender
notwithstanding any investigation
heretofore or hereafter made by or on behalf
of the Lender, shall survive the execution
and delivery of this Security
Agreement and shall continue in full force
and effect without time limit.
2.19 GOVERNMENTAL AUTHORIZATIONS;
CONTENTS; FEDERAL REGISTRATION COLLATERAL
No authorization, approval or other action
by, and no notice to or filing with,
any governmental authority or consent of
any other Person is required for (i)
the grant by Debtor of the security
interest granted hereby or for the
execution, delivery or performance of this
Agreement by Debtor; or (ii) the
exercise by the Lender of its rights and
remedies hereunder (except as may have
been accomplished by or at the direction of
the Debtor or the Lender). Except as
set forth on Schedule "J" hereto, none of
the Collateral is Collateral with
respect to which (a) security interests may
be registered, recorded or filed
under, or notice thereof given under any
United
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States of America federal statute or
regulation ("Federal Registration
Collateral"). Except for (a) the filing of
UCC financing statements with the
Secretary of State of Michigan, (b) the
filing of any necessary registrations,
recordations or notices, as applicable, in
respect of any Federal Registration
Collateral and (c) entering into
appropriate control agreements with respect to
deposit accounts, security accounts and
letter-of-credit rights (in each case,
as defined in the Code) to the extent
perfection may be effected only by doing
so under the Code, no authorization,
approval or other action by, and no notice
to or filing with, any governmental
authority or consent of any other Person is
required for the perfection of the security
interest granted hereunder.
SECTION 3 - COVENANTS OF DEBTOR
The Debtor covenants and agrees with the
Lender as follows.
3.1 REPAIR
The Debtor shall diligently repair (or
cause to be repaired), maintain, use,
care for, protect and operate the
Collateral, ordinary wear and tear excepted,
and shall carry on and conduct its business
in a proper and efficient manner so
as to preserve and protect the Collateral.
The Debtor shall permit the Lender to
examine any of the Collateral at any time
and wherever the Collateral may be
located and, the Debtor shall immediately
upon request therefor by the Lender,
deliver to the Lender any and all evidence
of ownership of any of the Equipment
including, without limitation, certificates
of title and applications of title.
3.2 INFORMATION
The Debtor shall keep proper books of
account in accordance with sound
accounting practice and applicable laws and
GAAP consistently applied with
respect to questionable, improper or
corrupt payments, shall promptly furnish to
the Lender such information with respect to
the Collateral and the Debtor and
its business as the Lender may from time to
time require. The Debtor shall
permit the Lender or its authorized agents,
at any times and at the expense of
the Debtor, to verify Accounts Receivable
directly with account debtors or by
other procedures, to have access to all
premises occupied by the Debtor or any
place where the Collateral may be found in
order to discuss the affairs,
finances and accounts of the Debtor with
appropriate officers, to inspect the
Collateral and to examine the information
contained in any records or other
writings of the Debtor including, without
limitation, books of account and other
financial records and reports relating to
the Collateral, to have temporary
custody thereof and to make copies thereof
and take extracts therefrom and
shall, at the request of the Lender, mark
the Collateral to indicate clearly the
security interest of the Lender. The Debtor
shall, promptly upon becoming aware
of any pending or threatened action or
proceeding, give notice thereof to the
Lender provided that the Debtor shall
provide written notice to the Lender not
later than two (2) Business Days
thereafter.
3.3 FINANCIAL STATEMENTS
Including such other financial information
and statements relating to the
Debtor's business and the Collateral that
the Lender may from time to time
require, the Debtor shall deliver to the
Lender the following financial
information, all of which shall be prepared
in accordance with GAAP consistently
applied: (i) no later than forty-five (45)
days after the end of each quarter of
each Fiscal Year, copies of internally
prepared quarterly financial statements,
including, without
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limitation, balance sheets and statements
of income, retained earnings, cash
flows and reconciliation of surplus
certified on behalf of the Debtor by the
Chief Financial Officer of the Debtor; and
(ii) no later than ninety (90) days
after the end of each of the Debtor's
Fiscal Years, audited consolidated annual
financial statements with an unqualified
opinion by an accounting firm
(auditors) selected by the Debtor and
satisfactory to the Lender, which
financial statements shall be accompanied
by (A) a letter from such auditors
acknowledging that they are aware that a
primary intent of the Debtor in
obtaining such financial statements is to
influence the Lender and that the
Lender is relying upon such financial
statements in connection with the exercise
of their rights hereunder and (B) copies of
any management letters sent to the
Debtor by such auditors.
3.4 MAKE PAYMENTS
The Debtor shall pay all rents, Taxes,
rates, and levies lawfully levied,
assessed or imposed in respect of the
Collateral or any part thereof as and when
the same shall become due and payable
except as are being contested in good
faith by proper legal proceedings with
respect to which adequate reserves have
been established and are being maintained
and shall exhibit to the Lender, when
required, the receipts and vouchers
evidencing such payments.
3.5 ENCUMBRANCES
Except for any encumbrances in favour of
the Lender and purchase money security
interests on Collateral hereafter acquired
by the Debtor granted to a secured
party who has complied with the PPSA with
respect thereto, the Debtor shall keep
the Collateral free at all times from any
and all encumbrances of whatsoever
nature, kind or priority other than those
in favour of the Lender and the
Permitted Liens, defend the title to the
Collateral against all persons, not
permit the Collateral to become an
accession to any property not subject to the
security interest granted by this Security
Agreement and not to become a fixture
unless the security interest of the Lender
ranks prior to the interests of all
persons in the realty. The Lender may, at
any time, contest the validity and
enforceability against it or the Debtor of
any encumbrance including, without
limitation, any purchase money security
interest.
3.6 INSURANCE
The Debtor shall cause all of the
Collateral which is of a character usually
insured by businesses owning or operating
Collateral of a similar nature to be
properly insured and kept insured with
reputable insurers acceptable to the
Lender, against loss or damage by fire or
other risks and hazards usually
insured against by businesses owning or
operating Collateral of a similar
nature, in such amounts, containing such
terms, in such form and for such
purposes, as may be satisfactory to the
Lender. Loss under such insurance shall
be payable to the Lender as first loss
payee and such insurance shall contain a
mortgage clause acceptable to the Lender.
The Debtor shall, at the Lender's
request, provide satisfactory evidence that
such insurance has been effected,
that loss thereunder is payable to the
Lender as first loss payee and any other
information relating to such insurance as
the Lender may require. If the Debtor
fails to maintain satisfactory insurance,
the Lender may, at its option, obtain
such insurance at the expense of the Debtor
and the Debtor shall forthwith repay
all costs and expenses incurred by the
Lender in connection therewith and all
such costs and expenses shall be deemed
advanced to the Debtor by the Lender,
shall become part of the Obligations, shall
bear interest at the highest rate
per annum charged by the Lender on the
Obligations or any part thereof and shall
be secured by this Security Agreement.
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3.7 COMPLIANCE WITH GOVERNMENTAL
REQUIREMENTS
The Debtor shall maintain all governmental
consents, franchises, certificates,
licenses, authorizations, approvals and
permits and the Debtor shall remain in
compliance with all applicable federal,
provincial, state, local and foreign
statutes, orders, regulations, rules and
ordinances (including, without
limitation, environmental laws and
statutes, orders, regulations, rules and
ordinances relating to taxes, employer and
employee contributions and similar
items, securities, pension plans or
employee health and safety). Following any
determination by the Lender that there is
non-compliance, or any condition which
requires any action by or on behalf of the
Debtor in order to avoid
non-compliance, with any environmental law,
at the Debtor's expense cause an
independent environmental engineer
acceptable to the Lender to conduct such
tests of the relevant site(s) as are
appropriate and prepare and deliver a
report setting forth the results of such
tests, a proposed plan for remediation
and an estimate of the costs thereof.
3.8 PERMITTED DISPOSALS
The Debtor shall not, remove, destroy,
lease, sell or otherwise dispose of any
of the Collateral (1) except equipment
which has become worn out or damaged or
otherwise unsuitable for its purpose, in
which case the Debtor shall substitute
for such equipment, subject to the security
interest created hereby and free
from any other security interests, property
of equal value such that the
security hereby constituted shall not
thereby be in any way reduced or impaired,
(2) except as otherwise permitted
hereunder, or (3) except in the ordinary
course of Debtor's business.
3.9 NO CHANGE IN BUSINESS
The Debtor shall not, without the prior
written consent of the Lender, which
consent shall be conditional on the receipt
by the Lender of all security and
deeds of confirmation as its counsel may
consider advisable to protect the
Lender's interest, directly or indirectly:
change the nature of its business;
change its Fiscal Year or amend its
organizational documents; carry on business
through any person, corporation,
partnership or other entity (including, without
limitation, any subsidiary except to the
extent of any business currently
carried on by such subsidiary); acquire, or
enter into any a
