CREDIT FACILITY AND
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SECURITY AGREEMENT
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THIS AGREEMENT is made by and between the Company (as herein
defined) and the Bank (as herein defined).
In consideration of the covenants and agreements contained
herein, the Company and the Bank hereby mutually agree as follows:
ARTICLE I. DEFINITIONS
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SECTION 1.1. GENERAL. Any accounting term used but not
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specifically defined herein shall be construed in accordance with
GAAP. The definition of each agreement, document, and instrument set
forth in Section 1.2 hereof shall be deemed to mean and include such
agreement, document, or instrument as amended, restated, or modified
from time to time.
SECTION 1.2. DEFINED TERMS. As used in this Agreement:
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"ACCOUNT" shall mean (a) any account as defined in the UCC, and
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(b) any right to payment for Goods sold or leased or for services
rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned.
"ACCOUNT DEBTOR" shall mean the Person who is obligated on an
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Account Receivable;
"ACCOUNT RECEIVABLE" shall mean:
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(a) any account receivable, Account, Chattel Paper, Contract
Right, General Intangible, Document, or Instrument owned,
acquired, or received by a Person,
(b) any other indebtedness owed to or receivable owned,
acquired, or received by a Person of whatever kind and
however evidenced, and
(c) any right, title, and interest in a Person's Goods which
were sold, leased, or furnished by that Person and gave rise
to either (a) or (b) above, or both of them. This includes,
without limitation:
(1) any rights of stoppage in transit of a Person's sold,
leased, or furnished Goods,
(2) any rights to reclaim a Person's sold, leased, or
furnished Goods, and
(3) any rights a Person has in such sold, leased, or
furnished Goods that have been returned
"AFFILIATE" shall mean, with respect to a specified Person, any
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other Person: (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with such Person, (b)which beneficially owns or holds with
power to vote five percent (5%) or more of any class of the voting
stock of such Person, (c) five percent (5%) or more of the voting
stock of which other Person is beneficially owned or held by such
Person, or (d) who is an officer or director of such Person.
"AFFILIATE BANK" shall mean any of the Subsidiaries (other than
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the Bank) of KeyCorp and its successors.
"BANK" shall mean Key Bank of Colorado, a state chartered banking
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corporation, and its successors and assigns.
"BUSINESS CONDITION" shall mean the financial condition, business
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and assets of a Person.
"BUSINESS DAY" shall mean a day of the year on which banks are
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not required or authorized to close in Denver, Colorado and, if the
applicable Business Day relates to any LIBOR Rate Loan, on which
dealings are carried on in the London interbank eurodollar market.
"CAPITAL EXPENDITURES" shall mean any and all amounts invested,
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expended or incurred by a Person in respect of the purchase,
improvement, renovation or expansion of any land and depreciable or
amortizable property of such Person (including expenditures required
to be capitalized in accordance with GAAP).
"CASH COLLATERAL ACCOUNT" shall mean a commercial Deposit Account
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designated "cash collateral account" and maintained by the Company
with Bank, without liability by Bank to pay interest thereon, from
which account Bank shall have the exclusive right to withdraw funds
until all Obligations are paid, performed, satisfied, enforced, and
observed in full.
"CASH SECURITY" shall mean all cash, Instruments, Deposit
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Accounts, and other cash equivalents, whether matured or unmatured,
whether collected or in the process of collection, upon which Company
presently has or may hereafter have any claim, that are presently or
may hereafter be existing or maintained with, issued by, drawn upon,
or in the possession of Bank.
"CHATTEL PAPER" shall mean "chattel paper" as defined in the UCC.
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"CODE" shall mean the Internal Revenue Code of 1986, as amended
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from time to time.
"COLLATERAL" shall have the meaning described in Section 3.1
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below.
"COLLECTIONS" shall have the meaning described in Section 4.1(a)
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of this Agreement.
"COMMONLY CONTROLLED ENTITY" shall mean a Person, whether or not
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incorporated, which is under common control with the Company within
the meaning of Section 414(b) or (c) of the Code.
"COMPANY" shall mean Dynamic Materials Corporation, a Colorado
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corporation, with its principal office located at 551 Aspen Ridge Dr.,
Lafayette, Colorado 80026, and its successors.
"COMPANY'S LOCATION" shall mean the location of: (a) Company's
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place of business, if there is only one such place of business; or (b)
if there is more than one place of business, the place (1) from which
Company manages the main part of its business operations, and (2)
where persons dealing with Company would normally look for credit
information.
"CONTRACT RIGHT" shall mean (a) any contract right, and (b) any
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right to payment under a contract not yet earned by performance and
not evidenced by an Instrument or Chattel Paper.
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"CONTRACT YEAR" shall mean the twelve (l2) month period which
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commences on each anniversary of the execution of the Agreement.
"CREDIT LOAN" shall mean any of the revolving Loans described in
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Section 2.1(a)(i) of this Agreement.
"CURRENT ASSETS" and "CURRENT LIABILITIES" shall mean the amounts
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as determined in accordance with GAAP not inconsistent with present
accounting procedures, except that all Credit Loans shall also be
considered as Current Liabilities..
"DEED OF TRUST" shall mean the Deed of Trust given by the Company
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to the Bank upon certain real property owned by the Company located in
Lafayette, Colorado.
"DEPOSIT ACCOUNT" shall mean (a) any deposit account, and (b) any
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demand, time, savings, passbook, or a similar account maintained with
a bank, savings and loan association, credit union, or similar
organization, other than an account evidenced by a certificate of
deposit.
"DOCUMENT" shall mean (a) any document, (b) any document of
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title, including a bill of lading, dock warrant, dock receipt,
warehouse receipt or order for the delivery of Goods, and any other
document which in the regular course of business or financing is
treated as adequately evidencing that the Person in possession of it
is entitled to receive, hold, and dispose of the document and the
Goods it covers, and (c) any receipt covering Goods stored under a
statute requiring a bond against withdrawal or a license for the
issuance of receipts in the nature of warehouse receipts even though
issued by a Person who is the owner of the Goods and is not a
warehouseman.
"ENVIRONMENTAL LAW" shall mean any federal, state, or local
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statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability upon a Person in
connection with the use, release or disposal of any hazardous toxic or
dangerous substance, waste or material.
"EQUIPMENT" shall mean "equipment" (as defined in the UCC) and
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fixtures (as defined in the UCC) including, without limitation, all
machinery, equipment, furniture, furnishings, fixtures, and packaging
production equipment, parts, material handling, supplies, and motor
vehicles (titled or untitled) of every kind and description, now or
hereafter owned by the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended from time to time.
"EVENT OF DEFAULT" shall mean any one or more of the occurrences
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described in ARTICLE IX hereof.
"FEDERAL FUNDS RATE" shall mean, during any period, a fluctuating
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interest rate per annum for each day during such period, that is the
rate determined by Bank to be the opening rate per annum paid or
payable by it on the day in question in its region market for federal
funds purchased overnight from other banking institutions.
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"FEDERAL FUNDS RATE LOAN" shall mean any Loan that bears interest
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with reference to the Federal Funds Rate.
"FINAL MATURITY DATE" shall mean the seventh annual anniversary
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date of this Agreement.
"FUNDED DEBT" shall mean all Indebtedness which matures more than
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one year after the date such Indebtedness was incurred, less any
portion thereof that is payable within twelve (l2) months following
the date as of which the calculation is made.
"FUNDS FROM OPERATIONS" shall mean the aggregate of the Company's
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profit before taxes and extraordinary items plus depreciation, plus
amortization, plus deferred income taxes.
"GAAP" shall mean generally accepted accounting principles as
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then in effect, which shall include the official interpretations
thereof by the Financial Accounting Standards Board, consistently
applied.
"GENERAL INTANGIBLE" shall mean (a) any "general intangible" (as
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defined in the UCC), and (b) any personal property (including things
in action) other than Goods, Accounts, Contract Rights, Chattel Paper,
Documents, Instruments, and money.
"GOODS" shall mean (a) any "goods" (as defined in the UCC), and
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(b) all things which are movable at the time the security interest
granted Bank under the Agreement attaches or which are fixtures but
does not include money, Instruments, Documents, Accounts, Chattel
Paper, General Intangibles, or Contract Rights.
"HAZARDOUS MATERIALS" shall mean any substance or material
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defined or designated as a hazardous or toxic waste, hazardous or
toxic material, hazardous or toxic substance, or other similar term,
by any United States federal, state or local environmental statute,
regulation or ordinance.
"INDEBTEDNESS" shall mean for any Person (i) all obligations to
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repay borrowed money, direct or indirect, incurred, assumed, or
guaranteed, (ii) all obligations for the deferred purchase price of
capital assets excluding trade payables, (iii) all obligations under
conditional sales or other title retention agreements, and (iv) all
lease obligations which have been or should be capitalized on the
books of such Person.
"INSTRUMENT" shall mean "instruments" (as defined in the UCC).
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"INTEREST PERIOD" means, with respect to any LIBOR Rate Loan, the
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period commencing on the date such Loan is made, continued, or
converted and ending on the last day of such period as selected by the
Company pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of such period as
selected by the Company pursuant to the provisions below. The
duration for any LIBOR Rate Loan which is a Credit Loan shall be 1
month, 2 months, or 3 months, as selected by the Company; and the
duration for any LIBOR Rate Loan which is a Term Loan shall be 3
months; provided, however, that whenever the last day of any Interest
Period would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall occur on the next succeeding
Business Day, and; provided, further, however, that if such extension
of time would
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cause the last day of such Interest period for a LIBOR Rate Loan to
occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day.
"INVENTORY" shall mean all "inventory" (as defined in the UCC)
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now owned or hereafter acquired by the Company, including, without
limitation, all Goods, merchandise, work-in-process, raw materials,
finished Goods, and inventory held for lease to other Persons; all
other materials, supplies, and tangible personal property of any kind,
nature, or description held for sale or lease or for display or
demonstration; and all documents of title or other Documents
pertaining thereto, and all proceeds of the foregoing.
"LIBOR RATE" means, for any Interest Period for any LIBOR Rate
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Loan, an interest rate per annum (rounded upwards to the next higher
whole multiple of 1/16% if such rate is not such a multiple) equal at
all times during such Interest Period to the quotient of (a) the rate
per annum (rounded upwards to the next higher whole multiple of 1/16%
if such rate is not such a multiple) at which deposits in United
States dollars are offered at 11:00 a.m. (London, England time) (or as
soon thereafter as is reasonably practicable) by prime banks in the
London interbank eurodollar market two Business Days prior to the
first day of such Interest Period in an amount and maturity of such
LIBOR Rate Loan, divided by (b) a number equal to 1.00 minus the
aggregate (without duplication) of the rates (expressed as a decimal
fraction) of the LIBOR Reserve Requirements current on the date two
Business Days prior to the first day of such Interest Period.
"LIBOR RATE LOAN" shall mean any Loan that bears interest with
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reference to the LIBOR Rate.
"LIBOR RATE MARGIN" shall mean: (i) for the period commencing on
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the date of this Agreement and ending on September 30, 1996, 125 basis
points, and (ii) thereafter, such Margin as is adjusted pursuant to
Section 2.3(b)(ii) of this Agreement.
"LIBOR RESERVE REQUIREMENTS" means, for any Interest Period for
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any LIBOR Rate Loan, the maximum reserves (whether basic,
supplemental, marginal, emergency, or otherwise) prescribed by the
Board of Governors of the Federal Reserve System (or any
successor) with respect to liabilities or assets consisting of or
including "Eurocurrency liabilities" (as defined in Regulation D of
the Board of Governors of the Federal Reserve System) having a term
equal to such Interest Period.
"LIEN" shall mean any mortgage, security interest, lien, charge,
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encumbrance on, pledge or deposit of, or conditional sale or other
title retention agreement with respect to any property or asset.
"LOAN" OR "LOANS" shall mean any of the loan advances to the
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Company extended by the Bank in accordance with Section 2.1(a).
"LOAN BASE" shall mean an amount not in excess of the sum of the
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following:
(a) the greater of (1) fifty percent (50%) of the net book value
of all real property and Equipment of the Company, or (2)
seventy percent (70%) of the total appraised value of all
real property and Equipment of the Company as reflected on
an appraisal satisfactory to the Bank, in its reasonable
discretion, plus
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(b) eighty percent (80%) of the amount due and owing on
Qualified Accounts Receivable, plus
(c) fifty percent (50%) of the cost or market value (whichever
is lower) of Company's Eligible Inventory which consists of
raw Inventory, plus
(d) thirty percent (30%) of the cost or market value (whichever
is lower) of Company's Eligible Inventory which consists of
work-in-process.
"LOAN CERTIFICATE" shall mean the certificate in the form of
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Exhibit B attached hereto.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the Deed of
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Trust, the Environmental Indemnity Agreement, and any other documents
relating thereto.
"LOCKBOX" shall have the meaning specified in Section 4.1 of this
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Agreement.
"LOCKBOX BANKS" shall have the meaning specified in Section 4.1
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of this Agreement.
"MARGIN ADJUSTMENT DATE" shall have the meaning specified in
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Section 2.3(b) of this Agreement.
"MARGIN STOCK" shall have the meaning given to it under
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Regulation U of the Board of Governors of the Federal Reserve System,
as amended from time to time.
"MATERIAL ADVERSE EFFECT" shall mean material adverse effect on
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(i) the ability of the Company and any Subsidiaries taken as a whole
to fulfill their obligations under any of the Loan Documents or
(ii) the Business Condition of the Company and any Subsidiaries taken
as a whole.
"MATERIAL AGREEMENTS" shall mean (a) any agreement to which the
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Company is a party which provides for the receipt or expenditure by
the Company or any Subsidiary of more than $150,000.00 in any 12-month
period, other than sales orders in the ordinary course of business,
and (b) any other agreement to which the Company is a party which is
material to the business of the Company.
"MULTIEMPLOYER PLAN" shall mean a Plan described in ERISA which
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covers employees of the Company and employees of any other Person,
which together would be treated as a single employer for purposes of
ERISA.
"NOTE" shall mean the promissory note of Company in the form of
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Exhibit A attached hereto evidencing the Loans;
"OBLIGATIONS" shall mean any and all indebtedness, obligations,
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liabilities, contracts, indentures, agreements, warranties, covenants,
guaranties, representations, provisions, terms, and conditions of
whatever kind, now existing or hereafter arising, and however
evidenced, that are now or hereafter owed, incurred, or executed by
Company to, in favor of, or with Bank or any Affiliate Bank.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
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established pursuant to subtitle A of Title IV or ERISA.
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"PERMITTED INVESTMENT" shall mean the Company's:
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(a) investments existing on July 19, 1996 as disclosed in the
Schedule on Exhibit C hereto;
(b) extensions of credit in the nature of Accounts Receivable,
or notes receivable arising from the Company's sale or lease
of goods or services in the ordinary course of business;
(c) investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar
transactions in the ordinary course of business;
(d) investments (excluding debt obligations) received in
connection with the bankruptcy or reorganization of the
Company's customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, such
customers or suppliers arising form transactions in the
ordinary course of business;
(e) investments consisting of (i) compensation of Company
employees, officers or directors so long as the Company's
Board of Directors lawfully determines that such
compensation is in the Company's best interest, (ii) travel
advances, employee relocation loans and other employee loans
and advances lawfully made in the ordinary course of
business, and (iii) loans lawfully made to Company's
employees, officers or directors relating to the purchase of
equity securities of Company;
(f) investments in marketable U.S. Treasury and Agency
obligations;
(g) investments in certificates of deposit and bankers'
acceptances issued or created by any domestic commercial
bank;
(h) investments in instruments issued or enhanced by a member
bank of the Federal Reserve System;
(i) investments in debt obligations issued by a corporation, or
state or municipal entity rated Bb or better in accordance
with a rating system employed by either Moody's Investor's
Service, Inc. or Standard & Poor's Corporation; or
(j) investments of other types aggregating not in excess of
$200,000.00.
"PERMITTED LIEN" shall mean the following, subject to the
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limitation set forth in Section 8.19 hereto:
(a) Liens existing as of the date of this Agreement and
disclosed in the Schedule on Exhibit C hereto;
(b) Liens for taxes or governmental assessments, charges, or
levies the payment of which is not at the time required by
any provision of this Agreement or any other Loan Document
unless such Liens are not delinquent or are being contested
in good faith by appropriate proceedings;
(c) Liens that secure the Company's Indebtedness for the
purchase price of any real or personal property and that
only encumber the property purchased, improvements or
accessions thereto, and proceeds thereof;
(d) Liens securing capital lease obligations;
(e) Liens on Equipment leased by the Company pursuant to an
operating lease in the ordinary course of business
(including proceeds thereof and accessions thereto) incurred
solely for the purpose of financing the lease of such
Equipment (including Liens arising from UCC financing
statements regarding leases permitted by this provision);
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(f) Easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar Liens
affecting real property not interfering in any material
respect with the ordinary conduct of the business of the
Company;
(g) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in
connection with the importation of Goods;
(h) Liens imposed by law, such as Liens of landlords, carriers,
warehousemen, mechanics, and materialmen arising in the
ordinary course of business for sums not yet due or being
contested by appropriate proceedings promptly initiated and
diligently conducted, provided the Company has set aside
proper amounts, determined in accordance with GAAP, for the
payment of all such Liens;
(i) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation,
unemployment insurance, and other types of social security,
or to secure the performance of tenders, statutory
obligations, and surety and appeal bonds, or to secure the
performance and return of money bonds and other similar
obligations, but excluding Indebtedness;
(j) Liens in respect of judgments or awards with respect to
which the Company shall, in good faith, be prosecuting an
appeal or proceeding for review and with respect to which a
stay of execution upon such appeal or proceeding for review
shall have been obtained;
(k) Liens in favor of the Bank or any Affiliate Bank; and
(l) Liens incurred in connection with the extension, renewal,
refunding, refinancing, modification, amendment or
restatement of Indebtedness secured by Liens of the type
described in clauses (a), (c), (d) and (k) above, provided
that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and
the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.
"PERSON" shall mean any natural person, corporation (which shall
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be deemed to include business trust), association, limited liability
company, partnership, joint venture, political entity, or political
subdivision thereof.
"PLAN" shall mean any plan (other than a Multiemployer
----
Plan) defined in ERISA in which the Company or any Subsidiary is, or
has been at any time during the preceding two (2) years, an "employer"
or a "substantial employer" as such terms are defined in ERISA.
"PROCEEDS" means any "proceeds" (as defined in the UCC).
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"QUALIFIED ACCOUNT RECEIVABLE" means an Account Receivable of
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Company which, at all times until it is collected in full,
continuously meets the following requirements:
(a) is not subject to any claim for credit, allowance, or
adjustment by the Account Debtor or any set off or counter
claim;
(b) arose in the ordinary course of business from the
performance (fully completed) of services or bona fide sale
of Goods which have been shipped to the Account Debtor, and
not more than ninety one (91) days have elapsed since the
date of the Company's invoice for performance (fully
completed) of services or the sale of Goods for or to the
Account Debtor;
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(c) does not arise outside of the United States of America,
except those Accounts Receivable which the Bank has
determined under subpart (k) below is not unsatisfactory in
any respect;
(d) is not subject to an assignment, pledge, claim, mortgage,
lien, or security interest of any type except that granted
to or in favor of Bank;
(e) Account Debtor has not rejected, returned, revoked
acceptance of, or refused to accept any of the Goods which
are the subject of the Account Receivable;
(f) Company has not received any Instrument or Chattel Paper
with respect to or in payment of the Account Receivable;
(g) are Accounts Receivable with respect to which the Account
Debtor is located in any state which requires that the
Company, in order to sue any Person in such state's court,
either: (i) qualify to do business in such state, or (ii)
file a report with the taxation division of such state for
the then current year, so long as the Company has fulfilled
such requirements to the extent applicable for the then
current year;
(h) are owed by the United States or any department, agency, or
instrumentality thereof so long as the Company has complied
with the Federal Assignment of Claims Act in respect of the
Bank's security interest therein as granted hereunder;
(i) are owed by any State or any department, agency, or
instrumentality thereof so long as the Company has complied
with any applicable statutory or regulatory requirements
thereof in respect of the Bank's security interest therein
as granted hereunder;
(j) are not owed by an Affiliate of the Company; and
(k) Bank, in the exercise of its reasonable credit judgment, has
not determined that the Account Receivable is unsatisfactory
in any respect.
"QUALIFIED INVENTORY" shall mean only such Inventory of the
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Company, valued at the lower of (i) cost (on a first in, first out
basis), or (ii) fair market value, as the Bank, in its reasonable
discretion, shall from time to time consider to be Eligible Inventory.
"RELATED EXPENSES" means any and all reasonable costs,
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liabilities, and expenses (including without limitation, losses,
damages, penalties, claims, actions, reasonable attorney's fees, legal
expenses, judgments, suits, and disbursements) incurred by, imposed
upon, or asserted against, Bank in any attempt by Bank:
(a) to obtain, preserve, perfect, or enforce any security
interest evidenced by (i) the Agreement, or (ii) any other
pledge agreement, mortgage deed, deed of trust,
hypothecation agreement, guaranty, security agreement,
assignment, or security instrument executed or given by
Company to or in favor of Bank;
(b) to obtain payment, performance, and observance of any and
all of the Obligations,
(c) to maintain, insure, audit, collect, preserve, repossess,
and dispose of any of the Collateral, or
(d) incidental or related to (a) through (c) above.
"RELATED TRANSACTION DOCUMENTS" shall mean the documents listed
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on Exhibit C.
"REMITTANCES" shall have the meaning described in Section 4.1(a)
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of this Agreement.
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"REPORTABLE EVENT" shall have the meaning assigned to that term
----------------
in Section 4043 of ERISA for which the requirement of 30 days' notice
to the PBGC has not been waived by the PBGC.
"SINGLE EMPLOYER PLAN" shall mean any Plan as defined in
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Section 4001(a)(15) of ERISA.
"SUBORDINATED DEBT" shall mean Indebtedness of a Person which is
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subordinated, in a manner satisfactory to the Bank, to all
Indebtedness owing to the Bank.
"SUBSIDIARY" shall mean any Person of which more than fifty
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percent (50%) of (i) the voting stock entitling the holders thereof to
elect a majority of the Board of Directors, managers, or trustees
thereof, or (ii) the interest in the capital or profits of such
Person, which at the time is owned or controlled, directly or
indirectly, by the Company or one or more other Subsidiaries.
"TANGIBLE NET WORTH" shall mean the total assets of a Person less
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(i) such Person's Total Indebtedness, and (ii) the aggregate amount of
all of such Person's intangible assets.
"TERMINATION DATE" shall mean the third anniversary date of this
----------------
Agreement or such earlier date on which the commitment of the Bank to
make Loans pursuant to Section 2.1(a) shall have been terminated
pursuant to this Agreement.
"TERM LOAN" shall mean any of the term loans described in Section
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2.1(a)(ii) of this Agreement.
"TOTAL INDEBTEDNESS" shall mean the total of all items of
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indebtedness or liability which in accordance with GAAP would be
included in determining total liabilities on the liability side of the
balance sheet as of the date of determination.
"UCC" shall mean the Uniform Commercial Code in effect in the
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State of Colorado from time to time.
The foregoing definitions shall be applicable to the singulars
and plurals of the foregoing defined terms. All accounting and
financial terms used in this Section and in this Agreement and not
otherwise defined shall be determined in accordance with GAAP
consistently applied.
ARTICLE II. CREDIT FACILITY
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SECTION 2.1 (A). AMOUNT OF CREDIT. The Bank hereby agrees,
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subject to the terms and conditions of this Agreement, to make,
continue, and convert Credit Loans to the Company as follows:
(i) The Bank will make one or more revolving Credit Loans to the
Company from time to time on and after the date of this Agreement
through and including the Termination Date, in an aggregate
principal amount not to exceed the lesser of (i) Seven Million
Five Hundred Thousand ($7,500,000.00), or (ii) the Loan Base as
calculated from time to time. The Bank will also continue Credit
Loans of any type or convert Credit Loans of one type into Loans
of another type. Until the Termination Date, the Company may
borrow, repay, and reborrow such Credit Loans up to the maximum
amount of such Credit Loans. The Company may from time to time,
upon not less than ten (l0) Business Days' prior notice
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made by telegraph, telex, or telephone and confirmed in a writing
delivered to the Bank, terminate or reduce permanently, the
commitment of the Bank to make Loans pursuant to this Section
2.1(a)(i) hereof by the amount of $50,000.00 or any integral
multiple thereof; provided that the Company shall immediately pay
to the Bank the amount, if any, by which the aggregate principal
amount of such Loans outstanding exceeds such reduced commitment
of the Bank at that time. If, however, after giving effect to
any such payment any LIBOR Rate Loans would be prepaid prior to
the end of their respective Interest Periods, the notice of the
termination or permanent reduction in the commitment of the Bank
to make Loans pursuant to this Section 2.1(a)(i) shall be deemed
to be the Company's request that such termination or reduction be
effective on the last day of such Interest Periods.
(ii) If no Event of Default shall have occurred and be continuing, the
Company may, on or before the Termination Date elect to convert
all or a portion of the Credit Loans outstanding to one or more
Term Loans; whereupon the amount of the Credit Loans available to
be borrowed under Section 2.1(a)(i) above shall be permanently
and automatically reduced by the amount of such Credit Loans
converted to Term Loan(s). The Company shall make such election
by written notice delivered to Bank not less than fifteen (15)
days prior to the effective date of the Term Loan(s), specifying
the principal amount of the Term Loan(s) and the initial interest
rate applicable thereto (i.e. whether the Term Loan is to be a
LIBOR Rate Loan or a Federal Funds Rate Loan). Each Term Loan
shall be in an amount of $50,000.00 or an integral multiple
thereof. All Credit Loans outstanding on the Termination Date
shall automatically be converted to a single Term Loan. The
Company shall repay each Term Loan on a fully amortized basis
over a period commencing on the date of each Term Loan and ending
on a date not later than the Final Maturity Date. The principal
amount of each Term Loan shall be payable in consecutive and
equal quarterly installments on the last day of each March, June,
September and December (commencing with the first such date
following the fixing of the Term Loan) until the maturity date of
such Term Loan or the earlier acceleration of the maturity of the
Term Loan in accordance with ARTICLE XI hereof, when any
remaining principal balance shall be due and payable. Each
principal installment shall be an amount equal to the original
principal amount of the Term Loan divided by the number of
calendar quarters occurring between the date of the making of the
Term Loan and the maturity date of such Term Loan.
(iii) Each Credit Loan or Term Loan shall be either a LIBOR Rate Loan
or a Federal Funds Rate Loan, subject to the following
conditions:
(A) Each Loan that is made or continued as or converted into a
LIBOR Rate Loan shall be made, continued, or converted on such
Business Day, in such amount (equal to $10,000.00 or an integral
multiple thereof), and with such an Interest Period as the
Company shall request by written notice given to the Bank no
later than 11:00 a.m. (Denver, Colorado time) on the third
Business Day prior to the date of disbursement or continuation of
or conversion into the requested LIBOR Rate Loan. Each written
notice of any LIBOR Rate Loan shall be irrevocable and binding on
the Company and the Company shall indemnify the Bank against any
loss or expense incurred by the Bank as a result of any failure
by the Company to consummate such LIBOR Rate Loan, including,
without limitation, any loss (including loss of anticipated
profits) or expense incurred by reason of
11
liquidation or reemployment of deposits or other funds acquired
by the Bank to fund the LIBOR Rate Loan. A certificate as to the
amount of such loss or expense submitted by the Bank to the
Company shall be conclusive and binding for all purposes, absent
manifest error. In the event that the Company fails to provide
the Bank with the required written notice, the Company shall be
deemed to have given a written notice that such LIBOR Rate Loan
shall be converted to a Federal Funds Rate Loan on the last day
of the applicable Interest Period. In no event shall the Company
be permitted to select a LIBOR Rate Loan having an Interest
Period ending after the Final Maturity Date;
(B) Each Loan that is made as or converted into a Federal Funds
Loan shall be made or converted on such Business Day and in such
amount (equal to $10,000.00 or any integral multiple thereof) as
the Company shall request by written notice given to the Bank no
later than 11:00 a.m. (Denver, Colorado time) on the date of
disbursement of or conversion into the requested Federal Funds
Loan;
(C) Each LIBOR Rate Loan that is a Term Loan shall have an
Interest Period of three (3) months.
SECTION 2.2. LOANS EVIDENCED BY PROMISSORY NOTE. All Loans
----------------------------------
shall be evidenced by the Note, dated the date hereof. The Note shall
be a master note, and the principal amount of all Loans outstanding
shall be evidenced by the Note or any ledger or other record of the
Bank, which shall be presumptive evidence of the principal owing and
unpaid on the Note.
SECTION 2.3. INTEREST RATES. The Company shall pay interest on
--------------
the unpaid principal amount of each Credit Loan and Term Loan made by
the Bank from the date of such Credit Loan or Term Loan, as the case
may be, until such principal amount shall be paid in full as follows:
(a) (i) During such periods as any LIBOR Rate Loan comprising a
Credit Loan or Term Loan is outstanding, at a rate per annum
equal to the sum of the LIBOR Rate and the LIBOR Rate Margin (as
described in sub-part (b) below) in effect from time to time from
and after each Margin Adjustment Date occurring on or prior to
the date of the making, the conversion or the continuation of
such Loan, as the case may be, in accordance with this Agreement.
(ii) During such periods as any Federal Funds Rate Loan
comprising a Credit Loan or Term Loan is outstanding, at a rate
per annum equal at all times to the sum of the Federal Funds Rate
plus two hundred (200) basis points.
(b) (i) Except as otherwise provided herein, the LIBOR Rate Margin
in effect shall be adjusted as of the first day of each calendar
quarter, beginning with October 1, 1996 (each a "Margin
Adjustment Date"), in accordance with Section 2.3(b)(ii) below.
The LIBOR Rate Margin in effect shall be applicable to new
advances for Credit or Term Loans as of the date of such
advances, and to converted or continued Loans as of the date of
conversion or continuation, occurring within the calendar quarter
in which such LIBOR Rate Margin is in effect. With respect to
any LIBOR Rate Loan for which the last day of the Interest Period
is a date subsequent to the Margin Adjustment Date, such LIBOR
Rate Margin shall not be applicable until the continuation date
of such LIBOR Rate Loan, if applicable, subsequent to the Margin
Adjustment Date.
12
(ii) As of any Margin Adjustment Date, the LIBOR Rate Margin
shall be adjusted to be the percentage indicated in the following
table corresponding to the Company's Indebtedness to Tangible Net
Worth Ratio, which shall be calculated from the balance sheet
provided by the Company to the Bank under Section 8.1(a) of this
Agreement immediately preceding the Margin Adjustment Date.
Indebtedness to Tangible LIBOR Rate Margin
------------------------ -----------------
Net Worth Ratio
---------------
>= 2.00 to 1.00 150 Basis Points
<= 1.99 to 1.00 125 Basis Points
but > 1.00 to 1.00
<= 1.00 to 1.00 100 Basis Points
(iii) Any such adjustment to the LIBOR Rate Margin shall only
remain effective until the earlier of the next Margin Adjustment
Date or the date on which an Event of Default shall occur
(excepting therefrom an Event of Default created by the Company's
Indebtedness to Tangible Net Worth exceeding 1.99:1.00 as
required under Section 8.18 of this Agreement in which case the
LIBOR Rate Margin shall be one hundred fifty (150) basis points).
The LIBOR Rate Margin to be effective from such earlier date and
from time to time thereafter shall be the LIBOR Rate Margin as
adjusted pursuant to this Agreement; provided, however, that: (i)
-----------------
if the Company shall not deliver the financial statements in
accordance with Section 8.1 of this Agreement, the LIBOR Rate
Margin shall be two hundred (200) basis points per annum, and
(ii) if an Event of Default (excepting therefrom an Event of
Default created by the Company's Indebtedness to Tangible Net
Worth exceeding 1.99:1.00 as required under Section 8.18 of this
Agreement) shall occur which has not been waived in writing by
the Bank, the interest rate shall be the interest rate applicable
pursuant to Sub-Section (c) below.
(c) Upon the occurrence of any Event of Default and so long as such
Event of Default is continuing (excepting therefrom an Event of
Default created by the Company's Indebtedness to Tangible Net
Worth exceeding 1.99:1.00 as required under Section 8.18 of this
Agreement, or an Event of Default created by the Company's
failure to deliver the financial statements in accordance with
Section 8.1 of this Agreement), the unpaid principal amount of
all Loans, and accrued interest thereon, or any fees or any and
other sum payable hereunder, shall thereafter until paid in full
bear interest at a rate per annum equal to six hundred (600)
basis points in excess of the Federal Funds Rate in effect from
time to time.
SECTION 2.4. INTEREST PAYMENTS. The Company shall pay to the
-----------------
Bank interest on the unpaid principal balance of each Federal Funds
Rate Loan on either (i) the date such Loan is converted to a LIBOR
Rate Loan, or (ii) the last date of each March, June, September and
December. The Company shall pay to the Bank interest on the unpaid
principal balance of each LIBOR Rate loan on (i) the date such Loan is
converted to a Federal Funds Rate Loan, or (ii) the last day of the
applicable Interest Period of such Loan, whichever is earlier.
SECTION 2.5. PREPAYMENT. The Company may prepay any Federal
----------
Funds Rate Loans in whole, or in part, at any time or times. The
Company may prepay any LIBOR Rate Loan, in whole or in part, only on
the last day of the Interest Period applicable to such LIBOR Rate Loan
upon
13
not less than three (3) Business Days' prior written notice given to
the Bank. Each prepayment of a Term Loan shall be applied to the
principal installments in the inverse order of their respective
maturities.
SECTION 2.6. FEES. The Company shall pay to the Bank:
----
(a) A commitment fee of $37,500.00 payable upon the execution of this
Agreement;
(b) An annual fee of $2,500.00 if the total amount of the commitment
of the Bank to make Credit Loans in accordance with Section
2.1(a)(i) hereof is unused in any Contract Year during the period
from the date of this Agreement to the Termination Date, payable
on the anniversary of this Agreement and on the Termination Date;
and
(c) Prior to maturity (whether by acceleration or otherwise), for
each payment of principal or interest not paid when due, a late
fee equal to five percent (5.00%) of such payment, not to exceed
$100.00.
SECTION 2.7. COMPUTATION OF INTEREST AND FEES. Interest on
--------------------------------
Loans and unpaid fees, if any, shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed.
SECTION 2.8. ADDITIONAL COSTS.
----------------
(a) If, due to either (i) the introduction of, or any change in, or
in the interpretation of, any law or regulation, or (ii) the
compliance with any guideline or request from any central bank or
other governmental authority (whether or not having the force of
law), there shall be any increase in the cost to the Bank of
making, funding or maintaining LIBOR Rate Loans, then the Company
shall from time to time, upon demand by the Bank pay to the Bank
additional amounts sufficient to reimburse the Bank for any such
additional costs. A certificate of the Bank submitted to the
Company as to the amount of such additional costs, shall be
conclusive and binding for all purposes, absent manifest error.
Notwithstanding anything to the contrary contained in this
Section 2.8(a), the Company shall not be obligated to indemnify
or reimburse the Bank for any additional costs which arose or
were incurred during, or is otherwise attributable to, any period
of time more than 180 days prior to the date on which the Bank
delivered its written certificate for indemnification or
reimbursement for such additional costs and such costs shall be
nondiscriminatory in nature and will apply without exception to
all Bank clients of equal standing. Upon notice from the Company
to the Bank within five (5) Business Days after the Bank notifies
the Company of any such additional costs pursuant to this Section
2.8(a), the Company may either (i) prepay in full all LIBOR Rate
Loans so affected then outstanding, together with interest
accrued thereon to the date of such prepayment, or (ii) convert
such LIBOR Rate Loans so affected then outstanding into Federal
Funds Rate Loans upon not less than four (4) Business Days'
notice to the Bank. If any such prepayment or conversion of any
LIBOR Rate Loan occurs on any day other than the last day of the
applicable Interest Period for such Loan, the Company also shall
pay to the Bank such additional amounts sufficient to indemnify
the Bank against any loss, cost, or expense incurred by the Bank
as a result of such prepayment or conversion, including, without
limitation, any loss (including loss of anticipated profits),
cost, or expense incurred by reason of the liquidation or
reemployment
14
of deposits or other funds acquired by the Bank to fund any such
Loan, and a certificate as to the amount of any such loss, cost,
or expense submitted by the Bank to the Company shall be
conclusive and binding for all purposes, absent manifest error.
(b) If either (i) the introduction of, or any change in, or in the
interpretation of, any law or regulation, or (ii) the compliance
with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law),
affects or would affect the amount of capital required or
expected to be maintained by the Bank or any corporation
controlling the Bank and the Bank determines that the amount of
such capital is increased by or based upon the existence of the
Loans (or commitment to make the Loans) and other extensions of
credit (or commitments to extend credit) of similar type, then,
upon demand by the Bank, the Company shall pay to the Bank from
time to time as specified by the Bank additional amounts
sufficient to compensate the Bank in the light of such
circumstances, to the extent that the Bank reasonably determines
such increase in capital to be allocable to the existence of the
Bank's Loans (or commitment to make the Loans). A certificate of
the Bank submitted to the Company as to such amounts shall be
conclusive and binding for all purposes, absent manifest error.
Notwithstanding anything to the contrary contained in this
Section 2.8(b), the Company shall not be obligated to indemnify
or reimburse the Bank for any such additional amounts which arose
or were incurred during, or is otherwise attributable to, any
period of time more than 180 days prior to the date on which the
Bank delivered its written certificate for indemnification or
reimbursement for such additional amounts and such amounts shall
be nondiscriminatory in nature and will apply without exception
to all Bank clients of equal standing. Upon notice from the
Company to the Bank within five (5) Business Days after the Bank
notifies the Company of any such additional costs pursuant to
this Section 2.8(b), the Company may either (A) prepay in full
all Loans of any types so affected then outstanding, together
with interest accrued thereon to the date of such prepayment, or
(B) convert all Loans of any types so affected then outstanding
into Loans of any other type not so affected upon not less than
four (4) Business Days' notice to the Bank. If any such
prepayment or conversion of any LIBOR Rate Loan occurs on any day
other than the last day of the applicable Interest Period for
such Loan, the Company also shall pay to the Bank such additional
amounts sufficient to indemnify the Bank against any loss, cost,
or expense incurred by the Bank as a result of such prepayment or
conversion, including, without limitation, any loss (including
loss of anticipated profits), cost, or expense incurred by reason
of the liquidation or reemployment of deposits or other funds
acquired by the Bank to fund any such Loan, and a certificate as
to the amount of any such loss, cost, or expense submitted by the
Bank to the Company shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.9. ILLEGALITY. Notwithstanding any other provision of
----------
this Agreement, if the introduction of or any change in or in the
interpretation of any law or regulation shall make it unlawful, or any
central bank or other governmental authority shall assert that it is
unlawful, for the Bank to perform its obligations hereunder to make,
continue, or convert LIBOR Rate Loans hereunder, then, (a) on notice
thereof by the Bank to the Company, the obligation of the Bank to make
or continue a LIBOR Rate Loan or to convert any Federal Funds Rate
Loan into a LIBOR Rate Loan shall terminate and the Bank shall
thereafter be obligated to make only Federal Funds Rate Loans whenever
any written notice requests for any type LIBOR Rate Loans are
received, and (b) upon demand therefor by the Bank to the Company, the
Company shall either (i) forthwith prepay in full all LIBOR Rate Loans
then outstanding, together with interest accrued thereon, or
15
(ii) request that the Bank, upon four (4) Business Days' notice,
convert all LIBOR Rate Loans then outstanding into Federal Funds Rate
Loans. If any such prepayment or conversion of any LIBOR Rate Loan
occurs on any day other than the last day of the applicable Interest
Period for such Loan, the Company also shall pay to the Bank such
additional amounts sufficient to indemnify the Bank against any loss,
cost, or expense incurred by the Bank as a result of such prepayment
or conversion, including, without limitation, any loss (including loss
of anticipated profits), cost, or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the
Bank to fund any such Loan, and a certificate as to the amount of any
such loss, cost, or expense submitted by the Bank to the Company shall
be conclusive and binding for all purposes, absent manifest error.
SECTION 2.10. INTEREST RATE SWAP CONTRACTS. The Company shall
----------------------------
have the option at any time and from time to time to enter into one or
more interest rate swap contracts with Key Capital Markets, Inc. on
any portion of the Loans outstanding, on terms and conditions mutually
agreeable to the Company and Key Capital Markets, Inc. Such interest
rate swaps may be entered into for periods up to, but not extending
beyond, the Final Maturity Date.
ARTICLE III. SECURITY AGREEMENT
--------------------------------
SECTION 3.1. GRANT OF SECURITY INTEREST. To secure the prompt
--------------------------
payment and performance of the Obligations, and in addition to any
other collateral or Lien securing the Obligations, the Company hereby
grants to the Bank a continuing security interest in and to and a
pledge of all of the tangible and intangible personal property and
assets of the Company (the "Collateral"), whether now owned or
existing or hereafter acquired or arising and wheresoever located
including, without limitation: (a) all Accounts Receivable, (b) all
Inventory, (c) all Equipment, (d) all General Intangibles (excluding
patents), (e) any and all deposits or other sums at any time credited
by or due from the Bank to the Company, whether in the Cash Collateral
Account, another Depository Account, or other account, (f) all Cash
Security, (g) all Instruments, Documents, documents of title, policies
and certificates of insurance, securities, Goods, choses in action,
Chattel Paper, cash or other property, to the extent owned by the
Company or in which the Company has an interest, (h) all Collateral
which now or hereafter is at any time in the possession or control of
the Bank or in transit by mail or carrier to or from the Bank or in
the possession of any Person acting in the Bank's behalf, without
regard to whether the Bank received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise or
whether the Bank had conditionally released the same, and any and all
balances, sums, proceeds and credits of the Company with, and any
claims of the Company against, the Bank, (i) all accessions to,
substitutions for, and all replacements, products and Proceeds,
profits and rents of the herein above-referenced property of the
Company described in this Section including, but not limited to,
proceeds of insurance policies insuring such property, (j) all books,
records, and other property including, but not limited to, credit
files, programs, printouts, computer software (to the extent not
disallowed by any agreement between the Company and third parties),
programs, and disks, magnetic tape and other magnetic media, and other
materials and records) of the Company pertaining to any such
above-referenced property of the Company, (k) all real property,
improvements, fixtures, appurtenances, leasehold interests and any
other property of similar kind or character, and (l) all "investment
property" (as defined in the UCC).
SECTION 3.2. GRANT OF LICENSE. The Company hereby grants to the
----------------
Bank, a fully-paid, royalty-free, worldwide right and license to, upon
the occurrence of an Event of Default, (a) use,
16
or sell or otherwise transfer, any and all of the Company's Inventory;
(b) use or sell any such work-in-process, raw materials or completed
or finished products, and (c) accept any and all orders or shipments
of products ordered by the Company from manufacturers and use or sell
any such products.
SECTION 3.3. PERFECTION. The Company shall execute such
----------
financing statements provided for by applicable law, and otherwise
take such other action and execute such assignments or other
instruments or documents, in each case as the Bank may reasonably
request, to evidence, perfect, or record the Bank's security interest
in the Collateral or to enable the Bank to exercise and enforce its
rights and remedies under this Agreement with respect to any
Collateral. The Company hereby authorizes the Bank to execute and file
any such financing statement or continuation statement on the
Company's behalf. The parties acknowledge that a carbon, photographic,
or other reproduction of this Agreement shall be sufficient as a
financing statement to the extent permitted by law.
SECTION 3.4. GENERAL REPRESENTATIONS AS TO COLLATERAL. The
----------------------------------------
Company represents that the Schedule attached as Exhibit C hereto sets
forth: (a) the principal place of business of the Company and the
office where its chief executive offices and accounting officers are
located, (b) the office where Company keeps its records concerning the
Accounts Receivable and General Intangibles, (c) the location of the
Company's registered office, (d) each location at which is located any
Inventory, Equipment or other tangible Collateral of the Company,
including, without limitation, the location of any warehouse, bailee
or consignee at which Collateral is located, and (e) all trade names,
assumed names, fictitious names and other names used by the Company
during the five (5) years prior to the date hereof.
SECTION 3.5. TITLE TO COLLATERAL; LIENS; TRANSFERS. The Company
-------------------------------------
has good, clear and merchantable title to and ownership of the
Collateral, free and clear of all Liens, except for Permitted Liens.
Except as otherwise provided herein or in any other Loan Document, and
except as to Permitted Liens and sale of Inventory in the ordinary
course of business, the Company shall not encumber, pledge, mortgage,
grant a security interest in, assign, sell, lease or otherwise dispose
of or transfer, whether by sale, merger, consolidation, liquidation,
dissolution or otherwise, any of the Collateral.
SECTION 3.6. CHANGES AFFECTING PERFECTION. The Company shall
----------------------------
not, without giving the Bank thirty (30) days prior notice thereof:
(a) make any change in any location where Company's Equipment or
material amounts of Company's Inventory is maintained or locate any of
the Company's Equipment or material amounts of the Company's Inventory
at any new locations, (b) make any change in the location of its chief
executive office, principal place of business or the office where
Company's records pertaining to its Accounts and General Intangibles
are kept, (c) add any new places of business or close any of its
existing places of business, (d) make any change in Company's name or
adopt any trade names, assumed names or fictitious names or otherwise
add any name under which the Company does business, or (e) make any
other change (other than sales of Inventory in the ordinary course of
business) which might affect the perfection or priority of the Bank's
Lien in the Collateral.
SECTION 3.7. POWER OF ATTORNEY FOR INSURANCE. Upon request of
-------------------------------
the Bank, the Company shall promptly deliver to the Bank true copies
of all reports made to insurance companies. The Company hereby
irrevocably makes, constitutes, and appoints the Bank (and all
officers, employees, or agents designated by the Bank) as its true and
lawful attorney-in-fact and agent, with full power of
17
substitution, such that the Bank shall have the right and authority,
upon the occurrence and during the continuance of an Event of Default
which has not been waived in writing by the Bank as required by this
Agreement, to make and adjust claims under such policies of insurance,
receive and endorse the name of the Company on, any check, draft,
instrument or other item of payment for the proceeds of such policies
of insurance and make all determinations and decisions with respect to
such policies of insurance. The Company hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof.
This power of attorney is a power coupled with an interest and shall
be irrevocable. Without waiving or releasing any obligation,
Potential Default or Event of Default by the Company under this
Agreement, the Bank may (but shall not be required to) at any time or
times thereafter maintain such action with respect thereto as the Bank
deems advisable. All sums disbursed by the Bank in connection
therewith (including, but not limited to, reasonable attorneys' and
paralegals' fees and disbursements, court costs, expenses and other
charges relating thereto) shall be payable on demand, and until paid
by the Company to the Bank, with interest thereon at the then
applicable Federal Funds Rate plus four hundred basis points, and
shall be additional Obligations under this Agreement secured by the
Collateral.
SECTION 3.8. PROTECTION OF COLLATERAL; REIMBURSEMENT. All
---------------------------------------
insurance expenses and all expenses of protecting, storing,
warehousing, insuring, handling, maintaining, and shipping any
Collateral, any and all excise, property, sales, use, or other taxes
imposed by any state, Federal, or local authority on any of the
Collateral, or in respect of the sale thereof, or otherwise in respect
of the Company's business operations which, if unpaid, could result in
the imposition of any Lien upon the Collateral, shall be borne and
paid by the Company. If the Company fails to promptly pay any portion
thereof when due, except as may otherwise be permitted under this
Agreement or under any of the other Loan Documents, the Bank, at its
option, may, but shall not be required to, pay the same. All sums so
paid or incurred by the Bank for any of the foregoing and any and all
other sums for which the Company may become liable under this
Agreement and all reasonable costs and expenses (including reasonable
attorneys' fees and paralegals' fees, legal expenses, and court costs,
expenses and other charges related thereto) which the Bank may incur
in enforcing or protecting its Liens on or rights and interests in the
Collateral or any of its rights or remedies under this Agreement or
any other agreement between the parties to this Agreement or in
respect of any of the transactions to be had under this Agreement
shall be repayable within (5) Business Days of demand and if not paid
within said five (5) Business Day period, which amount shall also
accrue interest, until paid by the Company to the Bank with interest
thereon at a rate per annum equal to the Federal Funds Rate plus four
hundred basis points, shall be additional Obligations under this
Agreement secured by the Collateral. Unless otherwise provided by
law, neither the Bank nor any Affiliate Bank shall be liable or
responsible in any way for the safekeeping of any of the Collateral or
for any loss or damage thereto or for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other Person whomsoever.
SECTION 3.9. INSPECTION; VERIFICATION. During regular business
------------------------
hours and with prior notice and after reasonable notice to the
Company, the Bank (by any of its officers, employees, agents,
representatives, or designees) shall have the right to inspect the
Company's Collateral and to inspect and audit, all books, records,
journals, orders, receipts, or other correspondence related thereto
(and to make extracts or copies thereof as the Bank may desire) and to
inspect the premises upon which any of the Collateral is located for
the purpose of verifying the amount, quality, quantity, value, and
condition of, or any other matter relating to, the Collateral,
provided, however, that upon the occurrence and during the continuance
- -----------------
of an Event of Default, the Bank may exercise such access and other
rights at any time the Bank deems such action necessary or desirable.
In addition to
18
inspections as outlined above, the Bank or its designee shall have the
right to make test verifications of the Accounts Receivable and other
Collateral and physical verifications of the Inventory and other
tangible items of the Collateral in any manner and through any
commercially reasonable medium that the Bank considers advisable, and
the Company agrees to furnish all such assistance and information as
the Bank may require in connection therewith. The Company shall pay
the costs for each of one such inspection and one such verification in
each 12-month period; provided that if an Event of Default has
occurred and is continuing, the Company shall pay the costs of all
such inspections and verifications.
SECTION 3.10. ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS.
----------------------------------------------
On or before the fifteenth (15th) calendar day of each month from and
after the date of this Agreement, the Company shall deliver to the
Bank, in form and substance acceptable to the Bank, a summary aged
trial balance of the Company's Accounts Receivable dated as of the
last day of the preceding month (and upon the Bank's request, a
detailed aged trial balance, of all then existing Accounts Receivable
specifying the names, face value and dates of invoices for each
Account Debtor obligated on an Account Receivable so listed). In
addition, upon the Bank's request, the Company shall furnish the Bank
with copies of proof of delivery and the original copy, if available,
of all documents relating to the Accounts Receivable including, but
not limited to, repayment histories and present status reports, and
such other matters and information relating to the status of then
existing Accounts Receivable as the Bank shall reasonably request. If,
upon the occurrence of an Event of Default, the Bank so requests, the
Company shall execute and deliver to the Bank, on forms supplied by
the Bank and at such intervals as the Bank may from time to time
require, written assignments of all of its Accounts after shipment of
the subject goods, together with copies of invoices and/or invoice
registers related thereto.
SECTION 3.11. REPORTING REGARDING INVENTORY. The Company shall
-----------------------------
report inventory figures no later than fifteen (15) days after the end
of each month based upon month-end balances reconciled to the period
end balance sheet. The Company's Inventory shall be reported based
upon reconciliation of the financial statements to the perpetual
inventory system or a regular physical count, as the case may be, and:
(a) the values shown on reports of Inventory shall be at the lower of
cost or market value determined in accordance with the Company's usual
cost accounting system, consistently applied, and (b) no later than
fifteen (15) days after the end of each month, or more frequently, if
the Bank shall so request, the Company shall submit to the Bank an
inventory report reconciled to the Loan Base Certificate for the end
of such month, the Company's perpetual inventory records and its
general ledger, broken down into such detail and with such categories
as the Bank shall require (including, but not limited to, a report
indicating the type, location and amount of raw materials,
work-in-process and finished goods, and all other information deemed
necessary by the Bank to determine the level of Eligible Inventory and
ineligible Inventory).
SECTION 3.12. OTHER COLLATERAL REPORTS. The Company shall
------------------------
furnish the Bank with, on or before the fifteenth (15th) day of each
month from and after the date of this Agreement, a report listing the
schedule of backlog of orders being processed by the Company, and such
other reports regarding other Collateral as the Bank from time to time
reasonably may request.
19
ARTICLE IV. COLLECTION OF ACCOUNTS
----------------------------------
AND LOCKBOX
-----------
SECTION 4.1. LOCKBOX; RECEIPT IN TRUST.
-------------------------
(a) Maintenance of Lockbox. The Company has rented and shall continue
----------------------
to rent the post office boxes in the name of the Company (the
"Lockboxes") as and having the addresses set forth in the
Schedule attached as Exhibit C hereto, and such other Lockboxes
and addresses as the Bank upon request of the Company may approve
from time to time. The Company shall notify all of its customers
and Account Debtors to forward all Collections of every kind due
the Company to one of the Lockboxes (such notices to be in such
form and substance as the Bank may require from time to time).
The Company shall establish and, unless otherwise directed by the
Bank, maintain blocked accounts ("Blocked Accounts") with such
other banks as are acceptable to the Bank, as set forth in each
case in the Schedule attached as Exhibit C hereto (collectively,
the "Lockbox Banks"). Each Lockbox Bank and the Company shall
have entered into a Lockbox Agreement with respect to the
Lockboxes controlled by such Lockbox Bank and with the Bank with
respect to the Blocked Account maintained at such Lockbox Bank,
each such Lockbox Agreement in form and substance satisfactory to
the Bank. All collections from Account Debtors ("Collections")
sent directly to the Lockboxes shall be deposited into the
Blocked Account in accordance with the terms of the applicable
Lockbox Agreement. The Company will promptly deposit all
remittances from Account Debtors submitted to the Company
("Remittances"), in the identical form in which such Remittances
were made (except for any necessary endorsements), whether by
cash or check, into the Blocked Account or the Cash Collateral
Account established pursuant to Section 4.2 below. Only the
Lockbox Bank, and to the extent not inconsistent with the
applicable Lockbox Agreement, the Bank, shall have at all times
sole access to the Lockbox. The Company shall take all action
necessary to grant the Lockbox Bank and, to the extent not
inconsistent with the applicable Lockbox Agreement, the Bank such
sole access. At no time shall the Company remove any item from
the Lockbox without the Bank's prior written consent. The
Company shall notify all customers or Account Debtors to pay all
Collections to the Lockboxes and all payees to pay all
Remittances to the Lockbox, the Blocked Account or such Cash
Collateral Account. The Company shall not instruct any Account
Debtor or payee to pay any Collection or Remittance to any other
place or address without the Bank's prior written consent. If
the Company neglects or refuses to notify any customer or Account
Debtor to pay any Collection to the Lockbox, the Bank shall be
entitled to make such notification. To the extent not
inconsistent with the applicable Lockbox Agreement, the Company
hereby grants to the Bank an irrevocable power of attorney,
coupled with an interest, to take in the Company's name all
action necessary to: (i) grant the Bank sole access to the
Lockbox, (ii) after the occurrence and during the continuance of
an Event of Default, contact Account Debtors to pay any
Collections to the Lockbox or for any other reason, and (iii)
endorse each Collection or Remittance delivered to the Lockbox
for deposit to the Cash Collateral Account.
(b) Receipt in Trust. Any Collections or Remittances received
----------------
directly by the Company shall be deemed held by the Company in
trust and as fiduciary for the Bank. The Company immediately
shall deposit any such Collection or Remittance, in its original
form, into one of the Blocked Account or into the Cash Collateral
Account. Pending such deposit, the Company agrees that it will
not commingle any such Collection or Remittance with any of
20
the Company's other funds or property, but will hold it separate
and apart therefrom in trust and as fiduciary for the Bank until
deposit is made into the Blocked Account or Cash Collateral
Account.
SECTION 4.2. CASH COLLATERAL ACCOUNT. Each Lockbox Bank shall
-----------------------
acknowledge and agree, in a manner satisfactory to the Bank, that: (i)
all Collections and Remittances deposited in the Blocked Accounts are
the sole and exclusive property of the Bank, and (ii) such Lockbox
Bank shall have no right to setoff (except as the Bank may expressly
agree upon in writing) against the Blocked Accounts. In accordance
with the terms of the applicable Lockbox Agreements, each Lockbox Bank
will wire, or otherwise transfer immediately available funds in a
manner satisfactory to the Bank, all Collections and Remittances
deposited into the Blocked Accounts to the Cash Collateral Account on
a daily basis as soon as good funds in respect to such Collection and
Remittances are collected. All funds in the Cash Collateral Account
shall be deemed to be the property of the Bank and shall be subject
only to the signing authority designated from time to time by the
Bank. The Company shall have no control over such funds. The Bank
shall have sole access to the Cash Collateral Account, and the Company
shall have no access thereto. The Company hereby grants to the Bank a
security interest in all funds held in the Lockbox and, to the extent
funds in the Cash Collateral Account were to be construed to be the
property of the Company, all funds held in the Cash Collateral Account
as security for the Obligations. The Cash Collateral Account shall not
be subject to any deduction, set-off, banker's lien or any other right
in favor of any person or entity other than the Bank. Prior to the
occurrence of an Event of Default which is continuing, deposits to the
Cash Collateral Account shall be: (i) applied immediately against the
principal and/or interest of the Loans and/or other Obligations of the
Company to the Bank under this Agreement all in such order and method
of application as may be elected by the Bank in its sole discretion;
provided, however, the Bank will use reasonable efforts to avoid
- ------------------
applications that would cause early prepayment of a LIBOR Rate Loan
prior to the expiration of its applicable Interest Period, or (ii) to
the extent not so applied by the Bank, released to the Company for use
in the Company's business.
SECTION 4.3. CREDITING OF COLLECTIONS AND REMITTANCES. For the
----------------------------------------
purpose of calculating interest and determining the aggregate Loans
outstanding and resulting loan availability hereunder, all Collections
and Remittances shall be credited to the Company on the Business Day
on or after which the Bank receives notice of the deposit of the
proceeds of such Collections and Remittances into the Cash Collateral
Account, and is in good funds with respect thereto, prior to 2:00 p.m.
(Denver, Colorado time). From time to time, upon advance written
notice to the Company, the Bank may adopt such additional or modified
regulations and procedures as it may deem reasonable and appropriate
with respect to the operation of the Cash Collateral Account, the
Lockbox and the services to be provided by the Bank under this
Agreement.
SECTION 4.4. COST OF COLLECTION. All reasonable costs of
------------------
collection of the Company's Accounts Receivable, including
out-of-pocket expenses, administrative and record-keeping costs,
reasonable attorney's fees, and all service charges and costs related
to the establishment and maintenance of the Lockbox and the Cash
Collateral Account, shall be the sole responsibility of the Company,
whether the same are incurred by the Bank or the Company, and the
Bank, in its sole discretion, may charge the same against the Company
and/or any account maintained by the Company with the Bank and the
same shall be deemed part of the Obligations hereunder. The Company
hereby indemnifies and holds the Bank harmless from and against any
loss or damage with respect to any Collection or Remittance deposited
in the Cash Collateral Account which is
21
dishonored or returned for any reason. If any Collection or Remittance
deposited in the Cash Collateral Account is dishonored or returned
unpaid for any reason, the Bank, in its sole discretion, may charge
the amount of such dishonored or returned Collection or Remittance
directly against the Company and/or any account maintained by the
Company with the Bank and such amount shall be deemed part of the
Obligations hereunder. The Bank shall not be liable for any loss or
damage resulting from any error, omission, failure or negligence on
the part of the Bank under this Agreement, except losses or damages
resulting from the Bank's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction.
SECTION 4.5. RETURN OF FUNDS. Upon the payment in full of all
---------------
Obligations and the termination of the Bank's commitment to make any
more Loans hereunder: (a) the Bank's security interests and other
rights in funds in the Cash Collateral Account under Section 4.2 of
this Agreement shall terminate, (b) all rights to such funds shall
revert to the Company, and (c) the Bank will, at the Company's
expense, take such steps as the Company may reasonably request to
evidence the termination of such security interests and to effect the
return to the Company of such funds.
SECTION 4.6. NOTICE TO ACCOUNT DEBTORS. The Company hereby
-------------------------
authorizes the Bank, upon the occurrence and during the continuance of
an Event of Default, in accordance with the powers conferred upon the
Bank pursuant to any applicable provision of this Agreement, to: (a)
notify any or all Account Debtors that the Accounts Receivable have
been assigned to the Bank, for the benefit of the Bank, and that the
Bank has a security interest therein, and (b) direct such Account
Debtors to make all payments due from them to the Company upon the
Accounts Receivable directly to the Bank or to a lock box designed by
the Bank; provided, however, that the Bank shall not exercise any of
------------------
its rights under this sentence unless: (i) the Company has failed to
so notify or direct any such Account Debtor following a request from
the Bank to the Company for such notification or direction, or (ii)
the Bank reasonably believes that the Company has failed to so notify
or direct any such Account Debtor. The Bank shall promptly furnish
the Company with a copy of any such notice sent. Any such notice, in
the Bank's sole discretion, may be sent on the Company's stationery,
in which event the Company shall co-sign such notice with the Bank.
SECTION 4.7. APPOINTMENT OF ATTORNEY-IN-FACT. The Company
-------------------------------
hereby irrevocably appoints the Bank (and all persons designated by
the Bank) as the Company's true and lawful attorney (and
agent-in-fact) to: upon the occurrence and during the continuance of
an Event of Default in the Company's or Bank's name: (i) demand
payment of the Accounts Receivable, (ii) enforce payment of the
Accounts Receivable, by legal proceedings or otherwise, (iii) exercise
all of the Company's rights and remedies with respect to the
collection of the Accounts and any other Collateral, (iv) settle,
adjust, compromise, extend, or renew the Accounts Receivable, (v)
settle, adjust, or compromise any legal proceedings brought to collect
the Accounts Receivable, (vi) if permitted by applicable law, sell or
assign the Accounts Receivable and other Collateral upon such terms,
for such amounts, and at such time or times as the Bank deems
advisable, (vii) discharge and release the Accounts Receivable and any
other Collateral, (viii) take control, in any manner, of any item of
payment or proceeds relating to any Collateral, (ix) prepare, file,
and sign the Company's name on a proof of claim in bankruptcy or
similar document against any Account Debtor, (x) prepare, file, and
sign the Company's name on any notice of Lien, assignment, or
satisfaction of Lien or similar document in connection with the
Accounts Receivable, (xi) do all acts and things necessary, in the
Bank's discretion, to fulfill the Company's obligations under this
Agreement, (xii) endorse the name of the Company upon any of the items
of payment or proceeds relating to any Collateral
22
and deposit the same to the account of the Bank on account of the
Obligations, (xiii) endorse the name of the Company upon any Chattel
Paper, document, Instrument, invoice, freight bill, bill of lading, or
similar document or agreement relating to the Accounts Receivable,
Inventory and any other Collateral, (xiv) use the Company's stationery
and sign the name of the Company to verifications of the Accounts
Receivable and notices thereof to Account Debtors, (xv) use the
information recorded on or contained in any data processing equipment
and computer hardware and software relating to the Accounts
Receivable, Inventory, and any other Collateral to which the Company
has access, and (xvi) notify post office authorities to change the
address for delivery of the Company's mail to an address designated by
the Bank, receive and open all mail addressed to the Company, and,
after removing all Collections and Remittances and other Proceeds of
Collateral, forward the mail to the Company. The Company hereby
ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
ARTICLE V. SPECIFIC REPRESENTATIONS, WARRANTIES
------------------------------------------------
AND COVENANTS RELATING TO COLLATERAL.
------------------------------------
SECTION 5.1. DISPUTES AND CLAIMS REGARDING ACCOUNTS. The
--------------------------------------
Company shall notify the Bank promptly of all material disputes and
claims and settle or adjust them at no expense to the Bank, but no
material discount, credit or allowance outside the ordinary course of
business or material adverse extension, compromise or settlement shall
be granted to any customer or account debtor in respect of an Eligible
Account and no returns of merchandise outside the ordinary course of
business shall be accepted by the Company in settlement or
satisfaction of an Eligible Account Receivable which settlement or
satisfaction would have a Material Adverse Effect, without the Bank's
consent which consent shall not be unreasonably withheld.
SECTION 5.2. DEPOSIT ACCOUNTS. Other than: (a) the Blocked
----------------
Accounts and the Cash Collateral Account, and (b) those other Deposit
Accounts disclosed on the Schedule on Exhibit C hereto and consented
to by the Bank (such disclosed Deposit Accounts being, the "Permitted
Accounts"), neither the Company nor any of its Subsidiaries maintains
a Deposit Account or trust account for the purpose of collecting and
depositing Collections and\or Remittances or otherwise holding monies
of the Company.
SECTION 5.3. COMPLIANCE WITH TERMS OF ACCOUNTS; GENERAL
------------------------------------------
INTANGIBLES. The Company will perform and comply in all material
- -----------
respects with all obligations in respect of Accounts Receivable,
Chattel Paper, General Intangibles and under all other contracts and
agreements to which it is a party or by which it is bound relating to
the Collateral where failure to so comply would result in any material
impairment in the value of the Collateral, unless the validity thereof
is being contested in good faith by appropriate proceedings and such
proceedings do not involve the material danger of the sale, forfeiture
or loss of the Collateral which is the subject of such proceedings or
the priority of the lien in favor of the Bank thereon.
SECTION 5.4. NO WAIVERS, EXTENSIONS, AMENDMENTS. The Company
----------------------------------
will not, without the Bank's prior written consent, which consent
shall not be unreasonably withheld or delayed, grant any extension of
the time of payment of any of the Accounts, Chattel Paper or
Instruments, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any person liable for
the payment thereof, or allow any credit or discount whatsoever
thereon, other than in the ordinary course of business.
23
SECTION 5.5. LOCATION OF COLLATERAL. All of the locations of
----------------------
the Company and its Subsidiaries and all locations of the Collateral
are set forth in the Schedule attached hereto as Exhibit C. Other than
as otherwise set forth in the Schedule on Exhibit C hereto, as amended
or supplemented by written notice to the Bank: (a) the Company does
not keep, and shall not keep, any Collateral owned by it on any
property not owned in fee simple by the Company, and (b) each of the
Subsidiaries of the Company does not keep, and shall not keep, any
Collateral owned by it on any property not owned in fee simple by the
Company except to the extent permitted by this Agreement.
SECTION 5.6. LIEN PRIORITY. From and after the date of this
-------------
Agreement, by reason of the filing of financing statements and
termination statements in all requisite governmental offices, this
Agreement and the Loan Documents will create and constitute a valid
and perfected first priority security interest (except as permitted by
this Agreement and subject to Permitted Liens) in and Lien on that
portion of the Collateral which can be perfected by such filing or
delivery, which security interest will be enforceable against the
Company and all third parties as security for payment of all
Obligations.
SECTION 5.7. LIEN WAIVERS; LANDLORD, BAILEE AND CONSIGNEE
--------------------------------------------
WAIVERS, WAREHOUSE RECEIPTS. The Company will not create, permit or
- ---------------------------
suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien, claim or right, in
or to the Collateral, other than the Permitted Liens. The Company
shall defend the right, title and interest of the Bank in and to any
of the Company's rights to the Collateral and in and to the Proceeds
and products thereof against the claims and demands of all Persons.
In the event any Collateral of the Company comprising personal
property subject to the security interest or Lien in favor of the Bank
is at any time located on any real property not owned by the Company,
the Company will obtain and maintain in effect at all times while any
such Collateral is so located valid and effective lien waivers, in
form and substance reasonably satisfactory to the Bank whereby each
owner, landlord, consignee, bailee and mortgagee having an interest in
such real property shall disclaim any interest in such Collateral, as
the case may be, and shall agree to allow the Bank reasonable access
to such real property in connection with any enforcement of the
security interest granted hereunder.
SECTION 5.8. MAINTENANCE OF INSURANCE. The Company will
------------------------
maintain with financially sound and reputable companies, insurance
policies: (a) insuring the real property portion of the Collateral,
the Equipment, the Inventory, and all equipment subject to any lease,
against loss by fire, explosion, theft, flood (if any such properties
are located in a federally designated flood hazard area) and such
other casualties as are usually insured against by companies engaged
in the same or similar businesses, and (b) insuring the Company and
the Bank against liability for personal injury and property damage
relating to such real property, Equipment, Inventory and equipment
covered by any equipment lease, such policies to be in such form and
in such amounts and coverage as may be reasonably satisfactory to the
Bank, with losses payable to the Company and the Bank as their
respective interests may appear. All insurance with respect to the
real property, Equipment and Inventory shall: (i) provide that no
cancellation, reduction in amount, change in coverage or expiration
thereof shall be effective until at least thirty (30) days after
written notice to the Bank thereof, and (ii) be satisfactory in all
respects to the Bank.
SECTION 5.9. MAINTENANCE OF EQUIPMENT. The Company will keep
------------------------
and maintain each item of Equipment in good operating condition,
ordinary wear and tear excepted, and the Company will provide all
maintenance and service and all repairs necessary for such purpose.
24
SECTION 5.10. LIMITATIONS ON DISPOSITIONS OF INVENTORY AND
--------------------------------------------
EQUIPMENT. The Company will not sell, transfer, lease or otherwise
- ---------
dispose of any of the Inventory or Equipment, or attempt, offer or
contract to do so, except for (a) dispositions of Inventory in the
ordinary course of business, and (b) so long as no Event of Default
has occurred, the disposition of obsolete or worn out Equipment in the
ordinary course of business and other dispositions of Equipment
permitted by this Agreement.
SECTION 5.11. GENERAL APPOINTMENT AS ATTORNEY-IN-FACT. The
---------------------------------------
Company hereby irrevocably constitutes and appoints the Bank and any
officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Company and in the name of the Company
or in its own name, from time to time following the occurrence of an
Event of Default, in the Bank's reasonable discretion, for the purpose
of carrying out the terms of this Agreement, without notice (except as
specifically provided herein) to or assent by the Company, to take any
and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to effect the terms of
this Agreement, including, without limiting the generality of the
foregoing, the power and right, on behalf of the Company, to do the
following, upon notice to the Company: (a) to pay or discharge taxes,
liens, security interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any repairs or any
insurance, called for by the terms of this Agreement and to pay all or
any part of the premiums therefor and the costs thereof, and otherwise
to itself perform or comply with, or otherwise cause performance or
compliance with, any of the covenants or other agreements of the
Company contained in this Agreement which the Company has failed to
perform or with which the Company has not complied; (b) to commence
and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect the Collateral or any
thereof and to enforce any other right in respect of any Collateral;
(c) to defend any suit, action or proceeding brought against the
Company with respect to any Collateral; (d) to settle, compromise or
adjust any suit, action or proceeding described above and, in
connection therewith, to give such discharges or releases as the Bank
may deem appropriate; (e) to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Bank were the absolute owner
thereof for all purposes; and (f) to do, at the Bank's option and the
Company's expense, at any time, or from time to time, all acts and
things which the Bank deems necessary to protect, preserve or realize
upon the Collateral and the Bank's security interest therein, in order
to effect the intent of this Agreement, all as fully and effectively
as the Company might do. This power of attorney is a power coupled
with an interest and shall be irrevocable.
SECTION 5.12. BANK NOT LIABLE. The powers conferred on the Bank
---------------
hereunder are solely to protect its interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The
Bank shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers and neither it nor any of
its officers, directors, employees or agents shall be responsible to
the Company for any act or failure to act, except for its own gross
negligence or willful misconduct.
SECTION 5.13. AUTHORITY TO EXECUTE TRANSFERS. Without
------------------------------
limitation of any authorization granted to the Bank hereunder, the
Company also hereby authorizes the Bank, upon the occurrence of an
Event of Default, to execute, in connection with the exercise by the
Bank of its remedies hereunder, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
25
SECTION 5.14. PERFORMANCE BY BANK OF THE COMPANY'S OBLIGATIONS.
------------------------------------------------
If the Company fails to perform or comply with any of its agreements
contained herein and the Bank shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the
expenses of the Bank incurred in connection with such performance or
compliance, together with interest thereon at the interest rate
provided for in Section 2.3(c) hereof in effect from time to time,
shall be payable by the Company to the Bank within five (5) Business
Days following demand. In consideration of and as security for any
performance by the Bank of any of Company's obligations or agreements
hereunder, the Company does hereby (a) grant to the Bank a security
interest in the Collateral, and (b) assign to the Bank all of its
right, title, and interest (including, without limitation, all rights
to payment) arising under or with respect to all of Company's Accounts
Receivable, whether now owned or hereafter acquired or received by
Company, but not including any duty, obligation, or liability of
Company with respect thereto.
ARTICLE VI. GENERAL REPRESENTATIONS AND WARRANTIES
---------------------------------------------------
The Company represents and warrants to the Bank (which
representations and warranties will survive the delivery of the Note
and all extensions of credit under this Agreement) that:
SECTION 6.1. ORGANIZATION; CORPORATE POWER.
-----------------------------
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction in which
it is incorporated;
(b) The Company has the corporate power and authority to own its
properties and assets and to carry on its business as now being
conducted;
(c) The Company is qualified to do business in every jurisdiction in
which the ownership or leasing of its property or the doing of
business requires such qualification and the failure of such
qualification would have a Material Adverse Effect; and
(d) The Company has the corporate power to execute, deliver, and
perform its Loan Documents and to borrow hereunder.
SECTION 6.2. AUTHORIZATION OF LOAN. The execution, delivery,
---------------------
and performance of the Loan Documents and the Loans by the Company
have been duly authorized by all requisite corporate action.
SECTION 6.3. NO CONFLICT. The execution, delivery, and
-----------
performance of the Loan Documents will not (a) violate any provision
of any law, rule or regulation, the Articles of Incorporation of the
Company, or By-Laws of the Company, (b) violate any order of any court
or other agency of any federal or state government or any provision of
any material indenture, agreement, or other instrument to which the
Company is a party or by which it or any of its properties or assets
are bound, (c) conflict with, result in a breach of, or constitute
(with passage of time or delivery of notice, or both), a default under
any such material indenture, agreement, or other instrument, or
(d) result in the creation or imposition of any Lien, other than a
Permitted Lien, or other encumbrance of any nature whatsoever upon any
of the properties or assets of the Company except in favor of the
Bank.
26
SECTION 6.4. EXECUTION OF LOAN DOCUMENTS. The Loan Documents
---------------------------
have been duly executed and are valid and binding obligations of the
Company fully enforceable in accordance with their respective terms.
SECTION 6.5. FINANCIAL CONDITION. The following information
-------------------
with respect to the Company has heretofore been furnished to the Bank,
or with respect to Subpart (b) below, shall be delivered no later than
September 30, 1996:
(a) Audited annual financial statements of the Company for the
periods ended December 31, 1994 and December 31, 1995; and
(b) The pro forma financial statements of the Company as of June
30, 1996, which pro forma financial statements reflect the
Company's purchase of the assets of the DETACLAD explosion
bonded clad metal business and the liabilities incurred by
the Company related to such purchase.
Each of the financial statements referred to above in this
Section 6.5 was prepared in accordance with GAAP (subject in the case
of interim statements, to the absence of footnotes and normal year-end
adjustments) applied on a consistent basis, except as stated therein.
Each of the financial statements referred to above in this Section 6.5
fairly presents the financial condition or pro forma financial
condition, as the case may be, of the Company and is complete and
correct in all material respects and no Material Adverse Effect has
occurred since the date thereof.
SECTION 6.6. LIABILITIES; LIENS. The Company has made no
------------------
investment in, advance to, or guarantee of, the obligations of any
Person nor are the Company's assets and properties subject to any
claims, liabilities, Liens, or other encumbrances, except as disclosed
in the financial statements and related notes thereto referred to in
Section 6.5 hereof.
SECTION 6.7. LITIGATION. There is no action, suit, examination,
----------
review, or proceeding by or before any governmental instrumentality or
agency now pending (including any claims alleging infringement of
intellectual property rights of others) or, to the knowledge of the
Company, threatened against the Company or against any property or
rights of the Company, which, if adversely determined, would
materially impair the right of the Company to carry on business as now
being conducted; would materially adversely affect the financial
condition of the Company; or would draw into question the legal
existence of the Company or the validity authorization or
enforceability of any of the Loan Documents, except for the
litigation, if any, described in the notes to the financial statements
referred to in Section 6.5 hereof.
SECTION 6.8. PAYMENT OF TAXES. The Company has accurately
----------------
prepared and timely filed, or caused to be filed, all Federal, state,
local, and foreign tax returns required to be filed, and has paid, or
caused to be paid, all taxes as are shown on such returns, or on any
assessment received by the Company, to the extent that such taxes
become due, except as otherwise contested in good faith. The Company
has set aside proper amounts on its books, determined in accordance
with GAAP, for the payment of all taxes for the years that have not
been audited by the respective tax authorities or for taxes being
contested by the Company.
SECTION 6.9. ABSENCE OF ADVERSE AGREEMENTS. The Company is not
-----------------------------
a party to any indenture, loan or credit agreement or any lease or
other agreement or instrument or subject to any
27
corporate or partnership restriction which would be reasonably likely
to have a Material Adverse Effect.
SECTION 6.10. REGULATORY STATUS. Neither the making nor the
-----------------
performance of this Agreement, nor any extension of credit hereunder,
requires the consent or approval of any governmental instrumentality
or political subdivision thereof, any other regulatory or
administrative agency, or any court of competent jurisdiction.
SECTION 6.11. FEDERAL RESERVE REGULATIONS: USE OF LOAN
-----------------------------------------
PROCEEDS. The Company is not engaged principally, or as one of its
- --------
important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock. No part of the
proceeds of the Loans will be used, directly or indirectly, for a
purpose which violates any law, rule or regulation of any governmental
body, including without limitation the provisions of Regulations G, U,
or X of the Board of Governors of the Federal Reserve System, as
amended. No part of the proceeds of the Loans will be used, directly
or indirectly, to purchase or carry any Margin Stock or to extend
credit to others for the purpose of purchasing or carrying any Margin
Stock.
SECTION 6.12. SUBSIDIARIES. The Company has no Subsidiaries.
------------
SECTION 6.13. ERISA. The Company and any Commonly Controlled
-----
Entity do not maintain or contribute to any Plan which is not in
substantial compliance with ERISA. Neither the Company nor any
Commonly Controlled Entity maintains, contributes to, or is required
to make or accrue a contribution or has within any of the six
preceding years maintained, contributed to or been required to make or
accrue a contribution to any Plan subject to regulation under Title IV
of ERISA, any Plan that is subject to the minimum funding requirements
of Section 412 of the Code or Section 302 of ERISA, or any
Multiemployer Plan.
SECTION 6.14. SOLVENCY. The Company has received consideration
---------
which is the reasonable equivalent value of the obligations and
liabilities that the Company has incurred to the Bank. The Company is
not insolvent as defined in any applicable state or federal statute,
nor will the Company be rendered insolvent by the execution and
delivery of this Agreement or the Note to Bank. The Company is not
engaged or about to engage in any business or transaction for which
the assets retained by it shall be an unreasonably small capital,
taking into consideration the obligations to Bank incurred hereunder.
The Company does not intend to, nor does it believe that it will,
incur debts beyond its ability to pay them as they mature.
SECTION 6.15 SCHEDULE ON EXHIBIT C. The Schedule on Exhibit C
----------------------
accurately and completely lists the location of all real property
owned or leased by the Company. The Company enjoys quiet possession
under all material leases of real property to which it is a party as a
lessee, and all of such leases are valid, subsisting and, in full
force and effect. Except as specified in the Schedule in Exhibit C
hereto, none of the real property occupied by the Company or any
Subsidiary is located within any federal, state or municipal flood
plain zone. Except as set forth in the Schedule in Exhibit C, all of
the material properties used in the conduct of the Company's business
(i) are in good repair, working order and condition (reasonable wear
and tear excepted) and reasonably suitable for use in the operation of
the Company's business; and (ii) are currently operated and
maintained, in all material respects, in accordance with the
requirements of applicable governmental authorities.
28
SECTION 6.16 ACCURACY OF REPRESENTATIONS AND WARRANTIES. None
-------------------------------------------
of the Company's representations or warranties set forth in this
Agreement or in any document or certificate furnished pursuant to this
Agreement or in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a
material fact necessary to make any statement of fact contained herein
or therein, in light of the circumstances under which it was made not
misleading.
SECTION 6.17 NO INVESTMENT COMPANY. The Company is not an
----------------------
"investment company" or a company "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
19409, as amended, which is required to register thereunder.
SECTION 6.18 APPROVALS. Except as set forth in the Schedule in
----------
Exhibit C hereto, all approvals required of the Company from all
Persons including without limitation all governmental authorities with
respect to the Loan Documents have been obtained.
SECTION 6.19 LICENSES, REGISTRATIONS, COMPLIANCE WITH LAWS, ETC.
---------------------------------------------------
The Schedule in Exhibit C hereto accurately and completely describes
all permits, governmental licenses, registrations and approvals,
material to carrying out of the Company's businesses as presently
conducted and required by law or the rules and regulations of any
federal, foreign governmental, state, county or local association,
corporation or governmental agency, body, instrumentality or
commission having jurisdiction over the Company, including but not
limited to the United States Environmental Protection Agency, the
United States Department of Labor, the United States Occupational
Safety and Health Administration, the United States Equal Employment
Opportunity Commission, the Federal Trade Commission and the United
States Department of Justice and analogous and related state and
foreign agencies. All existing material authorizations, licenses and
permits are in full force and effect, are duly issued in the name of,
or validly assigned to the Company and the Company has full power and
authority to operate thereunder. There is no material violation or
material failure of compliance or, to the Company's knowledge,
allegation of such violation or failure of compliance on the part of
the Company with any of the foregoing permits, licenses,
registrations, approvals, rules or regulations and there is no action,
proceeding or investigation pending or to the knowledge of the Company
threatened nor has the Company received any notice of such which might
result in the termination or suspension of any such permit, license,
registration or approval which in any case could have a Material
Adverse Effect.
SECTION 6.20 COPYRIGHT. The Company has not violated any of the
----------
provisions of the Copyright Revision Act of 1976, 17 U.S.C.
Section 101, et seq. Except as set forth on the Schedule on Exhibit C
-- ---
hereto, the Company has not filed any registration statements, notices
and statements of account with the United States Copyright Office.
The Schedule on Exhibit C hereto accurately and completely sets forth
all registered copyrights held by the Company and contains exceptions
to the representations contained in this Section 6.20. To the
Company's knowledge no inquiries regarding any such filings have been
received by the Copyright Office.
SECTION 6.21 ENVIRONMENTAL COMPLIANCE. Except as expressly set
------------------------
forth in the Schedule on Exhibit C hereto, neither the Company nor, to
the knowledge of management of the Company, any other Person has:
(a) ever caused, permitted, or suffered to exist any Hazardous
Material to be spilled, placed, held, located or disposed of on,
under, or about, any of the premises owned or leased by
29
the Company (the "Premises"), or from the Premises into the
atmosphere, any body of water, any wetlands, or on any other real
property, nor does any Hazardous Material exist on, under or about the
Premises, or in respect of Hazardous Material used or disposed of in
compliance with law;
(b) ever used (whether by the Company or by any other Person) as
a treatment, storage or disposal (whether permanent or temporary) site
for any Hazardous Waste as defined in 42 U.S.C.A. Section 6901, et
--
seq. (the Resource Recovery and Conservation Act); and
- ---
(c) any knowledge of any notice of violation, Lien or other
notice issued by any governmental agency with respect to the
environmental condition of the Premises or any other property occupied
by the Company.
The Company is in compliance with all Environmental Laws and all other
applicable federal, state and local health and safety laws,
regulations, ordinances or rules, except to the extent that any non-
compliance will not, in the aggregate, have a Materially Adverse
Effect on the Company or the ability of the Company to fulfill its
obligations under this Agreement or the Note.
SECTION 6.22 MATERIAL AGREEMENTS, ETC. The Schedule on Exhibit
-------------------------
C hereto accurately and completely lists all Material Agreements, all
of which are presently in effect. All of the Material Agreements are
legally valid, binding, and to the Company's knowledge, in full force
and effect and neither the Company nor, to the Company's knowledge,
any other parties thereto are in material default thereunder.
SECTION 6.23 PATENTS, TRADEMARKS AND OTHER PROPERTY RIGHTS. The
----------------------------------------------
Schedule on Exhibit C hereto contains a complete and accurate schedule
of all registered trademarks, registered copyrights and patents of the
Company, and pending applications therefor, and all other intellectual
property in which the Company has any rights other than "off-the-
shelf" software which is generally available to the general public at
retail. Except as set forth in the Schedule on Exhibit C hereto, the
Company owns, possesses, or has licenses to use all the patents,
trademarks, service marks, trade names, copyrights and non-
governmental licenses, and all rights with respect to the foregoing,
necessary for the conduct of its business as now conducted, without,
to the Company's knowledge, any conflict with the rights or others
with respect thereto.
SECTION 6.24 RELATED TRANSACTION DOCUMENTS. The Company has,
------------------------------
prior to the date hereof, delivered to the Bank true copies of the
Related Transaction Documents, and each and every amendment or
modification thereto.
ARTICLE VII. CONDITIONS OF LENDING
-----------------------------------
SECTION 7.1. FIRST LOAN. The obligation of the Bank to make a
----------
Loan shall be subject to satisfaction of the following conditions,
unless waived in writing by the Bank: (a) all legal matters and Loan
Documents incident to the transactions contemplated hereby shall be
reasonably satisfactory, in form and substance, to Bank's counsel;
(b) the Bank shall have received (i) certificates by an authorized
officer of the Company, upon which the Bank may conclusively rely
until superseded by similar certificates delivered to the Bank,
certifying (1) all requisite action taken in connection with the
transactions contemplated hereby, and (2) the names, signatures, and
authority of the Company's authorized signers executing the Loan
Documents, and (ii) such other documents as the Bank may reasonably
require to be executed by, or delivered on behalf of, the
30
Company; (c) the Bank shall have received the Note, with all blanks
appropriately completed, executed by an authorized signer of the
Company; (d) the Company shall have paid to the Bank the fee(s) then
due and payable in accordance with ARTICLE II of this Agreement; and
(e) the Bank shall have received the written opinion of legal counsel
selected by the Company and satisfactory to the Bank, dated the date
of this Agreement, in form satisfactory to the Bank and covering such
other matter(s) as the Bank may reasonably require.
SECTION 7.2. EACH LOAN. The obligation of the Bank to make any
---------
Loan shall be subject to compliance with Section 2.l herein and also
subject to satisfaction of the following conditions that at the date
of making such Loan, and after giving effect thereto: (a) no Event of
Default shall have occurred and be then continuing, (b) each
representation and warranty set forth in this Agreement and in each of
the other Loan Documents is true and correct as if then made, and (c)
no event shall have occurred or failed to occur which has or is
reasonably likely to have a Material Adverse Effect.
ARTICLE VIII. COVENANTS
------------------------
As long as credit is available hereunder or until all principal
of and interest on the Note have been paid in full:
SECTION 8.1. ACCOUNTING; FINANCIAL STATEMENTS AND OTHER
------------------------------------------
INFORMATION. The Company will maintain a standard system of
- -----------
accounting, established and administered in accordance with GAAP
consistently followed throughout the periods involved, and will set
aside on its books for each fiscal month the proper amounts or
accruals for depreciation, obsolescence, amortization, bad debts,
current and deferred taxes, prepaid expenses, and for other purposes
as shall be required by GAAP. The Company will deliver to the Bank:
(a) As soon as practicable after the end of calendar month in each
year, and in any event within fifteen (15) days thereafter, a
consolidated and consolidating balance sheet of the Company and
each of its Subsidiaries as of the end of such month, and
statements of income, changes in financial position, and
shareholders' equity of the Company for such month, certified as
complete and correct by the principal financial officer of the
Company, subject to changes resulting from year-end adjustments;
(b) As soon as practicable after the end of each fiscal year, and in
any event within ninety (90) days thereafter, a consolidated and
consolidating balance sheet of the Company and each of its
Subsidiaries as of the end of such year, and statements of
income, changes in financial position, and shareholders' equity
of the Company for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by a report and an unqualified
opinion of independent certified public accountants of recognized
standing, selected by the Company and satisfactory to the Bank,
which report and opinion shall be prepared in accordance with
generally accepted auditing standards, together with a
certificate by such accountants (i) briefly setting forth the
scope of their examination (which shall include a review of the
relevant provisions of this Agreement) and stating that in their
judgment such examination is sufficient to enable them to give
the certificate, and (ii) stating whether their examination has
disclosed the existence of any condition or event which
constitutes an Event of Default under this Agreement, and, if
their examination has disclosed such a condition or event,
specifying the nature and period of existence thereof;
31
(c) As soon as practicable, and in any event within fifteen (15) days
of the end of each calendar month in each year, a certificate by
the Company indicating the Debt to Tangible Net Worth Ratio as at
the end of such calendar month;
(d) As soon as practicable, and in any event within fifteen (15) days
of the end of each calendar month in each year, the Loan
Certificate fully completed as to all figures and information
called for therein and certified as complete and correct by a
duly authorized officer of Company; and
(e) With reasonable promptness, such other data and information as
from time to time may be reasonably requested by the Bank.
SECTION 8.2. INSURANCE; MAINTENANCE OF PROPERTIES. The Company
-------------------------------------
will maintain with financially sound and reputable insurers,
insurance with coverage and limits as may be required by law or as may
be reasonably required by the Bank. The Company will, upon request
from time to time, furnish to the Bank a schedule of all insurance
carried by it, setting forth in detail the amount and type of such
insurance. The Company will maintain in good repair, working order,
and condition, all properties used or useful in the business of the
Company.
SECTION 8.3. EXISTENCE; BUSINESS. The Company will cause to be
-------------------
done all things necessary to preserve and keep in full force and
effect its existence and rights, to conduct its business in a prudent
manner, to maintain in full force and effect, and renew from time to
time, its franchises, permits, licenses, patents, and trademarks that
are necessary to operate its business. The Company will comply in all
material respects with all valid laws and regulations now in effect or
hereafter promulgated by any properly constituted governmental
authority having jurisdiction; provided, however, the Company shall
not be required to comply with any law or regulation which it is
contesting in good faith by appropriate proceedings as long as either
the effect of such law or regulation is stayed pending the resolution
of such proceedings or the effect of not complying with such law or
regulation is not to jeopardize any franchise, license, permit patent,
or trademark necessary to conduct the Company's business.
SECTION 8.4. PAYMENT OF TAXES. The Company will pay all taxes,
----------------
assessments, and other governmental charges levied upon any of its
properties or assets or in respect of its franchises, business,
income, or profits before the same become delinquent, except that no
such taxes, assessments, or other charges need be paid if contested by
the Company in good faith and by appropriate proceedings promptly
initiated and diligently conducted and if the Company has set aside
proper amounts, determined in accordance with GAAP, for the payment of
all such taxes, changes, and assessments.
SECTION 8.5. LITIGATION; ADVERSE CHANGES. The Company will
---------------------------
promptly notify the Bank in writing of (a) any future event which, if
it had existed on the date of this Agreement, would have required
qualification of any of the representations and warranties set forth
in this Agreement or any of the other Loan Documents, and (b) any
Material Adverse Effect.
SECTION 8.6. NOTICE OF DEFAULT. The Company will promptly
-----------------
notify the Bank of any Event of Default hereunder and any demands made
upon the Company by any Person for the acceleration and immediate
payment of any Indebtedness owed to such Person.
32
SECTION 8.7. INSPECTION. The Company will make available for
----------
inspection by duly authorized representatives of the Bank, or its
designated agent, the Company's books, records, and properties when
reasonably requested to do so, and will furnish the Bank such
information regarding its business affairs and financial condition
within a reasonable time after written request therefor.
SECTION 8.8. ENVIRONMENTAL MATTERS. The Company and each of its
---------------------
Subsidiaries:
(a) Shall comply with all Environmental Laws, and
(b) Shall deliver promptly to Bank (i) copies of any documents
received from the United States Environmental Protection Agency
or any state, county or municipal environmental or health agency,
and (ii) copies of any documents submitted by Company or any of
its Subsidiaries to the United States Environmental Protection
Agency or any state, county or municipal environmental or health
agency concerning its operations.
SECTION 8.9. SALE OF ASSETS. The Company will not, directly or
--------------
indirectly sell, lease, transfer, or otherwise dispose of any plant or
any manufacturing facility or other assets except for (i) assets sold
for full and adequate consideration which the Board of Directors or
senior management of the Company has determined to be worn out,
obsolete, or no longer needed or useful in its business, and
(ii) assets sold in the ordinary course of business, provided that the
Company receives full and adequate consideration in exchange for such
assets sold.
SECTION 8.10. LIENS. The Company will not, directly or
-----
indirectly, create, incur, assume, or permit to exist any Lien with
respect to any property or asset of the Company now owned or hereafter
acquired other than Permitted Liens.
SECTION 8.11. INDEBTEDNESS. The Company will not, directly or
------------
indirectly, create, incur, or assume Indebtedness, or otherwise become
liable with respect to, any Indebtedness other than:
(a) Indebtedness now or hereafter payable, directly or indirectly, by
the Company to the Bank or any Affiliate Bank;
(b) Subordinated Debt of the Company;
(c) To the extent permitted by this Agreement, Indebtedness for the
lease or purchase price of any real or personal property, which
is secured only by a Permitted Lien;
(d) Unsecured Indebtedness and deferred liabilities incurred in the
ordinary course of business;
(e) Indebtedness for taxes, assessments, governmental charges, liens,
or similar claims to the extent not yet due and payable;
(f) Indebtedness of the Company existing as of the date of this
Agreement, which is expressly disclosed on the Schedule on
Exhibit C hereto;
(g) Other Indebtedness of the Company not exceeding $200,000.00 in
the aggregate outstanding at any time; and
33
(h) Extensions, renewals, refundings, refinancings, modifications,
amendments and restatements of any of the items listed in items
(b) through (g) above, provided that the principal amount thereof
is not increased or the terms thereof are not modified to impose
more burdensome terms upon the Company.
SECTION 8.12. INVESTMENTS; LOANS. Except for Permitted
------------------
Investments, the Company will not, directly or indirectly,
(a) purchase or otherwise acquire or own any stock or other securities
of any other Person, or (b) make or permit to be outstanding any loan
or advance (other than trade advances in the ordinary course of
business) or enter into any arrangement to provide funds or credit, to
any other Person.
SECTION 8.13. GUARANTIES. The Company will not guarantee,
----------
directly or indirectly, or otherwise become surety (including, without
limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to, or
otherwise invest in, any Person, or enter into any working capital
maintenance or similar agreement) in respect of any obligation or
Indebtedness of any other Person, except guaranties by endorsement of
negotiable instruments for deposit, collection, or similar
transactions in the ordinary course of business.
SECTION 8.14. MERGERS; CONSOLIDATION. The Company will not
----------------------
merge into or consolidate with any other Person or permit any other
Person to merge into or consolidate with it, or sell all or
substantially all of its assets, except that the Company may merge
into or consolidate with any other Person or permit any other Person
to merge into or consolidate with it; provided, however, that (i) the
--------- -------
Company shall be the corporation which survives such merger or results
from such consolidation; (ii) immediately after the consummation of
the transaction, and after giving effect thereto, the Company would be
permitted by the provisions of this Article VIII to incur additional
Indebtedness; and (iii) before and immediately after the consummation
of the transaction, and after giving effect thereto, no Event of
Default, or event which with notice or lapse of time or both would
become an Event of Default, exists or would exist.
SECTION 8.15. CURRENT RATIO. The Company will not permit the
-------------
ratio by which its Current Assets exceeds its Current Liabilities,
calculated at the same point in time, to be at any time less than 2.00
to 1.00.
SECTION 8.16. FUNDS FROM OPERATIONS TO TOTAL DEBT. The Company
-----------------------------------
will not permit the ratio of Funds from Operations to Total
Indebtedness, calculated annually upon the Bank's receipt of the
financial statements provided by the Company under Section 8.1(b) of
this Agreement, to be less than twenty five percent (25.00%)
SECTION 8.17. SUBORDINATED DEBT. The Company will not make any
-----------------
payment upon any outstanding Subordinated Debt, except in such manner
and amounts as may be expressly authorized in any subordination
agreement presently or hereafter held by the Bank.
SECTION 8.18. RATIO OF TOTAL INDEBTEDNESS TO TANGIBLE NET WORTH.
--------------------------------------------------
The Company will not permit the ratio of its Total Indebtedness to the
sum of its Tangible Net Worth, calculated at the same point in time,
to be at any time more than 1.99 to 1.00.
34
SECTION 8.19. CAPITAL EXPENDITURES. The Company will not make
--------------------
Capital Expenditures in an aggregate amount in excess of $800,000.00
in any fiscal year without thirty (30) days' prior written
notification to the Bank.
SECTION 8.20. SENIOR MANAGEMENT. The Company will not replace
-----------------
or accept the resignation of the President or Chief Executive Officer
of the Company without sixty (60) days prior written notice to Bank.
SECTION 8.21. COMPLIANCE WITH ERISA. With respect to the
---------------------
Company and any Commonly Controlled Entity, the Company will not
permit the occurrence of any of the following events to the extent
that any such events would result in a material Adverse Effect on the
Company, (a) withdraw from or cease to have an obligation to
contribute to, any Multiemployer Plan, (b) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code) involving any
Plan, (c) except for any deficiency caused by a waiver of the minimum
funding requirement under Section 412 of the Code, as described above,
incur or suffer to exist any material "accumulated funding deficiency"
(as defined in Section 302 of ERISA and Section 412 of the Code) of
the Company or any Commonly Controlled Entity, whether or not waived,
involving any Single Employer Plan, (d) incur or suffer to exist any
Reportable Event or the appointment of a trustee or institution of
proceedings for appointment of a trustee for any Single Employer Plan
if, in the case of a Reportable Event, such event continues unremedied
for ten (10) days after notice of such Reportable Event pursuant to
Sections 4043(a), (c) or (d) of ERISA is given, if in the reasonable
opinion of the Bank any of the foregoing is likely to result in a
Material Adverse Effect, (e) allow or suffer to exist any event or
condition, which presents a material risk of incurring a material
liability of the Company or any Commonly Controlled Entity to PBGC by
reason of termination of any such Plan or (f) cause or permit any Plan
maintained by the Company and/or any Commonly Controlled Entity to be
out of compliance with ERISA.
SECTION 8.22. LOAN BASE. The Company will not request any Loan
---------
which, when aggregated with all other Loans outstanding under this
Agreement, exceed the Loan Base. Further, if at any time the total
Loans outstanding under this Agreement exceed the Loan Base, the
Company agrees to repay within twenty-four (24) hours one or more
Loans in amount sufficient to reduce the aggregate balances
outstanding on the Loans to an amount less than the Loan Base.
ARTICLE IX. EVENTS OF DEFAULT
------------------------------
The occurrence of any one or more of the following events shall
constitute an Event of Default under this Agreement:
SECTION 9.1. PRINCIPAL OR INTEREST. If the Company fails to pay
---------------------
any installment of principal of or interest on the Note, or any other
sums of money when due and payable under this Agreement (including but
not limited to payments required to reduce all Loan amounts to the
Loan Base) and such failure continues for twenty-four (24) hours; or
SECTION 9.2 MISREPRESENTATION. If any representation or
-----------------
warranty made herein by the Company or in any written statement,
certificate, report, or financial statement at any time furnished by,
or on behalf of, the Company in connection herewith, is incorrect or
misleading in any material respect when made; or
35
SECTION 9.3. FAILURE OF PERFORMANCE OF THIS AGREEMENT. Except
----------------------------------------
as otherwise provided herein, if the Company fails to perform or
observe any covenant or agreement contained in this Agreement or any
of the other Loan Documents, and such failure remains unremedied for
thirty (30) calendar days after the Bank shall have given written
notice thereof to the Company; or
SECTION 9.4. CROSS-DEFAULT. If the Company (a) fails to pay any
-------------
Indebtedness aggregating more than $100,000.00 (other than as
evidenced by the Note, which failure shall constitute an Event of
Default under Section 10.1) owing by the Company when due, whether at
maturity, by acceleration, or otherwise, or (b) fails to perform any
term, covenant, or agreement on its part to be performed under any
agreement or instrument (other than the Loan Documents, which failure
to perform shall constitute an Event of Default under Section 9.1 or
Section 9.3) evidencing, securing, or relating to such Indebtedness in
excess of $100,000 when required to be performed, or is otherwise in
default thereunder, if the effect of such failure is to accelerate, or
to permit the holder(s) of such Indebtedness or the trustee(s) under
any such agreement or instrument to accelerate, the maturity of such
Indebtedness, whether or not such failure shall be waived by such
holder(s) or trustee(s); or
SECTION 9.5. INSOLVENCY. If the Company shall discontinue
----------
business or (a) is adjudicated a bankrupt or insolvent under any law
of any existing jurisdiction, domestic or foreign, or ceases, is
unable, or admits in writing its inability, to pay its debts generally
as they mature, or makes a general assignment for the benefit of
creditors, (b) applies for, or consents to, the appointment of any
receiver, trustee, or similar officer for it or for any substantial
part of its property, or any such receiver, trustee, or similar
officer is appointed without the application or consent of the
Company, and such appointment continues thereafter undischarged for a
period of thirty (30) days, (c) institutes, or consents to the
institution of any bankruptcy, insolvency, reorganization,
arrangement, readjustment or debt, dissolution, liquidation, or
similar proceeding relating to it under the laws of any jurisdiction,
(d) any such proceeding is instituted against the Company and remains
thereafter undismissed for a period of thirty (30) days, or (e) any
judgment, writ, warrant of attachment or execution, or similar process
is issued or levied against a substantial part of the property of the
Company or any Subsidiary and such judgment, writ, or similar process
is not effectively stayed within thirty (30) days after its issue or
levy.
SECTION 9.6. LOSS OF OCCUPANCY OF PENNSYLVANIA LEASEHOLD. If
------------------------------------------
the Company, for any reason, is evicted from, or loses the right to
occupy, the Leased Premises located in Dunbar, Pennsylvania and which
are the subject of a sublease between E.I. du Pont de Nemours and
Company, as sublessor, and the Company, as sublessee.
ARTICLE X. REMEDIES UPON DEFAULT
---------------------------------
SECTION 10.1. OPTIONAL ACCELERATION. In the event that one or
---------------------
more of the Events of Default set forth in Sections 9.l through 9.6
above occurs and continues and is not waived by the Bank, then, in any
such event, and at any time thereafter, the Bank may, at its option,
terminate its commitment to make any Loan and declare the unpaid
principal of, and all accrued interest on any Note, and any other
liabilities hereunder, and all other Indebtedness of the Company to
the Bank forthwith due and payable, whereupon the same will forthwith
become due and payable without presentment, demand, protest, or other
notice of any kind, all of which the Company hereby expressly waives,
anything contained herein or in any Note to the contrary
notwithstanding.
36
SECTION 10.2. AUTOMATIC ACCELERATION. Upon the happening of an
----------------------
Event of Default referred to in Section 9.6 above, the unpaid
principal of, and all accrued interest on, any Note, and any other
liabilities hereunder and all other Indebtedness of the Company to the
Bank then existing will thereupon become immediately due and payable
in full and the commitment, if any, of the Bank to make any Loan, if
not previously terminated, will thereupon immediately terminate
without presentment, demand, protest, or notice of any kind, all of
which are hereby expressly waived by the Company, anything contained
herein or in any Note to the contrary notwithstanding.
SECTION 10.3. REMEDIES. The Bank shall have the rights and
--------
remedies of a secured party under the Uniform Commercial Code in
addition to the rights and remedies of a secured party provided
elsewhere within the Agreement or in any other writing executed by the
Company. The Bank may require the Company to assemble the Collateral
and make it available to the Bank at a reasonably convenient place to
be designated by the Bank. Unless the Collateral is perishable,
threatens to decline speedily in value, or is of a type customarily
sold on a recognized market, the Bank will give the Company reasonable
notice of the time and place of any public sale of the Collateral or
of the time after which any private sale or other intended disposition
thereof is to be made. The requirement of reasonable notice shall be
met if such notice is mailed (deposited for delivery, postage prepaid,
by U.S. mail) to either, at the Bank's option (l) principal office of
the Company as set forth in this Agreement (or as modified by any
change therein which the Company has supplied in writing to the Bank),
or (2) the Company's address at which the Bank customarily
communicates with the Company, at least ten (l0) days before the time
of the public sale or the time after which any private sale or other
intended disposition thereof is to be made. At any such public or
private sale, the Bank may purchase the Collateral. After deduction
for the Bank's Related Expenses, the residue of any such sale or other
disposition shall be applied in satisfaction of the Obligations in
such order of preference as the Bank may determine. Any excess, to
the extent permitted by law, shall be paid to the Company, and the
Company shall remain liable for any deficiency.
SECTION 10.4. NO WAIVER. The remedies in this ARTICLE X are in
---------
addition to, not in limitation of, any other right, power, privilege,
or remedy, either in law, in equity, or otherwise, to which the Bank
may be entitled. No failure or delay on the part of the Bank in
exercising any right, power, or remedy will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right
hereunder.
ARTICLE XI. MISCELLANEOUS
--------------------------
SECTION 11.1. AMENDMENTS. No waiver of any provision of this
----------
Agreement, the Note, or consent to departure therefrom, is effective
unless in writing and signed by the Bank. No such consent or waiver
extends beyond the particular case and purpose involved. No amendment
to this Agreement is effective unless in writing and signed by the
Company and the Bank.
SECTION 11.2. EXPENSES; DOCUMENTARY TAXES. The Company shall
---------------------------
pay (a) all out-of-pocket expenses of the Bank, including fees and
disbursements of special counsel for the Bank, in connection with the
preparation of this Agreement (which fees of special counsel shall not
exceed $10,000.00), any waiver or consent hereunder or any amendment
hereof or any Event of Default hereunder, and (b) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Bank,
including reasonable fees and disbursements of counsel, in connection
with such Event of Default and collection and other enforcement
proceedings resulting therefrom. The Company shall
37
reimburse the Bank for its payment of all transfer taxes, documentary
taxes, assessments, or charges made by any governmental authority by
reason of the execution and delivery of this Agreement or the Note.
SECTION 11.3. INDEMNIFICATION. The Company shall indemnify and
---------------
hold the Bank harmless against any and all liabilities, losses,
damages, costs, and expenses of any kind (including, without
limitation, the reasonable fees and disbursements of counsel in
connection with any investigative, administrative or judicial
proceeding, whether or not the Bank shall be designated a party
thereto) which may be incurred by the Bank relating to or arising out
of this Agreement or any actual or proposed use of proceeds of any
Loan hereunder; provided, that the Bank shall have no right to be
indemnified hereunder for its own gross negligence, bad faith or
willful misconduct as determined by a court of competent jurisdiction.
The Company further agrees to indemnify the Bank against any loss or
expense which the Bank may sustain or incur as a consequence of any
default by the Company in payment when due of any amount due hereunder
in respect of any LIBOR Rate Loan, including, but not limited to, any
loss of profit, premium, or penalty incurred by the Bank in respect of
funds borrowed by it for the purpose of making or maintaining any such
Loan, as determined by the Bank in the exercise of its sole but
reasonable discretion. A certificate as to any such loss or expense
shall be promptly submitted by the Bank to the Company and shall, in
the absence of manifest error, be conclusive and binding as to the
amount thereof.
SECTION 11.4. CONSTRUCTION. This Agreement and the Note will be
------------
governed by and construed in accordance with the laws of the State of
Colorado, without regard to principles of conflict of laws. The
several captions to different Sections of this Agreement are inserted
for convenience only and shall be ignored in interpreting the
provisions hereof.
SECTION 11.5. EXTENSION OF TIME. Whenever any payment hereunder
-----------------
or under the Note becomes due on a date which the Bank is not open for
the transaction of business, such payment will be due on the next
succeeding Business Day and such extension of time will be included in
computing interest in connection with such payment.
SECTION 11.6. NOTICES. All written notices, requests, or other
-------
communications herein provided for must be addressed:
to the Company as follows:
Dynamic Materials Corporation
551 Aspen Ridge Dr.
Lafayette, Colorado 80026
Attn: Paul Lange, President
to the Bank as follows:
Key Bank of Colorado
3600 S. Yosemite Street
Denver, Colorado 80237
Attn: Scott Wetzel, Corporate Banking
38
or at such other address as either party may designate to the other in
writing. Such communication will be effective (i) if by telex, when
such telex is transmitted and the appropriate answer back is received,
(ii) if given by mail, 72 hours after such communication is deposited
in the U.S. mail certified mail return receipt requested, or (iii) if
given by other means, when delivered at the address specified in this
Section 11.6.
SECTION 11.7. SURVIVAL OF AGREEMENTS; RELATIONSHIP. All
------------------------------------
agreements, representations, and warranties made in this Agreement
will survive the making of the extension of credit hereunder, and will
bind and inure to the benefit of the Company and the Bank, and their
respective successors and assigns; provided, that no subsequent holder
--------
of the Note shall by reason of acquiring that Note, as the case may
be, become obligated to make any Loan hereunder and no successor to or
assignee of the Company may borrow hereunder without the Bank's
written assent. The relationship between the Company and the Bank
with respect to this Agreement, the Note, and any other Loan Document
is and shall be solely that of debtor and creditor, respectively, and
the Bank has no fiduciary obligation toward the Company with respect
to any such document or the transactions contemplated thereby.
SECTION 11.8. SEVERABILITY. If any provision of this Agreement
------------
or the Note, or any action taken hereunder, or any application
thereof, is for any reason held to be illegal or invalid, such
illegality or invalidity shall not affect any other provision of this
Agreement or the Note, all of which shall be construed and enforced
without reference to such illegal or invalid portion and shall be
deemed to be effective or taken in the manner and to the full extent
permitted by law.
SECTION 11.9. ENTIRE AGREEMENT. This Agreement, the Note, and
-----------------
any other Loan Document integrate all the terms and conditions
mentioned herein or incidental hereto and supersede all oral
representations and negotiations and prior writings with respect to
the subject matter hereof.
SECTION 11.10. JURY TRIAL WAIVER. THE COMPANY AND THE BANK EACH
------------------
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE BANK AND
THE COMPANY ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE BANK'S ABILITY TO PURSUE
REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION
CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
BETWEEN THE BANK AND THE COMPANY.
39
IN WITNESS WHEREOF, the Company and the Bank have each caused
this Agreement to be executed by their duly authorized officers this
19 day of July , l996.
- ---- ------
COMPANY: DYNAMIC MATERIALS CORPORATION
BY: /s/ P. Lange
-------------------------------------
TITLE: President
BANK: KEY BANK OF COLORADO
BY: /s/ Scott Wetzel
-------------------------------------
TITLE: A.V.P. Corporate Banking
----------------------------------
40
EXHIBIT A
PROMISSORY NOTE
---------------
$7,500,000.00 JULY 19, 1996
For value received, DYNAMIC MATERIALS CORPORATION (the
"Company") promises to pay to the order of KEY BANK OF COLORADO,
Denver, Colorado, (the "Bank"), its successor and assigns, at its main
office, on the date or dates and in the manner specified in Article II
of the Credit Agreement (as defined below), the aggregate principal
amount of the Loans as shown on any ledger or other record of the
Bank, which shall be rebuttably presumptive evidence of the principal
amount owing and unpaid on this Note.
The Company promises to pay to the order of the Bank interest on
the unpaid principal amount of each Loan made pursuant to the Credit
Agreement from the date of such Loan until such principal amount is
paid in full at such interest rate(s) and at such times as are
specified in ARTICLE II of the Credit Agreement.
This Note is the Note referred to in, and is entitled to the
benefits of, the Credit Facility and Security Agreement ("Credit
Agreement") by and between the Bank and the Company dated July 19,
l996, as the same may be hereafter amended from time to time. This
Note may be declared forthwith due and payable in the manner and with
the effect provided in the Credit Agreement, which contains provisions
for acceleration of the maturity hereof upon the happening of any
Event of Default and also for prepayment on account of principal
hereof prior to the maturity hereof upon the terms and conditions
therein specified.
Each defined term used in this Note shall have the meaning
ascribed thereto in Section 1.2 of the Credit Agreement.
The Company expressly waives presentment, demand, protest, and
notice of dishonor.
The Company acknowledges that this Note was signed in the City of
Denver, in the State of Colorado.
COMPANY: DYNAMIC MATERIALS CORPORATION
By:_________________________________
Title: President
LOAN CERTIFICATE EXHIBIT B
----------------
Dynamic Materials Corporation
Certificate Date: _______________
Borrowing Base Calculation:
$ Advance Qualified
------ ------- ---------
Rate Collateral
---- ----------
Accounts Receivable
- -------------------
*Eligible Accounts Receivable 80% (A)
------- --------- ---------
*(Per loan agreement)
Inventory
- ---------
Raw Material 50% (B)
------- --------- ---------
Work In Process 30% (C)
------- --------- ---------
Property, Plant & Equipment
- ---------------------------
P,P,& E: Appraised 70% (D)
------- --------- ---------
P,P,& E: Net Book Value 50% (E)
------- --------- ---------
Total Qualified Collateral (Add lines A. through E.) (F)
---------
Less: Current Outstanding Revolving Credit Balance (G)
---------
Total Collateral Excess (Shortfall): (F.-G.)
---------
Covenant Tests:
- --------------
1.) Current Ratio _________
2.) Total Indebtedness to Tangible Net Worth _________
3.) Capital Expenditures (YTD Total) _________
4.) Funds From Operations to Total Debt (Test Annually Only) _________
5.) Date of Last Backlog Report submitted to
Bank _________
6.) Date of Last Receivable Aging submitted to
Bank _________
7.) Date of Last Inventory Analysis submitted to Bank _________
8.) Date of Last Financial Statement submitted to Bank _________
I certify that the above information is true and correct to the best
of my knowledge, and further attest that Dynamic Materials Corporation
is in full compliance with the terms and conditions of its loan
agreement with KeyBank of Colorado (the "Loan Agreement"), (ii) no
Event of Default shall have occurred and is continuing, (iii) each
representation and warranty set forth in the Loan Agreement is true
and correct as of the date of this Loan Certificate and (iv) no event
shall have occurred or failed to occur which has or is reasonably
likely to have a Material Adverse Effect (as all capitalized terms are
defined in the Loan Agreement):
BY:_________________________________ Title:______________________
Name (Print)________________________ Date: ______________________
EXHIBIT C
SCHEDULE OF COMPANY
-------------------
In order to induce Key Bank of Colorado ("Bank") to make loans to
Dynamic Materials Corporation ("Company") under, and pursuant to, that
Credit Facility and Security Agreement dated July 19, 1996, between
Bank and Company ("Credit Agreement"), Company represents and
certifies to Bank those matters described below as of July 19, 1996,
which representations and certifications assume the Company has closed
the transaction by which the Company is purchasing from E.I. du Pont
de Nemours and Company the assets of the DETACLAD explosion bonded
clad metal business. All capitalized terms have the meanings defined
in the Credit Agreement.
THE COMPANY'S PRINCIPAL PLACE OF BUSINESS, CHIEF EXECUTIVE OFFICES,
ACCOUNTING OFFICERS, AND RECORDS OF ACCOUNTS RECEIVABLE AND GENERAL
INTANGIBLES ARE LOCATED AT:
551 Aspen Ridge Dr.
Lafayette, Colorado 80026
THE COMPANY'S REGISTERED OFFICE IS LOCATED AT:
551 Aspen Ridge Drive
Lafayette, CO 80026
THE LOCATION OF ALL REAL PROPERTY OWNED OR LEASED BY THE COMPANY IS
DESCRIBED BELOW; NONE OF SUCH PROPERTY IS LOCATED IN ANY FEDERAL,
STATE, OR MUNICIPAL FLOOD ZONE; AND ALL SUCH PROPERTY IS IN GOOD
REPAIR, WORKING ORDER AND CONDITION, REASONABLY SUITABLE FOR USE IN
THE COMPANY'S BUSINESS OPERATIONS, AND ARE CURRENTLY OPERATED AND
MAINTAINED, IN ALL MATERIAL RESPECTS, IN ACCORDANCE WITH REQUIREMENTS
OF APPLICABLE GOVERNMENTAL AUTHORITIES:
The company owns the real estate known as 1301 Courtesy
Road, Louisville, Colorado.
The Company leases facilities at:
John Jolly Ranch -- Deertrail, Colorado
551 Aspen Ridge Drive -- Lafayette, Colorado
1255 Distel Drive -- Lafayette, Colorado
The Dunbar Mine
Kennett Square
THE COMPANY LOCATES INVENTORY, EQUIPMENT, AND ALL OTHER TANGIBLE
COLLATERAL OF THE COMPANY ONLY AT THE FOLLOWING LOCATIONS, WHICH
INCLUDES THE LOCATION OF ALL WAREHOUSES, BAILEES OR CONSIGNEES:
1301 Courtesy Road, Louisville, Colorado
1225 Distel Drive, Lafayette, Colorado
Dunbar Mine, Dunbar, Pennsylvania
THE ONLY TRADE NAMES, ASSUMED NAMES, FICTITIOUS NAMES OR OTHER NAMES
USED BY THE COMPANY DURING THE FIVE YEARS PRIOR TO THE DATE OF THIS
CERTIFICATE ARE AS FOLLOWS:
E.F. Industries
Explosive Fabricators, Inc.
THE ADDRESSES OF ALL POST OFFICE BOXES RENTED BY THE COMPANY TO SERVE
AS LOCKBOXES ARE AS FOLLOWS:
Norwest Lockbox 418
THE ONLY DEPOSIT ACCOUNTS OR TRUST ACCOUNTS (COLLECTIVELY, THE
"PERMITTED ACCOUNTS") MAINTAINED BY THE COMPANY FOR THE PURPOSE OF
COLLECTING AND DEPOSITING COLLECTIONS AND\OR REMITTANCES OR OTHERWISE
HOLDING MONIES OF THE COMPANY, OTHER THAN THE BLOCKED ACCOUNTS AND
CASH COLLATERAL ACCOUNTS, ARE DISCLOSED BELOW:
Norwest Denver Operating Account
THE ONLY BANKS WITH WHICH THE COMPANY HAS, OR WILL, ESTABLISH BLOCKED
ACCOUNTS ARE AS FOLLOWS:
THE COMPANY HAS OBTAINED THE APPROVAL OF ALL PERSONS (INCLUDING ALL
GOVERNMENTAL AUTHORITIES) REQUIRED TO ALLOW THE COMPANY TO ENTER INTO
AND PERFORM ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS, EXCEPT FOR THE
FOLLOWING APPROVALS:
THE COMPANY PRESENTLY HOLDS THE PERMITS, GOVERNMENTAL LICENSES,
REGISTRATIONS AND APPROVALS (COLLECTIVELY, THE "PERMITS"), MATERIAL
TO CARRYING ON THE COMPANY'S BUSINESSES LISTED BELOW; ALL OF WHICH ARE
IN FULL FORCE AND EFFECT, ARE DULY ISSUED IN THE NAME OF, OR VALIDLY
ASSIGNED TO THE COMPANY AND THE COMPANY HAS FULL POWER AND AUTHORITY
TO OPERATE THEREUNDER; THERE ARE NO MATERIAL VIOLATIONS OR FAILURES OF
COMPLIANCE ON THE PART OF THE COMPANY WITH THE PERMITS; AND THERE ARE
NO ACTIONS, PROCEEDINGS OR INVESTIGATIONS PENDING OR, TO THE COMPANY'S
KNOWLEDGE THREATENED, NOR HAS THE COMPANY RECEIVED ANY NOTICE OF WHICH
MIGHT RESULT IN THE TERMINATION OR SUSPENSION OF ANY PERMIT WHICH IN
ANY CASE COULD HAVE A MATERIAL ADVERSE EFFECT, EXCEPT AS DISCLOSED
BELOW:
Permit from Bureau of Alcohol Tobacco and Fire Arms for
storage and use of explosives
Special use zoning allowance at Deertrail, Colorado by
Arapahoe County
Standard business licenses - State of Colorado
Storm Water Discharge Permit - State of Colorado
Air Emissions Discharge Permit - State of Colorado
Magazine permit, Federal Bureau of Alcohol, Tobacco and Fire
Arms
Explosive Manufacturing Usage Permit, Federal Bureau of
Alcohol, Tobacco and Fire Arms
44
THE COMPANY HAS NOT FILED ANY REGISTRATION STATEMENTS, NOTICES OR
STATEMENTS OF ACCOUNT WITH THE UNITED STATES COPYRIGHT OFFICE EXCEPT
AS DESCRIBED BELOW; THE REGISTERED COPYRIGHTS HELD BY THE COMPANY ARE
ACCURATELY AND COMPLETELY SET FORTH BELOW; AND TO THE COMPANY'S
KNOWLEDGE NO INQUIRIES REGARDING ANY SUCH FILINGS HAVE BEEN RECEIVED
BY THE COPYRIGHT OFFICE EXCEPT AS DISCLOSED BELOW:
None.
THE REGISTERED TRADEMARKS, REGISTERED COPYRIGHTS AND PATENTS OF THE
COMPANY, PENDING APPLICATIONS THEREFOR, AND ALL OTHER INTELLECTUAL
PROPERTY IN WHICH THE COMPANY HAS ANY RIGHTS (OTHER THAN "OFF-THE-
SHELF" SOFTWARE WHICH IS GENERALLY AVAILABLE TO THE GENERAL PUBLIC AT
RETAIL) IS COMPLETELY AND ACCURATELY DESCRIBED BELOW; AND, EXCEPT AS
SET FORTH BELOW, THE COMPANY OWNS, POSSESSES, OR HAS LICENSES, AND ALL
RIGHTS WITH RESPECT TO THE FOREGOING, NECESSARY FOR THE CONDUCT OF ITS
BUSINESS AS NOW CONDUCTED, WITHOUT, TO THE COMPANY'S KNOWLEDGE, ANY
CONFLICT WITH THE RIGHTS OF OTHERS WITH RESPECT THERETO:
Registered Trademarks and Trade Names:
DynaCouple
DuraTemp
EFTEK
DETACLAD
DETACOUPLE
U.S. Patents and Patent Applications:
Explosively Bonding Metal Composite, U.S. Patent No.
5,323,955
Process for Explosively Bonding Metals, U.S. Patent No.
5,400,945
Hot Rolled Explosion-Bonded Titanium/Steel Composites,
Filing Date: March 29, 1996
ALL OF THE MATERIAL AGREEMENTS ARE ACCURATELY AND COMPLETELY LISTED
BELOW, ALL OF WHICH ARE IN EFFECT, AND ARE LEGALLY VALID, BINDING, AND
TO THE COMPANY'S KNOWLEDGE, IN FULL FORCE AND EFFECT; NEITHER THE
COMPANY, NOR TO THE COMPANY'S KNOWLEDGE, ANY OTHER PARTIES THERETO ARE
IN MATERIAL DEFAULT OF THE MATERIAL AGREEMENTS:
Sublease dated July 22, 1996 between the Company and E.I.
duPont de Nemours and Company
Tolling/Services Agreement for Industrial Diamonds dated
July 22, 1996 between the Company and E.I. du Pont de
Nemours and Company
Purchase and Sale Agreement dated July 22, 1996 between the
Company and E.I. du Pont de Nemours and Company
ASC Engineering
Thompson Metal Fabrication
Boeing Commercial
45
Larsen & Taibro
Nooter Corporation
Consorcio Industrial
Monsanto
Struthers Industries, Inc.
Cosmos Minerals Corporation
Trinity Industries
Graham Manufacturing
Ingalls Shipbuilding
Resolute Samantha, Ltd.
Phoenix Metallurgical Company
Scientific Engineering
Senior Engineering
Ohmstede
VDM Australia
Lukens Steel Company
Oregon Metallurgical
Teledyne Wah Chang ALbany
Timet
Titanium Industries
Franco Steel
Uniform Components
Le Tarneau Steel
American Alloy
DetaClad operation - Du Pont Corporation
ESCO
INCO
Metal 600ps
RMI Titanium
Tyesson
Carl Thompson Associates
The Wallach Company
Cooley Godward Castro Huddleson & Tatum
Chubb Insurance
Liberty Mutual Insurance
Norwest Bank Denver
Norwest Investment Services
Norwest Leasing
Colorado National Leasing
Design Fabricators
Mutual of Omaha
Northwestern Mutual Insurance
Invesco
John Jolly, Sr.
46
ALL OF THE RELATED TRANSACTION DOCUMENTS ARE LISTED BELOW:
Purchase and Sale Agreement dated July 22, 1996
Tolling Manufacturing Agreement dated July 22, 1996
Lease Agreement dated July 22, 1996
ALL OF THE COMPANY'S INVESTMENTS EXISTING ON JULY 19, 1996 ARE
DESCRIBED BELOW:
Norwest Denver - Operating Account
ALL OF THE LIENS EXISTING AS OF THE DATE OF THIS AGREEMENT ARE LISTED
BELOW:
Concord Financial
Sanwa Leasing
Colonial Pacific
Norwest Leasing
EXCEPT AS EXPRESSLY DESCRIBED BELOW, NEITHER THE COMPANY NOR, TO THE
KNOWLEDGE OF THE COMPANY, ANY OTHER PERSON HAS: (A) EVER CAUSED,
PERMITTED, OR SUFFERED TO EXIST ANY HAZARDOUS MATERIAL TO BE SPILLED,
PLACED, HELD, LOCATED OR DISPOSED OF ON, UNDER, OR ABOUT, ANY OF THE
PREMISES OWNED OR LEASED BY THE COMPANY (THE "PREMISES"), OR FROM THE
PREMISES INTO THE ATMOSPHERE, ANY BODY OF WATER, ANY WETLANDS, OR ON
ANY OTHER REAL PROPERTY, NOR DOES ANY HAZARDOUS MATERIAL EXIST ON,
UNDER OR ABOUT THE PREMISES, OR IN RESPECT OF HAZARDOUS MATERIAL USED
OR DISPOSED OF IN COMPLIANCE WITH LAW; (B) EVER USED (WHETHER BY THE
COMPANY OR BY ANY OTHER PERSON) AS A TREATMENT, STORAGE OR DISPOSAL
(WHETHER PERMANENT OR TEMPORARY) SITE FOR ANY HAZARDOUS WASTE AS
DEFINED IN 42 U.S.C.A. SECTION 6901, ET SEQ. (THE RESOURCE RECOVERY
-- ---
AND CONSERVATION ACT); OR (C) ANY KNOWLEDGE OF ANY NOTICE OF
VIOLATION, LIEN OR OTHER NOTICE ISSUED BY ANY GOVERNMENTAL AGENCY WITH
RESPECT TO THE ENVIRONMENTAL CONDITION OF THE PREMISES OR ANY OTHER
PROPERTY OCCUPIED BY THE COMPANY:
Those disclosed in 1989 report of the Toxic Release
Inventory Data System (TRIS) attached hereto.
47