AMENDED AND RESTATED
CREDIT FACILITY AND
SECURITY AGREEMENT
THIS AGREEMENT is made by and between the Company (as herein defined) and
the Bank (as herein defined).
WHEREAS, the Company and the Bank entered into a Credit Facility and
Security Agreement dated as of July 19, 1996, (the "Receivables Line") which, as
amended, provided for loans up to five million dollars ($5,000,000) to be
supported by the Company's eligible accounts receivable and inventory; and
WHEREAS, the Company and the Bank entered into a Credit Facility and
Security Agreement dated as of March 18, 1998, (the "Reducing Revolving Credit")
which, as amended, provided for loans of up to four million dollars
($4,000,000); and
WHEREAS, the Company has entered into an Asset Purchase Agreement dated as
of November 18, 1998 which contemplates the acquisition (the "Acquisition") by
the Company of certain of the assets of Precision Machined Products, a Colorado
corporation, and the Company has requested that the Bank restructure the
Receivables Line and the Reducing Revolving Credit to provide financing for the
Acquisition and a working line of capital; and
WHEREAS, the Bank is willing to restructure the above-referenced credit
facilities on the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, the Company and the Bank hereby mutually agree that the Receivables Line
and the Reducing Revolving Credit are amended and restated in their entirety as
follows:
ARTICLE I. DEFINITIONS
SECTION 1.1 GENERAL. Any accounting term used but not 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:
"ACCEPTABLE REAL ESTATE" shall mean only such real property of the
Company, valued at the lower of cost or fair market value, as the Bank in its
reasonable discretion, shall from time to time consider eligible to support
advances under the Acquisition Line or the Working Capital Line.
"ACCOUNT" shall mean (a) any account as defined in the UCC, and (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 Account
Receivable.
"ACCOUNT RECEIVABLE" shall mean:
(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, including, without limitation (i) any rights of stoppage in
transit of a Person's sold, leased, or furnished Goods, (ii) any rights to
reclaim a Person's sold, leased, or furnished Goods, and (iii) 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 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.
"ACQUISITION" shall have the meaning set forth in the recitals hereto.
"ACQUISITION LINE" shall mean the line of credit provided by the Bank
pursuant to Section 2.1(a) hereof.
"ACQUISITION LINE CREDIT LIMIT" shall mean $8,000,000 less any permanent
reductions to such amount resulting from (i) conversion of Credit Loans to Term
Loans pursuant to Section 2.2 hereof, (ii) principal payments required to be
made under Section 2.7(a) hereof and (iii) Free Cash Flow recapture payments
made under Section 2.8(c) hereof.
"ACQUISITION LINE MATURITY DATE" shall mean the last day of the sixth
(6th) Contract Year.
"ACQUISITION NOTE" shall mean the promissory note of the Company in
substantially the form of Exhibit A hereto, evidencing amounts advanced by the
Bank pursuant to Section 2.1(a) hereof.
"BANK" shall mean KeyBank National Association, a national banking
association, and its successors and assigns.
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"BORROWING BASE" shall mean an amount equal to the sum of:
(a) the lesser of (i) 50% of the net book value of all Eligible Equipment
of the Company, or (ii) 70% of the orderly liquidation value of all Eligible
Equipment of the Company, or (iii) 80% of the forced sale value of all Eligible
Equipment of the Company, each as determined in accordance with an appraisal
performed prior to the inclusion of such Equipment in the Borrowing Base by a
licensed appraiser satisfactory to the Bank, in its reasonable discretion; plus
(b) 75% of Acceptable Real Estate; plus
(c) 80% of Eligible Accounts Receivable; plus
(d) the sum of (i) 50% of Eligible Inventory consisting of raw materials
and Eligible Inventory consisting of work-in-process previously purchased by the
Company from Spin Forge LLC or purchased from Precision Machined Products
pursuant to the Acquisition, plus (ii) 30% of Eligible Inventory consisting of
work-in-process other than work-in-process previously purchased by the Company
from Spin Forge LLC or purchased from Precision Machined Products pursuant to
the Acquisition, plus (iii) 50% of Eligible Inventory consisting of finished
product.
Each dollar of Borrowing Base availability shall support one dollar of Loans
under either the Acquisition Line or the Working Capital Line, and the Borrowing
Base shall be utilized to support borrowings under the Acquisition Line and the
Working Capital Line in such amounts and in such proportions as the Bank and the
Company shall agree.
"BORROWING BASE CERTIFICATE" shall mean the Borrowing Base Certificate in
the form of Exhibit D attached hereto.
"BUSINESS CONDITION" shall mean the financial condition, business and
assets of a Person.
"BUSINESS DAY" shall mean a day of the year on which banks are 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, 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 but
excluding expenditures relating to the Company's Pennsylvania Industrial
Development Revenue Bond Project).
"CASH COLLATERAL ACCOUNT" shall mean a commercial Deposit Account
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.
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"CASH SECURITY" shall mean all cash, Instruments, Deposit 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.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERAL" shall have the meaning described in Section 3.1 hereof
"COLLECTIONS" shall have the meaning described in Section 4.1 hereof.
"COMMONLY CONTROLLED ENTITY" shall mean a Person, whether or not
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 Delaware
corporation, with its principal office located at 000 Xxxxx Xxxxx Xx.,
Xxxxxxxxx, Xxxxxxxx 00000, and its successors.
"CONTRACT RIGHT" shall mean (a) any contract right, and (b) any right to
payment under a contract not yet earned by performance and not evidenced by an
Instrument or Chattel Paper.
"CONTRACT YEAR" shall mean the each twelve (12) month period which
commences on the date hereof and on each anniversary of the date of execution of
the Agreement.
"CREDIT LOAN" shall mean a revolving Loan described in Section 2.1 of this
Agreement.
"CURRENT ASSETS" and "CURRENT LIABILITIES" shall mean the amounts as
determined in accordance with GAAP not inconsistent with present accounting
procedures.
"DEBT SERVICE COVERAGE RATIO" shall mean the ratio of (i) the sum of (A)
net income after taxes, exclusive of extraordinary gains and gains on the sale
of assets, plus (B) depreciation and amortization, plus (C) interest expense
(including the portion of any capitalized lease obligation allocable to interest
expense), to (ii) the sum of (A) current maturities of long-term debt and
capitalized leases, plus (B) interest expense (including the portion of any
capitalized lease obligation allocable to interest expense), plus (C) dividends
and distributions, plus (D) unfinanced Capital Expenditures.
"DEPOSIT ACCOUNT" shall mean (a) any deposit account, and (b) any 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 title,
including a xxxx 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
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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.
"EBITDA" of the Company for any period shall mean the Company's earnings
(including one-time or extraordinary adjustments relating to the Xxxx Xxxxx
Separation Agreement and one-time start-up costs associated with the Company's
Pennsylvania Industrial Development Revenue Bond- backed project) plus interest,
taxes, depreciation and amortization, each as calculated for such period in
accordance with GAAP.
"ELIGIBLE ACCOUNTS RECEIVABLE" means, as at any applicable date of
determination, the aggregate face amount of the Accounts Receivable included in
the definition of Accounts Receivable hereunder without duplication, in each
case less (without duplication) the aggregate amount of all reserves,
limitations and deductions with respect to such Accounts Receivable set forth
below or as otherwise provided in this Agreement and less the aggregate amount
of all returns, discounts, claims, credits, charges and allowances of any nature
with respect to such Accounts Receivable (whether issued, owing, granted or
outstanding). Unless otherwise approved in writing by the Bank in its sole
discretion, no individual Account Receivable shall be deemed to be an Eligible
Account Receivable if:
(a) the Company does not have legal and valid title to the Account
Receivable; or
(b) the Account Receivable is not the valid, binding and legally
enforceable obligation of the Account Debtor subject, as to enforceability, only
to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws at the time in effect affecting the enforceability of creditors' rights
generally and (ii) judicial discretion in connection with the remedy of specific
performance and other equitable remedies; or
(c) the Account Receivable arises out of sale made to any Affiliate of the
Company; or
(d) the Account Receivable or any portion thereof is unpaid more than the
earlier of (i) 90 days after the original invoice date, or (ii) 105 days after
the services were provided, or goods sold, which gave rise to such Account
Receivable; or
(e) the Account Receivable, when aggregated with all other Accounts
Receivable of the same Account Debtor (or any Affiliate thereof), exceeds fifty
percent (50%) in face value of all Accounts Receivable of the Company then
outstanding, to the extent of such excess;
(f) (i) the Account Debtor is also a creditor of the Company, to the
extent of the amount owed by the Company to the Account Debtor, (ii) the Account
Receivable is subject to any claim on the part of the Account Debtor disputing
liability under such Account Receivable in whole or in part, to the extent of
the amount of such dispute or (iii) the Account Receivable otherwise is or is
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reasonably likely to become subject to any right or setoff or any counterclaim,
claim or defense by the Account Debtor, to the extent of the amount of such
setoff or counterclaim, claim or defense; or
(g) the Account Debtor has commenced a voluntary case under applicable
bankruptcy laws, as now constituted or hereafter amended, or made an assignment
for the benefit of creditors or if a decree or order for relief has been entered
by a court having jurisdiction in the premises in respect of the Account Debtor
in an involuntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or if any other petition or other application for relief
under the Account Debtor, or if the Account Debtor has failed, suspended
business, ceased to be solvent, or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or for all or a significant
portion of its assets or affairs; or
(h) the Bank does not have a valid and perfected first priority security
interest in such Account Receivable; or
(i) the sale to the Account Debtor is on a consignment, xxxx-and-hold,
sale on approval, guaranteed sale or sale-and-return basis or pursuant to any
written agreement providing for repurchase or return; or
(j) it is from the same Account Debtor (or any Affiliate thereof) and
fifty percent (50%) or more, in face amount, of other Accounts Receivable from
either such Account Debtor or any Affiliate thereof are ineligible pursuant to
paragraph (d) above; or
(k) seventy-five percent (75%) or more, in face amount, of other Accounts
Receivable from the same Account Debtor are not deemed Eligible Accounts
Receivable hereunder; or
(l) the Goods giving rise to such Account have not been shipped and
delivered to and accepted by the Account Debtor or the services giving rise to
such Account have not been performed by the Borrower and accepted by the Account
Debtor or the Account otherwise does not represent a final sale;
(m) the principal place of business of the Account Debtor is located
outside of the United States, unless the Account Receivable is (i) backed by a
bank letter of credit naming the Bank as beneficiary or assigned to the Bank, in
the Bank's possession and acceptable to the Bank in all respects, in its sole
discretion, or (ii) covered by a foreign receivables insurance policy acceptable
to the Bank in its sole discretion;
(n) the Account Receivable does not comply in all material respects with
all applicable legal requirements, including where applicable, the Federal
Consumer Credit Protection Act, the Federal Truth in Lending Act and Regulation
Z of the Board of Governors of the Federal Reserve System, in each case as
amended; or
(o) the Account Receivable arises out of unbilled cooperative advertising
activities.
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"ELIGIBLE EQUIPMENT" shall mean only such Equipment of the 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 sole discretion, shall from time to time consider to
be Eligible Equipment.
"ELIGIBLE INVENTORY" shall mean only such Inventory of the 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 sole discretion, shall from time to time consider to
be Eligible Inventory.
"ENVIRONMENTAL LAW" shall mean any federal, state, or local 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 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 1974, as
amended from time to time.
"EVENT OF DEFAULT" shall mean any one or more of the occurrences described
in ARTICLE IX hereof.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, during any period, a
fluctuating 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.
"FEDERAL FUNDS EFFECTIVE RATE LOAN" shall mean any Loan that bears
interest with reference to the Federal Funds Effective Rate.
"FREE CASH FLOW" of the Company shall mean the difference between (i) the
sum of the Company's net income plus depreciation and amortization, and (ii) the
sum of (A) current maturities of long-term debt and capitalized leases of the
Company, and (B) unfinanced Capital Expenditures.
"FUNDED DEBT" of the Company shall mean the sum of (i) all outstanding
senior bank Indebtedness of the Company, (ii) all Indebtedness of the Company
relating to any bonds or other debt securities issued by the Company, (iii) all
Indebtedness in respect of the Letter of Credit Loan, and (iv) all Subordinated
Debt of the Company.
"GAAP" shall mean generally accepted accounting principles as then in
effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, consistently applied.
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"GENERAL INTANGIBLE" shall mean (a) any "general intangible" (as 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 (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 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 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).
"INTEREST PERIOD" means, with respect to any LIBOR Rate Loan, the 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 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) 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.
"LETTER OF CREDIT LOAN" shall mean the $7,000,000 loan to Company from
Bank, evidenced by the issuance of a Letter of Credit to provide a credit
enhancement for bond financing and which loan shall be secured by a lien on
certain property, plant and equipment of the Company located in Mount Xxxxxxxx,
Pennsylvania.
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"LIBOR RATE" shall mean, for any Interest Period for any LIBOR Rate 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 reference
to the LIBOR Rate.
"LIBOR RATE MARGIN" shall mean: (i) during the period prior to the first
Margin Adjustment Date, 200 basis points, and (ii) thereafter, the number of
basis points determined pursuant to Section 2.5(b)(ii) hereof.
"LIBOR RESERVE REQUIREMENTS" means, for any Interest Period for 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,
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 Company
extended by the Bank in accordance with ARTICLE II hereof.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes and any other
documents relating thereto.
"LOCKBOX" shall have the meaning specified in Section 4.1 of this
Agreement.
"MARGIN ADJUSTMENT DATE" shall have the meaning specified in Section
2.5(b)(i) hereof.
"MARGIN STOCK" shall have the meaning given to it under 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 (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.
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"MATERIAL AGREEMENTS" shall mean (a) any agreement to which the Company is
a party which provides for the receipt or expenditure by the Company or any
Subsidiary of more than $500,000.00 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 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 Acquisition Note or the Working Capital Note;
"NOTES" shall mean the Acquisition Note and the Working Capital Note.
"OBLIGATIONS" shall mean any and all indebtedness, obligations,
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 of the Bank.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to subtitle A of Title IV or ERISA.
"PERMITTED INVESTMENT" shall mean the Company's:
(a) investments existing on the date hereof 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;
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(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 types not enumerated in subparts (a) through (i)
aggregating not in excess of $100,000.
"PERMITTED LIEN" shall mean the following:
(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);
(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
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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
conjunction 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 of the 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 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).
"RELATED EXPENSES" means any and all reasonable costs, 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
12
(d) incidental or related to subparts (a) through (c) above.
"REMITTANCES" shall have the meaning described in Section 4.1 of this
Agreement.
"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 Section
4001(a)(15) of ERISA.
"SUBORDINATED DEBT" shall mean Indebtedness of a Person which is
subordinated, in a manner satisfactory to the Bank, to the Obligations.
"SUBSIDIARY" shall mean any Person of which more than fifty 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" of the Company shall mean its net worth plus
Subordinated Debt, MINUS intangible assets and any notes, Accounts Receivable or
other obligations owed to the Company by any Affiliate or officer of the
Company.
"TERM LOAN" shall mean any of the term loans described in Section 2.2 of
this Agreement.
"TOTAL INDEBTEDNESS" of the Company shall mean the Company's aggregate
Indebtedness (including any Indebtedness in respect of the Letter of Credit
Loan) minus any Subordinated Debt of the Company.
"UCC" shall mean the Uniform Commercial Code in effect in the State of
Colorado from time to time.
"UNUSED AMOUNT" shall mean the difference between (i) the Working Capital
Line Credit Limit, and (ii) the aggregate amount of all outstanding Credit Loans
under the Working Capital Line.
"UNUSED LINE RATE" shall mean: (i) during the period prior to the first
Margin Adjustment Date, a rate of interest per annum equal to 37.5 basis points,
and (ii) thereafter, a rate of interest per annum, to be redetermined on each
Margin Adjustment Date, equal to the number of basis points indicated on the
following table corresponding to the ratio of the Company's Indebtedness to its
Tangible Net Worth:
13
RATIO UNUSED LINE RATE
<1.00 to 1.00 12.5 Basis Points
>=1.00 to 1.00 but <2.00 to 1.00 25.0 Basis Points
>=2.00 to 1.00 but <3.00 to 1.00 25.0 Basis Points
>=3.00 to 1.00 37.5 Basis Points
"WORKING CAPITAL LINE" shall mean the line of credit provided by the Bank
pursuant to Section 2.1(b) hereof.
"WORKING CAPITAL LINE CREDIT LIMIT" shall mean $6,000,000 less any
permanent reductions to such amount resulting from (i) conversion of Credit
Loans to Term Loans pursuant to Section 2.2 hereof and (ii) principal payments
required to be made under Section 2.7(b) hereof.
"WORKING CAPITAL LINE MATURITY DATE" shall mean the last day of the second
(2nd) Contract Year.
"WORKING CAPITAL NOTE" shall mean the promissory note of the Company in
substantially the form of Exhibit B hereto, evidencing amounts advanced by the
Bank pursuant to Section 2.1(b) hereof.
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 FACILITIES
SECTION 2.1 AMOUNT AND TERMS OF THE CREDIT FACILITIES.
(a) ACQUISITION LINE. The Bank hereby agrees, subject to the terms and
conditions of this Agreement, to make a Credit Loan or Credit Loans available to
the Company from time to time on and after the date of this Agreement through
and including the Acquisition Line Maturity Date, in an aggregate principal
amount not to exceed the lesser of (i) the Acquisition Line Credit Limit and
(ii) that portion of the Borrowing Base which is utilized to support advances
under the Acquisition Line (which amount shall not be greater than the
difference between (i) the Borrowing Base, and (ii) the aggregate principal
amount outstanding under the Working Capital Line). Until the Acquisition Line
Maturity Date, the Company may borrow, repay, and reborrow such Credit Loan up
to the maximum amount thereof, subject to the mandatory principal reductions set
forth in Sections 2.7(a) and 2.8(b) hereof and sufficient Borrowing Base
availability.
(b) WORKING CAPITAL LINE. The Bank hereby agrees, subject to the terms and
conditions of this Agreement, to make a Credit Loan or Credit Loans available to
the Company from time to time on and after the date of this Agreement through
and including the Working Capital Line Maturity Date, in an aggregate principal
amount not to exceed the lesser of (i) the Working Capital
14
Line Credit Limit and (ii) that portion of the Borrowing Base which is utilized
to support advances under the Working Capital Line (which amount shall not be
greater than the difference between (i) the Borrowing Base, and (ii) the
aggregate principal amount outstanding under the Acquisition Line). Until the
Working Capital Line Maturity Date, the Company may borrow, repay, and reborrow
such Credit Loan up to the maximum amount thereof, subject to the mandatory
principal reductions set forth in Section 2.7(b) hereof and sufficient Borrowing
Base availability.
SECTION 2.2 CONVERSION OF CREDIT LOANS.
(a) If no Event of Default shall have occurred and be continuing, the
Company may elect to convert all or a portion of any Credit Loan made pursuant
to Section 2.1(a) or 2.1(b) hereof to a Term Loan, whereupon the aggregate
amount of Credit Loans available to be borrowed under the Acquisition Line and
the Working Capital Line, as applicable, shall be permanently and automatically
reduced. The Company shall make such election by written notice delivered to the
Bank not less than fifteen (15) days prior to the effective date of the Term
Loan, specifying the principal amount of the Term Loan and the initial interest
rate applicable thereto (i.e. whether the Term Loan is to be a LIBOR Rate Loan
or a Federal Funds Effective Rate Loan). Each Term Loan shall be in an amount of
$50,000.00 or an integral multiple thereof. 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 Acquisition Line Maturity
Date, in the case of Term Loans made pursuant to Section 2.1(a) hereof, or the
Working Capital Line Maturity Date, in the case of Term Loans made pursuant to
Section 2.1(b) hereof. 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 in
full. Each principal installment shall be an amount equal to the remaining
principal amount of such Term Loan divided by the number of remaining payments
(including the payment to be made at maturity).
SECTION 2.3 LIBOR AND FEDERAL FUNDS EFFECTIVE RATE LOANS. Each Credit Loan
or Term Loan shall be either a LIBOR Rate Loan or a Federal Funds Effective 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 or an integral multiple thereto), 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
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
15
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 Effective 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
maturity date of the credit facility under which such Loan is requested.
(b) Each Loan that is made as or converted into a Federal Funds Effective
Rate Loan shall be made or converted on such Business Day and in such amount
(equal to $10,000 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 Effective Loan;
(c) Each LIBOR Rate Loan that is a Term Loan shall have an Interest Period
of three (3) months.
SECTION 2.4 LOAN EVIDENCED BY NOTES. All Loans made under the Acquisition
Line shall be evidenced by the Acquisition Note, and all Loans made under the
Working Capital Line shall be evidenced by the Working Capital Note. The Notes
shall be master notes, and the principal amount of all Loans outstanding under
each Note shall be evidenced by such Note or any ledger or other record of the
Bank, which shall be presumptive evidence of the principal owing and unpaid on
such Note.
SECTION 2.5 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) 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 subpart (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, and (ii) during such periods
as any Federal Funds Effective 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 Effective 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 January 1, 1999 (each a "Margin Adjustment Date"), in accordance with
Section 2.5(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 a
converted or continued Loan 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.
16
(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 ratio of the Company's Indebtedness to its Tangible Net Worth, which
shall be calculated from the quarterly balance sheet most recently provided by
the Company to the Bank under Section 8. l(a) hereof:
RATIO LIBOR RATE MARGIN
<1.00 to 1.00 100 Basis Points
>=1.00 to 1.00 but <2.00 to 1.00 125 Basis Points
>=2.00 to 1.00 but <3.00 to 1.00 150 Basis Points
>=3.00 to 1.00 200 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. 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 its 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 shall occur which has not
been waived in writing by the Bank, the interest rate shall be the interest rate
applicable pursuant to subsection (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 failure to deliver its financial statements in accordance with Section
8.1 of this Agreement), the unpaid principal amount of the Loan, 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 Effective Rate in
effect from time to time.
SECTION 2.6 INTEREST PAYMENTS. The Company shall pay to the Bank interest
on the unpaid principal balance of each Federal Funds Effective 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 Effective Rate Loan, or (ii)
the last day of the applicable Interest Period of such Loan, whichever is
earlier.
SECTION 2.7 PRINCIPAL PAYMENTS.
(a) Commencing September 30, 1999, and on the last day of each calendar
quarter thereafter, the aggregate principal amount available under the
Acquisition Line shall be permanently reduced by the amount of $363,637.00, and
the Company shall immediately pay to the Bank the amount, if any, by which the
aggregate principal amount outstanding under the Acquisition Line exceeds such
reduced commitment of the Bank at that time. If, after giving effect to any such
17
payment any LIBOR Rate Loan would be prepaid prior to the end of its applicable
Interest Period, the Company shall pay the Bank the breakage fee required under
Section 2.11(c) hereof.
(b) The aggregate principal amount available under the Working Capital
Line shall be permanently reduced by the amount of $1,000,000 on the last day of
the first Credit Year, and the Company shall immediately pay to the Bank the
amount, if any, by which the aggregate principal amount outstanding under the
Working Capital Line exceeds such reduced commitment of the Bank at that time.
If, after giving effect to any such payment any LIBOR Rate Loan would be prepaid
prior to the end of its applicable Interest Period, the Company shall pay the
Bank the breakage fee required under Section 2.11(c) hereof.
(c) On the Acquisition Line Maturity Date, in the case of the Acquisition
Line, and on the Working Capital Line Maturity Date, in the case of the Working
Capital Line, all amounts outstanding under the Acquisition Line and the Working
Capital Line, respectively, shall be immediately due and payable. If payment of
the outstanding Loans at maturity causes any LIBOR Rate Loan to be prepaid prior
to the end of its applicable Interest Period, the Company shall pay the Bank the
breakage fee required under Section 2.11(c) hereof.
SECTION 2.8 PREPAYMENT.
(a) VOLUNTARY PREPAYMENT. The Company may prepay any Federal Funds
Effective Rate Loan 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 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.
(b) MANDATORY PREPAYMENT. Without notice or demand, if the sum of the
outstanding principal balance of Loans made under Sections 2.1(a) and 2.1(b)
hereof shall at any time exceed the Borrowing Base, the Company shall
immediately prepay the Loans to the extent necessary to eliminate such excess.
Any payment received by the Lender under this Section 2.8(b) or under 2.8(a) may
be applied to the Obligations, in such order and in such amounts as the Bank, in
its discretion, may from time to time determine. If, after giving effect to any
such payment any LIBOR Rate Loan would be prepaid prior to the end of its
applicable Interest Period, the Company shall pay the Bank the breakage fee
required under Section 2.11(c) hereof.
(c) FREE CASH FLOW RECAPTURE. Within ninety (90) days of the end of each
fiscal year of the Company commencing with the Company's fiscal year ending on
December 31, 1999, the Company shall make a principal payment in respect of the
Acquisition Line in an amount equal to fifty percent (50%) of the Company's Free
Cash Flow for such fiscal year, and the aggregate principal amount available
under the Acquisition Line shall be permanently reduced in such amount. If,
after giving effect to any such payment any LIBOR Rate Loan would be prepaid
prior to the end of its applicable Interest Period, the Company shall pay the
Bank the breakage fee required under Section 2.11(c) hereof.
18
(d) PREPAYMENT UPON SIGNIFICANT SALE OF ASSETS. Without notice or demand,
if the Company sells, leases, transfers or otherwise disposes of any plant or
any manufacturing facility or other assets in any single transaction involving
amounts exceeding $250,000, the Company shall immediately prepay the Loans in
the full amount of the consideration (whether cash or otherwise) received by the
Company in respect of such sale. Such prepayment shall be applied to the
Acquisition Line or the Working Capital Line in such proportions as the Company
shall direct, but such application shall not effect a permanent reduction to the
applicable credit facility. If, after giving effect to any such prepayment, any
LIBOR Rate Loan would be prepaid prior to the end of its applicable Interest
Period, the Company shall pay the Bank the breakage fee required under Section
2.11(c) hereof.
SECTION 2.9 FEES. The Company shall pay to the Bank:
(a) A commitment fee of $30,000 payable upon the execution of this
Agreement;
(b) An annual administrative fee of $5,000, payable on last day of each
Credit Year and on the Acquisition Line Maturity Date;
(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; and
(d) An unused line fee with respect to the Working Capital Line at the
Unused Line Rate on the average daily Unused Amount of the Working Capital Line
from the date of this Agreement to and including the Working Capital Line
Maturity Date, due and payable quarterly in arrears on the last day of each
calendar quarter and on the Working Capital Line Maturity Date.
SECTION 2.10 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 2.11 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 2.11(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
19
Bank within five (5) Business Days after the Bank notifies the Company of any
such additional costs pursuant to this Section 2.11(a), the Company may either
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 Effective Rate
Loans upon not less than four (4) Business Days' notice to the Bank.
(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 Loan (or commitment to make the
Loan) 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 Loan (or commitment to make the Loan). 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 2.11(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 2.11(b), the Company may
either (A) prepay in full the Loan if so affected, together with interest
accrued thereon to the date of such prepayment, or (B) convert the Loan if so
affected into a Loan of any other type not so affected upon not less than four
(4) Business Days' notice to the Bank.
(c) If any prepayment or conversion of any LIBOR Rate Loan (including any
prepayment or conversion under this Section 2.11 or under Section 2.7 or
subparts (b), (c) or (d) of Section 2.8) 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 2.12 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
20
make or continue a LIBOR Rate Loan or to convert any Federal Funds Effective
Rate Loan into a LIBOR Rate Loan shall terminate and the Bank shall thereafter
be obligated to make only Federal Funds Effective Rate Loans whenever any
written notice requests for any type LIBOR Rate Loan is received, and (b) upon
demand therefor by the Bank to the Company, the Company shall either (i)
forthwith prepay in full any LIBOR Rate Loan then outstanding, together with
interest accrued thereon, or request that the Bank, upon four (4) Business Days'
notice, convert any LIBOR Rate Loan then outstanding into a Federal Funds
Effective Rate Loan. 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 2.13 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 maturity date of the credit facility under
which such Loans were made.
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, 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 personal property or assets owned by
the Company 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,
21
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). Notwithstanding the foregoing, the Collateral shall not
include that certain sublease (the "Sublease") dated July 22, 1996 between the
Company and X.X. xxXxxx de Nemours and Company ("DuPont") and those assets
located on the property covered by the Sublease or those assets used directly or
indirectly in connection with the services provided by the Company to DuPont
under that certain Tolling/Services Agreement for Industrial Diamonds dated July
22, 1996, all of which assets are located at the Company's facility in Dunbar,
Pennsylvania.
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, 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 offices 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.
22
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
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 Effective
Rate plus six hundred (600) 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
23
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 five (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 Effective Rate plus six hundred (600) basis points, shall
be additional Obligations under this Agreement secured by the Collateral. Unless
otherwise provided by law, neither the Bank nor any Affiliate of the 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 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 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, HOWEVER 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 thirtieth (30th) 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
Receivables 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.
24
SECTION 3.11 REPORTING REGARDING INVENTORY. The Company shall report
inventory figures no later than thirty (30) 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 thirty (30)
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, the Company's
perpetual inventory records and its general ledger, broken down into such detail
and with such categories as the Bank shall require.
SECTION 3.12 OTHER COLLATERAL REPORTS. The Company shall furnish the Bank
with, on or before the thirtieth (30th) 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.
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 as 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 applicable Blocked Account or
the Cash Collateral Account established pursuant to Section 4.2 below. Only the
Lockbox Banks, and to the extent not inconsistent with the applicable Lockbox
Agreement, the Bank, shall have at all times sole access to the Lockboxes. The
Company shall take all action necessary to grant the Lockbox Banks and, to the
extent not inconsistent with the applicable Lockbox Agreements, the Bank such
sole access. At no time shall the Company remove any item from any 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 Lockboxes, the Blocked Accounts or such Cash Collateral
Account. The Company shall not instruct any Account Debtor or
25
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 applicable 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 Accounts 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 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 a Blocked Account or the 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 any 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 all in such
order and method of application as may be elected by the Bank in its sole
discretion; PROVIDED, HOWEVER, that 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, release 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 or on the next
26
Business Day 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 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 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 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:
(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 Lockbox 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.
27
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) authorized, upon the
occurrence and during the continuance of an Event of Default in the Company's or
the Bank's name, to (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 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 xxxx, xxxx 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 Account Receivable and no returns of merchandise outside the
ordinary course of business shall be accepted by the Company in settlement or
satisfaction of an 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
28
hereto and consented to by the Bank, 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.
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 government 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,
29
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 necessary for the operation of the Company's business 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.
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 and for such time as such Event of Default is
continuing, 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
30
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 component
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.
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 2.5(c) hereof in effect from time to time,
shall be payable by the Company to the Bank within five (5) Business Days
following demand.
ARTICLE VI. GENERAL REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank (which representations and
warranties will survive the delivery of the Notes 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;
31
(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 obligations under the 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 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 Company, or By-Laws of 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 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.
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:
(a) Audited annual financial statements of the Company for the periods
ended December 31, 1996 and December 31, 1997;
(b) Unaudited, internally prepared financial statements of the Company for
the ten-month period ending October 31, 1998; and
(c) Pro forma financial statements of the Company as of December 1, 1998,
including a consolidated opening balance sheet and a consolidated statement of
profit and loss of the Company, which pro forma financial statements reflect the
Company's purchase of the Precision Machined Products assets 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
32
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 its 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 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
33
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 Notes. 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 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.
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.
34
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. ss. 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 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. ss. 6901, ET SEQ. (the Resource
Recovery and Conservation Act); and
35
(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 Notes.
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 nongovernmental 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.
ARTICLE VII. CONDITIONS OF LENDING
SECTION 7.1 FIRST LOAN. The obligation of the Bank to make the initial
Loan or Loans 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 Company, upon which the
Bank may conclusively rely until superseded by similar certificates delivered to
the Bank, certifying (A) all requisite action taken in connection with the
transactions contemplated hereby, and (B) the names, signatures, and authority
of Company's authorized signers executing the Loan Documents, (ii) documentation
satisfactory to the Bank evidencing the Acquisition, and (iii) such other
documents as the Bank may reasonably require to be executed by, or delivered on
behalf of Company; (c) the Bank shall have received the Notes, with all blanks
appropriately completed, executed by an authorized signer of 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; (e) the Bank shall have received
the written opinion of legal counsel selected by 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; (f) the Bank
shall have received a fixed asset appraisal, satisfactory to the Bank, of the
Precision Machined Products Assets performed by KeyCorp Leasing; (g) the Bank
shall have received documentation identifying assets of the Company which are
pledged to support the Letter
36
of Credit Loan; (h) the Bank shall have received an initial Borrowing Base
Certificate and loan covenant compliance certificate; and (i) the Company shall
have entered into one or more interest rate swap contracts with Key Capital
Markets, Inc. fixing interest rates on a minimum of $5,000,000 in principal
amount of the Acquisition Line.
SECTION 7.2 EACH LOAN. The obligation of the Bank to make each Loan shall
be subject to satisfaction of the following additional 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 Notes 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 which 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 each calendar month in each
year and in any event within thirty (30) days thereafter, a consolidated and
consolidating balance sheet of the Company 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 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;
37
(c) promptly after the filing thereof, copies of the state and federal tax
returns of the Company and all schedules thereto;
(d) promptly upon their distribution, copies of all financial statements,
reports and proxy statements which the Company shall have sent to its
stockholders, and promptly after the sending or filing thereof, copies of all
regular and periodic reports which the Company shall file with the Securities
and Exchange Commission or any national securities exchange;
(e) As soon as practicable, and in any event within thirty (30) days of
the end of each calendar month in each year, a certificate by the Company and
all relevant facts in reasonable detail to evidence, and the computations as to,
whether or not the Company is in compliance with the financial covenants set
forth in Sections 8.15 through 8.19 hereof; and
(f) 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, that 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
38
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.
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:
(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 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 (i) without receipt of full and adequate consideration
therefor, or (ii) involving amounts exceeding $250,000 in any single transaction
without making the prepayment required by Section 2.8(d) hereof.
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 of the 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;
39
(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 covered under subparts (a)
through (f) of this Section 8.11 not exceeding $100,000 in the aggregate
outstanding at any time; and
(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 permit any other Person to merge into or consolidate with it if
(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. On the last day of each month during the term
of this Agreement, the Company will have a ratio of Current Assets to Current
Liabilities (calculated without regard to current maturities of Funded Debt)
that is not less than 2.00 to 1.00.
SECTION 8.16 DEBT SERVICE COVERAGE RATIO. The Company shall maintain its
Debt Service Coverage Ratio, as measured on the last day of each calendar
quarter during the term of this Agreement for the twelve-month period ending on
such date of calculation, at a ratio of not less than 1.25 to 1.00.
40
SECTION 8.17 DEBT TO TANGIBLE NET WORTH. The Company shall maintain the
ratio of its Total Indebtedness to its Tangible Net Worth, as measured on the
last day of each month during each period set forth below, at a ratio that is
less than the ratio set forth opposite such period:
PERIOD RATIO
Date hereof to and including
December 31, 1999 4.00 to 1.00
January 1, 2000 to and including
December 31, 2000 3.25 to 1.00
January 1, 2001 and thereafter 3.00 to 1.00
SECTION 8.18 FUNDED DEBT TO EBITDA. During each period set forth below,
the Company shall maintain the ratio of its Funded Debt to its EBITDA, as
measured on the last day of each calendar quarter for the twelve-month period
ending on the date of calculation, at a ratio that is less than the ratio set
forth opposite such period:
PERIOD RATIO
Date hereof to and including
December 31, 2000 3.50 to 1.00
January 1, 2001 and thereafter 3.00 to 1.00
SECTION 8.19 CAPITAL EXPENDITURES. The Company will not make Capital
Expenditures in an aggregate amount in excess of $1,000,000 in any fiscal year
without thirty (30) days' prior written notification to the Bank.
Notwithstanding the foregoing, the Capital Expenditure limitation set forth
herein shall not include expenditures relating to the Acquisition.
SECTION 8.20 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 8.21 SENIOR MANAGEMENT. The Company will not replace its
President, Chief Executive Officer or Chief Financial Officer without sixty (60)
days prior written notice to the Bank and will not accept the resignation of its
President, Chief Executive Officer or Chief Financial Officer without providing
written notice to the Bank, which notice will be given to the Bank as soon as
reasonably possible after the Company has knowledge of the same, but in no event
more than three (3) days following the date that the Company obtains such
knowledge.
SECTION 8.22 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
41
"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.
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 any Note, or any other sums of money
when due and payable under this Agreement and such failure continues for
forty-eight (48) hours; or
SECTION 9.2 MISREPRESENTATION. If any representation or warranty made
herein by Company or in any written statement, certificate, report, or financial
statement at any time furnished by, or on behalf of, Company in connection
herewith, is incorrect or misleading in any material respect when made; or
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 or any other sums of money when due and payable under the Letter of
Credit Loan or under any other transaction or document evidencing Indebtedness
of the Company to the Bank, and such failure continues for forty-eight (48)
hours, 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) evidencing, securing, or
relating to the Letter of Credit Loan or any other transaction or document
evidencing Indebtedness of the Company to the Bank, and such failure remains
unremedied for thirty (30) calendar days after the Bank shall have given written
notice thereof to the Company, or is otherwise in default thereunder.
42
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.
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 9.1 through 9.5 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, including any notes executed in connection with the Letter of Credit Loan,
and any other liabilities hereunder, and all other indebtedness of 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 Company hereby expressly waives, anything contained herein or in
any Note to the contrary notwithstanding.
SECTION 10.2 AUTOMATIC ACCELERATION. Intentionally Deleted.
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, the Letter
of Credit Loan 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 (i) the 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 (ii) the Company's address at which the Bank
customarily communicates with the Company, at least ten (10) 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
43
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
Notes, 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, 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 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 Notes.
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, HOWEVER, that the Bank shall have no right to be indemnified hereunder
for its own 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 Notes will be governed
by and construed in accordance with the laws of the State of Colorado, without
regard to principles of
44
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
any 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
000 Xxxxx Xxxxx Xx.
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Santa, Vice President of Finance and Chief
Financial Officer
to the Bank as follows:
KeyBank National Association
000 X. Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxx, Corporate Banking
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,
HOWEVER, that no subsequent holder of any 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 consent. The relationship between the Company and the Bank with respect
to this Agreement, the Notes, and any other Loan Document is and shall be solely
that of debtor and creditor, 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 any Note,
or any action taken hereunder or thereunder, 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
45
Notes, 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 Notes, 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 11.1 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.
IN WITNESS WHEREOF, the Company and the Bank have each caused this
Agreement to be executed by their duly authorized officers as of the 30th day of
November, 1998.
REMAINDER OF PAGE INTENTIONALLY DELETED
46
COMPANY: DYNAMIC MATERIALS CORPORATION
By: _______________________________
Title: ____________________________
BANK: KEYBANK NATIONAL ASSOCIATION
By: _______________________________
Title: ____________________________
47
EXHIBIT A
ACQUISITION NOTE
$8,000,000.00 November 30, 1998
For value received, DYNAMIC MATERIALS CORPORATION, a Delaware corporation
(the "Company") promises to pay to the order of KEYBANK NATIONAL ASSOCIATION
(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 outstanding under
the Acquisition Line, 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 evidenced by this Note 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 Acquisition Note referred to in, and is entitled to the
benefits of, the Amended and Restated Credit Facility and Security Agreement
("Credit Agreement") by and between the Bank and the Company dated November 30,
1998, 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: ____________________________
EXHIBIT B
WORKING CAPITAL NOTE
$6,000,000.00 November 30, 1998
For value received, DYNAMIC MATERIALS CORPORATION, a Delaware corporation
(the "Company") promises to pay to the order of KEYBANK NATIONAL ASSOCIATION,
(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 outstanding under
the Working Capital Line, 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 evidenced by this Note 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 Working Capital Note referred to in, and is entitled to
the benefits of, the Amended and Restated Credit Facility and Security Agreement
("Credit Agreement") by and between the Bank and the Company dated November 30,
1998, 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: ____________________________
EXHIBIT C
SCHEDULE OF COMPANY
[See Attached]
EXHIBIT D
BORROWING BASE CERTIFICATE
DYNAMIC MATERIALS CORPORATION
BORROWING BASE CERTIFICATE
AS OF ____________
The undersigned officer of Dynamic Materials Corporation, hereby certifies
that the following is a true and accurate calculation of the Borrowing Base as
of the date specified above, determined in accordance with the requirements of
the Amended and Restated Credit Facility and Security Agreement dated November
___, 1998 between Dynamic Materials Corporation, a Delaware corporation
("Borrower") and KeyBank National Association ("Lender").
Name:_________________________________________
Title:________________________________________
Date:_________________________________________
Accounts Receivable Aging Schedule:
1-30 Day 31-61 Day 61-90 Day 90+Day Total
------ ------ ------ ------ ------
--------------------------------------------------------------------------
BORROWING BASE CALCULATION:
ACCOUNTS RECEIVABLE PORTION:
Accounts Receivable/1/
Less:
(a) Accounts Receivable to which Borrower does
not have valid tit _______
(b) Accounts Receivable which are not the binding
obligation of the account debtor _______
--------------------
/1/Reference is made to the definitions of "Eligible Accounts Receivable" in
Section 1.2 of the Credit Agreement. Information must be provided in accordance
with such definitions. Captions set forth below are for reference purposes only
and may not reflect the actual definition in the Credit Agreement.
(c) Accounts Receivable arising from services provided by
Borrower to an Affiliate of Borrower _______
(d) Accounts Receivable which are unpaid more than the
earlier of ninety (90) days after the original
invoice date or one hundred five (105) days after
the services were provided _______
(e) Accounts Receivable which, when aggregated with all
other Accounts Receivable of the same account debtor
or Affiliate, exceed 50% in face value of all
Accounts Receivable of Borrower _______
(f) Accounts Receivable (i) wherein the account debtor is
also a creditor of the Borrower, (ii) which are
subject to dispute or (iii) which are or are
likely to become subject to any right of setoff or
other claim or defense _______
(g) Accounts Receivable wherein the debtor has commenced
a voluntary case under applicable bankruptcy laws, or
made an assignment for the benefit of creditors, or a
decree has been entered in respect of the debtor in an
involuntary case under federal bankruptcy laws _______
(h) Accounts Receivable in which the Lender does not
have a valid perfected first priority security
interest _______
(i) Accounts Receivable for which the sale to the account
debtor is on a consignment, xxxx-and hold, sale on
approval, guaranteed sale or sale-and-return basis _______
(j) Accounts Receivable from the same account debtor in
which 50% or more of the other Account Receivables from
such account debtor are unpaid within the applicable
period of time set forth above _______
(k) Accounts Receivable for which 75% or more of other
Accounts Receivable from the same account debtor are
not deemed Eligible Accounts Receivable _______
(l) Accounts Receivable which have not been shipped and
delivered to and accepted or the services giving rise
to such Account Receivable have not been performed or
the Account Receivable otherwise does not represent a
final sale _______
(m) Accounts Receivable for which the principal place of
business of the debtor is located outside of the
United States _______
(n) Accounts Receivable which do not comply in all
material respects with all applicable legal
requirements _______
(o) Accounts Receivable arising out of unbilled
cooperative advertising activities _______
Eligible Accounts Receivable
=======
BORROWING BASE:
80% of Eligible Accounts Receivable _______
Revolving Credit Availability
=======
INVENTORY PORTION:
Eligible Inventory/2/
=======
BORROWING BASE:
50% of Eligible Inventory consisting of raw
materials _______
50% of Eligible Inventory consisting of
work-in-process purchased by the Company from
Spin Forge LLC or Precision Machined Products _______
30% of Eligible Inventory consisting of
work-in-process other than work-in-process
referred to in the immediately preceding category _______
50% of Eligible Inventory consisting of finished
product _______
------------------
/2/ Reference is made to the definition of "Eligible Inventory" in Section
1.2 of the Credit Agreement. Information must be provided in accordance with
such definition.
Revolving Credit Availability
=======
EQUIPMENT PORTION:
Eligible Equipment/3/
=======
BORROWING BASE:
the LESSER of:
50% of net book value of Eligible Equipment; or _______
70% of orderly liquidation value of Eligible
Equipment; or _______
80% of forced sale value of Eligible Equipment _______
Revolving Credit Availability
=======
REAL ESTATE PORTION:
Acceptable Real Estate/4/
=======
BORROWING BASE:
75% of Acceptable Real Estate _______
Revolving Credit Availability
=======
AGGREGATE REVOLVING CREDIT
AVAILABILITY
=======
-------------------
/3/ Reference is made to the definition of "Eligible Equipment" in Section
1.2 of the Credit Agreement. Information must be provided in accordance with
such definition.
/4/ Reference is made to the definition of "Acceptable Real Estate" in
Section 1.2 of the Credit Agreement. Information must be provided in accordance
with such definition.
