Exhibit 10.27
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CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
DYNAMIC MATERIALS CORPORATION
AND
XXXXX FARGO BUSINESS CREDIT, INC.
December 4, 2001
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ARTICLE I......................................................................1
Section 1.1 Definitions...................................................1
Section 1.2 Other Definitional Terms; Rules of Interpretation............10
ARTICLE II....................................................................11
Section 2.1 Revolving Advances...........................................11
Section 2.2 Procedures for Requesting Revolving Advances.................11
Section 2.3 Capital Adequacy.............................................12
Section 2.4 Letters of Credit............................................13
Section 2.5 Special Account..............................................13
Section 2.6 Payment of Amounts Drawn Under Letters of Credit;
Obligation of Reimbursement..................................14
Section 2.7 Obligations Absolute.........................................15
Section 2.8 Interest; Minimum Interest Charge; Default Interest;
Clearance Days; Participations; Usury........................15
Section 2.9 Fees.........................................................16
Section 2.10 Time for Interest Payments; Payment on Non-Banking Days;
Computation of Interest and Fees.............................17
Section 2.11 Lockbox; Collateral Account; Application of Payments.........18
Section 2.12 Voluntary Prepayment; Reduction of the Maximum Line;
Termination of the Credit Facility by the Borrower...........19
Section 2.13 Mandatory Prepayment.........................................19
Section 2.14 Revolving Advances to Pay Obligations........................19
Section 2.15 Use of Proceeds..............................................19
Section 2.16 Liability Records............................................19
ARTICLE III...................................................................20
Section 3.1 Grant of Security Interest...................................20
Section 3.2 Notification of Account Debtors and Other Obligors...........20
Section 3.3 Assignment of Insurance......................................20
Section 3.4 Occupancy....................................................20
Section 3.5 License......................................................21
Section 3.6 Financing Statement..........................................21
Section 3.7 Setoff.......................................................22
Section 3.8 Collateral...................................................22
ARTICLE IV....................................................................22
Section 4.1 Conditions Precedent to the Initial Revolving Advance
and Letter of Credit.........................................22
Section 4.2 Conditions Precedent to All Revolving Advances and
Letters of Credit............................................24
ARTICLE V.....................................................................25
Section 5.1 Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Federal Employer
Identification Number........................................25
Section 5.2 Capitalization...............................................25
Section 5.3 Authorization of Borrowing; No Conflict as to
Law or Agreements............................................25
Section 5.4 Legal Agreements.............................................26
Section 5.5 Subsidiaries.................................................26
Section 5.6 Financial Condition; No Adverse Change.......................26
Section 5.7 Litigation...................................................26
Section 5.8 Regulation U.................................................26
Section 5.9 Taxes........................................................26
Section 5.10 Titles and Liens.............................................27
Section 5.11 Intellectual Property Rights.................................27
Section 5.12 Plans........................................................28
Section 5.13 Default......................................................28
Section 5.14 Environmental Matters........................................28
Section 5.15 Submissions to Lender........................................29
Section 5.16 Financing Statements.........................................29
Section 5.17 Rights to Payment............................................30
ARTICLE VI....................................................................30
Section 6.1 Reporting Requirements.......................................30
Section 6.2 Financial Covenants..........................................34
Section 6.3 Permitted Liens; Financing Statements........................35
Section 6.4 Indebtedness.................................................36
Section 6.5 Guaranties...................................................36
Section 6.6 Investments and Subsidiaries.................................37
Section 6.7 Dividends and Distributions..................................37
Section 6.8 Salaries.....................................................37
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Section 6.9 Books and Records; Inspection and Examination................37
Section 6.10 Account Verification.........................................38
Section 6.11 Compliance with Laws.........................................38
Section 6.12 Payment of Taxes and Other Claims............................38
Section 6.13 Maintenance of Properties....................................38
Section 6.14 Insurance....................................................39
Section 6.15 Preservation of Existence....................................39
Section 6.16 Delivery of Instruments, etc.................................39
Section 6.17 Sale or Transfer of Assets; Suspension of Business
Operations...................................................39
Section 6.18 Consolidation and Merger; Asset Acquisitions.................40
Section 6.19 Sale and Leaseback...........................................40
Section 6.20 Restrictions on Nature of Business...........................40
Section 6.21 Accounting...................................................40
Section 6.22 Discounts, etc...............................................40
Section 6.23 Plans........................................................40
Section 6.24 Place of Business; Name......................................40
Section 6.25 Constituent Documents; S Corporation Status..................41
Section 6.26 Performance by the Lender....................................41
Section 6.27 SNPE.........................................................41
ARTICLE VII...................................................................41
Section 7.1 Events of Default............................................41
Section 7.2 Rights and Remedies..........................................44
Section 7.3 Certain Notices..............................................44
ARTICLE VIII..................................................................45
Section 8.1 No Waiver; Cumulative Remedies; Compliance with Laws.........45
Section 8.2 Amendments, Etc..............................................45
Section 8.3 Addresses for Notices; Requests for Accounting...............45
Section 8.4 Further Documents............................................46
Section 8.5 Costs and Expenses...........................................46
Section 8.6 Indemnity....................................................46
Section 8.7 Participants.................................................47
Section 8.8 Execution in Counterparts; Telefacsimile Execution...........47
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Section 8.9 Retention of Borrower's Records..............................47
Section 8.10 Binding Effect; Assignment; Complete Agreement;
Exchanging Information.......................................47
Section 8.11 Severability of Provisions...................................48
Section 8.12 Headings.....................................................48
Section 8.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.....48
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CREDIT AND SECURITY AGREEMENT
Dated as of December 4, 2001
DYNAMIC MATERIALS CORPORATION, a Delaware corporation (the "Borrower"), and
XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"),
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided, the following terms shall have the meanings
assigned to them in this Section or in the Section referenced after such term:
"Accounts" means all of the Borrower's accounts, as such term is defined in
the UCC, generated by the Borrower's U.S. operations, including each and every
right of the Borrower to the payment of money, whether such right to payment now
exists or hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a rendering of
services, out of a loan, out of the overpayment of taxes or other liabilities,
or otherwise arises under any contract or agreement, whether such right to
payment is created, generated or earned by the Borrower or by some other person
who subsequently transfers such person's interest to the Borrower, whether such
right to payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and interests
(including all Liens) which the Borrower may at any time have by law or
agreement against any account debtor or other obligor obligated to make any such
payment or against any property of such account debtor or other obligor; all
including but not limited to all present and future accounts, contract rights,
loans and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Affiliate" or "Affiliates" means any Person controlled by, controlling or
under common control with the Borrower, including any Subsidiary of the
Borrower. For purposes of this definition, "control," when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement.
"Availability" means the difference of (i) the Borrowing Base and (ii) the
sum of (A) the outstanding principal balance of the Note plus (B) the L/C Amount
plus (C) any reserves imposed by the Lender in its sole discretion.
"Banking Day" means a day on which the Federal Reserve Bank of New York is
open for business.
"Base Rate" means the rate of interest publicly announced from time to time
by Xxxxx Fargo Bank National Association at its principal office in San
Francisco as its "prime rate", with the understanding that the "prime rate" is
one of Xxxxx Fargo's base rates (not necessarily the lowest of such rates) and
serves as the basis upon which effective rates of interest are calculated for
loans making reference thereto.
"Book Net Worth" means the aggregate of the common and preferred
shareholders' equity in the Borrower, excluding equity infusions after the date
hereof and the impact of any asset impairment expense, and otherwise determined
in accordance with GAAP.
"Borrowing Base" means at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) 80% of Eligible Accounts, plus
(ii) the lesser of (A) 50% of Eligible Inventory or (B)
$2,000,000.
"Capital Expenditures" means for a period, any expenditure of money during
such period for the lease, purchase or other acquisition of any capital asset.
"Change of Control" means the occurrence of any of the following events:
any Person, other than SNPE, Inc., or "group" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, except that a Person will be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than fifty percent (50%) of the voting power of
all classes of voting stock of the Borrower.
"Collateral" means (A) all of the Borrower's Accounts and Inventory, (B)
all sums on deposit in any Collateral Account or in any other U.S. deposit
account, any items in any Lockbox and all sums on deposit in the Special
Account, (C) all of the following, acquired by the Borrower with respect to its
U.S. operations after the date hereof the purchase of which constitutes a
Capital Expenditure: all of the Borrower's chattel paper, documents, Equipment,
General Intangibles, goods, instruments and Investment Property and (D) all of
the following related to all of the foregoing: the Borrower's chattel paper,
deposit accounts, documents, Equipment, General Intangibles, goods, instruments,
Investment Property, letter-of-credit rights and letters of credit, together
with (i) all substitutions and replacements for and products of any of the
foregoing; (ii) in the case of all goods, all accessions; (iii) all accessories,
attachments, parts, equipment and repairs now or hereafter attached or affixed
to or used in connection with any goods; (iv) all warehouse receipts, bills of
lading and other documents of title now or
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hereafter covering such goods; (v) all collateral subject to the Lien of any
Security Document; (vi) any money, or other assets of the Borrower that now or
hereafter come into the possession, custody, or control of the Lender; and (vii)
proceeds of any and all of the foregoing.
"Collateral Account" means the "Lender Account" as defined in the Lockbox
and Collection Account Agreement.
"Commitment" means the Lender's commitment to make Revolving Advances to,
and to cause the Issuer to issue Letters of Credit for the account of, the
Borrower pursuant to Article II.
"Constituent Documents" means with respect to any Person, as applicable,
such Person's certificate of incorporation, articles of incorporation or
by-laws.
"Credit Facility" means the credit facility being made available to the
Borrower by the Lender under Article II.
"Current Maturities of Long Term Debt" means as of a given date, the amount
of the Borrower's long-term debt and capitalized leases which became due and
were actually paid during the applicable period ending on the designated date.
"Debt" means of a Person as of a given date, all items of indebtedness or
liability which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet for such Person
and shall also include the aggregate payments required to be made by such Person
at any time under any lease that is considered a capitalized lease under GAAP.
"Debt Service Coverage Ratio" means the ratio of (i) the sum of (A) Funds
from Operations and (B) Interest Expense minus (C) unfinanced Capital
Expenditures to (ii) the sum of (A) Current Maturities of Long Term Debt and (B)
Interest Expense.
"Default" means an event that, with giving of notice or passage of time or
both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day of any
month during which a Default or Event of Default has occurred and ending on the
date the Lender notifies the Borrower in writing that such Default or Event of
Default has been cured or waived.
"Default Rate" means an annual interest rate equal to three percent (3%)
over the Floating Rate, which interest rate shall change when and as the
Floating Rate changes.
"Director" means a director of the Borrower, if the Borrower is a
corporation, a governor of the Borrower, if the Borrower is a limited liability
company, or a partner of the Borrower, if the Borrower is a partnership.
"ERISA" means the Employee Retirement Income Security Act of 1974.
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"ERISA Affiliate" means any trade or business (whether or not incorporated)
that is a member of a group which includes the Borrower and which is treated as
a single employer under Section 414 of the IRC.
"Eligible Accounts" means all unpaid Accounts arising from the sale or
lease of goods or the performance of services, net of any credits, but excluding
any such Accounts having any of the following characteristics:
(i) That portion of Accounts unpaid 90 days or more after the invoice
date;
(ii) That portion of Accounts that is disputed or subject to a claim
of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final delivery of
goods or rendition of services, as applicable, by the Borrower to the
customer, including progress xxxxxxxx, and that portion of Accounts for
which an invoice has not been sent to the applicable account debtor;
(iv) That portion of Accounts owed by account debtors located in the
states of New Jersey, Minnesota, Indiana, or West Virginia (or any other
state that requires a creditor to file a business activity report or
similar document in order to bring suit or otherwise enforce its remedies
against such account debtor in the courts or through any judicial process
of such state), unless the Borrower has qualified to do business in such
state, or has filed a notice of business activities report with the
applicable division of taxation, the department of revenue, or with such
other state offices, as appropriate, for the then-current year, or is
exempt from such filing requirement;
(v) Accounts constituting (i) proceeds of copyrightable material
unless such copyrightable material shall have been registered with the
United States Copyright Office, or (ii) proceeds of patentable inventions
unless such patentable inventions have been registered with the United
States Patent and Trademark Office;
(vi) Accounts owed by any unit of government, whether foreign or
domestic (provided, however, that there shall be included in Eligible
Accounts that portion of Accounts owed by such units of government for
which the Borrower has provided evidence satisfactory to the Lender that
(A) the Lender has a first priority perfected security interest and (B)
such Accounts may be enforced by the Lender directly against such unit of
government under all applicable laws);
(vii) Accounts owed by an account debtor located outside the United
States which are not (A) backed by a bank letter of credit naming the
Lender as beneficiary or assigned to the Lender, in the Lender's possession
or control, and with respect to which a control agreement concerning the
letter-of-credit rights is in effect, and acceptable to the Lender in all
respects, in its sole discretion, or (B) covered by a foreign receivables
insurance policy acceptable to the Lender in its sole discretion;
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(viii) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(ix) Accounts owed by an Owner, Subsidiary, Affiliate, Officer or
employee of the Borrower;
(x) Accounts not subject to a duly perfected security interest in the
Lender's favor or which are subject to any Lien in favor of any Person
other than the Lender;
(xi) That portion of Accounts that has been restructured, extended,
amended or modified;
(xii) That portion of Accounts that constitutes advertising, finance
charges, service charges or sales or excise taxes;
(xiii) That portion of the aggregate Accounts owed by a single account
debtor that exceeds 15% of all Accounts of the Borrower;
(xiv) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if 20% or more of the total amount due under Accounts
from such debtor is ineligible under clauses (i), (ii) or (xi) above; and
(xv) Accounts, or portions thereof, otherwise deemed ineligible by the
Lender in its sole discretion.
"Eligible Inventory" means all Inventory of the Borrower, at the lower of
cost or market value as determined in accordance with GAAP; but excluding any
Inventory having any of the following characteristics:
(i) Inventory that is: in-transit; located at any warehouse, job site
or other premises not approved by the Lender in writing; located in any
location for which the financing statements filed by the Lender would be
insufficient to perfect a first priority security interest in such
Inventory; covered by any negotiable or non-negotiable warehouse receipt,
xxxx of lading or other document of title; on consignment from any Person;
on consignment to any Person or subject to any bailment unless such
consignee or bailee has executed an agreement with the Lender;
(ii) Supplies, packaging, maintenance parts or sample Inventory;
(iii) That portion of the aggregate work-in-process Inventory
consisting of non-material components of work-in-process Inventory that
exceeds 45% of all work-in-process Inventory of the Borrower;
(iv) Inventory that is damaged, obsolete, slow moving or not currently
saleable in the normal course of the Borrower's operations;
5
(v) Inventory that the Borrower has returned, has attempted to return,
is in the process of returning or intends to return to the vendor thereof;
(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant to a license
unless the applicable licensor has agreed in writing to permit the Lender
to exercise its rights and remedies against such Inventory;
(viii) Inventory that is subject to a Lien in favor of any Person
other than the Lender; and
(ix) Inventory otherwise deemed ineligible by the Lender in its sole
discretion.
"Environmental Law" means any federal, state, local or other governmental
statute, regulation, law or ordinance dealing with the protection of human
health and the environment.
"Equipment" means all of the Borrower's equipment, as such term is defined
in the UCC, held by its U.S. operations, whether now owned or hereafter
acquired, including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment, office
and recordkeeping equipment, parts, tools, supplies, and including specifically
the goods described in any equipment schedule or list herewith or hereafter
furnished to the Lender by the Borrower.
"Event of Default" has the meaning specified in Section 7.1.
"Financial Covenants" means the covenants set forth in Section 6.2.
"Floating Rate" means, with respect to the Revolving Advances, an annual
interest rate equal to the sum of the Base Rate plus the Interest Rate Margin.
"Funding Date" has the meaning specified in Section 2.1.
"Funds From Operations" means for a given period, the sum of (i) Net Income
excluding extraordinary gains, (ii) depreciation and amortization, (iii)
deferred income taxes, and (iv) other non-cash items, each as determined for
such period in accordance with GAAP.
"GAAP" means generally accepted accounting principles, applied on a basis
consistent with the accounting practices applied in the financial statements
described in Section 5.6.
"General Intangibles" means all of the Borrower's general intangibles, as
such term is defined in the UCC, held by its U.S. operations, whether now owned
or hereafter acquired, including all present and future Intellectual Property
Rights, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Borrower's name, and the
goodwill of the Borrower's business.
"Guarantor(s)" means any Person hereafter guarantying the Obligations. On
the date hereof, there are no Guarantors.
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"Hazardous Substances" means pollutants, contaminants, hazardous
substances, hazardous wastes, petroleum and fractions thereof, and all other
chemicals, wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
"IRC" means the Internal Revenue Code of 1986.
"Infringe" when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.
"Intellectual Property Rights" means all actual or prospective rights
arising in connection with any intellectual property or other proprietary
rights, including all rights arising in connection with copyrights, patents,
service marks, trade dress, trade secrets, trademarks, trade names or mask
works.
"Interest Expense" means for a fiscal year-to-date period, the Borrower's
total gross interest expense during such period (excluding interest income), and
shall in any event include (i) interest expensed (whether or not paid) on all
Debt, (ii) the amortization of debt discounts, (iii) the amortization of all
fees payable in connection with the incurrence of Debt to the extent included in
interest expense, and (iv) the portion of any capitalized lease obligation
allocable to interest expense.
"Interest Rate Margin" means one percent (1.0%); provided, however, that if
(i) no Event of Default then exists, and (ii) the Borrower's audited financial
statements for the fiscal year ending December 31, 2001, demonstrate that the
Borrower's Net Income for such fiscal year equals or exceeds $2,150,000, the
Interest Rate Margin shall be reduced to one half of one percent (0.50%) as of
the first day of the month following the month such financial statements are
delivered to the Lender.
"Inventory" means all of the Borrower's inventory, as such term is defined
in the UCC, held by its U.S. operations, whether now owned or hereafter
acquired, whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease or under
service contracts or for manufacture or processing, and wherever located.
"Investment Property" means all of the Borrower's investment property, as
such term is defined in the UCC, held by its U.S. operations, whether now owned
or hereafter acquired, including but not limited to all securities, security
entitlements, securities accounts, commodity contracts, commodity accounts,
stocks, bonds, mutual fund shares, money market shares and U.S. Government
securities.
"Issuer" means the issuer of any Letter of Credit.
"L/C Amount" means the sum of (i) the aggregate face amount of any issued
and outstanding Letters of Credit and (ii) the unpaid amount of the Obligation
of Reimbursement.
"L/C Application" means an application and agreement for letters of credit
in a form acceptable to the Issuer and the Lender.
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"Letter of Credit" has the meaning specified in Section 2.4.
"Licensed Intellectual Property" has the meaning specified in Section
5.11(c).
"Lien" means any security interest, mortgage, deed of trust, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or
device, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or hereafter acquired
and whether arising by agreement or operation of law.
"Loan Documents" means this Agreement, the Note, the Security Documents and
any L/C Application.
"Lockbox" means "Lockbox" as defined in the Lockbox and Collection Account
Agreement.
"Lockbox and Collection Account Agreement" means the Lockbox and Collection
Account Agreement by and among the Borrower, Xxxxx Fargo Bank West, Regulus
West, LLC and the Lender, of even date herewith.
"Material Adverse Effect" means any of the following:
(i) a material adverse effect on the business, operations, results of
operations, prospects, assets, liabilities or financial condition of the
Borrower;
(ii) a material adverse effect on the ability of the Borrower to
perform its obligations under the Loan Documents;
(iii) a material adverse effect on the ability of the Lender to
enforce the Obligations or to realize the intended benefits of the Security
Documents, including a material adverse effect on the validity or
enforceability of any Loan Document or of any rights against any Guarantor,
or on the status, existence, perfection, priority (subject to Permitted
Liens) or enforceability of any Lien securing payment or performance of the
Obligations; or
(iv) any claim against the Borrower or threat of litigation which if
determined adversely to the Borrower would cause the Borrower to be liable
to pay an amount exceeding $500,000 or would be an event described in
clauses (i), (ii) and (iii) above.
"Maturity Date" means December 4, 2004.
"Maximum Line" means $6,000,000 unless said amount is reduced pursuant to
Section 2.12, in which event it means such lower amount.
"Minimum Interest Charge" has the meaning given in Section 2.8(b).
"Multiemployer Plan" means a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) to which the Borrower or any ERISA Affiliate contributes or
is obligated to contribute.
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"Net Income" means fiscal year-to-date after-tax net income from continuing
operations, excluding the impact of any asset impairment expense, and otherwise
as determined in accordance with GAAP.
"Note" means the Borrower's revolving promissory note, payable to the order
of the Lender in substantially the form of Exhibit A hereto.
"Obligation of Reimbursement" has the meaning specified in Section 2.6(a).
"Obligations" means the Note, the Obligation of Reimbursement and each and
every other debt, liability and obligation of every type and description which
the Borrower may now or at any time hereafter owe to the Lender, whether such
debt, liability or obligation now exists or is hereafter created or incurred,
whether it arises in a transaction involving the Lender alone or in a
transaction involving other creditors of the Borrower, and whether it is direct
or indirect, due or to become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, or sole, joint, several or joint and several, and
including all indebtedness of the Borrower arising under any Loan Document or
guaranty between the Borrower and the Lender, whether now in effect or hereafter
entered into.
"Officer" means with respect to the Borrower, an officer of the Borrower,
if the Borrower is a corporation, a manager of the Borrower, if the Borrower is
a limited liability company, or a partner of the Borrower, if the Borrower is a
partnership.
"Owned Intellectual Property" has the meaning specified in Section 5.11(a).
"Owner" means with respect to the Borrower, each Person having legal or
beneficial title to an ownership interest in the Borrower or a right to acquire
such an interest.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
maintained for employees of the Borrower or any ERISA Affiliate and covered by
Title IV of ERISA.
"Permitted Lien" has the meaning specified in Section 6.3(a).
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
maintained for employees of the Borrower or any ERISA Affiliate.
"Premises" means all premises where the Borrower conducts its business and
has any rights of possession, including the premises legally described in
Exhibit C attached hereto.
"Related Documents" has the meaning specified in Section 2.7
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"Reportable Event" means a reportable event (as defined in Section 4043 of
ERISA), other than an event for which the 30-day notice requirement under ERISA
has been waived in regulations issued by the Pension Benefit Guaranty
Corporation.
"Revolving Advance" has the meaning specified in Section 2.1.
"Security Documents" means this Agreement, the Lockbox and Collection
Account Agreement and any other document delivered to the Lender from time to
time to secure the Obligations.
"Security Interest" has the meaning specified in Section 3.1.
"SNPE Loan Agreement" means the Term Loan Agreement, by and between the
Borrower and SNPE, Inc., dated as of July 3, 2001.
"SNPE Note" means the Borrower's Term Note, dated as of July 3, 2001,
payable to the order of SNPE, Inc. in the original principal amount of
$4,000,000, together with all renewals, extensions and modifications thereof and
any note or notes issued in substitution therefor.
"SNPE Indebtedness" means all obligations arising under the SNPE Note and
the SNPE Loan Agreement.
"Special Account" means a specified cash collateral account maintained by a
financial institution acceptable to the Lender in connection with Letters of
Credit, as contemplated by Section 2.5.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of Directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Termination Date" means the earliest of (i) the Maturity Date, (ii) the
date the Borrower terminates the Credit Facility, or (iii) the date the Lender
demands payment of the Obligations after an Event of Default pursuant to Section
7.2.
"UCC" means the Uniform Commercial Code as in effect in the state
designated in Section 8.13 as the state whose laws shall govern this Agreement,
or in any other state whose laws are held to govern this Agreement or any
portion hereof.
"Unused Amount" has the meaning specified in Section 2.9(b).
"Xxxxx Fargo Bank West" means Xxxxx Fargo Bank West, National Association.
Section 1.2 Other Definitional Terms; Rules of Interpretation. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to
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this Agreement as a whole and not to any particular provision of this Agreement.
All accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with GAAP. All terms defined in the UCC and not otherwise
defined herein have the meanings assigned to them in the UCC. References to
Articles, Sections, subsections, Exhibits, Schedules and the like, are to
Articles, Sections and subsections of, or Exhibits or Schedules attached to,
this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". Defined terms
include in the singular number the plural and in the plural number the singular.
Reference to any agreement (including the Loan Documents), document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof (and, if
applicable, in accordance with the terms hereof and the other Loan Documents),
except where otherwise explicitly provided, and reference to any promissory note
includes any promissory note which is an extension or renewal thereof or a
substitute or replacement therefor. Reference to any law, rule, regulation,
order, decree, requirement, policy, guideline, directive or interpretation means
as amended, modified, codified, replaced or reenacted, in whole or in part, and
in effect on the determination date, including rules and regulations promulgated
thereunder.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 Revolving Advances. The Lender agrees, on the terms and subject
to the conditions herein set forth, to make advances to the Borrower from time
to time from the date all of the conditions set forth in Section 4.1 are
satisfied (the "Funding Date") to the Termination Date (the "Revolving
Advances"). The Lender shall have no obligation to make a Revolving Advance to
the extent the amount of the requested Revolving Advance exceeds Availability.
The Borrower's obligation to pay the Revolving Advances shall be evidenced by
the Note and shall be secured by the Collateral. Within the limits set forth in
this Section 2.1, the Borrower may borrow, prepay pursuant to Section 2.12 and
reborrow.
Section 2.2 Procedures for Requesting Revolving Advances. The Borrower
shall comply with the following procedures in requesting Revolving Advances:
(a) Time for Requests. The Borrower shall request each Revolving
Advance not later than 10:00 a.m., Denver, Colorado time on the Banking Day
which is the date the Revolving Advance is to be made. Each such request
shall be effective upon receipt by the Lender, shall be in writing or by
telephone or telecopy transmission, to be confirmed in writing by the
Borrower if so requested by the Lender, shall be by (i) an Officer of the
Borrower; or (ii) a person designated as the Borrower's agent by an Officer
of the Borrower in a writing delivered to the Lender; or (iii) a person
whom the Lender reasonably believes to be an Officer of the Borrower or
such a designated agent. The Borrower shall repay all Revolving Advances
even if the Lender does not receive such confirmation and even if the
person requesting a Revolving Advance was not in fact authorized to do so.
Any request for a Revolving Advance, whether written or
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telephonic, shall be deemed to be a representation by the Borrower that the
conditions set forth in Section 4.2 have been satisfied as of the time of
the request.
(b) Disbursement. Upon fulfillment of the applicable conditions set
forth in Article IV, the Lender shall disburse the proceeds of the
requested Revolving Advance by crediting the same to the Borrower's demand
deposit account maintained with Xxxxx Fargo Bank West unless the Lender and
the Borrower shall agree in writing to another manner of disbursement.
Section 2.3 Capital Adequacy. If the Lender determines at any time that its
Return has been reduced as a result of any Rule Change, the Lender may so notify
the Borrower and require the Borrower, beginning thirty (30) days after such
notice, to pay it the amount necessary to restore its Return to what it would
have been had there been no Rule Change. For purposes of this Section 2.3:
(i) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital adequacy, or
the interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender, including
rules requiring financial institutions to maintain total capital in amounts
based upon percentages of outstanding loans, binding loan commitments and
letters of credit.
(ii) "L/C Rule" means any law, rule, regulation, guideline, directive,
requirement or request regarding letters of credit, or the interpretation
or administration thereof by any governmental or regulatory authority,
central bank or comparable agency, whether or not having the force of law,
that applies to any Related Lender, including those that impose taxes,
duties or other similar charges, or mandate reserves, special deposits or
similar requirements against assets of, deposits with or for the account
of, or credit extended by any Related Lender, on letters of credit.
(iii) "Related Lender" includes (but is not limited to) the Lender,
any parent of the Lender, any assignee of any interest of the Lender
hereunder and any participant in the Credit Facility.
(iv) "Return", for any period, means the percentage determined by
dividing (i) the sum of interest and ongoing fees earned by the Lender
under this Agreement during such period, by (ii) the average capital the
Lender is required to maintain during such period as a result of its being
a party to this Agreement, as determined by the Lender based upon its total
capital requirements and a reasonable attribution formula that takes
account of the Capital Adequacy Rules and L/C Rules then in effect, costs
of issuing or maintaining any Revolving Advance or Letter of Credit and
amounts received or receivable under this Agreement or the Note with
respect to any Revolving Advance or Letter of Credit. Return may be
calculated for each calendar quarter and for the shorter period between the
end of a calendar quarter and the date of termination in whole of this
Agreement.
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(v) "Rule Change" means any change in any Capital Adequacy Rule or L/C
Rule occurring after the date of this Agreement, or any change in the
interpretation or administration thereof by any governmental or regulatory
authority, but the term does not include any changes that at the Funding
Date are scheduled to take place under the existing Capital Adequacy Rules
or L/C Rules or any increases in the capital that the Lender is required to
maintain to the extent that the increases are required due to a regulatory
authority's assessment of that Lender's financial condition.
The initial notice sent by the Lender shall be sent as promptly as
practicable after the Lender learns that its Return has been reduced, shall
include a demand for payment of the amount necessary to restore the Lender's
Return for the quarter in which the notice is sent, and shall state in
reasonable detail the cause for the reduction in its Return and its calculation
of the amount of such reduction. Thereafter, the Lender may send a new notice
during each calendar quarter setting forth the calculation of the reduced Return
for that quarter and including a demand for payment of the amount necessary to
restore its Return for that quarter. The Lender's calculation in any such notice
shall be conclusive and binding absent demonstrable error.
Section 2.4 Letters of Credit.
(a) The Lender agrees, on the terms and subject to the conditions
herein set forth, to cause an Issuer to issue, from the Funding Date to the
Termination Date, one or more irrevocable standby or documentary letters of
credit (each, a "Letter of Credit") for the Borrower's account by
guaranteeing payment of the Borrower's obligations or being a co-applicant.
The Lender shall have no obligation to cause an Issuer to issue any Letter
of Credit if the face amount of the Letter of Credit to be issued would
exceed the lesser of:
(i) $500,000 less the L/C Amount, or
(ii) Availability.
Each Letter of Credit, if any, shall be issued pursuant to a separate L/C
Application entered into between the Borrower and the Lender for the
benefit of the Issuer, completed in a manner satisfactory to the Lender and
the Issuer. The terms and conditions set forth in each such L/C Application
shall supplement the terms and conditions hereof, but if the terms of any
such L/C Application and the terms of this Agreement are inconsistent, the
terms hereof shall control.
(b) No Letter of Credit shall be issued with an expiry date later than
the Termination Date in effect as of the date of issuance.
(c) Any request to cause an Issuer to issue a Letter of Credit shall
be deemed to be a representation by the Borrower that the conditions set
forth in Section 4.2 have been satisfied as of the date of the request.
Section 2.5 Special Account. If the Credit Facility is terminated for any
reason while any Letter of Credit is outstanding, the Borrower shall thereupon
pay the Lender in immediately
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available funds for deposit in the Special Account an amount equal to the L/C
Amount. The Special Account shall be an interest bearing account maintained for
the Lender by any financial institution acceptable to the Lender. Any interest
earned on amounts deposited in the Special Account shall be credited to the
Special Account. The Lender may apply amounts on deposit in the Special Account
at any time or from time to time to the Obligations in the Lender's sole
discretion. The Borrower may not withdraw any amounts on deposit in the Special
Account as long as the Lender maintains a security interest therein. The Lender
agrees to transfer any balance in the Special Account to the Borrower when the
Lender is required to release its security interest in the Special Account under
applicable law.
Section 2.6 Payment of Amounts Drawn Under Letters of Credit; Obligation of
Reimbursement. The Borrower acknowledges that the Lender, as co-applicant, will
be liable to the Issuer for reimbursement of any and all draws under Letters of
Credit and for all other amounts required to be paid under the applicable L/C
Application. Accordingly, the Borrower shall pay to the Lender any and all
amounts required to be paid under the applicable L/C Application, when and as
required to be paid thereby, and the amounts designated below, when and as
designated:
(a) The Borrower shall pay to the Lender on the day a draft is honored
under any Letter of Credit a sum equal to all amounts drawn under such
Letter of Credit plus any and all reasonable charges and expenses that the
Issuer or the Lender may pay or incur relative to such draw and the
applicable L/C Application, plus interest on all such amounts, charges and
expenses as set forth below (the Borrower's obligation to pay all such
amounts is herein referred to as the "Obligation of Reimbursement").
(b) Whenever a draft is submitted under a Letter of Credit, the
Borrower authorizes the Lender to make a Revolving Advance in the amount of
the Obligation of Reimbursement and to apply the proceeds of such Revolving
Advance thereto. Such Revolving Advance shall be repayable in accordance
with and be treated in all other respects as a Revolving Advance hereunder.
(c) If a draft is submitted under a Letter of Credit when the Borrower
is unable, because a Default Period exists or for any other reason, to
obtain a Revolving Advance to pay the Obligation of Reimbursement, the
Borrower shall pay to the Lender on demand and in immediately available
funds, the amount of the Obligation of Reimbursement together with
interest, accrued from the date of the draft until payment in full at the
Default Rate. Notwithstanding the Borrower's inability to obtain a
Revolving Advance for any reason, the Lender is irrevocably authorized, in
its sole discretion, to make a Revolving Advance in an amount sufficient to
discharge the Obligation of Reimbursement and all accrued but unpaid
interest thereon.
(d) The Borrower's obligation to pay any Revolving Advance made under
this Section 2.6, shall be evidenced by the Note and shall bear interest as
provided in Section 2.8.
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Section 2.7 Obligations Absolute. The Borrower's obligations arising under
Section 2.6 shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of Section 2.6, under all circumstances
whatsoever, including (without limitation) the following circumstances:
(a) any lack of validity or enforceability of any Letter of Credit or
any other agreement or instrument relating to any Letter of Credit
(collectively the "Related Documents");
(b) any amendment or waiver of or any consent to departure from all or
any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right which
the Borrower may have at any time, against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom any
such beneficiary or any such transferee may be acting), or other person or
entity, whether in connection with this Agreement, the transactions
contemplated herein or in the Related Documents or any unrelated
transactions;
(d) any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(e) payment by or on behalf of the Issuer under any Letter of Credit
against presentation of a draft or certificate which does not strictly
comply with the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
Section 2.8 Interest; Minimum Interest Charge; Default Interest; Clearance
Days; Participations; Usury.
(a) Note. Except as set forth in subsections (c) and (f), the
outstanding principal balance of the Note shall bear interest at the
Floating Rate.
(b) Minimum Interest Charge. Notwithstanding the interest payable
pursuant to subsection (a), the Borrower shall pay to the Lender interest
of not less than $10,000 per calendar month (the "Minimum Interest Charge")
during the term of this Agreement, and the Borrower shall pay any
deficiency between the Minimum Interest Charge and the amount of interest
otherwise calculated under subsection (a) on the first day of each month
and on the Termination Date.
(c) Default Interest Rate. At any time during any Default Period, in
the Lender's sole discretion and without waiving any of its other rights
and remedies, the principal of the Revolving Advances outstanding from time
to time shall bear interest at
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the Default Rate, effective for any periods designated by the Lender from
time to time during that Default Period.
(d) Clearance Days. Notwithstanding Section 2.11(b)(ii), interest at
the interest rate applicable under this Section 2.8 shall accrue on the
amount of all payments (even if in the form of immediately available
federal funds) for one (1) day for clearance.
(e) Participations. If any Person shall acquire a participation in the
Revolving Advances under this Agreement, the Borrower shall be obligated to
the Lender to pay the full amount of all interest calculated under this
Agreement, along with all other fees, charges and other amounts due under
this Agreement, regardless if such Person elects to accept interest with
respect to its participation at a lower rate than the Floating Rate, or
otherwise elects to accept less than its prorata share of such fees,
charges and other amounts due under this Agreement.
(f) Usury. In any event no rate change shall be put into effect which
would result in a rate greater than the highest rate permitted by law.
Notwithstanding anything to the contrary contained in any Loan Document,
all agreements which either now are or which shall become agreements
between the Borrower and the Lender are hereby limited so that in no
contingency or event whatsoever shall the total liability for payments in
the nature of interest, additional interest and other charges exceed the
applicable limits imposed by any applicable usury laws. If any payments in
the nature of interest, additional interest and other charges made under
any Loan Document are held to be in excess of the limits imposed by any
applicable usury laws, it is agreed that any such amount held to be in
excess shall be considered payment of principal hereunder, and the
indebtedness evidenced hereby shall be reduced by such amount so that the
total liability for payments in the nature of interest, additional interest
and other charges shall not exceed the applicable limits imposed by any
applicable usury laws, in compliance with the desires of the Borrower and
the Lender. This provision shall never be superseded or waived and shall
control every other provision of the Loan Documents and all agreements
between the Borrower and the Lender, or their successors and assigns.
Section 2.9 Fees.
(a) Origination Fee. The Borrower shall pay the Lender a fully earned
and non-refundable origination fee of $30,000, due and payable upon the
execution of this Agreement. The Lender has received $30,000 toward payment
of this fee and the fees, costs and expenses described in Section 2.9(c)
and 8.5.
(b) Unused Line Fee. For the purposes of this Section 2.9, "Unused
Amount" means the Maximum Line reduced by outstanding Revolving Advances
and the L/C Amount. The Borrower agrees to pay to the Lender an unused line
fee at the rate of one quarter of one percent (0.25%) per annum on the
average daily Unused Amount from the date of this Agreement to and
including the Termination Date, due and payable monthly in arrears on the
first day of the month following the month in which such fee accrues and on
the Termination Date.
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(c) Audit Fees. The Borrower shall pay the Lender, on demand, audit
fees in connection with any audits or inspections conducted by the Lender
of any Collateral or the Borrower's operations or business at the rates
established from time to time by the Lender as its audit fees (which fees
are currently $85 per hour per auditor), together with all actual
out-of-pocket costs and expenses incurred in conducting any such audit or
inspection; provided, however, that except during Default Periods, the
Borrower shall not have to reimburse the Lender for such fees, costs and
expenses related to audits in excess of one audit per quarter.
(d) Termination and Line Reduction Fees. If the Credit Facility is
terminated (i) by the Lender during a Default Period that begins before a
Maturity Date, (ii) by the Borrower (A) as of a date other than a Maturity
Date or (B) as of a Maturity Date but without the Lender having received
written notice of such termination at least 90 days before such Maturity
Date, or if the Borrower reduces the Maximum Line, the Borrower shall pay
to the Lender a fee in an amount equal to a percentage of the Maximum Line
(or the reduction of the Maximum Line, as the case may be) as follows: (A)
one and one half percent (1.50%) if the termination or reduction occurs on
or before the first anniversary of the Funding Date; (B) one percent (1.0%)
if the termination or reduction occurs after the first anniversary of the
Funding Date but on or before the second anniversary of the Funding Date;
and (C) one half of one percent (0.50%) if the termination or reduction
occurs after the second anniversary of the Funding Date.
(e) Waiver of Termination and Line Reduction Fees. The Borrower will
not be required to pay the termination and line reduction fees otherwise
due under subsection (e) if such termination or line reduction is made
because of refinancing by an affiliate of the Lender.
(f) Letter of Credit Fees. The Borrower agrees to pay to the Lender on
the date of the issuance of each Letter of Credit issued hereunder, a fully
earned and non-refundable Letter of Credit fee equal to two percent (2.0%)
of the face amount of each Letter of Credit issued hereunder.
(g) Other Fees. The Lender may from time to time, upon five (5) days
prior notice to the Borrower during a Default Period, charge additional
fees for Revolving Advances made in excess of the Borrowing Base, for late
delivery of reports, in lieu of imposing interest at the Default Rate, and
for other reasons. The Borrower's request for a Revolving Advance at any
time after such notice is given and such five (5) day period has elapsed
shall constitute the Borrower's agreement to pay the fees described in such
notice.
Section 2.10 Time for Interest Payments; Payment on Non-Banking Days;
Computation of Interest and Fees.
(a) Time For Interest Payments. Interest shall be due and payable in
arrears on the first day of each month following the month in which such
interest accrues and on the Termination Date.
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(b) Payment on Non-Banking Days. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of
interest on the Revolving Advances or the fees hereunder, as the case may
be.
(c) Computation of Interest and Fees. Interest accruing on the
outstanding principal balance of the Revolving Advances and fees hereunder
outstanding from time to time shall be computed on the basis of actual
number of days elapsed in a year of 360 days.
Section 2.11 Lockbox; Collateral Account; Application of Payments.
(a) Lockbox and Collateral Account.
(i) The Borrower shall instruct all account debtors to pay all
Accounts directly to the Lockbox. If, notwithstanding such
instructions, the Borrower receives any payments on Accounts, the
Borrower shall deposit such payments into the Collateral Account.
Until so deposited, the Borrower shall hold all such payments in trust
for and as the property of the Lender and shall not commingle such
payments with any of its other funds or property. All deposits in the
Collateral Account shall constitute proceeds of Collateral and shall
not constitute payment of the Obligations.
(ii) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected,
the Borrower will immediately pay the Lender, or, for items deposited
in the Collateral Account, the bank maintaining such account, the
amount of that item, or such bank at its discretion may charge any
uncollected item to the Borrower's commercial account or other
account. The Borrower shall be liable as an endorser on all items
deposited in the Collateral Account, whether or not in fact endorsed
by the Borrower.
(b) Application of Payments.
(i) The Borrower may, from time to time, in accordance with the
Lockbox and Collection Account Agreement, cause funds in the
Collateral Account to be transferred to the Lender's general account
for payment of the Obligations. Except as provided in the preceding
sentence, amounts deposited in the Collateral Account shall not be
subject to withdrawal by the Borrower, except after full payment and
discharge of all Obligations.
(ii) All payments to the Lender shall be made in immediately
available funds and shall be applied to the Obligations upon receipt
by the Lender. Funds received from the Collateral Account shall be
deemed to be immediately available. The Lender may hold all payments
not constituting immediately
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available funds for three (3) additional days before applying them to
the Obligations.
Section 2.12 Voluntary Prepayment; Reduction of the Maximum Line;
Termination of the Credit Facility by the Borrower. Except as otherwise provided
herein, the Borrower may prepay the Revolving Advances in whole at any time or
from time to time in part. The Borrower may terminate the Credit Facility or
reduce the Maximum Line at any time if it (i) gives the Lender at least 30 days'
prior written notice and (ii) pays the Lender termination and Maximum Line
reduction fees in accordance with Sections 2.5(e). Any reduction in the Maximum
Line must be in an amount of not less than $100,000 or an integral multiple
thereof. If the Borrower reduces the Maximum Line to zero, all Obligations shall
be immediately due and payable. Subject to termination of the Credit Facility
and payment and performance of all Obligations, the Lender shall, at the
Borrower's expense, release or terminate the Security Interest and the Security
Documents to which the Borrower is entitled by law, including Revised Article 9
of the UCC.
Section 2.13 Mandatory Prepayment. Without notice or demand, if the sum of
the outstanding principal balance of the Revolving Advances plus the L/C Amount
shall at any time exceed the Borrowing Base, the Borrower shall (i) first,
immediately prepay the Revolving Advances to the extent necessary to eliminate
such excess and (ii) if prepayment in full of the Revolving Advances is
insufficient to eliminate such excess, pay to the Lender in immediately
available funds for deposit in the Special Account an amount equal to the
remaining excess.. Any payment received by the Lender under this Section 2.13 or
under Section 2.12 may be applied to the Obligations, in such order and in such
amounts as the Lender, in its discretion, may from time to time determine.
Section 2.14 Revolving Advances to Pay Obligations. Notwithstanding
anything in Section 2.1, the Lender may, in its discretion at any time or from
time to time, without the Borrower's request and even if the conditions set
forth in Section 4.2 would not be satisfied, make a Revolving Advance in an
amount equal to the portion of the Obligations from time to time due and
payable.
Section 2.15 Use of Proceeds. The Borrower shall use the proceeds of
Revolving Advances and each Letter of Credit for ordinary working capital
purposes and to retire certain debt owed to SNPE, Inc.
Section 2.16 Liability Records. The Lender may maintain from time to time,
at its discretion, records as to the Obligations. All entries made on any such
record shall be presumed correct until the Borrower establishes the contrary.
Upon the Lender's demand, the Borrower will admit and certify in writing the
exact principal balance of the Obligations that the Borrower then asserts to be
outstanding. Any billing statement or accounting rendered by the Lender shall be
conclusive and fully binding on the Borrower unless the Borrower gives the
Lender specific written notice of exception within 30 days after receipt.
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ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 Grant of Security Interest. The Borrower hereby pledges,
assigns and grants to the Lender a lien and security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations. Upon request by the Lender, the
Borrower will grant the Lender a security interest in all commercial tort claims
it may have against any Person.
Section 3.2 Notification of Account Debtors and Other Obligors. The Lender
may at any time, during a Default Period, notify any account debtor or other
person obligated to pay the amount due that such right to payment has been
assigned or transferred to the Lender for security and shall be paid directly to
the Lender. The Borrower will join in giving such notice if the Lender so
requests. At any time after the Borrower or the Lender gives such notice to an
account debtor or other obligor and so long as a Default Period exists, the
Lender may, but need not, in the Lender's name or in the Borrower's name, (a)
demand, xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
Section 3.3 Assignment of Insurance. As additional security for the payment
and performance of the Obligations, the Borrower hereby assigns to the Lender
any and all monies (including proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of the Borrower with
respect to, any and all policies of insurance now or at any time hereafter
covering the Collateral or any evidence thereof or any business records or
valuable papers pertaining thereto, and the Borrower hereby directs the issuer
of any such policy to pay all such monies directly to the Lender. At any time,
whether or not a Default Period then exists, the Lender may (but need not), in
the Lender's name or in the Borrower's name, execute and deliver proof of claim,
receive all such monies, endorse checks and other instruments representing
payment of such monies, and adjust, litigate, compromise or release any claim
against the issuer of any such policy.
Section 3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the right to
take exclusive possession of the Premises at any time during a Default
Period.
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(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose
of goods that are Collateral and for other purposes that the Lender may in
good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and terminate
upon the earlier of (i) payment in full and discharge of all Obligations
and termination of the Credit Facility, (ii) final sale or disposition of
all goods constituting Collateral and delivery of all such goods to
purchasers, and (iii) the end of a Default Period.
(d) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for any
rent or other compensation for the possession, occupancy or use of any of
the Premises, including any rent owed by Mypodiamond, Inc. to its landlord,
the Borrower shall reimburse the Lender promptly for the full amount
thereof. In addition, the Borrower will pay, or reimburse the Lender for,
all taxes, fees, duties, imposts, charges and expenses at any time incurred
by or imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or the
provisions of this Section 3.4.
Section 3.5 License. Without limiting the generality of any other Security
Document, the Borrower hereby grants to the Lender a non-exclusive, worldwide
and royalty-free license to use or otherwise exploit all Intellectual Property
Rights of the Borrower for the purpose of: (a) completing the manufacture of any
in-process materials during any Default Period so that such materials become
saleable Inventory, all in accordance with the same quality standards previously
adopted by the Borrower for its own manufacturing and subject to the Borrower's
reasonable exercise of quality control; and (b) selling, leasing or otherwise
disposing of any or all Collateral during any Default Period.
Section 3.6 Financing Statement. The Borrower authorizes the Lender to file
from time to time where permitted by law, such financing statements against
collateral described as "all personal property" as the Lender deems necessary or
useful to perfect the Security Interest. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtor:
Dynamic Materials Corporation
0000 Xxxxx Xxxx
Xxxxxxx, XX 00000
Federal Employer Identification No. 00-0000000
21
Name and address of Secured Party:
Xxxxx Fargo Business Credit, Inc.
MAC C7300-300
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Federal Employer Identification No. 00-0000000
Section 3.7 Setoff. The Lender may at any time or from time to time, at its
sole discretion and without demand and without notice to anyone, setoff any
liability owed to the Borrower by the Lender, whether or not due, against any
Obligation, whether or not due. In addition, each other Person holding a
participating interest in any Obligations shall have the right to appropriate or
setoff any deposit or other liability then owed by such Person to the Borrower,
whether or not due, and apply the same to the payment of said participating
interest, as fully as if such Person had lent directly to the Borrower the
amount of such participating interest.
Section 3.8 Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application. The Lender has no obligation to clean-up or otherwise prepare the
Collateral for sale. The Borrower waives any right it may have to require the
Lender to pursue any third person for any of the Obligations.
ARTICLE IV
CONDITIONS OF LENDING
Section 4.1 Conditions Precedent to the Initial Revolving Advance and
Letter of Credit. The Lender's obligation to make the initial Revolving Advance
or to cause any Letters of Credit to be issued shall be subject to the condition
precedent that the Lender shall have received all of the following, each in form
and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to which
the Borrower is leasing the Premises, together with a landlord's disclaimer
and consent with respect to each such lease.
22
(d) A true and correct copy of any and all mortgages pursuant to which
the Borrower has mortgaged the Premises, together with a mortgagee's
disclaimer and consent with respect to each such mortgage.
(e) A true and correct copy of any and all agreements pursuant to
which the Borrower's property is in the possession of any Person other than
the Borrower, together with, in the case of any goods held by such Person
for resale, (i) a consignee's acknowledgment and waiver of Liens, (ii) UCC
financing statements sufficient to protect the Borrower's and the Lender's
interests in such goods, and (iii) UCC searches showing that no other
secured party has filed a financing statement against such Person and
covering property similar to the Borrower's other than the Borrower, or if
there exists any such secured party, evidence that each such secured party
has received notice from the Borrower and the Lender sufficient to protect
the Borrower's and the Lender's interests in the Borrower's goods from any
claim by such secured party.
(f) An acknowledgment and waiver of Liens from each warehouse in which
the Borrower is storing Inventory.
(g) A true and correct copy of any and all agreements pursuant to
which the Borrower's property is in the possession of any Person other than
the Borrower, together with, (i) an acknowledgment and waiver of Liens from
each subcontractor who has possession of the Borrower's goods from time to
time, (ii) UCC financing statements sufficient to protect the Borrower's
and the Lender's interests in such goods, and (iii) UCC searches showing
that no other secured party has filed a financing statement covering such
Person's property other than the Borrower, or if there exists any such
secured party, evidence that each such secured party has received notice
from the Borrower and the Lender sufficient to protect the Borrower's and
the Lender's interests in the Borrower's goods from any claim by such
secured party.
(h) The Lockbox and Collection Account Agreement, properly executed by
the Borrower and Xxxxx Fargo Bank West.
(i) Control agreements, properly executed by the Borrower and each
bank at which the Borrower maintains deposit accounts.
(j) Current searches of appropriate filing offices showing that (i) no
Liens have been filed and remain in effect against the Borrower except
Permitted Liens or Liens held by Persons who have agreed in writing that
upon receipt of proceeds of the initial Revolving Advances, they will
satisfy, release or terminate such Liens in a manner satisfactory to the
Lender, and (ii) the Lender has duly filed all financing statements
necessary to perfect the Security Interest, to the extent the Security
Interest is capable of being perfected by filing.
(k) A certificate of the Borrower's Secretary or Assistant Secretary
certifying that attached to such certificate are (i) the resolutions of the
Borrower's Directors and, if required, Owners, authorizing the execution,
delivery and performance of the Loan Documents, (ii) true, correct and
complete copies of the Borrower's Constituent
23
Documents, and (iii) examples of the signatures of the Borrower's Officers
or agents authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Revolving Advance
requests, on the Borrower's behalf.
(l) A current certificate issued by the Delaware Secretary of State,
certifying that the Borrower is in compliance with all applicable
organizational requirements of the State of Delaware.
(m) Evidence that the Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary.
(n) A certificate of an Officer of the Borrower confirming, in his
personal capacity, the representations and warranties set forth in Article
V.
(o) An opinion of counsel to the Borrower, addressed to the Lender.
(p) Certificates of the insurance required hereunder, with all hazard
insurance containing a lender's loss payable endorsement in the Lender's
favor and with all liability insurance naming the Lender as an additional
insured.
(q) Payment of the fees and commissions due under Section 2.9 through
the date of the initial Revolving Advance or Letter of Credit and expenses
incurred by the Lender through such date and required to be paid by the
Borrower under Section 8.5, including all legal expenses, including
reasonable legal fees, incurred through the date of this Agreement.
(r) Evidence that after making the initial Revolving Advance,
satisfying all obligations owed to the Borrower's prior lender, satisfying
all intercompany debt obligations, satisfying all trade payables older than
60 days from invoice date, book overdrafts and closing costs, Availability
shall be not less than $500,000.
(s) Documentation of satisfactory test results at the Mount Xxxxxxxx,
Pennsylvania location.
(t) The Amendment to Convertible Subordinated Note properly executed
by SNPE, Inc. and the Borrower.
(u) Such other documents as the Lender in its sole discretion may
require.
Section 4.2 Conditions Precedent to All Revolving Advances and Letters of
Credit. The Lender's obligation to make each Revolving Advance and to cause each
Letter of Credit to be issued shall be subject to the further conditions
precedent that:
(a) the representations and warranties contained in Article V are
correct on and as of the date of such Revolving Advance or issuance of a
Letter of Credit as though
24
made on and as of such date, except to the extent that such representations
and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from such
Revolving Advance or issuance of a Letter of Credit which constitutes a
Default or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Existence and Power; Name; Chief Executive Office; Inventory
and Equipment Locations; Federal Employer Identification Number. The Borrower is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary. The Borrower has all requisite power and authority to
conduct its business, to own its properties and to execute and deliver, and to
perform all of its obligations under, the Loan Documents. During its existence,
the Borrower has done business solely under the names set forth in Schedule 5.1
and Boom, Inc. The Borrower's chief executive office and principal place of
business is located at the address set forth in Schedule 5.1, and all of the
Borrower's records relating to its business or the Collateral are kept at that
location. All Inventory and Equipment is located at that location or at one of
the other locations listed in Schedule 5.1. The Borrower's federal employer
identification number is correctly set forth in Section 3.6.
Section 5.2 Capitalization. Schedule 5.2 constitutes a correct and complete
list of all Persons holding ownership interests and rights to acquire ownership
interests which if fully exercised would cause such Person to hold more than
five percent (5%) of all ownership interests of the Borrower on a fully diluted
basis, and an organizational chart showing the ownership structure of all
Subsidiaries of the Borrower.
Section 5.3 Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's Owners; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including Regulation X of the
Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to the Borrower or
of the Borrower's Constituent Documents; (iv) result in a breach of or
constitute a default under any indenture or
25
loan or credit agreement or any other material agreement, lease or instrument to
which the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any Lien
(other than the Security Interest) upon or with respect to any of the properties
now owned or hereafter acquired by the Borrower.
Section 5.4 Legal Agreements. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms, except as enforcement may be limited
by equitable principals or by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally.
Section 5.5 Subsidiaries. Except as set forth in Schedule 5.5 hereto, the
Borrower has no Subsidiaries.
Section 5.6 Financial Condition; No Adverse Change. The Borrower has
furnished to the Lender its audited financial statements for its fiscal year
ended December 31, 2000 and unaudited financial statements for the
fiscal-year-to-date period ended September 30, 2001, and those statements fairly
present the Borrower's financial condition on the dates thereof and the results
of its operations and cash flows for the periods then ended and were prepared in
accordance with GAAP. Since the date of the most recent financial statements,
there has been no change in the Borrower's business, properties or condition
(financial or otherwise) which has had a Material Adverse Effect.
Section 5.7 Litigation. There are no actions, suits or proceedings pending
or, to the Borrower's knowledge, threatened against or affecting the Borrower or
any of its Affiliates or the properties of the Borrower or any of its Affiliates
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which, if determined adversely to the
Borrower or any of its Affiliates, would have a Material Adverse Effect.
Section 5.8 Regulation U. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Revolving Advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
Section 5.9 Taxes. The Borrower and its Affiliates have paid or caused to
be paid to the proper authorities when due all U.S. federal, state and local
taxes required to be withheld by each of them. Prior to July 3, 2001, the
Borrower and its Affiliates have paid or caused to be paid to the proper
authorities when due all foreign federal, state, provincial, local and other
taxes required to be withheld by each of them. On and after July 3, 2001, to the
knowledge of the Borrower, the Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all foreign federal, state,
provincial, local and other taxes required to be withheld by each of them. The
Borrower and its Affiliates have filed all foreign and U.S. federal, state,
provincial, local or other tax returns which to the knowledge of the Officers of
the Borrower or
26
any Affiliate, as the case may be, are required to be filed, and the Borrower
and its Affiliates have paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received by
any of them to the extent such taxes have become due.
Section 5.10 Titles and Liens. The Borrower has good and absolute title to
all Collateral free and clear of all Liens other than Permitted Liens. No
financing statement naming the Borrower as debtor is on file in any office
except to perfect only Permitted Liens.
Section 5.11 Intellectual Property Rights.
(a) Owned Intellectual Property. Schedule 5.11 is a complete list of
all patents, applications for patents, trademarks, applications to register
trademarks, service marks, applications to register service marks, mask
works, trade dress and copyrights for which the Borrower is the owner of
record (the "Owned Intellectual Property"). Except as disclosed on Schedule
5.11, (i) the Borrower owns the Owned Intellectual Property free and clear
of all restrictions (including covenants not to xxx a third party), court
orders, injunctions, decrees, writs or Liens, whether by written agreement
or otherwise, (ii) no Person other than the Borrower owns or has been
granted any right in the Owned Intellectual Property, (iii) all Owned
Intellectual Property is valid, subsisting and enforceable and (iv) the
Borrower has taken all commercially reasonable action necessary to maintain
and protect the Owned Intellectual Property.
(b) Agreements with Employees and Contractors. The Borrower has
entered into a legally enforceable agreement with each of its employees and
subcontractors listed on Schedule 5.11, obligating each such Person to
assign to the Borrower, without any additional compensation, any
Intellectual Property Rights created, discovered or invented by such Person
in the course of such Person's employment or engagement with the Borrower
(except to the extent prohibited by law), and further requiring such Person
to cooperate with the Borrower, without any additional compensation, in
connection with securing and enforcing any Intellectual Property Rights
therein; provided, however, that the foregoing shall not apply with respect
to employees and subcontractors whose job descriptions are of the type such
that no such assignments are reasonably foreseeable.
(c) Intellectual Property Rights Licensed from Others. Schedule 5.11
is a complete list of all agreements under which the Borrower has licensed
Intellectual Property Rights from another Person ("Licensed Intellectual
Property") other than readily available, non-negotiated licenses of
computer software and other intellectual property used solely for
performing accounting, word processing and similar administrative tasks
("Off-the-shelf Software") and a summary of any ongoing payments the
Borrower is obligated to make with respect thereto. Except as disclosed on
Schedule 5.11 and in written agreements copies of which have been given to
the Lender, the Borrower's licenses to use the Licensed Intellectual
Property are free and clear of all restrictions, Liens, court orders,
injunctions, decrees, or writs, whether by written agreement or otherwise.
Except as disclosed on Schedule 5.11, the Borrower is not obligated or
under any liability whatsoever to make any payments of a material nature by
way of royalties,
27
fees or otherwise to any owner of, licensor of, or other claimant to, any
Intellectual Property Rights.
(d) Other Intellectual Property Needed for Business. Except for
Off-the-shelf Software and as disclosed on Schedule 5.11, the Owned
Intellectual Property and the Licensed Intellectual Property constitute all
Intellectual Property Rights used or necessary to conduct the Borrower's
business as it is presently conducted or as the Borrower reasonably
foresees conducting it.
(e) Infringement. Except as disclosed on Schedule 5.11, the Borrower
has no knowledge of, and has not received any written claim or notice
alleging, any Infringement of another Person's Intellectual Property Rights
(including any written claim that the Borrower must license or refrain from
using the Intellectual Property Rights of any third party) nor, to the
Borrower's knowledge, is there any threatened claim or any reasonable basis
for any such claim.
Section 5.12 Plans. Except as disclosed to the Lender in writing prior to
the date hereof, neither the Borrower nor any ERISA Affiliate (i) maintains or
has maintained any Pension Plan, (ii) contributes or has contributed to any
Multiemployer Plan or (iii) provides or has provided post-retirement medical or
insurance benefits with respect to employees or former employees (other than
benefits required under Section 601 of ERISA, Section 4980B of the IRC or
applicable state law). Neither the Borrower nor any ERISA Affiliate has received
any notice or has any knowledge to the effect that it is not in full compliance
with any of the requirements of ERISA, the IRC or applicable state law with
respect to any Plan. No Reportable Event exists in connection with any Pension
Plan. Each Plan which is intended to qualify under the IRC is so qualified, and
no fact or circumstance exists which may have an adverse effect on the Plan's
tax-qualified status. Neither the Borrower nor any ERISA Affiliate has (i) any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the IRC) under any Plan, whether or not waived, (ii) any liability under
Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan or (iii) any
liability or knowledge of any facts or circumstances which could result in any
liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan
(other than routine claims for benefits under the Plan).
Section 5.13 Default. The Borrower is in compliance with all provisions of
all agreements, instruments, decrees and orders to which it is a party or by
which it or its property is bound or affected, the breach or default of which
could have a Material Adverse Effect.
Section 5.14 Environmental Matters.
(a) To the Borrower's best knowledge, there are not present in, on or
under the Premises any Hazardous Substances in such form or quantity as to
create any material liability or obligation for either the Borrower or the
Lender under the common law of any jurisdiction or under any Environmental
Law, and no Hazardous Substances have ever
28
been stored, buried, spilled, leaked, discharged, emitted or released in,
on or under the Premises in such a way as to create any such material
liability.
(b) To the Borrower's best knowledge, the Borrower has not disposed of
Hazardous Substances in such a manner as to create any material liability
under any Environmental Law.
(c) Except as provided on Schedule 5.14, There are not and there never
have been any requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation, relating in any way to
the Premises owned by the Borrower or the Borrower, alleging material
liability under, violation of, or noncompliance with any Environmental Law
or any license, permit or other authorization issued pursuant thereto. To
the Borrower's knowledge, there are not and there never have been any
requests, claims, notices, investigations, demands, administrative
proceedings, hearings or litigation, relating in any way to the Premises
leased by the Borrower, alleging material liability under, violation of, or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto. To the Borrower's best knowledge, no
such matter is threatened or impending.
(d) To the Borrower's best knowledge, the Borrower's businesses are
and have in the past always been conducted in accordance with all
Environmental Laws and all licenses, permits and other authorizations
required pursuant to any Environmental Law and necessary for the lawful and
efficient operation of such businesses are in the Borrower's possession and
are in full force and effect. No permit required under any Environmental
Law is scheduled to expire within 12 months and, to the Borrower's
knowledge, there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(e) To the Borrower's best knowledge, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or
any similar federal, state or local list, schedule, log, inventory or
database.
(f) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or Borrower's businesses.
Section 5.15 Submissions to Lender. All financial and other information
provided to the Lender by or on behalf of the Borrower in connection with the
Borrower's request for the credit facilities contemplated hereby is (i) true and
correct in all material respects, (ii) does not omit any material fact necessary
to make such information not misleading and, (iii) as to projections, valuations
or proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
Section 5.16 Financing Statements. The Borrower has provided to the Lender
signed financing statements and has authorized the filing of financing
statements sufficient when filed to perfect the Security Interest and the other
security interests created by the Security
29
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral which is capable of being perfected by filing financing statements.
None of the Collateral is or will become a fixture on real estate, unless a
sufficient fixture filing is in effect with respect thereto.
Section 5.17 Rights to Payment. Each right to payment and each instrument,
document, chattel paper and other agreement constituting or evidencing
Collateral is (or, in the case of all future Collateral, will be when arising or
issued) the valid, genuine and legally enforceable obligation, subject to no
defense, setoff or counterclaim, of the account debtor or other obligor named
therein or in the Borrower's records pertaining thereto as being obligated to
pay such obligation.
ARTICLE VI
COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing which consent
shall be given as determined by the Lender in its sole discretion in compliance
with applicable lender liability laws:
Section 6.1 Reporting Requirements. The Borrower will deliver, or cause to
be delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender:
(a) Annual Financial Statements. As soon as available, and in any
event within 90 days after the end of each fiscal year of the Borrower, the
Borrower will deliver, or cause to be delivered, to the Lender, the
Borrower's audited financial statements with the unqualified opinion of
independent certified public accountants selected by the Borrower and
acceptable to the Lender, which annual financial statements shall include
the Borrower's balance sheet as at the end of such fiscal year and the
related statements of the Borrower's income, retained earnings and cash
flows for the fiscal year then ended, prepared on a consolidated basis to
include any Affiliates, all in reasonable detail and prepared in accordance
with GAAP, together with (i) copies of all management letters prepared by
such accountants; (ii) a report signed by such accountants stating that in
making the investigations necessary for said opinion they obtained no
knowledge, except as specifically stated, of any Default or Event of
Default and all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrower is in compliance with the
Financial Covenants; and (iii) a certificate of the Borrower's chief
financial officer stating that such financial statements have been prepared
in accordance with GAAP and whether or not such Officer has knowledge of
the occurrence of any Default or Event of Default and, if so, stating in
reasonable detail the facts with respect thereto. As soon as available, and
in any event within 90 days after the end of each fiscal year of the
Borrower, the Borrower will deliver, or cause to be delivered, to the
Lender, the Borrower's internally prepared financial statements for the
Borrower's U.S. operations, prepared on a consolidating basis, which annual
financial statements shall
30
include the Borrower's balance sheet as at the end of such fiscal year and
the related statements of the Borrower's income, retained earnings and cash
flows for the fiscal year then ended, all in reasonable detail and prepared
in accordance with GAAP, together with a certificate of the Borrower's
chief financial officer stating that such financial statements have been
prepared in accordance with GAAP and whether or not such Officer has
knowledge of the occurrence of any Default or Event of Default and, if so,
stating in reasonable detail the facts with respect thereto.
(b) Monthly Financial Statements. As soon as available and in any
event within 20 days after the end of each month, the Borrower will deliver
to the Lender an unaudited/internal balance sheet and statements of income
and retained earnings of the Borrower for the Borrower's U.S. operations as
at the end of and for such month and for the year to date period then
ended, prepared, if the Lender so requests, on a consolidated basis to
include any Affiliates, in reasonable detail and stating in comparative
form the figures for the corresponding date and periods in the previous
year, all prepared in accordance with GAAP, subject to year-end audit
adjustments; and accompanied by a certificate of the Borrower's chief
financial officer, substantially in the form of Exhibit B hereto stating
(i) that such financial statements have been prepared in accordance with
GAAP, subject to year-end audit adjustments, (ii) whether or not such
Officer has knowledge of the occurrence of any Default or Event of Default
not theretofore reported and remedied and, if so, stating in reasonable
detail the facts with respect thereto, and (iii) all relevant facts in
reasonable detail to evidence, and the computations as to, whether or not
the Borrower is in compliance with the Financial Covenants.
(c) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each month, the Borrower will deliver
to the Lender an unaudited/internal balance sheet and statements of income
and retained earnings of the Borrower for the Borrower's U.S. operations as
at the end of and for such month and for the year to date period then
ended, prepared on a consolidating basis, in reasonable detail and stating
in comparative form the figures for the corresponding date and periods in
the previous year, all prepared in accordance with GAAP, subject to
year-end audit adjustments; and accompanied by a certificate of the
Borrower's chief financial officer, stating that such financial statements
have been prepared in accordance with GAAP, subject to year-end audit
adjustments and whether or not such Officer has knowledge of the occurrence
of any Default or Event of Default not theretofore reported and remedied
and, if so, stating in reasonable detail the facts with respect thereto.
(d) Collateral Reports. Within 15 days after the end of each month or
more frequently if the Lender so requires, the Borrower will deliver to the
Lender agings of the Borrower's accounts receivable and its accounts
payable, an inventory certification report, a backlog report of sales
orders backed by firm purchase orders, a calculation of the Borrower's
Accounts, Eligible Accounts, Inventory and Eligible Inventory as at the end
of such month or shorter time period and a Borrowing Base reconciliation
report.
(e) Projections. At least 30 days before the beginning of each fiscal
year of the Borrower, the Borrower will deliver to the Lender the projected
balance sheets and
31
income statements for each month of such year, each in reasonable detail,
representing the Borrower's good faith projections and certified by the
Borrower's chief financial Officer as being the most accurate projections
available and identical to the projections used by the Borrower for
internal planning purposes, together with a statement of underlying
assumptions and such supporting schedules and information as the Lender may
in its discretion require.
(f) Weekly Reports. Weekly or more frequently if the Lender so
requires, the Borrower will deliver to the Lender all credit memos, sales
reports, inventory reports listing inventory levels, receivables schedules,
collection reports, copies of invoices to account debtors in excess of
$250,000, shipment documents and delivery receipts for goods sold in excess
of $250,000 and copies of all deposit slips.
(g) Litigation. Reasonably promptly after the commencement thereof,
the Borrower will deliver to the Lender notice in writing of all litigation
and of all proceedings before any governmental or regulatory agency
affecting the Borrower (i) of the type described in Section 5.14(c) or (ii)
which seek a monetary recovery against the Borrower in excess of $50,000.
(h) Defaults. As promptly as practicable (but in any event not later
than five business days) after an Officer of the Borrower obtains knowledge
of the occurrence of any Default or Event of Default, the Borrower will
deliver to the Lender notice of such occurrence, together with a detailed
statement by a responsible Officer of the Borrower of the steps being taken
by the Borrower to cure the effect thereof.
(i) Plans. As soon as possible, and in any event within 30 days after
the Borrower knows or has reason to know that any Reportable Event with
respect to any Pension Plan has occurred, the Borrower will deliver to the
Lender a statement of the Borrower's chief financial Officer setting forth
details as to such Reportable Event and the action which the Borrower
proposes to take with respect thereto, together with a copy of the notice
of such Reportable Event to the Pension Benefit Guaranty Corporation. As
soon as possible, and in any event within 10 days after the Borrower fails
to make any quarterly contribution required with respect to any Pension
Plan under Section 412(m) of the IRC, the Borrower will deliver to the
Lender a statement of the Borrower's chief financial Officer setting forth
details as to such failure and the action which the Borrower proposes to
take with respect thereto, together with a copy of any notice of such
failure required to be provided to the Pension Benefit Guaranty
Corporation. As soon as possible, and in any event within 10 days after the
Borrower knows or has reason to know that it has or is reasonably expected
to have any liability under Section 4201 or 4243 of ERISA for any
withdrawal, partial withdrawal, reorganization or other event under any
Multiemployer Plan, the Borrower will deliver to the Lender a statement of
the Borrower's chief financial Officer setting forth details as to such
liability and the action which the Borrower proposes to take with respect
thereto.
(j) Disputes. Promptly upon knowledge thereof, the Borrower will
deliver to the Lender notice of (i) any disputes or claims by the
Borrower's customers exceeding
32
$50,000 individually or $100,000 in the aggregate during any fiscal year
and (ii) any goods returned to or recovered by the Borrower.
(k) Officers and Directors. Promptly upon knowledge thereof, the
Borrower will deliver to the Lender notice any change in the persons
constituting the Borrower's Officers and Directors.
(l) Collateral. Promptly upon knowledge thereof, the Borrower will
deliver to the Lender notice of any loss of or material damage to any
Collateral or of any substantial adverse change in any Collateral or the
prospect of payment thereof.
(m) Commercial Tort Claims. Promptly upon knowledge thereof, the
Borrower will deliver to the Lender notice of any commercial tort claims it
may bring against any Person, including the name and address of each
defendant, a summary of the facts, an estimate of the Borrower's damages,
copies of any complaint or demand letter submitted by the Borrower, and
such other information as the Lender may reasonably request.
(n) Intellectual Property.
(i) The Borrower will give the Lender 30 days prior written
notice of its intent to acquire or to grant material Intellectual
Property Rights and upon request shall provide the Lender with copies
of all proposed documents and agreements concerning such rights.
(ii) Promptly upon knowledge thereof, the Borrower will deliver
to the Lender notice of (A) any Infringement of its Intellectual
Property Rights by others, (B) claims that the Borrower is Infringing
another Person's Intellectual Property Rights and (C) any threatened
cancellation, termination or material limitation of its Intellectual
Property Rights.
(iii) Promptly upon receipt, the Borrower will give the Lender
copies of all registrations and filings with respect to its
Intellectual Property Rights.
(o) Reports to Owners. Promptly upon their distribution, the Borrower
will deliver to the Lender copies of all financial statements, reports and
proxy statements which the Borrower shall have sent to its Owners.
(p) SEC Filings. Promptly after the sending or filing thereof, the
Borrower will deliver to the Lender copies of all regular and periodic
reports which the Borrower shall file with the Securities and Exchange
Commission or any national securities exchange.
(q) Violations of Law. Promptly upon knowledge thereof, the Borrower
will deliver to the Lender notice of the Borrower's violation of any law,
rule or regulation, the non-compliance with which could have a Material
Adverse Effect on the Borrower.
33
(r) Other Reports. From time to time, with reasonable promptness, the
Borrower will deliver to the Lender any and all deposit records, equipment
schedules, copies of invoices to account debtors and such other material,
reports, records or information as the Lender may request.
Section 6.2 Financial Covenants.
(a) Minimum Debt Service Coverage Ratio. The Borrower will maintain,
during each period described below, its Debt Service Coverage Ratio for its
U.S. operations, determined as at the end of each such period, at not less
than the ratio set forth opposite such period (numbers appearing between "<
>" are negative):
Minimum Debt Service
Period Coverage Ratio
------ --------------
The three months ending December 31, 2001 0.89 to 1.00
The three months ending March 31, 2002 (0.21) to 1.00
The six months ending June 30, 2002 0.14 to 1.00
The nine months ending September 30, 2002 0.79 to 1.00
The twelve months ending December 31, 2002 1.01 to 1.00
(b) Minimum Book Net Worth. The Borrower will maintain, during each
period described below, its Book Net Worth for its U.S. operations,
determined as at the end of each month, at an amount not less than the
amount set forth opposite such period (numbers appearing between "( )" are
negative):
Period Minimum Book Net Worth
------ ----------------------
The calendar month ending October 31, 2001 $15,261,000
The calendar month ending November 30, 2001 $15,261,000
The calendar month ending December 31, 2001 $15,261,000
The calendar month ending January 31, 2002 $14,952,000
The calendar month ending February 28, 2002 $14,952,000
The calendar month ending March 31, 2002 $14,952,000
The calendar month ending April 30, 2002 $14,952,000
The calendar month ending May 31, 2002 $14,952,000
The calendar month ending June 30, 2002 $15,335,000
The calendar month ending July 31, 2002 $15,335,000
The calendar month ending August 31, 2002 $15,335,000
The calendar month ending September 30, 2002 $16,136,000
The calendar month ending October 31, 2002 $16,136,000
The calendar month ending November 30, 2002 $16,136,000
The calendar month ending December 31, 2002 and thereafter $16,911,000
34
(c) Minimum Net Income. The Borrower will achieve, during each period
described below, Net Income for its U.S. operations, determined as at the
end of each such period, of not less than the amount set forth opposite
such period (numbers appearing between "( )" are negative):
Period Minimum Net Income
------ ------------------
The three months ending December 31, 2001 ($165,000)
The three months ending March 31, 2002 ($309,000)
The six months ending June 30, 2002 $74,000
The nine months ending September 30, 2002 $875,000
The twelve months ending December 31, 2002 $1,650,000
(d) Minimum Cash Balance plus Excess Availability. From and after
September 30, 2002, during each calendar quarter, the sum of the Borrower's
cash balance in its operating account held at Xxxxx Fargo Bank West plus
Availability, determined immediately after the Borrower has made a payment
due to SNPE, Inc. under the SNPE Loan Agreement or the SNPE Note during
such quarter, shall be at least $500,000.
(e) Capital Expenditures. During the period from the date hereof to
and including December 31, 2002, the Borrower will not incur or contract to
incur Capital Expenditures of more than $2,150,000 in the aggregate.
(f) New Financial Covenants. On or before December 31, 2002, the
Borrower and the Lender shall agree on new covenant levels for this Section
6.2 for periods after such date. The new covenant levels will be based on
the Borrower's projections for such periods and shall be no less stringent
than the present levels, but if the Borrower and the Lender do not agree,
the Lender may designate the required amounts in its sole discretion, based
on the Borrower's projections for such periods, and such covenants shall be
no less stringent than the present levels. The failure by the Borrower to
maintain such designated amounts shall constitute an Event of Default.
Section 6.3 Permitted Liens; Financing Statements.
(a) The Borrower will not create, incur or suffer to exist any Lien
upon or of any of its assets, now owned or hereafter acquired, to secure
any indebtedness; excluding, however, from the operation of the foregoing,
the following (collectively, "Permitted Liens"):
(i) in the case of any of the Borrower's property which is not
Collateral, covenants, restrictions, rights, easements and minor
irregularities in title which do not materially interfere with the
Borrower's business or operations as presently conducted;
35
(ii) Liens in existence on the date hereof and listed in Schedule
6.3 hereto, securing indebtedness for borrowed money permitted under
Section 6.4;
(iii) the Security Interest and Liens created by the Security
Documents;
(iv) purchase money Liens relating to the acquisition of
machinery and equipment of the Borrower not exceeding the lesser of
cost or fair market value thereof, not exceeding $100,000 for any one
purchase or $500,000 in the aggregate during any fiscal year, and so
long as no Default Period is then in existence and none would exist
immediately after such acquisition;
(v) deposits or pledges of cash to secure obligations under
worker's compensation, social security or similar laws, or under
unemployment insurance;
(vi) deposits or pledges of cash to secure bids, tenders,
statutory obligations, surety and appeal bonds and other obligations
of like nature arising in the ordinary course of the Borrower's
business;
(vii) mechanics', workers', materialmens' or other like liens
arising in the ordinary course of the Borrower's business with respect
to obligations which are not due or which are being contested in good
faith by the Borrower; and
(viii) present or future zoning laws and ordinances or other laws
and ordinances restricting the occupancy, use or enjoyment of any real
property.
(b) The Borrower will not amend any financing statements in favor of
the Lender except as permitted by law.
Section 6.4 Indebtedness. The Borrower will not incur, create, assume or
permit to exist any indebtedness or liability on account of deposits or advances
or any indebtedness for borrowed money or letters of credit issued on the
Borrower's behalf, or any other indebtedness or liability evidenced by notes,
bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date hereof and
listed in Schedule 6.4 hereto; and
(c) indebtedness relating to Permitted Liens.
Section 6.5 Guaranties. The Borrower will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar transactions in the ordinary course of
business; and
36
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 6.4 hereto.
Section 6.6 Investments and Subsidiaries. The Borrower will not purchase or
hold beneficially any stock or other securities or evidences of indebtedness of,
make or permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including any partnership
or joint venture, except:
(a) investments in direct obligations of the United States of America
or any agency or instrumentality thereof whose obligations constitute full
faith and credit obligations of the United States of America having a
maturity of one year or less, commercial paper issued by U.S. corporations
rated "A-1" or "A-2" by Standard & Poor's Corporation or "P-1" or "P-2" by
Xxxxx'x Investors Service or certificates of deposit or bankers'
acceptances having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation);
(b) travel advances or loans to the Borrower's Officers and employees
not exceeding at any one time an aggregate of $100,000;
(c) advances in the form of progress payments, prepaid rent not
exceeding one month or security deposits; and
(d) current investments in the Subsidiaries in existence on the date
hereof and listed in Schedule 5.5 hereto.
Section 6.7 Dividends and Distributions. During a Default Period, the
Borrower will not declare any dividends (other than dividends payable solely in
stock of the Borrower) on any class of its stock or make any payment on account
of the purchase, redemption or other retirement of any shares of such stock or
make any distribution in respect thereof, either directly or indirectly. The
Borrower will not pay any dividends (other than dividends payable solely in
stock of the Borrower) on any class of its stock or make any payment on account
of the purchase, redemption or other retirement of any shares of such stock or
make any distribution in respect thereof, either directly or indirectly;
provided, however, that, after December 31, 2002, if (i) no Default Period
exists immediately prior to and immediately after, (ii) average Availability is
more than $500,000 over the three month period immediately prior to, and (iii)
Availability would be more than $500,000 immediately after, such payment, the
Borrower may pay dividends on any class of its stock in an aggregate amount of
up to fifty percent (50%) of the preceding year's annual Net Income.
Section 6.8 Salaries. The Borrower will not pay excessive or unreasonable
salaries, bonuses, commissions, consultant fees or other compensation.Section
6.9 Books and Records; Inspection and Examination. The Borrower will keep
accurate books of record and account for itself pertaining to the Collateral and
pertaining to the Borrower's business and financial condition and such other
matters as the Lender may from time to time request in which true and complete
37
entries will be made in accordance with GAAP and, upon the Lender's request,
will permit any officer, employee, attorney or accountant for the Lender to
audit, review, make extracts from or copy any and all company and financial
books and records of the Borrower at all times during ordinary business hours,
to send and discuss with account debtors and other obligors requests for
verification of amounts owed to the Borrower, and to discuss the Borrower's
affairs with any of its Directors, Officers, employees or agents. The Borrower
hereby irrevocably authorizes all accountants and third parties to disclose and
deliver to Lender, at the Borrower's expense, all financial information, books
and records, work papers, management reports and other information in their
possession regarding the Borrower. The Borrower will permit the Lender, or its
employees, accountants, attorneys or agents, to examine and inspect any
Collateral or any other property of the Borrower at any time during ordinary
business hours.
Section 6.10 Account Verification. The Lender may at any time and from time
to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
Section 6.11 Compliance with Laws.
(a) The Borrower will (i) comply with the requirements of applicable
laws and regulations, the non-compliance with which would materially and
adversely affect its business or its financial condition and (ii) use and
keep the Collateral, and require that others use and keep the Collateral,
only for lawful purposes, without violation of any federal, state or local
law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable Environmental
Laws and obtain and comply with all permits, licenses and similar approvals
required by any Environmental Laws, and will not generate, use, transport,
treat, store or dispose of any Hazardous Substances in such a manner as to
create any material liability or obligation under the common law of any
jurisdiction or any Environmental Law.
Section 6.12 Payment of Taxes and Other Claims. The Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges levied
or imposed upon it or upon its income or profits, upon any properties belonging
to it (including the Collateral) or upon or against the creation, perfection or
continuance of the Security Interest, prior to the date on which penalties
attach thereto, (b) all federal, state and local taxes required to be withheld
by it, and (c) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a Lien upon any properties of the Borrower;
provided, that the Borrower shall not be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which proper reserves
have been made.
Section 6.13 Maintenance of Properties.
(a) The Borrower will keep and maintain the Collateral and all of its
other properties necessary or useful in its business in good condition,
repair and working order
38
(normal wear and tear excepted) and will from time to time replace or
repair any worn, defective or broken parts; provided, however, that nothing
in this Section 6.13 shall prevent the Borrower from discontinuing the
operation and maintenance of any of its properties if such discontinuance
is, in the Borrower's judgment, desirable in the conduct of the Borrower's
business and not disadvantageous in any material respect to the Lender. The
Borrower will take all commercially reasonable steps necessary to protect
and maintain its Intellectual Property Rights.
(b) The Borrower will defend the Collateral against all Liens, claims
or demands of all Persons (other than the Lender) claiming the Collateral
or any interest therein. The Borrower will keep all Collateral free and
clear of all Liens except Permitted Liens. The Borrower will take all
commercially reasonable steps necessary to prosecute any Person Infringing
its Intellectual Property Rights and to defend itself against any Person
accusing it of Infringing any Person's Intellectual Property Rights.
Section 6.14 Insurance. The Borrower will obtain and at all times maintain
insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower operates.
Without limiting the generality of the foregoing, the Borrower will at all times
keep all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as the Lender may reasonably
request, with any loss payable to the Lender to the extent of its interest, and
all policies of such insurance shall contain a lender's loss payable endorsement
for the Lender's benefit. All policies of liability insurance required hereunder
shall name the Lender as an additional insured.
Section 6.15 Preservation of Existence. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.
Section 6.16 Delivery of Instruments, etc. Upon request by the Lender, the
Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel paper constituting Collateral, duly endorsed or assigned
by the Borrower.
Section 6.17 Sale or Transfer of Assets; Suspension of Business Operations.
The Borrower will not sell, lease, assign, transfer or otherwise dispose of (i)
the stock of any Subsidiary, (ii) all or a substantial part of its assets, or
(iii) any Collateral or any interest therein (whether in one transaction or in a
series of transactions) to any other Person other than (i) the sale of Inventory
in the ordinary course of business and (ii) the sale of obsolete or worn out
Equipment. The Borrower will not liquidate, dissolve or suspend business
operations. The Borrower will not transfer any part of its ownership interest in
any Intellectual Property Rights and will not permit any agreement under which
it has licensed Licensed Intellectual Property to lapse, except that the
Borrower may transfer such rights or permit such agreements to lapse if it shall
have reasonably determined that the applicable Intellectual Property Rights are
no longer
39
useful in its business. If the Borrower transfers any Intellectual Property
Rights for value, the Borrower will pay over the proceeds to the Lender for
application to the Obligations. The Borrower will not license any other Person
to use any of the Borrower's Intellectual Property Rights, except that the
Borrower may grant licenses in the ordinary course of its business in connection
with sales of Inventory or provision of services to its customers.
Section 6.18 Consolidation and Merger; Asset Acquisitions. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person.
Section 6.19 Sale and Leaseback. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 6.20 Restrictions on Nature of Business. The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.
Section 6.21 Accounting. The Borrower will not adopt any material change in
accounting principles other than as required by GAAP. The Borrower will not
adopt, permit or consent to any change in its fiscal year.
Section 6.22 Discounts, etc. The Borrower will not grant any discount,
credit or allowance to any customer of the Borrower or accept any return of
goods sold other than in the ordinary course of business; provided, however,
that the Borrower will not grant any discount, credit or allowance to any
customer of the Borrower or accept any return of goods sold during a Default
Period. The Borrower will not at any time modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the Borrower
other than in the ordinary course of business; provided, however, that the
Borrower will not modify, amend, subordinate, cancel or terminate the obligation
of any account debtor or other obligor of the Borrower during a Default Period.
Section 6.23 Plans. Unless disclosed to the Lender pursuant to Section
5.12, neither the Borrower nor any ERISA Affiliate will (i) adopt, create,
assume or become a party to any Pension Plan, (ii) incur any obligation to
contribute to any Multiemployer Plan, (iii) incur any obligation to provide
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required by law) or (iv) amend any Plan in
a manner that would materially increase its funding obligations.
Section 6.24 Place of Business; Name. The Borrower will not transfer its
chief executive office or principal place of business, or move, relocate, close
or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing
40
statement covering such Collateral would be required to be, but has not in fact
been, filed in order to perfect the Security Interest. The Borrower will not
change its name or jurisdiction of organization.
Section 6.25 Constituent Documents; S Corporation Status. The Borrower will
not amend its Constituent Documents. The Borrower will not become an S
Corporation.
Section 6.26 Performance by the Lender. If the Borrower at any time fails
to perform or observe any of the foregoing covenants contained in this Article
VI or elsewhere herein, and if such failure shall continue for a period of ten
calendar days after the Lender gives the Borrower written notice thereof (or in
the case of the agreements contained in Sections 6.12 and 6.14, immediately upon
the occurrence of such failure, without notice or lapse of time), the Lender
may, but need not, perform or observe such covenant on behalf and in the name,
place and stead of the Borrower (or, at the Lender's option, in the Lender's
name) and may, but need not, take any and all other actions which the Lender may
reasonably deem necessary to cure or correct such failure (including the payment
of taxes, the satisfaction of Liens, the performance of obligations owed to
account debtors or other obligors, the procurement and maintenance of insurance,
the execution of assignments, security agreements and financing statements, and
the endorsement of instruments); and the Borrower shall thereupon pay to the
Lender on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the Lender
in connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Lender, together with interest
thereon from the date expended or incurred at the Default Rate. To facilitate
the Lender's performance or observance of such covenants of the Borrower, the
Borrower hereby irrevocably appoints the Lender, or the Lender's delegate,
acting alone, as the Borrower's attorney in fact (which appointment is coupled
with an interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Borrower any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrower under this Section 6.26.
Section 6.27 SNPE. The Borrower will not amend or modify or permit the
amendment or modification of the SNPE Note or the SNPE Loan Agreement, each
dated as of July 3, 2001.
ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 7.1 Events of Default. "Event of Default", wherever used herein,
means any one of the following events:
(a) Default in the payment of any Obligations when they become due and
payable;
(b) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
41
(c) A Change of Control shall occur;
(d) The Borrower or any Guarantor shall be or become insolvent, or
admit in writing its or his inability to pay its or his debts as they
mature, or make an assignment for the benefit of creditors; or the Borrower
or any Guarantor shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or him or for all or any
substantial part of its or his property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of
the Borrower or such Guarantor, as the case may be; or the Borrower or any
Guarantor shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
relating to it or him under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against the Borrower or any such Guarantor; or any judgment, writ, warrant
of attachment or execution or similar process shall be issued or levied
against a substantial part of the property of the Borrower or any
Guarantor;
(e) A petition shall be filed by or against the Borrower or any
Guarantor under the United States Bankruptcy Code naming the Borrower or
such Guarantor as debtor;
(f) Any representation or warranty made by the Borrower in this
Agreement, by any Guarantor in any guaranty delivered to the Lender, or by
the Borrower (or any of its Officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement
contemplated by or made or delivered pursuant to or in connection with this
Agreement or any such guaranty shall prove to have been incorrect in any
material respect when deemed to be effective;
(g) The rendering against the Borrower of an arbitration award, final
judgment, decree or order for the payment of money in excess of $200,000
and the continuance of such arbitration award, judgment, decree or order
unsatisfied and in effect for any period of 30 consecutive days without a
stay of execution;
(h) A default under any bond, debenture, note or other evidence of
material indebtedness of the Borrower owed to any Person other than the
Lender, including without limitation SNPE, Inc., or under any indenture or
other instrument under which any such evidence of indebtedness has been
issued or by which it is governed, or under any material lease or other
contract, and the expiration of the applicable period of grace, if any,
specified in such evidence of indebtedness, indenture, other instrument,
lease or contract;
(i) Any demand, receipt or acceptance of any payment (whether of
principal, interest or otherwise) by SNPE, Inc. from the Borrower in
respect of the SNPE Indebtedness, or the exercise of any right of setoff in
respect of the SNPE Indebtedness, other than scheduled payments (but not
prepayments) of principal and interest required to be paid under the SNPE
Note; or a default under the Convertible Subordinated Note,
42
dated June 14, 2000 by the Borrower in favor of SNPE, Inc., by either the
Borrower or SNPE, Inc.
(j) Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Pension Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Pension Plan, shall have occurred and be continuing 30 days
after written notice to such effect shall have been given to the Borrower
by the Lender; or a trustee shall have been appointed by an appropriate
United States District Court to administer any Pension Plan; or the Pension
Benefit Guaranty Corporation shall have instituted proceedings to terminate
any Pension Plan or to appoint a trustee to administer any Pension Plan; or
the Borrower or any ERISA Affiliate shall have filed for a distress
termination of any Pension Plan under Title IV of ERISA; or the Borrower or
any ERISA Affiliate shall have failed to make any quarterly contribution
required with respect to any Pension Plan under Section 412(m) of the IRC,
which the Lender determines in good faith may by itself, or in combination
with any such failures that the Lender may determine are likely to occur in
the future, result in the imposition of a Lien on the Borrower's assets in
favor of the Pension Plan; or any withdrawal, partial withdrawal,
reorganization or other event occurs with respect to a Multiemployer Plan
which results or could reasonably be expected to result in a material
liability of the Borrower to the Multiemployer Plan under Title IV of
ERISA;
(k) An event of default shall occur under any Security Document;
(l) The Borrower shall liquidate, dissolve, terminate or suspend its
business operations or otherwise fail to operate its business in the
ordinary course, or sell or attempt to sell all or substantially all of its
assets, without the Lender's prior written consent;
(m) Default in the payment of any amount owed by the Borrower to the
Lender other than any indebtedness arising hereunder;
(n) Any Guarantor or person signing a support agreement in favor of
the Lender shall repudiate, purport to revoke or fail to perform his or its
obligations under such guaranty or support agreement in favor of the
Lender, any individual Guarantor shall die or any other Guarantor shall
cease to exist;
(o) Any person who has executed a support agreement in connection with
the Credit Facility shall die, become mentally or physically incapacitated,
or cease to be employed by the Borrower; provided, however, that such
occurrence shall not constitute an Event of Default if within 60 days of
such occurrence (i) the Borrower employs a replacement acceptable to the
Lender in its sole discretion and (ii) such replacement executes a support
agreement substantially in the form of the agreement executed by the person
so replaced; or
(p) Any breach, default or event of default by or attributable to any
Affiliate under any agreement between such Affiliate and the Lender shall
occur.
43
Section 7.2 Rights and Remedies. During any Default Period, the Lender may
exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the Commitment
to be terminated, whereupon the same shall forthwith terminate;
(b) the Lender may, by notice to the Borrower, declare the Obligations
to be forthwith due and payable, whereupon all Obligations shall become and
be forthwith due and payable, without presentment, notice of dishonor,
protest or further notice of any kind, all of which the Borrower hereby
expressly waives;
(c) the Lender may, without notice to the Borrower and without further
action, apply any and all money owing by the Lender to the Borrower to the
payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC, including
the right to take possession of Collateral, or any evidence thereof,
proceeding without judicial process or by judicial process (without a prior
hearing or notice thereof, which the Borrower hereby expressly waives) and
the right to sell, lease or otherwise dispose of any or all of the
Collateral (with or without giving any warranties as to the Collateral,
title to the Collateral or similar warranties), and, in connection
therewith, the Borrower will on demand assemble the Collateral and make it
available to the Lender at a place to be designated by the Lender which is
reasonably convenient to both parties;
(e) the Lender may make demand upon the Borrower and, forthwith upon
such demand, the Borrower will pay to the Lender in immediately available
funds for deposit in the Special Account pursuant to Section 2.13 an amount
equal to the aggregate maximum amount available to be drawn under all
Letters of Credit then outstanding, assuming compliance with all conditions
for drawing thereunder;
(f) the Lender may exercise and enforce its rights and remedies under
the Loan Documents; and
(g) the Lender may exercise any other rights and remedies available to
it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 7.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind. If the Lender sells any of the Collateral on credit, the
Obligations will be reduced only to the extent of payments actually received. If
the purchaser fails to pay for the Collateral, the Lender may resell the
Collateral and shall apply any proceeds actually received to the Obligations.
Section 7.3 Certain Notices. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice
44
shall be deemed commercially reasonable if given (in the manner specified in
Section 8.3) at least ten calendar days before the date of intended disposition
or other action.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Waiver; Cumulative Remedies; Compliance with Laws. No
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the Collateral.
Section 8.2 Amendments, Etc. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
Section 8.3 Addresses for Notices; Requests for Accounting. Except as
otherwise expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below next to its
signature or, as to each party, at such other address or telecopier number as
may hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if delivered by overnight courier, or (d)
the date of transmission if delivered by telecopy, except that notices or
requests delivered to the Lender pursuant to any of the provisions of Article II
shall not be effective until received by the Lender. All requests under Section
9-210 of the UCC (i) shall be made in a writing signed by a Person authorized
under Section 2.2(a), (ii) shall be personally delivered, sent by registered or
certified mail, return receipt requested, or by overnight courier of national
reputation, (iii) shall be deemed to be sent when received by the Lender and
(iv) shall otherwise comply with the requirements of Section 9-210. The Borrower
requests that the Lender respond to all such requests which on their face appear
to come from an authorized individual and releases the Lender from any liability
for so responding. The Borrower shall pay the Lender the maximum amount allowed
by law for responding to such requests.
45
Section 8.4 Further Documents. The Borrower will from time to time execute,
deliver, endorse and authorize the filing of any and all instruments, documents,
conveyances, assignments, security agreements, financing statements, control
agreements and other agreements and writings that the Lender may reasonably
request in order to secure, protect, perfect or enforce the Security Interest or
the Lender's rights under the Loan Documents (but any failure to request or
assure that the Borrower executes, delivers, endorses or authorizes the filing
of any such item shall not affect or impair the validity, sufficiency or
enforceability of the Loan Documents and the Security Interest, regardless of
whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).
Section 8.5 Costs and Expenses. The Borrower shall pay on demand all costs
and expenses, including reasonable attorneys' fees, incurred by the Lender in
connection with the Obligations, this Agreement, the Loan Documents, any Letter
of Credit and any other document or agreement related hereto or thereto, and the
transactions contemplated hereby, including all such costs, expenses and fees
incurred in connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Obligations and
all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
Section 8.6 Indemnity. In addition to the payment of expenses pursuant to
Section 8.5, the Borrower shall indemnify, defend and hold harmless the Lender,
and any of its participants, parent corporations, subsidiary corporations,
affiliated corporations, successor corporations, and all present and future
officers, directors, employees, attorneys and agents of the foregoing (the
"Indemnitees") from and against any of the following (collectively, "Indemnified
Liabilities"):
(i) any and all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution
and delivery of the Loan Documents or the making of the Revolving
Advances;
(ii) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section 5.14
proves to be incorrect in any respect or as a result of any violation
of the covenant contained in Section 6.11(b); and
(iii) any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including the reasonable fees and disbursements of
counsel) in connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such Indemnitee
shall be designated a party thereto, which may be imposed on, incurred
by or asserted against any such Indemnitee, in any manner related to
or arising out of or in connection with the making of the Revolving
Advances and the Loan Documents or the use or intended use of the
proceeds of the Revolving Advances.
46
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 8.6 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
Section 8.7 Participants. The Lender and its participants, if any, are not
partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.
Section 8.8 Execution in Counterparts; Telefacsimile Execution. This
Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
Section 8.9 Retention of Borrower's Records. The Lender shall have no
obligation to maintain any electronic records or any documents, schedules,
invoices, agings, or other papers delivered to the Lender by the Borrower or in
connection with the Loan Documents for more than four months after receipt by
the Lender.
Section 8.10 Binding Effect; Assignment; Complete Agreement; Exchanging
Information. The Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
To the extent permitted by law, the Borrower waives and will not assert against
any assignee any claims, defenses or set-offs which the Borrower could assert
against the Lender. This Agreement shall also bind all Persons who become a
party to this Agreement as a borrower. This Agreement, together with the Loan
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or oral, on
the subject matter hereof. Without limiting the Lender's right to share
information regarding the Borrower and its Affiliates with the Lender's
participants, accountants, lawyers and other advisors, the Lender, Xxxxx Fargo &
Company, and all direct and indirect subsidiaries of Xxxxx Fargo & Company, may
exchange any and all information they may have in their possession regarding the
Borrower and its Affiliates, and the Borrower waives
47
any right of confidentiality it may have with respect to such exchange of such
information except with respect to any such exchange in violation of the
Lender's internal confidentiality policy.
Section 8.11 Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
Section 8.12 Headings. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 8.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. The
Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Colorado. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Colorado in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents may be venued in either the state or federal courts located in the
City and County of Denver, Colorado and (iv) agree that a final judgment in any
such suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Dynamic Materials Corporation Dynamic Materials COrporation
0000 Xxxxx Xxxx
Xxxxxxx, XX 00000 By: _______________________________
Telecopier: (000) 000-0000 Xxxxxxx Santa
Attention: Xxxxxxx Santa Its Vice President,
e-mail: xxxxxx@xxxxxxxxxxxxxxxx.xxx Chief Financial Officer
and Secretary
Xxxxx Fargo Business Credit, Inc. XXXXX FARGO BUSINESS CREDIT, INC.
MAC-C7300-300
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000 By: _______________________________
Telecopier: (000) 000-0000 Xxxxxx X. Xxxxx
Attention: Xxxxxx X. Xxxxx Its Commercial Banking Officer
e-mail: xxxxxx.x.xxxxx@xxxxxxxxxx.xxx
49
Table of Exhibits and Schedules
Exhibit A Form of Note
Exhibit B Compliance Certificate
Exhibit C Premises
Schedule 5.1 Trade Names, Chief Executive Office, Principal Place of
Business, and Locations of Collateral
Schedule 5.2 Capitalization and Organizational Chart
Schedule 5.5 Subsidiaries
Schedule 5.11 Intellectual Property Disclosures
Schedule 5.14 Environmental Matters
Schedule 6.3 Permitted Liens
Schedule 6.4 Permitted Indebtedness and Guaranties
Exhibit A to Credit and Security Agreement
REVOLVING NOTE
$6,000,000 Denver, Colorado
December 4, 2001
For value received, the undersigned, DYNAMIC MATERIALS CORPORATION, a
Delaware corporation (the "Borrower"), hereby promises to pay on the Termination
Date under the Credit Agreement (defined below), to the order of XXXXX FARGO
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at its main
office in Denver, Colorado, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Six Million Dollars
($6,000,000) or, if less, the aggregate unpaid principal amount of all Revolving
Advances made by the Lender to the Borrower under the Credit Agreement (defined
below) together with interest on the principal amount hereunder remaining unpaid
from time to time, computed on the basis of the actual number of days elapsed
and a 360-day year, from the date hereof until this Note is fully paid at the
rate from time to time in effect under the Credit and Security Agreement of even
date herewith (the "Credit Agreement") by and between the Lender and the
Borrower. The principal hereof and interest accruing thereon shall be due and
payable as provided in the Credit Agreement. This Note may be prepaid only in
accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Note referred to in the Credit Agreement. This Note is secured, among other
things, pursuant to the Credit Agreement and the Security Documents as therein
defined, and may now or hereafter be secured by one or more other security
agreements, mortgages, deeds of trust, assignments or other instruments or
agreements.
The Borrower shall pay all costs of collection, including attorneys' fees
and legal expenses if this Note is not paid when due, whether or not legal
proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.
DYNAMIC MATERIALS CORPORATION
By:
-----------------------------------
Name: Xxxxxxx Santa
Its: Vice President, Chief Financial Officer
and Secretary
A-1
Exhibit B to Credit and Security Agreement
Compliance Certificate
To: Xxxxxx X. Xxxxx
Xxxxx Fargo Business Credit, Inc.
Date: __________________, 200___
Subject: Dynamic Materials Corporation
Financial Statements
In accordance with our Credit and Security Agreement dated as of
December 4, 2001 (the "Credit Agreement"), attached are the financial statements
of Dynamic Materials Corporation (the "Borrower") as of and for ______________,
200__ (the "Reporting Date") and the year-to-date period then ended (the
"Current Financials"). All terms used in this certificate have the meanings
given in the Credit Agreement.
I certify that the Current Financials have been prepared in accordance
with GAAP, subject to year-end audit adjustments, and fairly present the
Borrower's financial condition as of the date thereof.
Events of Default. (Check one):
|_| The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement except as
previously reported in writing to the Lender.
|_| The undersigned has knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement not previously reported in
writing to the Lender and attached hereto is a statement of the facts
with respect to thereto. The Borrower acknowledges that pursuant to
Section 2.8(c) of the Credit Agreement, the Lender may impose the
Default Rate at any time during the resulting Default Period.
Financial Covenants. I further hereby certify as follows:
1. Minimum Debt Service Coverage Ratio. Pursuant to Section 6.2(a) of the
Credit Agreement, as of the Reporting Date, the Borrower's Debt Service Coverage
Ratio was _____ to 1.00 which |_| satisfies |_| does not satisfy the requirement
that such ratio be no less than ______ to 1.00 on the Reporting Date as set
forth in table below (numbers appearing between "< >" are negative):
B-1
Minimum Debt Service
Period Coverage Ratio
------ --------------
The three months ending December 31, 2001 0.89 to 1.00
The three months ending March 31, 2002 (0.21) to 1.00
The six months ending June 30, 2002 0.14 to 1.00
The nine months ending September 30, 2002 0.79 to 1.00
The twelve months ending December 31, 2002 1.01 to 1.00
2. Minimum Book Net Worth. Pursuant to Section 6.2(b) of the Credit
Agreement, as of the Reporting Date, the Borrower's Book Net Worth was
$____________ which |_| satisfies |_| does not satisfy the requirement that such
amount be not less than $_____________ on the Reporting Date as set forth in
table below (numbers appearing between "( )" are negative):
Period Minimum Book Net Worth
------ ----------------------
The calendar month ending October 31, 2001 $15,261,000
The calendar month ending November 30, 2001 $15,261,000
The calendar month ending December 31, 2001 $15,261,000
The calendar month ending January 31, 2002 $14,952,000
The calendar month ending February 28, 2002 $14,952,000
The calendar month ending March 31, 2002 $14,952,000
The calendar month ending April 30, 2002 $14,952,000
The calendar month ending May 31, 2002 $14,952,000
The calendar month ending June 30, 2002 $15,335,000
The calendar month ending July 31, 2002 $15,335,000
The calendar month ending August 31, 2002 $15,335,000
The calendar month ending September 30, 2002 $16,136,000
The calendar month ending October 31, 2002 $16,136,000
The calendar month ending November 30, 2002 $16,136,000
The calendar month ending December 31, 2002 and thereafter $16,911,000
3. Minimum Net Income. Pursuant to Section 6.2(c) of the Credit Agreement,
the Borrower's Net Income for the ________ period ending on the Reporting Date,
was $____________, which |_| satisfies |_| does not satisfy the requirement that
such amount be not less than $_____________ during such period as set forth in
table below period (numbers appearing between "( )" are negative):
B-2
Period Minimum Net Income
The three months ending December 31, 2001 ($165,000)
The three months ending March 31, 2002 ($309,000)
The six months ending June 30, 2002 $74,000
The nine months ending September 30, 2002 $875,000
The twelve months ending December 31, 2002 $1,650,000
4. Minimum Cash Balance plus Excess Availability. Pursuant to Section
6.2(d) of the Credit Agreement, for the ________ period ending on the Reporting
Date, the sum of the Borrower's cash balance in its operating account held at
Xxxxx Fargo Bank West plus Availability, determined immediately after the
Borrower made the debt payment due to SNPE, Inc. during such quarter, was
$____________, which |_| satisfies |_| does not satisfy the requirement that
such amount be not less than $500,000.
5. Capital Expenditures. Pursuant to Section 6.2(e) of the Credit
Agreement, during the period from December 4, 2001, to and ending on the
Reporting Date, the Borrower has expended or contracted to expend during the
period ended ______________, 200___, for Capital Expenditures,
$__________________ in the aggregate which |_| satisfies |_| does not satisfy
the requirement that such expenditures not exceed $2,150,000 in the aggregate.
Attached hereto are all relevant facts in reasonable detail to evidence,
and the computations of the financial covenants referred to above. These
computations were made in accordance with GAAP.
DYNAMIC MATERIALS CORPORATION
By:
-------------------------------------
Its Chief Financial Officer
B-3
Exhibit C Credit and Security Agreement
Premises
The Premises referred to in the Credit and Security Agreement are legally
described as follows:
Owned Real Property
Description Address Original Deed Date
--------------------------------------------------------------------------------
Xx. Xxxxxxxx, XX Plant 0000 Xxxxxxxxxx Xxxx Xxxxx September 22, 1998
Xxxxx Xxxxxxxx, XX 00000
Legal Description:
All that certain piece, parcel or tract of land situate in North Union
Township, Fayette County, Pennsylvania known as Xxx Xx. 00 in a
Resubdivision of Xxxxxxxxxx Xxxx Xx. 0, Xxxxx Xxxxxxxx, the same
appearing of record in the Office of the Recorder of Deeds for Fayette
County, Pennsylvania, in Plan Book No. 31, page 76.
AMK Welding 000 Xxxxxxxx Xxx January 5, 0000
Xxxxx Xxxxxxx, XX 00000
Legal Description:
Known as Xx. 000 Xxxxxxxx Xxxxxx; Northerly by Xxxxxxxx Avenue 190.24
feet; Easterly by land now or formerly of Sperry Wood Corporation, 310
feet; Southerly by land now or formerly of Xxxx Xxxxx et al., (the
second piece hereafter described) 215.93 feet; Westerly by Patria
Road, 284.31 feet; and Northwesterly by the arc of a curve connecting
the southerly street line of Xxxxxxxx Avenue with the easterly street
line of Patria Road, 39.95 feet.
Xxx 0 Xxxxxx Xxxx (connected to above parcel) January 5, 1998
Legal Description:
Lot No. 8 as shown on a map or plan entitled "Patria Industrial Park
Xxxxxxxx Avenue South Windsor Scale 1' x 40' May 1970 Xxxxxxx X.
Xxxxxxxxxx Reg L.S. Revisions: Lots 2 and 3 now known as Parcel "A" on
file in the Town Clerk's Office in said Town of South Windsor.
Said premises are more particularly bounded and described as follow:
Northerly by land now or formerly of Xxxx Xxxxx, et al (the first
piece above described), 215.93 feet; Easterly by land now or formerly
of Sperry wood Corporation, 110 feet; Southerly by land now or
formerly of Abraharo Patria (Lot No. 7 on the aforesaid map), 215.93
feet; and Westerly by Patria Road, 110 feet.
C-1
Leased Real Property
Original
Description Address Commencement Lease Expiration
------------------------------------------------------------------------------
Dunbar, PA Mine Site Xxxxxx-Ohiopyle Rd. RR2 July 22, 1996 Dec. 15, 2000 with
Xxxxxx, XX 00000 renewal through
Dec. 15, 2005
Legal Description:
ALL THAT CERTAIN TRACT OR PARCEL OF LAND situate in the Township of
Dunbar, County of Fayette and Commonwealth of Pennsylvania, containing
approximately 378 acres, more or less; said tract is as shown on the
Mine Survey of the former New Castle Lime & Stone Company Mine,
prepared by Sucevic Engineering, Hopwood, PA, in September 1979.
Spin Forge 0000 Xxxx Xxxxx Xxxxxx March 18, 1998 Jan. 1, 2002, with
Xx Xxxxxxx, XX 00000 renewal through
Jan. 1, 2012
Legal Description:
Those portions of Xxxx 000, 000, 000, 000, xxx 000, xx Xxxxx 123 per
map recorded in Map Book 22. Pages 106 and 107, in the office of the
County Recorder of said County, lying southwesterly of the following
described line:
Beginning at the intersection of found punch marks on the rim of a
manhole, no reference, accepted as the Northwest corner of Lot 340 per
said Map Book, also accepted as a point on the centerline of Grand
Avenue, said intersection of found punch marks being South
89(degree)53'52" West, 328.41 feet measured, 328.50 feet record, from
the intersection of found punch marks on the rim of a manhole, no
reference, accepted as the Northeast corner of said Lot 368, also
accepted as a point on the centerline of Grand Avenue;
thence North 89(degree)53' 52" East, along the Northerly line of said
Lot 340, 109.58 feet to the True Point of Beginning of this
description; thence South 30(degree)28'58" East, 432.77 feet to a
point in the Easterly line of Lot 364 per said Map Book.
Precision Machined 0000 Xxxxxxxxxx Xxxxx December 1, 1998 Dec. 1, 2003, with
Products Ft. Xxxxxxx, XX 00000 renewal through
Dec. 1, 2008
Legal Description:
Xxx 00, Xxxxxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxx, Xxxxxxxx
X-0
Corporate Offices 0000 Xxxxx Xxxx April 1, 2001 Feb. 28, 2003,
Xxxxxxx, XX 00000 Sublease with
Flextronics Int'l
Legal Description:
Xxx 00, xxx Xxxxxx Xxxxxxxxxx Xxxx, a Subdivision in the City of
Boulder, County of Boulder, State of Colorado; also known by street
and number as 0000 Xxxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000
Corporate Offices 0000 Xxxxx Xxxx March 1, 2003 Feb. 28, 2006, with
Xxxxxxx, XX 00000 renewal through
Feb. 28, 2009
Legal Description:
Xxx 00, xxx Xxxxxx Xxxxxxxxxx Xxxx, a Subdivision in the City of
Boulder, County of Boulder, State of Colorado; also known by street
and number as 0000 Xxxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000
C-3
Schedule 5.1 to Credit and Security Agreement
Trade Names, Chief Executive Office, Principal Place of Business,
and Locations of Collateral
Trade Names
-----------
Dynamic Materials Corporation
Dynamic Materials
DMC
Boom, Inc.
Clad Metal division of Dynamic Materials Corporation
Explosive Fabricators, Inc.
Explosive Fabricators
Precision Machined Products
Precision Machined Products, a division of Dynamic Materials Corporation
PMP
Spin Forge
Spin Forge, a division of Dynamic Materials Corporation
Detaclad
Detaclad, a division of Dynamic Materials Corporation
AMK Welding
AMK Welding, a division of Dynamic Materials Corporation
AMK
Chief Executive Office/Principal Place of Business
--------------------------------------------------
Dynamic Materials Corporation
0000 Xxxxx Xxxx
Xxxxxxx, XX 00000
Other Inventory and Equipment Locations
---------------------------------------
Clad Metal Division Spin Forge Division
--------------------------------------------------------------------------------
Mt. Xxxxxxxx Facility 0000 Xxxx Xxxxx Xxx
0000 Xxxxxxxxxx Xxxx Xxxxx Xx Xxxxxxx, XX 00000
Xxxxx Xxxxxxxx, XX 00000
Xxxxxx Mine Precision Machined Products
Xxxxxx-Ohiopyle Road Division
XX 0, Xxx 000 ---------------------------
Xxxxxx, XX 00000 0000 Xxxxxxxxxx Xxxxx
Xx. Xxxxxxx, XX 00000
AMK Welding Division
--------------------------
000 Xxxxxxxx Xxx.
Xxxxx Xxxxxxx, XX 00000
S-1
Schedule 5.2 to Credit and Security Agreement
Capitalization and Organizational Chart
Holder Type of Rights/Stock No. of shares (after Percent interest on a
exercise of all rights fully diluted basis
to acquire shares)
SNPE, Inc. Common Stock 2,763,491 55.09%
Organizational Chart
Dynamic Materials Corporation (DMC)
|
|
Nobelclad (subsidiary of DMC)
|
|
Nitro Metall (subsidiary of Nobelclad)
S-2
Schedule 5.5 to Credit and Security Agreement
Subsidiaries
Nobelclad S.A., a French Societe Anonyme (subsidiary of Dynamic Materials
Corporation)
Nitro Metall A.B., a Swedish Aktiebolag (subsidiary of Nobelclad)
S-3
Schedule 5.11 to Credit and Security Agreement
Intellectual Property Disclosures
Patent Information
Patent Date Date
Number Description Filed Granted
--------------------------------------------------------------------------------
4,333,597 Method of explosively forming 5/27/80 6/8/82
Bi-Metal Tube Plate Joints
4,518,111 Method of Fabricating a Bi-Metal 10/17/83 5/21/85
Tube
4,600,332 Aluminum Titanium Transition 1/11/85 7/15/86
Joint Between Aluminum and
Steel Bodies
4,934,952 Corrosion Resistant Bonding Strap 3/28/89 6/19/90
5,001,299 Explosively Formed Electronic 6/1/89 3/19/91
Packages
5,022,144 Method of Manufacture Power 3/2/89 6/11/91
Hybrid Microcircuit
5,190,831 Bonded Titanium/Steel Components 11/5/91 3/2/93
5,213,904 Aluminum/Steel Transition Joint 11/5/91 5/25/93
4,220,027 Method for Explosive Forming 7/10/75 9/2/80
of Tubular Molds for Continuous
Steel Casting
5,109,594 Method of Making a Sealed 3/18/91 5/5/92
Transition Joint
5,041,019 Transition Joint for Microwave 11/1/90 8/20/91
Package
5,296,647 Assembly for Connecting an 10/25/91 3/22/94
Electrical Box to a Plate With a
Bimetallic Flange
S-4
Patent Date Date
Number Description Filed Granted
--------------------------------------------------------------------------------
5,323,955 Explosively Bonding Metal 2/26/93 6/28/94
Composite
5,400,945 Process for Explosively Bonding 6/18/93 3/28/95
Metals
* US Patents Expiration Dates are subject to a variety of factors and cannot be
guaranteed.
Patent Assignments
Docket
Number Description Date Inventor(s)/Comments
--------------------------------------------------------------------------------
127 600 Selectively Bonded Metal Plate 2/10/92 Xxxxxxx X. Xxxxx
127 700 Electronic Component Housing 7/13/92 Xxxxxx X. Xxxxxxxxx &
Module Xxxx X. Xxxxxxxxx
Method of Fabricating a Bi-Metal 10/17/83 Xxx Xxxxxxxx (Serial
Tube No. 542,532)
Patent Applications
Serial
Number Description Date Inventor(s)/Comments
--------------------------------------------------------------------------------
341.832 Method of Line Initiation for 1/22/82 Xxx Xxxxxxxx (Docket
Explosively Welding Large No. F81009)
Area Plates
360.068 Explosively Formed Electronic 6/1/89 Xxxx Xxxxxxxxx
Packages and Method of (Docket No. F8813CIP)
Manufacture
08/829.530 Hot Rolled Explosion Bonded 3/28/97 Xxxxxxxx et al.
Titanium Steel Metal Composite
338.849 Controlled Expansion Microwave 4/17/89
Packages and Method of
Manufacture
S-5
Foreign Patents
Number Foreign Patents Recorded Serial Number
--------------------------------------------------------------------------------
1,361.303 French Patent to Du Pont 3/20/69 54.081
1,075.938 Explosive Welding - Philipchuk
& Bois Patent - Canada
Trademarks
Registration
Number Description Date
--------------------------------------------------------------------------------
1.861.612 Dynalock 11/8/94
1.598.407 EFTEK 5/29/90
729.821 DETACLAD 7/20/65
883.356 DETACOUPLE 12/30/69
Foreign Trademark Registration of DETACLAD:
Jurisdiction Registration Number
----------------------------------------------------------------------
United Kingdom 000000
Xxxxx 499 000
Xxxxx 474 275
China 256 374
Canada 157029
Australia A-200,889
Switzerland 345467
Invention Disclosure
Date Description Inventor(s)/Comments
-------------------------------------------------------------------------------
10/4/91 Superior Quality, Low Cost Ferritic Xxxx Xxxxxx
Steel Clad
10/4/91 Sacrificial Surface Tri Clad for Severe Xxxx Xxxxxx/Xxxx X. Xxxxxxx
Corrosion Application
Date Description Inventor(s)/Comments
-------------------------------------------------------------------------------
9/13/88 Explosively Clad Copper Body Power Xxxx Xxxxxx/Xxxxx Xxxxx
Hybrid Package and Method of
Manufacture
S-6
12/1/82 Method of Fabrication a Zirconium Xxx Xxxxxxxx
Lined Bi-Metal Tube
11/17/93 Cryo-TTJ (Cryogenic Transitional Joint) Xxxxxx X. Xxxxxxx
List of Key Technical Employees - All Have Signed Borrower's Employee
Proprietary Information and Inventions Agreements
Xxxx Xxxxxx Xxxxxx Xxxxxx
Xxxx Xxxxx Xxxx Xxxx
Xxxx Xxxxxx
The Borrower is currently in discussions with Sigmabond (a Canadian company)
regarding the ownership of intellectual property used in connection with the
European cladding operations of Nobelclad (used only in research at this time).
Sigmabond is claiming that the Borrower is infringing on its intellectual
property.
S-7
Schedule 5.14 to Credit and Security Agreement
Environmental Matters
Notices of Violation - Industrial Waste Effluent Limits, dated November 15, 1999
and February 24, 2000, received from the City of El Segundo, Ca.
Dynamic Materials Corporation received a letter from the City of El Segundo, Ca.
on June 7, 2000 indicating the facility was in compliance with respect to the
Notices of Violations above.
S-8
Schedule 6.3 to Credit and Security Agreement
Permitted Liens
Filing
Creditor Collateral Jurisdiction Date Filing No.
-------- ---------- ------------ ------ ----------
CIT Group, Inc. Hankook Proturn CNC Turning Colorado 10/20/99 19992058333
Ctr.
CIT Group, Inc. Hankook Proturn CNC Turning California 10/20/99 9929960362
Ctr.
Xxxxx Fargo Equipment Finance, Mori Seiki Vertical Colorado 8/22/00 20002076006
Inc. Machining Ctr.
Xxxxx Fargo Equipment Finance, Mori Seiki CNC Turning Ctr. Colorado 1/2/01 20012000220
Inc.
XxXxxxxx Xxxxxxx Corp. Remaining forgings On MCD California 2/4/00 3960397
P.O. #'s 921438, 913537 &
920770
S-9
Schedule 6.4 to Credit and Security Agreement
Permitted Indebtedness and Guaranties
Indebtedness
Amount Maturity Periodic
Creditor Outstanding Date Payment Collateral
------------------------------------ ----------------- ---------------- ------------------- ---------------------------
Industrial Development Revenue $5,465,000 Sept. 2013 Varies from PA Facility Property,
Bonds $45,000 to Plan & Equipment
$255,000
SNPE, Inc. Convertible $1,200,000 06/14/05 --- Subordinated to all
Subordinated Note senior indebtedness.
No collateral.
SNPE, Inc. Term Loan $4,000,000 7/3/05 $333,333 Stock of Nobelclad
Quarterly
Beginning
9/30/02
Guaranties
NONE
Depository Accounts
Savings Bank of Manchester
000 Xxxx Xxxxxx, XX Xxx 000
Xxxxxxxxxx, XX 00000-0000
Acct: 9500192751
S-10
