<PAGE>
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
- ----------
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
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Securities Exchange Act of 1934
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for the quarterly period ended June 30, 1997
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or
--
Transition Report Pursuant to Section 13 or 15(d) of the
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Securities Exchange Act of 1934
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Commission file number 0-20993
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DTM CORPORATION
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(Exact name of registrant as specified in its charter)
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Texas 74-2487065
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(State or other jurisdiction (I.R.S. Employer
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of incorporation or organization) Identification No.)
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1611 Headway Circle, Building 2
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Austin, Texas 78754
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(Address of principal executive offices)
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(Zip code)
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512-339-2922
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(Registrant's telephone number, including area code)
----------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
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to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
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the preceding 12 months (or for such shorter period that the registrant was
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required to file such reports), and (2) has been subject to such filing
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requirements for the past 90 days.
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Yes/ X /No / /
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The number of outstanding shares of common stock was 6,283,082 as of June 30,
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1997.
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1
<PAGE>
Part 1. Financial Information
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Item 1. Financial Statements
- -----------------------------
DTM CORPORATION
---------------
Condensed Consolidated Statements of Operations (unaudited)
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(In thousands, except per share amounts)
----------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Products $ 5,049 $ 6,076 $ 10,378 $ 13,433
Service and Support 507 723 968 1,389
---------- ---------- ---------- ----------
5,556 6,799 11,346 14,822
Cost of sales:
Products 3,022 3,507 6,191 7,560
Service and Support 320 544 620 1,032
---------- ---------- ---------- ----------
3,342 4,051 6,811 8,592
---------- ---------- ---------- ----------
Gross Profit 2,214 2,748 4,535 6,230
Operating Expenses:
Selling, general and
administrative 2,272 3,066 4,312 6,023
Research and development 947 1,260 1,897 2,393
Stock compensation (EAP) - 2,927 - 2,927
---------- ---------- ---------- ----------
3,219 7,253 6,209 11,343
---------- ---------- ---------- ----------
Operating loss (1,005) (4,505) (1,674) (5,113)
Other income 5 52 12 56
Interest expense (253) (113) (479) (417)
---------- ---------- ---------- ----------
Loss before income tax
benefit allocated from
BFGoodrich (1,253) (4,566) (2,141) (5,474)
Income tax benefit allocated
from BFGoodrich 354 310 673 507
---------- ---------- ---------- ----------
Net Loss $ (899) $ (4,256) $ (1,468) $ (4,967)
========== ========== ========== ==========
Net loss per share $ (.25) $ (.76) $ (.41) $ (1.08)
========== ========== ========== ==========
Number of shares used 3,609,211 5,606,806 3,609,211 4,613,602
========== ========== ========== ===========
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE>
DTM CORPORATION
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 329 $ 4,957
Accounts receivable, net 7,205 6,237
Inventory 4,835 6,811
Prepaid expenses and other 595 267
-------- --------
Total current assets 12,964 18,272
Furniture and equipment, net 3,057 2,452
Capitalized development costs, net 848 801
Patent and license fees, net 791 930
Other noncurrent assets 237 184
-------- --------
Total assets $ 17,897 $ 22,639
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,845 $ 6,037
Due to BFGoodrich 614 1,137
Deferred revenues 1,474 1,263
Accrued expenses and other liabilities 2,640 2,477
Short-term borrowings 769 175
-------- --------
Total current liabilities 11,342 11,089
Borrowings under line of credit from
BFGoodrich 4,000 -
Notes payable 11,040 -
Shareholders' equity (deficit):
Preferred stock, $.001 par value,
3,000,000 shares authorized, no shares
issued and outstanding - -
Common stock, $.0002 par value,
60,000,000 shares authorized; 6,283,082
shares issued and outstanding
(3,243,391 at December 31, 1996) 1 1
Additional paid-in capital 28,019 50,225
Stock options outstanding - 2,927
Accumulated deficit (36,469) (41,436)
Cumulative translation adjustment (36) (167)
-------- --------
Total shareholders' equity (deficit) (8,485) 11,550
-------- --------
Total liabilities and shareholders'
equity $ 17,897 $ 22,639
======== ========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
DTM CORPORATION
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
------------------------
1996 1997
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,468) $ (4,967)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 996 1,225
Stock compensation (EAP) expense - 2,927
Changes in assets and liabilities:
Accounts receivable (1,437) 968
Inventory (1,361) (1,976)
Due to/from BFGoodrich 1,099 523
Prepaid expenses and other assets (839) 381
Accounts payable 1,462 192
Deferred revenues (15) (211)
Other, net (571) (175)
------- --------
Net cash used in operating activities (2,134) (1,113)
INVESTING ACTIVITIES
Purchases of furniture and equipment (1,172) (225)
Capitalized software development costs (224) (134)
Patent and license expenditures (255) (341)
------- --------
Net cash used in financing activities (1,651) (700)
FINANCING ACTIVITIES
Proceeds from issuance of stock - 20,706
Proceeds from short-term borrowings 2,364 371
Repayments of short-term borrowings (1,791) (965)
Draws (repayments) on line of credit
from BFGoodrich 2,800 (2,500)
Repayments of notes payable - (11,040)
------- --------
Net cash provided by financing
activities 3,373 6,572
Effect of foreign exchange rate changes
on cash 6 (131)
------- --------
Increase (decrease) in cash and cash
equivalents (406) 4,628
Cash and cash equivalents at beginning
of period 756 329
------- --------
Cash and cash equivalents at end of
period $ 350 $ 4,957
======= ========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
DTM CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
DTM Corporation ("DTM" or the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months and six months ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and related footnotes of the Company for the year ended
December 31, 1996 as disclosed in the Prospectus dated May 2, 1997 (the
"Prospectus").
2. INVENTORY
Inventory consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Raw materials and purchased parts $3,187 $4,596
Finished goods 1,648 2,215
------ ------
$4,835 $6,811
====== ======
</TABLE>
3. SHORT-TERM BORROWINGS
During the six-month period ended June 30, 1997, DTM borrowed $371,000 and
repaid $965,000 under the terms of financing arrangements with a third party. At
June 30, 1997, the Company had a total of $175,000 of short-term borrowings
outstanding, comprised of one loan, bearing an annual interest rate of
approximately 15 percent. The borrowings are collateralized by certain
equipment.
4. LINE OF CREDIT FROM BFGOODRICH
The Company had a line of credit agreement with The BFGoodrich Company
("BFGoodrich") under which the Company could borrow up to $4.0 million. As of
March 31, 1997, the amount outstanding under the line of credit was $4.0
million. In connection with an initial public offering in May 1997 (the "IPO"),
the Company issued 187,500 shares of common stock to BFGoodrich to convert $1.5
million of the
5
<PAGE>
DTM CORPORATION
---------------
Notes to Condensed Consolidated Financial Statements
----------------------------------------------------
(Unaudited)
-----------
borrowings to equity. The remaining $2.5 million was paid in full with proceeds
from the IPO.
5. NOTES PAYABLE
At March 31, 1997, DTM had lines of credit with three banks under unsecured
promissory notes. Total available borrowings from the three banks were $12.2
million and outstanding balances totaled $11.8 million at March 31, 1997.
Subsequent to the IPO, the outstanding balances were repaid.
Interest paid in connection with all of the above financing arrangements
was approximately $426,000 and $547,000 for the six months ended June 30, 1996
and 1997, respectively.
6. INCOME TAXES
For periods prior to the IPO, DTM was included in the consolidated federal
tax return of BFGoodrich. Accordingly, for such periods, the Company has
recorded the tax benefit allocated to it by BFGoodrich, which credited the
Company with a tax benefit approximating the benefit that BFGoodrich derived
from the use of the Company's tax losses. For periods subsequent to the IPO,
the Company is no longer entitled to the benefit of the tax allocation agreement
between the Company and BFGoodrich. Refer to the footnotes to the financial
statements as of December 31, 1996 and the disclosures in the Prospectus for
additional details.
7. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
------------------------
1996 1997
------- ------
<S> <C> <C>
Noncash investing and financing transactions:
Stock issued upon conversion of note by
majority shareholder $ - $1,500
Stock options outstanding - 2,927
</TABLE>
6
<PAGE>
DTM CORPORATION
---------------
Notes to Condensed Consolidated Financial Statements
----------------------------------------------------
(Unaudited)
-----------
8. SUPPLEMENTAL EARNINGS PER SHARE
The supplemental earnings per share are computed on a stand alone basis,
without allocation of income tax benefit from BFGoodrich. Both computations
reflect the shares of common stock issuable to employees related to exercisable
options that are outstanding under the Company's Equity Appreciation Plan, less
shares presumed to be repurchased using the treasury stock method. The 1997 as
adjusted computation assumes that the IPO took place at the beginning of each
period and reflects elimination of historically incurred interest expenses
related to debt repaid with proceeds from the IPO, along with the number of
shares offered, the net proceeds of which were used to fund debt repayment.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1997 1997
1997 AS ADJUSTED 1997 AS ADJUSTED
------------------------- ----------- ------------
<S> <C> <C> <C> <C>
Pro forma net loss $ (4,566) $ (4,566) $ (5,474) $ (5,474)
Plus interest on debt repaid with
proceeds from offering - 110 - 406
---------- ---------- ---------- ----------
Pro forma net loss as adjusted $ (4,566) $ (4,456) $ (5,474) $ (5,068)
========== ========== ========== ==========
Shares:
Weighted average number of shares
outstanding 5,247,583 6,283,082 4,251,023 6,283,082
Dilutive effect of options issued 365,820 359,223 365,820 362,579
---------- ---------- ---------- ----------
Total shares used in computing
pro forma net loss per share 5,613,403 6,642,305 4,616,843 6,645,661
========== ========== ========== ==========
Pro forma net loss per share
(primary and fully diluted) $ (.81) $ (.67) $ (1.19) $(.76)
========== ========== ========== ==========
</TABLE>
9. RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. SFAS
No. 128 replaces the presentation of primary earnings per share ("EPS") under
Accounting Principles Board Opinion No. 15 and related Interpretations, with the
presentation of basic EPS (which gives effect only to common shares actually
outstanding) and requires dual presentation of basic and diluted EPS on the face
of the income statement for all entities with complex capital structures. The
Company is required to adopt SFAS No.128 during the fourth quarter of 1997. The
Company has not completed its evaluation of the potential impact of this new
standard on EPS in future periods. However, based on the equity instruments
currently outstanding under existing stock compensation plans, this new standard
is not currently expected to have a material impact on EPS in future periods.
7
<PAGE>
DTM CORPORATION
---------------
Notes to Condensed Consolidated Financial Statements
----------------------------------------------------
(Unaudited)
-----------
10. OTHER EVENTS
In May 1997, the Company successfully completed the IPO. The net proceeds
received by the Company have been used to repay substantially all of the
Company's bank debt and other short-term borrowings. The Company intends to use
the remaining net proceeds for general corporate purposes, including the funding
of working capital requirements. Refer to the Prospectus for additional
information.
The Company has a phantom stock appreciation rights plan whereby all phantom
stock appreciation rights outstanding upon the IPO were converted into
immediately exercisable options to acquire shares of the Company's common stock.
Such conversion resulted in a non-recurring, non-cash, compensation expense of
approximately $2.9 million in the second quarter of 1997. Refer to the
Prospectus for additional information.
8
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and the Notes thereto
included in Item 1 of this Quarterly Report and the Prospectus. This discussion
and analysis contains forward-looking statements. Such statements are subject
to certain risks and uncertainties, including those discussed below or in the
Prospectus, that could cause actual results to differ materially from the
Company's expectations. Readers are cautioned not to place undue reliance on
any forward-looking statements, as they reflect management's analysis only as of
the date hereof. The Company undertakes no obligation to publicly release
results of any revision to these forward looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain income
statement data as a percentage of total revenues and certain cost of sales data
as a percentage of respective product revenues and service and support revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------------------
1996 1997 1996 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue:
Products 90.9% 89.4% 91.5% 90.6%
Service and Support 9.1 10.6 8.5 9.4
----- ----- ----- -----
100.0 100.0 100.0 100.0
Cost of sales:
Products 59.9 57.7 59.7 56.3
Service and Support 63.1 75.2 64.0 74.3
----- ----- ----- -----
60.2 59.6 60.0 58.0
----- ----- ----- -----
Gross Profit 39.8 40.4 40.0 42.0
Operating Expenses:
Selling, general and administrative 40.9 45.1 38.0 40.6
Research and development 17.0 18.5 16.7 16.2
Stock compensation (EAP) - 43.1 - 19.7
----- ----- ----- -----
57.9 106.7 54.7 76.5
----- ----- ----- -----
Operating loss (18.1) (66.3) (14.8) (34.5)
Other income .1 .8 .1 .4
Interest expense (4.6) (1.7) (4.2) (2.8)
----- ----- ----- -----
Loss before income tax benefit
allocated from BFGoodrich (22.6) (67.2) (18.9) (36.9)
Income tax benefit allocated from
BFGoodrich 6.4 4.6 5.9 3.4
----- ----- ----- -----
Net Loss (16.2)% (62.6)% (13.0)% (33.5)%
===== ===== ===== =====
</TABLE>
9
<PAGE>
Comparison of the Quarters Ended June 30, 1997 and June 30, 1996
The Company's operating results have varied substantially from year to year
and quarter to quarter. A sale by the Company of one of its selective laser
sintering systems ("Systems") can be material to the operating results for any
one quarter. Furthermore, new product introductions, seasonality of customer
buying patterns and other factors can cause fluctuations in operating results.
Revenues. Revenues for the second quarter of 1997 were $6.8 million, an
increase of 22.4 percent, compared to revenues of $5.6 million for the second
quarter of 1996. The Company's 1997 second quarter revenues of $6.8 million
resulted from sales of 15 SLS Systems, a majority of which were sold in the
second half of the quarter. From time to time, the Company will allow existing
customers to "trade-up" from a SLS 2000 System to a SLS 2500 System.
Product sales revenue for the second quarter of 1997 was $6.1 million, an
increase of 20.3 percent, compared to product sales revenue of $5.0 million for
the second quarter of 1996. The increase was primarily attributable to greater
sales of SLS(R) Systems and powdered materials. Revenues from powdered
materials sales increased as a result of a larger number of installed SLS
Systems.
Service and support revenue for the second quarter of 1997 was $723,000, an
increase of 42.6 percent, compared to service and support revenue of $507,000
for the same period in 1996. Service and support revenue increased primarily as
a result of the recognition of deferred warranty and maintenance revenue
associated with the larger number of installed SLS Systems.
Gross Profit. As more fully described in the Prospectus, the Company has
historically experienced significant fluctuations in its gross profits. Gross
profit for the second quarter of 1997 was $2.7 million, an increase of 24.1
percent, compared to gross profit of $2.2 million for the second quarter of
1996. As a percentage of revenue, gross profit for the quarter ended June 30,
1997 increased to 40.4 percent from 39.8 percent for the same period in 1996.
Gross profit attributable to product sales for the second quarter of 1997
was $2.6 million, an increase of 26.7 percent, compared to gross profit
attributable to product sales of $2.0 million for the second quarter of 1996. As
a percentage of product sales revenue, gross profit attributable to product
sales increased to 42.3 percent during the period, compared to 40.1 percent for
the same period in 1996. The increase in gross profit attributable to product
sales as a percentage of product sales revenue resulted primarily from a
favorable product mix of Sinterstation(R) 2500 and 2000 Systems.
Gross profit attributable to service and support revenues for the second
quarter of 1997 was $179,000, a decrease of 4.3 percent, compared to gross
profit attributable to service and support revenues of $187,000 for the second
quarter of 1996. As a percentage of service and support revenue, gross profit
attributable to service and support revenues was 24.8 percent and 36.9 percent
for the second quarter of 1997 and 1996, respectively. The decrease in profit
percentage is due to a decrease in training and consulting
10
<PAGE>
revenues, as well as an increase in international service and maintenance costs.
Selling, General and Administrative Expense. Selling, general and
administrative expense includes payroll and fringe benefits, advertising and
promotion expenses and other general expenses. Selling, general and
administrative expense for the second quarter of 1997 was $3.1 million, an
increase of 34.9 percent, compared to selling, general and administrative
expense of $2.3 million for the second quarter of 1996. A larger work force in
the second quarter of 1997 resulted in compensation and fringe benefits
increasing more than $261,000 over 1996 costs. Agent commissions increased by
approximately $141,000 over 1996 costs due to increased activity
internationally. Selling, general and administrative expense in the second
quarter of 1997 was impacted by an increase in travel, office and support costs
of approximately $383,000. As a percentage of revenue, selling, general and
administrative expense increased to 45.1 percent in the second quarter of 1997
from 40.9 percent in the second quarter of 1996.
Research and Development Expense. Research and development expense for the
second quarter of 1997 was $1.3 million, an increase of 33.1 percent, compared
to research and development expense of $947,000 for the second quarter of 1996.
As a percentage of revenue, research and development expense increased to 18.5
percent for the second quarter of 1997 from 17.0 percent for the second quarter
of 1996. The increase in research and development expense for the second
quarter of 1997 as compared to the second quarter of 1996 was due to the
continuing improvement of the selective laser sintering hardware, software and
processes, and the ongoing development of new powdered sintering materials.
Interest Expense. Interest expense for the second quarter of 1997 was
$61,000, a decrease of $187,000 compared to interest expense of $248,000 for the
second quarter of 1996. The decrease reflects the repayment of the company's
bank debt and other short-term borrowings following the successful completion of
the IPO.
Income Taxes. As a result of its tax sharing arrangement with BFGoodrich,
the Company was allocated an income tax benefit of $310,000 in the second
quarter of 1997 compared to $354,000 in the second quarter of 1996. Due to a
change in BFGoodrich ownership percentage resulting from the IPO, for periods
subsequent to the IPO, the Company will no longer have the benefit from the tax
allocation agreement with BFGoodrich. Refer to the footnotes to the financial
statements as of December 31, 1996 and the disclosures in the Prospectus for
additional details regarding income taxes.
Comparison of the Six Months Ended June 30, 1997 and June 30, 1996
Revenues. Revenues for the first six months of 1997 were $14.8 million, an
increase of 30.6 percent, compared to revenues of $11.3 million for the first
six months of 1996. The Company's 1997 first six months revenues of $14.8
million resulted from sales of 32 SLS Systems (including one rental conversion).
From time to time, the Company will allow existing customers to "trade-up" from
a SLS 2000 System to a SLS 2500 System.
Product sales revenue for the first six months of 1997 was $13.4 million,
an increase of 29.4 percent, compared to product sales revenue of $10.4 million
for the first
11
<PAGE>
six months of 1996. The increase was primarily attributable to greater sales of
SLS Systems and powdered materials. Revenues from powdered materials sales
increased as a result of a larger number of installed SLS Systems.
Service and support revenue for the first six months of 1997 was $1.4
million, an increase of 43.5 percent, compared to service and support revenue of
$968,000 for the same period in 1996. Service and support revenue increased
primarily as a result of the recognition of deferred warranty and maintenance
revenue associated with the larger number of installed SLS Systems.
Gross Profit. The Company has historically experienced significant
fluctuations in its gross profits. Gross profit for the first six months of
1997 was $6.2 million, an increase of 37.4 percent, compared to gross profit of
$4.5 million for the first six months of 1996. As a percentage of revenue,
gross profit for the first six months ended June 30, 1997 increased to 42.0
percent from 40.0 percent for the same period in 1996.
Gross profit attributable to product sales for the first six months of 1997
was $5.9 million, an increase of 40.3 percent, compared to gross profit
attributable to product sales of $4.2 million for the first six months of 1996.
As a percentage of product sales revenue, gross profit attributable to product
sales increased to 43.7 percent during the period, compared to 40.3 percent for
the same period in 1996. The increase in gross profit attributable to product
sales as a percentage of product sales revenue resulted primarily from a
favorable product mix of Sinterstation 2500 and 2000 Systems.
Gross profit attributable to service and support revenues for the first six
months of 1997 was $357,000, an increase of 2.6 percent, compared to gross
profit of $348,000 for the first six months of 1996. As a percentage of service
and support revenue, gross profit attributable to service and support revenues
was 25.7 percent and 36.0 percent for the first six months of 1997 and 1996,
respectively. The decrease in profit percentage is due to a decrease in
training and consulting revenues, as well as an increase in international
service and maintenance costs.
Selling, General and Administrative Expense. Selling, general and
administrative expense includes payroll and fringe benefits, advertising and
promotion expenses and other general expenses. Selling, general and
administrative expense for the first six months of 1997 was $6.0 million, an
increase of 39.7 percent, compared to selling, general and administrative
expense of $4.3 million for the first six months of 1996. A larger work force in
the first six months of 1997 resulted in compensation and fringe benefits
increasing more than $566,000 over 1996 costs. Agent commissions increased by
approximately $414,000 over 1996 costs due to increased activity
internationally. Selling, general and administrative expense in the first six
months of 1997 was impacted by an increase in travel, office and support costs
of approximately $722,000. As a percentage of revenue, selling, general and
administrative expense increased to 40.6 percent in the first six months of 1997
from 38.0 percent in the first six months of 1996.
Research and Development Expense. Research and development expense for the
first six months of 1997 was $2.4 million, an increase of 26.1 percent, compared
to
12
<PAGE>
research and development expense of $1.9 million for the first six months of
1996. As a percentage of revenue, research and development expense decreased to
16.2 percent for the first six months of 1997 from 16.7 percent for the first
six months of 1996.
Interest Expense. Interest expense for the first six months of 1997 was
$361,000, a decrease of $106,000 compared to interest expense of $467,000 for
the first six months of 1996. The decrease reflects the repayment of the
Company's bank debt and other short-term borrowings following the successful
completion of the IPO.
Income Taxes. As a result of its tax sharing arrangement with BFGoodrich,
the Company was allocated an income tax benefit of $507,000 in the first six
months of 1997 compared to $673,000 in the first six months of 1996. Due to a
change in BFGoodrich ownership percentage resulting from the IPO, for periods
subsequent to the IPO, the Company will no longer have the benefit from the tax
allocation agreement with BFGoodrich. Refer to the footnotes to the financial
statements as of December 31, 1996 and the disclosures in the Prospectus for
additional details regarding income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, cash used by the Company for operations and investing
activities has exceeded cash generated by the Company. The Company generally has
financed its cash needs through transactions with BFGoodrich and borrowings from
commercial banks and other short-term sources.
Net cash used in operating activities was approximately $2.1 million and
$1.1 million in the first six months of 1996 and 1997, respectively. Net cash
used in operating activities of $1.1 million for the first six months of 1997
resulted from the net loss of $5.0 million adjusted for non-cash charges for
depreciation and amortization of $1.2 million and stock compensation (EAP)
expense of $2.9 million. In addition, decreases in accounts receivable and
prepaid expenses of $1.0 million and $381,000, respectively, and increases in
amounts due to/from BFGoodrich of $523,000 and accounts payable of $192,000 were
offset by increases in inventory and deferred revenues of $2.0 million and
$210,000, respectively, as well as a decrease in accrued expenses of $164,000.
For the six months ended June 30, 1996 and 1997, BFGoodrich allocated to the
Company approximately $673,000 and $507,000, respectively, for tax benefits
resulting from inclusion of the Company in the consolidated income tax return of
BFGoodrich. Such amounts are included in "Due to/from BFGoodrich" in changes in
assets and liabilities used in operating activities in the Condensed Statements
of Cash Flows. See Note 6 to the Condensed Consolidated Financial Statements for
additional information.
The Company's investing activities included expenditures for patents and
licenses, capitalized software costs and furniture and equipment. Net cash used
by investing activities was approximately $1.7 million and $700,000 in the first
six months of 1996 and 1997, respectively.
The existence of the tax benefit allocation from BFGoodrich reduced the
Company's net loss for years 1994 through May 2, 1997. The Company expects that
the
13
<PAGE>
loss of the tax benefit allocation will materially adversely affect its
financial results and cash flows in any period in which the Company generates a
loss. The benefits of utilizing future tax loss carryforwards might be realized,
however, should sufficient profits be generated prior to the expiration of the
tax loss carryforwards.
Total indebtedness of the Company was approximately $16.0 million as of May
2, 1997, consisting primarily of notes payable to commercial banks under
existing lines of credit, short-term borrowings from other financing sources and
a line of credit extended to the Company by BFGoodrich under which the Company
had $4.0 million in outstanding borrowings. The Company retired approximately
$14.3 million of the debt with proceeds from the IPO, and $1.5 million under the
BFGoodrich line of credit was converted to equity. In the past, BFGoodrich
assisted the Company in obtaining loans from commercial banks. The Company has
been advised by BFGoodrich that with the completion of the IPO it does not
intend to continue to finance, or arrange for the financing of, the operations
of the Company.
The Company has executed a revolving line of credit ("line of credit") with
Texas Commerce Bank. The Company's ability to borrow thereunder is subject to an
initial review, a borrowing base calculation and the Company meeting certain
financial thresholds, including attaining certain levels of "established
profitability," as defined therein. Until achieving one such level, the Company
will be permitted to borrow up to $3.0 million; thereafter, available advances
against eligible receivables will be increased up to a maximum of $6.0 million,
provided that the bank is satisfied with its periodic inspection of the
Company's assets. Loans under the line of credit will mature within one year,
are collateralized by the Company's accounts receivable and inventory and bear
interest at the bank's prime interest rate plus three quarters of one percent.
Outstanding loans will be repaid automatically through a lockbox and collection
account arrangement. The agreement contains customary covenants, including
restrictions on additional liens or borrowings, as well as the payment of
dividends, and affirmative reporting requirements. In addition, the agreement
specifies the bank has the option to terminate the obligation to make further
advances under the line of credit on 30 days notice if employment of the chief
executive officer of the Company terminates and a qualified successor is not
appointed by the Company and approved by Texas Commerce Bank within a specified
period of time.
OTHER FACTORS AFFECTING FUTURE OPERATIONS
Seasonality. The Company's revenues are affected by capital budgeting and
spending patterns in the world wide market and shortened selling periods in
certain international markets. Due to these seasonal factors, the Company
typically experiences slowdowns in sales of SLS Systems during the first quarter
as a result of capital spending patterns in the North American market and during
the third quarter as a result of shortened selling periods in certain
international markets.
14
<PAGE>
Foreign Operations. The Company competes on an international basis through
its wholly owned subsidiary located in Germany and through export sales derived
from its United States sales operations (principally to the Pacific Rim). Sales
to customers outside of the United States constitute a significant portion of
DTM's revenues. International sales are generally priced in U.S. dollars.
However, European sales prices are sometimes negotiated in either Deutsche marks
or the local currency. The Company does not engage in hedging to mitigate the
effects of foreign currency exchange rate risk. The Company incurred
approximately $163,000 in transaction losses for the six months ended June 30,
1997.
Equity Appreciation Plan. The Company has a phantom stock appreciation
rights plan whereby all phantom stock appreciation rights outstanding upon the
IPO were converted into immediately exercisable options to acquire shares of the
Company's common stock. Such conversion resulted in a non-recurring, non-cash,
compensation expense of approximately $2.9 million in the second quarter of
1997. Refer to the Prospectus for additional information.
Intellectual Property and Proprietary Rights. In pursuing protection for
its proprietary rights in its SLS Systems, materials and related technology, the
Company currently relies on a combination of patent, copyright, trademark and
trade secret rights, as well as contractual provisions. The Company typically
seeks patent protection for its selective laser sintering technology, including,
where deemed appropriate, the selective laser sintering process, the SLS Systems
and the materials used in the SLS Systems. However, patent protection may not
always be available. There can be no assurance that patents will be issued
under any or all of the patent applications to which the Company has rights. In
addition, the laws of various countries in which the Company's products may be
sold may not protect the Company's products and intellectual property rights to
the same extent as the laws of the United States. Refer to the Prospectus for
additional details regarding intellectual property and litigation.
A Wisconsin federal court has granted summary judgement ending patent
infringement charges brought by the Company against Midwest Composite
Technologies, Inc. of Hartland, Wisconsin. The Company intends to appeal and
cannot predict the impact, if any, this will have on the Company's ongoing
business activities.
Quarterly Fluctuations in Operating Results. The Company's revenues and
operating results have varied substantially from quarter to quarter and may
continue to do so. The Company's revenues are earned unevenly throughout the
quarter and are typically skewed to the later end of the quarter. DTM typically
experiences a relatively long lead time to complete an SLS System sale and has
historically experienced little or no backlog. Furthermore, new product
introductions, seasonality of customer buying patterns and other factors can
cause fluctuations in quarterly results. The failure of the Company to complete
a particular SLS System sale in any given quarter can have a material adverse
effect on the Company's business and financial performance for that quarter.
15
<PAGE>
Dependence on Third-Party Suppliers. The Company subcontracts for
manufacture of SLS System components, powdered sintering materials and
accessories from single-source, third-party suppliers. A disruption in supply or
failure of a supplier to remain competitive in functionality or price could have
a material adverse effect on the Company's sales or reputation for timely
delivery, and, hence, on the Company's business and financial performance.
New Products; Engineering Testing Delays. The Company's ability to achieve
and maintain a significant market share may depend heavily on its ability to
improve its existing products, as well as to introduce new and innovative
products that facilitate increased use and more specialized applications of
existing products. DTM cannot predict with any certainty the degree to which its
ongoing research and development efforts in the areas of SLS System and
materials enhancements will be successful or, if so, when. In addition, the
Company can provide no assurance of its future success in selecting, developing,
manufacturing and marketing new products. When the Company or its competitors
announce new products with capabilities or technologies that have the potential
to replace the Company's existing product offerings, customers may defer or
forego purchases of existing Company products. This could materially adversely
affect the Company's business, including revenues and financial performance.
While the Company performs extensive testing prior to releasing new product
designs or product enhancements, products may contain unforeseen errors or
performance problems. The correction of errors and problems in new products
could cause delays in product introductions or shipments, require design
modifications to previously shipped products or cause adverse publicity, any of
which could adversely affect the Company's business and financial performance.
Competition. The market for rapid prototyping systems is highly
competitive. In marketing its SLS Systems, the Company experiences competition
from many sources. Certain of the Company's competitors may be better known and
may have greater financial, research and development, production and marketing
resources than DTM. Competition could increase as a result of the introduction
of new products or product enhancements by these competitors or the entry into
the industry by other companies. Increased competition could result in price
reductions, reduced margins and loss of market share, all of which could
materially adversely affect the Company's business and financial results.
SAFE HARBOR STATEMENT
Investors are cautioned that forward-looking statements contained in this
10-Q involve risks and uncertainties including without limitation the matters
described in "Other factors affecting future operations" and the following: (i)
the Company's plans, strategies, objectives, expectations and intentions are
subject to change at any time at the discretion of management and the Board of
Directors; (ii) the Company's plans and results of operations will be affected
by the Company's ability to manage its growth and working capital; and (iii) the
Company's business is highly competitive and the entrance of new competitors or
the expansion of the operations by existing competitors in the Company's markets
could adversely affect the Company's plans and results of operations.
16
<PAGE>
Part 2. Other Information
Item 1. Legal Proceedings
A Wisconsin federal court has granted summary judgement ending patent
infringement charges brought by the Company against Midwest Composite
Technologies, Inc. of Hartland, Wisconsin. The Company intends to appeal and
cannot predict the impact, if any, this will have on the Company's ongoing
business activities.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1997.
Exhibit 10 - Line of Credit Agreements
Exhibit 11 - Statement of computation of per share earnings is filed as part of
this report.
Exhibit 27 - Financial Data Schedule
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1997
DTM CORPORATION
(Registrant)
/S/ John S. Murchison, III
--------------------------------------------------
John S. Murchison, III
President and Chief Executive Officer
/S/ Uday Bellary
--------------------------------------------------
Uday Bellary
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
17
<PAGE>
EXHIBIT 10
REVOLVING PROMISSORY NOTE
(this "Note")
----
==============================================================================
| U.S. $6,000,000.00 | August 6, 1997 (the "Date") |
| | ---- |
|________________________________________________|_____________________________|
| ACCOUNT NUMBER: | NOTE NUMBER: | RENEWAL CODE: | TELLER: | OFFICER: |
| 012-0296210 | ___________ | N | KRP | DTD |
=============================================================================
FOR VALUE RECEIVED, DTM CORPORATION ("Borrower"), promises to pay to the order
--------
of TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Bank") on or before June 1, 1998,
----
at its office at 712 Main Street, P.O. Box 2558, Houston, Harris County, Texas
77252-2558, or at such other location as Bank may designate, in immediately
available funds SIX MILLION AND NO/100THS UNITED STATES DOLLARS (U.S.
$6,000,000.00) (the "Maximum Amount of Note") or the aggregate unpaid amount of
all advances hereunder, whichever is less. Borrower will also pay interest on
the unpaid principal balance outstanding from time to time at a rate per annum
equal to the lesser of (i) the sum of the Prime Rate (as hereinafter defined)
from time to time in effect plus three-quarters of one percent (3/4%), (the
"Stated Rate") or (ii) the maximum nonusurious rate of interest from time to
- ------------
time permitted by applicable law, (the "Highest Lawful Rate"). If the Stated
-------------------
Rate at any time exceeds the Highest Lawful Rate, the actual rate of interest to
accrue on the unpaid principal amount of this Note will be limited to the
Highest Lawful Rate, but any subsequent reductions in the Stated Rate due to
reductions in the Prime Rate will not reduce the interest rate payable upon the
unpaid principal amount of this Note below the Highest Lawful Rate until the
total amount of interest accrued on this Note equals the amount of interest
which would have accrued if the Stated Rate had at all times been in effect.
"Prime Rate" means the rate determined from time to time by Bank as its prime
----------
rate. The Prime Rate shall change automatically from time to time without
notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND
MAY NOT BE BANK'S LOWEST RATE.
If Texas law determines the Highest Lawful Rate, Bank has elected the
"indicated" (weekly) ceiling as defined in the Texas Credit Code or any
successor statute. Bank may from time to time, as to current and future
balances, elect and implement any other ceiling under such Code and/or revise
the index, formula or provisions of law used to compute the rate on this open-
end account by notice to Borrower, if and to the extent permitted by, and in the
manner provided in such Code.
Each advance must be at least FIFTY THOUSAND AND NO/100THS UNITED STATES
DOLLARS (U.S. $50,000.00) unless the amount available for borrowing under this
Note is less.
Accrued and unpaid interest is due and payable monthly, beginning on September
1, 1997, and continuing on the first day of each month thereafter and at
maturity when all unpaid principal and accrued and unpaid interest is finally
due and payable.
Interest will be computed on the basis of the actual number of days elapsed
and a year comprised of 360 days, unless such calculation would result in a
usurious interest rate, in which case such interest will be calculated on the
basis of a 365 or 366 day year, as the case may be.
All past-due principal and interest on this Note will, at Bank's option, bear
interest at the Highest Lawful Rate, or if applicable law does not provide for a
maximum nonusurious rate of interest, at a rate per annum equal to 18%.
In addition to all principal and accrued interest on this Note, Borrower
agrees to pay: (a) all reasonable costs and expenses incurred by Bank and all
owners and holders of this Note in collecting this Note through probate,
reorganization, bankruptcy or any other proceeding; and (b) reasonable
attorney's fees if and when this Note is placed in the hands of an attorney for
collection.
Borrower and Bank intend to conform strictly to applicable usury laws.
Therefore, the total amount of interest (as defined under applicable law)
contracted for, charged or collected under this Note will never exceed the
Highest Lawful Rate. If Bank contracts for, charges or receives any excess
interest, it will be deemed a mistake. Bank will automatically reform the
contract or charge to conform to applicable law, and if excess interest has been
received, Bank will either refund the excess to Borrower or credit the excess on
the unpaid principal amount of this Note. All amounts constituting interest
will be spread throughout the full term of this Note in determining whether
interest exceeds lawful amounts.
The unpaid principal balance of this Note at any time will be the total
amounts advanced by Bank, less the amount of all payments or prepayments of
principal. Absent evidence of error, the records of Bank will be conclusive as
to amounts owed. Subject to the terms and conditions of this Note and the Loan
Documents, Borrower may use all or any part of the credit provided for herein at
<PAGE>
any time before the maturity of this Note and may borrow, repay and reborrow.
There is no limitation on the number of advances made so long as the total
unpaid principal amount at any time outstanding does not exceed the Maximum
Amount of Note.
Borrower may at any time pay the full amount or any part of this Note without
the payment of any premium or fee. Any partial prepayment will be in the amount
of FIFTY THOUSAND AND NO/100THS UNITED STATES DOLLARS (U.S. $50,000.00), or an
integral multiple thereof. All payments may, at Bank's sole option, be applied
to accrued interest, to principal, or to both.
"Loan Document" means this Note and any document or instrument evidencing,
-------------
securing, guaranteeing or given in connection with this Note including, but not
limited to that certain Credit Agreement (Borrowing Base) of even date herewith
entered into by and between Borrower and Bank (as may be amended from time to
time, the "Credit Agreement"). "Obligations" means all principal, interest and
---------------- -----------
other amounts which are or become owing under this Note or any other Loan
Document. "Obligor" means Borrower and any guarantor, surety, co-signer,
-------
general partner or other person who may now or hereafter be obligated to pay all
or any part of the Obligations. Where appropriate the neuter gender includes
the feminine and the masculine and the singular number includes the plural
number.
If any Event of Default (as defined in the Credit Agreement) occurs, then Bank
may do any or all of the following: (i) cease making advances hereunder; (ii)
declare the Obligations to be immediately due and payable, without notice of
acceleration or of intention to accelerate, presentment and demand or protest or
notice of any kind, all of which are hereby expressly waived; (iii) set off, in
any order, against the Obligations any debt owing by Bank to any Obligor,
including, but not limited to, any deposit account, which right is hereby
granted by each Obligor to Bank; and (iv) exercise any and all other rights
under the Loan Document, at law, in equity or otherwise.
No waiver of any default is a waiver of any other default. Bank's delay in
exercising any right or power under any Loan Document is not a waiver of such
right or power.
Each Obligor severally waives notice, demand, presentment for payment, notice
of nonpayment, notice of intent to accelerate, notice of acceleration, protest,
notice of protest, and the filing of suit and diligence in collecting this Note
and all other demands and notices, and consents and agrees that its liabilities
and obligations will not be released or discharged by any or all of the
following, whether with or without notice to it or any other Obligor, and
whether before or after the stated maturity hereof: (i) extensions of the time
of payment; (ii) renewals; (iii) acceptances of partial payments; (iv) releases
or substitutions of any collateral or any Obligor; and (v) failure, if any, to
perfect or maintain perfection of any security interest in any collateral. Each
Obligor agrees that acceptance of any partial payment will not constitute a
waiver and that waiver of any default will not constitute waiver of any prior or
subsequent default. Borrower represents and agrees that: all advances
evidenced by this Note are and will be for business, commercial, investment or
other similar purpose and not primarily for personal, family, or household use
as such terms are used in Chapter One of the Texas Credit Code.
Borrower represents and agrees that each of the following statements is true:
(i) No advances will be used primarily for agricultural purposes as such term is
used in the Texas Credit Code. (ii) No advances will be used for the purpose of
purchasing or carrying any margin stock as that term is defined in Regulation U
of the Board of Governors of the Federal Reserve System (the "Board").
-----
Notwithstanding anything contained herein or in any other Loan Document, if this
is a consumer credit obligation (as defined or described in 12 C.F.R. 227,
Regulation AA, promulgated by the Board), the security for this credit
obligation will not extend to any non-possessory security interest in household
goods (as defined in Regulation AA) other than a purchase money security
interest, and no waiver of any notice contained herein or therein will extend to
any waiver of notice prohibited by Regulation AA.
Chapter 15 of the Texas Credit Code shall not apply to this Note or to any
advance evidenced by this Note.
This Note is governed by Texas law. If any provision of this Note is illegal
or unenforceable, that illegality or unenforceability will not affect the
remaining provisions of this Note. BORROWER AND BANK AGREE THAT THIS NOTE WILL
BE PERFORMED IN THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN TEXAS
AND THAT SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY
BORROWER OR BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR
PROCEEDING AGAINST BORROWER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH
COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE EXTENT PERMITTED
BY APPLICABLE LAW BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. BORROWER AGREES
THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. BANK MAY SERVE
PROCESS IN ANY OTHER MANNER
Page 2 of 3 Pages
<PAGE>
PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR WITH
RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER JURISDICTIONS OR
VENUES.
For purposes of this Note, any assignee or subsequent holder of this Note will
be considered the "Bank," and each successor to Borrower will be considered the
"Borrower."
Each Borrower and cosigner represents that if it is not a natural person, it
is duly organized and validly existing and in good standing under the laws of
the jurisdiction of its organization; has all power and authority to conduct its
business as presently conducted; and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification required by law. Each Borrower and cosigner that
is subject to the Texas Revised Partnership Act ("TRPA") agrees that Bank is not
----
required to comply with Section 3.05(d) of the TRPA and agrees that Bank may
proceed directly against one or more partners or their property without first
seeking satisfaction from partnership property. Each Borrower and cosigner
represents that if it conducts business under an assumed business or
professional name it has properly filed Assumed Name Certificate(s) in the
office(s) required by Chapter 36 of the Texas Business and Commerce Code. Each
of the persons signing below as Borrower or cosigner represents that he/she has
full requisite power and authority to execute and deliver this Note to Bank on
behalf of the party for whom he/she signs and to bind such party to the terms
and conditions of this Note and that this Note is enforceable against such
party.
NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF PERFORMANCE, NO
TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO
CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN DOCUMENT.
THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Borrower has executed this Note effective as of the Date.
ADDRESS OF BORROWER: 1611 Headway Circle Building 2
Austin, Travis County, TX 78754
BORROWER: DTM CORPORATION
By:
----------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
Title:
-------------------------------------------------------------------------
Date:
--------------------------------------------------------------------------
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
----------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
Title:
-------------------------------------------------------------------------
Date:
--------------------------------------------------------------------------
Page 3 of 3 Pages
<PAGE>
CREDIT AGREEMENT
----------------
(BORROWING BASE)
THIS CREDIT AGREEMENT (as amended, restated and supplemented from time to time,
this "Agreement") by and between DTM CORPORATION ("Borrower") and TEXAS COMMERCE
--------- --------
BANK NATIONAL ASSOCIATION ("Bank") is dated as of August 6, 1997 (the "Effective
----
Date").
1. THE LOANS.
---------
REVOLVING CREDIT NOTE 1.1 Subject to the terms and conditions hereof, Bank
agrees to make loans ("Loan" or "Loans") to Borrower from time to time before
---- -----
the Termination Date, not to exceed at any one time outstanding the lesser of
the Borrowing Base or $6,000,000.00; provided, that if the Borrower's EBITDA
---------
before capitalized expenses and SAR expenses for any quarter is ever less than
$1,000,000.00, the maximum amount available to the Borrower hereunder for such
quarter shall be limited to $3,000,000.00 (the "Commitment"). Borrower has the
----------
right to borrow, repay and reborrow. Each Loan must be at least $50,000.00 or
the balance of the Commitment, whichever is less and each repayment must be at
least $50,000.00 or the principal balance of the Note, whichever is less. The
Loans may only be used for working capital for the Borrower. Chapter 15 of the
Texas Credit Code will not apply to this Agreement, the Note or any Loan. The
Loans will be evidenced by, and will bear interest and be payable as provided
in, the promissory note of Borrower dated the Effective Date (together with any
and all renewals, extensions, modifications and replacements thereof and
substitutions therefor, the "Note"). "Termination Date" means the earlier of:
---- ----------------
(a) June 1, 1998; or (b) the date specified by Bank pursuant to Section 6.1
-----------
hereof.
BORROWING BASE 1.2 The Borrowing Base will be the amount shown as the
--------------
BORROWING BASE on the most recent Borrowing Base Report, subject to verification
by Bank and calculated using the eligibility criteria, borrowing base factors
and dollar ceilings for various components specified in the attached Exhibit A.1
-----------
or Exhibit A.2, as applicable, incorporated herein by reference.
-----------
REQUIRED PAYMENT 1.3 If the unpaid amount of the Loans at any time exceeds the
Borrowing Base then in effect, Borrower must make a payment on the Note in an
amount sufficient to reduce the unpaid principal balance of the Note to an
amount no greater than the Borrowing Base. Such payment shall be due
concurrently with the Borrowing Base Report. If the Borrower's EBITDA before
capitalized expenses and SAR expenses for any quarter is ever less than
$1,000,000.00, Borrower must make a payment on the Note in an amount sufficient
to reduce the unpaid principal balance of the Note to an amount no greater than
$3,000,000.00.
COMMITMENT FEE 1.4 Borrower will pay a commitment fee (computed on the basis
of the actual number of days elapsed in a year comprised of 360 days) of 1/4%
per annum on the daily average difference between the Commitment and the
principal balance of the Note, from the date hereof to the Termination Date. The
Commitment fee is due and payable quarterly in arrears. In addition, in
consideration of the Commitment, Borrower agrees to pay a fee in the amount of
$37,500.00 (Borrower has already paid Bank $30,000.00 of such fee at the
execution of that certain commitment letter dated April 30, 1997 delivered by
Bank to Borrower).
PAST DUE AMOUNTS 1.5 Amounts past due to Bank in connection with the Loan
Documents will bear interest from its due date until paid at the Highest Lawful
Rate unless the applicable Loan Document provides otherwise.
CAPITAL ADEQUACY 1.6 If Bank determines after the date of this Agreement that
any change in applicable laws, rules or regulations regarding capital adequacy,
or any change in the interpretation or administration thereof by any appropriate
governmental agency, or compliance with any request or directive to Bank
regarding capital adequacy (whether or not having the force of law) of any such
agency, increases the capital required to be maintained with respect to the Loan
or Note and therefore reduces the rate of return on Bank's capital below the
level Bank could have achieved but for such change or compliance (taking into
consideration Bank's policies with respect to capital adequacy), then Borrower
will pay to Bank from time to time, within 15 days of Bank's request, any
additional amount required to compensate Bank for such reduction as applied to
the Loan. Bank will request any additional amount by delivering to Borrower a
certificate of Bank setting forth the amount necessary to compensate Bank. The
certificate will be conclusive and binding, absent evidence of error. Bank may
make any assumptions, and may use any allocations of costs and expenses and any
averaging and attribution methods,
Page 1 of 13
<PAGE>
which Bank in good faith finds reasonable provided that such allocations and
methods are applied to all similarly situated borrowers.
2. CONDITIONS PRECEDENT.
--------------------
ALL LOANS 2.1 Bank is not obligated to make any Loan unless: (a) Borrower has
given notice under Section 4.10 to all Account Debtors; (b) Bank has received
the following, duly executed and in Proper Form: (1) copy of Borrower's
investment policy; (2) a Borrowing Base Report within the time required by this
Agreement; (2) a Request for Loan, substantially in the form of Exhibit B, not
---------
later than one (1) Business Day before the date (which shall also be a Business
Day) of the proposed Loan; provided however, Bank may accept and act upon verbal
advance requests received from Borrower's representative reasonably believed by
Bank to be authorized to make such requests; and (3) a Borrowing Base Report
within the time required by this Agreement; (4) such other documents as Bank
reasonably may require; (c) no Event of Default exists or an event which with
the passage of time or the giving of notice would become an Event of Default;
(d) the making of the Loan is not prohibited by, or subjects Bank to any penalty
or onerous condition under any Legal Requirement; and (e) prior to the Bank's
funding of the first Loan under the Commitment, the results of an asset audit by
the Bank have been found to be acceptable to the Bank in its sole judgment.
Furthermore, the Bank is not obligated to make any Loan that would result in the
aggregate Loans outstanding under the Commitment exceeding $3,000,000.00 unless
the results of an asset audit by the Bank (to be performed by the Bank no less
frequently than semi-annually) have been found to be acceptable to the Bank in
its sole judgment. Bank expressly reserves the right following any such asset
audit to reasonably re-classify any Account as an ineligible Account for
purposes of determining the Borrowing Base at any time when there are Loans
outstanding under the Commitment in an aggregate amount of $3,000,000.00 or
more.
FIRST LOAN 2.2 In addition to the matters described in the preceding section,
Bank will not be obligated to make the first Loan unless: (a) Bank has received
all of the Loan Documents specified on Annex I in Proper Form; and (b)
-------
Borrower's assets have been audited by the Bank and determined acceptable by the
Bank in its discretion.
3. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this Agreement
------------------------------
and to make the Loans, Borrower represents and warrants as of the Effective Date
and the date of each request for a Loan that each of the following statements is
true and correct in all material respects:
ORGANIZATION AND STATUS 3.1 Borrower and each Subsidiary of Borrower is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; has all power and authority to conduct its
business as presently conducted, and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification required by law. Borrower has no Subsidiary
other than those listed on Annex II and each Subsidiary is owned by Borrower in
--------
the percentage set forth on Annex II.
--------
FINANCIAL STATEMENTS 3.2 All financial statements delivered to Bank are
complete and correct in all material respects and fairly present, in accordance
with generally accepted accounting principles, consistently applied ("GAAP"),
----
the financial condition and the results of operations of Borrower and each
Subsidiary of Borrower on a consolidated basis as at the dates and for the
periods indicated. No material adverse change has occurred in the assets,
liabilities, financial condition, business or affairs of Borrower or any
Subsidiary of Borrower since the dates of such financial statements. Since the
date of the most recent consolidated financial statements of the Borrower and
its Subsidiaries delivered to the Bank, there has been no change in the
condition, financial or otherwise, of the Borrower and its consolidated
Subsidiaries taken as a whole as shown on the consolidated balance sheet as of
such date except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
ENFORCEABILITY 3.3 The Loan Documents are legal, valid and binding obligations
of the Parties enforceable in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency and other similar laws affecting
creditors' rights generally. The execution, delivery and performance of the
Loan Documents have all been duly authorized by all necessary action; are within
the power and authority of the Parties; do not and will not violate any Legal
Requirement, the Organizational Documents of the Parties or any agreement or
instrument binding or affecting the Parties or any of their respective Property.
Page 2 of 13
<PAGE>
COMPLIANCE 3.4 Borrower and each Subsidiary of Borrower has filed all
applicable tax returns and paid all taxes shown thereon to be due, except those
for which extensions have been obtained and those which are being contested in
good faith and for which adequate reserves have been established. Borrower and
each Subsidiary of Borrower is in compliance with all applicable Legal
Requirements which are material to the Borrower and each Subsidiary of Borrower
on a consolidated basis. Neither Borrower nor any Subsidiary of Borrower is in
default in the payment of any other material indebtedness or under any other
material agreement to which it is a party. Borrower has obtained all consents
of and registered with all Governmental Authorities or other Persons required to
execute, deliver and perform the Loan Documents.
LITIGATION 3.5 Except as previously disclosed to Bank in writing, there is no
litigation or administrative proceeding pending or, to the knowledge of
Borrower, threatened against, nor any outstanding judgment, order or decree
affecting Borrower or any Subsidiary of Borrower before or by any Governmental
Authority.
TITLE AND RIGHTS 3.6 Borrower and each Subsidiary of Borrower has good and
marketable title to its material Property, free and clear of any Lien except for
Liens permitted by this Agreement and the other Loan Documents. Except as
otherwise expressly stated in the Loan Documents or permitted by this Agreement,
the Liens of the Loan Documents will constitute prior Liens on the Collateral
described therein. Borrower and each Subsidiary of Borrower possesses all
material permits, licenses, patents, trademarks and copyrights required to
conduct its business. All material easements, rights-of-way and other rights
necessary to maintain and operate Borrower's Property have been obtained and are
in full force and effect.
REGULATION U; BUSINESS PURPOSE 3.7 None of the proceeds of any Loan will be
used to purchase or carry, directly or indirectly, any margin stock or for any
other purpose which would make this credit a "purpose credit" within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System. All
Loans will be used for business, commercial, investment or other similar purpose
and not primarily for personal, family, or household use or primarily for
agricultural purposes as such terms are used in Chapter One of the Texas Credit
Code.
ENVIRONMENT 3.8 Borrower and each Subsidiary of Borrower have complied with
applicable material Legal Requirements in each instance in which any of them
have generated, handled, used, stored or disposed of any hazardous or toxic
waste or substance, on or off its premises (whether or not owned by any of
them). Neither Borrower nor any Subsidiary of Borrower has any material
contingent liability for non-compliance with environmental or hazardous waste
laws. Neither Borrower nor any Subsidiary of Borrower has received any notice
that it or any of its Property or operations does not comply with, or that any
Governmental Authority is investigating its compliance with, any environmental
or hazardous waste laws.
INVESTMENT COMPANY ACT/PUBLIC UTILITY HOLDING COMPANY ACT 3.9 Neither Borrower
nor any Subsidiary of Borrower is an "investment company" within the meaning of
the Investment Company Act of 1940 or a "holding company" or an "affiliate" of a
"holding company" or a "public utility" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4. AFFIRMATIVE COVENANTS. Borrower agrees to do, and if necessary cause to be
---------------------
done, and cause its Subsidiaries (except where indicated otherwise) to do, each
of the following:
CORPORATE FUNDAMENTALS 4.1 (a) Pay when due all material taxes and
governmental charges of every kind upon it or against its income, profits or
Property, unless and only to the extent that the same shall be contested in good
faith and adequate reserves have been established therefor; (b) Renew and keep
in full force and effect all of its licenses, permits and franchises which are
material to the operation of its business; (c) Do all things reasonably
necessary to preserve its corporate existence and its qualifications in all
jurisdictions where such qualification is necessary or required; (d) Comply with
all applicable material Legal Requirements; and (e) Protect, maintain and keep
in good repair its material Property and make all replacements and additions to
its material Property as may be reasonably necessary to conduct its business.
Page 3 of 13
<PAGE>
INSURANCE 4.2 Maintain insurance with such reputable financially sound
insurers, on such of its material Property, in such amounts and against such
risks as is customary with similar Persons or as may be reasonably required by
Bank, and furnish Bank satisfactory evidence thereof promptly upon request.
These insurance provisions are cumulative of the insurance provisions contained
in Section 6 of the Security Agreement - Accounts and Inventory. Bank must be
named as a beneficiary, loss payee or additional insured of such insurance as
its interest may appear and Borrower must provide Bank with copies of the
policies of insurance and a certificate of the insurer that the insurance
required by this section may not be canceled, reduced or materially affected in
any manner without 30 days' prior written notice to Bank.
FINANCIAL INFORMATION/BORROWING BASE REPORT 4.3 Furnish to Bank in Proper
Form (i) the financial statements prepared in conformity with GAAP on a
consolidated basis and the other information described in, and within the times
required by, Exhibit C, Reporting Requirements, Financial Covenants and
---------
Compliance Certificate attached hereto and incorporated herein by reference;
(ii) the Borrowing Base Report substantially in the form of, and within the time
required by, Exhibit A.1 or Exhibit A.2, as applicable, (at the time of an
----------- -----------
advance or as long as debt is outstanding) along with the other information
required by Exhibit A.1 or Exhibit A.2, as applicable, to be submitted; (iii)
----------- -----------
within the time required by Exhibit C, Exhibit C signed and certified by the
--------- ---------
chief financial officer or president of Borrower; (iv) promptly after such
request is submitted to the appropriate Governmental Authority, any request for
waiver of funding standards or extension of amortization periods with respect to
any employee benefit plan; and (v) such other information relating to the
financial condition and affairs of the Borrower and guarantors and their
Subsidiaries as Bank may reasonably request from time to time in its discretion.
MATTERS REQUIRING NOTICE 4.4 Notify Bank immediately, upon acquiring knowledge
of (a) the institution or threatened institution of any lawsuit or
administrative proceeding which, if adversely determined, would reasonably be
likely to adversely affect Borrower and its Subsidiaries on a consolidated
basis; (b) any material adverse change in the assets, liabilities, financial
condition, business or affairs of Borrower and its Subsidiaries on a
consolidated basis; (c) any Event of Default or an event which with the passage
of time or the giving of notice would become an Event of Default; (d) any
material reportable event or any prohibited transaction in connection with any
employee benefit plan; or (e) the filing of any financing statement in
connection with any purchase money security interest and/or the execution of any
purchase money security interest security agreements.
INSPECTION 4.5 So long as debt is outstanding, the Borrower will permit Bank
and its affiliates to inspect and photograph the Borrower's Property, to examine
and copy the Borrower's files, books and records, and to discuss its affairs
with the Borrower's officers and accountants (provided that Bank shall have
first obtained Borrower's consent to discuss its affairs with Borrower's
accounts, such consent shall not be unreasonably withheld by Borrower), at such
times and intervals and to such extent as Bank reasonably desires, but in no
event shall Borrower's assets be audited by the Bank less frequently than semi-
annually.
ASSURANCES 4.6 Borrower shall promptly execute and deliver any and all further
agreements, documents, instruments, and other writings that Bank may reasonably
request to cure any defect in the execution and delivery of any Loan Document.
CERTAIN CHANGES 4.7 Notify Bank at least 30 days prior to the date that any of
the Parties changes its name or the location of its chief executive office or
principal place of business or the place where Borrower keeps its books and
records or the location of any material portion of its inventory and/or work in
process.
UNENCUMBERED FOREIGN ACCOUNTS 4.8 The Borrower shall not have more than
$3,000,000.00 in unencumbered foreign accounts receivable at any time without
prior written consent from the Bank.
LOCKBOX PROCESSING AGREEMENT/COLLECTION ACCOUNT 4.9 A. (i) Execute and deliver
to Bank a Lockbox Processing Agreement in Proper Form, together with Lockbox
Processing Instructions substantially in the form of Exhibit E attached hereto,
---------
provided however that should there be a conflict between the terms of this
Agreement and the Lockbox Processing Agreement or the Terms and Conditions of
the Collection Account or the Lockbox Processing Instructions, the terms of this
Agreement shall govern. (ii) Establish a deposit account styled Texas Commerce
Bank National Association DTM Corporation Borrowing
Page 4 of 13
<PAGE>
Base Accounts Receivable ("Collection Account") at Borrower's sole expense into
which all revenues, money checks and income, howsoever evidenced, received by
Borrower and its non-foreign Subsidiaries (a non-foreign Subsidiary is a
Subsidiary formed and existing under the laws of the United States of America)
will be deposited and maintain Borrower's demand deposit account #099-2276-7461
with the Bank (the "Deposit Account"). (iii) Deliver, or cause to be delivered
------- -------
directly to the Bank for deposit to the Collection Account, all revenues,
monies, checks, drafts income and proceeds of Accounts received by Borrower or
any of its non-foreign subsidiaries or by others on behalf of Borrower or any of
its non-foreign subsidiaries with such collections on the Accounts accompanied
by sufficient information to identify the invoice to which such collections
relate; (iv) To the best of Borrower's ability, cause each Account Debtor to
make all payments due to Borrower or any of its non-foreign Subsidiaries by
check payable to Borrower or any of its non-foreign subsidiaries and to mail or
deliver the checks to the Lockbox, for deposit to the Collection Account; (v)
Take all action as Bank may reasonably request to permit Bank to have continuous
domain and control over the Lockbox and Collection Account. B. Accounts. Bank
--------
shall have full right and authority at any time to notify and direct any Account
Debtor of Borrower and any non-foreign Subsidiary to deliver all payments
directly to Bank for deposit into the Collection Account. Bank shall have the
sole right to make withdrawals from, and to administer the Collection Account in
accordance with the terms of the Loan Documents. Any collections on account of
any Accounts received directly by Borrower or any non-foreign Subsidiary of
Borrower shall be received in trust for the benefit of Bank, segregated from
other funds of Borrower and/or any such non-foreign Subsidiary and paid over to
Bank in same form as received with any endorsement to be held in the Collection
Account. At any time when the Borrower's quarterly EBITDA before Capitalized
Expenses and SAR Expenses was equal to or less than $1,000,000.00 for the
immediately preceding quarter, Bank shall be entitled to daily apply all
collected deposits in the Collection Account first to the principal amount of
the Loans, then to interest on the Loans, then to fees and expenses and other
amounts owing to Bank and any excess after such application shall be maintained
in the Collection Account. In the event that there shall be a zero balance on
the Note, then for each such day that the Note has a zero balance the Bank will
daily deposit all collections deposited into the Collection Account into the
Deposit Account. C. Power of Attorney. Borrower hereby appoints Bank as
-----------------
Borrower's attorney-in-fact and grants Bank full right and authority to supply
any necessary endorsement on checks and drafts received, including endorsing
Borrower's name thereon as appropriate and to forward such items for collection
in normal course and deposit the proceeds thereof. This power of attorney is
irrevocable, shall survive the dissolution or liquidation of Borrower, and is
deemed coupled with an interest. This power of attorney shall terminate only at
such times as all Obligations have been paid in full. Termination of the power
of attorney shall not affect the validity of any acts performed by the Bank
pursuant to the power of attorney prior to termination. D. Grant of Security
-----------------
Interest. In accordance with the Loan Documents, Borrower assigns and pledges
- --------
to Bank, and grants to Bank a security interest in, all of Borrower's right,
title and interest in and to the Collection Account, and all certificates and
instruments, if any, from time to time representing or evidencing the Collection
Account; and all proceeds of any and all of the foregoing.
NOTICE OF ACCOUNT DEBTORS 4.10 Send to each Account Debtor written instructions
in the form previously delivered and approved by Bank, to remit all payments and
remittances in respect to the Accounts directly to the Lockbox.
5. NEGATIVE COVENANTS. The Borrower will not, and no Subsidiary of Borrower
------------------
(except where indicated otherwise) will:
INDEBTEDNESS 5.1 Create, incur, or permit to exist, or assume or guarantee,
directly or indirectly, or become or remain liable with respect to, any
Indebtedness, contingent or otherwise unless there is a permitted amount set
forth in Exhibit C, without prior written consent of Bank except: (a)
--------- ------
Indebtedness to Bank, or secured by Liens permitted by this Agreement, or
otherwise approved in writing by Bank, and renewals and extensions (but not
increases) thereof; (b) current accounts payable and unsecured current
liabilities, not the result of borrowing, to vendors, suppliers and Persons
providing services, for expenditures for goods and services normally required by
it in the ordinary course of business and on ordinary trade terms, payroll
taxes, sales taxes and other such taxes incurred in the ordinary course of
business; and (c) additional Indebtedness in an amount not to exceed
$500,000.00, including additional Indebtedness up to $250,000.00 incurred by the
Borrower's German Subsidiary (DTM Corporation GMbH).
LIENS 5.2 Create or permit to exist any Lien upon any of its Property now
owned or hereafter acquired, or acquire any Property upon any conditional sale
or other title retention device or arrangement or any purchase
Page 5 of 13
<PAGE>
money security agreement; or in any manner directly or indirectly sell (except
------
for the sale of inventory and/or replaced, obsolete equipment in the ordinary
course of Borrower's business), assign, pledge or otherwise transfer any of its
accounts or other Property, without prior written consent of Bank except: (a)
------
Liens, not for borrowed money, arising in the ordinary course of business; (b)
Liens for taxes not delinquent or being contested in good faith by appropriate
proceedings; (c) Liens in effect on the date hereof and disclosed to Bank in
writing or identified on the Borrower's Form S-1, so long as neither the
indebtedness secured thereby nor the Property covered thereby increases; (d)
Liens existing on the assets of a corporation at the time such corporation
initially becomes a Subsidiary; (e) Liens on any of Borrower's Property in an
amount not to exceed $500,000.00; (f) Liens in favor of Bank, or otherwise
approved in writing by Bank; (g) any extension, renewal or replacement of any
Lien permitted by the preceding subsections (a) through (f), so long as neither
the Indebtedness secured thereby nor the Property covered thereby increases.
Notwithstanding anything to the contrary herein, Borrower will not, and no
Subsidiary of Borrower will permit any Lien (occurring outside of the ordinary
course of Borrower's business or any such Subsidiary's business) on any
inventory that secures the Loans unless Bank shall provide Borrower with Bank's
prior written consent.
FINANCIAL AND OTHER COVENANTS 5.3 Fail to comply with the required financial
covenants and other covenants described, and calculated as set forth, in Exhibit
-------
C. Unless otherwise provided on Exhibit C, all such amounts and ratios will be
- - ---------
calculated: (a) on the basis of GAAP; and (b) on a consolidated basis.
Compliance with the requirements of Exhibit C will be determined as of the dates
---------
of the financial statements to be provided to Bank.
CORPORATE CHANGES 5.4 In any single transaction or series of transactions,
directly or indirectly: (a) liquidate or dissolve; (b) be a party to any merger
or consolidation or make any acquisition except for companies in similar lines
------
of business if: (x) the merger or acquisition is in the form of equity and not
debt; (y) the Borrower is in compliance with this Agreement on a pro forma and
post acquisition/merger basis; and (z) the Bank has granted prior written
approval to such merger or acquisition; (c) sell or dispose of any interest in
any of its Subsidiaries, or permit any of its Subsidiaries to issue any
additional equity other than to Borrower; or (d) sell, convey or lease all or
any substantial part of its assets, except for sale of inventory in the ordinary
------
course of business, and/or the sale of up to 10% of the book value of Borrower's
fixed assets.
RESTRICTED PAYMENTS 5.5 Unless otherwise permitted on Exhibit C, at any time:
---------
(a) redeem, retire or otherwise acquire, directly or indirectly, any shares of
its capital stock or other equity interest; (b) declare or pay any dividend
without prior written consent of Bank (except stock dividends and dividends paid
------
to Borrower); or (c) make any other distribution or contribution of any Property
or cash or obligation to owners of an equity interest or to a Subsidiary in
their capacity as such except to the extent necessary to reimburse such equity
------
owners for any expenses actually incurred by such equity owners on behalf of the
Borrower and except to Subsidiaries as necessary to cover normal operating costs
------
of such Subsidiary.
NATURE OF BUSINESS 5.6 Materially change the nature of its business or enter
into any business which is substantially different from the business in which it
is presently engaged.
AFFILIATE TRANSACTIONS 5.7 Enter into any transaction or agreement with any
Affiliate except upon terms not materially less favorable to Borrower than those
obtainable from wholly unrelated sources.
LOANS AND INVESTMENTS 5.8 Make any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase, any stock, bonds, notes,
debentures, or other securities of, any Person, except as provided in Borrower's
investment policy in effect as of the Effective Date and as provided to Bank
under Section 2.1 (or as otherwise provided in the Loan Documents).
CHANGE IN LOCKBOX 5.9 Instruct or otherwise agree to permit any Account Debtor
to remit payments to any account, lockbox or other location other than the
Lockbox.
6. EVENTS OF DEFAULT AND REMEDIES.
------------------------------
EVENTS OF DEFAULT 6.1 Each of the following is an "Event of Default":
------------------
(a) Any Obligor fails to pay any principal of or interest on the Note or any
other obligation under any Loan Document as and when due or within three (3)
Business Days following notice from the Bank to the Borrower; or
Page 6 of 13
<PAGE>
(b) Any Obligor or any Subsidiary of Borrower fails to pay at maturity, or
within any applicable period of grace, any principal of or interest on any other
borrowed money obligation or fails to observe or perform any material term,
covenant or agreement contained in any capital lease agreement to which it is a
party, involving more than $500,000.00 in the aggregate and the same shall not
have been cured within fifteen (15) days following notice by the Bank; or
(c) To the best of the Borrower's knowledge, any representation or warranty made
in connection with any Loan Document was incorrect, false or misleading in any
material respect when made; or
(d) Any Obligor violates any material covenant contained in any Loan Document
and fifteen (15) days have elapsed since such violation occurred; or
(e) Final judgment for the payment of money is rendered against Obligor or any
Subsidiary of Borrower and remains undischarged for a period of 30 days during
which execution is not effectively stayed; or
(f) The sale, encumbrance or abandonment (except as otherwise expressly
permitted by this Agreement) of any of the Collateral or the making of any levy,
seizure, garnishment, sequestration or attachment thereof or thereon; or the
loss, theft, substantial damage, or destruction of any material portion of such
Property; or
(g) Any order is entered in any proceeding against Borrower or any Subsidiary of
Borrower decreeing the dissolution, liquidation or split-up thereof, and such
order shall remain in effect for 30 days; or
(h) Any Obligor or any subsidiary of Borrower makes a general assignment for the
benefit of creditors or shall petition or apply to any tribunal for the
appointment of a trustee, custodian, receiver or liquidator of all or any
substantial part of its business, estate or assets or shall commence any
proceeding under any bankruptcy, insolvency, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect; or any such petition or
application shall be filed or any such proceeding shall be commenced against any
Obligor or any subsidiary of Borrower and the Obligor or such subsidiary by any
act or omission shall indicate approval thereof, consent thereto or acquiescence
therein, or an order shall be entered appointing a trustee, custodian, receiver
or liquidator of all or any substantial part of the assets of any Obligor or any
subsidiary of Borrower or granting relief to any Obligor or any subsidiary of
Borrower or approving the petition in any such proceeding, and such order shall
remain in effect for more than 30 days; or any Obligor or any subsidiary of
Borrower shall fail generally to pay its debts as they become due or suffer any
writ of attachment or execution or any similar process to be issued or levied
against it or any substantial part of its property which is not released,
stayed, bonded or vacated within 30 days after its issue or levy; or
(i) Any Obligor or any Subsidiary of Borrower conceals or removes any part of
its Property, with intent to hinder, delay or defraud any of its creditors,
makes or permits a transfer of any of its Property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or makes any transfer of
its Property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or
(j) Any Obligor that is not an individual dissolves.
IF EVENT OF DEFAULT OCCURS, then Bank may do any or all of the following: (1)
declare the Obligations to be immediately due and payable without notice of
acceleration or of intention to accelerate, presentment and demand or protest,
all of which are hereby expressly waived; (2) without notice to any Obligor,
terminate the Commitment and accelerate the Termination Date; (3) set off, in
any order, against the indebtedness of Borrower under the Loan Documents any
debt owing by Bank to Borrower (whether such debt is owed individually or
jointly), including, but not limited to, any deposit account, which right is
hereby granted by Borrower to Bank; and (4) exercise any and all other rights
pursuant to the Loan Documents, at law, in equity or otherwise. Notwithstanding
anything contained herein to the contrary, the Bank shall have no obligation to
make any additional Loans to the Borrower under the Commitment following any
Event of Default and during any Cure Period therefor.
REMEDIES CUMULATIVE 6.2 No remedy, right or power of Bank is exclusive of any
other remedy, right or power now or hereafter existing by contract, at law, in
equity, or otherwise, and all remedies, rights and powers are cumulative.
7. MISCELLANEOUS.
-------------
NO WAIVER 7.1 No waiver of any default or Event of Default will be a waiver of
any other default or Event of Default. No failure to exercise or delay in
exercising any right or power under any Loan Document will be a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
further or other exercise thereof or the exercise of any other right or power.
The making of any Loan during either the existence of any default or Event of
Default, or subsequent to the occurrence of an Event of Default will not be a
waiver of any such default or Event of Default. No amendment, modification or
waiver of any Loan Document will be effective unless the same is in writing and
signed by the Person against whom such amendment, modification or
Page 7 of 13
<PAGE>
waiver is sought to be enforced. No notice to or demand on any Person shall
entitle any Person to any other or further notice or demand in similar or other
circumstances.
NOTICES 7.2 Any consent, waiver, notice, demand, request or other instrument
required or permitted to be given under the Loan Documents shall be in writing
and be deemed to have been properly given and shall be effective (a) when
delivered, if delivered in person, (b) four Business Days after being deposited
in the United States mail, provided it is sent certified or registered, return
receipt requested, postage prepaid, or (c) upon actual receipt if delivered by
hand delivery or by air express courier, addressed as set forth below:
IF TO THE BANK: IF TO THE BORROWER:
ATTN: DONNA TANNER DAY ATTN: PRESIDENT, CEO OR CFO
TEXAS COMMERCE BANK NATIONAL ASSOCIATION DTM CORPORATION
700 LAVACA 1611 HEADWAY CIRCLE
AUSTIN, TEXAS 78789 BUILDING 2
AUSTIN, TEXAS 78754
Either party may change its address for notices by notice in the manner set
forth above.
GOVERNING LAW/ARBITRATION 7.3 (a) UNLESS OTHERWISE SPECIFIED THEREIN, EACH
LOAN DOCUMENT IS GOVERNED BY TEXAS LAWS AND THE APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA. To the maximum extent permitted by law, any controversy or
claim arising out of or relating to the Loans or any Loan Document, including
but not limited to any claim based on or arising from an alleged tort or an
alleged breach of any agreement contained in any of the Loan Documents, shall,
at the request of any party to the Loan or Loan Documents (either before or
after the commencement of judicial proceedings), be settled by mandatory and
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA Rules") and pursuant to Title 9 of
---------
the United States Code, or if Title 9 does not apply, the Texas General
Arbitration Act. In any arbitration proceeding: (i) all statutes of limitations
which would otherwise be applicable shall apply; and (ii) the proceeding shall
be conducted in the city in which the office of Bank originating the Loans is
located, by a single arbitrator if the amount in controversy is $1 million or
less, or by a panel of three arbitrators if the amount in controversy (including
but not limited to all charges, principal, interest fees and expenses) is over
$1 million. Arbitrators are empowered to resolve any controversy by summary
rulings substantially similar to summary judgments and motions to dismiss.
Arbitrators may order discovery conducted in accordance with the Federal Rules
of Civil Procedures. All arbitrators will be selected by the process of
appointment from a panel, pursuant to the AAA Rules. Any award rendered in the
arbitration proceeding will be final and binding absent evidence of error, and
judgment upon any such award may be entered in any court having jurisdiction.
(b) If any party to the Loan or Loan Documents files a proceeding in any court
to resolve any controversy or claim, such action will not constitute a waiver of
the right of such party or a bar to the right of any other party to seek
arbitration under the provisions of this Section or that of any other claim or
controversy, and the court shall, upon motion of any party to the proceeding,
direct that the controversy or claim be arbitrated in accordance with this
Section.
(c) No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to the Loan Documents before, during or
after any arbitration proceeding to: (i) exercise self-help remedies including
but not limited to setoff or repossession; (ii) foreclose any Lien on or
security interest in any Collateral; or (iii) obtain relief from a court of
competent jurisdiction to prevent the dissipation, damage, destruction,
transfer, hypothecation, pledging or concealment of assets or Collateral
including, but not limited to attachments, garnishments, sequestrations,
appointments of receivers, injunctions or other relief to preserve the status
quo.
(d) To the maximum extent permitted by applicable law and the AAA Rules, neither
Bank nor any Obligor or any Affiliate, officer, director, employee, attorney, or
agent of either shall have any liability with respect to, and Bank and each
Obligor waives, releases, and agrees not to sue any of them upon, any claim for
any special, indirect, incidental and consequential damages suffered or incurred
by such Person in connection with, arising out of, or in any way related to,
this Agreement or any of the other Loan Documents. Each of Bank and each
Obligor waives, releases, and agrees not to sue each other or any of their
Affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
Nothing contained herein, however, shall be construed as a waiver of any
Obligor's or the Bank's right to compel arbitration of disputes pursuant to
subparagraphs (a) and (b), above.
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<PAGE>
(e) Nothing herein shall be considered a waiver of the right or protections
afforded Bank by 12 U.S.C. 91, Texas Banking Code Art. 342-609 or any similar
statute.
(f) Each party agrees that any other party may proceed against any other liable
Person, jointly or severally, or against one or more of them, less than all,
without impairing rights against any other liable Persons. A party shall not be
required to join the principal Obligor or any other liable Persons (e.g.,
sureties or guarantors) in any proceeding against any Person. A party may
release or settle with one or more liable Persons as the party deems fit without
releasing or impairing right to proceed against any Persons not so released.
SURVIVAL; PARTIES BOUND; TERM OF AGREEMENT 7.4 All representations,
warranties, covenants and agreements made by or on behalf of Borrower in the
Loan Documents will survive the execution and delivery of the Loan Documents;
will not be affected by any investigation made by any Person, and will bind
Borrower and the successors, trustees, receivers and assigns of Borrower and
will benefit the successors and assigns of the Bank; provided that Bank's
--------
agreement to make Loans to Borrower will not inure to the benefit of any
successor or assign of Borrower. Except as otherwise provided herein, the term
of this Agreement will be until the later of the final maturity of the Note and
the full and final payment of all Obligations and all amounts due under the Loan
Documents.
DOCUMENTARY MATTERS 7.5 This Agreement may be executed in several identical
counterparts, on separate counterparts; each counterpart will constitute an
original instrument, and all separate counterparts will constitute but one and
the same instrument. The headings and captions in the Loan Documents have been
included solely for convenience and should not be considered in construing the
Loan Documents. If any provision of any Loan Document is invalid, illegal or
unenforceable in any respect under any applicable law, the remaining provisions
will remain effective. The Loans and all other obligations and indebtedness of
Borrower to Bank are entitled to the benefit of the Loan Documents.
EXPENSES 7.6 Any provision to the contrary notwithstanding, and whether or not
the transactions contemplated by this Agreement are consummated, Borrower agrees
to pay on demand all out-of-pocket expenses (including, without limitation, the
fees and expenses of counsel for Bank) in connection with the negotiation,
preparation, execution, filing, recording, modification, supplementing and
waiver of the Loan Documents and the making, servicing and collection of the
Loans. Borrower agrees to pay Bank's standard (i) Documentation Preparation and
Processing Fee for preparation and negotiation of this Agreement to execution,
in an amount not to exceed $2,000.00; (ii) lockbox processing fees; (iii)
account maintenance fees for the Collection Account; and (iv) any expenses of
collection or other expenses incurred by Bank in connection with the maintenance
of the Collection Account, shall be reimbursed by Borrower to Bank at customary
fee rates charged by the Bank for the services. Bank may obtain reimbursement
by causing other depository accounts of Borrower at Bank to be charged from time
to time therefor. The obligations of Borrower under this and the following
section will survive the termination of this Agreement. Notwithstanding anything
contained herein to the contrary, Borrower's cost for each semi-annual field
audit shall not exceed $2,500.00.
INDEMNIFICATION 7.7 BORROWER AGREES TO INDEMNIFY, DEFEND AND HOLD BANK
HARMLESS FROM AND AGAINST ANY AND ALL LOSS, LIABILITY, OBLIGATION, DAMAGE,
PENALTY, JUDGMENT, CLAIM, DEFICIENCY AND EXPENSE (INCLUDING INTEREST, PENALTIES,
ATTORNEYS' FEES AND AMOUNTS PAID IN SETTLEMENT) TO WHICH BANK MAY BECOME SUBJECT
ARISING OUT OF OR BASED UPON THE LOAN DOCUMENTS, OR ANY LOAN, OR THE RECEIPT,
HANDLING, PAYMENT AND APPLICATION OF THE MONIES RECEIVED IN CONNECTION WITH THE
COLLECTION ACCOUNT, INCLUDING THAT RESULTING FROM BANK'S OWN NEGLIGENCE, EXCEPT
------
AND TO THE EXTENT CAUSED BY BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
USURY NOT INTENDED 7.8 Borrower and Bank intend to conform strictly to
applicable usury laws. Therefore, the total amount of interest (as defined
under applicable law) contracted for, charged or collected under this Agreement
or any other Loan Document will never exceed the Highest Lawful Rate. If Bank
contracts for, charges or receives any excess interest, it will be deemed a
mistake. Bank will automatically reform the Loan Document or charge to conform
to applicable law, and if excess interest has been received, Bank will either
refund the excess to Borrower or credit the excess on any unpaid principal
amount of the Note or any other Loan Document. All amounts constituting
interest will be spread throughout the full term of the Loan Document or
applicable Note in determining whether interest exceeds lawful amounts.
Page 9 of 13
<PAGE>
NO COURSE OF DEALING 7.9 NO COURSE OF DEALING BY BORROWER WITH BANK, NO COURSE
OF PERFORMANCE AND NO TRADE PRACTICES OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE
MAY BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
AGREEMENT.
RIGHTS OF BORROWER AND BANK 7.10 Bank has not exercised any control, and Bank
shall not exercise any control, over Borrower in the determination of which of
Borrower's creditors Borrower will pay or which payments Borrower will make in
the ordinary course of Borrower's business. Borrower, alone, shall exercise
such judgment and determination. Nothing contained herein, however, shall, in
any manner, affect, limit or impair the rights or remedies of Bank under this
Agreement or any other Loan Documents as otherwise provided by applicable law,
whether with regard to realization on the Collateral, rights of set off,
compensation or otherwise.
SECURITY INTEREST IN ACCOUNTS OF FOREIGN SUBSIDIARIES. 7.11 The Bank does not
have, nor does any other party have a Security Interest in accounts receivable
invoiced by foreign Subsidiaries of the Borrower.
CONFIDENTIALITY. 7.12 Notwithstanding any provision in any Loan Document, the
Borrower shall not be required to divulge or otherwise make available Borrower's
trade secrets, processes, other know how and proprietary property or
information. In addition, Borrower shall not be required to make any disclosure
if the result thereof would be to jeopardize or destroy its ability to assert
any applicable privilege for such information in connection with any court,
investigatory, or administrative or similar proceeding. The Bank agrees that it
will hold in confidence and not disclose Confidential information except; (a)
to its directors, officers, trustees, employees and its agents and professional
consultants, provided that such Persons are bound by an obligation of
confidence, (b) to any governmental regulatory authority having jurisdiction
over the Bank, (c) to any other Person to which such delivery or disclosure may
be necessary or appropriate (i) to affect compliance with any law, rule,
regulation or order applicable to the Bank, or (ii) in response to any
subpoenas, informal investigative order or other legal process, or (iii) in
connection with any litigation to which it is a party or (iv) in order to
enforce or protect its rights under the Loan Documents. As used herein,
"Confidential Information" means confidential or proprietary information
delivered or made available by or on behalf of Borrower or any Subsidiary to the
Bank (including, without limitation, any nonpublic information) and which is
identified in writing by Borrower as "Confidential Information", but does not
include information (x) which was publicly available or otherwise know to the
Bank, at the time of disclosure (other than through disclosure by the Borrower
or any Subsidiary on behalf of the Borrower or any Subsidiary), (y) which
subsequently becomes publicly know through no act or omission by the Bank or (z)
which otherwise becomes know to the Bank, other than through disclosure by the
Borrower or any Subsidiary or on behalf of the Borrower or any Subsidiary or
disclosure in violation of an obligation of confidence of which the Bank knows
or should have known.
CHANGE IN CEO. 7.13. Permit any change in the Borrower's CEO unless: (a) the
Borrower replaces the CEO with a qualified successor within a reasonable period
of time after the removal, termination, resignation, failure to serve, etc. of
the CEO and (b) the Bank has approved such successor CEO in writing within 30
days after the date of such replacement. If the CEO is not replaced within such
reasonable time and/or the Bank does not approve such successor CEO in writing
within 30 days after the date of such replacement, then all cash collected
through the Collection Account shall be applied to the outstanding balance on
the Note and the Bank's commitment to extend Loans to the Borrower shall
terminate. Under no circumstance shall a change in the identity of Borrower's
CEO be the basis for declaration of a default or Event of Default under any Loan
Document.
8. DEFINITIONS.
-----------
Unless the context otherwise requires, capitalized terms used in Loan Documents
and not defined elsewhere shall have the meanings provided by GAAP, except as
follows:
Accounts means all accounts as such term is defined in the Texas Business and
Commercial Code.
Account Debtor means any person indicated in Borrower's records as obligated on
or in connection with any Account.
Affiliate means, as to any Person, any other Person (a) that directly or
- ---------
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds twenty-five percent (25%) or more of any class of
voting stock of such
Page 10 of 13
<PAGE>
Person; or (c) twenty-five percent (25%) or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Person in question. The
term "control" means to possess, directly or indirectly, the power to direct the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise. Bank is not under any circumstances to be
deemed an Affiliate of Borrower or any of its Subsidiaries.
Authority Documents means certificates of authority to transact business,
- -------------------
certificates of good standing, borrowing resolutions (with secretary's
certificate), secretary's certificates of incumbency, and other documents which
empower and enable Borrower or its representatives to enter into agreements
evidenced by Loan Documents or evidence such authority.
Business Day means a day when the main office of Bank is open for the conduct of
- ------------
commercial lending business.
Collateral means all Property, tangible or intangible, real, personal or mixed,
- ----------
now or hereafter subject to Security Documents.
Corporation means corporations, partnerships, limited liability companies, joint
- -----------
ventures, joint stock associations, associations, banks, business trusts and
other business entities.
Government Accounts means receivables owed by the U.S. government or by the
- -------------------
government of any state, county, municipality, or other political subdivision as
to which Bank's security interest or ability to obtain direct payment of the
proceeds is governed by any federal or state statutory requirements other than
those of the Uniform Commercial Code, including, without limitation, the Federal
Assignment of Claims Act of 1940, as amended.
Governmental Authority means any foreign governmental authority, the United
- ----------------------
States of America, any state of the United States and any political subdivision
of any of the foregoing, and any agency, department, commission, board, bureau,
court or other tribunal having jurisdiction over Bank or any Obligor, or any
Subsidiary of Borrower or their respective Property.
Highest Lawful Rate means the maximum nonusurious rate of interest permitted to
- -------------------
be charged by applicable Federal or Texas law (whichever permits the higher
lawful rate) from time to time in effect. If Chapter One of the Texas Credit
Code establishes the Highest Lawful Rate, the Highest Lawful Rate is the
"indicated rate ceiling" as defined in that Chapter.
Indebtedness means and includes (a) all items which in accordance with GAAP
- ------------
would be included on the liability side of a balance sheet on the date as of
which Indebtedness is to be determined (excluding capital stock, surplus,
surplus reserves and deferred credits); (b) all guaranties, endorsements and
other contingent obligations in respect of, or any obligations to purchase or
otherwise acquire, Indebtedness of others, and (c) all Indebtedness secured by
any Lien existing on any interest of the Person with respect to which
indebtedness is being determined, in Property owned subject to such Lien,
whether or not the Indebtedness secured thereby has been assumed.
Legal Requirement means any law, ordinance, decree, requirement, order,
- -----------------
judgment, rule, regulation (or interpretation of any of the foregoing) of, and
the terms of any license or permit issued by, any Governmental Authority.
Lien shall mean any mortgage, pledge, charge, encumbrance, security interest,
- ----
collateral assignment or other lien of any kind, whether based on common law,
constitutional provision, statute or contract.
Loan Documents means this Agreement, the agreements, documents, instruments and
- --------------
other writings contemplated by this Agreement or listed on Annex I, all other
assignments, deeds, guaranties, pledges, instruments, certificates and
agreements now or hereafter executed or delivered to the Bank pursuant to any of
the foregoing, and all amendments, modifications, renewals, extensions,
increases and rearrangements of, and substitutions for, any of the foregoing.
Lockbox means the postal lockbox ( 1127 ) maintained by Bank into which
- ------- --------
Borrower directs Account Debtors to make payment and remittance in respect to
Accounts.
Obligations means all principal, interest and other amounts which are or become
- -----------
owing under this Agreement, the Note or any other Loan Document.
Obligor means each Borrower and any guarantor, surety, co-signer, general
- -------
partner or other person who may now or hereafter be obligated to pay all or any
part of the Obligations.
Organizational Documents means, with respect to a corporation, the certificate
- ------------------------
of incorporation, articles of incorporation and bylaws of such corporation; with
respect to a limited liability company, the articles of organization,
regulations and other documents establishing such entity, with respect to a
partnership, joint venture, or trust, the agreement, certificate or instrument
establishing such entity; in each case including all modifications and
supplements thereof.
Parties means all Persons other than Bank executing any Loan Document.
- -------
Page 11 of 13
<PAGE>
Person means any Corporation, trust, unincorporated organization, Governmental
- ------
Authority or any other form of entity.
Proper Form means in form and substance reasonably satisfactory to the Bank and
- -----------
customary for the types of transactions in which they are being tendered or
requested.
Property means any interest in any kind of property or asset, whether real,
- --------
personal or mixed, tangible or intangible, including, but not limited to any and
all intellectual property.
Security Documents means those Security Agreements listed on Annex I and all
- ------------------ -------
supplements, modifications, amendment, extensions thereof and all other
agreements hereafter executed and delivered to Bank to secure the Loans.
Subordinated Debt means any Indebtedness subordinated to Indebtedness due Bank
- -----------------
pursuant to a written subordination agreement in Proper Form by and among Bank,
subordinated creditor and Borrower which at a minimum must prohibit: (a) any
action by subordinated creditor which will result in an occurrence of an Event
of Default or default under this Agreement, the subordination agreement or the
subordinated Indebtedness; and (b) upon the happening of any Event of Default or
default under any Loan Document, the subordination agreement, or any instrument
evidencing the subordinated Indebtedness (i) any payment of principal and
interest on the subordinated Indebtedness; (ii) any act to compel payment of
principal or interest on subordinated Indebtedness; and (iii) any action to
realize upon any Property securing the subordinated Indebtedness .
Subsidiary means, as to a particular parent Corporation, any Corporation of
- ----------
which 50% or more of the indicia of equity rights is at the time directly or
indirectly owned by such parent Corporation or by one or more Persons controlled
by, controlling or under common control with such parent Corporation.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BANK AND THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF BANK AND THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
BORROWER: DTM CORPORATION
By:
-----------------------------------------------------------------------------
Name:
---------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
-----------------------------------------------------------------------------
Name:
---------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Page 12 of 13
<PAGE>
EXHIBITS: ANNEXES:
A.1 Borrowing Base Report I Loan Documents
A.2 Borrowing Base Report II Subsidiaries
B Request for Loan
C Reporting Requirements, Financial Covenants,
and Compliance Certificate
D Lockbox Processing Agreement
E Lockbox Processing Instructions
Page 13 of 13
<PAGE>
EXHIBIT A.1
BORROWING BASE REPORT
ACCOUNTS RECEIVABLE
(APPLICABLE AT ALL TIMES WHEN THE BORROWER'S QUARTERLY
-----
EBITDA BEFORE CAPITALIZED EXPENSES DOES NOT EXCEED $1,000,000.00)
--------
BORROWING BASE REPORT FOR PERIOD BEGINNING: ____________________ AND ENDING
____________________ ("CURRENT PERIOD") REQUIRED BY THE CREDIT AGREEMENT DATED
--------------
THE EFFECTIVE DATE (AS AMENDED, RESTATED, AND SUPPLEMENTED FROM TIME TO TIME,
THE "AGREEMENT") BY AND BETWEEN DTM CORPORATION AND TEXAS COMMERCE BANK NATIONAL
---------
ASSOCIATION
- -------------------------------------------------------------------------------
THE BORROWING BASE REPORT MUST BE SUBMITTED TO BANK WITHIN: (A) WITHIN 15 DAYS
OF EACH MONTH END IF: (X) THERE IS NO OUTSTANDING BALANCE UNDER THE NOTE OR (Y)
WHEN THE BORROWER'S QUARTERLY EBITDA BEFORE CAPITALIZED EXPENSES AND SAR
EXPENSES EXCEEDS $1,000,000.00 FOR THE IMMEDIATELY PRECEDING QUARTER; AND (B) ON
MONDAY OF EACH WEEK IF: (X) THERE IS AN OUTSTANDING BALANCE UNDER THE NOTE; OR
(Y) WHEN THE BORROWER'S QUARTERLY EBITDA BEFORE CAPITALIZED EXPENSES AND SAR
EXPENSES WAS EQUAL TO OR LESS THAN $1,000,000.00 FOR THE IMMEDIATELY PRECEDING
QUARTER. BORROWER MUST PROVIDE THE FOLLOWING ALONG WITH THE BORROWING BASE
REPORT: ACCOUNTS RECEIVABLE AGINGS AND LISTING.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE PRIOR MONTH
-----------------
<S> <C> <C>
Line 1. Total Accounts (less discounts and payables at end of $_______________
prior month [Line 4 on immediately preceding
Borrowing Base Report])
2. Changes during Current Period $_______________
(a) Add increases to Accounts $_______________
(b) Minus cash collections $_______________
(c) Minus credit memos $_______________
(d) Minus other reductions
to Accounts $_______________
3. Total changes - Add Lines 2(a) through (d) $_______________
CURRENT PERIOD
--------------
4. Total Accounts as of the end of the Current Period $_______________
INELIGIBLE ACCOUNTS AS OF THE END OF THE CURRENT PERIOD:
5. That portion (e.g., invoice) of all of the Accounts
of any Account Debtor where the Account
is more than 90 days from invoice date $_______________
6. All of the Accounts, not already included in Line 5,
of any Account Debtor if 20% of the dollar amount of
all of the Accounts of such Account Debtor
are more than 90 days from invoice date $_______________
</TABLE>
EXHIBIT A.1 - Page 1 of 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
7. That portion of all of the Accounts of any Account
Debtor which exceeds 10% of the dollar amount of
the total of all Accounts for all Account Debtors for
the Current Period (Line 4) (except for the Accounts
------
of Fortune 500 companies or other Accounts as may
be approved by Bank in writing from time to time,
the "excepted Accounts") $_______________
8. That portion of all of the Excepted Accounts of any
Excepted Account Debtor which exceeds 30% of the
dollar amount of the total of all Accounts for all Account
Debtors for the Current Period (Line 4) $_______________
9. Intercompany and Affiliate Accounts $_______________
10. Government Accounts [GOVERNMENT ACCOUNTS MEANS
-------------------
RECEIVABLES OWED BY THE U.S. GOVERNMENT OR BY THE
GOVERNMENT OF ANY STATE, COUNTY, MUNICIPALITY, OR
OTHER POLITICAL SUBDIVISION AS TO WHICH BANK'S
SECURITY INTEREST OR ABILITY TO OBTAIN DIRECT PAYMENT
OF THE PROCEEDS IS GOVERNED BY ANY FEDERAL OR STATE
STATUTORY REQUIREMENTS OTHER THAN THOSE OF THE UNIFORM
COMMERCIAL CODE, INCLUDING, WITHOUT LIMITATION,
THE FEDERAL ASSIGNMENT OF CLAIMS ACT OF 1940,
AS AMENDED.] $_______________
11. Foreign Accounts (unless secured by a letter of credit issued
------
by a bank satisfactory to the Bank or insured by Eximbank
or other private insurance acceptable to the Bank)
$_______________
12. Accounts subject to any dispute or setoff or contra
account $_______________
13. Accounts arising from the sale of Inventory which as been
returned by the Account Debtor without being resold in the
ordinary course of Borrower's business $_______________
14. Accounts arising from Inventory subject to any
purchase money security interests $_______________
15. Total Ineligible Accounts for the Current Period $_______________
(Add Lines 5 through 14)
16. Total Eligible Accounts for the Current Period $_______________
(Line 4 - Line 15)
17. Multiplied by: Borrowing Base Factor 70%
-------------
18. Equals: Eligible Accounts portion of the BORROWING BASE
-------
as of the end of the Current Period $_______________
19. Foreign Accounts covered by Eximbank insurance or
private insurance acceptable to Bank $_______________
20. Multiplied by Insured Foreign Accounts Borrowing
-------------
Base Factor 90%
</TABLE>
EXHIBIT A.1 - Page 2 of 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
21. Equals: Insured Foreign Accounts portion of BORROWING
-------
BASE as of the end of the Current Period $_______________
22. Foreign Accounts secured by a letter of credit issued by a
bank satisfactory to Bank $_______________
23. Multiplied by Secured Foreign Accounts Borrowing
-------------
Base Factor 80%
24. Equals: Secured Foreign Accounts portion of BORROWING
-------
BASE as of the end of the Current Period $_______________
25. Total BORROWING BASE as of the end of the Current Period
(Line 18 + Line 21 + Line 24) $_______________
26. Less: Aggregate principal amount outstanding under the Note as
----
of the end of the Current Period: $_______________
27. Equals: amount available for borrowing subject to the terms of
------
the Agreement, if positive; or amount due, if negative: $_______________
--
</TABLE>
The term "Accounts" shall have the meaning as set forth in the Texas Business
--------
and Commerce Code in effect as of the date of the Agreement. The Bank expressly
reserves the right following any inspection of the Borrower's Property, files,
books and records (as provided for in Section 4.5 of the Agreement) to
reclassify any Account as ineligible for purposes of determining the Borrowing
Base. All other terms not defined herein shall have the respective meanings as
in the Agreement.
Borrower certifies that the above information and computations are true,
correct, complete in all material respects and not materially misleading as of
the date hereof.
Borrower: DTM CORPORATION
By:
-----------------------------------------------------------------------------
Name:
---------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Date:
---------------------------------------------------------------------------
EXHIBIT A.1 - Page 3 of 3
<PAGE>
EXHIBIT A.2
BORROWING BASE REPORT
ACCOUNTS RECEIVABLE
(APPLICABLE AT ALL TIMES WHEN THE BORROWER'S QUARTERLY
----
EBITDA BEFORE CAPITALIZED EXPENSES DOES NOT EXCEED $1,000,000.00)
--------
BORROWING BASE REPORT FOR PERIOD BEGINNING: ____________________ AND ENDING
____________________ ("CURRENT PERIOD") REQUIRED BY THE CREDIT AGREEMENT DATED
--------------
THE EFFECTIVE DATE (AS AMENDED, RESTATED, AND SUPPLEMENTED FROM TIME TO TIME,
THE "AGREEMENT") BY AND BETWEEN DTM CORPORATION AND TEXAS COMMERCE BANK NATIONAL
---------
ASSOCIATION
- -------------------------------------------------------------------------------
THE BORROWING BASE REPORT MUST BE SUBMITTED TO BANK WITHIN: (A) WITHIN 15 DAYS
OF EACH MONTH END IF: (X) THERE IS NO OUTSTANDING BALANCE UNDER THE NOTE OR (Y)
WHEN THE BORROWER'S QUARTERLY EBITDA BEFORE CAPITALIZED EXPENSES AND SAR
EXPENSES EXCEEDS $1,000,000.00 FOR THE IMMEDIATELY PRECEDING QUARTER; AND (B) ON
MONDAY OF EACH WEEK IF: (X) THERE IS AN OUTSTANDING BALANCE UNDER THE NOTE; OR
(Y) WHEN THE BORROWER'S QUARTERLY EBITDA BEFORE CAPITALIZED EXPENSES AND SAR
EXPENSES WAS EQUAL TO OR LESS THAN $1,000,000.00 FOR THE IMMEDIATELY PRECEDING
QUARTER. BORROWER MUST PROVIDE THE FOLLOWING ALONG WITH THE BORROWING BASE
REPORT: ACCOUNTS RECEIVABLE AGINGS AND LISTING.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINCE PRIOR MONTH
-----------------
<S> <C> <C>
Line 1. Total Accounts (less discounts and payables at end of $_______________
prior month [Line 4 on immediately preceding
Borrowing Base Report])
2. Changes during Current Period $_______________
(a) Add increases to Accounts $_______________
(b) Minus cash collections $_______________
(c) Minus credit memos $_______________
(d) Minus other reductions
to Accounts $_______________
3. Total changes - Add Lines 2(a) through (d) $_______________
CURRENT PERIOD
--------------
4. Total Accounts as of the end of the Current Period $_______________
INELIGIBLE ACCOUNTS AS OF THE END OF THE CURRENT PERIOD:
5. That portion (e.g., invoice) of all of the Accounts
of any Account Debtor where the Account
is more than 90 days from invoice date $_______________
6. All of the Accounts, not already included in Line 5,
of any Account Debtor if 20% of the dollar amount of
all of the Accounts of such Account Debtor
are more than 90 days from invoice date $_______________
</TABLE>
EXHIBIT A.2 - Page 1 of 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
7. That portion of all of the Accounts of any Account
Debtor which exceeds 10% of the dollar amount of
the total of all Accounts for all Account Debtors for
the Current Period (Line 4) (except for the Accounts
------
of Fortune 500 companies or other Accounts as may
be approved by Bank in writing from time to time,
the "excepted Accounts") $_______________
8. That portion of all of the Excepted Accounts of any
Excepted Account Debtor which exceeds 30% of the
dollar amount of the total of all Accounts for all Account
Debtors for the Current Period (Line 4)
9. Intercompany and Affiliate Accounts $_______________
10. Government Accounts [GOVERNMENT ACCOUNTS MEANS
-------------------
RECEIVABLES OWED BY THE U.S. GOVERNMENT OR BY THE
GOVERNMENT OF ANY STATE, COUNTY, MUNICIPALITY, OR
OTHER POLITICAL SUBDIVISION AS TO WHICH BANK'S
SECURITY INTEREST OR ABILITY TO OBTAIN DIRECT PAYMENT
OF THE PROCEEDS IS GOVERNED BY ANY FEDERAL OR STATE
STATUTORY REQUIREMENTS OTHER THAN THOSE OF THE UNIFORM
COMMERCIAL CODE, INCLUDING, WITHOUT LIMITATION,
THE FEDERAL ASSIGNMENT OF CLAIMS ACT OF 1940,
AS AMENDED.] $_______________
11. Foreign Accounts (unless secured by a letter of credit issued
------
by a bank satisfactory to the Bank or insured by Eximbank
or other private insurance acceptable to the Bank)
$_______________
12. Accounts subject to any dispute or setoff or contra
account $_______________
13. Accounts arising from the sale of Inventory which as been
returned by the Account Debtor without being resold in the
ordinary course of Borrower's business $_______________
14. Accounts arising from Inventory subject to any
purchase money security interests $_______________
15. Total Ineligible Accounts for the Current Period $_______________
(Add Lines 5 through 14)
16. Total Eligible Accounts for the Current Period $_______________
(Line 4 - Line 15)
17. Multiplied by: Borrowing Base Factor 80%
-------------
18. Equals: Eligible Accounts portion of the BORROWING BASE
-------
as of the end of the Current Period $_______________
19. Foreign Accounts covered by Eximbank insurance or
private insurance acceptable to Bank $_______________
20. Multiplied by Insured Foreign Accounts Borrowing Base Factor 90%
-------------
</TABLE>
EXHIBIT A.2 - Page 2 of 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
21. Equals: Insured Foreign Accounts portion of BORROWING
-------
BASE as of the end of the Current Period $_______________
22. Foreign Accounts secured by a letter of credit issued by a
bank satisfactory to Bank $_______________
23. Multiplied by Secured Foreign Accounts Borrowing
-------------
Base Factor 80%
24. Equals: Secured Foreign Accounts portion of BORROWING
-------
BASE as of the end of the Current Period $_______________
25. Total BORROWING BASE as of the end of the Current Period
(Line 18 + Line 21 + Line 24) $_______________
26. Less: Aggregate principal amount outstanding under the Note as
----
of the end of the Current Period: $_______________
27. Equals: amount available for borrowing subject to the terms of
------
the Agreement, if positive; or amount due, if negative: $_______________
--
</TABLE>
The term "Accounts" shall have the meaning as set forth in the Texas Business
--------
and Commerce Code in effect as of the date of the Agreement. The Bank expressly
reserves the right following any inspection of the Borrower's Property, files,
books and records (as provided for in Section 4.5 of the Agreement) to
reclassify any Account as ineligible for purposes of determining the Borrowing
Base. All other terms not defined herein shall have the respective meanings as
in the Agreement.
Borrower certifies that the above information and computations are true,
correct, complete in all material respects and not materially misleading as of
the date hereof.
Borrower: DTM CORPORATION
By:
-----------------------------------------------------------------------------
Name:
---------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Date:
---------------------------------------------------------------------------
EXHIBIT A.2 - Page 3 of 3
<PAGE>
EXHIBIT B
REQUEST FOR LOAN
LETTERHEAD OF BORROWER
Texas Commerce Bank National Association
700 Lavaca
P.O. Box 550
Austin, TX 78789-0001
Re: Request for Loan under Agreement
Attention: Donna Tanner Day
This letter confirms our oral or telephonic request of ____________, 19__,
for a Loan in accordance with that certain Credit Agreement (as amended,
restated and supplemented from time to time, the "Agreement") dated as of the
Effective Date between you and us. Any term defined in the Agreement and used in
this letter has the same meaning as in the Agreement.
The proposed Loan is to be in the amount of $_______________ and is to be
made on ____________________, 19_____, which is a Business Day at least _______
Business Days after the date of this letter. The proceeds of the proposed Loan
should be (check one:) [ ] deposited into account number __________ with the
Bank [ ] ____________________________________________________________________
________________________________________________________________.
The undersigned hereby certifies that:
(1) The representations and warranties made by the Borrower or by any
other Person in the Agreement and the other Loan Documents are true
and correct in all material respects on and as of this date as though
made on this date.
(2) The proposed Loan complies with all applicable provisions of the
Agreement.
(3) No Event of Default has occurred and is continuing.
Sincerely,
DTM CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
EXHIBIT B - Page 1 of 1
<PAGE>
ANNEX I
LOAN DOCUMENTS
"Loan Documents" includes, but is not limited to, the following:
1. Agreement
2. Note
3. [ ] Assignment covering:
[ ] Life insurance
[ ] Deposit account
[ ] Other (specify)
4. Borrowing Base Report
5. Compliance Certificate
6. [X] Security Agreements, in Proper Form, covering:
[X] Accounts and general intangibles
[X] Equipment
[ ] Inventory
[ ] Securities
[ ] Secured note
[ ] Certificate of deposit or deposit account
[ ] Partnership interest
[ ] Rights under contract
[ ] Other (specify)
7. [ ] Deed of Trust
8. [ ] Title Insurance Policy
9. [X] Financing Statements
10. [ ] Guaranty by:
11. [X] Other (specify): Certificate of Account Status
12. [ ] Opinion of Borrower' Counsel
13. [X] Certified Copies of Organizational and Authority Documents
14. [X] Insurance policies and certificates
15. [X] Subordination Agreement covering: [ ] debt to:
[X] lien of: landlord(s)
16. [X] Financial Statements of: Borrower
17. [X] UCC search
18. [ ] Regulation U Purpose Statement (U-1)
19. [X] Lockbox Processing Agreement
ANNEX I - Page 1 of 1
<PAGE>
ANNEX II
SUBSIDIARIES
Subsidiary Name Where
and Address Incorporated % Owned
- --------------- ------------ -------
DTM CORPORATION GMbH German corporation 100%
Otto-Hahn-Strasse 6
D-40721
Hilden, Germany
ANNEX II - Page 1 of 1
<PAGE>
EXHIBIT C to Agreement between
DTM CORPORATION ("Borrower") and
--------
Texas Commerce Bank National Association ("Bank")
----
dated the Effective Date as same may be amended,
restated and supplemented in writing.
REPORTING REQUIREMENTS, FINANCIAL COVENANTS AND
COMPLIANCE CERTIFICATE FOR CURRENT REPORTING
PERIOD ENDING ________________, 199__
("END DATE")
--------
<TABLE>
<CAPTION>
===================================================================================================================================
A. Financial Reporting. Borrower will provide the following financial information within the times indicated Compliance
(see ( 4.3): Certificate
- ----------------------------------------------------------------------------------------------------------------
WHO WHEN DUE WHAT (Circle)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BORROWER (i) Within 90 days of fiscal Annual financial statements (balance sheet, Yes No
year end income statement, cash flow statement) Audited
(Borrower's fiscal year ends on (with unqualified opinion) by independent
____________, 199__.) certified public accountants of international
repute, accompanied by this Compliance
Certificate
-----------------------------------------------------------------------------------------------------
(ii) Within 35 days of each Unaudited interim financial statements Yes No
quarter end in which there is no accompanied by this Compliance Certificate
outstanding balance on the Note
-----------------------------------------------------------------------------------------------------
(iii) Within 35 days of each Unaudited interim financial statements Yes No
month end in which there is an accompanied by this Compliance Certificate
outstanding balance on the Note
-----------------------------------------------------------------------------------------------------
(iv) (a) Within 15 days of each Borrowing Base Report (Exhibit A.1 or Exhibit Yes No
month end if: (x) there is no A.2, as applicable), along with accounts
outstanding balance under the receivable aging and listing
Note or (y) when the Borrower's
quarterly EBITDA before
Capitalized Expenses and SAR
Expenses exceeds $1,000,000.00
for the immediately preceding
quarter; or (b) on Monday of
each week if: (x) there is an
outstanding balance under the
Note; or (y) when the Borrower's
quarterly EBITDA before
Capitalized Expenses and SAR
Expenses was equal to or less
than $1,000,000.00 for the
immediately preceding quarter
-----------------------------------------------------------------------------------------------------
(v) Within 15 days of each month Accounts payable aging Yes No
end
==================================================================================================================================
</TABLE>
EXHIBIT C - Page 1 of 3
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
<S> <C> <C> <C> <C>
B. FINANCIAL COVENANTS. Borrower will comply with the COMPLIANCE CERTIFICATE
------------------- ----------------------
following financial covenants, defined in accordance with
GAAP and the definitions in Section 8, and incorporating
the calculation adjustments indicated on the Compliance
Certificate (see (S) 5.3):
- ----------------------------------------------------------------------------------------------------------------------------------
REQUIRED ACTUAL REPORTED Compliance
------- --------------- (Circle)
Except as specified otherwise, each covenant will be For Current Reporting Period/as of the End Date Yes No
maintained at all times and reported for each Reporting
Period or as of each Reporting Period End Date, as
appropriate:
- ----------------------------------------------------------------------------------------------------------------------------------
1. Maintain a Tangible Net Worth as adjusted at all times of Stockholders' Equity $________ Yes No
at least the greater of: (i) $8,500,000.00 through 12/31/97 Minus: Goodwill $________
and $8,000,000.00 at all times thereafter. Other Intangible Assets $________
Loans/Advances to
Equity holders $________
Loans to Affiliates $________
Plus: Subordinated Debt $________
= Tangible Net Worth as adjusted $________
- ----------------------------------------------------------------------------------------------------------------------------------
2. Maintain a Quick Ratio of at least 0.90 : 1.0 through $________________/ $____________ = $_________ Yes No
12/31/97 and increasing to 1.0 : 1.0 at all times thereafter.
(Total Current (Current Quick
Assets minus Liabilities Ratio
Inventory) including any
amounts
outstanding
under the Note)
- ----------------------------------------------------------------------------------------------------------------------------------
3. Have EBITDA (Cash Flow before interest and income tax Cash Flow $________ Yes No
expense and amortization) before Capitalized Expenses and Plus: Tax Expense $________
before SAR Expenses for the quarter ending 3/31/97 of Interest Expense $________
$(100,000.00), for the quarter ending 9/30/97, Amortization $________
$500,000,000.00 for the quarter ending 12/31/97 and Equals: EBITDA $________
$(200,000.00) for the quarter ending 3/31/98.
- ----------------------------------------------------------------------------------------------------------------------------------
==================================================================================================================================
C. Other Required Covenants to be maintained and to be certified. COMPLIANCE CERTIFICATE
==================================================================================================================================
REQUIRED ACTUAL REPORTED COMPLIANCE
-------- --------------- (CIRCLE)
- ----------------------------------------------------------------------------------------------------------------------------------
(i) No additional liens and encumbrances on Borrower's Yes No
Property (see (S) 5.2).
- ----------------------------------------------------------------------------------------------------------------------------------
(ii) No additional debt (see (S) 5.1). Yes No
- ----------------------------------------------------------------------------------------------------------------------------------
(iii) No dividends or advances (see (S) 5.5). Yes No
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT C - Page 2 of 3
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(iv) No change in the CEO of Borrower Yes No
(see (S) 7.13)
- ----------------------------------------------------------------------------------------------------------------------------------
(v) The Borrower shall not have more than $2,000,000 in Yes No
unencumbered foreign accounts receivable at any time without
written consent from the Bank (see (S) 4.8).
- ----------------------------------------------------------------------------------------------------------------------------------
(vi) No merger or acquisition (see (S) 5.4) Yes No
==================================================================================================================================
</TABLE>
THE ABOVE SUMMARY REPRESENTS SOME OF THE COVENANTS AND AGREEMENTS CONTAINED IN
THE AGREEMENT AND DOES NOT IN ANY WAY RESTRICT OR MODIFY THE TERMS AND
CONDITIONS OF THE AGREEMENT. IN CASE OF CONFLICT BETWEEN THIS EXHIBIT C AND THE
AGREEMENT, THE AGREEMENT SHALL CONTROL.
The undersigned hereby certifies to the best of his or her knowledge that the
above information and computations are true and correct in all material respects
as of the date hereof, and that since the date of the Borrower's most recent
Compliance Certificate (if any):
[ ] No default or Event of Default has occurred under the Agreement
during the current Reporting Period, or been discovered from a
prior period, and not reported.
[ ] A default or Event of Default (as described below) has occurred
during the current Reporting Period or has been discovered from a
prior period and is being reported for the first time and:
[ ] was cured on ___________________________________.
[ ] was waived by Bank in writing on __________________________.
[ ] is continuing.
Description of Event of Default: ___________________________________________
____________________________________________________________________________
____________________________________________________________________________
Executed this , 19________________.
BORROWER: DTM CORPORATION
SIGNATURE:
---------------------------------------------------------------------
NAME:
--------------------------------------------------------------------------
TITLE: (Chief Financial Officer or President)
-------------------------------------------------------------------------
ADDRESS:
-----------------------------------------------------------------------
EXHIBIT C - Page 3 of 3
<PAGE>
SECURITY AGREEMENT -- ACCOUNTS AND INVENTORY
(this "Agreement")
DTM CORPORATION
1611 Headway Circle Building 2
Austin, Travis County, TX 78754
("Debtor"), and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
712 Main Street, P.O. Box 2558
Houston, Harris County, Texas 77252-2558,
("Secured Party"), agree as follows:
1. DEFINITIONS. (a) "Collateral" means all Accounts, all Inventory and all
Proceeds, together with true, correct and complete copies of true and correct
copies of all books and records of Debtor, whether in paper or electronic form,
relating to the Collateral. "Accounts" means all of Debtor's accounts as well as
all instruments, negotiable documents, chattel paper and deposit accounts that
evidence or reflect the accounts. "Inventory" means all inventory of Debtor,
including without limitation materials (which reflect payment on any Account or
evidence any obligation on any Account), supplies, returned or repossessed
goods, goods in transit and goods held by others under lease, consignment or
other arrangements, and all documents or certificates of title relating to the
foregoing. (b) "Obligations" means all debts, obligations and liabilities of
every kind and character, whether joint or several, contingent or otherwise, of
Debtor now or hereafter existing in favor of Secured Party, and arising under or
from any Loan Document (as defined in the Credit Agreement). Debtor and Secured
Party specifically contemplate that Debtor may hereafter become further indebted
to Secured Party. (c) "Past Due Rate" means the highest nonusurious rate of
interest that Secured Party may contract for, charge or receive under applicable
law, or 18% if applicable law does not specify such a rate. (d) "Proceeds" means
the rights and interests of Debtor in goods, the sale and delivery of which give
rise to any Account, including all returned or repossessed goods, and all
products and proceeds, in cash or otherwise, of all Collateral. (e) "Security
Interest" means the security interests created by this Agreement. (f) "Credit
Agreement" means that certain Credit Agreement (Borrowing Base) dated August 6,
1997 entered into by and between Debtor as Borrower and Secured Party as Bank
(as may be amended from time to time). (g) "UCC" means the Texas Uniform
Commercial Code, as amended from time to time. All terms defined in the UCC are
used in this Agreement as defined in the UCC unless otherwise defined in this
Agreement.
2. CREATION OF SECURITY INTEREST. To secure the payment and performance of the
Obligations, Debtor grants to Secured Party a security interest in and assigns
to Secured Party all Collateral which Debtor owns or later acquires.
3. DEBTOR'S REPRESENTATIONS AND WARRANTIES. (a) Debtor is the sole lawful
owner of the Collateral, free and clear of all material encumbrances, and has
the right and power to transfer the Collateral to Secured Party. No financing
statement covering the Collateral, other than in favor of Secured Party, is on
file in any public office. (b) This Agreement constitutes the legal, valid and
binding obligation of Debtor, enforceable in accordance with its terms. (c)
The Collateral and the Debtor's production, sale and use thereof comply with all
applicable laws, rules and regulations (including without limitation the Fair
Labor Standards Act), and Debtor has obtained any consents necessary to execute,
deliver and perform its obligations under this Agreement. (d) The address set
forth above is Debtor's place of business, if Debtor has only one place of
business, Debtor's chief executive office, if Debtor has more than one place of
business, or Debtor's residence, if Debtor has no place of business.
4. DEBTOR'S AGREEMENTS. (a) Debtor will warrant and defend its title to and
Secured Party's interest in the Collateral against any adverse claimant. Debtor
will promptly take all reasonable and appropriate steps to collect the
Collateral. Debtor will not agree to a material modification of the terms of
any Account except for those modifications which may reasonably occur from time
to time in the ordinary cause of Debtor's business, without the written consent
of Secured Party. (b) Notwithstanding the security interest in Proceeds
granted herein, Debtor will not sell, transfer, assign or otherwise dispose of
any interest in the Collateral, except as authorized in this Agreement, the
Credit Agreement or in
1
<PAGE>
writing by Secured Party, and Debtor will keep the Collateral (including
Proceeds) free from unpaid charges, including taxes and assessments, and from
all encumbrances other than those in favor of Secured Party or except as
authorized in the Credit Agreement. Debtor may sell or lease Inventory in the
ordinary course of business. Sale in the ordinary course of business does not
include a transfer in total or partial satisfaction of a debt. (c) Secured Party
may require that Debtor (i) deposit all payments on the Accounts in a special
bank account over which Secured Party alone has power of withdrawal, and (ii)
direct each account debtor to send remittances to an address designated by
Secured Party. Secured Party may hold the funds in the account as security, or
apply the funds to pay the Obligations. (d) Debtor will furnish Secured Party
all information Secured Party may reasonably request with respect to the
Collateral and which information is within the control of Debtor. Debtor will
notify Secured Party promptly of any event that could have a material adverse
effect on the aggregate value of the Collateral or on the Security Interest, or
any change in Debtor's location, name, identity or organizational structure. (e)
Debtor will keep accurate books and records regarding the Collateral and so long
as any debt is outstanding, will allow Secured Party to inspect the Collateral
and to inspect and make copies (including electronic copies) of its books and
records during regular business hours. Secured Party may make test verifications
of the Collateral.
5. FURTHER ASSURANCES. Secured Party may file this Agreement or any financing
statements wherever Secured Party believes necessary to perfect the Security
Interest. A photographic or other reproduction of this Agreement or any
financing statement relating to this Agreement will be sufficient as a financing
statement. Debtor authorizes Secured Party and irrevocably appoints Secured
Party as Debtor's attorney-in-fact to file any financing statement (including
any amendments) relating to this Agreement electronically, and Secured Party's
transmission of Debtor's name as part of any filing relating to this Agreement
will constitute Debtor's signature on the financing statement. Debtor will take
such action as Secured Party may at any time require to protect, assure or
enforce the Security Interest. If any Collateral is located on or in leased
property, Debtor will furnish Secured Party an executed landlord's waiver
satisfactory to Secured Party. Debtor will promptly deliver to Secured Party
any part of the Collateral that constitutes instruments, and will make a
designation on all of its chattel paper, instruments and negotiable documents
comprising the Collateral to reflect the Security Interest.
6. DEBTOR'S USE OF COLLATERAL; INSURANCE. (a) Debtor will keep the Inventory at
1611 Headway Circle, Building 2, Austin, Travis County, Texas 78754 and/or 9701
Dessau Road, Suites 903 and 904, Austin, Travis County, Texas 78754. (b) Debtor
will properly maintain the Inventory in all material respects and will comply in
all material respects with all applicable laws, rules and regulations in the
use, sale and production of the Inventory (including without limitation the Fair
Labor Standards Act). (c) DEBTOR WILL MAINTAIN INSURANCE ON THE COLLATERAL
against all customary risks for goods of the same type and use, including
without limitation fire and theft, and any other risks designated by Secured
Party. DEBTOR MAY FURNISH INSURANCE THROUGH EXISTING POLICIES DEBTOR OWNS OR
CONTROLS OR THROUGH NEW POLICIES ISSUED BY ANY COMPANY AUTHORIZED TO TRANSACT
BUSINESS IN TEXAS. Secured Party will be named on a customary loss payee
endorsement to all such insurance, providing for payment to Secured Party and
Debtor (and no other person) as their interests appear, and providing for at
least 30 days written notice to Secured Party before cancellation. (d) Secured
Party is irrevocably appointed attorney in fact for Debtor to obtain, adjust,
settle and cancel such insurance. Secured Party agrees that it shall not act
under such power of attorney unless the Debtor shall fail to obtain, adjust,
settle and cancel its insurance in accordance with this Agreement and/or the
Credit Agreement. Secured Party may apply all proceeds of insurance to repayment
of the Obligations, whether Debtor is in default or not.
7. COSTS AND EXPENSES. Debtor will pay, or reimburse Secured Party for, all
reasonable costs and expenses of every character incurred from time to time in
connection with this Agreement (including all modifications and renewals) and
the Obligations, including costs and expenses incurred (a) for mortgage or
recording taxes, (b) to satisfy any obligation of Debtor under this Agreement or
to protect the Collateral, (c) in connection with the evaluation, monitoring or
administration of the Obligations or the Collateral (whether or not an Event of
Default has occurred), and (d) in connection with the exercise of Secured
Party's rights and remedies. Costs and expenses include reasonable fees and
expenses of outside counsel and other outside professionals and charges imposed
for the services of attorneys and other professionals employed by Secured Party
or its affiliates. Any amount owing under this Section will be due and payable
within five days of demand and will bear interest from the date of expenditure
by Secured Party until paid at the Past Due Rate. If any part of the
Obligations is governed by Chapter 3, 4, 5 or 15 of the Texas Credit Code, this
Section is limited to the extent required by those chapters.
2
<PAGE>
8. SECURED PARTY'S RIGHTS AND REMEDIES. After an Event of Default (as defined
in the Credit Agreement) occurs, Secured Party will have all rights and remedies
of a secured party after default under the UCC and other applicable law.
Secured Party may, without waiving any default, do anything Debtor is required
to do by this Agreement but fails to do. Secured Party may require Debtor to
assemble the Collateral and make it available at a reasonably convenient place
Secured Party designates. Except for the safe custody of any Collateral in its
possession and accounting for moneys actually received by it, Secured Party will
have no duty as to any Collateral, including any duty to preserve rights against
prior parties. Debtor irrevocably appoints Secured Party Debtor's attorney-in-
fact to endorse any checks or other instruments included in the Collateral, or
to take any other action to enforce, collect or compromise the Collateral.
Secured Party is not required to take possession of any Collateral prior to any
sale, nor to have any Collateral present at any sale. Secured Party may sell
part of the Collateral without waiving its right to proceed against the
remaining Collateral. If any sale is not completed or is defective in the
opinion of Secured Party, Secured Party may make a subsequent sale of the same
Collateral. Any bill of sale or other instrument evidencing any foreclosure
sale will be prima facie evidence of factual matters stated or recited therein.
If a sale of Collateral is conducted in conformity with customary practices of
banks disposing of similar property, the sale will be deemed commercially
reasonable, but Secured Party will have no obligation to advertise or to sell
Collateral on credit. Written notice to Debtor mailed 10 days prior to public
or private sale is reasonable notice. By exercising its rights, Secured Party
will not become liable for, and Debtor will not be released from, any of
Debtor's duties or obligations under the contracts and agreements included in
the Collateral. Secured Party may purchase Collateral at any public sale, and
may credit the purchase price against the Obligations. All remedies in this
Agreement are cumulative of any and all other legal, equitable or contractual
remedies available to Secured Party. Debtor WAIVES any rights to a marshalling
of assets or sale in inverse order of alienation, and any rights to notice
except as provided in the UCC.
9. ADDITIONAL AGREEMENTS. (a) This Agreement will remain in effect until the
payment in full of all Obligations. (b) No modification or waiver of the terms
of this Agreement will be effective unless in writing and signed by Secured
Party. Secured Party may waive any default without waiving any other prior or
subsequent default. Secured Party's failure to exercise or delay in exercising
any right under this Agreement will not operate as a waiver of such right. No
single or partial exercise of any right under this Agreement will preclude any
other or further exercise of that right or any other right. (c) Any notice
required or permitted under this Agreement shall be in writing and be deemed to
have been properly given and shall be effective (i) when delivered, if delivered
in person, (ii) four Business Days after being deposited in the United States
mail, provided it is sent certified or registered, return receipt requested,
postage prepaid, or (iii) upon actual receipt if delivered by hand delivery or
by air express courier, addressed as set forth below:
IF TO THE SECURED PARTY: IF TO THE DEBTOR:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION ATTN: PRESIDENT, CEO OR CFO
700 LAVACA DTM CORPORATION
AUSTIN, TEXAS 78789 1611 HEADWAY CIRCLE
ATTN: DONNA TANNER DAY BUILDING 2
AUSTIN, TEXAS 78754
EITHER PARTY MAY CHANGE ITS ADDRESS FOR NOTICES BY NOTICE IN THE MANNER SET
FORTH ABOVE.
(d) If any provision of this Agreement is unenforceable or invalid, that
provision will not affect the enforceability or validity of any other provision.
If the application of any provision of this Agreement to any person or
circumstance is illegal or unenforceable, that application will not affect the
legality or enforceability of the provision as to any other person or
circumstance. (e) If more than one person executes this Agreement as Debtor,
their obligations under this Agreement are joint and several, and the term
Collateral includes any property described in Section 1 that is owned by any
Debtor individually or jointly with any other Debtor and the term "Obligations"
includes both several and joint obligations of each Debtor. (f) The section
headings in this Agreement are for convenience only and shall not be considered
in construing this Agreement. (g) This Agreement may be executed in any number
of counterparts and by different parties in separate counterparts, each of which
will constitute one and the same agreement. (h) This Agreement benefits the
Secured Party and its successors and assigns and is binding on Debtor and its
heirs, legal representatives, successors and assigns. (i) If any of the
Obligations are subject to Chapter 3, 4, 5 or 15 of the Texas Credit Code or
Regulation AA of the Board of Governors of the Federal Reserve System
(collectively, the "Consumer Restrictions"), (1) nothing in this Agreement
waives any rights which cannot be legally waived under the Consumer
Restrictions, and (2) the Collateral does not include any assignment of wages or
any non-possessory, non-purchase money security interest in household goods. (j)
THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE OF TEXAS. (k) Secured Party
is executing
3
<PAGE>
this Agreement for the purpose of acknowledging the following notice, and
Secured Party's failure to execute this Agreement will not invalidate this
Agreement.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
DEBTOR: DTM CORPORATION
By:
----------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
Title:
-------------------------------------------------------------------------
Date:
--------------------------------------------------------------------------
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
----------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
Title:
-------------------------------------------------------------------------
Date:
--------------------------------------------------------------------------
4
<PAGE>
EXHIBIT 11.1
STATEMENT OF COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1996 1997 1996 1997
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss $ (899,000) $(4,256,000) $(1,468,000) $(4,967,000)
========== =========== =========== ===========
Shares:
Weighted average number of shares
outstanding 3,243,391 5,247,583 3,243,391 4,251,023
Dilutive effect of options to be
issued (1) 365,820 359,223 365,820 362,579
---------- ----------- ----------- -----------
Total shares used in computing net
loss per share 3,609,211 5,606,806 3,609,211 4,613,602
========== =========== =========== ===========
Net loss per share (primary & fully
dilutive) $ (.25) $ (.76) $ (.41) $ (1.08)
========== =========== =========== ===========
</TABLE>
(1) Reflects the shares of Common Stock issuable to employees related to
exercisable options that are outstanding under the Equity Appreciation Plan,
less shares assumed to be repurchased using the treasury stock method.
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME OF
THIS FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> APR-01-1996 APR-01-1997
<PERIOD-END> JUN-30-1996 JUN-30-1997
<CASH> 329 4,957
<SECURITIES> 0 0
<RECEIVABLES> 7,845 6,905
<ALLOWANCES> 640 668
<INVENTORY> 4,835 6,811
<CURRENT-ASSETS> 12,964 18,272
<PP&E> 9,159 8,793
<DEPRECIATION> 6,102 6,341
<TOTAL-ASSETS> 17,897 22,639
<CURRENT-LIABILITIES> 11,342 11,089
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 28,019 50,225
<TOTAL-LIABILITY-AND-EQUITY> 17,897 22,639
<SALES> 5,049 6,076
<TOTAL-REVENUES> 5,556 6,799
<CGS> 3,022 3,507
<TOTAL-COSTS> 3,342 4,051
<OTHER-EXPENSES> 3,219 7,253
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 253 113
<INCOME-PRETAX> (1,253) (4,566)
<INCOME-TAX> (354) (310)
<INCOME-CONTINUING> (899) (4,256)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (899) (4,256)
<EPS-PRIMARY> 0 (.81)
<EPS-DILUTED> 0 (.57)
</TABLE>
